Tag Archives: investors

Straight to the Source

Several stats are most often quoted when talking about the real estate market. Current inventory, months supply of inventory, and median sale price, for example. How can you look these up yourself? You don’t have to be a Realtor® to do so. These stats are available on the Columbus Realtors® website.

http://www.columbusrealtors.com/stats

For example, we have heard that the inventory is low. How low is it exactly? Months supply of inventory is the number of months it would take for the current inventory of homes to sell given the current pace of sales.

  • In June 2017, Franklin County had 1.4 months of supply and Delaware County had 2.3 months of supply.
  • Central Ohio in general in June 2017 had 1.9 months of supply.
  • 6 years ago, in June of 2011, Central Ohio had about 10 months of supply.

Indeed, the inventory is low!

I had to go to the archive to get the 2011 statistic, but all are available at the link above.

June 2017, Investors: Where to Focus

This is one man’s opinion, mine, on the current real estate market conditions. You can be successful in any of the categories if you are good. However, each market better supports certain efforts.

1. Choose the Right Market and Location

Always choose the market you know.

2. Wholesaling

Wholesalers are sources of deals right now, which is rare. I believe wholesalers are doing well right now.

3. Real Estate Agent

With record low inventory, every house for sale creates a buyer frenzy. Buyers are 5:1 or 9:1 depending on who you talk to. Real estate agents need sellers (and we know it).

4. Retailing

This is my pick!

Retailers create value and thereby create inventory, which is currently scarce. If you can and are willing to work, contract, or hire contractors, your efforts will be rewarded by desperate buyers!

5. Landlording

Managers are always in high demand. Currently, investors who are enjoying great rental rates and a good economy are looking to off-load their headaches and hire management. Managing is a good choice.

6. Lease-Option / Rent-to-Own

Lease-options are seller-driven, typically when sellers have difficulty finding buyers. These are currently rare because buyers are so abundant.

7. Be the Bank / Invest

As an investor, I do not like to do this, but I have to pick this as currently the least desirable category. At no time in recent history has money and capital been so under-appreciated. Interest rates held at record lows by government policy and foreign investors desperately seeking returns have driven prices sky-high. Apartment buildings are selling at sub-6% capitalization rates in some places and home prices are outpacing appraisers’ willingness to comply. I personally am keeping my money on the sideline except to quickly bring inventory to market and sell it.

Long-term fixed-rate loans with low rates are hard to bet against, but before you lock yourself in, do a quick calculation on the monthly payment of a potential buyer in 5 years who will likely be buying from you with a normal interest rate on his loan. Your rate is low, your payment is low, but the prices reflect that.

The very last thing I would do is pay current market prices with a variable rate loan. Current conditions could not be worse for this type of investment. I personally have a variable rate loan on my apartment building and I am seeking to lock in the rate for 5 years because that is the longest typically available for a commercial loan. Fortunately I paid the 2013 price so I am way up. I am not selling, but I would not pay today’s price.

These are all my opinions. Please comment. All discussion is welcome.

Real Estate Investor Tools

I break real estate into 7 categories. I learned these categories at my first COREE meeting in January 2017 from the COREE founder Vena Jones Cox. I highly recommend COREE and I now always start here with these categories when making personal real estate investment decisions. You should too!

1. Choose the Right Market and Location

You want to invest in real estate? Start by deciding which option fits best into your lifestyle, skill-set, tolerance for risk, and involvement.The current market conditions should support your decision. Also, you should be familiar with the location you choose. See below for your options.

Tools

Use the categories below to direct your efforts.

2. Wholesaling

Wholesaling is finding motivated sellers and signing contracts to purchase for under-market prices, then selling the contract for a higher price, still under market value, to cash buyers.

Who does wholesaling: wholesaling often involves a lot of direct mail, and you have to have the stomach to drive people in a tough situation to as low a price as possible.*

*As a real estate agent, I do not wholesale.

3. Real Estate Agent

Real estate agents take a commission to help regular people and investors navigate the real estate market. We hold a license that requires us to uphold a fiduciary responsibility to our clients.

Tools

Either get your license, or know how to hire a real estate agent. See my referral program.

4. Retailing

Retailing is buying, adding value by improving, then selling. AKA “flipping.”

Who does retailing: retailing is generally best done by contractors, handymen, or people who are good at hiring contractors. It is very labor and capital intensive, but since you are adding value, can be lower risk.

Tools

Nates Rehab Cost Estimator Spreadsheet v2.1

5. Landlording

Landlording is managing investment properties. You have to manage tenants, maintenance, contractors, and account for money. To manage for hire typically requires a real estate license and a broker with specific E&O insurance. Many brokers do not allow managing for hire.

Who does landlording: managing is time, labor, and liability intensive. Very few people want to manage investment properties and deal with the “headaches.” For that reason, it is in high demand, and pays cash with little or no personal capital input.

Tools

When hiring a manager, I highly recommend finding a local manager who is part of IREM, the Institute of Real Estate Management.

6. Lease-Option / Rent-to-Own

This niche fills the gap between selling real estate and owning / renting out / managing real estate. Lease-options give a potential buyer with lower credit, usually in a small single family home, the chance to care for a home while leasing that he has the option to buy if he succeeds at obtaining financing. The advantage to the owner / investor / optionor is that the tenant takes on more maintenance responsibility and has personal buy-in.

Who this is for: this is a tool for investors in single family homes who want to transfer some of the maintenance responsibility to tenants and potentially sell some of their investments.

7. Be the Bank / Invest

This is where the money comes from. The guy with the money is taking the risk and deserves to be paid.

Who this is for: this is for people who have money and some experience in the type of investments they choose. Real estate can bring a high return, even very passive return, but when putting up your own money, you have to know your investment and trust the people managing it.

Tools

Nates Property Evaluator v3.2

Change only the numbers in yellow boxes! The other boxes contain formulas. Enter the basics about a property in familiar Excel format to quickly evaluate profitability. Evaluate multiple properties quickly, compare, and archive. Free to use and distribute.

I used this evaluator to identify my apartment building as a great investment, and it has been.

Nates Loan Calculator v3.3

Change only the numbers in yellow boxes! The other boxes contain formulas. Use this spreadsheet to calculate loans. Each sheet in the document has the loan equation solved for a different parameter.

I also recommend the In A Day Development 10bii Calculator. It is better than my spreadsheet. You can download it for your phone and it is worth every penny of the few dollars that you pay for it.

Useful Real Estate Links

Central Ohio Real Estate Entrepreneurs is the local Columbus real estate investor club.

Franklin County

Franklin County Auditor has property owner information.

Franklin County Sheriff Sales has foreclosure auction information.

Columbus Development Commission

Franklin County Sex Offenders Search

Trulia Crime Map

Delaware County

Delaware County Auditor

Delaware County Sheriff Sales

Loan Programs

OHFA 1st Time Home Buyer Down Payment Assistance Mortgage Tax Credit Etc.

Grants for Grads

National

FHA Approved List

National Association of Realtors® Economist Outlook

NETR Online has the link to all public records websites around the US