Arn Cenedella

Archive for the 'Investment Real Estate' Category

Is it a good time to buy?

That is the $64Million question on many folks’ minds.

Here is my “take”:
In my San Francisco Peninsula market, I would say:
Are there good values to be found? Yes.
Are we at botttom? Probably not. I expect contiuned downward pressure on prices. (In most San Francisco Peninsula cites, values are down maybe 10% to 20% from the peak in 06/07)
Is it a good time to buy? Yes: 1)  if you find a house you  really like  in the community where you want to put down roots 2) you have a long-term perspective – say 10 years and 3) your job situtation is pretty stable and 4) you buy comfortably within your financial means – this is not the time to stretch.

Jay Thompson The Phoenix Real Estate Guy provides a similar perspective on the Phoenix market which has been hit much much harder than our own market.

What say you?

What do my Homescopes blog buddies around Northen California have to say?

11 unit apartment building for sale in San Carlos

440 Walnut St, San Carlos has just come on the market at $2,000,000 and is listed by Jocelyn Jamias of NAIBT Commercial.

This property consists of 10 one bedroom one bath apartments and 1 two bedroom one bath apartment and is located just 2 blocks from downtown.

Current gross income is $141,900 – priced at 14.1x gross income and offers a 4.4% CAP rate.

Rents are below market so this property offers an opportunity for rental increases.

Did you know you can buy this building using your 401K or other IRA funds?

Contact me and let’s find you a good investment.

FNMA eases guidelines on investor loans

I have recently written on several occasions that this market is a good opportunity for first-time buyers and for first-time investors.

On February 6, 2009, FNMA amended its policy on investor loans. Prior to this time, the maximum number of loans was 4. This has now been increased to 10.

FICO scores of 720 and above are required.

And the investor must have 6 months reserves for each investment property. Per the BawldGuy, this is known as a sominex account – ie – knowing you have rainy day cash put away for vacancies, repairs etc. – you know, so you can sleep at night!

Steve Heideman of Bigger Pockets Investment Blog provides additional details.

Additionally, it is possible to use 401K and IRA funds to purchase investment property. This may not be the right strategy for everyone but for some, maybe.

Buyers always contact me and say they want to buy a foreclosure.

I get several inquiries or phone calls a week from buyers wanting to buy a foreclosure.

I ask: Why? They say: To get a good deal.

They want a list of foreclosure homes before the lender forecloses on the home – Realty Trac sells this information.

In my opinion, this is the wrong strategy for buyers who want to get a deal!

First of all, buying property on the court house steps at a foreclosure auction is NOT for the non-professional John Q Public who rightfully wants to get started investing in real estate. Investing in real estate is a good thing for the long-term.

Consider the following:

The best buys in the market are REOs – real estate owned by banks and other lenders – who have foreclosed and take title to the property. Several of my clients have recently purchased REOs for about 50% of their previous sale price. Most if not all REOs are listed on mls. Have your agent search specifically for REOs – that is where you will find the best deals.

Let me explain my thinking….

Consider you have an owner that owes $400,000 on his house and for whatever reason he can not make his payments – so the lender starts foreclosure proceedings by filing a notice of default – this process in CA takes 3 months and 21 days minimum.

If the property is worth $500,000, this owner can put his property on the market – sell tomorrow for $450,000 and walk away with $50,000. Why would this owner walk away from $50,000 cash – the answer is: he would not!

If the house is now worth only $350,000, he can not sell the property without lender approval of a short payoff.

Say the property does go to the foreclosure sale, the bank’s minimum bid would be their loan amount or $400,000 plus back payments, unpaid taxes, penalties etc.

If the property was worth only $350,000; why would anyone bid $400,000 at foreclosure auction? Again the answer is – he would not.

Bottom line the only properties that go to foreclosure HAVE LITTLE OR NO EQUITY. If there was equity, owner could sell cheap and get at least some cash out.

So the smarter strategy is to let bank foreclose – take title and put on market as an REO.

Based on my experience in listing and selling REOs, the bank would probably put this property on the market at $250,000 – get 6 offers and sell for $310,000.

Trust me after 31 years in the business, the best buys are NOT foreclosures – it is a myth – the best buys are REOs.

Hope this helps. Let me know if I can be of any help in finding you a DEAL

Good news for Investors – Fannie Mae rule change

Until today, Fannie Mae had a rule that they would not buy mortgages from borrowers who had five or more real estate loans – or perhaps more accurately stated – mortgages from borrows that had loans on five or more properties.

Fannie Mae changed this rule today:

Per Fannie Mae announcement 09-02:

Multiple Mortgages to the Same Borrower
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

I have recently written several posts stating my belief this is a great market for first-time buyers or for first-time investors.

This Fannie Mae rule change will make it easier for investors to make additional real estate investments.

Due to price decreases and interest rate decreases, invesotrs can now buy property in certain areas of the San Francisco Peninsula with 20% down and have a break-even cash flow. This was impossible two years ago.

In more expensive areas, the numbers are also better than they were two years ago but will require 30% to 35% down.

I have contacts with real estate brokers throughout the country – Dallas, Raleigh, Austin, Phoenix, Indianapolis, Sacramento, San Diego, and the Bid Island. If you are looking for wloer downpayments with greater cash flow, these areas are worth a look.

And do not forget, you can use 401(K) and IRA funds to purchase real estate so if you are tired of stock market gyrations, this is an option to consider.

Facebook Building for Sale in downtown Palo Alto $9.1M

The Facebook building at 164 Hamilton Ave. Palo Alto just came on the market at $9.1M.

This 10,395 square foot office building is listed by Vince Schwab.

2 years ago, I very much enjoyed selling a house located on Addison right across the street from HP’s founding garage location.

Now I will work on Facebook’s building.

Downtown Palo Alto is happening.

Did you know you can buy real estate with your 401(k) or IRA funds?

With real estate values down, there are excellent buys in real estate for long-term investment – both here on the San Francisco Peninsula and elsewhere in the country. I have developed experienced real estate contacts in other areas of the country like Sacramento, San Diego, Phoenix, Dallas/Ft. Worth, Kansas City, Raleigh, NC, and elsewhere.

There are solid long-term investment opportunities available on the San Francisco Peninsula.

Would you prefer to have greater control over your retirement funds?

Would you prefer to invest your retirement funds in real estate – a tangible asset that people need for shelter?

Yes, real estate values in most areas of the country are down.
But I would submit that stock portfolios are down even more.

If you would like more information on investment opportunities and/or purchasing real estate with your 401(K) or retirement funds, please contact me for a FREE 50 page Q&A about self-directed IRA real estate investing.

I am happy to meet with you for a NO OBLIGATION consultation and explanation of the process.

San Carlos first-time home buyers – Opportunity Knocks!

I believe the current market provides an excellent opportunity for first-time buyers to purchase a home in a desirable mid-peninsula community. As a first-time buyer, the combination of low low interest rates and lower prices make a purchase at this time worthy of serious consideration. While it may be true that we are not at the bottom of the market, perhaps prices will drop another 5% or so. But over the long term, the present time is a buying opportunity.

For a first-time buyer – purchasing a home now provides a place to live – that they control – in an area they wish to live and raise their family- and the possibility of investment returns in the future.

For example, consider……

1983 Belle Ave., San Carlos is located in desirable Howard Park area of San Carlos – not far from Burton Park and Christmas Tree Lane aka Eucalyptuus and downtown San Carlos – not to mention close to St Charles, Brittan Acres, and Central Middle School. Current list price is $769,000 – down from its original list of $839,000. This home might of had a market value of $850,000 2 years ago. Property is listed with George Chopoff ReMax .

2 bedrooms 1 bath 1,070sf on a 5,000sf lot. Charming home – nice condition – good lot.

Let’s look at the numbers. These calculations are for illustration purposes and are accurate for the purpose of this post. A lender should be contacted for exact financing info including APR and a CPA should be consulted to determine tax savings in your individual case.

First-time owner occupant buyer:

$769,000 less 10% down ($76,900) leaves $692,100 loan.

$692,100 loan at 5.5% 30 year fixed including MMI has a $3,929 payment.

Add in $770 for property taxes and $75 for home insurance.

Total monthly payment is $4,775. Income (before tax) needed to qualify is roughly $13,640 per month.

So a couple making a combined gross income of $163,000 ($82,000 each) can buy this house.

Tax savings due to interest and property tax deductions assuming a 25% combined federal and state bracket result in tax savings of about $1,380 per month – leaving an after tax cost (rent equivalent) of $3,400 per month. Certainly, this will be an increase in the rent most people pay prior to buying. I would esitmate current rental value of this house at $2,400 per month. I could say the cost of owning this house is approx. $1,000 per month or $12,000 per year.

$12,000 is 1.56% of the total cost of the house.

So if the property appreciates even 2% a year over the next 7 to 10 years; a buyer would still be “ahead of the game”.

In addition to possible financial gain, an owner receives the emotional benefits of controlling their shelter – being able to fix the house up in a manner most appealing to them.

Even lower priced homes – east of el camino – can be found below $600,000.

So if you want to home a home in San Carlos, this is a good time to try.

As a 23 year resident of San Carlos, I can assure you it as the Chamber of Commerce says San Carlos is ”The City of Good Living”.

Follow me at www.twitter.com/SanCarlosCA for real-time listing updates sent right to your phone.

Smart Markets to buy Real Estate In

Forbes has just published article listing the top 10 smart market to purchase real estate in.

Forbes looks at the percentage of “motivated” sellers – these would be owners who are in financial distress or lenders who have foreclosured and now own properties they do not want – ie. REOs.

Interestingly enough both San Francisco and San Jose are on this top 10 list.

Here are the top ten markets – the first number is the 2008 percentage and the second number is the 2009 percventage of “motivated” sellers in each market. In each case, the percentage of “motviated” sellers is higher in 2009 than it was in 2008.

10. Atlanta             17%                  30%

9. San Jose             9%                    33%

8. Washington DC          11%         33%

7. San Francisco              15%               37%

6. Phoenix                 12%              40%

5. Detroit                   24%              40%

4. Los Angeles            28%                41%

3. San Diego               30%                 47%

2. Sacramento            41%                   54%

1. Las Vegas               28%                  64%

Wow – 5 of the top 10 are in California.

Foreclosure Opportunities #2

There are 42 homes currently priced under $300,000 in East Palo Alto and east Menlo Park.

Here is list of homes and asking prices.

Most of these homes are REO or short sale foreclosures.

Lenders are anxious to get these homes sold and “off their books”.