Getting Started with Apartment Building Investments: Lesson Seven: How To Retire Rich

Getting Started with Apartment Building Investments: Lesson Seven: How To Retire Rich

by K-Diddy Rocio

This is not meant to scare you, but according to The Wall Street Journal, the average 35 year old person in the United States will need to have saved a nest egg of at least 3 million dollars by the time they retire at age 65.  That may seem like an astounding number and it basically leaves investors a few choices to build a nest egg of that magnitude.

The first choice would be to play the lottery and hope.  Unfortunately, right now this is the plan that many millions of Americans are undertaking right now.   You might be one of them.

The other, and more common route, is to contribute to your 401k and maximize on your employers matching contributions.  This has worked for some people in the past but as good, high paying, professional careers become more scarce in the United States this route doesn't appear to be a wise choice for most people.  Most people's 401ks are mostly invested in a basket of stocks, mutual funds and bonds.  The problem with putting your nest egg into a 401k is the fact that you are basically counting on the fact that the stock market will be in a bull market when you are ready to retire.  If not, you will end up like many people who in 2008, when the stock market nose dived, were forced postpone their retirement by another decade because the value of their retirement nest egg had dropped so dramatically.

So what is the answer to securing your retirement future?  It just might be a strategic apartment building investment.  Here's why:

1) Other People's Money. As opposed to investments in stocks apartment buildings offer the opportunity to invest with other people's money.  In fact, investing in apartment buildings allows you to purchase the building with up to 100% other people's money by using a combination of partnerships and traditional bank financing.  In addition, the balance of the mortgage is paid off over the life of the loan using other people's money in the form of rent payments made by your tenants. 

2) Scarcity and Demand.  A record low number of multifamily units will be completed this year. The increase in rental housing demand is being met by a sharp reduction in the supply of new apartments. Just to put this into perspective, over the 10-year period from 1998 through 2008, there's an average of about 240,000 new rental completions per year. Last year, there were 160,000. And this year, completions are expected to be below 80,000 units, which would make it a 50-year low. This level of new completions is actually less than the estimated annual loss due to obsolescence, meaning that we're seeing essentially a net zero increase in the stock at a time of strong demand. New starts are not expected to approach historical levels until late next year, 2012, which means it would likely not be until late '13 and into '14 that we'll see completions return to historical levels. And obviously it's the completions that are what's important in affecting the supply demand fundamentals.

3) Demographics.  Roughly 3 million young adults had been living with family during the past five years, according to data from the Census and real-estate investment brokerage firm Marcus & Millichap, and housing experts estimate that they now generate about one-third of rental demand.

4)  Instant Returns.  Factoring in maintenance costs and other variables, an investment property should produce at least a 6% return on the initial cash investment in the first year after it is purchased. For example, an investor who puts down $250,000 in cash on a $750,000 property would need to clear at least $15,000 in the first year.

What does all of this mean to you as an investor?  It means that the time to begin buying apartment buildings is right now.  I am not promising that you will be the next Donald Trump but I certainly believe that apartment building investing now offers one of the safest and securest ways to secure the comfortable retirement that you deserve.

The next step is to get started.  But don't go out today and begin buying apartment buildings unless you are properly prepared.  You need to arm yourself with all of the tools, information and market knowledge to ensure that you are investing in the right property that will not only continue to pay for itself over the years but also offer you a hefty monthly cash flow that will put money in your pocket.

5 STRATEGIES FOR NAVIGATING THE SUMMER CLEARANCE SALE - ON REAL ESTATE!

5 STRATEGIES FOR NAVIGATING THE SUMMER CLEARANCE SALE - ON REAL ESTATE!

 

 

Home prices are low, interest rates are low - real estate is basically having a summer clearance sale! But unlike buying a clearance-priced car or computer, making the wrong move in this real estate 'sale' can have disastrous effects, from losing your dream home due to a bad bid to ending up with a money pit of a property.
Here are a few money-saving, pitfall-avoiding tips and tricks for buyers who want to do some smart home shopping this summer.
1.  Have a vision in place, before you start your house hunt. Actually, have several visions in place.  Have a financial vision, complete with a clear picture of what your total income and expenses look like, in the  “after homebuying”  view, including what you pay out for your home and related expenses, like HOA dues and homeowners’ insurance.  Have a vision of your life in your new home, including what you want to do, with whom and where you want and need to go - in the work, family and recreation areas of your life.
If you kick off your conversations with your mortgage broker and real estate agent with a clear understanding of the lifestyle you are looking to create, you’ll be much less likely to get derailed. With a clear vision in place and, ideally, on paper, you can clearly communicate your wants, needs, goals and financial boundaries to your professionals, telling them what you can afford, rather than trying to shoehorn your financial plans into one-size-fits-all mortgage guidelines. With a vision, the temptation of an uber-low-priced, but completely inappropriate, home will not lure you into buying the wrong place for your needs. (Nor will an amazing home that is simply out of your personal price range - no matter how great a value it is for the money!)
2.  Don’t let affordability get between you and reality. High affordability doesn’t necessarily mean you can get every single thing you want - and name your price. The fact is, even people who are spending millions for their homes don’t get everything they want!  I’ve seen buyers insist that they need X number of bedrooms and Y number of bathrooms in move-in condition for a price that is just not going to happen, even in this clearance sale climate, and end up looking and looking, ad infinitum.
If your agent has shown you home after home that is what you want, but has sold for more than you want to spend, and you’re confident that you can find or cut a better deal because the market is down and you just so happen to be a brilliant negotiator (!), you might be at risk of falling into this trap.  There are deals to be had, but if you don’t stay grounded in reality, you’ll end up chasing your tail and missing out on the tax and lifestyle advantages of homeownership.
If you’ve been house hunting for months and months on end, your agent keeps trying to tell you that you should search in a lower price bracket, you have repeatedly gotten overbid or you just can’t seem to find the precise home you seek in the location and price range you seek, at least consider the possibility that you might have an outsized wish list for your budget. Take a step back, revisit your vision, and remind yourself what’s really important.  It’s okay to save some “must-haves” and “deal-breakers” for your next home purchase!
3.   Get a local expert to brief you on the local market, then screen out the noise.  Now more than ever, it’s essential to have laser beam focus on the information and strategies that will get you what you want - whether it’s an amazing deal on the home you’ve always wanted or simply success at becoming the owner of your first home at a price you never thought would ever be possible. Otherwise, you’ll end up all over the place, spending your time, money and sanity attending auctions, getting worked up over distressed properties that aren’t yet for sale, trying to negotiate deals with sellers who are in no position to cut them and having your lowball offers on bank-owned properties rejected time after time.
Don’t let a news story about a guy in Minnesota who got a home for $3.27 be the basis for your entire home buying strategy. Instead, ask around and get referrals to a local broker or agent who has a track record of helping the people you know.  Read their answers on Trulia Voices and ask them your own questions to get a sense for whether they might be a good fit for you - if they are, and you trust them, then consult with them on the dynamics of your local market.  The market is down everywhere, relative to 2006.  But some markets - and some neighborhoods within markets - are still seeing multiple offers and home prices which are relatively recession-proof, compared to what you’d expect from the national news. 
Once you have a strategy in place, work it - don’t let your acupuncturist or shoe repair guy convince you that your strategy is wrong, that you could get the place for cheaper or that the bank should absolutely do every single repair, or you should walk away from the deal.  Many would-be buyers lose out on great homes because they take negotiating advice from their holistic veterinarian over that being offered by their broker or agent.
4.  Read everything. Good faith estimates. Contracts. Disclosures. Inspection reports.  There is a long, long list of multi-page documents that are very easy to “just sign” when you’re in the heat of the hunt and think you’re on the scent of an amazing deal. I’m not suggesting you ask for a week-long pause button to read every document, either - rather, read them when you get them, ask questions, and keep asking until you understand the documents.
Many buyers this summer will make offers on more than one home before they get into contract on “the one,” and many of those properties will be short sales or foreclosures.  With distressed properties, every contract is different, so it behooves you not to go on autopilot, just skimming the papers as you might otherwise. Also, inspection reports might reveal red flags and condition issues that you’d normally expect to see in the seller’s disclosures.  It’s especially critical, in these situations, to fully understand as much as you can about the property, your loan, and your obligations and due dates under the contracts.
5.  Stop your mental accounting and do the actual math - on paper.  In the field of behavioral economics, mental accounting refers to the tendency we humans have of doing math in our heads, separating things like easy money (e.g., the so-called “instant equity” from buying a home for less than it’s supposedly worth) from hard-earned wages and salary, and making spending decisions differently from these different mental accounts.
On the scent of a good deal, and in the heat of the hunt, even the most meticulous homebuyer can go up a few thousand in offer price to beat out other buyers.  No problem, right?  Well, but then when the inspector uncovers a few needed repairs, they make a mental guess as to what they’ll cost, and add that in - again, mentally. Then, when the lender requires a few extra thousand bucks than expected to close, that goes on top, but again, only mentally.  And mental money tends to stretch a bit longer than real money does! 
So, you can see how it’s possible to break the bank when you thought you were in great shape because you scored such a great purchase price for the property itself. 
Even if you hate budgets with every iota of your being, buck up on this one project, pull out the calculator or open up a spreadsheet and keep track of every line item. Get actual repair bids during your inspection period, to the extent possible, and get your math mojo on. It’s fine to buy and incur these overages here and there, but keeping track of them is key.  You know what I like to say - surprises are for birthday parties, not for real estate transactions, and not for your bank account, either! 
Keeping a strict tab on the expenses you incur during the transaction - or will need to incur afterwards -- will save you so much drama later.

Priced to sell out of the box.3180 Lake Shore.1800 SF.3br/2.5ba for 318K. Watch the sailboat classes in the harbor..

 

Watch the sun rise as the sailboat class begins from this 1800 sf premier tier-picture postcard lake harbor and park views. Full amenity building, valet parking. Great Lakeview location steps to shopping, lake, park and transportation. Carpe Diem-Priced to Sell!

Sold in 1 day. Priced right for the mkt. Staged correctly. Carpe Diem! Why not be next?

Sold in 1 day. Priced right for the mkt. Staged correctly. Carpe Diem! Why not be next?

Great Evanston Single Family. Think Spring! Prolific Raspberry Bushes abound in the large perennial garden w/easy care plants/vegetables. Included: A Victorian farmhouse beautifully restored for modern living. Unique split staircase and heated floors in kitchen/family rm. Compl. updated over the last 5 years. Quiet cul-de-sac street, newer Paver patio & walkway, & screened in front porch.

20 Incredibly Useful iPhone/ipad Apps for Homebuyers & Sellers

Whether you’re buying or selling a house, there’s a lot to consider — what’s available, what your price range is, comparable sales, neighborhood information, and more. It’s a lot of work to gather all of this information, but using iPhone apps can make the process a lot easier. Read on to learn about 20 great apps for people engaged in a home sale.

1. Zillow: Using the Zillow app, homebuyers can actually drive around a neighborhood and view values of all homes, not just those for sale. You can also check prices on sale properties, and check out homes on Google Street View if you’re not in the area.
2. Walk Score: If walkability is important to you in a home, check out the Walk Score using this app. You’ll find out about nearby amenities and find the most walkable parts of the neighborhood.
3. Open Home Pro: Open Home Pro is a must-have for real estate agents. You can use it to collect client information, publish real estate listings, and stay in contact with clients.
4. AroundMe: Use AroundMe to quickly find out about what’s around potential homes. You’ll be able to search for banks, gas stations, hospitals, and other important businesses.
5. Wikihood: Using Wikihood, you can learn about any neighborhood in the world. You’ll learn about people, culture, buildings, companies, geographical information, and more.
6. Sketches: Use Sketches to jot down notes and illustrate ideas on your iPhone. You can even annotate pictures, making notes about items within a home.
7. Evernote: Whether you’re buying or selling a home, keeping track of your notes, photos, and more is valuable. Using Evernote, you can create notes with photo, text, or audio, geo-tag notes, and even autosynchronize to your computer.
8. CompleteForeclosures: Find great homes at foreclosure prices using this app. You’ll find asking prices and home details, as well as guides for buying a foreclosure home.
9. Home Buying Power: Show clients their buying power or figure out your own using this app. It allows you to focus on the right price point by entering your desired payment or income percentage, along with a down payment, loan term, and interest rate.
10. Agent Feedback: Agents can keep home sellers constantly updated on feedback from open home visitors. It’s a great way to stay on top of feedback from real buyers.
11. Sex Offender Tracker App: Locate sex offenders in any neighborhood using this app. You can see pictures and the distance from your potential home.
12. TourNarrator: Use TourNarrator to capture client feedback about properties using notes, photos and voice recordings. You can share these notes with clients, and even post them on your website in a formatted PDF.
13. Photo Measures: Photo measures allows you to save measurements on your photos. You’ll be able to take photos on tours, then plan your space with measurements you can refer to later.
14. Mortgage Calc Pro!: Use this app to calculate fixed rate mortgages by entering loan information. You can include PMI, and even email calculations as a PDF.
15. Redfin: Redfin’s real estate app will allow you to see every home for sale on an MLS-powered map, complete with photos. You can save searches, favorites, tours, notes, and more.
16. Real Estate-Real Easy: Create your own branded real estate app on the iPhone with Real Estate-Real Easy. You will be able to set it up and maintain it easily.
17. ColorSmart: Using BEHR’s ColorSmart, you’ll be able to visualize colors in your new home. Take a photo, then fill in a BEHR paint color to see what it would look like.
18. Dictionary of Real Estate Terms: Check out this app to find a dictionary of over 300 terms in real estate. It’s great for new agents, or homebuyers who want to familiarize themselves with the industry.
19. CrumbTracks: With CrumbTracks, you can store photos and videos that you’ve taken of homes. You’ll even be able to annotate and share them with others, estimate monthly payments, and take notes about each home.
20. My Realty Tool: My Realty Tool makes it easy for realtors to keep track of listings, keys, leads, and more. This is a great way to replace your spreadsheet of information.

Chicago Supply Inventory..Improving:)

 

 

 

Taking Inventory:
Supply Picture Slowly Improving

One closely watched gauge of the local real estate market is Months Supply of Inventory (MSI).

MSI forecasts how long it would take to sell off the remaining supply of active listings given the current pace of sales. As a general rule of thumb, a balanced market, where supply and demand is in equilibrium, has about 6 months worth of inventory. But throughout the real estate downturn, MSI has been well above that benchmark.

Lately, however, MSI has become much more palatable. In fact, in the city of Chicago MSI is at a two-year low as of the end of March. While some areas do indeed have an oversupply of homes for sale, other neighborhoods show a virtual balance between supply and demand.

For example, North Center, Lincoln Square, Forest Glen, Rogers Park and the Near West Side, which includes the West Loop, all had around 6 months worth of inventory in March. Lincoln Park, Lakeview, Edgewater and West Town, which includes Wicker Park, all had less than 8 months worth of supply. The citywide average in March was 7.1 months - 50% below March 2009 levels.

Anecdotally, we are seeing more multiple offer situations. New listings that are priced correctly and in good condition are being snapped up quickly. That has not been the case over the last two years. The perception of an endless supply of flawless, inexpensive homes is far from today's reality.

MSI fluctuates seasonally and, historically, is at its lowest during the spring. In addition, factors such as shadow inventory (homes that are in foreclosure but have not yet been sold) are keeping optimism in check. However, it should be noted that this spring's inventory levels have been achieved without the benefit of last year's housing tax credit. Furthermore, in the city condo market, large chunks of new-construction supply have been taken off the market by investors acquiring units in bulk to rent out as apartments. In the past 12 months, almost 1,000 new condos have been acquired in such a manner - more than the total number of individual new-construction sales for all of 2010.

The upshot is that slowly but surely things are getting better. Buyers are still in a strong position but can't snooze on a great listing. Sellers still may be dealing with some disappointment on the pricing front, but if your home is priced and presented right, the buyers are out there.

Of course, every neighborhood, price point and housing type is subject to a unique set of circumstances. For an in-depth analysis of inventory relative to your property sale or search, contact me anytime. And remember I always appreciate your referrals.

The New Home in 2015..

THE NEW HOME IN 2015

The current housing market has affected not only the number of new homes that are built each year, but also the characteristics, features, and size of the ones that do get built. Many in the industry are wondering about how the new home will evolve over the next few years and whether those changes will stick once the economy bounces back to a more solid footing. The National Association of Home Builders conducted a survey that sheds light on the likely characteristics of the average, new single-family detached home in 2015.

Some of the most relevant findings include:

•The average, new single-family home will be smaller and have more green features
•The living room will either vanish or merge with other spaces in the home
•The “Great Room” is the likeliest room to be included in the average new home
•Low-e windows and engineered wood products are the likeliest green features
•A double sink, recessed lighting, and table space for eating are very likely in kitchens


Broad Trends

In order to measure which of five broad trends would be more prevalent in the next five years, building professionals were asked to rank the following trends from least to most probable to occur by 2015: the average single-family home will get smaller, it will have more green features, it will have more technology features, it will have more universal features, and it will have more outdoor living features.
As Figure 1 shows, the majority of respondents agree that the single-family home will get smaller and that it will have more green features over the next five years. The former was rated as the first or second most probable trend by 74 percent of survey respondents, while the latter received similar ratings from 68 percent of them. Meanwhile, only 29 percent of respondents rated the trend for more technology features in the home as the first or second most probable trend, 20 percent rated the trend for more universal features likewise, and only 10 percent indicated more outdoor living features would be the dominant trend over the next five years. Regarding universal features, many respondents indicated that the average home of 2015 would be “adaptable,” and not necessarily “accessible,” implying that many accessibility features would be planned for, but not actually included in the average home.

Average Home Size
Respondents expect the average, new single-family detached home in 2015 to be about 2,152 square feet, 10 percent smaller than the average size of single-family homes started in the first three quarters of 2010. Overall, 63 percent of respondents expect the average size of new homes in 2015 to be somewhere between 2,000 square feet and 2,399 square feet, 22 percent expect it to be between 2,400 square feet and 2,999 square feet, while 13 percent expect it to only be 1,600 square feet to 1,999 square feet (Figure 2).

Data from the Census Bureau indicates that the average size of single-family homes completed peaked in 2007, at 2,521 square feet, was virtually unchanged in 2008, and then declined in 2009 to 2,438 square feet. Preliminary data for 2010 shows a further decline, down to 2,377 square feet. Although part of the recent drop in average home size may indeed be temporary due to hard economic times, a number of factors lead building professionals to expect home size declines in the long-run: consumers are focused on lowering the cost of heating and cooling their homes; they no longer have sizeable equity in their current homes to finance a much larger one; diminished expectations for house price appreciation has reduced demand for extra square footage in order to achieve appreciation on a larger base; demographics, 29 percent of the US population will be 55+ in the year 2020, demanding smaller homes; and strict mortgage underwriting for the foreseeable future. Combined, these factors will weigh on the consumer to purchase homes based on need more than want.

How Living Room Will Change
An overwhelming majority of respondents do not expect the living room to stay in its current form. Instead, more than half (52 percent) expect the living room to merge with other spaces in the home, while 30 percent expect it to vanish to save on square footage. Another 13 percent expect it will become a parlor/retreat/library or music room (Figure 3).

Rooms/Features
The great room (kitchen-family room-living room) is the most likely room to be included in the average, new single-family detached home of 2015. Using the scale from 1 to 5 (where 1=not at all likely and 5=very likely), the great room topped the list of “very likely” rooms/features, with an average rating of 4.6, followed by walk-in closet in master bedroom (4.5), laundry room (4.2), ceiling fan (4.1), master bedroom on 1st floor of 2-story home (4.1), and a 2-car garage (4.0) (Figure 4).

A home office, 9’+ ceilings in the first floor (both with average ratings of 3.9), an indoor fireplace (3.4) and bolder colors on interior walls (3.2) were designated only as “somewhat likely” to be included in the average new single-family home of 2015. Some of the “least likely” features to be present: two master bedroom suites, a sunroom, and a hobbies room (all with average ratings of 2.2), a media room (2.4) and the living room (2.5).

Green Features
Low-e windows are “very likely” to be present in the average new single-family home of 2015 (4.5 average rating), as well as engineered wood beams, joists, or trusses (4.4), water efficient features (dual flush toilets or low flow faucets) and Energy-Star rating for the whole home (both with an average rating of 4.1) (Figure 5).
Some of the green features respondents rated only as “somewhat likely” to be present in the average new single-family detached home of 2015 include insulation higher than required by code (3.8), tankless water heater (3.8), and argon gas windows (3.7). Two green features were considered to be “unlikely” candidates for the average new home in 2015: green certification from LEED program (2.7) and other renewable energy sources i.e. geothermal, wind (2.8).

Kitchen Features
As previously stated, the kitchen, along with the family room and the living room, will increasingly be combined to form the Great Room. But what exactly is the kitchen of the average new home of 2015 likely to have? According to survey respondents, a double sink (4.3 average rating), recessed lighting (4.2), table space for eating (4.1), a breakfast bar (4.0), and pull-out drawers (4.0) are “very likely” features in kitchens five years from now (Figure 6).
A central island (3.8) is “somewhat likely” to be included in kitchens of average new homes in 2015, along with a walk-in pantry (3.6), a recycling center (3.6), desk/computer area (3.4 ), granite countertop (3.4), and to a lesser degree laminate countertops (3.0).
What the average new kitchen of 2015 is “unlikely” to have is a trash compactor, fireplace, wine cooler, and butler’s pantry (all with an average rating of 2.3), hot water dispenser (2.6), and a small appliance storage area (2.8).