[Lcdproc] United Built Homes, Tapped Out Local Real Estate Values Force Many Investors To Look Elsewhere

Fri Jan 4 11:15:02 2008

------=_Part_17538_26589651.1199445267507
Content-Type: text/plain; charset=ISO-8859-1
Content-Transfer-Encoding: 7bit
Content-Disposition: inline

United Built Homes, Tapped Out Local Real Estate Values Force Many Investors
To Look Elsewhere

In some areas of the country it is getting more and more difficult to find
values that make sense for investment. Further complicating returns are
accelerating taxes and insurance. Laying this all over an investment
scenario margins are thin or non-existent. Long term appreciation in these
tapped out areas is the only way to recognize any type of return but the
property may need to be fed cash every year and that is not a pretty
picture. The rents lag the necessary number to make the property feasible.
With some cooling markets, the rapid appreciation of values may not be there
to make those properties worthy of consideration. Like many other competing
investments other areas are combed for values. Warren Buffet looks high and
low for investments in the U.S. as well as offshore to give shareholders the
often anticipated return on their investment. For the moment let?s assume an
investor is somewhat less in net worth than Mr. Buffet. If there is money
available, perhaps other areas could be examined for potential targets of
investment dollars.

Twenty or more years ago there would have been scant ready data to pour over
for potential investments in the out of town real estate markets. Today,
there exist volumes of information online so the opportunity to perform due
diligence in a particular area has been accelerated. Many Realtors are
currently setting on their hands, due to slow market conditions, and would
welcome an out of town investor to work with. Following is a discussion of a
buying criterion to maximize the potential for your return on invested
dollar.

Cities and States are not static. Likewise a company stock may have been
beat up and bloodied in the stock market, but management toiled to improve
the numbers and suddenly the stock became pretty in market?s eye. Much the
same has happened with cities around the U.S. One day many of the large
businesses left and area and local economics took a hit and suffered years
of struggling and economic adversity. However, over time, cities and states
worked hard to reinvent themselves and have come back close to where it was
before. Again this takes years to achieve. Many a city vows to diversify and
spread their eggs out among several baskets as not to set them up to be
crushed down the road by economic downturns. What any investor looks at is
the trends. Just as it is with other investments. The question is always
posed, ?Is the investment trending up or down?? It is wise to take positions
as things are moving in an up trend and have a way to run for a good play.

In many areas it was necessary to look at multifamily properties say in the
4 units or less just to have a chance to have some cash flow. For many, this
is just too much property management to consider. By looking outside the
area and focusing on attractive single family homes in established
subdivisions with minimum three bedrooms, two baths, with a two-car garage
the cookie cutter property begins to take shape. Sticking to basics and not
deviating from this style will maximize the investment. When investing from
afar there is little room for specialized properties so unique they become
tough to manage or sell. Vanilla is what is called for here with homes in
good condition and repair. Even in some of these newly uptrending areas
there is still some desperation in seller?s mind because it had been a dry
period for so long. Normally, the public is slow to recognize that change is
afoot. An investor, to be successful will need to exploit this opportunity.

Wells Fargo and the National Association of Home Builders reported in the
third quarter of 2006 that the least affordable housing in metro areas were
found in California and New York city and Nassau/Suffolk areas of New York
state. Again, this is not a static situation, this is the way it is now.
These numbers are based on average income for the areas tied to the medium
priced home. Los Angeles was reported to have a 1.80% affordability index.
Fresno was reported to have a 7.10% affordability index. It further gives
fuel to the fact that many homeowners will drive an hour and a half just to
get to work in an effort to find a more affordable suburb.

The 10 most affordable major metro areas includes Indianapolis at 85.9%,
Youngstown at 85.5%, Detroit 82.9%, Buffalo at 82.9%, Grand Rapids at 81.6%,
Dayton at 81.2%, Toledo 80.5%, Harrisburg 79.5%, Akron, 79.5%, Rochester at
79.0%. The common thread here is that many of these areas were considered as
?rust belt? cities. Times are changing, nothing is static for long unless
zero effort is invested to make positive changes. Smaller cities in the same
study that were big in affordability index were noted as Springfield, Ohio,
Mansfield, Ohio, Lansing and East Lansing, Michigan, Lima, Ohio, Battle
Creek, Michigan and Canton-Massillon, Ohio. This is in no way a directive to
immediately jump in and buy an investment home in these areas, rather, it?s
just a heads up to start looking in these areas. There are pluses and
minuses in every state and city. This is just an identification exercise to
see where there ?might? be some deals.

To focus on an investment criteria of buying three bedrooms, two baths, two
car garage homes may indicate that these properties may not exist in the
older cities. An investor may need to look at the surrounding suburbs that
will match the criteria. Locate a Certified Property Manger, which is a
Realtor designation of someone who specializes in property management. In
most cases the fees will be half or all the first months rent and 10% of the
collected rents. Find out, what the rental levels are for a subdivision home
that is a 3/2/2 in various locations. With that number an investor can start
performing due diligence in starting with the projected rents and working
the numbers backward to try and achieve a $200+ cash flow each month. Land
values and depreciation are factored in to determine the cash flow before
tax and after tax. These are unique times in the mortgage industry with a
buy down rate of 5.5% on a 30-year fixed available right now. Next week, who
knows? To quickly figure the deal, it would take a factor of $5.6778 per
$1,000 loan amount to get a monthly principal and interest number. With this
add the projected insurance and taxes for a projected payment. You will have
the management fees to factor in as well a vacancy factor of a conservative
7% of projected annual rents. Since this is a single family home, the rental
customer will pay for the electric, gas, garbage, water, sewer and say a
negotiated repair limit of the first $50. Coupled with an extremely
affordable mortgage interest rate and an uptrending area this could work for
a longer-term investment. Highly leveraged properties would not work as far
as cash flow goes UNLESS the seller were willing to offer terms by way of a
seller held second with very low payments and interest rate. Even an
investor with challenged credit can get a rate buy down on a subprime
mortgage. The numbers will tell if a property will work or not OR it will
tell the maximum price that can be paid based on the due diligence phase and
the information inputted.

An investor will need to locate motivated sellers with some sort of economic
pressure, which will be noted with a vacant home. Offers with the seller
paying all the closing costs and prepaids expenses would be noted in any
offer to purchase. Further contributions to an interest rate buy down would
be another point to negotiate with a motivated seller. In all cases, a very
thorough home inspection must be performed. There is no room for major
hiccups. As the up trends continue in these areas, a sale may be
contemplated down the road. Many rental customers buy the homes they live
in. It?s the first built in prospect to buy for the investor.

Again, if an investor has tapped out the city he resides, there might be
other options by diversifying in other areas. This will point an investor in
a general area to begin a search. There is no substitution for good due
diligence. Other cities may be equally attractive. Check it out.

------=_Part_17538_26589651.1199445267507
Content-Type: text/html; charset=ISO-8859-1
Content-Transfer-Encoding: 7bit
Content-Disposition: inline

United Built Homes, Tapped Out Local Real Estate Values Force Many Investors To Look Elsewhere In some areas of the country it is getting more and more difficult
to find values that make sense for investment. Further complicating
returns are accelerating taxes and insurance. Laying this all over an
investment scenario margins are thin or non-existent. Long term
appreciation in these tapped out areas is the only way to recognize any
type of return but the property may need to be fed cash every year and
that is not a pretty picture. The rents lag the necessary number to
make the property feasible. With some cooling markets, the rapid
appreciation of values may not be there to make those properties worthy
of consideration. Like many other competing investments other areas are
combed for values. Warren Buffet looks high and low for investments in
the U.S. as well as offshore to give shareholders the often anticipated
return on their investment. For the moment let?s assume an investor is
somewhat less in net worth than Mr. Buffet. If there is money
available, perhaps other areas could be examined for potential targets
of investment dollars. 
Twenty or more years ago there would have been scant ready data to pour
over for potential investments in the out of town real estate markets.
Today, there exist volumes of information online so the opportunity to
perform due diligence in a particular area has been accelerated. Many
Realtors are currently setting on their hands, due to slow market
conditions, and would welcome an out of town investor to work with.
Following is a discussion of a buying criterion to maximize the
potential for your return on invested dollar. 
Cities and States are not static. Likewise a company stock may have
been beat up and bloodied in the stock market, but management toiled to
improve the numbers and suddenly the stock became pretty in market?s
eye. Much the same has happened with cities around the U.S. One day
many of the large businesses left and area and local economics took a
hit and suffered years of struggling and economic adversity. However,
over time, cities and states worked hard to reinvent themselves and
have come back close to where it was before. Again this takes years to
achieve. Many a city vows to diversify and spread their eggs out among
several baskets as not to set them up to be crushed down the road by
economic downturns. What any investor looks at is the trends. Just as
it is with other investments. The question is always posed, ?Is the
investment trending up or down?? It is wise to take positions as things
are moving in an up trend and have a way to run for a good play. 
In many areas it was necessary to look at multifamily properties say in
the 4 units or less just to have a chance to have some cash flow. For
many, this is just too much property management to consider. By looking
outside the area and focusing on attractive single family homes in
established subdivisions with minimum three bedrooms, two baths, with a
two-car garage the cookie cutter property begins to take shape.
Sticking to basics and not deviating from this style will maximize the
investment. When investing from afar there is little room for
specialized properties so unique they become tough to manage or sell.
Vanilla is what is called for here with homes in good condition and
repair. Even in some of these newly uptrending areas there is still
some desperation in seller?s mind because it had been a dry period for
so long. Normally, the public is slow to recognize that change is
afoot. An investor, to be successful will need to exploit this
opportunity. 
Wells Fargo and the National Association of Home Builders reported in
the third quarter of 2006 that the least affordable housing in metro
areas were found in California and New York city and Nassau/Suffolk
areas of New York state. Again, this is not a static situation, this is
the way it is now. These numbers are based on average income for the
areas tied to the medium priced home. Los Angeles was reported to have
a 1.80% affordability index. Fresno was reported to have a 7.10%
affordability index. It further gives fuel to the fact that many
homeowners will drive an hour and a half just to get to work in an
effort to find a more affordable suburb. 
The 10 most affordable major metro areas includes Indianapolis at
85.9%, Youngstown at 85.5%, Detroit 82.9%, Buffalo at 82.9%, Grand
Rapids at 81.6%, Dayton at 81.2%, Toledo 80.5%, Harrisburg 79.5%,
Akron, 79.5%, Rochester at 79.0%. The common thread here is that many
of these areas were considered as ?rust belt? cities. Times are
changing, nothing is static for long unless zero effort is invested to
make positive changes. Smaller cities in the same study that were big
in affordability index were noted as Springfield, Ohio, Mansfield,
Ohio, Lansing and East Lansing, Michigan, Lima, Ohio, Battle Creek,
Michigan and Canton-Massillon, Ohio. This is in no way a directive to
immediately jump in and buy an investment home in these areas, rather,
it?s just a heads up to start looking in these areas. There are pluses
and minuses in every state and city. This is just an identification
exercise to see where there ?might? be some deals. 
To focus on an investment criteria of buying three bedrooms, two baths,
two car garage homes may indicate that these properties may not exist
in the older cities. An investor may need to look at the surrounding
suburbs that will match the criteria. Locate a Certified Property
Manger, which is a Realtor designation of someone who specializes in
property management. In most cases the fees will be half or all the
first months rent and 10% of the collected rents. Find out, what the
rental levels are for a subdivision home that is a 3/2/2 in various
locations. With that number an investor can start performing due
diligence in starting with the projected rents and working the numbers
backward to try and achieve a $200+ cash flow each month. Land values
and depreciation are factored in to determine the cash flow before tax
and after tax. These are unique times in the mortgage industry with a
buy down rate of 5.5% on a 30-year fixed available right now. Next
week, who knows? To quickly figure the deal, it would take a factor of
$5.6778 per $1,000 loan amount to get a monthly principal and interest
number. With this add the projected insurance and taxes for a projected
payment. You will have the management fees to factor in as well a
vacancy factor of a conservative 7% of projected annual rents. Since
this is a single family home, the rental customer will pay for the
electric, gas, garbage, water, sewer and say a negotiated repair limit
of the first $50. Coupled with an extremely affordable mortgage
interest rate and an uptrending area this could work for a longer-term
investment. Highly leveraged properties would not work as far as cash
flow goes UNLESS the seller were willing to offer terms by way of a
seller held second with very low payments and interest rate. Even an
investor with challenged credit can get a rate buy down on a subprime
mortgage. The numbers will tell if a property will work or not OR it
will tell the maximum price that can be paid based on the due diligence
phase and the information inputted. 
An investor will need to locate motivated sellers with some sort of
economic pressure, which will be noted with a vacant home. Offers with
the seller paying all the closing costs and prepaids expenses would be
noted in any offer to purchase. Further contributions to an interest
rate buy down would be another point to negotiate with a motivated
seller. In all cases, a very thorough home inspection must be
performed. There is no room for major hiccups. As the up trends
continue in these areas, a sale may be contemplated down the road. Many
rental customers buy the homes they live in. It?s the first built in
prospect to buy for the investor. 
Again, if an investor has tapped out the city he resides, there might
be other options by diversifying in other areas. This will point an
investor in a general area to begin a search. There is no substitution
for good due diligence. Other cities may be equally attractive. Check
it out.

------=_Part_17538_26589651.1199445267507--