Latest Indianapolis Real Estate Market Conditions

Stats were just released late this past week.  In the Indianapolis area, annual sales of homes have increased from this time last year from 26,000 to 27,000.  Also, overall prices have remained unchanged from this time last year.  On the surface that may not seem great, but considering the mortgage market and foreclosure issues, those numbers are phenomenal.  We are seeing houses selling very quickly now.  Some of that has to do with the time of year, but the mortgage market is starting to settle down and buyers are gaining some confidence.  Buyers are still looking for deals, but those “great” deals are going to start drying up sooner rather than later.  My appraisal business has jumped slightly and we have seen more activity on the realty side of the business.  Those pent up buyers I have been talking about are coming out to smell the roses.  The market still has some rebounding left to do, but Indy is already picking up some steam and is poised for a nice rebound.  Are you ready?

-B
- www.investorschoiceindy.com 

Posted by Clayton Posted in: Investors Choice, Indianapolis Real Estate Market, Investment Property Rehab, Mortgages & Lending, Indiana Real Estate, Real Estate No Comments » March 2008

What is that Investors Choice Indy company, anyway…???

I wanted to send out a quick thank you to everyone that visits this site.  Word is spreading quickly about what we do.  Bringing awareness to the community about our projects and idea is wonderful.  I continue to hear stories about title companies, mortgage companies, real estate agents, and other industry professionals talking about what we do.  Even though they may not contribute (although they really should to get more involved), their presence is helping get our name out to the public.  Thank you again to everyone for helping.  Your help will come back to help you in the way of having like minded people share experiences and knowledge.  I hope more of you “lurkers” start to write in to ask questions and give opinions about our topics.  Everyone would love to hear from you. 

-B
IC Indy Guru

Posted by Clayton Posted in: Investors Choice, Investment Property Rehab, Mortgages & Lending, Indiana Real Estate, Real Estate No Comments » March 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

Investor’s Choice Meeting - November 5th, 2007

Investor’s Choice includes a private “club” with investors from the Indianapolis area.  We meet once a month on the first Monday of the month.  Currently we meet in the Greenwood area at 7pm.  We discuss various real estate investments and talk collectively about ideas.  Mostly we are a support group with a small number of members.  That close, personalized touch is something we pride ourselves on.  If you are in the Indianapolis area and would like to attend, the November meeting is open at no cost.  November’s meeting will be on the 5th at 7pm and will include a licensed CPA as our featured guest.  Normally these meetings are closed to non-IC members, but November is the month for giving, so we plan to be festive and give part of our service.  It gives you a chance to get to know us and us to know you.  If you are interested, please e-mail me direct at info@investorschoiceindy.com.  I will copy you to the meeting announcement next week.  That announcement will include directions and contact info.  We look forward to hearing from you.

Brian

Posted by Clayton Posted in: Real Estate No Comments » October 2007

“The Billionaire Inside”

No one can deny Donald Trump’s market savy or instincts about real estate (wives are a completely different story).  There was an interesting program on CNBC last night-”The Billionaire Inside”, an hour long interview with Donald Trump.  “The Donald” covers a range of topics and he states several times that now and the next 6 months are the time to capitalize on the Buyer’s market.  Now is the time to negotiate your best deal!  Hard to argue with a multi-millionaire.

Quote for the Day:  “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

Posted by Clayton Posted in: Real Estate No Comments » October 2007

The State & The Fed Proposals on Property Taxes & Mortgages

Many changes are on the horizon.  State and Federal lawmakers are looking to alter tax plans and ease the mortgage crisis that will affect every property owner.  These proposals are just that, proposals.  They still have to go through the legislative bodies and be signed into law.  As all things political are concerned, there will be debates and probably some changes.  However, considering this is an election year, I don’t anticipate a lot of fight from either side of the aisle in getting these proposals passed.  Property owners are hurting and the legislators are hearing from their constituents.  Something must and will be done, and it will be done sooner than later.

The State of Indiana is looking at the biggest changes that will have a direct impact on every property owner throughout the state.  Property taxes have increased on average by 50% from tax year payable 2006 to tax year payable 2007.  Many property owners saw their property tax bill increase by 100% and still other saw 200%+ increases in their tax bills.  The full impact of those increases is yet to be seen.  Mitch Daniels, Indiana’s Governor, suspended those tax bills for many counties early in the summer.  The reason being, assessed values were not correct due to faulty assessment practices.  Many properties were assessed at the wrong value and consequently, their tax bills were incorrect.  The Governor ordered those counties to reassess every property in those districts.  Once that reassessment is complete, new tax bills were to be sent out.  As a result, all property owners were required to pay the May and November 2007 property tax installments based upon the 2006 property tax bills, which did not include the 2007 increase.  As a resolution, a third bill will be mailed out and due in the Spring of 2008.  That third bill will reconcile the difference between the amount paid and the amount that should have been paid in 2007.  Are you confused?  So is practically every other resident.
To take care of that issue, Governor Daniels spoke on a live television news broadcast last night to outline sweeping changes.  Those proposed changes are as follows:
Cut property taxes - The Governor’s proposal calls for the State to take over school operating, school transportation and child welfare levies.  Not only will the move provide REAL property tax relief, it will also cut out some of the overwhelming complexity of property taxes, thereby allowing taxpayers to more easily determine who is responsible for property tax spending.  These cuts will be funded by a one-cent sales tax increase.  In addition, Mr. Daniels is proposing to enact a State Constitutional Amendment to permanently set the rate for property taxes.  The set rates would be 1% for homeowners, 2% for rental property, and 3% for business property.  Those percentage rates are based upon the fair market value for those properties.  Those changes will amount to an average of approximately 33% reduction in everyone’s property tax bill.
Fix the assessment system - Through a variety of structural changes, the assessment system will be fixed.  Governor Daniels’ proposal includes two of those structural changes - the elimination of township assessors and the appointment of county assessors.  This will create fewer and larger assessment jurisdictions, leading to equitable, fair market value assessments.  This will also remove the political pressure from assessors, who are charged with ministerial, not policy-making duties.

Those changes are monumental and have long been needed.  Of course we would all prefer to not pay property taxes at all, but that is something that will not happen.  Governor Daniels even mentioned last night that he looked into eliminating property taxes, but that it was something that could not be done.
The Federal Government is taking on the issue of the mortgage problems.  Bill H.R. 3648, Mortgage Forgiveness Debt Relief, includes four changes to the current law:
First, the permanent exclusion from gross income of discharged home mortgage indebtedness.  The bill would provide for a permanent exclusion for discharges of up to two million dollars of indebtedness (on or after January 1, 2007), which is secured by a principal residence.  Instead of including this amount as income, the basis of the individual’s principal residence would be reduced by the amount excluded from income under this bill.  In other words, if an individual loses their house due to foreclosure, the lender will give the borrower a 1099 that includes the amount of debt that was forgiven as a result of the foreclosure.  The borrower would then have to claim that amount as income on their 1040 and pay taxes on that income.  This bill would eliminate that tax.
Second, long-term extension of the deduction for mortgage insurance.  The bill extends the deduction for mortgage insurance for seven years (through the end of 2014).  The bill would provide that payments will quality for this deduction whenever they are paid so long as the contract is entered into after 2006 and before 2015.
Third, modification of the qualifications tests for cooperative housing corporations.  The bill would modify the requirements for qualifying for the special rules available to cooperative housing corporations.  Under current law, a coop housing corporation must meet several requirements, including a requirement that 80 percent or more of the coop housing corporation is earned from the corporation’s tenant-stockholders.  The bill would provide two alternatives to this 80 percent rule (ie. one based on square footage and another based on coop expenditures).  These two alternatives will make it easier to quality as a cooperative housing corporation.
Lastly, modification of exclusion of gain on the sale of a principal residence.  The bill amends the current law exclusion of up to $250,000 for a single person ($500,000 if married filing jointly) of a gain realized on the sale or exchange of a principal residence.  Under the bill, if a taxpayer moves their principal residence to a second home, the taxpayer will only be able to utilize this exclusion to the extent that it relates to the period of time when the homes was first used as a principal residence.
As mentioned above, these are only proposals and are not law.  Overall, I believe these changes to be a step in the right direction.  Time will tell what the actual impact will be.  I am keeping my eyes and ears open.  What do you think?

-B

Lets Discuss this on the forum!

Posted by Clayton Posted in: Real Estate No Comments » October 2007

Indianapolis Investment Property - Market Analysis

Many of you have been asking for this info and I wanted to back up what I have been telling you about the market.  I pulled properties that have sold within the past 3 months (since the mortgage crunch) that are in the areas that I am suggesting to concentrate on for purchasing.  Based upon MLS data, and in the specific areas (So Bro - Southern Broad Ripple and the Tarkington area), the data I have is this:

Southern Broad Ripple:
48 sold properties, 23 of those were non-REO properties and 25 of them were REO type sales.  That is an even split and something I have noted for quite a while.  The even better news is this, the average DOM (days on market) is at an average of 105 days.  Out of the 23 non-REO properties, 11 of them sold in less than 90 days and 9 of them sold in less than 60 days.  I also did a cross reference check of currently active properties and the numbers aligned almost perfectly in regard to the numbler of REO (50-50) and non-REO properties and the average DOM (110 days).  Bottom line, these properties are selling, even in the mortgage downturn.  Also, the lowest non-REO sale was $59,500 and the highest $143,000.  Obviously that is a wide range, but shows the low end to be in line with what I have put out.

Tarkington area (South of 42nd Street):
24 sold properties, 7 of those were non-REO properties and 17 of them were REO type sales.  This market has a historically low turnover due to the owners holding onto their properties.  Being close to Butler University really keeps the owners remain as owners, so the data is more skewed and harder to read.  Regardless, the news is just as refreshing.  The average DOM is at an average of 111 days.  The active properties, however, show an even better sign, as the average DOM is even less at 93 DOM.  The lowest non-REO listing was at $64,900 and the highest was $195,000.  This market is hot just like So Bro.

I hope that helps illustrate that the values are there and that these properties are still selling.  Imagine what the market will look like in 3 months when your first rehabbed properties hit the market.  I can’t stress enough…get in now!!
-B

Posted by Clayton Posted in: Real Estate No Comments » October 2007

Want to be a landlord, huh??

“Could you throw out a single mother with three children on Christmas Day?”  How cruel does that question sound?  When I started in the real estate investment business many years ago, an experienced investor friend of mine asked if I had the ability and resolve to be a good landlord.  I didn’t quite understand what he was getting at.  After all, how hard could it be?  My naivety kicked in as a thought to myself, “I lived in an apartment once and it went off without a hitch.”  My friend pursued further and asked the question above.  He told me to think long and hard about my answer.  Giving him the benefit of the doubt, I contemplated, “Could I do that?”  It seemed so harsh, so mean.  At the time and given that situation I didn’t believe I could make that decision.  Little did I know that fate would deal me a hand and I would face that nearly exact scenario.

Over the course of my investment history I have heard every story in the book from tenants as to why they can’t make their lease payment.  From, “I only get paid every other week and will be a little late this month.” to “I can get you part of the rent next week, just hold out a bit longer.”  Those excuses still resound in my head.  In the beginning, I believed every one of them to my own financial peril.  Over time and after hearing excuse after excuse, I became numb to the tenant’s words.  As much as I wanted to be understanding of their plight, I realized that I had a business to run.  I couldn’t meet my own financial obligations with excuses.  My creditors didn’t care if my tenants weren’t paying the rent.  They simply wanted me to make my payments.

After going through the eviction process with a single mother several years ago, I thought to myself that there had to be a better way to handle the situation.  Tenants don’t want the humiliation of being evicted or the hassle of having to move, any more than landlords like to toss their tenants to the curb.  That single mother didn’t want to transplant her children and I didn’t want to have to put them out on the street.  That situation hit me hard and I knew there had to be a better way to help my tenants while I managed my own financial concerns.

When I stared out in this business, I foolishly trusted everyone.  I didn’t check the credit worthiness of my tenants; I didn’t call previous landlords; and I didn’t ask about the tenants needs.  I simply placed an ad in the paper, waited for a prospective tenant to call, we signed a lease agreement and the tenant moved in.  For the most part I had marginal success with that process, but it would catch up with me.  It wasn’t until later that I started to understand what the rental business required and what I needed to do to become a smart landlord.  It took a tenant named “Lisa”, a single mother with two children, to help me learn how I could win in a winless situation.

Start with the basics, screen your tenants.  That seems like such an easy solution, but I can’t tell you how many times I have talked with other landlords that don’t do that simple task.  I am not the one to condemn since I didn’t make any attempt to research my tenants.  With the advent of the internet, it is so easy to do a quick check of tenants.  There are companies that can be hired to verify a tenant’s credit, check their criminal background history and discover if they have written any bad checks.  The cost for that can be put back onto the tenant as an application fee.  In fact, I tell any prospective tenants that I intend to complete a credit and background check and that they are required to pay the cost.  That usually weeds out quite a few “undesirable” tenants.  A simple background check can make or break you as a successful landlord.  However, that process doesn’t cover you for all situations.  Honest and credit worthy people can run into trouble and become bad tenants quickly.

Get to know your tenants from the beginning.  Every tenant has a financial and family situation that you should know.  I am not suggesting that you should delve into your tenant’s entire family history, nor do I recommend that you become best friends with your tenants.  However, having a snap shot of your tenant’s “situation” up front can help turn a potentially bad tenant into a great, long-term tenant.

If I had only asked Lisa about her situation, I could have learned up front that she was recently divorced.  She was living off of a part time job and the child support payments provided by her estranged husband.  I didn’t learn of her plight until she missed her rent payment three months into the lease.  Learning from my earlier mistakes, I was diligent enough to run a credit check on her but I didn’t know about her recent family “problem”.  However, if I had asked the questions, I could have worked with her to come up with a different rental solution from the beginning.  Lisa honestly thought she could make the lease payments.  I discovered too late that the wages from her part time job barely covered the rent, and to add insult to injury, her ex-husband was traditionally late with the child support checks.  At the time, all I cared about was getting her out of my property and finding a new tenant.  That wouldn’t serve either of us as I would discover.

That brings me to my last bit of advice; work with your tenants to amicably work toward a resolution.  Communication can be your final salvation in keeping your investment profitable.  Bad things happen to good people.  People lose their job; they get divorced; they have a medical situation; life happens.  It is unfortunate, but a part of living.  Keep in contact with your tenants.  Not just to collect rent, but to learn of problems with your property and to stay on good terms with your tenants.  If your tenants feel that you genuinely care about their life, they will typically do the right thing in regard to your property and pay the rent.

Concluding the story of my situation with Lisa, she had quickly gotten in over her head and ran into some financial trouble at the beginning of December.  Being a businessman, I had started the process of evicting her through the court system.  I knew that I would have to clean and prepare the property; advertise the property; and start the process all over again during the holiday season.  All of that would add to my expenses since I most likely wouldn’t find a new tenant until late January.  It was not going to be pretty any way it went.  Instead, I decided to visit my tenant.  We talked for about one and a half hours about each of our concerns and needs.  In the end we negotiated a mutually beneficial alternative to eviction.  She remained in the property for December, rent free.  During that time, she cleaned the property and got it ready for a second tenant.  I was on the verge of placing an ad in the paper for a new occupant when Lisa called to say that she found a new tenant for me.  An acquaintance of Lisa needed a space for a short period of time and was willing to fulfill the remaining term of her original lease.  I signed a new lease with Lisa and put her into another property I owned.  We had decreased her rent payment by $125 per month and I gave her the first month at half price which was enough to get her back on her feet.  Once she learned that I cared about her situation and was willing to help her out, she did all that she could assist me and get herself into a better situation.  I can’t tell you how good I felt about resolving that issue.  Lisa was a tenant for the next two years and excepting only one additional late payment (which I knew about before hand due to our communications), she was a wonderful tenant.  We turned a potentially bad situation into a good one.

I had helped a tenant out of a bad situation and helped myself out of a potential financial loss.  I learned so much from that situation.  In future dealings I used that experience with other tenants that had trouble paying.  Don’t get me wrong, I have had some tenants that I just couldn’t work with, but overall I would consider my landlord experience a good one and best of all, I sleep sound at night. All tenants won’t be like Lisa, but it is an example of what can happen by being a smart landlord.

Leasing property and being a landlord is not for everyone.  With correct information and better tenant selection from back ground checks; making smart decisions for you and the tenant at the beginning; and maintaining a little patience in dealing with a potentially bad tenant, you can be a smart landlord and see great financial benefits.

And so the question for you is out there, “Could you throw out a single mother with three children on Christmas Day?”  Think long and hard on it.  Be honest with yourself.  Could you do it?  Hopefully you will never be placed in that situation; however, if you are a landlord long enough, you be placed in the position of having to make tough decisions.  It is inevitable.  It is not pleasant, but a necessary evil in this business.  No one likes to be the bad guy, so why not look for solutions to avoid having to make that decision.  To this day I have never forgotten that “advice”.  It was a good test of whether or not I would make a smart investor and an even better landlord.

Posted by Clayton Posted in: Real Estate No Comments » October 2007

Indianapolis Housing on the Rebound

Indianapolis has long been used as a test market for many companies such as fast food restaurants, snack food manufacturers and a variety of other businesses. Anybody remember the McDLT© and Olestra©? The reason those businesses use us as “guinea pigs” is the fact that Indiana is known as a “vanilla state“. We typically aren’t on the cutting edge of anything like the east and west coast states, and we are considered by those marketers to be representative of the average American people and aren’t subject to wild opinions.

Likewise, our real estate market follows along with that “vanilla state” theory. One thing my 12 years of real estate experience has taught me is that the Indianapolis housing market is stable and has been that way for many years. We didn’t see the massive price increases like the residents of Florida or California saw two and three years ago. However, we haven’t seen the massive price drops and the “bursting” of the “housing bubble” that those states are experiencing. On average, the Metropolitan Indianapolis area has seen a very modest two to five percent increase in house prices for at least the past 8 years. That is a general percentage as some areas have remained stagnant such as sections of Marion County, while other areas such as Zionsville and Noblesville have seen higher percentages. Ironically, the Zionsville area has very recently seen a larger drop in housing prices.

As long as Indiana remains a vanilla state, we won’t see the rapid price increases or price decreases in the housing market. Knowing that information, it came as no surprise to me to see that Indianapolis placed second in Business 2.0 magazine’s October ranking of the Top 10 cities poised for a housing turnaround. Dallas/Fort Worth was ranked number one. New Orleans, Atlanta, and Montgomery Alabama followed Indianapolis, with Memphis, Mobile, Austin, Houston and St. Louis rounding out the top ten. The magazine forecasts that Indianapolis will see a 5.6 percent spike in housing prices by 2009. Low unemployment, an influx of white collar jobs and ease of finding reasonable housing were all cited as reasons for the market rebound. The magazine went on to state that Indianapolis is “the nation’s most affordable major metro” area.

That percentage spike is not a huge number, but is it very encouraging considering the state of the real estate market throughout the nation. In fact, many local real estate companies are already planning for this rebound. The Indianapolis Star recently quoted Donna Kreps, the general sales manager for F.C. Tucker (the city’s largest real estate company) as saying, “she (sic) credits the predicted turnaround to an increase in jobs in the area, more consumer confidence and lower interest rates.” She went on to say, “her (sic) real estate company is planning for an uptick in business – including increasing its recruitment.”

Again, this does not come as a surprise to me at all. I have been saying those things all along. Sure we are experiencing a mild hiccup right now in the market due to the mortgage predicament, but all of the indicators point to the fact that our city is ready to recover quickly. The doom and gloom seen on the national news about the poor real estate market may apply to other states, but Indianapolis has risen above those states. Now is the time to take advantage of some really great opportunities. Don’t let general news articles and reports, or uneducated opinions prevent you from jumping into that real estate investment arena. With desperate sellers and low interest rates, we are still in a buyer’s market. Buy now while the prices are very low, and sell later as the market begins to rise. What is your strategy for success? What goes down, will always find its way back up.

Lets discuss this more on the Investor’s Choice Indy Forum at:
Indianapolis Housing on the Rebound

-B

Posted by Brian Lee Posted in: Indiana Real Estate, Real Estate No Comments » October 2007

Foreclosures likely to hit 2 Million in 2008

Foreclosures are reaching record levels and will likely top 2 million this year and next year nationally, Washington is finally helping.

Here are some small steps that have been taken to get things put back on the right track.
1)  Hotlines: Set up to help homeowners learn how to bargain with lenders and assist them with some refinancing plans.
2)  Financial Aid: State will offer loans to help pay for refinancing fees.
3)  Delays: Postponing foreclosures to help homeowners buy time to get their problems worked out.

Federal regulators along with policymakers are jumping in as well.

Here are some of the actions that they are taking:
1)  Interest rate cuts: This will help homeowners with adjustable loans by limiting the hike in monthly payments.
2)  Loan Purchases: Fannie Mae and Freddie Mac have permission to expand their portfolios up to 2%. This will allow them to hold more mortgages easing the logjams in the secondary market.
3)  Jawboning: New guidelines from Washington are urging lenders to spot trouble early and become proactive by waiving penalties and cutting prepayment costs that prevent refinancing.

Now is the time to get involved with real estate investments.  These actions will not only help strengthen the real estate market, but will also provide a greater number of buyers to purchase our properties.

Posted by Administrator Posted in: Real Estate No Comments » September 2007

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