Over the last few years we’ve been predicting records were going to be broken for years to come and that it would be a uniquely incredible environment for real estate investors. Today RealtyTrac issued a press release for the month of August that illustrates the fulfillment of this prediction in no uncertain terms.

Here are the key numbers to note:

In August, 1 in 381 housing units received a foreclosure filing.RealtyTrac has seen 1.2 million repossessions so far in 2010.Before the housing bubble burst, in 2005 only 100,000 houses became REO’s.95,364 property foreclosures in August, a historic record.An increase of 25% since the start of the 2010.In August, 96,469 homeowners receive a notice of default.1% decline in the number of NOD’s filed in July.A 30% decline since August 2009 after a peak of 142,064 NOD’s issued in April 2009.

For a complete list of notable numbers you’ll find them all just above the comment section. Our initial prediction was that with the drastic turn in the economy. This would create a flood of opportunity for real estate investors based on the sheer volume of properties vulnerable to a declining economy. 

The numbers laid out in this release speaks volumes of what’s going on in the big picture. In understanding the big picture we have the opportunity to reverse engineer these trends in order shed light on our local markets. Being investors we always need to be mindful of market conditions themselves as they will dictate what we can and can’t offer.

There are some pretty telling numbers laid out by in this release, but Rick Sharga, Vice President of RealtyTrac, doesn’t mince words by saying,

“I don’t think it gets any better really until the end of 2013.”

It doesn’t take a rocket scientist to recognize that things are getting worse (unless you’re an investor, in which case is the exact opposite). But it does take some cajones to make a long term prediction to when things will get better.

However, the fact remains that we’re real estate investors and investors have their skills and understanding of the market, put them both to use, and generate a positive return.

Now let’s look at these numbers to get a sense of what’s going

Digging below the surface of the scale these records reflect there are two trends that stand out.

The rate of properties being taken back by the bank is increasing.The rate in which Notice of Defaults are being is declining.

This may suggest that we’re reaching the bottom and things maybe turning around as the number of NOD’s and foreclosure filings that indicate the rate of origination for these troubled properties is winding down. But this simply isn’t case as Rick Sharga laments… but rather only the making of another twist in the housing saga called our market…

The Antagonists of the Housing Market

In any saga there comes a time where the protagonist looks back on what’s happened and then wonders what could have been. But for every saga there must be an antagonist to make things interesting and there have been 3 significant acts that have muddied up the waters… perhaps you can identify the antagonist.

Troubled Assets Relief Program aka “TARP”Foreclosure MoratoriumFirst Time Homebuyer Tax Credit

We can only wonder what might have been, but in essence these were all nothing but short term stalling tactics used by the protagonist to buy them more time. TARP was meant to relieve pressure on the housing chunk of the finance market. The moratorium literally but a dam up in a river of foreclosures but was completely unsustainable, stall tactic?

Finally the First Time Home Owner Tax Credit comes in to shore up enough incentivized buyers to redirect the market upward. It only temporarily altered buying patterns and now that we find ourselves in record bank repossessions we can assume this isn’t what the antagonist had in mind.

But these are pretty much old news, except for the fact that the effects of these acts have been adjusted for by the market to create the current list of statistics. So what gives?

You Didn’t Think a Saga of this Magnitude had only 1 Antagonist did you?

When it comes to taking back a property it is up to the bank to file (unless there’s a moratorium) and even though the number of REO’s is breaking records time-and-again it sure doesn’t seem that way in the field. If you’ve noticed this when you’re checking the daily list of REO’s on the MLS and have experienced the same bewilderment you are not alone.

In What is the Real Estate Shadow Inventory I covered a topic that continues to gain attention, and rightfully so! Shadow inventory is the perpetration of antagonist #2 and this is their concern:

The buyer pool is too soft.Softer the buyer pool then longer it takes to clear “distressed inventory.”Longer it takes to clear the greater price pressure there is on the overall market.An increase in price pressure increases the number of underwater properties in the market.The more homes that are underwater correlates directly to the number of homes in danger of foreclosure.

To add one more point based on the Notice of Default trend is that there they are attempting to stem the tide into the pre-foreclosure pool. So not only are banks unsustainably holding REO shadow inventory, but now they are now widening the schism by shadowing the foreclosure process which is cuts into our pool of motivated sellers.

Point here is that the efforts of the antagonists to the housing saga will continue and the plot can only thicken as their unsustainable efforts erode. A knot has been created and we, as the protagonists, are the only ones micro enough with the skill sets to solve these problems. Locally we invest and work to remove all of the pins, one-by-one, that continue to hold down our big picture.

Appendx: Key Indicators

In August, 1 in 381 housing units received a foreclosure filing.RealtyTrac has seen 1.2 million repossessions so far in 2010.2009 saw just under 1 million repossessions.Before the housing bubble burst, in 2005 only 100,000 houses became REO’s.95,364 property foreclosures in August, a historic record.2% increase over May’s record of foreclosures.As well as a 3% increase over July foreclosures.An increase of 25% since the start of the 2010.In August, 96,469 homeowners receive a notice of default.1% decline in the number of NOD’s filed in July.A 30% decline since August 2009 after a peak of 142,064 NOD’s issued in April 2009.Total foreclosure actions totaled 338,836 in August.An increase of 4% from July.Down 5% from August 2009.Auctions that were newly scheduled numbered 147,000 properties in August.Up 9% from July and the 2nd highest total since April 2005.http://www.mikejacka.com/Blog/post/2010/01/29/Real-Estate-Investors-Need-To-Start-With-Back-Page-An-Online-Classified-Site-Primer.aspx

Let’s discuss this because it is only the tip of the iceberg…

“What do these numbers tell you?“ “What’s your REO market like?” “What do you see happening next?”

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Make Money Flipping Houses

Steps in Fixing and Flipping Houses

Who wants to be a Flipper?  Most people have seen the show flip this house and have seen a little bit of what goes into fixing up and flipping a house.  But Most people do not see all the little things that go into the process.  Fixing and flipping houses can provide huge profits for many individuals but you can also lose money if you do not do your home work and know what you are doing.

This article will show you the over view of the steps that goes into a successful rehabbing project.

Step one –Find the House

Before you can fix up and sell a property you need to find a house.  There are hundreds of different ways to market for sellers.  You can get a realtors to find you a fixer upper, you can put out signs saying you buy houses, put up classified ads, send out mailers, or drive around and look for ugly or vacant houses.

You will want to be careful and make sure that you buy the house right.  Here is a little formula for buying a fixer upper.  Take the After Repair Value of the house(ARV) x 70%   Then Subtract that Number from the repairs needed.

The Next Step is the Walk Through.  I like to Do this walk through before I close on the house, so that I know exactly what price I Need to Buy the house at.

Step Two – Walk Through the Property

You will need to set aside around an hour or more depending on the size of the house.  You will need a flash light, a note book, tape measure and a camera.

I First start in the living room, and list out everything I need to replace, Measure the Room size and note any damages you see.  I do this in every room.  You will also want to do a little more in the kitchen and bath room.  Check everything you can, make sure there is no leaks and what not.  Also measure the cabinets, Measure the counters.  Note if you are going to replace them or re finish them.

I also take pictures of each room.    If you are going to make any changes to the lay out of the house, make sure you have graph paper and draw the new layout you want.

Step Three – Put a Scope of Work Together and Material List

Next you will want to put together a scope of work and material list.  I like to create a scope of work for each different type of job, from electrical, plumbing, roofing, siding, interior.

To get a material list, if its your first time doing a project, take you scope of work to Lowes, or home depot and have someone help you.  Have them explain to you what everything is going to cost.

Step Four – Contractor Bids

Once you know what all your material is going to cost you can start getting contractors to bid on the property.   You Will to make sure you have a lock box on the property and leave 6 or so scopes of work at the house.  Call 3 or more contractors and tell them the job, tell them you have a scope of work at the house and give them the lock box code.  Also make sure you give them a dead line to get back to you, no more than a week.

Once you get all your bids back, pick the one that you feel will be the best, not the cheapest.  Pick the person who seems the most reasonable and who you think will do a good job.

Step Five – The Work Begins

This step is pretty simple.  All you are doing now is managing the contractor and making sure they are working on your project.   As a side note, never pay a contractor all the money up front.  Have a pay schedule make out and have them get paid when certain mile stones have been complete.

Step Six – Clean Up and Land Scaping

Your almost done now.  Now the work is done, the contractors are cleaning up the house.  You will want to make sure the house is spotless before you give them their final check.  Also this is the land scaping stage.  Where you trim trees, bushes, plant flower and whatever you want to do to make the outside look Great.

Step Seven – Marketing the house

Slap a for sale sign in the yard, market your house on every free classified site you can find online, or Get a realtor to sell your house for you.

Step Eight – Collect Your Check

If you house is priced right and looks amazing you should have a check in your hand in no time.

This was a quick over view of the rehabbing process.  There are other steps in there but I would have to write a book to ad them all.  Get out there and Start fixing and flipping houses.

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Filed under: Rehabbing Houses

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Intro to Flipping Houses For Profit

Why do people spend money on real estate seminars, read every book they can find, and hire expensive coaches? It is because flipping houses can be the fastest way to financial freedom and everyone wants to learn how to make more money flipping houses.

Get Financially Free

There are so many individuals living pay check to pay check living in the rat race.  If you think that living pay check to pay check is fun than I feel sorry for you.  You need to get out of that I am secure mindset and do something today.  I believe that flipping houses is the best ways to become financially free and not have to worry about how you are going to pay the bills, worrying what things cost, cutting coupons, shopping at discount stores, and just being Broke!  If any of these things hit home, then read on and learn how you can achieve your dreams.   It does not matter if you are love real estate or know anything about it.  Real estate can be an avenue for you to become financially free, so you can do other endeavors you want to do.

Real estate is a tried and true investment vehicle.  In the long run real estate will, with few exceptions like the recent rescission, go up in value.  In the short term real estate values can go up, down, and make your head spin in the process.  There are places like Billings Montana where historically real estate has risen around 3 percent every real consistently.  You do not have to worry about crazy swings over the years.

There are hundreds of different ways to make money flipping houses today.  You can buy and hold, fix and flip, wholesale real estate, lease option, subject too, bulk reo’s or simply loan out your money.   All of the other options are great and can be a great way to earn profit.  Buying and holding strategy should only be used when you have some good cash reserve built up first.  The buy and hold strategy is used to create long term wealth through rental property and rental income.  Unless you have a lot of money saved up then start in other places and work your way up.

Best Strategy to Get Started

So if you are looking to just start out in real estate investing, I would recommend that you start off wholesaling.  This method is simple and uses no cash a lot of times.  All you do is find a property, get it under contract for a good price, and then assign the contract to another investor.  It’s simple enough.   Preston Ely’s wholesaling course is the best on the market today.

Get Preston Ely

You can use this strategy to build up your cash reserves, so that you can start buying and holding for long term wealth.  I recommend that you whole sale ten properties then buy a property to hold.   Wholesale another ten and then buy one to keep.   This way you will not become one of those land lords who is cash poor.   You have to have substantial cash saved up to make sure you can pay for necessary repairs, make the payments if you do not have a tenant in the property and just have money if something unexpected comes up.

Filed under: RE Investing

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