Commercial Real Estate Lapse, Rebound, Relapse: Sunday Morning Thoughts 02 June 2013

What caused the lapse in the commercial real estate market?   

Many would think sub-prime lending, but that is not the cause.  Commercial lending is based on the income of the property.  The lapse has been caused by easy lending.  Similar to sub-prime lending in that it was easier to get a loan and purchase a commercial property, without regard for knowing how to manage a commercial property.

Many people had never learned about managing commercial real estate but entered into the arena believing they could handle the demands of commercial property.  Many of the properties were multifamily apartments.  Although many of the investors sold off items from the apartments, such as , microwaves, refrigerators, washing machines, dyers, etc. and then skipped out on their loans, and leaving in their wake the rubble of what was once a viable housing community.

Many of these properties were left in a horrible state, but was it really that horrible?

Not necessarily so.

It had been noticed that many once viable properties, in thriving rental areas, had fallen into low occupancy, disrepair, and higher than normal expenses due to mismanagement; with many units in a community becoming uninhabitable from some type of damage such as fire, or property destruction such as knocking holes in the walls.

The lapse was a time of finding a plethora of value-add properties, which are still present at this time and many more like type properties entering the commercial market weekly, if not daily for lucrative rental areas.

Next Sunday’s post the Rebound part II.

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Backing the American Dream: Sunday Morning Thoughts 23 December 2012

As a private lender of mortgage notes, one can find a way to make the American Dream of Home Ownership a reality once again. 

The banks are still having tight credit restrictions, and good people with good credit are finding it hard to get a purchase loan whether first time buyer or second purchase.  Although on the flip side of the coin, at present, refinance and reverse mortgages are a booming industry for the banks; which makes this a lucrative time for small lenders and lender groups to capitalize on a much-needed product, single family purchase loans.  There are considerations to make such as usury laws, which are the interest rates a lender can charge.  The average institutional bank interest rate for a 30 year mortgage is 3.125% and for 15 year loan the rate is 2.75%.

When considering lending to consumers and investors, usury laws prohibit going above a set limit for some states.  In general, the set limit for most states is 10% for other states the limit is a little less at 8%.

Many hard money lenders are within the guidelines of lending but they are navigating in tricky waters.

With real estate showing signs of a slow recovery in many areas, and institutional lenders implementing tougher credit restrictions, the time for private lending is now.

So, where do you find qualified borrowers?

Believe it or not, people who had the interest only loan and lost their homes after the loan reset.  Many of the families with the interest only loan were banking on being able to refinance the loan into more reasonable payments than the reset payments.  But the problem, a story we all familiar with by now, the value of homes had dropped drastically in most areas, and most home owners were faced with one added dilemma, being upside down on their mortgages.

Under water mortgages, loan resets, and the added frustration of denied loan modifications only has made private lending necessary and lucrative for a real estate recovery.  Getting involved is easy, fill out the form at the bottom of this article for more information on becoming a private lender.

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Residential and Commercial Real Estate Investing: Sunday Morning Thoughts 5 August 2012

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In our previous posts we shared an overview of the A, B, C’s of commercial and residential real estate investing, and the pitfalls of alligator investments.

Our next look is residential and commercial real estate investing, not versus each other, which means a real estate holdings portfolio would be more stable in any market, buyer, seller, or flat if both types of investments are included.

Currently residential real estate, in certain markets, is seeing some improvement, but with more foreclosures on the horizon, that may change in the very near future.

Commercial real estate is also seeing fluctuations which will benefit commercial investors.  The factors are, but not limited to:

Maturing loans

Mismanagement of the asset and its negative effects on NOI

Insolvency

An underwater mortgage, owing more than 100% of property value

So how does a private lender take advantage of all these factors?

By investing in purchase loans, bridge loans, rehab loans, construction loans new and completion, and/ or become a second mortgage holder, or investing non-performing and performing notes.

Whichever strategy is your preference being the lender in today’s real estate market is a safe bet to increase the rate of return on your investment.

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The Return of Foreclosures: Sunday Morning Thoughts 15 January 2012

Foreclosure is back and in a big way.

Many lenders took a lot of flack for the robo-signing of foreclosures.  But now with all the waiting and re evaluating period coming to an end, the banks will be stepping up the pace of foreclosures, thus creating a bigger real estate surplus.  All types of real estate from residential to underdeveloped land and everything between.

How will it all impact housing, buying, selling of real estate, and an investor’s bottom line in real estate?

The current buyers market will continue, but the heating up of the market will still be in the distant future due to the stricter changes in lending.

A new bottom may develop in some areas with more foreclosures due to enter the real estate market.

What is a possible strategy for buying properties in this weird market?

Being flexible.

Flexibility in your thinking of purchasing and owning real estate will be a necessity.  Buying and holding, leasing, and renting are all standards in real estate, but now the implementation of those standards will have to be examined.

Start thinking out of the box, because frankly, the box is an ever-changing structure and the rules are temporarily set in stone as we await the other shoe falling in our global economy.

But there is another question on the horizon, “What is going to happen with Fannie Mae and Freddie Mac?”

Inflation of the Dollar and the Effects on Real Estate: Sunday Morning Thoughts 08 January 2012

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When in times of inflation not only does the dollar lose value, but real estate values will almost always go down.  Now factoring in the housing crisis which has created a housing glut plus interest rates staying low to no movement upward, this is possibly one of the best times to invest in real estate.

Times only look bleak, if you chose to place your money in a mattress, instead of having the dollar work for you.  There are many deals and duds in the real estate market of today.  But how can one navigate and discern what would be a good, great or bad investment.

Location, Location, LOCATION.

This really means to know whether or not the real estate investment is in a great location for its specific type.

For example, you would not open a night club in a family oriented neighborhood; business would probably never take off the way you would want it to.  Another example, you would not open a grocery store in a warehouse district where houses were not close by.  Nor would you consider opening a nursery school within 5 miles of a state prison.  Not too many people would build a multi million dollar mansion in an area where the neighboring houses were valued at $100,000 maximum.

The aforementioned are just not sound investments.

Considering the location for the purpose of the real estate, should be the leading factor in evaluating and moving forward with a purchase.

So in our current economy, which may see further devaluation of the dollar and a subsequent falling of real estate values in some areas, where could someone invest their money to have a decent return?

To be able to “play” the stock market, one would have to know a great fund manager, stock broker or be skilled in the nuances of the stock market.  For real estate making creative deals and using creative financing can yield a worthy and profitable return.

Predictions for 2012

The New Year is upon us, what will it hold in store for us?

In short Inflation, Migration, and a steady Housing glut.

2012 will not be as bleak as some economist and the followers of the 2012 countdown/ Aztec Mayan calendar have predicted.

The cycles of the past indicate that there will be a worsening in the stock market after about the first 5 months of the New Year.  This is based on the cycle of the Depression era.  The market is currently acting in the same way as it did during that time.

But of course we all know “this is the time to become a millionaire”; only if you know how to invest.  Investing in an IRA is always a good idea; your money is earning interest tax-free.  You do have to watch the fund that you are invested in, if it is a loser then you will have losses and eventually no retirement cushion.  Most funds follow the S & P so you could stand to earn a very small amount of interest on your money.

With the debt ceiling raised and the debt steadily rising we are headed for more inflation than we may be able to tolerate.  So if you have all your money in the US dollar, such as a savings account or money market account then you are invested in the dollar.  Translation, if you save $50 dollars today that $50 will be worth less in the inflated future.  So having money in investments, such a gold, silver, and yes real estate will help improve your bottom line.

With real estate there are two factors in the coming year which will help to prove an investment sound or unsound.  Migration patterns of our older Americans and increasing foreclosures.

So with inflation and real estate lowering in value, and credit still tight it means people will be trying to gain ground that may feel like it continually slipping away.

It does not have to be bleak.

With correct positioning in profitable markets and having a diverse portfolio the storm may feel like a sunshiny day in a tropical paradise versus a Tsunami.

So remember the New Year will be what you make of it.

Re-Emerging Investment Opportunities: Sunday Morning Thoughts 20 March 2011

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Recently Hewlett-Packard signed an industrial lease on a distribution center in the San Bernardino County California more specifically Cajon.  The property is 1.4 million square feet which makes it one of the largest industrial leases in southern California.  The lease period is seven years.

 

It is anticipated that the region will become highly sot after by other Fortune 500 Companies for mega box space.  There have been other deals in the area in the past few months, Living Spaces, Harbor Freight Tools, and American Building Supply Inc., have recently inked deals in the Cajon area.

 

What does this mean to a commercial real estate Investor?

 

The area maybe experiencing growth, again; buying homes and other rental property would be a possible start, in addition to office and large industrial space.  No one can work there if they do not live near there.

 

Once there is a migration of people to an area, house values will increase, as will the need for retail such as, fast food, grocery stores, and general shopping in the immediate as well as in the outlying areas.

 

On another note transaction in cash are on the increase.  Earlier in 2010 the percentage of real property purchased in cash was at about 23% that has now risen to 32% and is anticipated to increase throughout the coming years.

 

Does this surge in cash buyers mean people have huge stacks of cash lying around?

 

Not necessarily, it could mean private lenders, and lending groups have been funding deals and realizing a profit.

 

To contact us Investor@ImmaculateEnterprisesllc.biz

 

If Warren Buffett is looking for Deals Shouldn’t you be?: Sunday Morning Thoughts 27 Feb 2011

Well if you have been keeping up with all the latest news, you will notice that Warren Buffet’s letter to his investors is choc full of information not only for his businesses but for all Americans.

Warren Buffet is looking for companies to purchase and he’s paying cash.  Berkshire Hathaway is worth 52Billion dollars, with 38Billion dollars in cash reserves.

“Money will always flow toward opportunity, and there is an abundance of that in America.”  Warren Buffett

Warren also made a bold claim that the housing industry would bounce back in a year or so, although the bounce back is more or so than a year, if Warren is taking time to mention it, it can only mean take time to invest in it.

People do not realize that investing in real estate is still a safe bet, and waiting for the rock bottom you may miss it and be involved with the buying frenzy.

America is on the cusp of the recovery, it has been a long and hard road.

Take time to evaluate what, how, and when you want to invest.  Make sure the risk does not out weigh the return.  We have seen many people sitting on the sidelines waiting, but think, if Warren Buffet is no longer waiting and is actively seeking investments,-his elephant gun is loaded and his trigger finger is itching.

Is the U.S. Housing Market Bottoming out?

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According to Mark Zandi, Moody’s economist the current data is showing that the housing market has not hit bottom yet.  As stated in our last post, the housing market in the more desirable areas will experience leveling out after hitting the bottom, then a gradual increase which will pick up momentum.

We have not hit bottom yet but we are a little closer.  New construction of homes dropped in December, coupled with the existing homes sales rising and eminent foreclosures stalling, all this can equal home prices increasing moderately.  This is actually a false positive of a housing market recovery.

The more stable recovery is to come.

Once all the foreclosure robo-signing is sorted out and no longer favoring lender nor homeowner then the market will finally be back on track for a recovery.  Remember we spiraled into our current real estate slump with the subprime lending now it’s time to right the wrongs. 

If you are thinking about investing in the real estate market visit our website.

The Robo-Foreclosure mess and the effects on Private Lending: Sunday Morning Thoughts 16 January 2011

If you read last Sunday’s post then you will understand that the robo signing scandal has become the bane of most Banks.  Judicial foreclosures have been thrown out by Judges.  The reason, there was not enough proof on the lender’s part of owning the note; seems as though the process of foreclosure is going to take even longer.

With all the shoddy paperwork, what type of impact will this have on the real estate market?

A slowing effect on foreclosures, so basically property values should see an increase in markets that are considered desirable and a leveling in values for harder hit areas where every other house is a lender owned vacancy.  The future, the harder hit areas will become popular again as home values begin improving in the desirable areas, against the lower priced harder hit areas.  New inventory will also begin to pick up but not just yet that’s on the horizon.

How will this effect private lending?

Well not the same as it is affecting large banks.  Aside [If you buy paper from any institution then you better scrutinize the paperwork to make sure they are the current note holders among a myriad of other important things.]

The upside to the robo-signing  scandal, banks maybe a little easier to work with for short sales and loan modifications.

Private lenders will find themselves in a better investment in a shorter period of time, due to the slowing of foreclosures and the appreciation of various types of property. Even the DOW is showing appreciation in the REIT’s being offered.  In the coming months and years private lending will prove it self to be a very lucrative investment strategy in this weak yet improving real estate market.

Take advantage of the wave of our near future.