This is not another “Now is a Great Time to Buy” real estate article.  It’s just some simple facts of the Atlanta real estate investor grade market.  Investor grade is a starter-home property ready and suitable for renting or resale.  The analysis was conducted by a third party company, PortReal, LLC.  PortReal benchmarks investor grade pricing using the 15th percentile price point in the market.  They believe investor grade housing shapes supply/demand for the overall housing market by defining a clearing price for investors.

Many people have believed this is a trickle-up recession that began when the starter-home market became over-inflated and loans were given to those who should not have had one the first place.  By correcting this first home market, a recovery could begin to follow.  So, let’s see how PortReal validates their 37% Underpriced Investor Grade Market…

A 3 bedroom investor grade property in metro Atlanta is estimated to cost $104,500.  The rents produced from 3 bedrooms properties are sufficient to cover operating and financing costs (80% LTV @6.46%) of a $166,811 property.  Therefore, $166,811 – $104,500 = $62,311 divided by $166,811= 37.35% below the investor grade benchmark.

Granted there is still a high amount of inventory to burn through, but the good sign is there is enough incentive now for investors to take risks and buy the investor grade properties. Thereby reducing the inventory and forcing a trickle-up rebound as start home sellers become move-up buyers.

Atlanta Real Estate Investment Market Report by PortReal

Investing in tenant occupied  commercial properties with a decent CAP rate is a viable alternative to investing your money in the stock market. This form of investing requires extensive due diligence but has the ability to grow your investment dollars steadily. Its no secret that we are experiencing a down turn in the real estate market. If you purchase a property in a down market with a good rate of return, as the market recovers, your property will likely increase in value. This lines up with the old adage  of “buy low, sell high”. The object of this type of investing is to obtain a good return on your investment dollar and have the possibility of picking up a decent rate of appreciation as the market recovers.

Over the past few years, many commercial developers retained ownership of some of their properties and leased them to tenants. A portion of these developers are now selling their tenant occupied spaces to obtain cash to purchase or finance other deals in this market. If you are interested in earning seven to eleven percent on your investment dollars, please contact me (James West) at Maxsell Real Estate 678-741-2060 to learn about the opportunities in your area.

Today, I am writing to rave about their new product Rentomatic.  If you are Landlord, especially for residential properties, then you will love the organization of your properties in one web portal.  If you are Tenant, you will appreciate the email reminders about rent and the option to pay online (ask your Landlord for the privilege).

This afternoon Webware had this excellent review of Rentomatic:

Paperless billing is one of the greatest facets of the Internet, especially when it comes to recurring payments. For many folks, the biggest monthly expense is rent, and the process of sending off a check, or coordinating payments with roommates to keep a roof over your head is a juggling act. Rentomatic (which rolls off the tongue a lot easier than its predecessor iiProperty) is aiming to help change that for people in apartment buildings with anywhere from one to ~50 units.

While this technology remains mostly unchanged for landlords who might have previously used iiProperty to handle finances, expiring leases, and online advertising of open apartments, Rentomatic adds some new perks to the tenant side of things with a whole new front end that lets renters pay without a paper trail. Once you’ve linked your bank account or credit card, you can pay the rent while in your pajamas or even set up automated billing. It’s also got a built-in service for maintenance forms, in case something at your place needs a little TLC.

Read the rest of the story at Webware.

2.  “Don’t quit your day job” – After months of research, there isn’t a pool of no money down properties to be had as all the television infomercials lead you to believe. Unless you’re blessed with a trust fund, have a couple hundred thousand just lying around or just won the lottery you will have to borrow money.  You can’t borrow money if you don’t have a job.

3. “There’s no time like the present” – Turn around time means everything.  The faster the real estate sign goes up the faster you get your money back. 

5. “Dreams do come true” – We were able to do all the construction ourselves.  We sold the house (actually made some money) and are now on the look out for a new project to purchase.

As a Realtor, I do take my responsibilities very seriously and I can say that I would loose sleep selling a home that was overpriced for the market.  Even worse would be the feeling that I would have knowing that a client of mine got into a mortgage situation with a teaser rate or reverse-amortization.  Just my thoughts…..feel free to comment.

Here is the article:

Dream of owning a home wakes up to reality
Mortgage shake-up tightens lending terms

By BILL TORPY
Published on: 08/09/07

Not long ago, financially strapped consumers with low credit scores — of, say, 600 — could obtain mortgages and call themselves "home owners."

But with the industry in turmoil, particularly for credit-troubled borrowers, local mortgage broker Brooks Campbell now has another name for them: "I think we’ll be calling them ‘renters.’ "

Subprime mortgages to risky borrowers, 100 percent financing and interest-only loans have gotten a slew of consumers and lenders in trouble. And with funds drying up, Campbell, a senior vice president of Vanguard Mortgage Corp. in Atlanta, said conditions are returning to fixed-rate mortgages and down payments.

"It’s going back to where it used to be," Campbell said. "It won’t have a big effect on the average, normal, first-time buyer, as long as you have decent credit — 680 and above (680 is an average credit score and 850 is the highest). But the customer with credit issues, and who can’t verify income, will have an issue."

Such customers may not get a loan at all.

The turmoil in the industry hit home Tuesday when Atlanta-based HomeBanc Corp. announced it was closing its mortgage loan business and selling some assets. That came on the heels of a Monday announcement that American Home Mortgage Investment Corp. of Melville, N.Y., the nation’s 10th-largest mortgage lender, filed for bankruptcy protection.

Signs of the spreading trouble in the industry are evident in various ways.

Graveyard humor in the industry is rampant as brokers each day click onto mortgageimplode.com, a Web site that now lists 114 "imploded" lenders (HomeBanc was 112).

The implosion is seen on the borrowing side, too. Suzanne Boas, president of Consumer Credit Counseling Service of Atlanta, said that in 2005 her organization had four counselors dedicated to foreclosure prevention. Today it has 36.

"And it’s not enough," she said.

Borrowers have been wowed by loans that allowed them to pay interest only or not all of the interest, and by adjustable-rate products that ballooned to market rates after two years. That strategy may have worked for borrowers when home prices were appreciating strongly a few years ago. Just about anyone could get into the game — and did.

"If you had a 580 credit score and a pulse, you could get financing," said Steve Smith, a broker for Wisdom Financial in Oak Lawn, Ill. He said some lenders got themselves into trouble with "stated income" programs that allowed borrowers access to money without showing a W-2 form.

But flat or falling home prices and adjustable mortgages that reset to higher rates over time have caused foreclosures to soar.

The epidemic has caused many investors in mortgages, as well as the lenders they fund, to re-evaluate their actions. Said Smith, "It’s going to come back to reality."

Consumer advocate and radio host Clark Howard agreed, saying the mortgage business is getting more rational.

"The tremendous competition for the borrower is gone," he said. "For a while, we had the best circumstances we ever had. Ever. … But a lot of people got into homes they shouldn’t have. No one did them a favor, putting them into homes they couldn’t afford. We don’t have an automatic right to the American Dream. You earn the American Dream.

"Back to the basics is what works. If you can qualify with a traditional 30-year loan, you can afford the home."

Boas from Consumer Credit Counseling said there is a silver lining: The market has more homes at affordable prices for those looking to buy a first home.

That glimmer, however, has been largely blocked out by the grim news. Last January, her office launched a foreclosure hotline (888-995-HOPE) and expected to get 5,000 calls from Georgia and conduct 2,000 counseling sessions in the first year. They got 8,200 calls and conducted 2,200 counseling sessions in the first six months.

Nationally, 13.77 percent of the nation’s subprime mortgages were past due in the first quarter, according to the Mortgage Bankers Association. Georgia posted a delinquency rate of 15.14 percent — eighth in the nation.

Mary Moore of the Center for Responsible Lending in Durham, N.C., said the turmoil should serve as a "wake-up call" for both lenders and borrowers.

"Beware of a lender that says credit doesn’t matter," Moore said. "You’re credit does matter."

She said 100 percent financing loans can be disastrous in a period of flat or decreasing home prices.

"You can be upside-down in your loan real quick."

Lawrence Yun, NAR senior economist, said a good buyers’ market has evolved. “Buyers now have an overwhelming advantage given the wide selection of homes available in many markets,” he said. “But with profit margins coming under pressure, homebuilders will limit new construction well into 2008. This should help the overall inventory level to move steadily into a more balanced state.”

Existing-home sales are expected to total 6.11 million this year and 6.37 million in 2008, down from 6.48 million last year. New-home sales are projected at 865,000 in 2007 and 878,000 next year, compared with 1.05 million in 2006. Housing starts, including multifamily units, are forecast at 1.43 million units this year and 1.44 million in 2008, down from 1.80 million last year.

Existing-home prices are likely to rise 1.8 percent to a median of $222,700 in 2008 after a 1.4 percent decline this year to $218,800. The median new-home price should rise 2.2 percent to $245,400 next year following a 2.6 percent drop in 2007 to $240,100.

“Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008,” Yun said. “Local conditions vary considerably, but with historically low mortgage interest rates this summer and sustained job gains, it could be a good time for first-time buyers with a long-term view to test the housing waters.”

The 30-year fixed-rate mortgage is estimated to average 6.7 percent during the second half of this year, and fluctuate around 6.6 percent in 2008.

Growth in the U.S. gross domestic product (GDP) will probably be 2.0 percent in 2007, compared with a 3.3 percent growth rate last year; GDP is forecast to grow 2.8 percent in 2008.

The unemployment rate is likely to average 4.6 percent in 2007, unchanged from last year. Inflation, as measured by the Consumer Price Index, is projected at 2.6 percent in 2007, down from 3.2 percent last year. Inflation-adjusted disposable personal income should rise 3.0 percent this year, up from a 2.6 percent gain in 2006.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Reprinted from www. REALTOR.org with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright [July 2007]. All rights reserved.

Every residential tenant and landlord will find rentometer.com a very simple yet insightful web tool to use to determine market rents in the area. Tenants curious if they are getting deal on the rent or paying too much? Landlords not sure where to set the rent rate to attract Tenants? Investors curious about the going rents in a given zip code? All of these answers can be found quickly and easily by using rentometer.com. Here is an example of $1,000 per month for 3 bedrooms in Woodstock (30188) stacks up to the market.

The site itself is a great mashup of Google maps and rental data displayed in a simple and slick interface. Be sure to check out this handy real estate tool as well as many others on our Tools page over at maxsell.net/tools

Jason Hartman, Founder & President, Platinum Properties Investor Network has a good breakdown of the 5 Comfort Factors that make real estate investing more attractive than the stock market. They are…

COMFORT FACTOR #1: Tax benefits

Most of the tax benefits associated with investing in real estate are fairly straightforward. To summarize, sell stock in which you have a gain and you’ll be paying taxes – there’s just no way around it. But sell appreciated property and if you do it right, you can defer your tax indefinitely.

COMFORT FACTOR #2: Cash flow

Most stock market investors will pay 100 percent of the share price for a stock (investors who don’t mind the risk of margin calls can buy many stocks for 50 percent down), while real estate investors typically need to put down only five to 10 percent with no risk of margin calls.

COMFORT FACTOR #3: Risk management and control

For decades, real estate has been the most reliable and dramatic wealth generator for millions of people – and despite the slump experienced in some recently booming areas, many parts of the country continue to experience price appreciation. Real estate markets with steady, solid growth present little risk to mortgage lenders, so it makes sense for them to loan money to investors on attractive terms. Not only does it make sense, but they are actually anxious to loan it to you. Although stock investments have potential for lucrative returns, they are unfortunately afflicted with volatility and suffer unpredictably sharp price fluctuations that often have nothing to do with the quality of the company or the competence of its management.

COMFORT FACTOR #4: Leverage & appreciation

Housing is a universal need and with labor and building materials becoming more costly and populations on the rise, real estate prices have nowhere to go but up in certain markets over the long term. With mortgages on sale at the lowest interest rates in the past 40 years, it makes sense to invest in real estate. To simplify, investing $10,000 in residential real estate with leverage versus a $10,000 investment in the S&P 500, results in residential real estate solidly outperforming the S&P 500 – not counting the tax benefits of real estate.

COMFORT FACTOR #5: Early mortgage payoff

Rent a property for greater than the sum of the monthly expenses and you’ve got positive cash flow. Use the income to enhance your lifestyle, pay off debt, or re-invest in additional properties. This is when Rent-to-Value (RV) Ratio™ becomes critical – a quick, rule of thumb evaluation technique that can instantly determine whether a property makes good investment sense. The ideal RV Ratio is 0.7 percent – anything below 0.5 percent would be considered an unwise investment decision. For example, considering a $200,000 house in Texas that rents for $1400/month (RV equals 0.7 percent). Renting the property for as low as $1000 would still result in an acceptable RV Ratio of 0.5 percent. By comparison, a $500,000 property in Southern California may rent for $1500/month, generating a 0.3 percent RV ratio. By selecting properties that make sense from the start, cash flow can be maximized. Even by using a similar ratio for stocks, the price-to-earnings (PE) ratio, choosing a stock that appears to make sense will not necessarily produce as predictable and reliable an outcome.

Click here for a complete review of why Main Street is better than Wall Street.

“We have raised our estimate for GDP growth this year to 2.6 percent, based largely on the recent strength in consumer spending and what appears to be the beginning of a turnaround in the nation’s trade deficit. Residential construction and motor vehicle assemblies will continue to be a drag on overall growth and business fixed investment will likely get off to a slow start this year.
The major downside risk to the economy continues to be the housing sector. We expect the bulk of the decline in residential construction to be behind us by the middle of this year. That may prove to be too optimistic, however. In addition, inventories could pull-back more than we
currently expect, giving us lower GDP figures in the early part of the year. With economic growth out of the danger zone, the Federal Reserve will likely hold interest rates steady this year. Monetary policy is currently slightly restrictive and will become even more so if GDP growth rises just 2.6 percent
this year.”

Special thanks to David Bell of Wachovia for providing this report. Contact David for all of your commercial financing and business banking needs at 770-618-1625.

Download the full .pdf file for Wachovia Economic Group Monthly Outlook.

I am constantly testing these new sites as marketing tools. Some I used yesterday, some I use today, but I am not sure what I will be using tomorrow? These are interesting times for agents and brokers and our clients and customers as real estate transitions from 1.0 to 2.0. With these thoughts in mind, there is an interesting debate going on over Rain City Guide about the value of these new online real estate portals and marketing sites. One commenter (afthree), makes some interesting points when he says,…

“At the Inman conference in NY there was a great session for Brokers only, ie no web 2.0 companies allowed. Fantastic criteria came out of the session as to what websites to send listing to and which to avoid:

1. Is the website trying to create a real estate brand? If they are trying to create a real estate brand, then they are a competitor.

2. Would the website exist without broker’s listings? If not, then they add no value to the real estate ecosystem.

You are are hurting yourself in the long run by sending your listings to a company trying to create a real estate brand, particularly if it would not exist without listings from brokers.

By this criteria: Trulia, Zillow and PropSmart are competitors to every broker and agent. Google, Craigslist, Oodle, Microsoft, are not competitors.

Trulia and PropSmart clearly would not exist without listings from brokers. Zillow is an interesting case of creating a real estate brand without broker’s listings, very innovative and much harder work.

I’m using this criteria and I’m sending my listings to Google, Craigslist, Oodle and Microsoft, but not to Trulia, and Propsmart.”

The responses have been equally thought-provoking, like this one…

“Search engine mega portals like Microsoft, Google, etc.

These companies are scary. Microsoft & Google have the resources, traffic, talent, and drive to do whatever they want. When these giants walk, the earth moves. However, their business interests are so large and diversified, that it’s unlikely they’d ever focus on the real estate industry to the point where they’d be effective competitors to Propsmart, Trulia, and Zillow.

But what happens if one of them decides to buy one of these companies someday, (perhaps to enhance GoogleBase or Live Expo to compete with Craiglist) then what? You can’t compete against Google (unless your Microsoft, and even they have their hands full).”

The whole post and discussion is worth a read if you are interested in how the future of real estate adapts to an internet marketing platform. Surf over to read Adventures in digital listing land.