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Investment Property Sales Pick Up

The Wall St. Journal is reporting that investment property sales were up last year. Particularly the sales of single family homes increased last year according to the National Association of Realtors.

One of the reasons I believe this to be the case is that interest rates have remained low. The ability for investors to finance a significant portion of their purchase with low fixed rate financing for 30 years is an incredible opportunity. This type of financing is available for 2-unit, 3-unit, and 4-unit properties as well.

I believe, another reason for the increased demand for investment property is that investors can buy some, not all, properties for below replacement cost. This means that when new homes are built, they will necessarily be more expensive than the investor’s property in order for the contractor to make a profit or break even.

For more information about real estate investment please head over to the Maclennan Investment Group, Inc. website.

If you are interested in buying an investment property in the San Francisco Bay Area, please call me at (925) 385-8798.

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Landlords: Beware of “Successful Rent” Scam

The California Association of Realtors® posted the following warning about “Successful Rent” courtesy of the Apartment Owners Association to landlords about a scam being perpetrated on rental property owners and property managers:

Beware of “Successful Rent”

The Apartment Owners Association is warning of a company called Successful Rent run by a lady named Sunny who is scamming rental property owners.

Sunny calls owners who have vacancies and claims she has prospective tenants from out of the country looking for homes. She then sends someone over who fills out the rental application and gives the owner or manager a fake cashier’s check to hold the apartment. She also says that she will run the credit report for the owner for free.

On the day of move-in, she calls the owner and says the tenant found another place and they would like their money back. The owner then writes a check for the deposit amount and a week or two later, gets a letter from their bank saying the original cashier’s check was fraudulent.

For more information about real estate investment call Peter @ (925) 385-8798 or visit http://www.maclennaninvestments.com.

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Where Can I Get a Good Return on My Money? – Not at the Bank

So you’ve got some cash socked away for a rainy day. Where can you park it to get the best return?

Rainy Day Funds

According to a Wall Street Journal article from 3/9/2012, not at the bank. The national average return for a 4-year CD is 0.89%. Ouch! The article states that I-Bonds issued by the U.S. Treasury should at least keep pace with inflation.

These low yields are acceptable in exchange for liquidity or the ability to access your funds quickly. If this is your “Emergency Fund” (3-6 months of living expenses) or if you are in retirement and need more liquidity, it is acceptable to trade returns for the ability to access cash.

Retirement Funds

However, having CD’s or low yielding bonds as a part of a wealth building strategy is a risky proposition. Many investors chose to have a CD ladder. But maturing CD’s will have to be replaced with CD’s with a much lower rate of return.

Money market accounts are also returning a paltry 0.23% according to the WSJ.

In my article The Hidden Tax on Savers, I laid out how government policy is “taxing” investors using CD’s and Money Market accounts. Low interest rates are a means to “re-inflate” the balance sheets of the large banks.

If you are trying to accumulate wealth or build up your retirement portfolio, choosing an investment that is returning less than the rate of inflation is a losing proposition. If you are paddling up-stream at the same rate as the water is flowing down stream, you won’t make any progress. If inflation is higher than your rate of return, you are not making progress, but actually going backwards.

Alternatives Return Sources

You should seek an alternative investment that generally keeps pace with inflation. You don’t want to have to pay fees to store or hold the investment safely.  It would also be a huge benefit if your investment offered tax advantages.

Hmm… Tax advantages, cash flow, and generally keeps pace with inflation. Real estate seems to fit that bill.

Contact me today to see if we can put together a strategy to beef up your retirement accumulation and returns at (925) 385-8798.

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Oracle of Omaha on Housing

Warren Buffett told CNBC that he would buy a couple hundred thousand houses if it was practical. Buffett’s investing prowess has consistently placed him in the top 5 wealthiest men in the world.

Buffett realizes that current home prices combined with the low interest rate financing environment provide a unique buying opportunity. Investors who buy now, rent out the unit for more than the carrying costs, and hold their investment for the long term are likely to have a great investment.

An investor with $50,000 could buy a $200,000 home here in Contra Costa County that has 3 bedrooms and 2 baths. Assume the interest rate for this 30-year mortgage is 5.00%. The payment on a $150,000 mortgage at 5.0% is $805 per month or about $9,700 per year.

Taxes, insurance, and maintenance will add about $500 per month. This investor chooses to have a property manager for the property which will run another $150 per month. Total expenses for the property will be $650 per month or $7,800 per year. Expenses plus the principal and interest payments should total $17,500 per year.

A 3-bedroom home in Concord, CA should rent for at least $1,650 per month. The total income will be about $19,800. The property will provide the investor with about $185 per month or $2,220 this is a return of 4.44% per year.

If the property never goes up in value through the life of the mortgage, and the rent never changes the investor will also be paying down the mortgage. The investor will have turned a $50,000 investment into $185 per month and a $200,000 value. This computes to a return of almost 7.25% per year.

Do you think housing prices will stay flat for 30 years? Do you think rents will be flat for 30 years? If rents and housing prices go up, the return above will increase.

Do you expect your stock market investment to perform this well over the next 30 years? If not, give me a call at (925) 385-8798.

Disclaimer: This is not an investment recommendation. Investors should do their own research. This post is for informational purposes only.

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Real Estate Investors May Prosper from Incentives to Get the Market Moving

Many of the largest banks are offering incentives to homeowners to short sale their house. This may provide an opportunity for real estate investors.

A house in Contra Costa County

Bank Incentives to Homeowners

CNNMoney.com is reporting that banks are offering up to $35,000 for homeowners to short sale their home.

NEW YORK (CNNMoney) — In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

The deals are aimed at incentivizing homeowners who owe more on their home than it is worth and who are seriously delinquent on their payments to sell their homes in a short sale.

The banks are finally realizing that the best solution is to rip the Band-Aid off than face slow agonizing pain.

From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

What This Could Mean for Real Estate Investors

If homeowners are incentivized to sell their homes, it could create a temporary glut of homes available for sale. As well, banks may complete the foreclosure process on more homes now that a settlement with the attorneys general has been reached. This too may put downward pressure on home prices.

Real estate investors could attempt to use this increased supply to their advantage. Interest rates are still historically low. An investor with strong income and a 25% down payment can qualify for a great mortgage on an investment home.

For many years single family homes in California did not make investment sense. Now, with prices depressed and low interest rates, an investor can by a home with a reasonable down payment and expect to get a decent cash-on-cash return. A return that is much better than the current rates of CD’s at most banks.

If you are thinking of investing in real estate and would like more information call me at (925) 385-8798.

 

Company Profile

Welcome to Maclennan Investment Group, Inc., your East Bay Area real estate investment advisors. Maclennan Investment Group assists buyers and sellers of real estate maximize the investment potential of their real estate assets.

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Offering real estate services in the communities of: Walnut Creek, Concord, Pleasant Hill, Martinez, Alamo, Lafayette, and surrounding cities.

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Disclaimer: Information deemed reliable but not guaranteed. This site is not meant to offer legal or tax advice.

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925.385.8798

Maclennan Investment Group, Inc.
3380 Vincent Rd, Ste HUB
Pleasant Hill, CA 94523
p. (925) 385-8798
Licensed Broker in the State of California, DRE#01871809
Equal Housing Opportunity
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