This blog is mostly concerned with the local Sonoma County market, but once in awhile I'll include other information. This is hot off the wires from one of my favorite Real Estate gurus, Adiel Gorel of ICG.
He has been helping people invest in different parts of the country for many years and here are some notes from a recent conference call:
Is it the bottom?
Maybe. Hard to predict precisely, but prices are very far down from peaks and have generally stabilized.
Some homes are selling for far less than construction costs.
Some examples:
$70k to buy .
It would cost $160k to build and would sell with builder’s profit in addition to costs.
Shadow inventory is often talked about. (Bank owned by not on the market.) The area graphs show that they bank owned properties are going down a bit as a % of the total in places like Phoenix.
Financing is the challenge:
Banks could get softer or harder. Too many variables to predict.
Logic and the banks do not co-exist. We may not see the complete picture.
If you own less than 4 properties with loans, you can get a loan
If you own more than 4 properties with loans on them, 25-30% down
or buy with cash, even use retirement account money.
Once banks relax a bit, you can refi. and get your money back
There are some special situations with builder/developer financing.
Cash flow is strong, even with 20% down because of low mortgage interest rates and
Average rental prices have come down 10-15%
Some housing prices have come down up to 70%
Markets:
CA and NY some areas
Love Sacramento market
But little left. Too many investors
Likes diversified economy and bigger areas.
AZ, NV, FL , he likes best
Las Vegas
VA loans with 5% down.
Prices down 75% from peak.
Still good long term demographic projections.
Phoenix
Uptick from 2009
Does not think the new proposed law in AZ will affect it long term.
Still good long term demographic projections.
Florida:
Orlando
$40 to $43 per ft for fairly new homes.
Bank owned properties.
$60k priced homes.
Slightly better than Tampa or Jacksonville, because of better economy due to tourism and conventions (which are starting to come back.)
Still good long term demographic projections.
Atlanta
Non-recourse loans available.
20-22% down, new homes, cash flow. Tenant with option to buy.
Oklahoma City
5 yr loan with 25% down
30 yr loan, 40% down
$50-60k - to 100k
Denver
Some flipping there
A lot of patience and a strong stomach
Other areas,
Like Washington, Idaho, the deals are not generally there. There are some foreclosures, but prices have not come down so much generally.
Dallas has some malaise, not as good bargains. Did not go up so much and has not come down so much.
Still likes single-family homes for most investors.
Duplexes and 4 plexus: be careful of the areas for these.
Apartment buildings
More like operating a business.
Best are 150 to 300 units with onsite managers.
Sometimes smaller complexes are OK if managed by a specialty firm which manages several of these.
Flips:
Does not recommend short term flips as much as longer term:
Safer, but not as quick, to keep for a year or 2.
Buy quality:
Not too fancy areas, but good solid areas with school districts and good value.
You can buy junk for less, but there is more risk.
Existing properties:
Some mods are going through.
Short refis. These are rare.
$5000 fee or 1% of loan
What to do with investment properties currently owned with negative cash flow?
If only $100 to $200 negative and you have good credit to preserve, keep them.
If not, you need to consider individual situations.
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