BloodhoundBlog

There’s always something to howl about.

Category: Investment (page 2 of 20)

November 30, 2011

Revestor.com is live now. Revestor.com searches current listings by cash flow and capitalization rate.

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I received an email, from BHB Anaheim presenter Bill Lyons, that Revestor.com is live now and will be announced to the public tomorrow.  Bill knows that the Bloodhound way is to fly under the radar, sneak in the back door, and quietly win so I appreciate the chance to break the news.

Revestor.com is a new property search site.  It’s unique proposition is that it allows users to search by either capitalization rate or cash flow.  Revestor believes it will become a useful tool for both investors and primary residence home buyers.  Bill Lyons suggested that its unique ranking display, offers data to a home buyer, which is currently unavailable.  Incorporating the income potential of a property offers another valuation model for home buyers to consider.

I ran a search for an area with which I’m familiar; Oceanside, CA  zip code 92056.  I searched for properties listed from $150,000 to $250,000, by cash flow, and ten current listings were displayed.  The top two listings appealed to me:

3906 Marvin –  a 3BR 2BA, 1064 s.f. SFD with $902 of free cash flow, with an 80% LTV loan, listed at $169, 767

3132 Glenn –  a 4BR 2BA, 1302 s.f. SFD with $533 of free cash flow, with an 80% LTV loan, listed at 249,900

Revestor offers a “launch” blog post and I’ll insert Bill’s comments from there (italicized), as I offer my ideas  here.

Here is what I like about the site:  I like the map display of the listings and I love the fact that it ranks the listings by investment potential.  The financial data offered, on individual listings, is pretty comprehensive.  It drills down on expense data and allows the user to customize it.  The mortgage data is cool because it allows you to slide the down payment tool and see real-time figures.  The exit strategy information is unique but I’m unclear as to how they determine the potential resale value.

Bill offered:  While San Diego is just a starting point we are still very much a “work in progress“. The site is not perfect (especially for a perfectionist that is striving for simplicity). We launched Read more

July 29, 2011

Could Mortgage Rates DROP after a Treasuries’ credit ratings downgrade?

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

The dictated debt limit deadline looms and a credit rating downgrade, to US Treasury securities and agency mortgage-backed securities, seems likely.  Naturally, a spike in treasury yields is expected and a subsequent rise in mortgage rates should follow.   That’s right out of the senior year textbook, in most American business schools.

I’m not so sure the fixed-income markets will follow the textbook.  Mortgage rates might … do nothing in response the the credit rating downgrade.  Here’s why:

The credit ratings agencies lack……well…credibility.

The independent credit ratings agencies ( Moodys, Standard & Poors, Fitch, etc) have a reputation for being late on the scene.  They got hoodwinked with Enron, MCI/Worldcom, and Greece.  They were asleep at the wheel during the mortgage meltdown, issuing AAA ratings to CDOs, up until late 2007.  They are often considered to be too chummy with the issuers (the issuers pay their fee) and when the issuer is a government (with the power to regulate their business), they generally walk on eggshells.

The news may be baked into the market already.

The ratings agencies have been signaling a potential downgrade for months.  Clearly, raising the US debt limit will allow the Treasury to remain “liquid” but the agencies have said a downgrade is likely unless a substantive plan is enacted to reduce spending.  Cut, Cap & Balance, the “most extreme” of the proposals offered, still might not have been “extreme” enough to avoid a downgrade.  Both political parties are demonstrating that they lack the political will to address the long-term structural deficits, needed to bolster the Federal budget, to avoid the ratings downgrade.  Fixed income traders seem to be shrugging that off.

US Treasury securities are still considered to be the safest investment in the world.

Certainly there are better run countries than the US but their debt offerings lack SIZE; there ain’t enough of that debt for the real money.  Germany has its EU obligations hanging around in the background and Japan seems to be in worse shape than we are.  Chinese sovereign debt could be a consideration but the Chinese and Japanese still want their investments dollar-denominated.  The US is, for all Read more

July 12, 2011

Wall Street Journal: “A home is a lousy investment.”

by

Suburban Phoenix Real Estate Broker

Author website

Ahem: “Today’s young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance.”

From the Wall Street Journal:

At the risk of heaping more misery on the struggling residential property market, an analysis of home-price and ownership data for the last 30 years in California—the Golden State with notoriously golden property prices—indicates that the average single family house has never been a particularly stellar investment.

In a society increasingly concerned with providing for retirement security and housing affordability, this finding has large implications. It means that we have put excessive emphasis on owner-occupied housing for social objectives, mistakenly relied on homebuilding for economic stimulus, and fostered misconceptions about homeownership and financial independence. We’ve diverted capital from more productive investments and misallocated scarce public resources.

Between 1980 and 2010, the value of a median-price, single-family house in California rose by an average of 3.6% per year—to $296,820 from $99,550, according to data from the California Association of Realtors, Freddie Mac and the U.S. Census. Even if that house was sold at the most recent market peak in 2007, the average annual price growth was just 6.61%.

So a dollar used to purchase a median-price, single-family California home in 1980 would have grown to $5.63 in 2007, and to $2.98 in 2010. The same dollar invested in the Dow Jones Industrial Index would have been worth $14.41 in 2007, and $11.49 in 2010.

No need to pass these facts along to the National Association of Realtors. They already know.

May 11, 2011

What’s the long term investment value of owning your own home? Would you believe… nothing?

by

Suburban Phoenix Real Estate Broker

Author website

Business Insider has the goods.

Yes, I know you can tell me stories about killings made. We’ve done it, too. How are your results lately?

Meanwhile, do you want to have a long talk with all those folks who bought their homes believing in the wealth-producing miracle of the mortgage-interest tax deduction?

Does anyone want to chip in for some wood polish for the NAR’s nose?

April 26, 2011

Housing Might Not Be a Good “Investment” But It’s Not a Bad Hedge Against Inflation

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Debra and I had the good fortune to met Anthony Randazzo at a Reason Foundation dinner last week.  Mr. Randazzo published an article today, about real estate as a “store of value” (which was consistent with what we’ve been talking about here on BloodhoundBlog).

Few people will dispute that more homeowners adds “social value” to communities.  Greg Swann articulated that nicely here:

The essence of our freedom is the free ownership of the land, and yet everywhere we turn, private property is subjected to one law after another, and everything that is not forbidden is compulsory instead.

This is a grievous error. The men who become Brownshirts or Klansmen or Khmer Rouge — the men who make up murderous mobs — are men without land. It is the husbandry of the land — each man to his own parcel — that most makes husbands of us, that sweeps away our willingness to live as brigands or rapists or thugs.

By robbing the private ownership of the land of its meaning, the state is, by increments, robbing its citizens of their humanity. No one burns down his own home, nor his neighbor’s home. But when the time comes that we all seem to own our homes only by sufferance, none of us will have anything left to defend.

What Greg was arguing against was an activist government, abusing eminent domain laws.  I was happy to read that locally, the brigands disguised as National City, CA Councilmen were defeated last week but the war in defense of private property rights will be a long campaign.

Mr Randazzo’s article however, demonstrates how that “social value” (op. cit.) can be distorted when the planners keep planning:

When looking at housing this way, the “ownership society” lauded by President Bush in the early 2000s, sounds like a good idea. Especially when considering the social values associated with homeownership, like being a good neighbor and having a stake in nuturing a community. However, while owning a home is rarely a bad thing, it might not be the great investment our Read more

April 19, 2011

Until there is a brokerage counter at Wal-Mart, there is no real estate bubble

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Ever wonder about the relationship between gold and real estate?

Jim Klein got me to thinking about a “store of wealth”, when I postulated that there is no gold bubble:

I think people can get snookered into thinking it’s a great “investment.” It’s protection, it’s barter; it’s a store of wealth. To me, that’s not what “investment” means, which is usually about income. I believe that in actual inflation periods, gold tends to appreciate on the low side, particularly when compared with many other assets. It does much better /anticipating/ inflation, as now.

I remembered hearing that term before, over on Seeking Alpha:

Gold and Real Estate have historically been the two ways to store real value as they are as real assets as you get. So what happens when the value of one real asset is artificially manipulated? We all know by now what caused the bubble in real estate, but, at the height of the bubble it was unknown to the market that it was a bubble on the verge of bursting

Real estate does have income-producing value though, as Sean Purcell pointed out to us years ago.  Also, the median-priced home is larger today than it was 40 years ago, because of change in retail demand.  Still, for fun, let’s compare the median price of a single-family home, in August, 1971 ($25,300) to the price of a single-family home, in February, 2011 ($202,100), in ounces of gold:

On August 1, 1971, the price of gold was pegged at $35/oz so it would have taken 722 ounces of gold to purchase a median-priced, single-family home.  Two weeks later, The United States terminated its participation in The Bretton Woods Agreement, creating a fiat currency.

At the end of February, 2011, you might have paid $1,400/oz for gold.  You could purchase a median-priced, single family home then for 144 ounces of gold, about one-fifth the cost (in gold), from 1971.

What I’m missing here is the net operating income you would have derived from that single-family home, over the 40-year period.  I’d have to know Read more

April 17, 2011

“When Wal-Mart has a gold coin section in the jewelry department…

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

…then we can start talking about a possible bubble in gold.”–Gary North, on LewRockwell.com

Gold is an investment asset. It therefore will not become popular short of an economic collapse – hyperinflation followed by a depression. The average person owns no gold coins, nor will he anytime soon.

Where would he buy them? How could 100 million households buy a single gold coin per household? This would be impossible. There are only a few small coin stores in any community. They are mostly mom-and-pop outfits. The U.S. Mint could not meet the demand.

When Wal-Mart has a gold coin section in the jewelry department, then we can start talking about a possible bubble in gold. Not until then.

If you’re looking for the best primer for owning gold click the link above and read the whole article.  Of course, if you’re confident that the Fed will find a way to unwind QE II, and that the money center banks are all safe, and that we’re finished with bail outs, and that the Federal budget deficit is under control, you have no need to own gold as an an inflation hedge.  If you think ANY of those shoes could still drop, buy the yellow metal until you see it offered at Sam’s Club.

February 7, 2011

Pope Obama and the Synod of Commerce

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

President Obama ventured into the enemy’s lair today, channeling his inner Reagan.  The message, designed to be benign towards industry, still included his sarcastic finger-wagging at the tycoons:

“I’m here in the interest of being more neighborly,” Obama said. “Maybe if we’d brought over a fruitcake when I first moved in, maybe we would have gotten off to a better start.”

The President just doesn’t get it, though.  He still thinks the fascist model works:

Obama alternated between pledging help for business from the federal government and asking big business to do its part to help “win the future,” a theme he first introduced two weeks ago in the State of the Union address.

“Ultimately, winning the future is not just about what the government can do to help you to succeed,” said Obama. “It’s also about what you can do to help America succeed.”

Obama claims that he is open to suggestions:

If businesses lack confidence in the economy, Obama said they should let him know about it.

“If there is a reason you don’t share my confidence, if there is a reason you don’t believe that this is the time to get off the sidelines – to hire and invest – I want to know about it,” Obama said. “I want to fix it.”

Cool.  Let’s tell him to roll back the federal register to 1990.  Uh, oh !  Maybe not.

Obama has launched a review of regulations to eliminate burdensome rules, but he gave a nod to their importance in Monday’s speech.

“Even as we work to eliminate burdensome regulations, America’s businesses have a responsibility to recognize that there are some safeguards and standards that are necessary to protect the American people from harm or exploitation,” Obama said.

“Moreover, the perils of too much regulation are matched by the dangers of too little. We saw that in the financial crisis, where the absence of sound rules of the road was hardly good for business.”

Sean Purcell is right.  Obama isn’t a pragmatist, looking for solutions.  The President is a religious zealot, forced to Read more

February 1, 2011

Virginia Legislature Wants The Commonwealth To Be The Golden State. California Accedes.

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Worried about a dollar collapse?   Virginians may worry less because their legislature  is proactively investigating solutions:

WHEREAS, various systems of alternative currency employing gold or silver, or both, in the form of coin or its equivalent in bullion have already proved themselves in the free market, and could either be employed by the Commonwealth directly or be used as models for a new system created by the Commonwealth to meet Virginia’s unique needs; and

WHEREAS, the adoption of an alternative currency consisting of gold or silver, or both, would not destabilize the present monetary and banking systems, the Commonwealth’s governmental finances, or Virginia’s private economy, because it would not compel or commit the Commonwealth or her citizens to employ such alternative currency to the exclusion of the Federal Reserve System’s currency immediately, but would merely make the alternative currency available, and enable it to be used in competition with and preference to the Federal Reserve System’s currency, to the degree that the need for such use became apparent; and

Governor McDonnell (R-VA) claims the resolution would be unconstitutional, that the powers to coin money rest with the federal branch of government.  I don’t think that matters.  The Virginia Resolution simply recognizes that a competing currency might be needed should the US currency collapses.  That resolution could very well be the “shot heard ’round the world”.

Americans of all walks of life, from the CEO in the corner office to the cop walking the corner beat are following the price of gold and silver daily.  Some are actually buying the precious metals, too.    Wall Street, in its typical fashion, developed a derivative product to sell to its customers.  The bankers and brokers claim GLD and SLV are a more simple approach to hedging portfolios with an exposure to precious metals.  Guess what?  It may be harder to find the actual metals, held by the Wall Street mutual funds, than the mortgages packaged in the collateralized debt obligations.  GLD and SLV may be empty vaults; perhaps a scam.

I started moving money into silver about Read more

December 7, 2010

When the grasshoppers vote to enslave the ants, the ants vote with their feet: “I opt-out of California.”

by

Suburban Phoenix Real Estate Broker

Author website

From newgeography.com:

So, in protest to the insensitive indulgent big-spenders that run Sacramento, I say, “Don’t touch my junk!!!” My beautiful California home is now on the market for $2,000,000. My next home will be in a no state income tax state like Texas or Nevada. I will not buy that new Jaguar that I was planning to purchase for $75,000. I will keep my old Cadillac and deprive Sacramento of $6,562 from its 8.75% sales tax. My next purchase for my real estate business will be an office building in Prague in the Czech Republic, a democracy that has lower taxes and fewer regulations. My income will remain either offshore or in a state that does not confiscate like the money grubbers in Sacramento. And, I will not be investing my capital to create any new jobs in California. In the digital age, my staff will be located in states that are a little more business friendly.

Apparently, I am not alone. Migration out of California exceeds the rate of almost every other state. Why are my fellow “high-earners” leaving the Golden State? Maybe it is because California ranks nationally in the bottom two for business friendliness while placing third in state income taxes.

We have Jerry Brown as our Governor again, meaning that he will live his entire life without a real job. The Central Valley, once agricultural wonderland of America, has Depression era unemployment, this as a result of a green-inspired court water shut-off designed to protect an Anchovy sized piece of bait called the Delta Smelt. And, our brilliant voters – including those working class voters most impacted – rejected Prop 23. That means that on January 1, 2011, California must begin to reduce our greenhouse gases by 40%. To achieve this noble goal, we seem certain to make ourselves even more uncompetitive with other countries and other states.

If that was not enough, voters also approved Prop 25 which allows the public union dominated Democrats to pass its budget with a simple majority. They did such a good job ($20 billion shortfalls) when they were forced to obtain a 2/3rds Read more

November 23, 2010

California’s Long Term Real Estate Outlook

by

Real Estate Investments Broker

Author website

Even though we can’t be sure of what our income tax rate will be for 2011, we do have a kinda sorta idea of the high side, right? Lookin’ for more to be thankful for this Thursday? If you don’t live in California, trust me, be thankful as you anticipate tax day.

Those who’ve worked hard to produce, often employing breadwinners in the process, will be payin’ almost half of each dollar earned at the margin, if the current federal rates aren’t renewed. In my town you can add the constant irritation of a 9.5% sales tax. Is it really a mystery why so many people and businesses are puttin’ the Golden State in their rear view mirror?

The seeming paradox is that the population continues its upward trend. That trend has been more or less a net economic positive since the end of WWII. However, in my opinion, that is rapidly changing, and has been for quite awhile.

The producers are hittin’ the exits. New producers aren’t arriving in nearly large enough numbers to make up the shortfall. Smart folk don’t run into a tax chainsaw on purpose.

When whatever ya wanna call normal finally returns to the economic scene, CA will still be a tax tax tax state. And, lest we forget, history shows that those who love taxes also love spending — taxpayer’s money.

The price of a home will still be, relatively speaking, far more expensive, and much of the time older than their counterparts in other states. Lifestyle? Weather? The last few years has shown that those who have the financial option to leave, and many who simply can’t afford to remain, are hittin’ the road, Gettin’ Outa Dodge.

At some point, even great weather and lifestyle become overpriced.
 
I speak as a CA native. The trends of the last 20 years or so have saddened me. To each their own, but my view of CA’s real estate future, especially investments, is not positive. I think many have allowed their micro view to override the macro realities. When a state transitions from producer friendly to a taker state, the Read more

November 18, 2010

I just “feel” that mortgage rates could drop, for a short period of time

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Didn’t I just tell you mortgage rates will be rising,  ten days ago?

I sure did, and I think I offered a pretty solid, fundamental explanation of how the bond bubble will pop.  That hiss you heard, directly after my post, was the rapid escape of helium from the bond balloon.  Back then, the 4.0% FNMA bond was trading at 102.75, while today, that bond is trading at 101.50, after reaching a low of 101.25.

What’s that mean to your customers?

The very same $300,000 loan, they could have locked in with no points, on November 8, 2010, will cost that customer about $5,000 extra, in closing costs, today.

I “feel” they’ll have a shot at getting close to that no-point pricing before the month is over.  Let me explain the difference between “feeling” something and “being pretty certain about” something.  I’m pretty certain that the sun is setting over the yardarm of below 5% mortgage rates but I’m having a little difficulty reading the sun dial.  I know it’s sometime between 3PM and 8PM for this mortgage rates rally.

Still, before the last ray sinks into the sea, we’ll see some rallies.  Here’s why I “feel” that way:

  • The Fed is buying between $600B and $900B worth of bonds.  It is resolute that this sort of monetary policy is what is needed to lower unemployment.  So certain is it that it is fighting back against political criticism of QE2.
  • The GM public offering was received very well yesterday.  Investors jumped at the chance to own the electric car company so much that GM expanded it’s offering and is trading higher, post-offering.
  • The Irish bond bailout appears to be happening.

Traders are calming down, and trusting the power of central banks’ and governments’ bailouts again.  A trader’s loyalty is about as reliable as a lap-dancer’s love but, for the near-term, bond traders think  QE2 just might drive bond prices higher.  They ain’t selling too much and they ain’t buying too much.  Expect them to watch what happens through next week, then pile on the bond train, hoping to make a quick buck.  That’s good for mortgage rates, in the short-term.

Eventually, Read more

November 8, 2010

Mama Grizzly Knows Sumptin’: It’s Sunset For Low Mortgage Rates

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

One of the things I love about the internet is that links last.  For your soap-operatic pleasure, Sarah Palin asks a national author if he read his own newspaper, when he criticized her remarks about inflation:

So, imagine my dismay when I read an article by Sudeep Reddy in today’s Wall Street Journal criticizing the fact that I mentioned inflation in my comments about QE2 in a speech this morning before a trade-association. Here’s what I said: “everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher.”

Mr. Reddy takes aim at this. He writes: “Grocery prices haven’t risen all that significantly, in fact.” Really? That’s odd, because just last Thursday, November 4, I read an article in Mr. Reddy’s own Wall Street Journal titled “Food Sellers Grit Teeth, Raise Prices: Packagers and Supermarkets Pressured to Pass Along Rising Costs, Even as Consumers Pinch Pennies.”

It’s common knowledge that Sarah Palin is a vacuous bimbo, who gathers her economic news from the Wasilla Women’s Club Newsletter, right ?

Call me suspicious but I watched an amiable dunce win the Cold War, without firing a shot.  Let’s just say I’m less inclined to question the intelligence of country bumpkin politicians, after living through Reagan, and am more inclined to second guess the propagandists at the major dailies.

Whodathunk Mama Grizzly would face the Wall Street Journal, though?

Mama Grizzly and Mama Brady know something about inflation; they do the weekly grocery shopping.  When Mama Brady told me that our grocery budget had to be adjusted upwards, while I was remarking that our budgeted monthly fuel expenses had to be adjusted  as well, I started thinking that inflation might just be around the corner- that’s not good for mortgage rates.

September 20, 2010

Real Estate Investment Tips

by

Realtor, Internet Marketing Expert

Author website

Finding a “bargain” property to purchase for rental purposes takes some analytical skills, market knowledge, and a real estate agent who is in sync with your investment goals.

Some investors would consider the ideal rental property to be a three- bedroom, two-bath house in good repair, or needing minor touch-ups at most, and would be willing to pay at or near market value price if neighborhood rental values would justify the investment.

This investor would be holding the property long-term, and would have a desirable property, available for immediate occupancy, and would attract renters willing to pay top dollar to live there.

Other investors would prefer to find a property that is structurally sound, but in need of extensive cosmetic rehabilitation. If this property could be purchased at a considerably below market value price, and if the cost of repair and possible rental income would justify the purchase price, then that would be this investor’s  idea of a “bargain.”

A knowledgeable real estate agent should point out to the new investor that disassociating ones self from a prospective property to rent is vitally important, meaning that the investor should not evaluate an investment property as a property he or she might want or not want to live in. Investment properties should be looked at with profit potential in mind.

Holding a rental property long-term, enables the investor to ride out market swings and generate continued cash-flow. However, consideration must also be given to the fact that the longer a property is held the more extensive the costs of future repairs are going to be, such as roof replacement, appliance replacements, etc.

Furthermore, if the investor is planning to purchase multiple rental properties over time, consideration should be given to hiring a property manager to oversee rent collections, maintenance, emergencies, etc.

Hiring a property manager is often more cost-effective than handling everything one’s self. Additionally, the property manager can be the investor’s knowledgeable guide in calculating the rent levels that would simultaneously attract renters and optimize revenues.

The new investor will have many important decisions to make before committing to a particular property:

  • Is this property suitable for my purposes?
  • How much Read more
September 1, 2010

“The American dream is not dead — it’s just taking a well-deserved rest.”

by

Suburban Phoenix Real Estate Broker

Author website

From the New York Times, economist Karl Case of Case-Shiller fame says: Buy!

This financial crisis has made us all too aware that we live in a Catch-22 world: the performance of the housing market drives the economy, and the performance of the economy drives the housing market. But housing has perhaps never been a better bargain, and sooner or later buyers will regain faith, inventories will shrink to reasonable levels, prices will rise and we’ll even start building again. The American dream is not dead — it’s just taking a well-deserved rest.

« Older posts Newer posts »

Inventing Real Estate 2.0

Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

Media Contacts