When to say when.. How much Investment Property Rehab is enough??

An important component in pricing and marketing a property will be in looking at the market and your competition (ie. listing and sale comparables).  Most of the homes that I am putting out as investment deals are in areas that having one bathroom is common.  I would agree that having a second bathroom in a three or four bedroom house would be ideal.  However, it is not an “expected” feature in these areas.  Also, the expense is almost always probititive.  Appraisers like myself use the term “incurable”, meaning that the cost to make an improvement (ie. bathroom) costs more than the value you would get of the improvement.  As an example, it might cost $5,000 to add a bathroom.  If the market will only allow for an increase of value at $2,500 due to that bathroom addition, then the improvement is considered to be incurable.  If you were to spend the same $5,000, however, and receive at least $5,000 of market value, then the improvement would be considered curable.  In most cases, room additions will be incurable.  Having said that, I just went out to a property this past weekend with 4 bedrooms and only one bathroom.  The house has a perfect area for a second full bathroom.  The cost will be nominal because it will only involve a slight conversion of space.  In that situation, adding the bathroom is going to become part of the rehab plan.  Not every property will see that type of renovation though.  In fact, most of them won’t due to cost and more importantly the market expectations in those particular areas.

Join in the conversation at the Investors Choice Indy Forum

 Til Next Time…

Posted by Clayton Posted in: Investment Property Rehab No Comments » January 2008

U.S. mortgage rates fall - Rate on 30-year fixed’s at lowest in over two years: Freddie Mac

Reading a recent article on www.MARKETWATCH.com, what we have all been talking about is the truth.  With all the media hype on the gloom and doom of todays Real Estate Market, or The Mortgage Crisis, today marks another positive look into the future for Real Estate Investors.  While the National Association of Realtors is showing a slowdown in Pending home sales, the mortgage industry is reflecting with a new incentive to home buyers, with the lowest interest rate for a 30 year fixed in over two years.  Freddie Mac.

“Because average mortgage rates have come down more than a quarter of a percentage point in the past two weeks, there has been a pickup in refinance activity as borrowers take advantage of the lower rates,” Nothaft said.

“For the first week of 2008, the Mortgage Bankers Association reported an increase in the refinance share of mortgage applications and the pace of overall applications, both at the highest levels in four weeks.”

article credit - MarketWatch

In addition, the Mortgage applications rose 32.2% last week

I invite everyone to goto our forum at WWW.INVESTORSCHOICEINDY.COM/FORUM to discuss their thoughts on this and other aspects of the Real Estate Marking in Indianapolis and other parts of the United States

-C

Posted by Clayton Posted in: Real Estate No Comments » January 2008

Mortgage Market - What’s going on…???

As many of you know, lenders are changing their rules and lending criteria.  The foreclosures and mortgage defaults have definitely set them on edge.  They are now understanding where they went wrong and how to avoid those issues in the future.  Many of the loan programs that were once available are near history including stated income, stated asset and no money down loans.  For the most part that is a good thing, but it will hurt some of those borrower’s that relied on those programs such as self-employed individuals like myself.  Right now no one knows where the dust will settle exactly; however, I submit the following: Lenders are hurting because they had no stops as to the type of lending they would do.  It was a long running joke that if a borrower had a pulse and could sign their name (not spell it correctly ), anyone could get a loan.  Surprisingly, a limited number of those borrowers have defaulted.  Current numbers are showing that less than 10% of all mortgages have defaulted.  That is still a large number, but far less than what the media would have you believe.  My thoughts are this, lenders are in the business to loan money.  They have made some bad decisions in the recent past.  Many of them have sunk as a result, but the fact remains that our country, the State of Indiana and the City of Indianapolis is filled with buyers that are ready, willing and able to buy homes.  Lenders know this and will continue to make loans.  Sure the lending criteria will be tighter and all borrowers will be scrutinized moreso than in the past, but lenders are in the business to loan money.  As long as there are buyers that want to buy a house, there will be lenders that will make a loan if those borrowers meet the higher lending requirements.  Considering that the high risk type loans make up around 8% of the entire mortgage market, I don’t see a need to worry.  In fact, it was recently announced that the mortgage mainstream is back.  Lenders have been forced to go back to sound underwriting and pricing practices.  They have increased their lending criteria by making high risk loans (100% LTV, Stated Income) to only the most creditworthy borrowers.  Not to fear for the rest of you though.  Fannie Mae and Freddie Mac (our government dollars at work) are exercising expanded authority they received in the fall to buy non-conventional loans for their own portfolios and Congress is breathing new life into FHA reforms.  The current credit crunch could all but be decimated if the proposed higher loan limits and more flexible downpayment requirements for FHA are enacted.  Overall, the housing market is the back bone of our economy.  All government officials, lenders and banks know that fact.  They want to get the stream flowing again more than anyone and I suspect it will be sooner than later. 

Stay tuned. 

Posted by Clayton Posted in: Mortgages & Lending No Comments » January 2008

Come Join our Meeting - Where Real Estate Investors HELP Real Estate Investors

As many of you know, Investor’s Choice and this site is designed for real estate investors, by real estate investors.  Over the past six months, we have seen our group grow and add new members from all over the world.  That is so exciting to me and our team.  I am really looking forward to what 2008 has to bring.  There are many new things coming up this year in the way of lending, market rebound and taxation that will affect everyone.  For the savy and well informed investor, those changes can potentially pay huge dividends.

The IC group has meetings every month to talk about various investing issues and typically include a featured guest speaker.  Normally those meetings are open only to Investor’s Choice “Preferred Investors” that have paid their membership dues.  However, I want to kick off 2008 with a bang.  As such, I want to personally invite any “non-members” to our January meeting that will take place next Wednesday the 9th.  The meeting is held in the Greenwood area and starts at 7pm.  This meeting will be our Kickoff to ‘08.  We are going to set plans and goals for each of our members and get prepared for the New Year.  In addition, we will have a guest speaker to talk about investment planning, both short and long term.  If you have an interest in attending this meeting, please reply to this message or e-mail me direct at brian@investorschoiceindy.com and I will give you more information.  I look forward to seeing everyone next week!  ’08 is going to ROCK!!!

To Our Success,

Brian
IC Indy Guru

Posted by Clayton Posted in: 2008 Meetings No Comments » January 2008