The Cash Flow Store
"Off Wall Street investing resource."
WSJ picks up on Flipping in Phoenix
· DECEMBER 8, 2009
With so much information on mainstream sites on real estate activity this article is a true standout as very accurate of todays market. If you have not had a chance to read it enjoy - Brian Davison
House Flipping Makes a Comeback WSJ
SCOTTSDALE, Ariz. -- Four years after the collapse of the U.S. housing bubble, flipping homes is back in fashion.
Jon Mirmelli, a Phoenix real-estate investor, learned late in the morning of Sept. 28 that a never-occupied custom house on the northern fringes of this Phoenix suburb was going up for auction around noon the same day. The six-bedroom home, built on a three-acre desert plot, has a kitchen with two dishwashers, four ovens, "antibacterial" copper sinks, and a master "spa" bathroom with space for a flat-screen TV visible from the tub.
Flipping Foreclosures
Joshua Lott for The Wall Street Journal
Avraham Azoulay, left, and Donna Valva looked over their list of foreclosed houses outside the Maricopa County Court building during an auction in Phoenix, Dec. 3, 2009.
The minimum bid, as set by a unit of Citigroup Inc., which had a $1.3 million mortgage on the home, was $379,900. After several minutes of bidding among investors and their representatives, some wearing shorts and flip-flops, Mr. Mirmelli won the home for $486,300. A week later, he agreed to sell it for $690,000 to a woman who moved in this month.
During the housing boom, millions of Americans tried to make money by buying and then quickly reselling new houses and condominiums. That kind of flipping stopped several years ago as home sales stalled amid a surge in foreclosures and curtailed lending.
Now, a different breed of flipper is proliferating: one who seeks bargains at foreclosure auctions. Unlike the boom-time flippers, the latest generation needs cold cash, lots of local-market knowledge and strong nerves.
Investors compete mostly with other full-time professionals who monitor foreclosure auctions at county courthouses across the country. The bidders often haven't had a chance to inspect the property or determine whether it's occupied by tenants, who may be hard to evict.
Sometimes "you have half an hour to make a half-million-dollar decision," says Damon Lines, an executive at PostedProperties.com, a Phoenix firm that provides information to foreclosure investors and bids on their behalf. "That's something most people can't or aren't willing to do."
In the states where home prices have fallen the most, many local real-estate markets are dominated by foreclosed property, dragging down the value of neighboring homes. Barclays Capital estimates that banks and mortgage investors have 639,000 foreclosed homes for sale across the U.S., largely concentrated in Florida, California, Arizona and Nevada. That's equivalent to more than 10% of expected U.S. home sales this year.
“ Don't try this at home kids. It's still a risky business. ”
— Charlie Rose
Flippers swoop in at public auctions of foreclosed homes, known as trustee or sheriff sales. In many states, the lender sets the minimum bid, and takes possession of the property only if no one bids more. In the past, the minimum generally was about equal to the mortgage balance due. But in today's market, in which many home values have dropped far below the loan balance, lenders wouldn't attract investors if they set the minimum at that level.
So lenders, or the loan-servicing firms that represent banks and investors, are increasingly likely to set the minimum much lower. Their goal is to tempt others to buy the house and spare banks the headaches and costs that come with taking possession.
Sean O'Toole, chief executive officer of ForeclosureRadar.com, a research firm, estimates that in November about 21% of homes sold in trustee sales in California went to investors rather than to a foreclosing lender, up from 6% a year earlier. The trend is similar in some other areas with high foreclosure rates, including Phoenix and Miami.
The advantage of such an outcome for the bank is that it gets money for the property right away, even if it isn't enough to cover the loan balance due. The bank doesn't need to make repairs to the home, cover the taxes and insurance, or pay real-estate-agent commissions.
"Suprise Housing Data" is only a suprise to those not on the ground.
Below is an article from Seeking Alpha, just one of the many articles today on the "suprise" strength in the housing market. As many of you know this was no suprise, but there are many out there that still think that housing is falling into a large black abysis.....
See, Brian's response...and notice that he talked of the strength just a few days before....
Article by Scott Grannis was Chief Economist from 1989 to 2007 at Western Asset Management Company Posted November 23rd, 2009.
Existing home sales have exploded to the upside in recent months. Undoubtedly, the approaching expiration of the the $8,000 tax credit for first-time buyers had something to do with this. But even if that were the whole story, doesn't it just go to show that the resolution of the housing crisis is a matter of finding the right price? We know that home prices have fallen significantly, and obviously the tax credit makes them more affordable; the combination of the two has been enough to spur the market to levels of activity not seen for over two years. This is a market that is clearing, and this is another sign that we have seen the bottom in real estate.
Take away the tax credit and the level of sales would likely decline, but in lieu of the credit, lower prices (5-10% lower) would apparently be enough to greatly stimulate sales. So if we're not at the absolute bottom we're pretty close. Plus, as this next chart shows, we also have mortgage rates that are very close to all-time lows. The way to fix the housing crisis (i.e., the glut of homes) was always to find the price that would clear the market. The takeaway from all this is that it sure looks like we've found that price.
Brian's Response to the Article:
The good news is that this posting is closer to the correct story on the current housing situation. This article supports what I stated here on Seeking Alpha on Nov. 13th:
"For those that may think that the hardest hit city in America may be an indicator I offer you this: the increase is already happening, from my experience."
It is all about the price point and the tax benefits (but not the tax benefit your thinking of). One can purchase a tangible asset at 75% - 80% off the last sales price (sound familiar?) and have double digit positive cash flow in 30 days with the benefit of tax deductibility of an investment property expenses. And IF this is a (or the) bottom then the property may appreciate over the next 5 years.
This demand is the very much the same demand that has driven up the stock market since March of this year, with the exception that many investors like this over stocks for the degree of transparency, control, tax advantages and possible use of leverage.
Over 40% of all transactions are cash in Las Vegas, and for my company over 70% are all cash. In our exit surveys the buyers all indicate the first reason for buying a property now is the ROI today.
With the demand being greater than the supply for most of this year, I agree with the author that the price is right for the opportunistic investor with an eye on history.
All the best,
Brian Davison
The Cash Flow Store
It's good to wake up in Vegas for a 29 day flip with 62% ROI
Results Update
Purchase Amount: $42,000
Purchase Date: 09/03/09
Sale Price: $68,000
Sale Date: 10/01/09
Return on Investment: 62%
Investment Time: 29 days
Property Address: 8250 N. Grand Canyon Unit #1096 bldg 14 Las Vegas, NV.
Property Current Income: $975.00/Mo. $11,700.00/Annum
Contact: Jason@TheCashFlowStore to learn more.
Investor Fixer Property, $30,000k instant equity
Asking Price: $149,900
Equity on Purchase: $30,000
Property Address: 3915 Belhaven Las Vegas, NV. 89147
Property Value: $180,000 - $200,000
Market Rents: $1,600
Avg. Annual Cash Flow: $19,200
Property:
Genuine investor property located in a high demand area of SW Las Vegas. House has 2,318 sq.ft. on huge 14,342 sq. ft. lot with a pool, central air.
There is nothing currently available on the market at 1,500sq.ft. + for less than $200,000. Neighborhood is well maintained, this is the real diamond in the rough.
http://www.zillow.com/homes/map/3915-Belhaven,-las-vegas,-nv-89147_rb/
or call: 702-612-2681.
The 'Liquid Cash Flow' Program
I have an exciting announcement to make that will be on the show next Tuesday at 3:00 on financial talk radio station 970 knuu (970knuu.com), but first some background:
The Cash Flow Store offers five core alternative products to diversify a portfolio and recoup market losses. However, real estate has the most "buzz" around it for everyone I talk to. Even the most conservative market analysis agree that at some level now can be a good time to get into real estate. Some of the prices we are seeing here in Las Vegas are a full 70% off the last sales price, and of course the properties that The Cash Flow Store works with all product positive cash flow.
That being said, we all know the traditional sacrifice an investor makes getting into real estate was liquidity, meaning that it would be difficult - if not very difficult in todays market to get access to the funds. So in many peoples minds real estate investing to take advantage of the market has been "off the table" due to the lack of liquidity. Well, we have this obstacle solved, we offer access to your investment capital...we offer liquidity.
In the show for next week I am rolling out a new product: 'The Liquid Cash Flow Program'. This program will allow investors to participate in a transparent, easy to understand transaction that will yield double digit cash flow with access to the investment. There is no fee involved to get into, remain in or exit the program.
Feel free to contact me for details on this new program, to see one of our latest offerings or for a comprehensive analysis of your off wall street investments.
All the best,
Brian Davison
Loan Modification - Getting Debt Free
Yesterday I was challenged by an appointment that came to me from the radio show on 970am knuu. The last show was about the debt side of cash flow, more specifically: loan modifications. The theme of that show influenced the discussion of the customers and myself.
The view of the customer was that the most important financial activity the typical person could undergo was to eliminate all debt in their life, much along the lines of financial guru Dave Ramsay's focus. Whereas I agree that proper debt management and even zero debt is an excellent way to position oneself, it is not the end all be all.
For example; lets say your home is completely paid for, you own it outright (or at least control it through a trust or LLC with no debt). You still have all the utilities, upkeep, property taxes and possibly an HOA dues just for the home you live in that is debt free. What happens if these bill go unpaid due to no or limited income? Well, at first you sit in the dark with no power, then after a couple years the county will put your home up for sale due to unpaid property taxes. The same analogy can be made for automobiles, ect.
However, cash flow will provide the tool to pay for liabilities, no matter what they are, utilities or a mortgage payment. And higher cash flow can cover higher liabilities or be used for reinvestment. Given that life has its monthly obligations regardless of having debt or living debt free, I submit that cash flow is the paramount focus of all investing activity.
Imagine having consistent, solid cash flow every month from investments that you can see and touch that is completely passive in a variety of industries...that will give you the financial freedom most people dream about.
All the best,
Brian Davison
