When Rent Lowers, So Does Your Income!

I recently read an article from MSN that had me a little worried at first. The article talked about the top 10 US cities with declining rents. As a future landlord that scared me because one thing that every landlord knows is that when your rents lower, so does your income!

1. Seattle, Washington: Average rent/mo = $1,023. Rent decreased last year a total of 13.85% with vacancy rates jumping from 5-6.4%. One of the main causes for this huge decrease was due to increased unemployment that went from 6-9% in one year. That's a whopping 133,300 people that lost their jobs!


2. Reno, Nevada: Average rent/mo =$753. Rent decreased 13% last year since one-fourth of gaming revenues were lost and unemployment rose from 8.8-12.7%.


3. Las Vegas, Nevada= Average rent/mo=$766. Rent decreased 12.4% in the last year. It's no wonder since unemployment went from 8.7% a year ago to 13.1% in December. Vacancy rates are at a HUGE 9.9% and foreclosures are at 12.04%; the largest level for all US cities.


4. Tacoma, Washington: Average rent/mo= $840. Monthly rents decreased 12.3% in all. The major contributing factor for this was again, unemployment which went from 7.1-9.5% in one year.


5. San Jose, California: Average rent/mo= $1,590. Annual drop in rents was 12.3%. What's interesting is that unemployment which went from 7.8% in 2008 to the current 11.5% only increased the vacancy rates in the apartment market to 5.3%, however the office space vacancy rate is now almost 25%! Looks like silicon valley and its 11.5% (103,300 people) are looking for work elsewhere.


6. Phoenix, Arizona: Average rent/mo= $667. Rent decreased 11.2% with a vacancy rate for apartments reaching 11.3%! What are landlords doing to battle those numbers? Giving tenants all sorts of concessions for staying with them or getting new tenants to move in.


7. Salinas, California: Average rent/mo= $1,044. Last years drop in rent was 11.1%, but vacancy rates are not bad at 5.3%. Since this is an agricultural area unemployment is usually around 10% in the winter. This year's winter, however, was drastically higher at 16.7%.


8. Salt Lake City, Utah: Average rent/mo= $727. Rent dropped 10.3% last year. Unemployment isn't nearly as bad as other metros at only 6.2%, but that's a far cry higher than it was in 2008 at 3.8%. Vacancy rates jumped higher than the unemployment did when it went from 2.9% in 2007 to 7.6% last year.


9. Oakland, California: Average rent/mo $1,356. Decreased rents were 9.7% last year. Vacancy rates are still decent at only 5.3%, but unemployment is at 10.9% compared to a year ago when it was 7.7%. Also, retail sales dropped 27.8% in this recession while other cities were only around an 8% decline in sales.


10. Palm Bay, Florida: Average rent/mo= $611. Rents decreased last year a total of 9.5% as did employment which hit 12.1% (triple what it was in 2007). The vacancy rate is the highest in the 88 metros surveyed for this article at 14.4%.

I didn't share this to alarm anyone interested in becoming a landlord. If you set up your investments properly you can shelter yourself from times such as these and maybe even come out ahead. Plus!!! There is good news. According to Marcus and Millichap (a large real estate research firm) there should be "strong rent growth in 2011" due to the large size of the echo-boom generation and the decrease in construction. Not to mention the many people displaced from foreclosures, short sales, or the need to downsize.

Things may look a little scary at times, but there are many opportunities out there; especially in these seemingly scary times.

MSN Article

Marcus & Millichap 2010 Apartment report

The Importance of Setting Up Your Business RIGHT!

Want to know just how destructive setting up the wrong entity for your business can be? After getting sued by a business partner Terry Hoskins of Ohio didn't just face sale and foreclosure of his business, but of his house too! He only owed $160,000 of the total $350,000 the house was worth AND NEVER MISSED A PAYMENT!! So, instead of letting the bank take his home from him, he bulldozed it to the ground.

"I'll tear it down before I let you take it....I plan on giving back what was on
this hill exactly (as) it was....I brought it out of the ground and I plan on
putting it back in the ground."

If Mr. Hoskins had instead correctly set up all his businesses so that his personal assets (his home) were protected this never would have happened. Sure, he would have lost his businesses, but at least his home would have been safe.

From the looks of it Hoskins owed money to the government and to his brother after the lawsuit. It was his businesses, not his home that owed the money. One thing that I have learned a lot about in the last couple of months is that you need to set up each of your businesses properly in order to prevent exactly this kind of situation. How exactly do you do that? Get a good lawyer to help you. It's as easy as that.

What do you think? Was the bank justified in going after his home?

MSN Article

News 5 Article

Watch this short video for more of what happened.

Buffet's Tips to New Investors

One of the things I really like about signing out of my hotmail account is going to the MSN homepage and taking a look at the top stories. Every once in a while I happen upon something that catches my interest, now-a-days it's usually something about real estate or investing.

In this article by Brett Arends of the Wall Street Journal Buffett gives new investors 6 great tips. Below are a few highlights of those tips.

1. Stay liquid. "We will never become dependent on the kindess of strangers," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivable have will be dwarfed by our ouwn liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earning from our many and diverse businesses."


2. Buy when everyone else is selling. "We've put a lot of money to work during the chaos of the last two years. I's been an ideal period for investors: A climate of fear is their best friend...Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."


3. Don't buy when everyone else is buying. "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance," Buffett wrote. "The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying."


4. Value, value, value. "In the end, what counts in investing is what you pay for a business -- throught the purchase of a small piece of it in the stock market -- and what that business earns in the succeeding decade or two."


5. Understand what you own. "Investors who buy and sell based upon media or analyst commentary are not for us, "Buffett wrote.


6. Defense beats offense. "Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the 11 years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue."

Click here to see the full article.

For the letter Buffett wrote to his shareholders that this article was written from, click here.

Plans Change

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My husband and I are extremely gung-ho about real estate investing. We have seminars to attend all over the country, forums to go to, people to meet, properties to buy, and...well, you can imagine all the other things we really want to do right now. I will say this, real estate investing is something to really learn about and prepare for before you dive in. You can fail and fall pretty hard in this business, I see it every day while doing my research: owner needs to sell, multiple properties foreclosed on that were owned by the same company, mis-managed properties, and the list goes on.

Nick and I really want to just dive in. We have some pretty large goals and a small time frame to achieve them in, but we are eager and ready to learn. I attended a seminar recently that basically gave me the step-by-step guide on how to find, buy, and close on a property. Having taken that seminar I wanted to run out and start buying, in fact, we were encouraged to; but I knew there were still things I needed to do.

Originally I had seminars scheduled about every 2 weeks in different cities for the next 3 months. I wanted to run out, learn, and apply. Since then, I have learned another valuable lesson; you need to walk before you leap. My real estate coach has been walking me and Nick through the different things we need to do before we jump out into the market. For example: we need to set up our current finances and come up with a debt elimination plan, we need to reschedule our time so we can learn more, we need to set up our real estate team, we need to do market research, we need to go over our funding options, we need to network and get a pool of investors going, and...you get the idea. It's like our coach said, if you are going to build a house you don't just run out and start pouring the foundation, you need to do a lot of planning first.

As a result of this small lesson I changed my plans. Now I plan to attend a seminar every 4-6 weeks to allow myself time to actually apply what was learned in that seminar before moving onto the next one. This way is much more beneficial since I will retain more information once I give myself time to put it into practice. Once I've mastered many different real estate strategies I can dovetail a lot better (dovetailing is when you use more than once strategy in any given real estate deal such as: buy wholesale, get creative financing, rehab the property, then lease option it out =4 strategies).

So, Nick and I won't be running out to purchase multi-million dollar apartment buildings right away like we really want to, but we will get started on the right foot and have a sturdy foundation to build on. Once we do get everything in order, watch out world, we're going to invest like crazy!

Marketing is My Business

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It may not seem like marketing is your business when you're a real estate investor, or it may be the last thing you think of, but it's true. When you are a real estate investor, marketing IS your business. Let's look at it like this. If your business structure was an target sheet, real estate would be your bulls eye. Real estate is your goal, your core, the thing you are aiming for, but how are you going to get there? Especially if your just starting out in the business. Through marketing, of course.

Every successful company spends millions of dollars in advertising campaigns each year. Nike, Wal-Mart, Coke, McDonald's, and the list could go on. Marketing is the lifeblood of each of these companies. Without it, it's safe to say that they would most likely parish. Marketing is what informs people about what they're doing and what their deals are. Marketing is what brings the people in by the millions, and keep those companies making large sums of money.

So, why would a real estate investor need to use marketing? Simple. As a real estate investor we also need to bring people to us, whether it be buyers, sellers, renters, or other investors. We need to bring people to us, so we can help them and make money in the process. Take, for example, a simple add in a newspaper, on a sign in front of a yard, posted online that you may have seen before, "We buy houses! Cash or terms! Give us a call xxx-xxxx." It's simple, but think of it...as an investor, you no longer need to go out and look for homes to buy or motivated sellers to help out...they are going to call you! When they come to you, you save time, when you save time, you save money and can make more money by working on more deals. Get it?

That's one way to look at marketing as an investor's lifeblood. Now how about something as simple as a business card. Hand them out to everyone you know. When you meet someone new, give them a business card. When you're at a store leave behind a business card. When someone looks at your card and reads "Real Estate Investor" they just might be interested in what you do, and just might have a house they're trying to get rid or, or know someone who needs to sell but can't find a buyer, or they might have a piece of land they don't want, OR they just might have some money to invest and want to do it with you. It happens every day. Hand out a card, make a contact, and create new business.

As a real estate investor what happens when people start COMING TO YOU to sell, buy, rent, or invest with? Simply put, you make more money. What happens if you don't set up your marketing to bring people to you? You don't meet as many people, don't make as many deals, and DON'T make as much money. Sounds good to me!

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It's a Team Effort

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Investing in real estate is a team sport. You can't be expected to know every aspect of the business; there's just too much to know and you will end up wasting precious time on things other people can do for you or with you while you continue to look for other properties and move on to the next deal. Here is a short list of some of the people you will need to be on your team:


Your Business Team:

• Attorney who specializes in business and real estate law. He will help you set up your business and keep it in accordance with the law.
• Accountant who can help you with personal and business financial situations, and who also knows the in's and out's of real estate tax laws.

The Property Search Team:

• Real Estate Broker/Agent will help you understand the market you wish to invest in and bring the properties that will profit to you.
• Property Manager to asses multifamily properties you wish to invest in from a management standpoint. Also need a good company to manage your property once you buy it (you don't want to do it all yourself, takes too much time

The Offer Team:

• Attorney will review contracts and make sure they are legally binding.
• Lender/Mortgage Broker who is familiar with property investing (they may even provide you with good leads on other properties).
• Investors can bring in extra sources of capital for investments
• Contractor/Rehab specialist is good for property walk-throughs. They will help you determine the cost of minor & major repairs.

Other Team Members:

• Appraiser who specializes both in your market and the types of properties you target. They not only help determine value of a property before you buy but can project value for after you buy (fix, improve management, etc.)
• Architects are for when you need more than just cosmetic repairs, but major reno's.
• Insurance Agents. Every property needs insurance, and you need the best deal. Every year or two you should also get new bids on insurance to see if you can save.
• Property tax consultants are great. Tax laws can be too confusing, get professional help.
• Income tax consultants also help maximize tax advantages in properties.
• Estate Planners help you shelter and dispose of assets in case of illness or death. Good for when you have a substantial amount of properties.
• Environmental Company/industrial hygienist. Good if you suspect mold or asbestos, or any other environmental hazard on a property.
• Surveyor to help with boundary lines, elevations, etc.
• Structural Engineer in case improvements affect the structural integrity of a property.

Keep in mind that you don't need all these people at once. You can slowly add them as you need them. The people you must begin with though, are your attorney, accountant, real estate professional, and mortgage broker. Also remember that all of these people can help generate leads to other properties, investors, contacts, etc. If you plan to invest in more than one location, like me, you will need a team for each location.

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Thing on My Plate

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The past couple of weeks, since the seminar and my determination to get this business going, have been CRAZY! On my list of things to do:

• Research, research, research!! Not only research the market, but also how to start a business, where to invest, what to invest in, hard money lenders, networking groups, how to obtain information, HOT spots, and as you can imagine a plethora of other topics.
• Learn. I've read two books since the seminar. Taken two online classes: one about foreclosures, and another about setting up a business plan.
• Get the biz set-up. This is perhaps the most difficult and perplexing thing on my plate right now. We live in Hawaii, want to invest in Utah, Nebraska, and Oklahoma. Which location do I set up the business? The place where I live now, the place(s) we'll live in the future (Utah and Nebraska), both locations? I don't know. I'm talking to attorneys and accountants in Hawaii right now, but when I go to Utah in a month and a half I'll be talking to attorneys & accountants there to figure out where we'll end up setting up the biz. Either way, we'll have to do business long distance.
• Set up my POWER TEAM! I need to ask around, find, call, interview, and research the following people to put on my team for EACH STATE we plan to invest in. Attorney, accountant, tax professionals, real estate agent or broker, mortgage broker, contractors, property management companies, commercial broker, insurance broker, appraiser, architect, environmental consultants, engineers. The most immediate and important at the moment being attorney, accountant, real estate agent, & mortgage broker. The rest I can slowly add to the team depending on what I'm going to invest in (most likely I'll need a good contractor and property management company soon).
• Network. I've already joined a couple of real estate investing groups online for both Utah and Hawaii, now I just need to go.
• Find funding. I don't even want to think of this one yet...but I am. Since I'm new and haven't done much networking yet, I don't know all the investors (let alone what to say to them or how to work with them). I also don't have a mortgage broker set up; really important for funding. Yikes!! I'll get it done, but for now it's a huge stressor.
• Find properties. This is mostly done online right now since our immediate investments are on the mainland (more affordable to get into in order to start creating cash flow and earned income). Also, what we are looking at right now is mostly research. Looking at the markets, then the properties available for those market, performance expectations for various areas, which locations are better for which investments, cap rates, ROI, REO's, pre-foreclosures, etc. I need to know as much as I can about these markets now, so that when I go there (in the next month or so) I'll know what's a good deal, what's not, what I'm looking for, etc. Basically all the facts so that when I find something I can hop on it, then bring it to an investor, or get the funding from a broker.
• Schedule. I need to, and actually have, set up my class and traveling schedule for the next couple of months. This is what I have so far. Sept 12th, Honolulu, Rich U class. Sept 25th, Wholesale class, Bakersfield. Oct 9th, Foreclosure class, Dallas. Oct 18th, Mobile Home class, Utah. Oct 30, Lease Options class, Denver. Nov 13th, Rehabbing class, Las Vegas. Dec 4th, Creative Financing class, Honolulu. Unconfirmed, Dec 11, Commercial Properties class, Atlanta. I'll also be in Utah, my first investment area, from Oct 12-Nov 11 (fly out and attend classes periodically). That's 8 confirmed classes with one pending. Not bad. Plus for much of that time I'll be where I want to invest. Awesome!

As you can see, I have a lot on my plate right now. I work every day towards my goals and cross off things every day as well. That doesn't, however, diminish the fact that I still have A LOT to do!!! Wish me luck, give me advice, give me a contact, or just read this blog.