Market Advisors Blog

Is now the time to invest in real estate?

Looking to diversify your retirement funds? Are you looking for income generation, or long term growth, or both? No matter whether or not you are a seasoned real estate investor, or just beginning to consider real estate as an alternative investment asset, everyone is asking the same question… “Is now the time to invest in real estate with my self directed retirement funds?”

To best understand “when to buy” and conversely “when to sell” is to simply take a lesson from what is termed “market momentum analysis” or “market timing signs”. (By the way I recommend a good read: “Timing the Real Estate Market” by Robert Campbell. You can go to www.RealEstateTiming.com

I’ll give you the simple rule of thumb. “Buy when others are fearful” and “Sell when everyone is buying”.

Now lets apply this principle to today’s real estate market. Since May 2010 (coinciding with the expiration of the federal tax credits) real estate market prices are again sliding, sales are well off their peaks, foreclosures are setting fresh records, a “double-dip” is in full swing. Market fear is on the rise.

Clearly a “Buy” signal.

So what should the savvy investor be looking for in this market? Good ole’ positive cash flow. Regardless of whether one invests through equity or debt, an “average” real estate investment today should be providing an ROI of a minimum 10% cash on cash annually.
And let me repeat “minimum”.

Remember, 99% of all real estate investing is a long term “Buy Hold” scenario. A “Buy Flip” strategy though lucrative in some cases is quite risk sensitive during this current market stage. Always invest for positive cash flow so not to get “stuck” for a loss with a short term strategy like a “Buy Flip”.

To your Success!

Words from the Wise..Experience does count

I was reading an interesting article which profiles a 97 year old Realtor…yes 97 years old and still active on a daily basis at his real estate office.

Aside from the obvious quotes, I was intrigued from George Johnson’s perspective about todays market, which he says is not as bad as he has seen previously. (obviously he has been through more than a few downturns)…but even more interesting is that he is spot on… “After every housing recession, the market has “gone higher than the one before.”

Older and Wiser…

Here is the article link

More misery ahead for Home Prices

Is anyone out there paying attention to market momentum principles? Remember the rule of thumb for any investment…”Buy Low, Sell High”. Pay attention to the signals…

BUY when FEAR is top of mind…
Buy when you have a consecutive monthly pattern of decelerating unit sales…
Buy when unemployment rates are peaking…
Buy when positive cash flow is peaking…

Simple instructions to follow:

Talk about investing in real estate with 5 people…see if at least 3 think you’re crazy.

Look at the last 3 months of sales reported by NAR.

Unemployment has peaked, no sign of improvement yet, but not growing either.

Can you positve cash flow in areas where unheard of historically?

Yes, in the near term housing prices are still soft, which is a perfect time to accumulate, and diversify your portfolio.

The FHA not immune to defaults…FEAR on the rise.

I won’t begin to regurgitate all the details, however suffice it to say that the FHA is seeing more and more defaults on loans insured since 2008!! What? Yes, that’s right since 2008.  Review the entire article here by the way the article is well written by Keith Jurow of the Real Estate Channel.

My point is to make a claim, right now, and right here on our Market Advisors Blog…August 10,2010. “Market Momentum is still knee deep in the FEAR stage which will lead to further market price deterioration across all residential real estate markets in the US.”

Now when I deliver my seminars and workshops during the next year with Entrust and Pensco I can refer back to this published statement and say “Told You So!”

However, do not  get me wrong. I am a buyer at these “fearful” times. I have no problem investing in properties that deliver positive cash flow at over 12% return and a 5 GRM. With these real numbers I will be happy to “Buy/Hold” or “accumulate and wait”. With a less than 1% CD rate…plllleeease and thank you.

Have you checked out Fortune or Money magazine lately?

Take a look at the June 2010 Money Magazine…specifically page 82…”Stock up for more Income”. Or, the June 14 2010 edition of Fortune Magazine, specifically page 82 “Our 2010 Retirement Guide: You Can Still Win”.

Let me summarize…Its all about investing in “Funds” and it is all about being satisfied with marginal investment gains…apparently less than 5% if you are LUCKY!

Fortune magazine even goes so far as to suggest “asset class diversification” …but sadly stops short at anything other than publicly traded Funds. (of course that is where the big $$$ are, especially when  it comes to fueling advertising for these financial rags.)

True diversification should also include “alternative assets” , such as Real Estate, and look toward specialized niche sponsors that can offer greater returns with minimal risk.

Just how can you find out more about how to take advantage of these opportunities? May I suggest you first become knowledgeable of your retirement options. Look to these websites for easy to understand content about self-directed retirement.

Pensco Trust Co.

The Entrust Group

U Direct IRA Services

Lots of good info…and when it comes to a good investment opportunity, specializing in real estate, contact me at

john@mymarketadvisors.com

Foreclosures Good for the Economy?

Strange as it may seem there actually might be a consumer spending benefit to the economy due to increasing defaults on home mortgages.

WHAT ??!!

Yes, the latest rise in consumer spending numbers is juiced by the simple fact that as more and more Americans stop paying on their mortgage…that frees up cash which finds it way into retail coffers.

YOU HAVE GOT TO BE JOKING??!!

No, strange but true. Check out this latest report from CNBC and Realty Trac.

Though someone might seem to think this is good news, think again, Foreclosures, NODs and Short Sales are INCREASING at a record pace which is continuing in the 3rd year since the burst of the bubble. Home values continue to suffer.

Let’s not forget that the single most important asset to the average American family is the “HOME”, which is being wasted. What this country needs is a paradigm shift back to values, and Government needs to do all it can to support “HOME VALUE” by creating JOBS and stimulating (or rewarding) HOME BUYERS.

Why Invest in Condos…

Interesting how a great majority of real estate investors shun investing in Condos during this fantastic distressed property extravaganza. I wonder how well thought out their investment portfolio strategy might be when investing in foreclosure real estate?

Here are some points to consider when comparing condo product to typical single family.

• Price per sf  in todays distressed market averages 30% less.
• Investor competition is minimal.
• HOAs provide a wealth of information on product condition, amenity condition, restrictions and HUD compliance before you buy.
• Monthly assessments are competitive to insurance, maintenance, and services required for a typical single family.
• You can insure against unforseen special assessments.
• Gross rents per sf are superior.
• Remodel costs are less.
• Optimizes Buy/Flip or Buy/Hold strategy.

These are just some of the reasons why I prefer Condos for my Buy/Flip and Buy/Hold strategies.

Real Estate Rants

Today Case Shiller released its 1st Quarter 2010 report on home prices, so lets sum it up… “Housing prices rebounded from crisis lows, but recently have seen renewed weakness as tax incentives are ending and foreclosures are climbing.”

As an active real estate investor it is of no surprise to me that housing is soft again. When will we learn that short term government stimulus programs are just that?…short term.

When will we learn that real improvement in unemployment will lead to a sustained housing recovery?

When will we learn that investors should be given incentives to put more money to work in real estate, rather than impede their profit?

When will we learn that overly strict lending guidelines are a constraint to the housing market recovery, rather than a  remedy to the cause of the foreclosure crises?

What will save the housing market, and where can an investor put money to work?

Quite simply “Jobs” will save the housing market overall, and in todays market an investor should put money to work in properties that offer real value and savings to a prospective buyer…meaning  “You can own this house for less than rent”.

I am putting my money to work in properties like these…check it out http://mymarketadvisors.com/deal.html

Market Advisors…Focus on the Sweet Spot

Successful investing in today’s real estate markets requires discipline, patience, and cash. The cash component is obvious, however, the patience and discipline is what most Investors lack resulting in missed opportunity or even disaster.

The “Sweet Spot” in today’s investment market is based on the following parameters:

• Market Momentum principles point to “BUY FLIP” strategies…check out Robert Campbell’s Real Estate Timing and get his newsletter.
• Location is still key as you must invest where demand is high
• Price Point is crucial…stay in the 100,000 range. See why in Diana Olicks blog.
• Know where and how to source properties at wholesale discounts…Trustee Sales and Short Sales.

Finally, you must exercise determination and patience as competition is high…Rewards extraordinary.

Cheap Money…Stupid Decisions

As of yesterday the latest headlines from the commercial real estate markets…”Commercial Behemoths Tishman Speyer and Blackrock WALK AWAY AND HAND OVER THE KEYS from their $5.4 BILLION 11,400 unit apartment project in Manhattan”

Yes, it is the confirmed trend, not only in residential but in major commercial to simply hand over the keys to properties, rather than fight it out.

Tishman and Blackrock paid $5.4 billion with $4.4 billion in debt for the project at the peak of the bubble. Now it is worth maybe $2 billion. The answer….walk away.

Hmmmm…now you know why BIG BANKS are not lending money. Because Creditors do not value their assets.

My question, however, is not yesterdays action by these two major developers…it is why did they buy this project in the first place at the peak of an obvious mega bubble, when all, obvious market momentum indicators were pointing to SELL SELL SELL?

The answer my friends….TOO MUCH CHEAP MONEY MAKES FOR STUPID DECISIONS.

So, here is my pitch to Tishman and Blackrock…Hire us to implement our Market Advisors Method momentum analytics for your projects. Your Investors will get the benefit of clear BUY and SELL signals which makes money for your Investors…NOT LOSE IT.