Happy Valentine's Day to you all!!
Every month, I plan to share some insights and different topics relevant to the local market with my fellow investors, friends and prospective clients in this monthly newsletter.
REO and Short Sell What is the difference between REO and a short sale?
-REO stands for Real Estate Owned. This is a real property that has already been foreclosed upon and is now owned by the bank.-A short sale in which the real property is still owned by the seller, i.e. the bank does not own the home yet but it does have to approve the sale, as it will be accepting less money than is owed on the property.
For our local market, the total number of homes sold in the Trianlge area in 2008 was 20580, down 28% from 2007. The median price of a home in Raleigh was $209,204. Foreclosed homes represented 10% of all transactions in the Raleigh area, compared to about 20% across the country. But the home prices in the Raleigh area dipped by 2.5 percent in the fourth quarter according to Zillow.
The word "Crisis" in Chinese = "Dangers (Risks)" and "Opportunities"
When we read the major local news for January, 2009, "company layoffs" and our first 6" of snow storm were the two biggies. Many of us enjoyed the snow with our kids but none of us is not weary of the current financial crisis.
We all know this economic storm we are facing now is a severe one and could affect some of us. What we can do now is to be paitent and cautious with any of our investment decisions. Being a bit more on the conservative side right now is not a bad idea at all.To be prudent with our investment decisions, it is time to evaluate our own professional, financial and personal situations.
I just helped a few investor clients closed their commerical and residential property purchases. Compared to 2 years ago, more transactions were cash offers and I was able to negotiate some really good deals for my investor clients. In some cases, with 20% or more discount from the already low asking prices. I can tell you right now that if you have enough cash or equity, you can experience their power in your negotiations.
Power Of Cash
Back to 2 or 3 years ago, borrowing money for property puchase was easy and leveraging was the king. All of these create an imbalance of supply and demand. Cash offer is most preferred by the sellers especially for the foreclosures and bank-owned properties. Typically the deal with cash offer can be closed in 2-3 weeks. A cash transaction also reduces the level of uncertainty for the sellers and the bank....no waiting and guessing for loan approval for the buyers. In this buyers' market, the negotiation leverage is in favor of the investors and buyers with cash. Take advantage of it.
Home Equity Line of Credit -- "Power of Equity"
If you have enough equity in your house, you don't need to have plenty of cash in your regular savings account before considering a cash offer. You can take advantage of the competitive rate for the home equity line of credit out there. The Home Equity Line of Credit (HELOC) right now is Prime +/- 0.01 and is around 3.25%. I am aware of HELOC rate as low as 2.99%. You just need to know where to find it and how to negotiate for it. The loan approval process in some cases could take less than a week depending on your equity position, credit history and other factors. Again, leveraging the power of equity is one of the best options. In the near term, the prime rate is expected to stay relatively low. You don't have to worry about rate hike in the short term. Consider this options seriously in your strategy.
Believe the numbers, not your guts......
As an investor, remember you or your family don't necessarily live in the purchased properties. Your selection criteria should be different from those for buying your personal home. Let the numbers do the talking. You need to calculate the ROI (Return on Investment). Also, make sure you add all costs such as repairs, vacancy, taxes, maintenance, insurance..e.t.c and then you will have a more accurate ROI. There is no better time to leverage the "Power of Cash" and "Power of Equity" now.
If you have any question related to your property investment planning and strategy for the good deals out there, please feel free to email me.Have a Happy Valentine's Day and good luck in your Real Estate Investing!
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