Real Estate Investing 101

Urban Team Hosts Sucessful Real Estate Investor Seminar & Discussion

Just a quick post on last night's Arizona residential real estate investor panel discussion. First, let us thank all those who came to the gathering. It wasn't a huge crowd, just the right number to have valuable discourse.

Gene Urban led things off with an update on the Greater Phoenix residential real estate market. The focus was on REOs and short sales. The fundamental market shift has been diminishing bank-owned listings with  a rise in short sale listings and actual closed transactions.

If you've read our blogs for a while, you know we have not been big fans of short sales. The odds of closing escrow have been pretty miserable and there are a lot of variables. That said, we are looking at them a bit more favorably. Many of the banks have finally gotten their act together on short sale transactions and more are closing escrow. There are still a lot of loose ends and concerns,  but the odds of closing escrow are much better and may be worth the hassle.

The stats on closed short sale transactions for the Greater Phoenix market are very interesting. During the first three months of 2009 only 1527 short sales made it through the bumpy process to completion. However, this past month, July 2009,  1304 short sales were reported "Sold" on ARMLS... that's a big performance shift.

Next up on the panel was Jennifer Ridenour, a ten year veteran of property management. She talked about the current state of the rental market. Her main topics were tenant acquisition and retention.

One area of concern is amateur landlords who are taking tenants without background checks and waiving part or all deposits. This puts a lot of pressure on the pros who have learned better. Oh well... the times are a changing. She recommends continuing tenant screening and perhaps be more open to tenants whose credit issues are primarily foreclosure related.

Tenant retention was another topic. Landlords are having to be more accommodating than in times past. A little honey helps keep happy tenants. We wrote a blog post on this topic a few weeks back you may want to take a look at...how to reduce vacancy rates on rental properties. 

Judy Giel with MetLife Home Loans was next up and talked about changes in lending practices. The focus of her talk was on condo loans. Last March Fannie Mae changed the loan guild lines on condos and FHA has fallen in with the tougher standards. The most problematic area has to do with HOA's. Fannie Mae won't buy loans on condos where over 15% of the homeowners in a complex are behind on HOA dues. As you can imagine, a lot of properties have more than 15% of the home owners behind on their dues.

Judy's take on the condo market is that loan aquisition will continue to  be difficult, resulting in a softening of condo sector. Cash investors may be able to pick up some incredible deals in Q4 2009 and into 2010. She advises very strong due-dilligence on HOAs.

The evening ended with a general Q & A session. A lot of good questions and answers where shared.

Best to you our loyal readers... we appreciate the time you spend with us.

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

LLC'S Can Create Problems as Well as Solutions For Home Investors

During our last Real Estate Investors 101 workshop, Judy Giel of MetLife Home Loans talked about problems associated with financing and LLC's.

Limited Liability Companies, aka LLC's, are often formed by real estate investors to create liability protection, increase anonymity, provide debt protection and many other reasons. However, they do present some problems and complications that we'd like to share with you.

Before we address concerns, please be advised that we are not attorneys or CPA's and we strongly suggest you consult with professional counsel prior to making any decisions or changes.

The problems we'll discuss pertain to investors who have or will have mortgages associated with their properties. If you bought your residential property using a lender to fund the purchase, you did so in your own name, notyour LLC. Residential lenders lend to people, not businesses.

Many investors re-title the property in the name of their LLC. Doing so can invoke the "due on sale" clause in your loan instrument. Actually, it does invoke the clause, whether the lender takes action is a different story.

Historically, most lenders have not taken action; However, the current industry problems have created policy changes. In talking to several lenders, they said their banks rarely invoke the due on sale when a property is transferring into an LLC and they probably wouldn't if you arecurrent with your payments. Again, we reiterate, consult with an attorney to get the most current info and rulings.

We mentioned that banks lend to individuals, this is true for refinancing too. When refinancing a loan you will have to transferthe property out of the LLC and back into the borrowers name. The transfer is likely to costa few bucks depending on who does the work. Check with your LLC preparer for exact costs and don't' be surprised if it is over $500.00.

Well, we hope this info provides you value and service... our objective here at Real Estate Investing101. In an upcoming post we'll have a real estate attorney describe the benefits of forming an LLC. Check back often to see what new info we're putting out there to help you be an informed person.

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

Fannie Mae HomePath… Great for Real Estate Investors

We discussed Fannie Mae’s HomePath program on our downtown Phoenix blog, Urban Life, a few months ago. Now we’d like to talk about it for the real estate investor.

Basically, Fannie Mae is looking at ways to reduce their REO home inventory and the HomePath financing program is one way. HomePath lets both traditional buyers and real estate investors buy selected Fannie Mae REO properties for little money down and low transaction fees.

Here are some of the specifics:

• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 10% for investors) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or even an employer.
• No mortgage insurance*
• No appraisal fee

I bet we have your attention now. Ten percent down, as you know, is hard to get these days and when you add in no appraisal and not mortgage insurance you have significantly reduced your closing costs.

Fannie Mae is able to offer no appraisal because they get one before they put the home on the market. Most  banks and asset companies simply get 2-3 BPO’s, but not Fannie. They get an appraisal and a BPO to determine listing prices.

The program does have a couple requirements. You have to use an approved HomePath lender and there are only about 15 or so. We like Desert Heritage Mortgage for the Phoenix market or you can go to the HomePath web site to find other options.

The other condition of the HomePath program is that only certain Fannie Mea REO properties are in the program. I checked the inventory for Phoenix while writing this post and there were 1054 properties available. Scottsdale had about 80 and Glendale had 253. As you can see, there are a lot of possibilities.

If you toss us an email, the link is in the top-right of the site, we’ll be happy to run a search for you and find some good candidates or you can do it yourself by going to our real estate web site, click on the search for homes tab and use the HomePath search tool. 

If cash is a bit tight, or you simply like to get into your investment homes with little down, the Fannie Mae Homepath program may be the ticket.

As always, we are here to answer questions anytime… well maybe not at 2:00 am.

Best to you,

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

We’re brothers, you’ll feel like family.