Real Estate News & Commentary by Chris McLaughlin, March 13, 2009
http://www.shortsalesriches.com/welcome.html
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“2 Careers That Boom in a Recession!”
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First a letter from its CEO led the financials higher this week, but now Citigroup’s Chairman, Richard Parsons, said that the banking behemoth would not need additional capital from the government. “Citi is actually one of the better capitalized banks in the world,” he noted. When asked by Reuters whether he believed the US government would attempt to nationalize the bank, Parsons retorted: “I don’t think the administration is heading in that direction…but I have a lot of confidence in the future viability and strength of a privately held Citi.”
The Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending March 6th indicated a 11.6% increase compared with the prior week for the total composite index, which includes both refinancing and purchase. The Refinance Index was up 13.5% to 3470.7 while the Purchase Index increased 7.1% to 253.3.
The association also reported today that the weak economy and credit crunch have led to increases in commercial mortgage delinquencies for the last quarter of 2008. “As expected, the weakening economy continues to take a toll on the performance of commercial and multifamily mortgages,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “But counter to the popular urban myth, commercial and multifamily mortgages are actually performing better than just about every other type of loan. Of more than 35,000 commercial/multifamily mortgages held by life insurance companies, only 33 loans were delinquent at the end of 2008, and commercial/multifamily mortgages ended 2008 as some of the best performing loans held by commercial banks and thrifts.”
Now on to our real estate investing education section …
$10,000 Homes – Gold Mine or Money Pit?
Recent figures from the Department of Housing and Urban Development reflect the startling trend of sub $10,000 homes in the Detroit market; investors, first-time home buyers and others seeking to preserve buying power or reduce out of pocket expenses are flocking to purchase a cash only home for pennies on the dollar but are homes that cost less than a used car a gold mine or money pit? It depends on who you ask and why they are buying.
Those Likely to Benefit
There are those that are likely to benefit from purchasing an ultra-low cost home including:
Retirees & Low Income Baby Boomers. Those on a fixed income like Social Security, Disability payments or a small pension plan may very well benefit from purchasing a low cost home for $10,000 or less. Assuming the home is in decent condition, the super small mortgage or cash only purchase may put them back on track to taking care of one of the most pressing problems facing many retirees; affordable housing. With the average cost of a 1 bedroom apartment in excess of $450 per month nationwide, the total cost of the home could pay for itself in two years or less. Baby Boomers with low incomes or even less savings would also benefit from buying now to protect their purchasing power especially should inflation take place in later years.
SOME Short Sale Investors. Unlike many areas of the nation where ultra-low cost homes are in need of extensive repairs, real estate agents report many of the homes in Detroit neighborhoods are actually in good condition and sold for 5 or even 10 times the current asking price as little as three years ago.
While it might seem obvious that the original buyers failed to make ends meet, don’t assume there isn’t room for big profits for new investors. A property that failed to cash flow at $50,000 to $100,000 might have plenty of room for profit at only $10,000. But before you run out to buy up entire blocks of Detroit real estate have a plan of action; unemployment is high, property taxes are major considerations and resale values could remain depressed in the area for some time to come.
Those Likely to Loose
Not everyone is likely to benefit from buying low priced homes in Detroit or elsewhere throughout the nation including those desiring to buy a first home and trade-up over time. While an ultra-low cost home may still appreciate substantially in value, the original starting price is so low that it could negatively impact your ability to afford a new home for years to come.
Even if the cost of the home quadrupled in value, it would still only provide a down payment in many markets across the nation. Worse, the proportional cost of taxes, insurance, PMI and other fees are higher as a proportional basis for sub-$10,000 homes. Likewise, the maintenance and repairs – especially for those purchasing multiple homes – is likely to be higher over time. Finally, be sure to consider the opportunity cost of purchasing an ultra-low cost home instead of a higher priced home with today’s low interest rates.
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com/welcome.html
P.S.
The Recession Proof Real Estate Investing webinar is this Saturday at 3:00 PM ET, NOON PM PST. Don’t miss out … click here:
https://www2.gotomeeting.com/register/295232483
Copyright Loss Mitigation Institute 2009.
All Rights Reserved.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid flipping of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner and Supervising Broker of one of Florida’s
largest Real Estate firms, running 4 different
offices, supporting nearly 450 agents, uniquely
positioning him to help thousands of investors
make money in the biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
* On twitter: http://twitter.com/mclaughlinchris
* On facebook: http://www.facebook.com/addfriend.php?id=709199143
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