Real Estate Investing and The Media

I was listening to one of the local real estate radio shows, and the guest was Alan Langston the Executive Director of the Arizona Real Estate Investors Association (AZREIA). The discussion was Phoenix area real estate market and the benefits of being a member of his organization.

AZREIA has been in existence for about 6 years and is one of the largest, if not the largest, real estate investor organizations in the country. Anyway being the Executive Director of a large industry organization gives the advantage of being connected with a lot of local real estate investors and industry experts, i.e. he knows and understands what’s going on in the Phoenix market place.

He made several good points during his discussion. They were talking about how negative the media is on the real estate market right now. (Remember the media is in the business of “SELLING” the news.) Anyway Alan made a great point about the media. To paraphrase he said the media helps to keep the noninformed investors out of the market. Which is a great way to look at the service the media provides. If you are not informed about the market (applies to all industries) you should not be investing. He also mentioned the informed real estate investors (like myself) have been watching the market closely and are now buying real estate.

If you are a long-term real estate investor, the simple fact is that if a property has positive cash flow, it has some good long-term potential. As with any type of investment or business endeavor it depends upon your goals and perspective.

If you are interested in investing in real estate or buying a personal residence, then get your financial house in order, put your Financial Success Team together and get informed about your local market.

Join your local real estate investing club or organization. In Phoenix Arizona and surrounding areas go to www.AZREIA.com to find out more information and become a better informed investor.  Be one of the few that take advantage of this real estate market to increase your financial position.

If you are in the Phoenix area and would like to work with an Investing REALTOR contact me at Tips@RealMarketPros.com

Make your day GREAT!

10 Reasons (7, 8, 9 and 10) Why I Like Real Estate As An Investment

(To read the prior posts regarding Real Estate Reasons To Invest select the desired post: 1-2, 3, 4-6.)

Number 7

Assignment of the agreement. You can assign the real estate agreement for a fee. If you are not interested in actually owning the piece of real estate you can negotiate a stellar deal and then sell or assign the agreement to another buyer for a handsome fee. You don’t even have to take possession of the property to make money from it. Sweet deal eh. But of course you want to have a contingency plan in place in the event you need to go through with the purchase.

Number 8

Little or No Money Down! You can buy a piece of real estate with little to no money out of your pocket. By finding the right type of seller (motivated) you can purchase real estate by taking over payments (make sure you understand the details of the loan you’re assuming).

Depending on your exit strategy (selling on a Rent-to-Own, or Lease Option contract) you can put down a little money to purchase and get a return of your initial funds while your tenant is renting and improving their credit and financial situation to be able to purchase the property from you at sometime in the future.

Another scenario is buying a deeply discounted property with a short-term loan and then refinancing to pull your funds back out to use again.

Number 9

Legally Pay Your Taxes Later. You can sell the investment property and purchase another one and legally defer any taxes on the profit owned. This means you get to use that money that normally would go to Uncle Sammy to make YOU more money. Why pay tax now if you can use the funds to accelerate your returns.

Number 10

Leveraged Wealth Generation. You can use other people to pay your mortgage payments on your real estate investments. If you have purchased right, you get to use tenant payments to pay your monthly payments associated with your property. So while they are paying the bank, you get to sit back relax and watch your assets grow in value. This growth in value comes one from the appreciation of the asset over time and two from the reduction of your principle on your mortgage over time creating more equity in your property.

So there you have it, just a few of the many, many, many different benefits of investing in real estate. There are also several very passive, secure ways to invest in real estate that I did not mention in the 10 Reasons (Click here to find out more.).

The Simple Warren Buffett Approach to Real Estate Investing

From what I understand about Warren Buffett, is that he likes to keep things simple.  He is said to have two basic rules of investing that he follows.

Rule 1: Never Loose Money

Rule 2: Always Remember Rule Number 1.

By following this simple approach in any aspect of investing whether it be stocks, or real estate you should consistently do well.

Why does this approach work so well?

I think Phil Town’s Rule # 1 investing approach, simplifies Warren’s (like I know the guy) approach to investing. The key is in doing the back ground research (due diligence) required to be able to attach a value to the company you are investing in. Really get to understand the company or in our case it is a real property.

By doing the research on the company’s past performance, and the people in charge, a level of predictability can be established. By looking at the numbers a value can then be established for that company today and in the future based on its past performance.

The risk can be reduced through the purchase of the company at a deep discount, which gives a margin of safety for any miscalculations or hidden issues that may come up in the future.

The company should also be one you would be willing to hold for the next 100 years.

It makes sense doesn’t it? If you know what should happen in the near future, and how an asset should perform, then the otherwise tough decisions become easy decisions when the asset doesn’t perform. Good decisions can be made based on the numbers instead of emotions.

My approach is similar, only the principles are applied to real estate. I’m looking for those situations in which the value of a real asset can be purchased at a significant discount. By sifting through the numbers a realistic value can be determined as well as the future expectation for appreciation performance (yes, properties are appreciating even with the current market conditions).

Once a market value is determined then comes the way to realize or create the equity in the property. This happens either through negotiating and buying the property at a 20-30% discount, or through property improvements, structural changes, zoning changes, income changes or simply by changing the perception of the property.

Knowing the numbers in a particular area and buying at a discounted value, allow us to ride out these market fluctuations. Buying a property at a 20% discount in a good area allows us to hold when the market declines 5-10 or even 15%.

Makes sense doesn’t it.

Anyway… there is HUGE money to be made in finding the discrepancies in value.

Risk is further reduced by having a contingency plan for each asset that works in both the short-term and the long-term.

In reality there are few things that are 100% predictable, and stuff happens out side our control. So in order to keep the cash invested and the assets safe, there is also a long-term plan. This plan allows us to continue to benefit from holding the property in our long-term portfolio.

As everyone is aware with the current market conditions not all real estate continues to appreciate without pull backs. With our approach we are able to ride out these market fluctuations.

So in reality our approach works in markets that are appreciating and markets that are depreciating.

Email me and we’ll set up a telephone appointment. This is a no obligation initial consultation on some of the strategies you can use to build your personal cash generating machine.

10 Reasons (4, 5, and 6) Why I Like Real Estate As An Investment

(To read the prior posts regarding Real Estate Reasons To Invest select the desired post: 1-2, 3, 7-10.)

Number 4

Depreciation. You’re able to depreciate your investment property year after year, even if the value of the asset is increasing. This can significantly affect your annual tax situation. By owning enough real estate you can significantly reduce the taxes you owe, and own a on property that is putting money into your bank account. To maximize this process and better understand this strategy you should be consulting your tax professional.

Number 5

Maximum Flexibility. You have maximum flexibly of what you can put in a real estate agreement. For example if you are unsure of the quality of the deal or have reservations about certain areas of the contract, you can include a clause that allows you to run it by your attorney or other professional before committing to going through the purchase.

You may also be interested in making repairs or improvements to the property before actually closing on the deal. What would be the advantage to doing this? Well as we discussed in one of the earlier points, improvements often increase the value of the property in an amount greater than the improvement. An example may be, if you have a home that you have an agreement to purchase for $200,000, and go in an make improvements increasing the value to $230,000, then you are buying the property with a nice already established equity position.

Number 6

Equity Use.  You can access the increased value of the real estate without needing to sell the asset. Meaning you can pull the equity out of a piece of real estate simply by getting a second loan or line of credit. The key to this strategy is to put the new available equity to work making you more money vs. spending it on a boat, new entertainment center or other doodads (for those of you who are Rich Dad, Poor Dad students).

While there are many more than just 10 Reasons Why I like Real Estate As An Investment, I’ll only mention 4 more.

10 Reasons (3) Why I Like Real Estate As An Investment

(To read the prior posts regarding Real Estate Investment Reasons select the desired link: 1-2, 4-6, 7-10.)

Number 3

Leveraged Improvements. There is the potential to make improvements to the asset and affect its value. The improvements made are often (when done correctly) create a perceived value greater than the original cost of the improvement. For example I have done some research in a particular neighborhood. I found that houses in this neighborhood with a garage and 3 bedrooms bring a significant amount more in sales price and sell faster than houses that only have a carport and two bedrooms. I’m guessing you may be saying “Duh of course they do.” But the real question is how much more does the 3 bedroom home with a garage bring? Is the amount to upgrade the house worth the increased sales price?

Well my research showed the difference between the two types of homes after subtracting the cost of repairs/improvements, closing costs and commissions had a projected net profit a little over $25,000! In case you haven’t been able to tell I’m very conservative and increase my projected costs by 10-15% and my projected sales price to about 95-96% of the current market price for similar homes.

Now to some $25,000 may not seem like much and to others it may seem like a significant amount. Just to be conservative lets say it takes 6 months to sell the house (instead of the 3 months it currently takes to sell in this neighborhood). What if you set yourself up to do two of these per year? An extra $50,000/year for a few hours of extra work and supervision, is an extra $50,000 worth it to you? That’s obviously an answer you will have to answer yourself.

Whether you think an extra $50,000 is a lot or not, I hope your seeing the main point I’m making. You can easily do something to affect the value of the asset. Try doing that with a stock you own.

More to on the way…

10 Reasons (1-2) Why I Like Real Estate As An Investment

(To read the posts regarding Real Estate Reasons To Invest select the desired post: 3, 4-6, 7-10.)

Now I know I’m going to hit a nerve with a few people. These may be the people who are saying, “Have you seen the market lately? Are you nuts?” These are the people and maybe your one of them, who purchased homes and property banking on continued high levels of appreciation. Buying at those inflated prices and now sitting there now owing more than what the property is worth. Not a big deal if you are getting a break even or positive cash flow. Oh you say you have a negative cash flow.

No doubt about, there is significant depreciation going on in many areas. Those of you who are in negative property situation need to pay close attention. If you would have purchased your property at a significant discount to begin with (at least 20% to the current market value) then you would not be in quite the same position of financial pain, as you are now.

If you are not able to purchase a property at a significant discount or realize a significant equity position in a month or two period of time without relying on appreciation alone, then you need to wait for the next deal.

There are many different reasons for the current state of the market. Which I may explain at some point in time in the future. The point is real estate has many great advantages as an investment when you BUY IT RIGHT. The key is putting together a team of professionals to assist you in finding those properties and the areas in which you can significantly reduce your risk and buy right.

These reasons for my liking real estate are in no particular order, and are just a few of the many reasons… Why I Like Real Estate!

Number 1

Leveraged Buying Power. You can buy assets worth greater than the amount you invest. For example Say we have $20,000 to invest in something. If you invest that amount in stock you control $20,000 of stock. If you were to purchase real estate you could use that $20,000 as a 20% down payment to purchase a $100,000 home. Or a 10% payment on a $200,000 home. (There are some other strategies in which you can legitimately, honestly and legally purchase or control a piece of real estate with using only about $5,000 (sometimes less) of the $20,000 and have $15, left over as a safety net).

Number 2

Leveraged Appreciation. This is where it is important to do your due diligence and consult with a professional so you can buy in the higher appreciating areas. Take the $200,000 house in the above example. Say in today’s current market conditions we have an area that is only appreciating at 1% per year. 1% of $200,000 is $2000 for that year. So if your initial investment was $20000 your rate of return is 10%. If you invest the same $20,000 in the stock market you need to get a 10% return. If you were working with a knowledgeable professional who has a team in place and can purchase that same house for only $5000 out of pocket your return on investment would be 40%. Realize there are also some other factors you have to consider into the equation, like taxes (depending upon how long you hold the investment), management fees and other expenses. But I hope you see the potential.

Stay tuned as the next few reasons are on the way…

Using Housing Alerts As A Due Diligence Tool

Learn How to Increase Your Real Estate Investing Profits.

Previously we discussed what HousingAlerts Real Estate Market Technical Analysis (TA) software was (click here to view that prior post).

Now we will discuss how to utilize the software to maximally expand your utilization of automatic appreciation as it pertains to the real estate market place.

We realize that every industry has a market cycle.  There are times when business is booming and times when the business market contracts, and the real estate market is no different.  As we are currently seeing we are now in the down cycle of the market.  The main objective of HousingAlerts is to utilize accurate housing data to best predict these market cycles.

Knowing when the best times (high appreciation) occur in the real estate markets to buy a property is key to maximally utilizing the advantage of automatic appreciation.  It is also just as important to avoid those times when the market is significantly declining.

How many of us purchased an investment property and then watched as it began to decline in value with the next year?  If you look back at the losses you have incurred up to now, I wonder how much profit an analysis tool like HousingAlerts might have saved you?

You can significantly improve your real estate investing profit and success by simply knowing when to buy with high appreciation and selling at the times when real estate begins to depreciate, not just a pull back.

You may think by investing in this way you would be faced with short holding periods, or be in and out of the real estate market quite a bit.  In most cases when you compare the 30 year buy and hold strategy to following the HousingAlerts strategy it would require to buy and sell 1-2 more times during that same period. Six to eight years is still a longer term hold from my view point.

This whole discussion can become a bit confusing without pictures and graphs.  Email me (HA@RealMarketPros.com) and I’ll send you a PDF document which better demonstrates the potential benefits of using HousingAlerts to assist you in making informed decisions about your current real estate market.

To receive the maximum value of the HousingAlerts Analysis tool you first must know your real estate investing strategy is.

Are you taking the perspective of investing only in your close surrounding area (backyard investing)?  (For those of you with little or know experience this is usually the best place to begin your real estate investing activity.  Get familiar with the process of buying, selling and managing your investments.  Then when you’re comfortable consider expanding to areas that are further away.)

Using HousingAlerts in your local real estate market area can allow you to fully maximize your investment activity.  Just think about if you were able to buy prior to the high appreciating times in your market and sell prior to the high depreciation times in the market.  You would make a lot more money!

Or if you have a little more experience with real estate you can use the HousingAlerts analysis system to find the next upcoming potentially hot real estate market.

Kind of like using a fish finder to locate the best places in the lake to find fish before you put your fishing pole in the water.  Fishing in the part of the lake where there is a decreased probability in finding fish is just a waste of time and effort.

So we must consider HousingAlerts as one of the first and most important steps in the entire real estate investing process. HousingAlerts may be the most critical step in helping you create the best chance of a successful outcome during the real estate investment due diligence process.

Its value comes in to play way before you commit substantial resources (time, energy, money or opportunity costs) in locating or analyzing particular neighborhoods or properties.

Long before you start focusing on individual neighborhoods, you need to first identify which phase of the real estate market cycle your overall investment market is facing. Then (and only then) will you know which investment techniques and strategies are appropriate at the “neighborhood” level… providing you determine it is a market you want to be in.

Since the most significant aspect of creating real estate wealth is through capturing “Automatic

Appreciation” (view my previous post here) you need to focus on a few specific questions:

1) In which real estate market should I invest (and when)?

2) What strategies and tactics are best going to fit the current market cycle?

3) Should I buy, sell or hold?

4) What should my hold period be?

Getting it right (or wrong) at this early part of the investment process will have more impact on your ultimate success (or failure) than anything else you may do.

In Summary

For Local Market Investors (back-yard investors… or those interested in only a single market), following a few simple market timing indicators can mean the difference between huge success, mediocre success or miserable failure. Another key is to pursue the correct buying, holding and selling strategies tailored to the specific market cycle you are investing in.

For Total Market Investors (those wishing to maximize their real estate wealth, while at the same time reducing risk and effort by continually investing in only the most highly appreciating real estate markets) the key is to always be seeking HOT emerging real estate markets while avoiding dead or flat markets.

You can learn more about the HousingAlerts system by visiting RealMarketMastery.com.

Or email me ( HA@RealMarketPros.com) to request the PDF document I mentioned earlier to better explain the system with graphs and pictures.

More To All

Finding the Best Real Estate Investment Areas In Phoenix, Arizona

Searching for The Best Real Estate
Investment Areas In Phoenix, Arizona

All due diligence contains an element of market research.  You need to find a source or sources to at a minimum give you an over all view of the market place.

When considering real estate as an investment, whether it be a personal residence or an investment property, there are several key areas that you want to consider to maximize your future profits.

The qualities that make a neighborhood attractive to live in are also the qualities that often make a good neighborhood to purchase investment property in.

One of the best indicators of a good neighborhood is the school district that it is located in.  Most parents myself included intend for their children to excel and prosper in life.  A key part of that equation is sending children to excellent schools.  Public schools more than private schools will often attract parents to the neighborhoods in those excellent school districts.

The Phoenix area schools offer open enrollment.  This means that students can attend schools other than the district in which they live, as long as there is space in the school, and parents are able to provide the needed transportation.

Transportation is provided to the children residing within each school district. So even with open enrollment there may a slight advantage by living within the school district.

Investing in areas that are within an excellent school district, or in close proximity are good places to begin your real estate investing due diligence.

You can find school information located on the Due Diligence page of this website, or go directly to the website of the Arizona Department of Education. (http://www.ade.state.az.us/)

Crime is the next area that often defines the quality of a neighborhood.  Even though crime can happen in nearly any neighborhood, great neighborhoods often have low crime statistics.

Investing in areas with low crime rates is beneficial in several ways.  If you should have a short-term vacancy there is less of a chance of your property being vandalized while finding a new tenant?  People generally want to live in safe areas, especially if they have children.

You can find school information located on the Due Diligence page of this website, or go directly to the website

Amenities are also to be considered when researching a place to buy real estate investment property.  Locating areas that are close to grocery stores, malls, entertainment and other destination areas should also benefit your real estate investment in the long run.

Where To Live In Phoenix and the Valley of the Sun is a very good resource to begin your real estate research with.  This book contains descriptions of the all the areas I mentioned above plus many more details on the neighborhood specifics for the Phoenix and surrounding areas.

As the book indicates, it was created and designed for an individual or families with specific needs and desires in the area in which they would like to live.  It can assist you in asking more informed questions to help you match your needs and wants to specific neighborhoods, or cities.

The book is designed to go from general geographical areas of the Phoenix metro area and is then further divided into cities, towns and neighborhoods.  The editors also use a 5 star ratings system for each area detailed in the book based on desirability, home prices, personality and access to amenities.

So the benefit is that most anyone new to the Phoenix area has a good resource for learning more about the local areas and neighborhoods.

The added benefit is that real estate investors can also use the book to easily locate the areas that will most likely be good areas to purchase real estate. Remember what I mentioned earlier, places that are in demand to live in often are the same places that are good to invest in.

I have ready to go search parameters based on the editors 4 and 5 star neighborhood ratings.  This assists you in quickly and easily searching for real estate investment property in the potentially higher appreciating areas.

Email me (Searches@RealMarketPros.com) and I will set up a search with your specific criteria for the area you are interested in purchasing an investment property.  The search will automatically inform you whenever there is a price change or new houses come onto the market.

There is really no easier way to begin your real estate investment purchase research.

You can find a used Where To Live In Phoenix book at Amazon.com for under $5 bucks (shipping included).   Or you can buy it new for $24.95.  Either option will give you an excellent start to your neighborhood research and due diligence.

Check it out today!

Using The Housing Alerts Program To Predict Real Estate Market Cycles

Searching For The Next HOT Real Estate Market.

About a year ago I joined HousingAlerts, as a charter member.  After hearing a little about it, I did a little research and was very impressed with the potential of the system.

The HousingAlerts Analysis System was developed a Harvard University Graduate, CPA and veteran real estate investor Ken Wade.

He developed the system out of the frustration of not having an accurate way to analyze real estate markets. He personally funded the research and development of a system that could perform technical analysis and utilize standard statistical methods to assist him in predicting real estate market cycles.

HousingAlerts is a web based software program that uses the U.S. Census Bureau’s Metropolitan Statistical Area (MSA) Data as the basis for performing Technical Analysis (TA).

A MSA can be defined as: A core area such as a central city along with the counties economically and socially connected to it.

Technical Analysis is a very sophisticated market cycle prediction tool that utilizes past results, trends and cycles to anticipate future market directions. Most investors are familiar with the use of TA to assist them in making financial decisions related to the stock market.

The MSA data is generated quarterly by the federal government and then complex statistical methods are applied to the data by the Housing Alerts program.

The genius of the system is in use of TA applied to the MSA data to develop Moving Averages (MA) pertaining to local real estate market cycles. These MA can act as triggers to assist you in making a decision on whether to buy, sell or change your acquisition strategy, in a particular real estate market.

You may be more familiar with the many stock trading software programs in which a red line crosses a green line triggering a buy or sell signal. A similar approach has now been developed for the real estate market through the use of HousingAlerts.

HousingAlerts monitors actual home price movements for all of the 379 individual MSA’s, using the same standard of measurement used by the U.S. Census Bureau.

HousingAlerts is purported to be the only system that uses actual and repeat home transactions to track home value changes.

This is really the only way to obtain truly accurate home price data. The significance of this software and the data is that it is currently the most detailed house-by-house price change data available.

It opened my eyes to the power of automatic appreciating real estate markets and the ability to locate them in a somewhat predictable fashion.

To learn more about this program you can click here to visit the HousingAlerts Website.

In next session I will discuss where HousingAlerts might fit into your real estate investing activity.

More To All and Less To None

It’s Time To Appreciate… Appreciation

Learn How To Make A Huge Difference In The Size and Growth…

Of Your Real Estate Portfolio.

There are two basic types of appreciation (Forced Appreciation-the hard way involving a lot of work, learning new techniques, searching for motivated sellers, trying to find the same deals that everyone else is also looking to find.

And then there is Automatic Appreciation-the easy way, the automatic increase in value due to the normal market cycle).

Forced Appreciation (Skill, Hard Work, Risk, and Limited Upside)

This approach is what we, as “traditional” real estate investors were taught to focus on. Buy low and (hopefully) sell higher.

Most forced appreciation strategies rely on finding “motivated sellers” or distressed properties and people, as they represent the best likelihood of getting the best price and/or terms.

With Forced Appreciation, investors only make money on the “spread” – the upside profit is limited… you make your money by “buying it right” (presumably at below market prices or with terms).

Although Forced Appreciation is profitable, it is not the way to massive, auto-pilot riches.

Automatic Appreciation

“Automatic Appreciation is like the power of compound interest on steroids, because of the ability to leverage the asset”

Automatic appreciation occurs due to the simple economics of supply and demand. This type of appreciation is what most homeowners in many markets experienced before the markets changed.

The huge windfall profits happen simply because of owning property in the right place at the right time… and not from ‘hard work’ or special skills. I’m sure you know of the individuals that jumped on the bandwagon at the height of the market, held their houses for 6 months or less and then sold for a hefty profit.

Where all of those people skilled, or experienced? Heck no! They were the beneficiaries of a fast appreciating market.

YOU MUST REALIZE there are still real estate markets out there today that are appreciating at greater than 10%. The question then becomes…

“Do YOU Know Where These High Appreciating Markets Are?”

As I mentioned above you may have heard the saying, “You make your money when you buy.” The real secret is that you make your money WHERE you buy.

Location, Location, Location, is the mantra that seems to be the most associated with real estate. In the realm of Automatic Appreciation, location and timing are truly the keys to quickly generating wealth.

It’s Now Time To Choose.

1) Work your arse off finding motivated sellers, tying-up and improving properties, managing crews of employees, agents and contractors and spending lots of hard-earned cash, spending time away from family and developing an ulcer.

OR

2) Take A Smarter, Easier Route. Take just 7 minutes to learn the real secret to locating the best most profitable, highest appreciating real estate markets to invest in. It can be as easy as a GREEN LINE crossing a RED LINE. It simply doesn’t get easier .

By the way, you can still apply the traditional forced appreciation techniques in the hot markets and redline your wealth building strategies.

Visit RealMarketMastery.com to learn more about locating the best real estate markets, and open your real estate investing portfolio to a new level of appreciation.