Singapore’s Unique Housing Market

“By the time Singapore attained self-government in 1959, the housing shortage and its related problems such as overcrowding and squatter colonies had reached alarming proportions. Public housing for the lower-income groups was thus given top priority and HDB (Housing Development Board) was set up by February 1960.

This marked the beginning of large-scale public housing development in Singapore. Compared to the cramped and unhygienic living conditions in shop/houses and squatter areas, flats built by HDB seemed luxurious – they were spacious and equipped with basic services such as electricity, flush toilets and piped water. By 31 March 1976, more than 50% of the population was living in HDB flats, a significant improvement from the 8.8% living in government sanctioned housing in 1959.

HDB took over the management of [other public housing developers] in 1982 and is now the sole provider of public housing in Singapore, excluding dwellings built or managed by other government bodies as staff quarters. As of 31 March 2008, 82% of the resident population was living in HDB flats.”¹

Let’s reiterate this significant fact – 82% (or more) of the residential properties in the city are government housing (HDB) flats. As such, they cannot be purchased by non-residents. This leaves the foreign investor with 18% (or less) of the residential market to deal in. This is still a large market, though, with 2,000-3,000 new properties built per month (until last January – see below), as Singapore becomes a leading force in Asian economy, and attracts more and more foreign residents in various stages of residency or migration.

As a result, all property agents in Singapore (who are strictly and fully licensed, checked and double-checked yearly and on a per-deal basis by government regulatory bodies and their own stern association membership panels) share the single, infinitely limited database of properties. While this is the case in many markets in the world, the distinction in Singapore, particularly in that small piece of the market open to foreign investors, is significant – it means that, should you choose to purchase property in Singapore, your single point of access to the market would AND SHOULD be a single realty agent.

There would be no point utilizing several teams and having them compete on getting “the best deal”, as these guys all share the exact same properties and contacts, listings and information – it would be far wiser to shop around for the best agency, then work with that agency to secure the quickest, most creative and best possible response to attractive listings as they arrive on the market – because competition will be fierce, and your offer will need to be attractive or well placed to be seriously considered.

Properties available for purchase may be freehold or 999 years land lease (virtually the same, unless you’re seriously considering investing over more than several centuries), as well as 99 year lease, in which case prices drop as the lease shortens, depending on the property’s age.

Capital Gain (History)

Singapore is considered a small, more balanced mirror-image of Hong-Kong, Asia’s second city-state mover/shaker, and while HK surged an additional 145% average house prices in the last decade, with sharp dips and even bigger surges all through 2005-2008 – Singapore took a milder roller-coaster ride, and is now at a comfortable 75% or so above late 2001 values.

A sharp rise from 2007 and onwards signaled the government’s lifting of strict foreign ownership restrictions – this opening of the market kicked off a wave of foreign interest and purchases, a wave only slightly countered late last year, when the powers that be in Singapore backpedalled, increasing stamp duty on new developments purchased by non-residents, as mentioned in last week’s post.

While this had a mild slowing effect on the purchasing spree in the month or two after the announcement, developers are now offering discounts to counter this new taxation, and it seems business is largely back to normal, as April sales have started rising yet again, (to a 3-year high, if some of the local analysts are to be believed) – sparking a claim of yet another approaching intervention by the government.

Capital Gain (Future Speculation)

As to future appreciation, though, while the trend has certainly been upwards so far, analysts mostly claim this “has to stop” (heard that one before, on both sides of the graphs – top analysts have gone as far as claiming a 12-20% decline in value in the coming year, with up to 40% declines by 2016(!) – Realtors on the ground seem to be sceptical, though, as Mike Roberts, team leader at SLP Singapore and local authority on Singapore realty testifies –

“What is moving…Low end, Mass Market… med to High end very slow but high end in District 9,10,11 (core central region) is lagging behind - hence now is a good time to buy for med-long term as this segment will improve in time playing catch up to the rest of the market.

Upgrades from HDB (Gov housing) to mass market condo is where the action is, sold 200+ [units, in the first 2 days] of a new development launch, prices from $810-$890 SGD [app. 634-700K USD].

Mike has been selling properties in Singapore for quite some time now, from the low $500Ks to the top $5M and over ranges, and we tend to take his advice in these matters, as evident in this 

Summary

Turn-Ons

Recent trend and common sense seem to point at potential for continued appreciation at an approximate 7.5% p/a or more (in central, recently built, previously owned properties), with possible sharper dips and rises anticipated over the next 7-8 years, if analysts and corresponding Hong Kong charts are to be believed. Local funding is highly accessible, interest rates very attractive. Increasing population, plenty of new developments and a strong economy seem to indicate good long-term prospects.

Turn-Offs

Government, while pro-business and normally reasonable, fiercely controls & regulates the market, creating uncertainty. Rental return very low in the majority of cases, and the small size of the market prevents extensive “deal mining” by local teams, as all teams share the same, strictly limited database of properties available for foreign purchase.

I hope this was of interest and use to you – as always, I’d love to hear your thoughts – before we jump headfirst into the dark and jasmine/sandalwood-scented waters of China, Asia’s (and the world’s) largest economy – and its emerging, glittering realty market.

Ziv

¹ Extract from infopedia.nl.sg
Images: Edwin Lee, FreeDigitalPhotos.net

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Real Estate in Singapore: Housing, Capital Gains, Positives & Negatives

Does this sound familiar? You’re new to real estate and want to get ‘in-the-game’. You open up Google, type in a few real estate words that peak your interest, and click ‘Search’. BOOOOOM!!! You are flooded with blog posts, message board posts, websites, YouTube videos, and last but not least, guru courses. This can truly an overwhelming feeling, but also an awesome opportunity to “earn” some money. Please, allow me to explain.

The theme slogan for this article comes from our good friend Benjamin Franklin: A penny saved is a penny earned.

The majority of what you will find on the front page of many Google searches are real estate guru courses. This isn’t by coincidence, they spend money to get themselves there. Whether you’re a newbie or a veteran, the question is, are they worth it?

The short answer: yes and no.

I know what you’re thinking, “what a wimpy cop-out answer that was!”, but in all actuality, it is the true answer. On that same note though, you need to ask follow-up with the question, how much is my time worth?

Let’s Face It

1) Guru’s make their living collecting publicly available information, packaging it into fancy websites, and marketing/branding it as the “ground-breaking”.

2) 99.9% of the information the Guru’s are selling can be found and pieced together by using BiggerPockets and Google.

3) Like death and taxes, you can be certain there will be some form of hidden costs.

The Choice

In Statement #1, two of these three aspects can be beneficial. Collecting and packaging the information all together DOES create an aspect of value in terms of time savings. On the other hand, as Statement #2 tells us, BiggerPockets and Google create a vast amount of value in regards to being a great “detective tool” to reverse engineer what these guru courses are teaching. Whether the guru course deals with flipping, short sales, subject-to’s, wholesaling, REO’s, blah, blah, blah, it is nothing “new”. Sure, it may have a “new” name, but the strategy has already been around the block multiple times.

I’ve taken all the paths…

Overpaid for the courses and felt like “notch in the Guru’s belt”.

Refused to buy and found the information on BiggerPockets and by other public means.

Refused to  buy and wasted so much time going on a wild goose chase that I should have just bought from the beginning.

Bought a guru course, saved myself the time of reverse engineering, and learned a couple great things.

What Path to Take?

My personal strategy in determining what path to take…

1) How specific or broad is the topic? What are they claiming?

2) Estimate reverse engineering time (time spent on BiggerPockets and Google, and then piecing it all together)

3) What is price?

Question #1

This is the most important estimation, as it will help answer the following question. If the topic is something broad like wholesaling, flipping, short sales, etc., then odds are there is a boatload of information available at your finger tips. If the topic is something broad, but they’re claiming some sort of “new twist”, then it will probably take a bit more time of digging  before you can uncover the concept they are “re-branding”. On top of this, if indeed it is an actual “new twist” (highly doubtful though), this will impact Question #3.

Question #2

This one is easy. The broader the topic and more information available, the less time needed for reverse engineering. The more “twists” and “never heard of tactics”, the more time will be needed.

Question #3

This will let you know how much money you are “spending” or “earning”.

Example 1 

Scenario: I’m Googling and I see a course for $97 (Question 3) about raising private money. Since private money is a pretty talked about topic (Question 1), it would probably only take about 2 hours of reverse engineering time to find and get a grasp on the topic (Question 2).

I can either “spend” $97 or “earn” $97. How do I decide? I need to figure out the cost of my time.

$97/2 = $48.50 per hour

For my business model (especially given the fact I have a monthly “education budget”), I would rather just spend the $97 and use that 2 hours to either network, check out a new property, or spend it with my family.

Now, if the course had just come out and was at the typical $997 price, that is the only variable that changes. There is still a boatload of information available regarding raising private money, so all other variables remain true.

$997/2 = $498.50 per hour

A penny saved is a penny earned, so I will GLADLY sit in my underwear at my computer and do some digging in order to “save,” and therefore “earn” $498.50 per hour. For some, it may still be worth it to just buy the course, but for me and where I am currently with my business, it makes more sense for me to take two hours out of my schedule to locate the information.

Example 2 

Scenario: I’m Googling and I see a course for $97 (Question 3) about how you can wave a wand and it will mesmerize the bank doing the short sale to automatically say ‘yes’ to whatever off you are presenting. Being this is a strong claim and that I imagine has information that will take time to dig and find (Question 1), it would probably take about 10 hours of reverse engineering time to find and get a grasp on the topic (Question 2).

$97/2 = $48.50 per hour

But wait a minute… remember Statement #3 about hidden cost? Let’s suppose there is a way that this strategy is actually ‘new’. Well, I live in a different state than the guru does, so does that affect me? If so, how? Doing this sort of strategy seems to open up a can of liabilities doesn’t it? How can I protect myself?

Yikes!! I can either head to law school and get a degree or talk with a local real estate attorney. Both costly things to do. Add these costs onto the $97 and the costs could spin out of control.

My choice: forget about the strategy and don’t allow myself to either A) get ripped off or B) waste my time going on a wild goose chase.

Remember, there is always more than just what the initial price suggests. The more goofy claims, the more hidden costs there are going to be — unless of course you just want to walk on thin ice and open yourself up to lawsuits from all directions (but then again, that would just be ANOTHER hidden costs).

Conclusion

Should you press the ‘Buy’ button? You should evaluate each buying decision on a case by case basis. We all are at different points in our businesses, and all of our time has different values on it. So, while it may make sense for Bobby-Boy to hit the ‘Buy’ button, it may not make sense for Timmy-Tom to make the same decision.

It is essential you consider the value of your time and to do a realistic estimation of the hidden costs that could potentially turn that $97 purchase into a $1,997 purchase.

Photo: Adriano Agulló

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Real Estate Guru Courses: Are They Worth It?

What if your tenants aren’t on your agenda?  What if your tenant(s) fight you at every turn: paying rent late, always complaining about the condition of the property, involving friends and relatives to pressure you, and so on?

What do you do in these and other situations to get them back on the wagon?

It always amazes me at the number of landlords who are constantly challenged by problem tenants.  Sometimes it’s just one tenant and other times it seems that it is all of them – but it doesn’t have to be that way.

First let me say that I know that some tenants just should not be your, or any landlord’s tenants.  They are constantly a pain and they seem to enjoy the entire process of making your life miserable.  This article is not intended to address these professional tenants, but rather those who can “trained” to become at the very least, decent tenants.

The key to keeping tenants on “your” agenda is to ensure that they know what your agenda is, and that you will enforce it at every opportunity.  That said, the first opportunity to enforce your agenda with your tenant screening and selection process.

I have discussed the screening and selection process in other articles, so I will keep this part short — Have a screening and selection process and follow it.  Period!

Once a tenant has moved in, it is essential to make sure they are trained to ensure they know what your agenda is and that you intend to enforce it.

Tenant Trouble Areas

Late Rent: You must ensure that your tenant knows you mean business when it comes to late rent.  On the first day that the rent is late you must take all of the actions afforded to you by your lease and the municipality you live in, and make sure you tenant knows you took those actions.  In addition, now is a good time to schedule a safe and clean inspection to get into the property and to let the tenants know you aren’t going to disappear.

Maintenance Issues: Correcting maintenance issues is your responsibility even if the tenants are responsible for the damage.  Where this becomes tricky is when a tenant starts playing games regarding your access to not only inspect the property, but to perform the maintenance.  Once a tenant moves to this position you have to recognize that they are moving off of your agenda and onto theirs.  Don’t let them do it.  Your lease is your guide here.  It should clearly state how and when you can enter your property and what notifications are required. 

I have written several articles about how to proceed once in property, but here are a few tidbits:

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

How to Deal with Problem Tenants: Keeping to YOUR Agenda

Harold grew up on the southside of Phoenix. Give him an address in zip code 85041 and he can tell you the size of the house and the year it was built. Name a street corner or intersection and he’ll recite a historical event that took place there, back to 1950.

Needless to say, Harold knows his neighborhood.

After the market crashed in 2008, he started buying houses in zip codes, 85040, 85041 and 85042 for $20,000 – $30,000. These were major rehab projects, but the numbers worked. Harold soon discovered that he could make money flipping houses in one of the roughest neighborhoods in the city.

What’s Harold’s secret? He knows the neighborhood. And the neighborhood knows Harold.

When an investor buys a house in south Phoenix, guts it, and then installs brand new kitchen cabinets, appliances, HVAC units, carpet, ceiling fans, light fixtures, window blinds and door hardware, do you know what usually happens next? It all mysteriously disappears – almost overnight.

But that doesn’t happen to Harold’s houses. Because he personally oversees every remodel job, and lets all of the neighbors know it’s his house, the cabinets, appliances, HVAC units, carpet, ceiling fans, light fixtures, window blinds and door hardware all stay intact. I swear if you drive by one of Harold’s properties you’ll see a halo hovering just above the roofline. Angels guard his houses.

You see Harold isn’t a greedy investor looking to make a quick buck, he’s just Harold – a neighbor and member of the community. So the neighborhood looks after him.

I don’t flip houses in Harold’s hood. That’s by design.

I like to buy in suburbia – in neighborhoods with wide streets, common areas, parks, freeway access, retail shopping and good schools. Homes in these neighborhoods look similar, but are not identical. Architecture, elevations, and colors share a common theme and are coordinated appropriately. I live in a subdivision that fits this description so I know what buyers like me want in a neighborhood.

Harold and I share the same exit strategy of fixing and flipping our houses. However, our target neighborhoods are completely different. What’s important when first starting out is you find an area that you know and feels comfortable.

Be like Harold. Because it’s not always what you know, it’s who you know.

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Fixing and Flipping in Harold’s Hood

With the continued volatility surrounding the stock market, more and more investors are converting their retirement accounts into self-directed IRAs. We speak to investors almost every day who want to invest in real estate in some form or fashion and want to use retirement funds (that probably aren’t earning enough to keep up with inflation) to do this.  Most investors intuitively know that the opportunities to invest in real estate right now are tremendous; however, not all investors have the same investing goals or risk tolerance when it comes to investing.

Many of the investors I speak to simply want to buy and own residential properties through their IRA. Others want to make a good return, but not deal with the hassles of being a landlord. One of the great things about real estate is there are so many different strategies and approaches to suit different tastes.

3 Strategies Investors Can Use to Invest Self-Directed Funds in Real Estate:

1.)    Buy and Own Individual Properties:  This is the most obvious way to invest self-directed funds in real estate; however, investors can accomplish this type of investing in a few different ways. Most investors simply pay cash for individual properties. Other investors are able to obtain non-recourse loans from banks that specialize in this or from private lending groups.  Lastly, some investors are able to buy percentage ownership in a particular property through their IRA. This can be a great strategy when investing with partners.

2.)    Private Lending (hard money):  Another popular way to invest retirement funds is through private lending opportunities. Private lending (also known as hard money), is where an investor lends money to another investor or company actively working in the real estate market. We work with a number of private lenders in our business who like the higher rates of return associated with hard money, but without the headaches sometimes associated with owning property. This strategy works great for investors with a low risk tolerance or hands-off approach.

3.)    Investing in a Real Estate Fund:  I have seen a number of real estate funds pop up over the last few years. Whether you are investing in a large REIT (Real Estate Investing Trust) or a small private placement fund, there are numerous opportunities to pool money with other investors to take advantage of this real estate market. The great thing about investing in a pool is the ability to have your investment in a diversified portfolio of real estate activities. For example,  a fund that my company is currently involved with uses funds to hold individual properties (for cash flow and long term appreciation), for hard money lending and for tax deed investing.  This is great because your invested funds have the benefit of being diversified into a number of different activities that all have the potential to generate very good returns without leaning too heavily towards a particular area.

For those investors interested in investing retirement funds in real estate, the great news is there is something for just about everybody. Whether you want to own individual properties or take a more hands-off approach,  the opportunities to invest in real estate right now are incredible … especially when you couple this with the ability to use a self-directed IRA to accomplish this.

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

3 Ways to Invest in a Self-Directed IRA in Real Estate

Announcements that a recovery is underway are not paying attention to the huge piece of the home sales pie belonging to foreclosures and short sales.  Distressed market share is not diminishing in the middle of the spring sales season and it is the first time in two years when prices are rising in a majority of markets.

Improving prices are supposed to inspire sellers to act, but if they are, then there is a rush of distressed properties pouting into the market. 

Two separate reports released early this week, both surveys of real estate professionals taken at roughly the same time, found that the discounts either held their own or increased last month.  The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey reported that the total share of distressed properties in the housing market in April, as represented by the HousingPulse Distressed Property Index (DPI), was 47.9 percent, using a three-month moving average. This was the 26th month in a row that the DPI has been above 40 percent.   In other words, “normal” homes made up slightly more than half the homes sold in America in April.

According to the National Association of Realtors, distressed sales accounted for 28 percent of April sales (17 percent were foreclosures and 11 percent were short sales), down from 29 percent in March and 37 percent in April 2011. Foreclosures sold for an average discount of 21 percent below market value in April, while short sales were discounted 14 percent.

The average price for non-distressed properties declined 1.5 percent from March to April, while the average price for short sales dipped 1.7 percent. For damaged REO the average price fell 1.4% and for move-in ready REO the average price slipped 0.3 percent.

Falling prices and steady sales suggest that inventories of foreclosures and short sales are rising, perhaps partly as the result the backlog of foreclosures that is being slowly released in the wake of the AG agreement to settle the Robo-signing scandal.

Photo: Ryan Dickey

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Housing Update: Distressed Sales Hang Tough

It’s the human condition, isn’t it? When inexperienced, but newly ‘educated’, we often convince ourselves we know what we don’t know. As a young man I must’ve been the poster boy for that concept. Almost like it was yesterday, the memory of my first ever day as a ‘real estate guy’ is still fresh. Walking from the parking lot to the office’s front door, then entering, the first thing that hit me was the smell of strong coffee — Navy Chief-strong coffee. I knew far more then, than I do today. It’s not even close. What a fool. It was a couple months past my 18th birthday. Know what I really knew that day about real estate? How to drive myself from home to the office, that’s how much.

Though I ‘succeeded’ that first day, it was, to be kind, a wholly fraudulent success. The details aren’t important, boring actually, but it was the beginning of a learning curve which has never stopped. Being second generation real estate broker, son of the broker-owner actually, was subject to  constant ‘review’ and ‘constructive criticism’, exceeded only by those who’ve experienced life as a preacher’s kid. I make that judgment with utmost confidence, as I experienced both firsthand. Don’t try it at home.

Though oft times the never ending review and criticism was petty, hurtful, and of little or no value, much of it was priceless. I learned two lessons that can’t be bought, but instead must be accepted.

1. With rarest exceptions, all of what we do is about results of one sort or another.

2. We can either gain experience, expertise, and knowledge — or we can pay for it.

The addendum to #2 is that we too often end up paying for it through our crummy results. When we talk ourselves into the false belief that we have the requisite EE&K, it hardly ever turns out well. The real problem is when we somehow Gump our way through, get a relatively positive result, then conclude we’ve ‘taken our game up a notch’. Speaking for myself, it wasn’t ’til years later that I figured out how lucky I’d been. Not only that, but how gracious my mentors had been. They knew my results were mediocre on the best of days, but they simply kept mentoring me, knowing my epiphanies would come in their own good time. And did they ever.

What does this have to do with real estate investing?

We tend to measure ourselves and our growth in EE&K by the use of relative comparison — usually to others. This isn’t bad in and of itself, but it does have a tendency to delay the brutal truth, which is:

That compared to the actual EE&K required to produce the results for which we work so hard, we’ve not hit the mark.

The most common problem hindering my advancement in real estate investment was the one with which Grandma pegged me perfectly when she said I was behaving as if I’d mastered my job, when in fact I was still at the apprentice stage. Ouch — and a half.

That attitude, the one telling me I’d reached a level not nearly attained, was the main reason I lost three properties early in my career. I didn’t have nearly the EE&K I fancied myself as possessing. Looking back, the results I produced were empirical evidence of that verdict. Our grandmas put it another way when they said we were gettin’ too big for our britches. ‘Course, the problem with investing in real estate, short or long term, is that we can’t always discern what we’ve actually wrought. It can be a vicious catch-22 of sorts.

We don’t know the questions to ask, so we don’t have the answers we don’t know we need.

I’ve seen first-hand how fooling ourselves into overvaluing our EE&K can lead to some decidedly distressful results. Doing things yourself, and/or learning by trial and error, at least when it comes to real estate investing, is akin to lighting dynamite and running. Sooner or later you ain’t gonna be fast enough. Doing that when the market shows signs of transition? A financial death wish.

I saw it in 1974 — in 1979 — in 1991ish —  2006 — and again in 2008/9. All those times, though never the same circumstances, had a few things in common. One of ‘em was that the do-it-yourselfer, for the most part, got slaughtered — as did those like my much younger self, who thought they had the answers they needed. Why?

They’d found all the answers for all the questions they’d ever asked. What exploded their plans, though, were the answers to the questions they never knew to ask.

Expertise — Experience — and Knowledge. Can’t. Be. Faked.

I’ve written here, on BiggerPockets more than two years now, I’ve read countless posts in which very wise authors have beseeched readers to either gain that EE&K, align themselves with someone who has ‘em, or hire it. Listen to these people, cuz they know whereof they speak.

Wisdom is only valuable when we use it, and only costly when we don’t.

Nothing trumps results.

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Nothing Trumps RESULTS – It’s ALL About Expertise, Experience, and Knowledge

If you have completed more than a handful of short sales, then you have likely have been involved in a value dispute with the short sale lender.  During the course of the short sale, the short sale lender sends out another Broker to complete a Broker Price Opinion (BPO) for the short sale listing. The bank then, in most cases, bases their price on the value stipulated in the BPO. However, often times, there is a discrepancy between the value stipulated in the BPO (what the bank wants) and the offer amount (what the buyer wants to pay). In many cases, what comes next is a valuation dispute. And, at some lending institutions, this is much easier to complete than at others.

Bank of America has recently revised their process for addressing valuation disputes that arise during the short sale transaction.

Here is an outline of the new process (courtesy of our friends at bankofamerica.com/realestateagent):

• Tell your short sale specialist that you would like a reconsideration of the value.
• Receive an investor-specific, easy-to-complete form from your short sale specialist that specifies all requirements for a successful value dispute.
• Fill out the form and attach specified evidence.
• Stay in touch with your short sale specialist for results.
• Expect a value dispute review within 10-12 business days once all required information has been received.

Here is the evidence you will need in order to support your valuation dispute:

Provide comparables that are recent, proximate (nearby) and similar to the property in question.

• “Recent” means sold within 90 days of the actual value document date.
• “Proximate” varies by location. In a rural area, for example, a home five miles away could be considered proximate.
• You will be able to provide additional notes to highlight characteristics of the comps.

When the dispute centers on property condition or hazards:

• Provide an itemized estimate from a licensed contractor on the contractor’s letterhead.
• Provide photos to illustrate the repair, condition issue or hazard you want to highlight.

If your valuation dispute relates to condition and significant repairs are required (which would lower the subject property’s value), it’s best to have multiple bids in order to support your position. Based on my experience, I can tell you that you should not expect the bank to pay for items such as new carpet because there is a small stain on the living room floor. Big stuff, legitimate supporting documents, and a strong will to succeed could lead to success in a short sale valuation dispute.

moneyblognewz

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Value Disputes and Bank of America Short Sales

Multifamily investing has never been hotter.  Multifamily apartments that are in great condition are fetching some of the highest prices seen in years.  On the other hand, older dated properties are selling at much lower rates.  If you have an older apartment complex that has become a little dated, now is the time to consider making some strategic upgrades.  It’s time to focus on upgrades that will deliver a big bang for your buck in both rental rates and sales price (when you decide to sell).

However, not all upgrades are equal.  You want to consider upgrades that will give you the highest return and maximize your property’s value.  Before you get started, remember to do your research.  Make sure the enhancements you do are appropriate for your area, tenant base, and property. You need to know what will make the biggest impact in your area.

We’ve put together a list of 5 upgrades that should be considered for your multifamily apartments.  These enhancements have been proven to refresh an older complex and deliver a high return for your investment dollar.

5 Essential Upgrades to Your Multifamily Properties

1. Paint – There is no other single item that can dramatically change the look and feel of your property for less money than new paint.  Adding color to the interior or exterior of the complex can make your apartments feel fresh, new, and cared for.  It can bring new life to any property, and your tenants and prospective tenants will notice it.  Pick colors that fit your area and that are soothing to your tenants.
2. Appliances – Residents love new appliances.  If you have old and dated appliances, consider replacing them.  It’s not uncommon for apartments with new or upgraded appliances such as stainless steel or black to fetch a premium rental rate.
3. Fixtures – Some of the most subtle and inexpensive items that you can upgrade are the fixtures: lights, pulls and knobs, doorknobs, and towel bars.  These items can be very inexpensive, but can deliver a lot of impact.  They can make it easier to lease your apartments and get more money from them.  Nothing says dated like brass.  Consider changing from dated brass to stainless steel, satin nickel, or oil-rubbed bronze.
4. Countertops or backsplashes – Avocado countertops and dated backsplash colors are also items that can quickly date a property.  Consider changing them out to modern, neutral colors and you’ll be amazed at the transformation.  Both of these items can cost very little to change, but your tenants will love them.
5. Common area amenities – Here is where you can make a big impact by doing small things.  Consider changing a dated courtyard to a new fire pit or fireplace.  Supplement the old landscaping with new modern plants and color.  Consider changing out the old playground equipment for newer equipment, or adding new planters and chairs to the pool area.  These upgrades can be very cost effective, and really improve the look and feel of your complex.

Now is the time to take advantage of strong multifamily market fundamentals.  But, to do that, you need to maximize your investment.  If your property has become a little dated over the years, it’s a great time to consider a little updating.  These upgrades will allow you to enhance your rental income as well as deliver the highest purchase price when you sell.  Focusing on enhancements that will deliver the best bang for your buck will have your tenants, your property, and your billfold thanking you.  They will also allow you to maximize your property’s value in a hot multifamily market.

Photo: Dieter Weinelt

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Multifamily Investing: Updating an Older Property for Maximum Profit

Unless you’ve been living under a rock for the last five years, you know Facebook. You probably can’t go two hours without checking your wall, “liking” your friend’s comment, and laughing at a video of a golden retriever playing the piano (seriously, check that one out. I’ve put a link on my own Facebook page!)

Additionally, you can’t escape the news of Facebook going public. On Friday morning, Facebook became a publicly traded company worth over $100 billion dollars, with 80% of their value found in their revenue from their online advertising.

Clearly, Facebook has proven that it’s advertising model is the future of advertising and marketing.

Today, I am going to show you how to take advantage of Facebook pay-per-click advertising to sell a home quicker, capture more leads, and super-charge your real estate investments.

A Modern Bandit Sign, With A Twist:

Facebook ads are similar to “bandit signs” that you might place around your neighborhood but with one major benefit – you only pay when the ad works.

What would your local newspaper say if you demanded only be charged you when someone calls about your ad, or if you ask your printing company to only bill you once your bandit sign has given you a lead? They would laugh in your face! However, this is exactly what Facebook allows you to do. This is known as “pay-per-click” advertising, which simply means you only pay when someone clicks. With pay-per-click advertising (such as Facebook, Google, or Bing), you only pay when your advertisement does what it is intended to do – bring in leads.

Why Facebook Marketing Rocks:

There are multiple ways to use pay-per-click advertising on the internet, and each have their benefits. However, Facebook ads have three unique characteristics that make it an ideal tool in your marketing arsenal.

• First, Facebook’s pay-per-click advertisements allow you to be location specific – meaning you can choose to have your ad only seen by people within ten, twenty, or within any number of miles of your target location. If you are trying to sell a home, you are able to specify exactly where you want your ad to show.
• Additionally, Facebook ads are interest specific. Do you think Facebook’s “like” feature is only for fun? Facebook actually uses “likes” and friendship relationships to help their marketers target certain individuals. This means, as a Facebook marketer, you can choose to show your ad only to people who are interested in a certain topic. For example, if you are trying to wholesale a fixer-upper, you have the ability to advertise only to people who “like” certain topics like “Rich Dad Poor Dad,” “The Family Handyman Magazine,” or “BiggerPockets.com”.
• Finally, pay-per-click advertising is demographically specific so you can target only certain ages or genders. For example, you can create an ad written to attract first-time homebuyers that is specifically targeted toward people between the ages of twenty-three and thirty-three that live within twenty miles of a home you are trying to sell.

How Facebook Ad Pricing Works:

The most common question people have when discussing Facebook ads is, “how much does it cost?”

The answer is more complicated than a simple dollar amount, but simple to use. Pay-per-click ad prices are based on an “silent auction” style, meaning that all advertisers will “bid” on a price they are willing to pay, based on the criteria you are targeting your advertising to.  You will simply tell Facebook what price per click you are willing to pay, and Facebook will never charge you more than that. Bid too low, and your ad will not be shown. To help you determine your range, Facebook will offer you a “bid range” to set your price within.

In other words, if there are ten advertisers out there who are marketing to people who like BiggerPockets.com” on Facebook, the highest price bid will be displayed first. You have the ability to set both your price-per-click as well as your daily and monthly budget. This concept can be a little tricky to wrap your head around, but will become much more clear as your set your ad up. In my experience, a typical “click” usually costs between 20 and 60 cents each.

Remember though, you only pay when someone actually clicks on your ad. Facebook will monitor your spending and keep you within the daily or monthly budget you have chosen. If you want to spend $100 per day advertising or just $5 per day, Facebook gives you that option.

Creating Your Marketing Funnel:

Before you jump in and start advertising on Facebook, you need to have your “marketing funnel” in place. A marketing funnel is simply your step-by-step process to accomplish your goal- from beginning to end.  You don’t want to start paying for advertising without a clear way to turn those “clicks” into cash. To create your marketing funnel it is important to work backwards, beginning with a simple question: What is your ultimate goal?

• Sell your FSBO property?
• Get leads from motivated sellers?
• Attract private money?

Once you have determined your goal, simply decide the best way to accomplish this, working backwards. For example, I am currently using Facebook to advertise a flip I have on the market to sell. My ultimate goal is to sell this home. To do this, I need to have people make an offer – but before they make an offer they will need to get inside the house and tour it. In order to get prospective buyers in the front door, I will need to attract their interest, so the goal of my marketing is to peak a prospective buyer’s interest. I decided the best way to make a prospective buyer interested in my property is to create a website filled with photographs of the property that also includes a form that buyers can fill out to get more information or set up a tour of the home.

A website is not necessary in order to capture leads, but can be beneficial. If you don’t have the technical ability to create a website, use a pre-made template or simply hire an inexpensive freelancer at a site such as Odesk.com or eLance.com. Otherwise, simply create a Facebook business page that accomplishes your goal.

Once your marketing funnel is fully created, its time to begin advertising.

Tips When Creating Your Facebook Ad:

You do not need to have a separate business Facebook page to create ads, but you can if you would like. To set up your ad campaign for the first time, click “advertising” on the very bottom of your main Facebook homepage if on a personal Facebook page or click “Build Audience” at the top of your Admin Panel if you are using a business Facebook account. When you create your ad, follow these six steps to ensure a high “click-through-rate” (the percentage of people who click on your ad compared to the number of people who see it”

1. Choose where you want your ad to send people. This destination could be your webpage, business Facebook page, or any site that you choose. Just make sure this location is part of your marketing “funnel” (see above).
2. Create a killer title. You are allowed only 25 characters for your title – so make them count. If you are advertising to local people, use something local in the title to make them stand out. For example, my recent ad title read “Why Rent In Grays Harbor?” (Grays Harbor is the county I live in). Facebook users are not accustomed to seeing local ads, so it stands out.
3. Intrigue them with your body. You are allowed 90 characters to convince your ad viewer to click on your ad. Appeal to both fact and emotion when you write, triggering interest in both sides of the brain. Don’t simply state the price and features, but intrigue them to want to know more.
4. Use an eye-catching photo. The photograph is the most important part of your ad, because it is often the only thing viewers pay attention to. Generally, using a photo that looks “non-professional” results in more clicks because people on Facebook are accustomed to seeing this style. Also, like it or not, photos with young, smiling women generally receive significantly higher click-through-rates.
5. Set your price. When you create a Facebook ad, you have the ability to set your budget.  Decide on your monthly or daily budget and choose how much you want to bid to get your ad shown. Facebook helps you out with this and shows you the range of prices that they recommend you bid within. I recommend setting your bid 20 cents lower than Facebook’s lowest bid suggestion price and move your price upward if you find your ad is not being shown that often.
6. Split-test like crazy. Split testing is the process by which you create multiple ads, each with small changes, to determine how people react to different parts of your ad. For example, you could create two identical ads, but with different photos, or change the wording in your title. Monitor your click-through-rates and continually seek to improve your ad.

Wrapping Up:

Facebook advertising is here to stay, and the best real estate investors are using Facebook everyday to grow their business and build substantial wealth. I am not suggesting to abandon your other marketing techniques, but simply begin exploring the vast new world of marketing online.  Facebook is a powerful tool that allows you to create advertisements that are specifically designed, geographically targeted, and only cost money when they work. However, while pay-per-click advertising is a remarkable way to market yourself, your product, or your business- blindly throwing money at Facebook hoping for leads will get you nothing but debt. It is imperative that you continue to grow, tweak, and monitor your ads so they will provide you with another powerful source of leads, sales, and wealth.

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Using Facebook Advertising to Super-Charge Your Real Estate Investing

Want to know where home prices will be rising in the coming months? No longer do you need to toss darts at a dart board or guess. Someone has actually created an index using the very, very freshest listing data combined with economic metrics to scientifically select tomorrow’s hot markets.

Every quarter Move, Inc. operator of Realtor.com, publishes the Top Turnaround Towns (There used to be ten’ we just expanded to 25). As a member of the team that created and updates this list, I’m always excited by the latest findings.

The latest list includes seven housing markets hit hardest by foreclosures – all from Florida – leading the nation towards a general housing recovery, while unexpected new comers in Michigan, Texas, Iowa and California are showing signs of strength and stability.

The list of Top Turnaround Towns, developed using year-over-year comparative data from the first quarters of 2012 and 2011, is led by Phoenix-Mesa, AZ, Miami, FL and Orlando, FL – three top foreclosure markets experiencing list price appreciation, along with reductions in inventories and their median age of inventory, all on a year-over-year quarterly basis. Other call out markets include Boise City, ID (4), which has been on the rise steadily since its debut at No. eight in the third quarter of 2011, and Naples, FL, which rose one spot from sixth to fifth in one quarter.

Noteworthy newcomers include Bay Area frontrunners Oakland, CA (6) and San Jose, CA (24), heating up as the nation watches the local hi-tech industry and upcoming Facebook IPO, and the Lone Star State markets of Dallas, TX (12) and Forth Worth-Arlington, TX (18). While Detroit, MI continues its struggle with high unemployment (10.2%), it landed in the 23rd position on the Realtor.com list with a 5.82% increase in list price appreciation, a -29.59% reduction of for sale inventory, and a market that’s moving 27.27% faster, all on a year-over-year quarterly basis.

“We continue to see signs of stabilization and recovery on the local level throughout the country, basing analysis on the real-time nature and accuracy of the Realtor.com data,” said Steve Berkowitz, CEO of Realtor.com operator, Move, Inc. “By all indications, the 2012 housing market is unfolding as we expected, and we’re encouraged with the progress local markets are making. However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed. All of these key factors will determine how quickly our local housing markets recover and remain healthy.”

*Among the 15 Best Housing Markets For the Next Five Years, Business Insider

**Made the Top Ten Best Real Estate Markets in 2012, ActiveRain.com

***Cities Where Real Estate is Ripe for a Rebound, Forbes January 2012

Highlighted Markets Named in the Q1 2012 Realtor.com Top Turnaround Town Report:

#1 – Phoenix-Mesa AZ leads the nation on the Realtor.com Turnaround Town list after advancing from the #2 position in the fourth quarter of 2011. While it was one of the hardest hit areas by foreclosures, median list prices are up 26.94% in the first quarter of 2012 compared to the same time last year, and the area experienced the largest increase in median list prices of all of the 146 MSAs monitored by Realtor.com. Unemployment in Phoenix is at 7.8%[i] and contributes to its improving local economy and growing demand for housing. The market experienced a -32.94% year-over-year quarterly decline in the local median age of inventory thanks to the sale of thousands of foreclosure bargains. While Maricopa County today generates 1 foreclosure filing for every 242 homes[ii], if inventory remains in check, it’s only a matter of time before Phoenix fully stabilizes and has lasting home value appreciation.

#4 – Boise City, ID is showing signs of a rebounding market with encouraging indicators for future stability. With an improved unemployment picture — Boise’s rate was 8.7% in February 2012, better than the state (9%) and national (8.2%)[iii] — positive housing indicators should follow. The City of Trees had fewer houses on the market in Q1 2012 than the same time last year, which may have contributed to higher demand and a housing market that moved 23.60% faster in Q1 2012 compared to the same quarter last year. Median listing prices rose by 17.53% on a year-over-year quarterly basis, and Boise City’s year-over-year inventory declined by -36.87%, which is the 12th best improvement tracked by Realtor.com. Only 1 in every 519 homes fell into foreclosure in Boise City’s Ada County[iv], contributing to the area’s stabilization of inventory.

#6 – Oakland, CA is showing the vital signs of a turnaround based on Realtor.com’s first quarter 2012 data. With an unemployment rate of 8.7%, far below California’s 11.4%, Oakland’s economy is growing. In the first quarter of 2012, median list prices in Oakland are up 7.07% compared to the same time last year, and inventory is moving 46.43% faster during the same time period. These factors were enough to move Oakland into the sixth spot on the Realtor.com list of Top Turnaround Towns. Also, in January 2012 the New York Times ranked Oakland fifth on its list of 45 places to go in 2012[v]. Today, Oakland’s market is a huge contrast to the -41.6% decline in median sale price it saw from first quarter of 2006 to the third quarter of 2010.[vi]

#18 Fort Worth-Arlington, TX hit the Realtor.com Turnaround Town list for the first tim in Q1 2012 thanks to the alignment of several key factors. As the 16th largest city in the U.S., this Gateway to The American West didn’t experience the housing boom like other U.S. cities and enters 2012 on solid ground. With unemployment in Fort Worth at -7.1% below the national rate of 8.2%, and the median household income above the national level, it’s no wonder demand for housing is growing. In the first quarter of 2012, median list prices in the area are up 8.9%, inventory is down -26.87%, and the median age of its inventory fall by -20.65% to 73 days – all compared to the same time last year. With stable list prices, reduced inventory counts, and a faster-moving market, smart buyers just might find the home of their dreams at the right price if they’re prepared to act quickly. Fort Worth made the ActiveRain.com Top Ten 2012 Best Performing Real Estate Markets[vii] and Forbes’ list of cities Where Real Estate is Ripe for a Rebound.[viii]

#23 – Detroit, MI was one of the country’s hardest hit areas in the recession thanks to the 2007 and 2008 layoffs in the Motor City’s auto industry. Unfortunately, this put Detroit at the top of foreclosure lists for years. Now, however, improving auto sales are helping to turn Detroit around. At 10.2%, its unemployment rate[ix] is still above the state and national rates, and foreclosure rates in the four counties that constitute the Detroit area are approximately 50% to 100% higher than the national rate[x]. However, there are encouraging signs for the local housing market. The largest over-the-year unemployment rate decreases in the U.S. this past March were registered in the Detroit area[xi]. List prices are starting to rise, up 5.82% on a year-over-year quarterly basis, while inventories are shrinking, down -29.59% in the first quarter of 2012 compared to Q1 2011. The median age of inventory has also declined -27.27% on a year-over-year quarterly basis down to a median of 56 days. he largest

Methodology:

Market rankings are based on their year-over-year median price appreciation, reduction in year-over-year median age of inventory, and inventory reduction levels as observed on Realtor.com, as well as unemployment rates on a year-over-year basis. The Realtor.com Top Turnaround Town Report is based on an algorithm that combines those four key measures with searches for properties on Realtor.com and the ratio of searches to listings in order to equalize markets by size. The resulting report reflects price changes that have taken place and gives weight to supply and demand dynamics that create continued progress towards growth and stability in future months.

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Top Turnaround Towns: Tomorrow’s Hot Real Estate Markets

You are probably reading this blog to find out just how ridiculous it’s going to be.  If you are a rehabber, real estate agent, home stager, or involved in marketing real estate in any way, you might want to read on!

When my family began real estate investing, we were completely dependent upon a Realtor that we hired to find us good deals.  Do you know what that meant?

MINISCULE PROFITS!

We found out very quickly that finding a house to fix & flip through the open market (MLS) was difficult if you wanted to make a decent profit.  Well, we did want to make a decent profit!  After watching hours and hours of “Flip That House”, I was trained to expect big profits.

Without any marketing tools in our hands, we became very dependent on the MLS to acquire houses to rehab.  Here is what kept us afloat:

Watching TV

… More specifically, we watched HGTV and any home decorator shows.  The revelation that I received and that became one of our greatest assets is this:  The lifestyle trends of what people like in their home begins with the TV!  Don’t think it crazy.  Where do the popular hair-do’s come from?  Where are people getting the latest wardrobe fashion trends from?  You got it, TV!

By watching and studying home shows and what their designers are pushing, you can learn what the public is going to gravitate towards.  From the color combinations on walls to the texture of carpet to the style of toilet, the information that can be gleaned about what is in style is all right there.  You can also learn about the style or age of different houses and the best way to effectively design the remodel.

We learned many things that helped us “press the comps” when we marketed them for sale.  For example, we never sell a house with a screen door blocking the front door.  We always remove the screens from the windows.  By just removing these two items (store them in the garage for the buyer though), we dramatically improve the curb appeal.

One of the best shows to watch as a fix & flip investor is “House Hunters”, where an agent would walk retail buyers through 3 houses before they picked one.  You would get to hear their positive and negative feedback on each home.  Absorbing all of this information found itself very useful when we would rehab.  The end result is that you create an end product that most people are attracted to.  Why are they attracted to it?  They saw it on TV!

If you want to get every penny out of your rehab, go watch & observe & learn from the ones that are setting the standard for YOUR BUYERS!  If your rehab looks like it is out of HGTV, you will maximize the potential of that house.

So, you can blame me when your family calls you a couch potato.  Just tell them,

NO MORE MINISCULE PROFITS!

Image(s): FreeDigitalPhotos.net: Ambro

This Article is Copyright © 2004-2012 BiggerPockets, Inc. All Rights Reserved.

Increase Your Rehabbing Profits by Watching TV, Really!