Real Estate Investing 101

How to Calculate NOI on Investment Property

Net operating income or NOI is one of the basic calculations used to to determine CAP rate and viability of an investment property. We have a page on Real Estate Investing 101 dedicated to the various real estate investment calculations. Now we are adding a nifty NOI calculator.

We found a NOI calculator on a site we were visiting and wanted to pass a link on to our readers. The NOI calculator can be used for single or multi-family real estate and has input boxes for most of the common costs. If you don’t see a box for a cost you are including, just put it is an unused box. Make sure and look at how the input box is calculated though. Some items are %’s, some are annual costs and others are monthly.

Here is a link to the NOI calculator.

Best to you,

Ron & Gene Urban
The Urban Team at Realty Executives
602-234-5777

New Real Estate Investors Be Careful

We've been getting a lot of calls from people new to real estate investing. Many are well informed and have realistic goals while others are relying on information that is just plain wrong.

It is important, if you want to be successful, to obtain as much "real" data and information as possible. Often this is hard to obtain because the person providing the info has something to gain if you buy a rental property from them and ethics are not the bedrock of their business practice.

As an example, I received a call this past week from someone who was told by a developer that one bedroom units in the Scottsdale area rent for $900.00 to $1200.00 per month. My gut told me this was not probable... maybe two or three bedroom units but not one. I check the ARMLS stats since February 1st 2010 and found most of the 1 bedroom condos in mid to north Scottsdale rented in the $700.00 range and none over $900.00/month. I am not saying the real estate developer was lying, heaven knows that has never been done, yet the facts do not support the claim.

The moral of this tale is to be careful and do your own due diligence. If someone promises you something, get it in writing. Learn how to perform market analysis or hire someone whose motivation is your success, not his or her pocketbook. Also, success is in the details. Forgetting to include expenses such as vacancy periods, marketing costs, maintenance, HOA fees, taxes, management costs and such can ruin a good day.

As they used to say on a TV cop show... be careful out there.

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Rental Property and City Sales Taxes

Many cities in the Greater Phoenix market are going after landlords for failure to pay sales tax on their rental properties. As a landlord, you are required to have your rental properties descinated as such in the tax records.

Valley cities, in an effort to find tax revenues, are combing information sources to find homes incorrectly identified as owner occupied when in fact they are rentals. Lnadlords may have to pay back taxes, fines and such when caught.

A recent article in the Arizona Republic talks about how Valley cities are taking action. Here is a link to the article for your edification.

The vaious Valley cities have different rules for landlords reporting rental properties, so you would be well advised to check with the tax officials in the city where your properties lie and make adjustments as required.

Best to you,

The Urban Team... your investment home real estate team.  

Greater Phoenix Rental Market Showing Strength

I was in a workshop with Cromford Report guru Mike Orr a couple days ago. He mentioned ARMLS data shows strength in the Greater Phoenix rental market. Specifically, he said the active rental listings during 2009 hovered between 8000 & 9500 rental listings. Today’s ARMLS numbers for all types of rentals popped up at 6339.

Mind you, not all rentals are on ARMLS. Many rentals are advertised using other media, yet I believe the ARMLS numbers show a trend. I have put called into AZCentral.com and Rent.com to see if they have similar figures. When I get them I’ll update this post.

In the meantime, let’s look at some ARMLS single family home rental numbers; The data is pretty telling. The table below shows the number of active rental listings as of this post,  as well as the number of signed contracts year-to-date in 2010.

NOTE: ALL DATA IS FOR SINGLE FAMILY HOMES ONLY.

City	# of Active SFH Rental Listings on 2/26/2010	Signed SFH Rental Contracts Jan/Feb 2010
Valley Wide	3352	3263
Phoenix	670	668
Chandler	142	266
Glendale	136	177
Peoria	143	156
Anthem	51	71
Scottsdale	623	280

As you can see,  the number of active listings is about 50% of the signed contracts numbers. This indicates the inventory is turning over approximately every 2 months.

Chandler and Anthem are showing great strength with the inventory turn over in the 1 month range while Scottsdale is relatively sluggish with a turnover rate of approximately 4 months.

Provided that the ARMLS numbers represent a general market trend, landlords are seeing good news for the future. Add to this the number of home owners being displaced by foreclosure or short sales and the 2010 rental market is looking good.

If you would like us to run this data report for you, we’d be delighted. We can provide results by city or zip code.

Best to you,

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Information is deemed reliable, but not guaranteed. Data provided by ARMLS.

Can I Buy A Home With An IRS Tax Lien, Maybe

We've seen a few deals come by where an IRS tax lien showed up during our due diligence.  Our mortgage friend, Ron Hall, from BNC National Bank just sent us this article that explores this subject. If you have more questions, give Ron a call at 623-293-6970 or pop him an email at rhall@bncnationalbank.com. Here is what Ron has to say:

Many home buyers and real estate professionals find out they are dealing with a tax lien and assume that this buyer is done and move on to the next client.

I am here to tell you that is a HUGE mistake. In FHA lending the rule of thumb is that if the collection can affect title it has to be paid off, well that’s a guideline not a rule.

A couple of things come into play that most people are not aware of: First, is there a payment arrangement? In this case can you show that you have set up a payment plan with the IRS and have made those payments in a timely manner? The gold standard here is 12 months of canceled checks as proof.  If the answer to that is yes the second and very little known tool is… Will the IRS subordinate the lien to the mortgage? We’ll most of the time that answer is YES. Think about it for a minute, you owe the tax guy some money, you want to buy a home, so you ask the IRS to subordinate the lien so that you can accumulate an asset that they can collect against in the future if you default. Is there really a downside for them?

Hope this info helps provide some options and clarity to those who face buying a home with an IRS tax lien.

Gene Urban
www.UrbanTeamAz.com
602-234-5777

Information is deemed accurate but not guaranteed.

Flipping Homes Just Got Easier With New FHA Guidelines

Good news for residential real estate investors who are flipping properties. Last Friday FHA issued a waiver on the 90 day flipping rule. In the past, a real estate investor had to let a property "season" for a minimum of 90 days before they could sell it to a buyer using an FHA loan product. Since many of the flips were in the under $150,000 range, FHA buyers were a big part of the market.Under the new FHA guidelines, the waiver of the 90 day rule allows an investor to put the property on the market immediately with the following restrictions.

1. Waiver takes effect February 1, 2010 and will last for one year unless extended.
2. Investors are now exempt from the 90 day seasoning rule.
3. All transactions must be arms-length.
4. No identity of interest can exist between the buyer and seller.

There are a few more considerations in the guidelines. We understand that homes marketed for more than 20% of purchase price will need to substantiate the increased value. So keep all your receipts for costs incurred in the renovation.

Investors should also understand that appraisers will still evaluate the price of the home based on current market value. We advise performing a detailed evaluation of the neighborhood you are investing in and plan your expenditures wisely. You don't want to do all this work only to find you have overbuilt for the neighborhood.

Best to you and thanks for following us on Real Estate Investing 101.

Gene Urban and Ron Urban
The Urban Team at Realty Executives
602-234-5777

our other sites:

www.SearchforHomesinPhoenix.com -- The best real estate search site for Greater Phoenix

www.UrbanLifeBlog.com -- Downtown and Central Phoenix Information

www.Short-Sale-Phoenix.com -- Everything you wanted to know about short sales.

Should I Buy A Foreclosure or a Short Sale?

Many investors are asking the big question... should l be looking at buying foreclosures or short sales.

The answer is not cut and dry. However, in many cases short sales may be the right choice for three reasons. First, they are priced similarly to foreclosures. Second, at this time there are more short sales to choose from than foreclosures. Third, they are often better condition since the home owner usually lives in the home and can augment your inspection with full property disclosures.

The third factor is important since most investors are not general contractors and have to pay retail or near retail for fixing up a property. The lack of disclosures and AS IS condition of a foreclosure can lead to some ugly post close of escrow problems. This simple factor can make a big difference to your bottom line. 

The BIG downside to short sales is time. It still takes a long time to close escrow on a short sale. The other caution is the seller's lender may come up with some surprise fees at the end like back HOA dues.

We all know investing in real estate is a gamble. That's part of the fun for many hard core investors... throw the dice and see what come up.  Short sales are simply one of the games you can choose to play.

We have a lot more information about short sales on our dedicated short sale web site... www.Short-Sale-Phoenix.com. 

Best to you,

Gene Urban & Ron Urban
The Urban Team at Realty Executives Phoenix
602-234-5777

Urban Team Launches New Real Estate Search Site for Greater Phoenix

Greetings on a rainy Monday in Phoenix. Rain is such an uncommon event here it is worth noting.

We, The Urban Team, are excited to announce our latest specialty web site for people searching for homes, condos, land, and investment property in the Greater Phoenix area. WWW.SearchForHomesInPhoenix/com not only features the spectacular Diverse Solutions search tool, it has a bevy of specialty pre-built searches designed to save you time.

Among the many specialty searches are:

• Search by zip code.
• Search by subdivision (Many of the most popular subdivisions are included)
• Search for foreclosures and bank owned properties.
• Find short sale homes, condos, land.

Don't forget to look at our Tips for Better Home Searching page too. It has info for both investors and regular home hunters.

Have a great day and even more fun as you search and find the best homes in the Phoenix Arizona market.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

Short Sales In Phoenix... Questions, Answers, Negotiation Help

Short sales are quickly becoming one of the main options investors have when buying a property in the Greater Phoenix and Scottsdale real estate market. In response, the Urban Team has launched a short sale specific web site. We'll tell you a bit more about that in a minute. Let's take a look at short sales first.

Some ask why short sales are becoming more prevalent when they have a reputation for being difficult to buy or sell. In the Valley of the Sun, the answer is pretty simple.

According to the Attorney General's office, 82% of Maricopa country homeowners with mortgages are upside down. If you are upside down on your mortgage, you have few options to sell your home. You can find a cash buyer who doesn't mind overpaying a lot (good luck with that one), you can sell your home and pay off the balance due on your mortgage (provided you have a lot of cash lying around) or you can do a short sale.

The good news is that short sales are getting easier to buy and sell. Many of the lenders have their act together and actually make decisions in under 60 days. What a concept!  In addition, new short sale guidelines are coming down the pike from Treasury that sound pretty good and will help the process immeasurably. We'll let you know when and what they do.

I just pulled some stats on the active listings in a few parts of towns and the data is pretty clear that short sales are on the rise. A couple months ago short sales comprised about 10% of the listings in Phoenix; Today the number is 31%. If we look at the NW Valley we see even higher numbers with short sales coming in at 35% of the active listings. Conversely, bank owned homes in the NW valley are way down with only 16% of the listings being REO properties. 

If you would like to learn more about short sales, the process and such, we have created a site just for you. Shot-Sale-Phoenix.com has lots of current information including: FAQ's, what goes into a short sale package, negotiating short sales, buyer questions as we ll as answers to those selling by short sale.

If there are areas of interest or questions not covered on the site, please let us know and we'll go hunting and foraging for the info.

Best to you on this beautiful November day.

Gene Urban
The Urban Team at Realty Executives
602-234-5777

What are Real Estate Investors Buying In Phoenix These Days?

This isn't an information post, rather I am trying to gather info from real estate investors as to what they are currently buying. So, all you investor types, can you give me a bit of feedback on what your current strategies are? If you are in the rental side of the business, how are vacancy rates effecting you? Are any of you trying to do flips? Where do you, the real people living and breathing real estate investing see as the short term opportunities?  Long term?

I will gather data and information from as many sources as possible and be back to you with the results. Just toss me an email at gene@urbanteamaz.com with your expert opinion and we'll see what the pros have to say.

Best to you,

Gene Urban