No, Seriously...

I was working late the other night, it was after 8:00 PM.
The phone rang.

It was a Local Real Estate Investor. I know that because that's what he told me. He found me on ActiveRain.

He was calling because he had an exciting offer for someone just like me.

He was soon to be auctioning off a home in nearby Discovery Bay.

I replied that was indeed, very exciting. (He didn't hear the sarcasm in my voice)

He was looking for a "Marketing Partner".

okay...

Local Real Estate Investor: "We're prepared to offer you exclusive rights to pre-qualify each and every bidder!"

okay...

Local Real Estate Investor: "We're looking for a mortgage company, like yours, who can capitalize on the enormous potential of this offer"

okay...

Mike: "Let's get down to nuts and bolts. Who is WE? and what's this going to cost me?"

Local Real Estate Investor: "I work with Professional Real Estate Investor Partner. We're looking for 2%"

long period of uncomfortable silence...

Mike: "Uh, 2% of what?"

Local Real Estate Investor: "2% of the sales price."

Mike: "What's the property going to sell for?"

Local Real Estate Investor: "I don't know it's an auction."

Mike: "Yeah, right. What's the property valued at?"

Local Real Estate Investor: "We estimate around $540,000"

Mike: "So you want $11,000 from me? And for that I get to prequalify ALL your bidders?"

Local Real Estate Investor: "Oh, sorry, I mis-spoke, we want 2% of the starting bid."

Mike: "OK, and what is the starting bid then?"

Local Real Estate Investor: "My partner and I haven't yet determined that exact figure just yet."

another long period of uncomfortable silence...

Local Real Estate Investor: "We're looking for around 8 to 9,000 - ballpark."

Mike: "For the starting bid?" (ok, so I was messing with him a bit)

Local Real Estate Investor: "Oh no, sorry for the amount we'll need from you."

Mike: "So you want $8,000 to 9,000 from me? And for that I get to prequalify ALL your bidders?"

Local Real Estate Investor: "See, I told you it was exciting!"

Mike: "Exciting Indeed! Before I commit, I'll just have to run this by my Professional Mortgage Financing Partner."

Local Real Estate Investor: "That's great. I'll call you tomorrow."

Now that we were buddies, partners, and teammates...

Mike: "Hey, this house isn't in foreclosure is it?"

Local Real Estate Investor: "No, but the lady was worried about not making her payments and she answered one of my ads. She signed the DEED over last week. She just rolled over for me."

Mike: "Wow that's great! I'll talk to you tomorrow."

You know exactly what this is all about. So did I.
Somewhere in Discovery Bay, a poor little old lady has lost any hope of saving or having any equity.
She signed her home away, it's gone.

She has a mortgage though.
Does she know the house is going to be sold?
Does she know she'll have to move?
When the house sells, will the mortgage actually be paid off?

This stuff just makes me sick!

While I am not a violent person, I'd love to send Guido to pay my new friend a visit.

Check out "The Foreclosure Report"

For additional reading:

• http://www.saukvalley.com/articles/2007/05/17/features/personal_finance/340382223453162.txt
• http://content.hamptonroads.com/story.cfm?story=125076&ran=94047
• http://www.boston.com/business/personalfinance/articles/2007/06/02/state_cracks_down_on_bailout_scams/
• http://www.cmonitor.com/apps/pbcs.dll/article?AID=/20070519/REPOSITORY/705190311/1028/OPINION02
• http://www.wmcstations.com/Global/story.asp?S=6514629

Real Estate Investor?

This is Part One in a Three Part series

The System

Have you ever seen one of those signs and wondered?

"We Pay CASH for Homes!"

or the latest incarnation...


"Real Estate Investor Apprentice Wanted"

Wonder how all these people could pay cash for all those homes?

Wonder why the same looking signs have popped up everywhere?

Wonder why if they have so much money, they can't afford better signs or advertising?

Wonder why if they are seeking an Apprentice - why are they driving a beat up Pinto?

I have too.

So a little over a year ago I paid good money to go to this big Real Estate shin dig in Moscone Center. It was put together by the Learning Annex. It had keynote speakers like Anthony Robbins, Robert Kiyosaki, and even The Donald.
I certainly wanted to "Learn" and why not learn from guys like that?

For three days, for twelve hours a day, I attended "class" after "class". If I remember right there were over 80 different "classes" offered. Not by the Keynote guys above, but by True Professional Real Estate Investors. These people were some of the most successful people on the planet. They had spent the early years of their life learning how to strike it rich with real estate and now wanted to give something back.

I know they were truly successful because of the expensive silk suits they wore. And then I couldn't help but notice their flashy watches. Oh and the way they talked about their last vacation. And then to verify what I already knew, they also told me they were (extremely wealthy). Each and every one of them did.

Amazingly, they were all willing to share vital information, the very same information it took them years of hard work to learn, with anyone!
Almost.

Just as long as you were one of the first 500 people to make their way to the back table and give their wonderful helpers a credit card.

Don't think of the $1,800 charge as a high price to pay for 12 CDs and a booklet. It's an investment in your future!

Time and time again, in each and every "class", with the very same speech pattern, the rush to the back was on. People of all walks of life were suddenly running for their financial lives.
Not for the door (as I might have hoped) but for the back table!
These good people would literally inundate the 20 or so wonderful helpers.


"NO... Take my Platinum Card first, I was here first!"

At times it reminded me of glorious holiday times past.
Cabbage Patch Kids, Tickle Me Elmo, and Beanie Babies have nothing on this spectacle.





Continued soon...

East Bay, Hot Bed of Defaults

I read an article in the Contra Costa Times yesterday.
It was also covered by all the news stations.

"Loan Defaults are the Worst in the East Bay!"

Hey, I can see that.
I blame all sorts of people here: LINK
Good people have been mislead into signing for more house than they can honestly afford.
The payments on the loan changes and viola!

"Honey, we can't afford to pay the mortgage this month"

And since money is the primary cause listed in divorces - guess what else the east bay might soon be leading in?

I was talking to a divorce attorney the other day and he was eagerly waiting for the flood. He already hired a couple extra people to help with the "soon to be" workload - really!

No matter why the current homeowner is past due there are a couple of things to look for here.

On the Opportunity Side of the coin, if you are buying your first home, picking up additional investment property, or just looking to get a deal - This may be your time!

• Distress Sales
• Foreclosures
• Notice of Defaults
• Short Sales

You name it, they'll be a lot more coming!
But are you ready?

To take advantage of any of the above you need your "Ducks in a Row".
You need to be able to act quickly.

You should be pre-approved now by a mortgage professional.
We're talking "Full Doc" and at a high enough interest rate that if rates bump 1/2 % your approval isn't out the window.
Remember, you are not locking at this rate, just qualifying at it.

Make sense?

Before you dive head first thinking you are going to get the deal of a lifetime - do your research. Read, read and read some more. Flipper? Start here: LINK

What if you are on the other side of the coin?
What if your spouse just told you, "Honey, we can't afford to pay the mortgage this month"?

Don't wait - don't hesitate - you need to Activate!
Get in contact with a mortgage professional now!

If you have to refi - do it.
If you have to sell - do it.
Do everything you can to NOT make a LATE mortgage payment.

Even if you have a couple of late payments - it's not the end of the world.
You still have options but ONLY if you act quickly - wait too long and those "opportunists" listed above will be taking advantage of you and you don't want that do you?

Want to read more about dealing with foreclosures?
http://www.patagoniafinance.com/2006/12/youre-in-foreclosure-happy-holidays.html

Doom and Gloom in Stocks

While this is a stock market (equity) story it also has dramatic parallels to the housing market.

I was talking to one of my stock market friends last night about yesterdays stock market drop.
This guy has worked on Wall St, he's been down in the pits, he's a true seasoned professional.

In case you didn't know the market dropped dramatically.
The Dow dropped 416 points in one day.
The largest single day loss in 5 years.
At one point in the day, the computers couldn't keep up with the orders and they saw a drop of over 100 points in a single minute!

Why did this all happen? The news reports list 3 different factors.

1. China had some "issues" which bled over to the other econimic markets around the world.
Their market dropped 9% partly due to concerns over government interventions in their markets.
China is important mainly because China is such a big player.

2. Durable Goods orders on big ticket items (think planes, trains and automobiles) fell 7.8% last month.
That was overall, the big plane part of it all dropped 60.3% - wow!

3. And then, there is the general overall feeling of world uncertainty and instability.
The Middle East, Iraq, Iran, North Korea.
The assassination attempt on Dick Cheney being the latest example.

But after all this doom and gloom, the truth of yesterday's stock drop is that it represented only a "correction" of 3%.
My stock friend says market corrections of 10% are normal and healthy.
He was actually happy about the correction but said it wasn't enough!
No he's not selling puts.

He explained that with a market hitting higher and higher highs, there are no really good buying opportunities.
These corrections represent perfect times to purchase quality products.
It's a good time to buy that stock, assuming there was a good reason to buy in the first place.

Here comes the Housing Connection:

But then he also had another insight that became crystal clear to me.
In a correction period, the true professionals know how to deal with it, they know how to ride out the storm.
The weekend warriors (as he calls them), the daytraders, the E-traders, the speculators, the Amateurs either cannot or do not want to ride the waves.
They drown, they drop out, they walk away.

In his words, (he called it a courtesy flush), this clears the playing field and gets the market back to being worked by the professionals.
It's like the Zamboni coming out between periods of a hockey game.

Transfer that over to our field of expertise - the Housing Market.
Is a correction of 10% normal for our field?
Is a clean sheet of ice coming for us?

I'll take the same position as my stock friend.
I've always said, I'd like to see rates rise and watch the amateur loan officers go back to selling cars and siding.
I'd like to see the weekend flippers lose all their equity and drop out of their game. Fewer part time agents wouldn't be all that bad would it?

Sounds a little harsh but I think it's a move that'll make for a healthier housing market overall.
Sometimes a little pain is good.

Buy, Hold or Sell

We're doing another Investing in Real Estate 101 seminar this weekend.

This one will be at the local Marriott in their largest room.
And guess what?

I just found out we're overbooked!
Not only are we sold out, we're really oversold!
"I'm sorry Mr. and Mrs. Smith we're going to have to bump you to a later flight, Oooops, I mean seminar."
Room capacity is 120.

Let's just say, we're going to be cozy in there!

The good news: More than 100 people are going to get some solid education in investing.
The bad news: You are probably not going to be one of them.

So just in case, here's a quick synopsis of what we're covering and why.

One of the cornerstone ideas in investing in RE that we push is cashflow.
You must have proper cashflow.

Investment in anything means looking at your ROI, "Return On Investment".
If you don't get a good ROI, why invest in the first place?

How do you get a return in RE?
Only two ways I know of:

1. Cashflow
2. Appreciation

Think about that for a minute.

What do we see in the marketplace these days?

Flippers?
Let's talk about appreciation in terms of flipping.
Flipping is, buying low, then turning around and selling higher.
It's not that easy of course.

Sometimes you need to buy low, invest big $ to fix and fluff, just to be able to sell higher - right?
We'll that's "Appreciation".
The cashflow in flipping comes into play when the first mortgage payment is due.
No rental income means total negative monthly cashflow.
That's ok for the short term if the flip yields enough appreciation.

The greatest ROI comes from the strategy of Buy and Hold.
You know this. Look back over the years and during good times and bad, property just keeps on chugging along.
Yeah, we're in the bad now, but take a step back and look at a wider view.
Somebody somewhere said ( I can't remember right now) that property values at least double every ten years, as an average, since the 1930's.
Never less than double.

As a real example let's look purchasing a $500,000 income property and holding for 10 years.
Let's assume you put down 100,000 (20%), have good cashflow, and you never pay a dime towards principal.
Let's also assume we have a dismal appreciation rate over the course of those 10 years of only 5% each year.

Now let's look at the numbers:
Present Value would be what you have in it now - $100,000
after 10 yrs appreciation the market value or Future Value would be $820,088
subtract the loan amount of $400,000 and you'll have $420,088 in equity right?

Now go put that in a calculator and see what your ROI was.
Oh, here's an online one I found: LINK
What did you find out?

Your ROI was 15.43% right?
That's each and every year and at a very dismal 5% appreciation rate.
Still don't believe it?
Take any regular calculator, or an 8th grade math student (Hey Emily, i have a project for you...),
and start by adding 15.43% of 100,000 to itself.
The first one is going to be easy $15,430 added to 100,000 is 115, 430.
Now add 15.43% of that to the total and so on and so on.
Do it 10 times and you'll come up with $420,088 give or take a penny.

But is 5% appreciation too small?
You might think so. Most professionals would agree with you.
We may never see triple digit appreciation again, but what about double?

Go back and do the same at 10% a year.
Now at year 10 the same property is worth roughly a cool $1.3 Million!
Subtract the loan amount of 400,000 and that leaves 942,355 to be exact.
Pop that in the ROI calculator.
WOW!
25.15%

And that folks, is why Buy and Hold makes so much sense.

Yeah, I know.
I left out Inflation, Taxes, 1031 Exchanges, Realtor Fees, and so much more.
Let's not cloud the issue, the point is more about the "WHY".
Why anyone would want to buy and hold RE.

But there's a catch.
To properly buy and hold, you need to be able to HOLD.
Anyone can buy.
I have 107% financing to prove it.
This is where the Cashflow comes in.

Proper cashflow allows the investor to hold.
It may provide anywhere from a decent or minimal income each month.
But the real returns are usually found in the appreciation, not in the cashflow.

That in a nutshell is the seminar presentation you are probably going to miss.

Bay Area Housing Market

As promised, here's a better look at the existing home sales numbers with an eye towards the bay area.

If you were watching the headlines yesterday, you saw the world coming to an end!
It's the natural sensationalistic thing to do.
Is that a word?
It should be!







Headlines like:

"Existing Home Sales Tumble in 2006"
"Existing Home Sales Hit 17-Year Low While Mortgage Rates Rise"
We even have the sky falling overseas,
"European Markets Fall On US Existing Home Sales Data, Weak Oils ..."

Headlines like that would lead you to believe.

In scanning the headlines an came across this little tidbit:
Two different news agencies, two different takes on the same story.



One says prices "Plunged", the other says they slipped "Modestly". Same numbers, same report, same day. Two sides to every coin right?

In the bay area here's how our numbers played out:


Here's a clip from a newsletter:
"A total of 7,488 new and resale houses and condos sold in the Bay Area last month. That was up 3.9 percent from 7,204 in November, and down 19.9 percent from 9,347 for December last year, according to DataQuick Information Systems.

Sales have declined on a year-over-year basis the last 21 months. Last month's sales count was the lowest for any December since 1996 when 7,180 homes were sold. The average for all Decembers since 1988 is 8,339. "

The chart above shows sales prices.
I believe these are Median but cannot verify that.
Over the year, you can see we're actually a bit higher than last January.

Also from DataQuick:
"The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,801 last month. That was down from $2,872 in November, and down from $2,943 for December a year ago. It peaked in June at $3,183. Adjusted for inflation, mortgage payments are 10.3 percent higher than they were at the peak of the prior cycle in early 1990.

Indicators of market distress are still in the normal range. Financing with adjustable-rate mortgages is flat. Foreclosure activity is rising but is still in the normal range. Down payment sizes are stable. Flipping rates and non-owner occupied buying activity are down, DataQuick reported."

"The median price paid for a Bay Area home was $612,000 in December. That was down 0.6 percent from $616,000 in November and up 0.5 percent from $609,000 for December a year ago. The median peaked last June at $644,000."


and I'll include this comment:

"Clearly the market is in a lull while potential buyers wait for lower prices. Because of seasonal factors prices may edge down during the next two months, but are likely to move up again in spring. An important factor is whether or not mortgage interest rates stay where they are. If they do, we should expect the market to pick up in March or April," said Marshall Prentice, DataQuick president."



What's it all mean?
To the short term person, the flipper, the speculator:
Not so good news, best to have sold in June when prices hit there high.
Now you'll probably have to hold till this June again to get your price.
Rates are probably going to go up, not go lower.
This is a key indicator to the Feds, they'll look at this as a healthy adjustment.
Further lessening the likelihood of their lowering rates any time soon.
That impacts your buying ability, as well as your buyers ability.
If you are buying - buy now. The market probably isn't going to go lower and why wait?
Get in the game!

To the long term person, the buy and hold, the RE investor:
Nothing new, business as usual.
We're in it for the year over year.
We have an exit strategy, we know where we are going.
The market fluctuates because that what it does.

I've said it before.
We are special here in the bay area.
Not "little yellow bus" special, insulated from the rest of the nation special.
I'm all for investing and owning in the bay area!

Oh, and the new home sales should be coming out today.
I don't care.
Neither should you.
It's the most skewed and incorrect report we're hit with.
I'd tell you why but I'll save that for another day.

When to Invest?

The question always comes up.
It doesn't matter if it's a "First Time Home Buyer",
or the "Wanna-Be Investor" it's always the same question.
"When is the right time to buy?"

But hey, it also comes in the form of a definite thought or statement.
"I'll buy when the market hits bottom."

Either way, question or statement, it comes down to WHEN?

When should you enter the market?
Guess what my take on this is?
That's right, it is always a great time to start investing!

Sounds like a sales pitch right?
It's not. The true investor always wants to be in the game.
Here's why...

There is always value in the market, though some times it is harder to find that value than other times. There is always a house or building that has not been taken care of properly, with motivated sellers. These are great properties to buy, just about anytime. More importantly, the real estate market is cyclical. Predicting cycles can some times be like predicting the weather. Since many of the greatest economists cannot seem to do either, it is not worth trying to jump in at the trough and get out at the peak. If anyone tells you differently, ask them if they have any swamp land they can sell you as well.

Buy and hold investors almost always make money because of the nature of real estate price increases. Even if you get in at a peak and hold, real estate typically comes back to bail the hold investor out. Established investors who only work in certain markets have even more of an advantage because they have seen peaks and valleys. They can read signs much better and know when it’s a great time to buy. Better still, they know what properties to buy because they are so familiar with the hot (and cold) spots in the area.

It's also important to consider the market when you decide on property types.
A quick example will make this clear: If you only invest in apartment buildings, then you want to watch out for housing prices and interest rates in your area. If rates get low and prices are still reasonable, people will flock from apartments to houses, leaving you with high vacancy. Doing some easy math (Net Operating Income falls) will show you that prices of apartments buildings will decline. Once this happens however, it might be a good time to buy apartment buildings. Why? Inevitably, housing prices will begin to rise and price people out of the market. As new home buyers enter the market, they will not be able to afford homes, but might be willing to settle for an apartment while they save.

It's the old supply and demand, ebb and flow all again.

So when?
Now!
(after you do your homework - right?)

Investment or Flip?

Two items seemed to dominate my inbox this weekend.

1. Growing concern on the housing market due to "Flippers".
2. Growing concern on the housing market due to "Sub Prime Lenders".

I'll deal with Flipping today - Sub Prime tomorrow.

We all know what a flipper is right?
One who buys a house and turns it around for a quick sale for profit.

Let me make this perfectly clear.
There is nothing wrong with flipping.
Stock traders do it all day long, people flip cars, horses, and even baseball cards.
Flipping the right house is OK too.
It is a real and viable way for the right person to make money in the real estate market.

Did you catch the caveat?
(It has to be the right house and the right person)

The problem with flipping is that so often it's all wrong.
It's the wrong neighborhood, wrong style, wrong kitchen, wrong price and so on.
Match that with the wrong person, who doesn't know the market, who gets the wrong loan, wrong expected ROI, with the wrong assets and reserves.

Flipping involves buying a selling a house, that should be simple enough.
Anyone can do it right?

All you need to do to become a millionaire overnight is have the right system.
Lucky for you they just happen to be advertising one on TV!
And look! All those other people are independently wealthy - if they can do it - so can I!

No wonder why flipping is the approach used by all those late night infomercial get rich schemes.

"We Pay Cash For Houses!"
"Real Estate Investor Apprentice Wanted"
"Buy a Home for Pennies on the Dollar"
"Buy Foreclosures, Buy Tax Liens"
and so on.

To be a real flipper there's a couple of things you have to have:
You must have capital (that means mucho pesos sitting in the bank).
You must know the neighborhood well.
You must know the market well.
Short Term interest rates are your friend.
Credit is your friend.
Speaking of friends; you'll need a Realtor, a Mortgage Person, a Contractor, a Painter, a Drywall expert, an Electrician, and a Plumber as best friends or business partners.
You'll need a well thought out business plan for each and every flip.
You'll need proper cash flow analysis.
You'll need to buy right, upgrade right, and sell right.
You'll also need a truckload of luck to make it all work.

Sometimes you need to buy and hold for a while.
That seems to be contra to flipping thoughts.
Get any of the above wrong and you could end up in trouble quick.

In the Bay Area, the Sacramento area has always offered up less expensive housing options.
Buying any house in the Bay Area is going to be expensive.
When looking at the vast expanses of the central valley, they can build as many houses as we want to buy. Supply and demand keeps the values down (more supply than demand).

It's the lower price that attracts the uneducated flipper to the area.
It's been described as a hotbed of flipping.
It's been this way for many years, nothing new.

But here is something that is new!
It's a blog detailing Sacramento area flippers who messed up.
Appropriately titled too! flippersintrouble.blogspot.com

I don't know who Max is but he has access to the MLS and is tracking some pretty interesting properties. There's some good information here!

I've detailed another flipping blog in the Sacramento area before.
Casey Serin's ongoing personal nosedive into financial ruin, http://iamfacingforeclosure.com

I even found a list of other "Flippers in Trouble" blogs
HERE

One on One Meeting

Disclaimer:
I am in no way insinuating we are in any way Presidential.
The truth is, I like to have a relevant picture for each post.

I generally go to Google Images and grab something I find. This time I couldn't find anything generic enough that wouldn't lead the reader to believe either of the two pictures was not a real seminar participant. So I opted for the overly obvious.
I am not now, nor have I ever been, Ronald Reagan.
Furthermore, Nancy (it's actually Suzanne Massie pictured) did not attend our seminar.
(Just in case the above picture confused you)
Pheew! Now that we have that straight, Let's move on.

Following a seminar, we invite attendees to schedule one on one meetings with us.
We only have so much time available and so many slots to fill.
Our latest seminar was about investing in Real Estate.
It grabbed the attention of many active investors and "wanna be" investors.

We had 130 or so attend the last one.
Personally, I don't know why they came (it being the Holiday Season and all).
And then, I really don't know why they then made the effort to come again to meet one on one for 30 minutes (It being even deeper into the aforementioned Holiday Season and all).
But they did.

We talked to many different people.
Everyone was absolutely wonderful.

At all Rob Black Seminars the attendees are given a card on which to write their question.
At the end of the seminar, we read the questions and answer them one at a time.
So everyone has a chance to get the answer to their question they want.

But sometimes the answer isn't as in depth as we have time for.
Sometimes it only opens up to more questions.

That's what a 30 minute consultation is for.
It's an extension of the seminar in which the attendee has 30 minutes to ask the questions that pertain to their particular situation.

While there is no sales pitch, it does offer us the time to sit down, meet face to face and mutually agree that we would like to work together in the future. I guess that's a soft sell.

I honestly think I take away more from these meetings than I give.


Warning:

It's just a funny observation, but in that group I see two distinct types or styles.
Type One:
Those that want to do all the research, all the homework, and thoroughly know their market inside and out.

And then there's Type Two:
They range from wanting to have it all handed to them on a plate, to not knowing the who what or where but are eager to learn.

Neither one is right, and then both are right.

Type One'rs will come to me with an idea or deal already done -
"Mike, I want a 7/1 Interest Only ARM on this house, no points / no fees, par pricing with a three year prepay. I'll put down $45,k and the comps suggest that should give me 79% LTV. When do you think I can sign and close?"

Type Two'rs either want to be handed a complete deal, or at least the major components.
They may do some homework.
They may be working towards becoming a card carrying member in good standing of Type One.
I'll see them try and emulate what the Type One does.
They'll even come to me with the same predetermined idea of what they need in a loan package.

The problem is that they haven't really done their homework.
They don't know what Type One does.
They don't know what the yield curve is.
The CPI Data, the Existing Home Sales, Foreclosure Rates.

Do they really need to?
The answer is "No, not really".

When you think about it, that's why you pay professionals right?

Using one of my favorite analogies:
You might learn all you can about gal bladder removal before going under the knife and that's a good thing.

But do you show up on the day of the surgery with homemade sharpie pen markings of where you think they should start cutting? Chances are that while you think you know the best places to slice you open, you'll also be open to their qualified opinions.

The same goes for dealing with loans.
Maybe this ties in with why you cannot simply go to those big online lenders.

Go to a loan officer with a preconceived idea of what you want and most of the times that's exactly what you'll get. But was that the right loan for you? Did the surgeon who removed your gal bladder run into your transverse colon because you penned the incision point too low?

The Point?
Go out there and learn.
But have an open mind, be open to suggestions, and listen.
Listening is maybe the most important part.

December Seminar

Scheduling a seminar in December is crazy!

With so much else to do, why in the world would anyone want to take time out of the busiest month in the year?

Between shopping, partying, skiing, and the holidays themselves - it's a pretty short month.

I know plenty of people in the real estate field that take the entire month off!

In the end though, I would guess 130 people felt a Rob Black Seminar was important enough to put off the shopping, put off the partying, the skiing, or whatever else they could have been doing. Instead they braved the rain and traffic and drove from as far away as Santa Rosa to sit and learn what it takes to invest in real estate properly! My hats are off to all of them!
I thank you and I certainly hope you came away with some valuable information.

I'd also like to thank Rob Black for putting this on.
Unfortunately, he wasn't able to make it - something last minute came up.
(and no it wasn't shopping, partying or skiing)

A big thank you to my co-presenter Charlie Krackeler.
I'd be happy if I was 1/4th the speaker Charlie is.
Wow! is he entertaining!

Also thank you to Santa Clara's Network Meeting Center.
A great facility to hold most any size meeting.

But once again, thanks to all those that came out to learn something!

I'll try and see if I can get presentation notes and maybe even the presentation itself available to download soon.

Investing in Real Estate: 101

This Saturday, Rob Black has arranged another educational seminar.
This one is in the San Jose TechMart.

It runs from 9 to Noon.
Cost is $6 in advance.
Why charge you ask?
First of all it's such a small amount,
and second, it's a great way to raise money for local charities.

Sign up is here: www.RobBlack.com


"Investing in Real Estate: 101
Santa Clara's Network Meeting Center (Silicon Valley's Techmart)
December 9th 9:00 AM to Noon
5201 Great America Parkway
http://www.acteva.com/booking.cfm?bevaid=123230

Wealth Preservation & Retirement Planning seminar. Learn how to reduce risk with diversification, tax reduction strategies, estate planning tips, how to pull money out of the markets in retirement, economic outlook, portfolio structure, asset allocation and much more. All questions wealth preservation and retirement planning questions will be answered.

Real Estate 101 and a Real Estate Investments seminar. Expert speakers will teach you about buying your first home, evaluating investment properties, calculating real estate ratios like rent multipliers, buying rentals strategies, proper use of mortgages, financing, taxes and much more. All questions real estate questions will be answered."

If you have never been to RB Seminar you are in for a treat.
They are funny, they are informative, and they are honest.

Personally, there are 3 things I really like about a "Rob Black" seminar.

• No Selling - Any speaker who is invited is going to give you honest information without the sales pitch you see in every other seminar.
• Charity - all money generated by the seminar goes to charity. It's a little thing. $6 dollars is a very small amount, yet 100 people at each of the 20 or so held a year is going to add up. Additionally, most all the speakers donate portions of their ongoing business to charity. (I can't speak for everyone)
• All Questions get Answered - copious amounts of time are alloted at the end of each seminar to answer questions from the attendees. A card is given out to all at the beginning and collected at the end so even the shy still get to ask their questions.
  

Hey, in the market today:

Bond prices are backing off this morning causing interest rates to rise slightly.
The yield on the 10 year note has risen to 4.46%, up from the market close yesterday at 4.42%.

We received a couple of reports this morning that were weaker than expected. Productivity rose at an annual rate of 0.2% in the third quarter after a 1.2% gain the previous three months, the Labor Department said. However, labor costs only rose at 2.3% pace, lower than estimates. In addition, the manufacturing sector showed weakness as U.S. Factory Orders fell 4.7% in October, the most since July 2000.

These reports were overshadowed by the Institute for Supply Management's index of non- manufacturing businesses, which climbed to 58.9 last month from 57.1 in October. The strength reflected in the service sector has buoyed the equity markets once again as the DOW is reaching a new all time high.

The good news for us is that the yield on the 10 year note remains below 4.50%

Transcripts?

Not school transcripts.
Show transcripts.

Somebody asked me the other day after a question and answer session on Rob Black's show if I had a transcript.

Ha, this is not Oprah!


I do not get transcripts, I don't think KRON has transcripts, they may not even keep a copy of the shows. Matter of fact I don't even get a copy of the video.

The best I get is the same as you.
For the next week or two it'll be available for viewing on their website. http://www.kron.com
I was on Nov. 29th sections 2, 3 and 4.

But, as far as I can remember, here's a quick synopsis of the questions and answers from yesterdays show.
Pardon my lack of transcription accuracies - I can't type as fast as I can think.


Gloria: Has a property with renters that are doing a rent to own scenario. The renters want to be on the deed. She asked about a quit claim deed.

Mike: She may have been confused, but the essence of what she was saying is they want to be listed on title. A quit claim deed is used to get a spouse or the like off of the deed. They are relinquishing their rights to the property by quiting their claim. I didn't want to correct her on air, but the answer I gave was "No, not a good idea. Not until the sale goes through. That gives them ownership in the house, not in the loan."

Lina: Owns a rental in AZ with no renters and negative cash flow. She asked if should she refi to get cash out just to make the payments.

Mike: She should sell the property right now or refi so that she can get positive cash flow. If she can refi and with a renter have a positive cash flow, if she cannot do that, sell and get out.
Staying in a losing position hoping and waiting for the house to appreciate is wrong from the start.

Rob had a side question, "Should a person come to me and ask about a particular scenario. Should they come to you and ask what a 3/1 Interest Only or a 5/1 would look like?"
I honestly have to say, I horribly bungled my answer.

I said absolutely.
But the thought I had wanted to get out was that it is more important to effectively communicate your exact condition, your exact needs, and your short term and long term goals to an educated mortgage person. That person can then propose different solutions to match the goals and needs of the borrower.

Coming to a loan officer and saying "this is what I want - what's your rate?"
May get you a loan that is not the best for your situation.

I have something like 7,000 different loan programs to choose from.
My expertise, my job, my art, is picking the ones that offer you the best answers to meet your goals.

Instead of all that I went on to suggested a Hybrid Payment Option Arm as an example for a short term solution to the callers problem. It may be the right loan to get her out of her situation, it's a short term fix and she'll need to know that going in.

Caller #3: (I'm sorry, I didn't get his name) Had rental property with positive cash flow but was thinking of someway to get out and get into something less demanding. He mentioned1031 and something about a REIT.

Mike: A 1031 Exchange refers to the IRS tax code that allows you to defer the capital gains on a property under certain circumstances. You have to be careful in doing any 1031X. If you go wrong it all becomes due and payable as capital gains and that's a bad thing. I also told him he has to sell and buy "like properties", a REIT is a stock product that invests in commercial properties. Buy into a REIT and you are buying shares. It is not the same as his rental which is real property. They are two different products and the IRS will not allow you to defer capital gains under those circumstances.

Oh yeah, and we started by talking about the New Home report that came out yesterday.
Here's the scoop.

On Tuesday, the Existing Homes Sales Report came out.
That was the topic on the 4:00 News that we discussed.
This is a national report that shows for the month of October the number of sales were up, yet the median home prices dropped at historic levels. I pointed out that while that is a national number I looked up the Bay Area and our median home value for October was exactly the same as it was a year ago. The Bay Area is a little special.

On Wednesday, the New Home Sales Report came out.
this is also a national number and showed the opposite of the existing sales figures.
The number of sales were down, while the median prices was up!
Interesting, eh?
But here's what you may not know.

The existing sales figures come from the Realtors.
They are real numbers based on actual sales that closed.

The new homes numbers come from the government.
They are derived from the contracts signed on new homes.
These contracts are usually signed before the house is built.
Right now around 40% of those contracts will not last to the sale.
40% of those people will back out!
That makes for Fuzzy Numbers.

Additionally, the existing homes account for 85% of the homes out there, new homes- only 15%.
That makes the new homes report a small sample of the housing market.

It's not a good leading indicator of the housing market.
However, it does play a role as an economic indicator as building a new home involves labor, materials, and capital. Existing homes do not. Does that make sense?

So as you listen to these reports coming out you have to know where they are getting their info and what it actually means.

Be careful out there.