Karen Nelson Bell's Daily Diaries (KNBDD)

It's Been a While Since Karen Nelson Bell Blogged On

2006-11-07T20:08:00.000-08:00

Hi Guys,
I've been in Clearwater, Florida, studying the market here. I think there will be a boom in the next two years, but right now, the market is definitely a buyer's market. I just bought a condo for a $125,000 discount over the asking price six months earlier. And I got about $12,000 in credits from the seller! It was a nothing down deal (of course), and even though I bought through a Realtor, it was pretty darned creative. I moved in in less than 24 hours from the time of making the first offer! Wow!

People around Clearwater think it's not the right time to be buying real estate, but I disagree. I LOVE buying in a buyers market and selling in a sellers market!

Love, Karen Nelson Bell

Home Values in Las Vegas Defy Predictions

2006-07-29T10:40:00.000-07:00

Here's a wonderful article for anyone who invested in Las Vegas lately. It will be interesting to see what prices prevail at the BLM land auction on August 2!

Home prices won't fall Values still going higher in Las Vegas Valley
By JENNIFER ROBISON REVIEW-JOURNAL
Jul. 21, 2006Copyright © Las Vegas Review-Journal Analysts:

Despite historically high inventory, the cost of housing in the Las Vegas Valley increased in the first half of 2006 and will continue to rise through the end of the year, according to housing analysts.

At the quarterly Crystal Ball housing-trends seminar on Thursday, market watchers said the valley's residential real estate market has defied detractors who said the good times couldn't last.

"Home prices are still going up in Las Vegas," said Larry Murphy, president of real estate monitoring firm SalesTraq. "That flies in the face of bubble theorists. There never was a bubble in Las Vegas, and there isn't one in the future." (Las Vegas has ALWAYS defied predictions, because of our unique economy.)

In June, the median price of a new home in Las Vegas reached $337,250 -- a 17.2 percent increase over the $287,761 median of June 2005. The big jump came despite relatively flat sales: The number of new homes sold in June was 3,502, a 1 percent increase when compared with 3,467 closings in the same month a year ago.

Through the first half of 2006, area builders closed on 18,295 units, up 7.3 percent over the 17,048 homes they sold in the first six months of 2005.

The median price of a new home in the first six months of 2006 was 12.7 percent higher than the median of the same time period in 2005.

In the first part of the year, the Las Vegas Valley's resale submarket showed some softness.
Buyers snapped up 4,152 existing homes in June, a 24.3 percent decline from the 5,482 resales that changed hands in June 2005. In the year's first half, homeowners have sold 22,547 existing homes, a 14 percent drop from 26,232 sales in the first six months of 2005.

Yet prices were up 5.7 percent year-over-year in June, from a median of $273,000 in 2005 to $288,550 last month. In the first half of 2006, the median resale price was 7.1 percent ahead of the same time a year earlier.

"Existing-home prices have not collapsed. They've come down to a more normal pace, especially compared to the 40 (percent) or 50 percent we experienced in 2004," Murphy said.
Steve Bottfeld, a senior analyst with research firm Marketing Solutions, said the price increases should continue through the end of 2006 even as sales decline.

Bottfeld predicted that the local market would finish 2006 with 50,000 resales, down from 54,828 resales in 2005. He also forecasted that builders will close on 39,000 new homes in 2006, up slightly from 38,705 units in 2005.

The overall falloff in closings will come as the market grapples with substantial inventory.
About 20,000 resales are on the market in Las Vegas as investors and homeowners with adjustable-rate mortgages look to trade in their properties.

"Speculators and people who bought homes with (adjustable-rate mortgages) in 2004 are in a lot of trouble and they're trying to get out," Bottfeld said.
(The strategy here is not to sell in this market... re-fi and recover when the time is right, in a year or two or five!)

Also propping up inventory of existing homes are sellers who want top dollar for properties they bought several years ago. They need maximum equity to move up to the pricier new homes they're eyeing, Bottfeld said. He noted that his market research in the second quarter uncovered for the first time local consumers who have canceled out of up to three new-home deals as they leave their existing home on the market in search of higher offers.

SalesTraq's Murphy said that though the tally of existing-home listings sounds high, the inventory totals 6.8 months of supply at current sales rates.

Housing supply is also abundant in the new-home sector.
Area builders were actively selling 503 subdivisions in June, a record high for the market and a 17.2 percent increase over the 429 communities they were marketing in June 2005, Murphy said.

The condominium-conversion market has a two-year supply of homes, with 15,785 apartment units designated as potential conversions, Murphy said, though he added there were no guarantees that all those rentals would change over to for-sale properties.

In the high-rise and mid-rise submarket, 37,307 units are in planning, marketing or under construction, SalesTraq's numbers show. But Murphy said that glut of supply isn't alarming because developers will take up to four years to finish those projects.

The sheer availability of housing options in Southern Nevada won't hamper appreciation in coming months, Bottfeld said.

He said he believes the median price of a new home will have risen 8 percent to 12 percent for the year by the end of 2006, while he expects the median for a resale to have gone up 5 percent to 8 percent.

With so many homes competing for buyers' dollars, why would analysts foretell price increases?
Bottfeld said three factors will promote appreciation.

Las Vegas has led the nation in job growth for 13 consecutive quarters. Local job formation in the first quarter was 7 percent, and the city has added nearly 65,000 positions in the last 12 months.

"We have a bigger demand for new people than anyone else in the country," Bottfeld said.
Also forcing prices upward are construction expenses.

Bottfeld said the cost of home building is rising 1 percent to 3 percent a month, and builders will need to pass at least some of that bigger tab onto buyers.

Finally, the valley continues to struggle with a lack of buildable land, so the cost to acquire vacant parcels will likely stay on its upward course. Bottfeld said some plots designated for residential development are selling for as much as $1.7 million an acre. At that price, a traditional single-family subdivision with a density of five homes to six homes per acre would carry a land cost per unit of more than $283,000.

"Prices have to continue to rise," Bottfeld said.

They'll Be Cryin' and We'll Be Buyin'

2006-06-06T22:20:00.000-07:00

Welcome to the month of June! If you believe the media, it's a terrible time for real estate... oh dear, it's a down market. It's cooling off. It's already cold. It's a BUYER'S market. Hmmmmm... what do buyers do in a buyer's market?

WE ACQUIRE PROPERTIES TO HOLD! We acquire them at discounts! Sometimes DEEP discounts! We acquire them without having to use bank qualifying too!

Remember, we're contrarians... when the rest of the world is cryin', we'll be buyin'!

Love, KNB

Housing market is both good, bad LV sales are down, but prices are near records

2006-05-26T10:24:00.000-07:00

This report included a quote from YOURS TRULY! Check it out!

May 26, 2006Copyright © Las Vegas Review-Journal
Housing market is both good, bad LV sales are down, but prices are near records
By HUBBLE SMITH REVIEW-JOURNAL

April's housing statistics for Las Vegas can be told as a "good news-bad news" story, SalesTraq President Larry Murphy said Thursday.
"The bad news is that new and existing home sales in April were subpar. The good news is that inventory appears to be at or very near its peak," he said.
"The bad news is that condo conversion closings are at their lowest point in 18 months. The good news is that both new and existing home prices are at or near record levels."
Sales of existing homes in Las Vegas have been slumping for several months. New home sales slipped to 2,595 in April, down 9.1 percent from the same month a year ago, Murphy reported. They're still 11 percent ahead for the year.
Existing-home sales continued to slide in April with a total of 3,715 closings, down 25 percent from a year ago.
New-home prices increased 18.1 percent from a year ago to $333,117. Existing-home prices have remained flat for the past 10 months, dropping slightly in April to $282,000.

Karen Nelson Bell, a real estate investor who's writing a book, "Nothing Down for Women," said waiting around for the so-called "bubble" to burst can be costly in the end.

"In order to predict a bubble or the bursting of a bubble, you have to look at many factors like demographics and economics," she said. "I guess you'd have to become an expert in those topics in order to know when or where bubbles are blowing or bursting. And guess what? All the experts I've read have said we're about to burst ... they've been saying that for two years now."

Price appreciation rates, which had slowed for five consecutive quarters, turned up in the fourth quarter, Murphy said.
"Why? Because the market senses that inventory is topping out," he said. "For the first time since May 2004, the number of new home subdivisions decreased."
Existing home inventory is at an all-time high of 17,161, but the rate of increase slowed to less than 1,000 units, Murphy noted.
The number of new lots in final mapping is just 4.2 percent ahead of last year and the number has declined for three consecutive months.
"In other words, inventory in the new-home sector has peaked and inventory in the resale sector is at or near its peak. And that is very good news," he said.
Inventory on a national supply basis was below the six-month threshold after being above in the prior two months, while the absolute level was up slightly, Susquehanna Financial Group home building analyst Stephen East said.

Housing market hangs in Fed's balancing act

2006-05-26T10:18:00.000-07:00

Housing market hangs in Fed's balancing act
By Sue Kirchhoff, USA TODAY
WASHINGTON — Adjustable-mortgage products that made the housing market more resilient over the past five years have left it more fragile as interest rates rise, complicating life for the Federal Reserve.
As mortgage rates rise in response to the Fed's boosting of short-term rates, the central bank must be careful not to overshoot and tamp down demand too fast. Rising rates and slowing growth in home prices also make it more difficult for consumers to refinance out of adjustable-rate mortgages (ARMs) or to meet rising payments when their mortgage interest rates adjust higher. Already, defaults are rising in some areas of the country, including pricey California areas.
Further, a slowing housing market increases rental rates. In the Labor Department's formula for calculating the consumer price index, rents are a big chunk of what's called "core inflation," a measure that excludes food and energy. Higher core inflation, in turn, spooks bond and stock traders, who fear an outbreak of inflation, putting more pressure on the Fed.
The Fed must balance rising inflation, high commodity prices and a strong job market on one hand against a declining housing market and scattered signs of slower business growth on the other.
"The Federal Reserve realizes that the volatility and, to a large degree, the spike that we have seen in energy prices is really due to speculative elements that are beyond their control," says Fred Dickson, chief market strategist for investment firm DA Davidson, who in a recent presentation to clients gave 30% odds that the Fed could overshoot on interest rates, sending the housing market tumbling.
"Housing is more interest-rate sensitive and more directly impacted by the policy decision-making of the Fed," Dickson says. "They are going to be sensitive to how far they go."
So far, the housing market appears to be cooling but not collapsing. new-home sales in April, while up from March, were down about 6% from a year ago, according to a report Wednesday. Mortgage applications last week fell by the most in three months.
But Fed Governor Donald Kohn in a recent speech cautioned that the behavior of the housing market and the consumer response were "among the great uncertainties about the economic outlook."
Record home sales and construction propped up the economy during the past several years, bolstering employment and consumer spending. Housing, directly and indirectly, was responsible for about a third of economic growth in 2005, according to estimates from Moody's Economy.com. Home-equity borrowing and cash-out refinancing hit $900 billion in 2005, about 10% of disposable income.
Doug Duncan, chief economist for the Mortgage Bankers Association, says housing, or at least a slice of the market, is arguably more sensitive to interest-rate increases today than in past Fed tightening cycles. That's because of a plethora of new mortgage products and the expansion of higher-cost lenders.
About one in five homeowners have ARMs, with monthly payments that will climb with rates.
"The further we go (on rate increases), the greater the risk of some more significant slowing, especially in those markets which have high components of adjustable products," says Duncan, who expects overall home sales to cool by 7% to 10% from 2005 levels and refinancing to dip. That forecast, however, is based on the Fed raising its target for short-term rates to 5% and then holding.
The central bank raised rates to 5% on May 10 and signaled that more rate increases might be needed. Policy will hinge on economic data between now and the Fed's June 28-29 meeting. Mortgage rates are at 6.6% for a 30-year, fixed-rate product.
Fed Chairman Ben Bernanke in a speech last week said housing appeared to be cooling in an orderly fashion. But in Senate testimony Tuesday, he noted that about 25% of all mortgages are adjustable-rate products and about 10% will reprice this year as interest rates rise. He and Duncan say the biggest worry is borrowers with lower incomes or impaired credit who borrowed from higher-cost lenders.
Bernanke also cautioned senators, however, that if the Fed did not react to overall price pressures in the economy, inflation expectations could rise. The markets would then push up long-term interest rates, hurting the housing market.
The degree of risk in housing varies geographically, with the highest concentration of ARMs on the East and West coasts. Historically, the biggest factor in big housing cool-downs has been the overall health of the job market, which currently is strong. The unemployment rate in April was a low 4.7%.
"I think the Fed would have concerns about the risk of an outsized decline in housing activity and house valuations because that could then risk (hurting) economic growth," says Richard DeKaser of National City.

I Make Up Statistics!

2006-05-25T08:53:00.000-07:00

There, I said it. I make up statistics. Of course, I'll TELL you I made up the statistic, which sets me apart from some of my writer friends.

Not only are the statistics suspect, when they're accurate, they're manipulated to support an opinion.

I read real estate news every morning, and every day, articles disagree with one another, commenting on the same set of statistics. What it boils down to is this:

YOU need to look at as many economic indicators as you can and then make your OWN predictions. Look at how many people are moving into your city vs how many are moving out. Look at what businesses are booming and which ones are closing down. Look at your weather and consider energy costs. Look at the for-sale signs up and down your block.

THEN, consider what savvy investors know: don't sell when the market favors buyers! BUY when the market favors buyers! Hang on to that property for long term value instead of committing a knee-jerk response mistake.

And P.S., don't tell anyone that some of us are BUYING right now, OK? We don't want a herd of investors swooping in to spoil our fun. "When everyone else is crying, we'll be buying."

Love, KNB

P.S. Of the people who read this blog, 87.53% will shake their heads laterally in amazement!

Can Slower Sales Bring Higher Prices?

2006-05-24T08:33:00.000-07:00

Mr. Miller has observed correctly that the herd of stock market investors who invaded the real estate market in 2004 created the boom environment.

Can Slower Sales Bring Higher Prices?
by Peter G. Miller

The news that new home starts dropped 7.4 percent in April raises two interesting puzzles: Why the decline and what does it mean?

"The declines in starts and permits for April reflect a natural pay-back for the weather-related surge in production earlier in the year, as well as builder adjustments to eroding demand and rising inventories," said David Seiders, chief economist with the National Association of Home Builders. "We continue to believe that the evolving slowdown represents an orderly adjustment toward more sustainable levels of housing production, following the record surge in 2005 that was fueled by extraordinary demand for single-family homes and condo units by investors/speculators."

Separately, Seiders also said the following a few days earlier:
"NAHB surveys of builders are documenting a fall off in investor purchases, rising sales cancellations by investors/speculators, and resales of units owned by investors/speculators as the prospects for price appreciation deteriorate. The cancellations and resales are adding supply to markets already experiencing an inventory run-up as demand by prospective owner-occupants cools in the face of deteriorating affordability conditions."

To me, there's a huge difference between a decline in sales because the weather is not as good as it had been earlier in the year and a decline in sales because weak and vulnerable investors are fleeing the market.
In an odd way -- eventually, at least -- those defecting investors are likely to be good for the marketplace.

One of the reasons for 2005's soaring home prices, especially with condos and new-homes, has been the large number of investors who entered the market. If you take natural demand and add hordes of excess investors you simply have more demand. That pushes up prices and those rising prices attract more investors who want to get in on the action. Unfortunately, swiftly rising prices can also freeze out those who "merely" wish to be homeowners.

As investments go, new homes and condos look awfully good because they require little maintenance and until recently the market for them has been largely excellent. You can buy 'em by the bunch and not spend a lot of time with repairs, mowing and such. For investors who see condos and new homes as commodities, something on which to bet instead of pork bellies or Enron futures, such properties are dandy investment vehicles.

They are also risky.
If you buy investment real estate the purpose of your purchase should be to gain value (a higher re-sale price or more equity), rent (positive cashflow) or both. That means such properties must either be rented or re-sold. Reduce the market for either tenants or buyers and suddenly investment properties can be vacant, unsold and very expensive to keep.

The recent decision by builders in many markets to sell homes at discount means that investors can no longer flip properties because buyers can get better deals from builders. Worse, such properties can be extremely difficult to rent at anything approaching a positive cashflow because many markets are brimming with look-alike new properties and condos. In such an environment, buyers and renters rule -- and fad investors with little cash will sell, sell at a loss, rent at a loss or will be foreclosed.

One local community I follow has about 35,000 people -- and now has more than 700 homes for sale. That's a huge volume of inventory at one time, and you can see a major reason for such numbers by looking at the property descriptions: such as new, never lived in, rent-to-own, price reduced, $5,000 to selling agent, seller will pay $10,000 in closing costs, $50,000 in incentives, former model, several available, etc.

The good news is that the marketplace is forever in the process of self-correction. When it tips too far in one direction it begins to tip the other way, always seeking a cosmic sense of balance.
It will take time to clear out the inventory now held by weak investors -- and by investors who will weaken under the burden of ongoing monthly costs. This is simply a healthy culling of the investor herd. In some cases, there will be local price declines and price declines by property type, but hopefully the worst result in most areas will be a general slowing of appreciation to something just above the rate of inflation. This would be an ideal situation for both sellers and buyers, a market with reasonably rising prices -- and something largely unseen during the past few years.

For more articles by Peter G. Miller, please press here.
Published: May 23, 2006

Top 2% of Market Still SellingAs Overall Sales Volume Falls

2006-05-24T08:11:00.000-07:00

This is good news for anyone investing in higher end homes, and yet, hear the advice that while high-end buying can produce some spectacular results, it's not for the beginning student investor. To minimize risks, it's better to invest in something that many people can afford to rent, lease/option, or buy!

Top 2% of Market Still SellingAs Overall Sales Volume Falls
By Troy McMullen From The Wall Street Journal Online

Despite growing indications of a cooling housing market, one niche continues to sell briskly -- multimillion-dollar homes.

Over the past few months in the overall U.S. real-estate market, more homes have crowded the market and sales volumes have fallen in areas from Houston to Boston and Washington, D.C. Freddie Mac, the government-sponsored provider of mortgage-loan funding, predicts total home sales this year will be down by about 7% from 2005's record levels. Yet one area of the market appears immune to all that: In many locations, homes on the ultrahigh end of the price scale -- those costing $3 million and up -- have been selling in increasing numbers.

In San Francisco, 18 homes in that range sold in the first quarter, up from 15 in the same period last year, according to real-estate information service DataQuick. In Jackson, Wyo., that number rose to 21 homes from 17, according to Jackson Hole Real Estate and Appraisal. Higher up the scale, 10 homes at $5 million or more in Palm Beach, Fla., sold in the first quarter, up from eight last year, says the county assessor's office.

One factor in the growth could be that median prices of all homes have risen, pushing more homes into the luxury end. Also, inventory is up across the board. But at a time when the overall number of home sales has declined in many markets, the number in the ultra-high range has continued to grow. One possible message: Just as it is often said that the rich aren't like the rest of us, the real-estate market of the rich appears to bear a decreasing resemblance to the one experienced by most Americans.

Paying in Cash
Homes at $3 million and up represent less than 2% of the overall market, estimates the National Association of Realtors. Activity at this small upper end has traditionally been a leading indicator for the broader market, says Gregory Heym, chief economist for the New York real-estate brokerages Brown Harris Stevens and Halstead Property. Now, he says, there may be less of a connection between the two segments. The stock market has created new wealth and the number of millionaires has grown, so more buyers are paying in cash. (The National Association of Realtors found that 8% of home buyers paid in cash last year, up from 6% in 2003.) That has left luxury buyers mostly insulated from economic factors such as rising short-term interest rates.

Mark Zandi, chief economist at forecasting firm Moody's Economy.com, says the segment of high-end buyers "won't be immune from the unfolding travails of the rest of the market, but it will weather those difficulties much better than it has historically."

Walter Molony, a spokesman for the National Association of Realtors, says the highly volatile high-end market serves as a poor market indicator. Activity among first-time home-buyers, he says, is more telling. "That segment provides liquidity for people to be able to trade up to larger homes," he says. "Without strong entry-level activity, the market would sink."

When Todd Michael Glaser listed his 11-bedroom Miami home in February, overall sales volume in the city was slipping -- sales fell 21% for the month over a year earlier. But he wasn't concerned. He listed it for $40 million, well above Miami-Dade County's record single-family home sale of $27.5 million in 1999.

Mr. Glaser, a 41-year-old real-estate investor, figured the property would sell based on its amenities and location. The 20,000-square-foot home is one of the biggest on North Bay Road, where neighbors include Billy Joel and Matt Damon. A month after hitting the market, it went under contract for purchase. Brokers with knowledge of the deal put the price at over $30 million, though Mr. Glaser wouldn't reveal the number. "It's not a property for the everyday home buyer," he says.

In Los Angeles County, 217 homes priced over $3 million sold during the first quarter, up from 114 during the same period last year, according to Cecelia Kennelly-Waeschle of Sotheby's International Realty. That is the biggest first-quarter jump since the firm started tracking sales in 1988. For the same period, the number of all sales in the county fell 10.3%, according to DataQuick. Two homes priced above $10 million sold in Santa Barbara, Calif., during the first quarter -- including a $28.5 million, 17-acre oceanfront property to actor Kevin Costner -- up from one a year earlier. (The data in this and other markets do not show how long the homes spent on the market or whether they sold at their original asking price.)

Some affluent buyers don't limit themselves to what's on the market. When Henry Kravis, managing partner of New York-based Kohlberg Kravis Roberts, went shopping for a Palm Beach house in January, he didn't like any of the available properties. His broker, Lawrence Moens, identified a property that wasn't for sale, but fit Mr. Kravis's criteria: a 15,255-square-foot home on five acres along Lake Worth. "I just knocked on the door and said, 'I've got a buyer willing to pay a lot of money for your home,' " says Mr. Moens. A few weeks later, the deal closed for $50 million, public records show. Local brokers say it is the highest price ever paid for a non-oceanfront property there. Mr. Kravis declined to comment.

Not all markets are seeing a surge in high-end sales. In Manhattan, 212 homes priced above $4 million sold in the first quarter, from 226 in the year-earlier period, according to Brown Harris Stevens. Appraisers say that apartments are staying on the market longer.

Even where sales are falling, confidence hasn't always flagged. On the Nevada side of Lake Tahoe, sales of homes priced above $1 million fell 35% in the first quarter over a year earlier, according to Chase International Realty. That didn't stop Tom Gonzales from raising the price on his home in Incline Village, Nev. After staying on the market for a year at $60 million, he raised the price on the 4.5-acre property to $65 million last month, to account for the upkeep he's paid. "I don't think there's a shortage of people looking for a property like this," says Mr. Gonzales, 61, who co-founded software company Commerce One in the 1990s.

Yet in Fairfield County, Conn., Lake Forest, Ill., and San Diego County, brokers say many sellers are trimming prices amid a glut of pricey homes. Writer Jane Green and her husband, bank executive David Burke, cut the price of their Westport, Conn., property by $1 million after it sat for eight months at $5 million. Shortly afterwards, the property sold in January for $3.9 million, public records show.

Talk of a slowdown hasn't affected Sean Wolfington, a former Philadelphia Internet entrepreneur, who just outbid two other buyers on a six-bedroom estate in Key Biscayne, Fla., formerly owned by the singer Cher. The cost: $8.8 million, in cash. "Interest rates aren't a factor for me," says Mr. Wolfington, 34, who now runs an independent film company. "Waterfront properties like these are in limited supply. I saw this as an excellent buying opportunity."

Email your comments to rjeditor@dowjones.com.

MPC Action Weekend of May 19, 2006

2006-05-20T09:04:00.000-07:00

Hi Everybody,

We've got a dozen people this weekend going through our 72-hour shopping spree, and three people did 8 deals on the first day! "I'll take it," is ringing through the air!

Many of the students this time around are working on the issues of FEAR, and I'd love to share one person's major win with you:

FEAR reduces with knowledge, responsibility, and control. The more you know, the more you can take responsibility for something, and the more you can invoke good control of the area!

And having a TEAM right beside you this weekend, and knowing that the TEAM will be there to support you for as long as you stay active yourself, WOW!

Will fear ever go away? As long as you're doing something new every now and then, fears can percolate. I'm doing a big deal right now unlike deals I've done before, and I have some trepidation.

My suggestion? Keep studying, keep connecting yourself with people who know something you can gain from, and keep exercising your risk muscle every day!

Love, KNB

P.S. If you want to know more about the MPC Action Weekend, call Suzan Hudson at 702-795-1020! Or go to www.MassivePassiveCash.com for a look around!

NEW LAWS AFFECTING RE INVESTORS

2006-05-15T06:49:00.000-07:00

This article was written by Colorado attorney and seminar guru Bill Bronchick. It's important for all of us to be aware of these laws, and his analysis is particularly cogent. KNB

"Big Brother" is Watching YOU!New (BAD) Legislation Coming Your Way
by Attorney William Bronchick
UPDATED FEB 2006

Well, it seems that with everything you do right, there's always someone else doing it wrong, do it badly, or doing it illegally. Enter Big Brother... the "well-intentioned" legislator who wants to get re-elected by passing a law that protects the innocent from bad people or from their own stupidity.

What am I talking about? Several states have passed or are about to pass a rash of laws that will make being a real estate investor a very difficult vocation. While I do understand the need for SOME guidelines and disclosures from the government to make sure that people are making informed choices and are protected from bad people, these laws are THROWING OUT THE BABY WITH THE BATH WATER and will likely cause financial harm to the real estate markets in those states.

The following is a review of some recent laws and bills that are pending or have passed.
IT IS IMPORTANT THAT YOU READ THIS EVEN IF YOU ARE NOT IN THESE STATES. When it comes to laws like these, it's "monkey see, money do", resulting in the domino effect. Your state can be next, so pay attention. Visit you state's website and review pending bills. Form a local political action committee. Be involved in the political process. If you are in one of these states, call, fax and email your representatives. Email all your friends and business associates. Picket in from of the state buildings. Contact your local news people. If you sit silent, you have no right to complain!

Texas - Senate Bill 629 - PASSED
This bill is an amendment to an earlier law passed in 2001 that regulated installment land contracts. The current law calls these "executory contracts" and requires certain disclosures, most of which are not big deal. However, the penalties for non-compliance are SUBSTANTIAL and bear no relationship to the supposed harm the consumers would bear if the disclosures are not followed. It's basically a windfall for buyers who find a good lawyer to hammer a technicality that most investors are not aware of.

SB 629 takes it up a notch classifying lease/options as "executory contracts", the same as land contracts. This is DEADLY for investors who want to keep the tax benefits ownership when selling on lease/option and taking advantage of capital gains rates. If Texas calls a lease/option an executory contract, it makes it a SALE, thus having a negative tax impact on the seller who may want to defer his gains through a 1031 exchange when the tenant exercises his option to purchase.
And, we're just getting started...

The bill further disallows an investor from selling a property by lease/option OR land contract if the seller has an underlying loan on the property without that lender's written permission. Since few, if any, investors have free and clear properties, this would effective ELIMINATE the process of buying a property, financing it, then reselling on a lease/option or land contract.

This is BAD because it hurts not just investors but ANYONE who has a house that they want to move. Builders often sell properties on a "rent-to-own" basis, and now will be prohibited from doing so if there is underlying financing on the property. What if you do a fix-and-flip, but are unable to resell the property for cash? Maybe the lease/option would be the solution so you can cover your mortgage payments while still getting a sale? It won't be possible in Texas if this bill passes.

And, it gets WORSE!
SB 629 states that you cannot sell a property under an executory contract unless you have title to the property. That means you cannot do a sandwich lease/option in Texas - PERIOD.
The bill also has a bunch of disclosures and regulations on lease/options, none of which are objectionable.
Read the bill here: Senate Bill 629

NORTH CAROLINA - HOUSE BILL 725 (still pending)
House Bill 725 is a push from the North Carolina Attorney General's office, which has been on the rampage against investors for some time. The AG's office claims to have "hundreds of complaints" from people who were hurt by investors who bought properties "subject to" existing mortgage loans, then defaulted. I find it very hard to believe that more than a few complaints were ever filed. From the way the bill is written it's clear they just don't understand how these transactions work.

This bill is targeted against the investor who buys a property subject to an existing loan, the resells the property by lease/option or land contract to a consumer. The bill requires a number of disclosures to all parties involved, some of which are fine and some of which are absurd and irrelevant.

The proposed bill requires the seller to get express written permission from his lender before transferring a property subject to an existing deed of trust, which will never likely happen. And, even if it were possible, the time frame it takes for a seller to get his lender's permission while he is in foreclosure is wholly impractical. This will hurt the seller who is in foreclosure and seeking to simply "dump" his property for whatever he can get. If the investor can cure the seller's back payments and/or negotiate a short sale with the lender, everyone walks away happy. If a seller has no options, he is going to walk away from the property and the bank will have another REO. Everyone loses.

Now, admittedly, some dumb or unscrupulous investors have taken deeds from sellers, promised to pay, then defaulted, leaving the seller with the short end of the stick. The right thing to do is require disclosures so that the seller enters into the deal KNOWING THE RISK. Adjustable rate mortgages are very dangerous, too, which is why R.E.S.P.A. requires disclosures. The government didn't go off the deed end and outlaw ARM loans.

Curiously, the bill exempts real estate agents from the law, which means a licensed agent could theoretically buy a property subject to an existing deed of trust without lender permission and without the same disclosures as a non-licensed investor would be required to give. The suspicious side of me thinks that the real estate agents are also behind this bill, trying to corner the market on investing or requiring an agent's assistance on these deals so they can profit.
And, the most laughable portion of the bill addressed people like me, requiring all educational seminars to include a copy of the new law in our materials. I suppose the drafters of this bill failed to examine the first amendment, which prohibits the government from restricting the content of free speech.
Read the bill here: House Bill 725

MARYLAND - HOUSE BILL 1288 (PASSED)
House Bill 1288 is aimed at foreclosure investors dealing with sellers in foreclosure.
The bill targets two types of activities, "Foreclosure Consulting" and "Foreclosure Purchasing". A "consultant" is someone who apparently charges a fee to give advice to the homeowner and/or help him to negotiate with his lender or get a new loan. A consultant must disclose his services in writing and offer a right to cancel that agreement at any time. The consultant cannot buy the property from the homeowner, nor can one of his "associates" (not clearly defined). The foreclosure purchaser must also give certain disclosures in writing, including a ten-day right to cancel the contract. This means you cannot get a deed without giving a homeowner a 10 day "cooling off" period. This is not necessarily a bad idea, but it may prevent a homeowner who is fighting a deadline from doing a last-minute sale. No matter how long the foreclosure process, most homeowners wait until the last week before taking action.

The final part of the bill deals with a foreclosure "reconveyance", that is, a deal wherein the homeowner stays in the property under a lease, reserving the option to repurchase the property from the buyer at a later date. I don't particularly like these kinds of transactions, because they generally fail and they can sometimes be reclassified by the courts as disguised loans. On the other hand, many homeowners facing foreclosure have no other means to save their property, and in a free market should have the opportunity to engage in a transaction which allows them to try to save their home based on intelligent, informed decisions. This law would require the investor to give the homeowner 82% of the proceeds of the sale if the homeowner cannot repurchase the property, which makes it unfeasible for any investor to even bother trying to help the homeowner. In short, such a law would hurt more homeowners than it purports to protect.

The 22 pages of requirements are very technical, so you should review it in detail with a local attorney. House Bill 1288 - Full Text in PDF Format

Colorado Senate Bill 06-071 (Still in Committee)
The Colorado bill is being pushed by the Attorney General and the Colorado Public Trustee's Association (Colorado's foreclosure process involves a public official, the county Public Trustee). This bill is a watered-down version of the Maryland Bill, which will also regulate "foreclosure consultants" and "equity purchasers".

Through lobbying efforts, we have gotten the ear of the AG's office to get some good amendments to the bill that should result in a sensible piece of legislation. Like the Maryland bill, the Colorado bill prohibits a "consultant" or one of his associates from buying a property in foreclosure from the homeowner. The bill, as amended, better defines a "consultant" so as not to confuse such a person with a "purchaser" who will be buying the property, not offering the homeowner "advice for money". The bill is still in discussion and we are hoping to further refine some of the "reconveyance" provisions to make it fair for investors and protect homeowners from predators.
The bill also adds criminal penalties for violation of the law, which is certainly scary for the average investor who does not understand how to comply. If you are in Colorado expect a seminar this Summer to explain all of the nuances!
Illinois Senate Bill 2349 (Still in Committee)
The Illinois law is similar to the Maryland Bill, but takes it up a notch. The proposed bill would also apply to properties "in distress", that is, homeowners who are 90 days late, but no foreclosure has been filed. This is extremely dangerous because there's no public filing until the foreclosure action has started, thus no way to know who is in default! Also, the Illinois bill would require an investor to pay off the seller's liens before doing a foreclosure reconveyance, that is, you can't take a property subject-to the existing loan and sell it back on a lease/option. However, you are not prohibited from taking subject-to and selling it to a third party.
The Illinois bill also contains the "82% of proceeds to the seller" provision, which effectively kills any intelligent investor from getting involved. Why would you want to buy a property and risk the homeowner defaulting, filing bankruptcy and hauling you into court over 18% gross profit? On the other hand, I can see the argument why it is patently unfair for a homeowner to lose a property with 50% equity for non-payment of one month's rent, but these cases are rare. In any event, a court always has the equitable power to call a contract "unconscionable" where it sees fit. Using an arbitrary number like 82% may not be feasible when the local real estate economy is in the toilet and banks are selling properties at 60% of value or less.
In short, the government should leave the free market open for people to make deals that they wish to make, punish those who take unfair advantage, and require mandatory disclosures so people can make informed choices.
CONCLUSION
I have mixed feelings about these new bills... on the one hand, they are rash responses the side effects of a strong real estate market, discouraging investors from getting involved in deals and resulting in more properties going to the bank.

On the other hand, some of these bills provide "safe harbors" for investors that follow the letter of the law. Since there are really few laws that relate to "creative" real estate investing, providing detailed rules make litigation by a disgruntled seller or tenant/buyer more difficult. It's hard to say, "you didn't disclose X, Y & Z" when in fact the law only requires "A, B & C".
If investors in these states MAKE SOME NOISE by contacting their state representatives right away, a modified version of these bills may get passed, making everyone happy. And, if something comes up in your own state, get involved in the process before a bad piece of legislation puts you out of business.

I highly recommend doing the following:
1. Get involved early in the process. Find out who is pushing the bill in your state and why. Contact these groups and offer to assist in the legislative process by discussing practical effects of these laws and other alternatives.
2. Get other groups involved in the process. Community leaders, such as real estate investor associations, mortgage brokers associations, title companies, boards of realtors, etc. Remember, the banks do not want these foreclosure properties in their inventory, so they need investors bailing out properties before they go to sale.
3. Speak to your local representatives. State legislators are generally accessible, to call, fax, and even visit their offices. Let them know you are a voter in their district that has concerns.
4. Speak to the Press. The media is pushing stories about how people in foreclosure are losing their homes, but there's two sides to every story. Talk with local newspaper, radio and television personalities. Write letters to the editor of your paper (click here for a good example).
5. Hire a lobbyist. The best way to get access to legislators is the good old fashioned way - MONEY. Lobbyists (also known as "Public Relations Experts") have connections with different law makers and can get you an audience to hear your issues. They can find out who is for and against particular issues, and who can either amend or "kill" a particular bill being presented. On the national level, the National Association of Responsible Home Rebuilders and Investors (www.NARHRI.org) has been active in about 8 states.
The most important thing is to get involved early in the process.

Email comments or questions to bronchick@legalwiz.com.
Related Articles:
A Review of the NCLC "Dreams Foreclosed" Report.
Is foreclosure Investing Criminal?
TELESEMINAR ONTHIS TOPIC*CLICK HERE*

Market Analysis for April 06, Maricopa County

2006-05-05T10:27:00.000-07:00

The following analysis was prepared by a company that provides hard money loans. Because they have to loan smart, they have to analyze smart, and I believe the author has excellent understanding.

A market condition prospective
delivered by Gregg Reichman, CEO, Active Finance Group, L.L.C. on behalf of the AFG partnership.

AFG is pleased to provide the following opinion of current market conditions for your consideration.

Overall Market Conditions:

We are now 1/3 of the way through the year 2006 and at AFG we are extremely pleased with the trends that have developed in the Investment Real Estate market.

Specifically, we believe that current market conditions afford the Investor the opportunity to confirm their property valuations with "hard data" as a reference point. Throughout 2005, market speed essentially rendered hard data worthless and the Investor was asked to just "believe" that the equity spread existed without any real "proof" that it did in fact exist.

We believe that we are currently in a slight oversupply of active residential product for sale in Maricopa County ; however, we continue to see properties that have no disappointing characteristics sell in a very short period of time and we expect that to continue. In our last newsletter we appealed to our subscribers to get back to the "fundamentals" of the business and be more critical and selective in evaluating acquisition candidates, ruling out properties that have multiple negative characteristics (unless those properties could be bought substantially under the wholesale pricing level as a risk insulator) in their acquisition model, and we believe that Investors who applied that suggestion to their business model have seen rewards as a resul! t of that advice.

Meaningful equity spreads are being achieved by Investors at the wholesale level and beyond the wholesale level as a result of this market stabilization.

The "bubble" that was anticipated by many so-called "experts" never materialized and we have seen pricing stabilize, with sight deflation of values on certain perimeter communities with an abundance of product available.

Remember, the "experts" in financial magazines might want to predict disaster for real estate investing so that you might be persuaded to put your money in the stock market where they can make money by br

The acquisition side:

Trustee Sales : Sanity has returned to the bidding process in this inventory pipeline and while there is still meaningful competition at the "courthouse" the Investor is able to see an exit strategy that makes economic sense when a purchase is achieved.

Pre-foreclosure: The pre-foreclosure pipeline is still not delivering the volume of product we came to expect in the year 2003, 2004 market as a result of the equity buildup that has occurred during the past 24 months. The Homeowner in trouble can use that equity "cushion" as a tool to solve their problem by offering the property under market in order to increase market speed, but achieving a tidy profit even at a current "bargain" price. We expect this pipeline to steadily increase as Homeowners who have made their purchase at current values experience typical problems associated with the possibility of foreclosure.

Short Sales: The short sale pipeline is building steadily as Lenders with growing REO portfolios can once again see the value of cashing out rapidly since they are now faced with a stabilized market offering traditional selling timeframes.

ARMLS: Savvy Investors are once again finding bargains in the most obvious places , including the Realtor's database ARMLS. With market speed stabilized, many Sellers are willing to trade the speed and convenience of a quick and easy sale to an Investor in exchange for a below market price. The prior equity buildup fuels this opportunity as they Seller is resigned to making "less profit" but still experiences a substantial return.

Investor profiles: We have seen a transition in the experience level of aggressive Investors who are now returning to a market that they can "understand", when for the last few years they may have been on the sidelines as traditional evaluation methods were ineffective. These long term speculative Real Estate Entrepreneurs are back in the marketplace with renewed enthusiasm as a result stabilization and predictable exit strategies for producing meaningful return on investment and an acceptable risk-reward ratio.

The disposition side: The average days on market to resell an property have once again become predictable . Overall these timeframes have increased, however Investors still achieve very low days on market for properties with proper fundamental elements and "no disappointments". Longer selling timeframes produce a higher cost of Capital for most investors who take advantage of leverage, however that higher cost is being appropriately offset by larger equity spreads on the acquisition side. Stable interest rates and aggressive immigration within states where AFG provides hard money funding continue to drive a dynamic buying atmosphere.

Funding sources: The most successful Real Estate Investors NEVER let lack of capital spoil an opportunity. You can rely upon Active Finance Group to fund all of your Hard Money needs, with true asset based lending, approvals within 24 hours, aggressive Loan to values and customer service second to none

AFG IS CURRENTLY PROVIDING HARD MONEY LOANS EXCLUSIVELY FOR THE INVESTOR IN THE FOLLOWING AREAS
PHOENIX ARIZONA AND SURROUNDING AREAS
HOUSTON TEXAS
DALLAS TEXAS
SAN ANTONIO TEXAS
LAS VEGAS NEVADA AND SURROUNDING AREAS
DENVER COLORADO AND COLORADO SPRINGS
CALIFORNIA

Delicious Statistics If You Invest in Vegas

2006-05-04T21:49:00.000-07:00

More info from Marketing Solutions and Sales Traq on the Las Vegas Marketplace:

Las Vegas' residential market broke just about every available record in the first quarter of 2006. March continued the record trends found in January and February.
Here's a brief overview:

-----> New home sales are a sizzling 19.3% ahead of last year's first quarter. March was the fifth highest new home sales month in history. We are definitely on pace to shatter last year's record new home sales totals.

----->Existing home sales are just about 1% ahead of last year. March figures are down slightly in total from last year. Resales in 2005 were just 2.2% under the record set in 2004. We still could see a record in resales this year.

----->New home prices are at an all-time record high $320,379 -- that's 12.5% ahead of last March. March figures include 629 conversion sales.

----->Resale prices -- you know, the ones that Forbes magazine said would drop by 8.5% this year -- are at a record $284,900 -- an 8.3% increase over last March.
While we expect inventory to recede significantly in the second quarter, the first quarter saw record totals.

----->MLS totals jumped nearly 2,000 to 16,201 in March-- the highest level in history. But, the key measure of absorption (average days on market) did not change. It remained steady at 54 (the same as last year's March). Our definition of a "hot" market is still: less than an average of 60 days on market.

----->There were a record high 512 active new home subdivisions in the market in March. That makes Las Vegas the city with the highest number of subdivisions per capita in the world!
A quick note here: Some homebuilders and Realtors have expressed concern that traffic seems to be "down." The amount of product available is one reason why traffic reports may not be reliable indicators in the current market. The more to see, the less traffic per subdivision.
Inventory is what makes many observers identify Las Vegas as a "Buyers Market."

Unfortunately, the term is overused and does not describe the situation well. A "Buyers Market" says the buyer can command both incentives and lower prices from the seller. In this market, we are not seeing lower prices. And, the incentives we see tend to be those you expect to remain competitive in a crowded market. So, we don't think "Buyers Market" is the appropriate term to describe the current situation in Las Vegas.

Frankly, we prefer the term "balanced." Argue what you will, but if prices continue to rise, we can't be in a "Buyers Market."

This is the kind of reporting that I love to see... they don't buy the hype.

Another Great MPC Action Weekend!

2006-05-01T09:36:00.000-07:00

We just finished another one of our monthly MPC Action Weekends with 13 eager attendees. When we finish tallying up the amount of real estate purchased over the weekend, I think it will amount to over 11 million dollars in assets! One of the students was a fourteen-year-old boy who started when he was nine, helping his parents do rehabs!

What a blast! Thank you everyone, for allowing us to mentor you. Thank you for the trust you placed in us. And CONGRATS for taking ACTION!

Love, KNB

P.S. For those of you who haven't heard about our weekends, check out www.MassivePassiveCash.com!

Many marriages today are 'til debt do us part

2006-04-30T21:04:00.000-07:00

This article should be required reading for every woman:

Many marriages today are 'til debt do us part

By Kathy Chu, USA TODAY

If love is the tie that binds couples together, money is often the wrench that pries them apart.
Money conspires to antagonize couples. It sometimes invites divorce. And though finances have always raised tensions for couples, it may be harder than ever these days to avoid conflict.
That's because today's range of family complications — moms leaving and re-entering the workforce, late marriages that bring debt and adult children, shrinking pensions and baffling health care choices — are demanding ever-more financial decisions from couples who can't even agree on whether the house is warm or cold.

"Our lives are more complex, and it's made communications around money more complex," says Carol Anderson, president of Money Quotient, which provides tools for financial advisers. "There are more bad emotions around money."

Which financial issues most often cause strife? Spending too much and saving too little, according to couples who responded to a USA TODAY/CNN/Gallup Poll in March. (Many couples don't admit to financial troubles, though. More on that later.)

Making matters worse is that couples don't talk much about money before committing to each other. Nearly two-thirds of married couples who responded to USA TODAY's poll said they talked little or not at all before the wedding about how to combine their finances.

"It's the No. 1 taboo topic," says Syble Solomon, a motivational speaker who created Money Habitudes, playing cards for planners and counselors to use in getting couples talking about money. "People will tell you about their intimate sexual lives before they'll tell you about their money."

Talking is just a start. Couples need help in planning for retirement, saving more and spending less, according to a survey the Financial Planning Association (FPA) conducted of its members in March and April for USA TODAY. (Of the 1,500 planners polled, 189 answered the survey.)
There's a big problem, though: The USA is a nation of spenders, not savers. The personal savings rate is negative, meaning Americans spend more than they earn. And the portion of disposable income going toward paying down debt — including mortgage and credit card debt — is near a record high. Households with at least one credit card carried an average of $9,498 in card debt in 2005, nearly twice the level of a decade ago, according to CardWeb.com.
Overspending is damaging

"Overspending is no different than being an alcoholic or drug addict" in its effect on a relationship, says Jan Dahlin Geiger, a financial planner in Atlanta. "What one person is doing could have a huge negative impact on the couple's finances."

In the worst-case scenario, overspending can cause an irreparable rift in a relationship. That's what happened with Ken Miner, 39, of Lenexa, Kan. Miner says his ex-wife's habit of "spending more than I made" helped lead to their divorce over a decade ago.

Part of the problem, he concedes, was the couple's lack of communication about money: "I was pretty enamored with the idea of being in love. At 23, finances weren't that important."

Many couples don't admit to having financial disagreements at all. Most of those polled by USA TODAY said they and their spouse or live-in partner were doing an "excellent" or "good" job with finances; 57% said they and their mates rarely disagree about money.

Yet the evidence suggests otherwise. Research scientist Jay Zagorsky tracked married couples born from 1957 to 1964 and found that money is consistently one of their top three topics for argument. Couples can't agree even on how much debt, income and assets they have, his research shows.

"Perception does not match reality," says Zagorsky, who works at Ohio State University's Center for Human Resource Research. "People don't want to admit they're doing terrible."

In the worst cases, money can be a home wrecker. In fact, two of the five couples USA TODAY originally chose to profile for this series split up a few weeks later. At least one partner within each couple said the breakup was due, in part, to the conflicts that ignited once they began to dig into their finances with the help of a financial planner. (USA TODAY chose two other couples to replace the ones who split up.)

A couple's efforts to gain control of household finances can be perilous work, with each partner tugging and pushing, like two people clinging to opposite sides of a raft. Fear of sinking can paralyze them.

That's why planners urge couples to recognize their specific challenges and tailor a plan to tackle them. This can help move a relationship closer to financial harmony.

Some of the issues that have complicated couples' finances in recent years, for better or worse:
•Marrying later. With later marriages, many people bring more assets and debt into a relationship. A result is "two very strong opinions" about managing money, with each partner having managed his or her own money for years, says Sheryl Garrett, editor of On the Road: Getting Married.

"If you wait until 30 to get married, you've been in a series of jobs, accumulated benefits, maybe 401(k) assets; you might even have a house," Garrett says. "It makes things more complicated."

The modern young couple looks something like Bryan and Marci Harman, who married in October. He was 32; she was 25. Now, they have three houses, four retirement plans and six bank accounts.

Each owned property before marriage. They're now trying to sell his former house and rent hers. Meantime, they've bought another house in Cincinnati, where they moved this year to be near her family and escape the steep cost of living in the Washington, D.C., area.

"The main concern for us is making sure that we have money every month" for the three mortgages, says Marci, who, by mutual agreement, takes charge of the joint finances. "That's added stress. Other than that, it's just trying to put together money for the future."

•Two-income families. The high number of households with both adults working has created "a vicious cycle of stress," says Bryan Clintsman, a financial planner in Southlake, Texas. "We tend to have a craving for more and more stuff. This creates more spending, which causes people to work harder."

As health care costs escalate and employers cut pensions — shifting the burden of retirement saving onto employees — couples face pressure to work harder and longer.

The tension between work and family life can bedevil two-income couples such as Thuy and Thai Nguyen, of Woodbridge, Va. The Nguyens are considering selling the family's beauty salon so Thuy can focus on their two kids, Dylan, 7, and Sydney, 3. But they're concerned about the consequences of only Thai working full time.

"I'm kind of worried about giving up the income," says Thuy, 36, who works at the salon five days a week, 10 hours a day. "But I want to spend time with the kids while they're young."
The two don't agree on everything. But they talk through financial decisions and agree in this case, because "the kids are the most important things" in our lives, says Thai, 39, a software engineer.

•Balancing financial control. With more women earning paychecks, more of them want joint control over money matters.

In 2004, wives earned more than their husbands in about one-fourth of dual-earner families, according to Census data. In 1981, that was true in only about one-sixth of two-income families.
The greater a woman's education level and earning potential, the more bargaining power she tends to have in household decisions — including financial ones — according to research expected to be released this year by economists Jennifer Ward-Batts of Claremont McKenna College in California and Shelly Lundberg of the University of Washington in Seattle.

It's still more common to have one person take the lead on finances. In the FPA poll, 75% of planners said men make the majority of the family's investment decisions. About one in five couples make these decisions jointly, the planners' survey showed.

The person who makes the investment decisions — and thus controls the bulk of family assets — tends to manage the couple's long-term financial goals. The other partner may take on short-term tasks, such as paying monthly bills. Nearly 60% of FPA planners say women tend to pay the bills.

In general, women know less about investing but make fewer mistakes, such as holding a stock for too long, when they do invest, according to 2004 research by Merrill Lynch Investment Managers. Men tend to enjoy investing more but are also more likely to invest without research.
When both spouses help make financial decisions, they're more likely to reach their goals, says Carrie Schwab Pomerantz, chief strategist for consumer education at Charles Schwab.

The couple may be able to attain better investment returns as well, according to Pomerantz, if one spouse is conservative with investments while the other takes risks, because, "You balance each other out."

•Non-traditional relationships. More unmarried couples, including same-sex partners, are setting up house. The number of unmarried couples living together shot up 72% from 1990 to 2000, to about 5.5 million, according to Census figures. Roughly one in nine of these households are unmarried same-sex partners. This has raised thorny issues about how to combine assets and divide them if the pair ever split up.

In most states, being part of an unwed couple gives you no specific right to inherit property from your partner. Nor do partners have a say in each other's medical care and financial affairs unless those wishes are spelled out in advance.

Mary Ware, 60, and Mary Frances Stuck, 56, addressed some of those issues through a domestic partnership agreement and wills. They also crafted medical powers of attorney — giving each other the power to make medical decisions if one of them falls seriously ill.
They can't legally marry in their state, New York, though they've been together for 28 years.
"When you do planning, it really does frustrate you," says Ware, an associate dean at the State University of New York College at Cortland. "You find a way around most everything; there's just one more step."

•Divorce and remarriage. Couples who married in recent years have a 40% to 50% chance of divorcing or separating during their lifetime, according to the National Marriage Project, a research organization at Rutgers, the State University of New Jersey.

How often is money an issue in divorces? Nearly 40% of financial planners who have worked with divorcing couples say it's frequently a "key factor" in couples' decisions to split up, according to the FPA's survey.

"(Divorcing) couples can't agree on spending styles, earning capacities and what to spend money on," says Susan Pease Gadoua, a divorce therapist in San Rafael, Calif.

Most people who divorce end up marrying a second and sometimes a third time. Those couples bring assets from former relationships. And that complicates the issue of which assets are his, hers and theirs.

Couples who have been married before tend to be "more suspicious" of each other and are increasingly doing "marital due diligence" before the wedding, says Thea Glazer, a financial planner in San Diego. "They conduct background checks on each other to make sure there are no outstanding liens" that could hurt them financially later on.

Those who remarry are more likely to draft prenuptial agreements, spelling out who gets what in case of divorce. And planners say those couples tend to make financial compatibility a higher priority the second time around.

Both Ken Miner, whose first marriage ended in divorce, and his fiancée, Kris Prueter, 42, are savers. He says they have "complementary" financial habits — she plans to handle the daily financial tasks, while he will take charge of investments — and have discussed money extensively during their five-year courtship.

The couple plan to live together with two kids from her first marriage and one from his.

"Coming out of a marriage that was unsuccessful, it provided me with an opportunity to educate myself as to what I was looking for in a long-term partnership," Miner says. "Fiscal compatibility and financial responsibility were in the top five."

Staying Upbeat In a Down Cycle

2006-04-30T20:45:00.000-07:00

Here’s an article that validates our investor group’s conviction that “Buy & Hold” is the only way to fly! KNB

Staying Upbeat In a Down Cycle
By Kenneth R. Harney, Washington Post
Saturday, April 29, 2006; Page F01

Anybody thinking about buying or selling a house this spring probably is asking the same questions: In terms of historical real estate cycles, is this a smart time for me to be in the market?

After a record five-year boom in prices and sales, isn't it obvious to everybody that the party is pretty much over, especially in high-fizz, high-cost markets of the West Coast, Florida, Washington, Phoenix and Las Vegas? Won't rising mortgage rates and fast-accumulating inventories of unsold houses cool the market even further? Could appreciation rates sag -- or swing negative -- making any purchase this spring look like a dumb move a year or two down the road?

These are all intelligent questions, and let's be frank: Nobody has the answers. Finally, someone says the plain truth! But new statistical research on the periodic ups and downs of home real estate cycles offers some insights into timing, lengths of ownership and rates of return on housing investments.

The research examined price data on 50 metropolitan housing markets from 1986 through 2005. During that period, price appreciation rates in some parts of the country, including California, Texas and New England, went through boom and bust cycles. In other areas, especially the Midwest, real estate appreciation was steady and moderate with almost no declines.

The study was conducted by Mark Milner, the chief risk officer for PMI Mortgage Insurance Co., a major loan underwriter that stands to lose large amounts of money when property values decline. The research used quarterly price data provided by the Office of Federal Housing Enterprise Oversight, which tracks home values in more than 300 metropolitan areas.

Milner concedes that his personal experience on timing home purchases hasn't been without setbacks. "I'm one of the unlucky ones," he said in the report. "In 1989, I bought a home in Los Angeles -- right before the bottom fell out of the market. When I got a job in another city and sold seven years later, I lost my down payment and everything I'd put in since, and I even wrote a check to the bank for a little bit extra."

Ouch! Many homes in the Los Angeles area lost 25 percent to 30 percent of their resale value during the early 1990s, but leveled off and began appreciating again by the mid-1990s.
"But here's the thing," Milner said, "I went on and bought another house, and then still another after that. Despite a loss during the first seven years, in 17 years of homeownership, I've recouped that initial loss and a lot more -- enough to make sending two kids to college a lot less daunting."

Milner's study assumed a 20 percent down payment on the median-priced home in each of the 50 metropolitan markets. Then it tracked the quarter-by-quarter appreciation performance of the median priced home, and came up with a statistical proxy for returns on investment in each market area.

Some of the report's broad conclusions are relevant to the questions posed above about timing and cycles and profits and losses:

Anybody who thinks home real estate values can't go down is simply out to lunch. When local economies lose jobs, demand for houses drops and so do property values. Markets where prices have accelerated in part because of speculation by investors are particularly vulnerable when local economies go flat.

The risk of loss is accentuated for buyers who do not hold on to their properties for extended periods. The longer you own a house, the greater your probability of making a profit on it, even if the local economy hits the skids for a while. Read that sentence ten times: The longer you own a house, the greater your probability of making a profit on it, even if the local economy hits the skids for a while.

For example, looking at all 50 metropolitan areas during the recession-impaired 1991-1995 time period, owners who sold after just five years experienced the biggest losses, with 12 percent of owners losing about 10 percent of their investment at an annualized rate. People who purchased during that period and hung on for 10 years ultimately made money, despite the intervening recession years.

From 1996 to 2000, buyers who sold their houses within five years of purchase had a 1 in 20 chance of losing money on their investment, with annualized losses averaging 10 percent. From 1986 to 2005, 99.6 percent of home buyers who held on to their houses for at least 10 years made money. This is why we love Buy & Hold!

The upshot: Yes, timing matters. If you buy at the top of an inflation cycle as a speculator and sell into an economic down cycle a couple of years later, you can lose a bunch. But if you buy a house and live in it for five, seven, 10 years, the odds are good that you will come out ahead -- even if, like Milner, you bought at the wrong time.

Amen!

Kenneth R. Harney's e-mail address is KenHarney@earthlink.net.

Real estate an investment option for 'SC students - Opinions

2006-04-27T08:10:00.000-07:00

Here's a REALLY interesting article from the student magazine at USC. This story shows in action what I've been teaching for years: students can get their housing for FREE. In fact, I take it a step further and teach how you can get someone else to pay for your kid's college! Anway, this is a cool article!

Real estate an investment option for 'SC students - Opinions

Gotta Get a Highrise Condo!

2006-04-26T08:40:00.000-07:00

The only thing that has stopped me from getting one of the new highrise condos is that they all require about 20% earnest money, and it will sit there for as much as a year before the project is completed. I guess I'm just not thinking right... I thought the money would be doing nothing, but of course, it's gaining appreciation. Never bet against Las Vegas!
Love, KNB

Apr. 26, 2006Copyright © Las Vegas Review-Journal Expert:
LV in 2nd phase of 'Manhattanization'
By HUBBLE SMITH REVIEW-JOURNAL

High-rise expert and developer Paul Murad mingles on Tuesday with Linda Rheinberger of the Greater Las Vegas Association of Realtors before the release of the Las Vegas Perspective during an unveiling event at Orleans Arena.

Paul Murad is constantly being questioned about his expertise in high-rise luxury condominium development. He's young -- named to the National Association of Realtors' Top 30 Under 30 list a couple of years ago -- and inexperienced.

Still, he wrote the book, "Manhattanizing Las Vegas," and has his own $200 million, 39-story Gateway Las Vegas condo tower in the works for downtown Las Vegas.

Murad, keynote speaker at Tuesday's Las Vegas Perspective, is an opportunist who has studied high-rise markets around the world, from China to Eastern and Western Europe and Canada and interviewed hundreds of people.

He said Las Vegas is on a parallel with Miami and has just "scratched the surface" in attracting affluent people to town, from wealthy foreigners and baby boomers to retirees and movie stars.
"This first phase of Manhattanizing is over," Murad said. "Now we're entering the second phase. What happened in Las Vegas over the last few years is amazing, going from a couple of high rises to a hundred. That hasn't happened anywhere else in the world."

Signs of a cooling housing market began to emerge last year and unsold inventory has increased for both condos and single-family housing, but Murad said demand for housing in Las Vegas remains strong, although the form of housing is changing.

The trend is toward vertical construction and retail that serves that market, he said.
Steffen Bandilla, a marketing strategist for mid-rise and high-rise developers, said the last couple of years were "crazy."

"It seems like every high-rise and mid-rise that started construction is successful," he said. "Sales is not a problem. It's mostly construction financing. They all have nice beautiful renderings, but they can't find construction financing."

The Las Vegas housing market is becoming one of specialization, said Linda Rheinberger, president of the Greater Las Vegas Association of Realtors and one of about 750 people attending Las Vegas Perspective.

It's not just single-family residential, but low-rise, mid-rise, high-rise and condo conversions, and the builders are getting younger, Rheinberger said.

"You know what it is with a lot of young people? They don't sit there and talk. They do. They don't look for reasons why things can't work. They jump in. They're flexible and they make adjustments along the way so projects are a success," she said, "and they recognize opportunity."
That's the Las Vegas mindset and has been since the beginning!

A demographic overview in the 120-page 2006 Las Vegas Perspective book showed a consensus forecast of 4.5 percent population growth for Clark County. Population has grown from slightly more than 1 million in 1995 to 1.81 million in 2005.

Median household income is $47,320, with nearly 20 percent of households making $50,000 to $74,999. The median age of adults is 47.9 years.

Finally, Some Good News for RE Investors from the Feds

2006-04-24T23:09:00.000-07:00

NEWS ALERT from The Wall Street Journal April 18, 2006 Fed policy-makers thought an end was likely "near" for the rate increases begun in mid-2004, and some had concerns about tightening too much, according to minutes of their March meeting.

It's nice to see some good news for the moment, isn't it?!

Mis Amigos, Mira! Bienes Raices en Mexico!

2006-04-24T08:46:00.000-07:00

U.S. retirees face real estate obstacles in Mexico's Yucatan
Michael Allen Wall Street Journal Apr. 23, 2006 12:00 AM

A big cadre of American baby boomers looking to retire someplace sunny and cheap is fueling a land rush in the Riviera Maya, a small, idyllic slice of Mexico's Yucatan peninsula. But many land seekers are encountering a variety of obstacles, including skyrocketing real-estate prices, confusing laws and con artists.

Real estate prices have spiked so quickly - roughly doubling in the past five years - that unscrupulous promoters sometimes try to flip property they don't even own. The warnings against this potential trouble are everywhere: "This property is not for sale," advises a hand-lettered placard posted in Spanish on a fenced-off beachfront lot, one of several near Tulum, about 80 miles south of Cancun. "Don't be caught by surprise."

The land rush is occurring at the beginning of a demographic tidal wave. With more than 70 million American baby boomers expected to retire in the next two decades, many without adequate pensions or health plans, some experts predict a vast migration to warmer, and cheaper, climates. Often, such buyers purchase a property 10 to 15 years before retirement, use it as a vacation home, and then eventually move there for most of the year. Developers increasingly are taking advantage of the trend, building gated communities, condominiums and golf courses. Mexico, already thought to be home to as many as 1 million American citizens, or roughly a quarter of all U.S. expatriates, is set to get the lion's share of new arrivals.

From the longtime artists' enclave of San Miguel de Allende in the hills of central Mexico to fast-growing sports-fishing and beach communities of the Baja peninsula to Puerto Vallarta on the Pacific coast, there is plenty to lure a sun-seeking retiree.

No place has boomed in recent years like the state of Quintana Roo in Mexico's far southeast corner. Anchored by the high-rise resort destination Cancun at one end and cosmopolitan Playa del Carmen an hour to the south, Quintana Roo is the country's fastest-growing state, with over a million residents. An estimated 1,500 to 3,000 American citizens live there more than six months out of the year, along with a few thousand Canadians, Europeans and South Americans.

The hottest section is near Tulum, just down the beach from a massive Mayan fortress overlooking the Caribbean. While the area retains a funky '60s vibe (there's a nude beach, unusual for conservative Mexico), in the past several years some swanky hotels and real estate developments have been launched. One was the Colombian drug lord Pablo Escobar's beachfront mansion. He was gunned down before he got a chance to enjoy it, but now it's a Buddhist-and-Mexican-themed boutique hotel, known as Amansala's Casa Magna and run by American Melissa Perlman. Austin developer Greg Schnurr recently launched Los Arboles, the first big master-planned community in Tulum, where he's carving 250 five-acre sites out of the jungle. (Though it isn't near the beach and lacks some permits, he has pre-sold 31 of the lots, which go for $50,000 each, mostly to Americans and Europeans.)

Real estate hang-ups But Mexican real estate law can be tough to navigate. Under the Mexican constitution, foreigners are allowed to own land outright anywhere except within 31 miles of the coastline or 62 miles from a national border. Within the so-called restricted zone, they can hold the property in a trust, or fideicomiso. While they don't officially own it, they retain the right to use it and sell it for a renewable 50-year period. In Tulum there is an additional real estate wrinkle: Several miles of virgin beachfront are claimed by an ejido, a form of communal ownership that's fairly common in Mexico.

The ejido is composed of impoverished peasants who were given the land years ago by the government, before anybody thought the property was worth anything. Now it could fetch tens of millions of dollars. Under current law, ejidos can be "privatized," subdivided and sold, subject to unanimous approval by ejido members and time-consuming government approvals. Until that happens, foreigners are technically blocked from buying pieces of it, according to real estate experts.Unfortunately, anxious buyers sometimes find an individual ejido member who claims ownership of a parcel and buy it at a steep discount, on the promise that they will receive full title when a privatization is completed. Such arrangements have given rise to endless title disputes.

'Ejido' land Lee Bufford, a retired Atlanta entrepreneur, says she bought a beachfront lot from a local man eight years ago for $50,000. It was ejido land and she didn't get a proper title, hoping to get that done later. But 3 1/2 years ago she was in an automobile accident in the United States and couldn't make it down for a while. Word spread that she had died, and she says the man reoccupied the property. After $75,000 in legal expenses, she says she has been told the man is fighting for control with a group backed by an ex-politician from Mexico City. "It's been a nightmare," Bufford says.

Conflicts over title aren't uncommon in Mexico. In 2000, some 200 American homeowners were evicted from their luxury development on the Baja coast, after a court ruled against the developer in a convoluted title dispute. Still, such hardships may be on the wane in Mexico, as the real estate business matures.

"In Mexico, you can buy safely but you've got to do your homework," says David Wiesley, president of FirstMexico Group LLC, San Diego, and a pioneer in the Mexican title-insurance business.

Have a Wonderful Weekend!

2006-04-23T11:10:00.000-07:00

Hi Everyone,

It's a gorgeous spring day in Las Vegas, and I'm going to earn myself some R&R! I'm going to spend the afternoon preparing my tax reports for 2005, and then go for a nice walk in the sunshine!

If you're a workaholic like me (to the point that you think "workaholic" is a real compliment), maybe you can earn yourself some sun-time. Rewarding ourselves for productivity is a good way to stay in touch with the reasons we love working: to be valuable to others.

Love, KNB

Smart Reporting by Hubble Smith Regarding Condo Conversions

2006-04-23T01:33:00.000-07:00

Sometimes, I think Hubble Smith is the only real estate writer who really "gets it." The folks at the money magazines are so busy trying to scare people into buying the flavor of the day mutual fund, sometimes they spew statistics completely irrelevant to the true RE investor. Check out his article today on condo conversions for some sensible reporting!

Apr. 22, 2006Copyright ©
Las Vegas Review-Journal Condo conversions still abound in Las Vegas
Former apartments only affordable option for some looking to buy
By HUBBLE SMITH REVIEW-JOURNAL

Louis Birdman of SunVest Communities oversees landscaping at Traverse Point, an apartment complex that the company bought and is converting to condominiums.Photo by John Gurzinski.
Real estate investor Louis Birdman of Florida-based SunVest Communities remains bullish on condominium conversions in Las Vegas, even as the housing market in general has cooled.
SunVest has sold 1,500 condos so far this year in Florida, Arizona and Nevada, including 400 to 500 units in Las Vegas, he said.

SunVest bought Traverse Point apartments near the Las Vegas Beltway and Stephanie Street for $40 million last year and is converting to condos starting in the mid-$100,000s for one-bedroom units.
My two cents sez there won't be any affordable housing other than units like these by 2010. And where will all the workforce for LV live? In your condo, if you had the foresight to acquire a few.

That project follows SunVest's Latigo at Silverado Ranch, Desert Shores Villas and Southgate condominiums, which is in the closeout phase of sales.

Birdman said escalating land and construction costs have deterred developers from building new apartments here. That's driven existing apartment prices to $140,000 and $150,000 a unit, making it difficult for owners to turn a profit at current rental rates, he said.

"Sometimes it's hard for converters to make economic sense of it," Birdman said. "We've seen some deals falling out of contract. There's only so far you can push the market, depending on the area."

Randall Friend, co-founder and principal of Anaheim, Calif.-based Eagle Real Estate Group, profited by converting the Camden Harbor apartments at 9000 Las Vegas Blvd. South into Sedona on the Boulevard condos.

Eagle purchased the 560-unit apartment community in January 2005 for $67.2 million and had enough sales by September to pay off the lender, Friend said. By October, all investor equity had been returned. The project earned 135 percent cash-on-cash return, he said. Nearly all of the units at Sedona have been sold. Prices ranged from $168,000 to $325,000.
Most investors are ecstatic to earn 10% cash-on-cash... wow!

Eagle has a 350-unit apartment deal in escrow, but will keep the property as a rental, rather than convert to condos, Friend said.

"That's more of our business plan. This one (Sedona) was out of the box for us," he said. "I like the apartments right now. I think the apartment market is very solid. People need a place to live, and as interest rates go up, it pushes people into apartments."

Long-term demand for multifamily housing is on an upward swing, the National Association of Home Builders reported on its Web site.

Baby boomer lifestyle changes, immigration, housing affordability and the nontraditional composition of households are among factors that will contribute to robust demand for multifamily rental and for-sale housing for several decades, the builders association said.
Condo conversions in Las Vegas were triggered by housing prices that appreciated by as much as 50 percent in 2004 and a shortage of affordable homes available to thousands of new residents relocating here every month, Friend said.

While early conversions such as Bella Vita were starting in the $90,000s, the median price of a condo or townhome in Las Vegas was $205,000 in March, up 12.6 percent from a year ago, the Greater Las Vegas Association of Realtors reported.

"I think condo conversions will continue to be a more feasible option for people looking to buy," said Michelle Johnson, sales director for the Coldwell Banker Condo Store in Las Vegas. "As opposed to the higher priced high-rises, and with the median price for all condos continuing to rise, the value provided by conversions makes them more palatable for a lot of buyers."

As long as median home prices and construction costs continue to rise, condo conversions will remain the best value based on price per square foot, she said.

Sedona on the Boulevard was selling at roughly $200 a square foot in a neighborhood where Park Avenue and Manhattan condos were priced from $350 to $400 a foot, Friend said.
"You've got to look at where the rest of the market is," Birdman added. "Comparatively speaking, I'd still consider it (conversions) affordable product. Look at Arizona and Florida. It's even pricier."

Larry Murphy, president of SalesTraq, wonders if conversion prices have peaked. He's showing a dip in March after prices climbed from about $130,000 in January 2005 to almost $200,000 in February.

Buyers and investors will determine how deep the niche is for condo conversions, said Mike Gallegos, an apartment broker for The Bentley Group. Properties with the best potential for conversion to condos have probably already been identified, he said.

"I would imagine, given the popularity of condos and the size and scope of the multifamily inventory here, most of the properties that could be converted have been viewed already. That's not to say there aren't more out there," Gallegos said.

SunVest is ready to start marketing the Pinehurst condo conversion in southwest Las Vegas Valley and plans to build two condo towers at 601 E. Fremont Street. Zoning for the first 255-unit tower has been approved, Birdman said.

Rising land costs in Las Vegas have driven some developers to rural areas as a means to build less expensive housing. Two-bedroom condos at Hawkridge, a 152-unit development in Mesquite, are going for $170,000, and three-bedroom condos are in the low $200,000s.

Like Las Vegas, Mesquite has experienced a sharp increase in housing costs, but still offers a resort lifestyle and climate at a reasonable price, said Joyce Knoblauch, developer of Hawkridge.
Also, multifamily builders and developers are snapping up larger tracts than they need and selling off the excess to offset escalating land and construction costs, NAHB reported from an industry conference in Scottsdale, Ariz. Other ways to deflect costs include phasing projects, anticipating price spikes and finding alternative material sources.

I've never been bullish on condos, but the economic indicators are pulling me in that direction. What do you think? KNB

A new property, nothing down, today!

2006-04-22T18:23:00.000-07:00

I'm pretty pleased, because I used the lease/option strategy to acquire house nothing down. I borrowed the option payment of $4,000 from a business credit line, and I had a tenant before I ever even made the offer. The whole transaction took a few hours. Both the house and the tenant were found by word of mouth (my most successful tool for finding great deals).

When people tell me there aren't any deals out there, it makes me want to go get another house! I'm kind of like some other women are about shoes. I'd rather buy real estate than shoes, because you need the real estate to put them in. Right? Right!

Love, KNB

Sharing a Wonderful Win!

2006-04-21T19:58:00.000-07:00

Hi all,

This week, I had such a nice win, and I want to share it with you, partly because I'm feeling all full of myself (!) and partly because the scene will benefit all of our MPC Action Weekend group!

My personal banker called me on the phone and said that the bank is going to develop a lending program especially for real estate investors and they want ME to help them pilot it! I’ve never thought about having the bank call me to advise them!!!!!! What an honor!

Well, let’s hope the program works out and we all move up to the next level as borrowers!

Have a great weekend!

Love, KNB

FORECLOSURES ON THE RISE, Part 2

2006-04-17T08:37:00.000-07:00

Here's hoping everyone had a wonderful weekend, celebrating Easter or Passover... I spent the afternoon in quiet healing reflection. On Saturday, some friends and family went hiking together, and that was wonderfully nourishing too.

On the real estate front, it looks like investors can turn to the foreclosure market to deliver the real product of HOPE AND HELP. If you go in with an honest determination to provide valuable benefit to people in trouble, you'll not only uncover some excellent deals, you'll get the amazing satisfaction of serving others!

Rising Foreclosure Rates PointTo a Normalizing Home Market
By Danielle Reed From The Wall Street Journal Online

As home-price appreciation has tapered off and mortgage rates have risen, foreclosures have started to pick up, with the Midwest region hit hardest.

The rate of foreclosure -- the process by which banks can ultimately take back the properties that secure mortgages -- is a key indicator that real-estate analysts and investors use as a signal of market distress.

In the past several years, foreclosures across the U.S. have been hovering around historically low levels, as home prices have risen nearly 50% in five years. This appreciation enabled borrowers to sell their homes relatively easily to resolve mortgage difficulties.

Now, a survey of the latest data confirms, that is starting to change, with an uptick across the U.S. in foreclosure rates and mortgage delinquencies (or late mortgage payments). But even the new higher rates of foreclosure and delinquencies are still low in historic terms.

Nationally, the number of mortgage loans that entered some stage of foreclosure rose to 117,259 in February, up 68% from the same month a year earlier, according to Irvine, Calif., online foreclosure-data service RealtyTrac.

Delinquencies are up as well. Data provider LoanPerformance, a subsidiary of First American Real Estate Solutions, reported that 3% of the most vulnerable loans -- those made to borrowers with less than a stellar credit history -- were 90 days delinquent in February. That is up from 2.84% in February 2005. Meanwhile, 90-day delinquencies for loans made to borrowers with better credit were up to 0.76% in February, from 0.67% a year earlier.

The rise in delinquencies isn't surprising, according to Doug Duncan, the Mortgage Bankers Association chief economist. In its own quarterly survey, for the fourth quarter of 2005, the association showed a 0.26 percentage point uptick in the rate of mortgage delinquencies as well as a 0.01 percentage point increase in the foreclosure rate from the third quarter.

The MBA has "been expecting an uptick in delinquencies due to a number of factors," Mr. Duncan said in the release, including greater prevalence of riskier adjustable-rate and subprime mortgages, as well as higher interest rates and energy costs.

Digging a little further into the data shows that three states in the Midwest consistently have among the highest rates of loan foreclosures and delinquencies: Indiana, Ohio and Michigan.
The reasons behind the higher rates of foreclosures and delinquencies vary somewhat, but there are two primary drivers, said Lou Barnes, a partner with mortgage banking firm Boulder West Financial Services in Boulder, Colo.

One is family economic distress, often related to job loss or divorce. Another is a slowing pace of home-price gains. And what the states hit hardest by mortgage foreclosures have in common is relatively low home-price appreciation (compared with the national average) over the past few years, typically combined with below-trend job growth.

In Ohio, 3.22% of loans were in foreclosure at the end of the fourth quarter, according to MBA data. The national level was 0.99%. Indiana had 2.75% of loans in foreclosure, and Michigan 1.75%. The entire "East North Central" region of the country, which includes Indiana, Ohio, Michigan, Illinois and Wisconsin, had 2.05% of its loans in foreclosure, the highest regional level in the nation, according to the MBA.

Still, even with the increase in foreclosures and delinquencies, the numbers are generally not alarming to economists, as they are rising from historically low levels. The market is simply returning to more typical levels, this line of thinking goes.

Email your comments to rjeditor@dowjones.com.
-- April 17, 2006

Happy April 15th to you!

2006-04-15T10:58:00.000-07:00

Yes, it's tax day today. Therefore, I selected an article that relates to the most unpleasant "holiday" on the calendar. However, I've been discovering that owning rental real estate sure brightens your outlook at tax time. (Be sure to check out Darrell's post on the subject... quite an eye opener!)

Ten Real Estate Tax Tips You Missed In 2006
Sara Clemence and Lacey Rose 04.12.06, 12:30 AM ET

Unless you are able to harness the powers of time travel, it's too late to fix this year's tax bill.
But, it's never too early to start planning your real estate tax strategies for next year. To better prepare you, we've decided to point out several real estate tax breaks you may have missed for 2005. Perhaps the pain will focus your attention for 2006. You say you deducted your mortgage interest? Big deal. That's amateur hour. Just about anyone who's ever wielded a 1040 knows that's an obvious deduction. If you're smart enough to own a house, you're smart enough to figure that out. However, there are also plenty of other (perfectly legal) real estate strategies that can help lower your next tax bill. They range from the super-simple, like remembering to deduct the points on a new mortgage, to the somewhat complex, like trading up on an investment property in order to defer taxes on a sales gain.

Little things, such as paying attention to the number of days you stay at a vacation home, can affect your tax bill. (If you use the vacation property for either 10% of the time it is rented or just 14 days--whichever is greater time-wise--the property can be considered an investment.) But so can big things, like marriage, which doubles the tax-exempt portion of a home sale gain.

The good news--or the bad news, depending on your viewpoint regarding tax laws--is that this past year has seen very few changes to federal tax law, especially when it comes to real estate. Translation: There are few new ways to get tripped up--or to minimize your bill--come tax time.

Some major events, namely Hurricanes Katrina, Rita and Wilma, did make a few changes necessary. Following this past fall's disasters, Congress passed a tax bill that enabled people living in what is declared a presidential disaster area to fully deduct their casualty losses. Prior to this, victims could only deduct casualty losses that were more than $100 and to the extent that they exceeded 10% of their adjusted gross income.

Take a hypothetical example from Kenneth M. Hart, a tax lawyer at Gunster Yoakley & Stewart in West Palm Beach, Fla.: Say your AGI (adjusted gross income) was $200,000, and you incurred $15,000 of casualty losses as a result of Hurricane Wilma. Under the prior law, you couldn't deduct any. This year, you can deduct all $15,000.

Otherwise, the tax breaks you likely missed in 2005 are largely the same as those you missed in 2004. In some cases, however, you may be fortunate enough to be able to file an amended return this year. And if not, you'll still get your shot. After all, April 2007 is still many months away. In the meantime, Bill Abrams, a partner in the Manhattan law firm of Abrams Garfinkel Margolis Bergson, says a good way to make sure you're getting all the tax breaks you can is to "keep good books and records. You'd rather be the Felix Unger than the Oscar Madison."

TIP # 1:
Taking Points
The fees paid to mortgage lenders, known as points, are considered a form of prepaid mortgage interest. That means they are fully deductible the year you take out the mortgage, says Bill Abrams, a tax attorney with Abrams Garfinkel Margolis Bergson, who works in New York City and Los Angeles. It's a simple but easily forgotten strategy, since your lender may not have reminded you of it in your year-end statement. (This is a great one for MPC Action Weekend grads who've got lots of new loans.)

TIP #2:
Trade Up
If you plan to sell one investment property and buy another, consider what is known as a "like-kind exchange," advises Kevin Roach, a partner in personal financial services for PricewaterhouseCoopers. It's a common practice for real estate professionals, but smaller investors may not know about it. Instead of selling a property and paying taxes, then reinvesting the proceeds, you can trade the property for one of comparable or higher value. The taxable gain is deferred until you cash out, but there is no limit on the number of times you can exchange, Roach says. A few caveats: You have to find the replacement property within 45 days of selling the old real estate and close on it within 180 days. Your cost basis for the new place will be the same as your cost basis for the old. And you can't do this with your home.

TIP #3:
Exchange Right
If you're going to go down the like-kind exchange road, remember that you don't get to defer the gains on any cash you may receive in the deal. Take a small-scale example from PricewaterhouseCoopers' Kevin Roach: Say you paid $10 for an apartment building. You exchange it for another property with a fair market value of $12, plus $4 in cash. You got $16, but this year you only have to recognize $4 of it for tax purposes. The rest can be put off until you sell out completely.

TIP #4:
Business Or Leisure
There tends to be a lot of confusion over vacation property that is rented out some of the time, Roach says. In these cases, the line between personal and investment property is drawn with time. Use the property for just 14 days or 10% of the time it is rented (whichever is greater), and it's an investment. That means you can record all of your expenses, from depreciation to roof replacement; if they exceed the rental income, you may be able to deduct a business loss. If it's a personal property, you can deduct your expenses from the rental income, but you can't go below zero. In either case, the amount and timing of the deductions allowed depends on your whole financial picture, so plan accordingly.

TIP #5:
Take The Damage Deduction
Coastal home owners take note: If you suffered property damage from a hurricane, floods or other sudden events, you can deduct costs that were not covered by insurance or reimbursed in other ways, says Kenneth M. Hart, a tax lawyer at Gunster Yoakley & Stewart in West Palm Beach, Fla. The costs must exceed 10% of your Adjusted Gross Income plus $100 per loss and are not subject to Alternative Minimum Tax limitations. This rule doesn't apply to victims of Hurricanes Katrina, Wilma and Rita, who can fully deduct casualty losses.

TIP #6:
Do It In Twos
You can deduct your property taxes on all of your personal holdings, whether you own one home or 16, Roach says. But mortgage interest is only deductible on your primary residence and one other abode, for up to $1.1 million of combined debt. The upside is that you can pick which house to count as the second one, so be sure to choose the one that gives you the biggest break.
(Be sure to ask your tax preparer about this, because if you are really investing full time as a business, this paragraph may be different for you.)

TIP #7:
Push Paper
In any given year, you might not have enough itemized deductions to make taking them worthwhile. But if you plan ahead, you may be able to "bundle" them, condensing them into the same year so that they get you a bigger deduction. That means you might pay your property taxes in advance to take the deduction in a certain year. Think ahead before you write those checks, and make sure your records properly reflect the payment.

TIP #8:
Check It All Out
When it comes to taking tax breaks, you need to look at the whole picture, says Bill Abrams of Abrams Garfinkel Margolis Bergson. If you don't watch out, you may end up canceling out tax breaks, because having too many deductions will throw you into the dreaded Alternative Minimum Tax territory. "You have to do an examination for the following year," he says.

TIP #9:
Wed Wisely
OK, it sounds a little far-fetched. But if you're thinking about selling your home and considering getting married this year, timing a double-play might be worthwhile, especially if your future spouse has been sharing the space. When you sell a home, $250,000 of any profit is tax-free, and that goes double for a married couple. The only catch is that, technically, the spouse should have lived there for at least two years.

TIP #10:
Points In The Right Direction
Being able to deduct those points is great--if you bought a home this year. If you paid points to refinance a home, you can take them off your income too. But the deductions have to be spread over the life of the loan. For a 30-year, $500,000 mortgage, that comes to less than $170 a year per point. We still think it's better than nothing.