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- Five Most Common Mistakes to Avoid in Real Estate Buying — Selling: | Bnetworking
Jackie Fraser says the following is a common mistake made by novice real-estate investors:
5. Not having the proper insurance
It's rare to see someone these days include insurance as one of the basics, but it's correct.
We say "these days" because insurance used to be an often-cited pillar in popular startup literature. Now we can read hundreds of articles on real-estate-investing fundamentals an never even see insurance mentioned.
People always end up kicking themselves after an uncovered loss. "Why didn't I get insurance for that?" Good question.
Source … http://bnetworking.co.uk/?p=558
- Commentary: Tips to protect yourself when investing in real estate | HTR Media | htrnews.com
A land trust per property with each beneficiary being a Nevada LLC to hide from lawyers who would sue you, even frivolously:
… it's just not worth taking the risk, especially when there are simple, easy steps you can take to prevent it. You've learned to avoid the crap shoot approach to real estate investing so don't gamble with legal dangers, either.
The object here is to make it as difficult as possible for a lawyer to find someone to sue. Time is money, and no one knows that like a lawyer. The longer it would take them to file a lawsuit, the less likely they are to take the case.
What do you think about this?
For one, it seems to us that one would need to hire a property-management firm in this case. Another thing is that hiding in this way could put a big dent in the ability to network. What's to prevent an attorney from suing the first trust and naming John and Jane Does and Roe Corporations and LLC's? Doesn't the first trust get to the whole LLC in this case. We've seen people form an LLC for each property, but those were sizable multi-family complexes. Thoughts?
- What to do in the Event of a Maintenance Emergency – Latest News and Guides for Property Managers – URentGuide
Brent Foster offers some tips on emergency maintenance/repair situations. What would you add to Brent's list? Some event may cross a number of lines, be property-maintenance related and also crime and/or health related, etc.
- Contact any emergency first-responders via 911, such as police, fire department, ambulance, etc.
- You may need to conduct first-aid. Do you have the training? Does the manager and management firm have the training? Be careful of blood-borne pathogens.
- You may need to avoid disturbing a crime scene.
- If there's a fire and you know nobody is in the unit or building, don't open doors or windows.
- Don't enter a building with an unacceptable risk for burn and/or smoke-inhalation injury(s). Keep others back at a safe distance too.
- If the structure has been severely damaged, it or parts of it may be at risk of collapsing. Don't enter dangerous areas. Keep others out too.
- You may need to shut off the main waterline to stop a leak. If a leak has been ongoing for some time, be careful concerning mold buildup.
- If you smell natural gas, turn off the gas supply line. Be sure old pilot lights are shut before turning the gas back on. If you have a professional maintenance staff, they should know the proper procedures. Be sure they do.
- Posting danger/do not enter signs and stringing out yellow caution tape may be wise depending upon the nature of the problem.
- Calling in an emergency contractor to secure broken property openings may also be necessary.
- Who's liable, etc.? Contact your insurance broker/agent if necessary to begin a claim submission if that would make economic sense. Follow the requirements specified in your insurance policy.
This is far from exhaustive.
Source … http://urentguide.com/latest-property -manager-guide/what-to-do-in-the-event-o f-a-maintenance-emergency
- [Very highly recommended] The Unemployment Rate at Full Employment: How Low Can You Go? – NYTimes.com
Bravo! Jared Bernstein and Dean Baker write:
While there are risks of higher inflation at low rates of unemployment, we simply cannot accurately pin down the level of unemployment that will lead to rising inflation.
The Experience With Low Unemployment in the 1990s Boom
As noted, there was considerable concern among economists, including those at the Fed, that the low unemployment rates in the late 1990s would lead to accelerating inflation. Yet as the unemployment rate fell below almost all the widely accepted measures of the Nairu, there is little evidence of any acceleration of inflation over this period.
Interestingly, the inflation measure that least supports the Nairu story in these years is the Fed's preferred measure: the core P.C.E. (personal consumption expenditures, excluding food and energy prices), which rose by just 0.2 percentage points in 2000 and even in 2001 was still lower than the 1997 rate. In other words, while one can find a bit of an acceleration in price growth over this period in certain series, that finding is far from robust. Unemployment was 4.5 percent or lower for three full years, from 1998 to 2000, yet the core rate of inflation was virtually the same at the end of this period as the beginning.
This is a strong argument for our call for targeting 5.5 and even 5.0 (at living wages).
Frankly, we are on board with going lower and lower with no named target, and only when it becomes a real problem should we tweak things to lessen inflation.
- Tax Proposal for an Economy No Longer Rooted in Manufacturing – NYTimes.com
Victor Fleischer, "professor of law at the University of San Diego, where he teaches classes on corporate tax, tax policy, and venture capital and serves as the director of research for the Graduate Tax Program," writes:
… it is no longer clear that we should use the tax system to encourage investment in tangible assets. After all, a system that encourages investment in tangible assets makes investments in other assets — intangible assets and human capital — look worse by comparison. The Baucus proposal aims to make the tax system match economic reality, removing the tax distortions from the equation. It would group tangible assets into just four different pools, with a fixed percentage of cost recovery applied to the tax basis of each pool each year, ranging from 38 percent for short-lived assets to 5 percent for certain long-lived assets.
It will be interesting to see the debate unfold on this issue. Depreciation is a big aspect in real-estate investing.
We do want them to avoid harming research and development though.
- Lee Jong-Wha on how to protect Asia's emerging economies from US monetary policy's spillover effects. – Project Syndicate
Very interesting proposal: Lee Jong-Wha, Professor of Economics and Director of the Asiatic Research Institute at Korea University, writes:
In 2008, the Fed established currency-swap lines with the central banks of ten developed economies, including the eurozone, the United Kingdom, Japan, and Switzerland, and four emerging economies (Brazil, South Korea, Mexico, and Singapore). These arrangements, most of which ended in 2010, responded to strains in short-term credit markets and improved liquidity conditions during the crisis. The South Korean central bank's $30 billion swap, though limited, averted a run on the won.
Reestablishing the Fed's swap arrangements with emerging economies would minimize negative spillovers during the coming monetary-policy reversal. Even an announcement by the Fed stating its willingness to do so would go a long way toward reassuring markets that emerging economies can avert a liquidity crisis.
The swap lines would also serve American interests. After all, trouble in emerging economies would destabilize the entire global economy, threatening the fragile recoveries of advanced economies, including the US. And, given China's rise, it is clearly in America's interest to maintain a balance of economic power in Asia.
- Housing Is Slowing In Response To Higher Mortgage Rates — And It Isn't Over Yet – Forbes
We concur. Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, writes:
… I can't rule out completely the idea that home prices might fall outright for a time in the first half of next year.
A potential homebuyer today needs to find $780 per month to buy a median-priced new home with a 20% down payment and a 30-year fixed rate mortgage. In early May, the monthly payment was $702. That's a big increase, and it has removed a large swathe of would-be purchasers who could only just afford the cost back in May, and now can't. Sure, mortgage rates remain very low by historical standards, but over short periods what matters is the change in rates, not the level.
The adjustment to the rate increase is not yet over. The number of people applying for a new mortgage to finance a home purchase has dropped about 16% since rates began to rise, and the trend is still downwards. This is beginning to filter into both new and existing home sales, which have fallen from their summer peaks and are now clearly headed lower.
Homebuilders have been very keen in recent years to see prices rising, because nothing gets people into the housing market faster than expectations of making a profit on a tax-advantaged asset which doubles as the family home. In order to keep prices rising, homebuilders have kept inventory very low relative to sales, not much above the levels seen at the peak of the boom. Inventory has been kept down by homebuilders' collective willingness to restrict the pace of construction, holding it in line with the increase in new home sales. With sales now falling, construction is likely to head south too.
This is very unfortunate, because housing construction has contributed about a quarter of all the economic growth reported over the past year.
"… over short periods what matters is the change in rates, not the level." What also matters is just how stuck at low rates wages are relative to prices and interest rates.
- Illegal NYC Homes Thrive as De Blasio Tackles Housing – Bloomberg
What a mess:
City law forbids homeowners from renting units that are more than one-half their height below curb level. In practice, it's flouted so frequently that some residents are hard-pressed to identify homes on their blocks without a basement apartment. In interviews last week, homeowners recounted how the units, which they rent for about $900 a month, are routinely built by construction companies and marketed by real estate agents off the books.
Some are firetraps lacking windows or quick exits. Others, with full kitchens, bathrooms and bedrooms, are distinguishable from legal units only by their lower ceilings and minimal amount of sunlight, which peeks in from windows big enough for only the slimmest of residents to slide through.
Most of the thousands of illegal basement apartments are in Queens, according to an estimate by Chhaya Community Development Corp., which works with South Asians in the borough. One survey by the organization found that least 35 percent could be potentially legalized to provide adequate air, light and safety.
- Don't Panic! The Declines in Mortgages Won't Last Forever
Matthew Frankel writes:
… why do higher rates affect refinancing more? Let's say you took out a mortgage a few years ago with a 6% interest rate, and that the original loan amount was $200,000. That makes your payment $1,199. Refinancing at 3.5%, when rates were at their lows, would produce a payment of around $898, a significant difference. At 4.5% (around where rates are now), the payment jumps to $1,013. According to Bankrate.com, the average closing costs on a $200,000 refinancing loan are $3,754, so it's easy to see why the savings on the monthly payment aren't worth it once rates climb.
- The JPMorgan Settlement Isn't Justice – Bloomberg
Part of Jonathan Weil's pointed and strong negative criticism of the US Justice Department's recent $13 billion settlement with JPMorgan:
The Justice Department said this week that the settlement "does not absolve JPMorgan or its employees from facing any possible criminal charges." By this point, though, it's hard to take the Justice Department seriously when it says to stay tuned.
The department also said that "JPMorgan acknowledged it made serious misrepresentations to the public" as part of the agreed-upon statement of facts. Actually, it did no such thing. The document didn't use the word "misrepresentation" or similar language to describe any of JPMorgan's actions.
Usually when corporations settle with the Justice Department, they agree not to contradict the government's assertions publicly. Yet on this occasion JPMorgan felt compelled to set the record straight. "We didn't say that we acknowledge serious misrepresentation of the facts," JPMorgan Chief Financial Officer Marianne Lake said during a Nov. 19 conference call.
She was right: The Justice Department overreached in its characterization. It isn't a good sign when the company paying billions of dollars to resolve a government probe comes across as more believable than the government lawyers who cut the deal.
- BlackRock Says JPMorgan Deal Undermining U.S. Market: Mortgages – Bloomberg
Jody Shenn reports:
JPMorgan Chase & Co.'s (JPM) record $13 billion deal to end mortgage bond probes has terms that undermine U.S. efforts to reduce taxpayer support of the market, according to BlackRock Inc., the world's biggest money manager.
"Washington has a public policy goal of reducing the role that the government plays in the housing-finance market, and at the same time we now have a series of settlements where no investors were at the table and where money toward the settlements may come from investors' pockets," said Barbara Novick, vice chairman of BlackRock. "It discourages the allocation of private capital to mortgage credit."
- M&T Bank Takes Action to Help Unemployed Borrowers
Sandra Lane reports:
Who ever heard of banks helping their unemployed borrowers find jobs? Though this may be hard to believe, this concept is becoming a reality thanks to a company in Bend, Oregon, named NextJob. This company's motto is "A job for every person and a person for every job."
Realizing that job loss in the current economy is the major reason homeowners default on their mortgages, management of M&T Bank in Buffalo, New York, announced Thursday that they will be offering a pilot program of NextJob's services to their unemployed borrowers at no cost.
Participants will work directly with a NextJob coach to develop a detailed job search action plan, create an effective resume and cover letter, and analyze career direction options.
They will also be trained to identify skills that could transfer to another industry or field, discover "hidden" jobs that are open but never advertised, learn how to effectively use the latest in internet tools, and prepare for successful interviews.
"We were impressed with the services offered by NextJob, and as a bank committed to the customers and communities we serve, we felt this would be an effective program to offer our unemployed borrowers," explained Mark Mendel, SVP Customer Asset Management.
In 2012, Fifth Third Bank, Cincinnati, Ohio, was the first bank in the nation to work with NextJob on implementing this innovative reemployment training program. Borrowers who participated in the initial pilot program had been out of work for approximately 22 months. After completing the training, almost 40 percent of participants were fully employed within six months. Because of this success, Fifth Third Bank expanded the program bank-wide in February of this year.
According to John Courtney, NextJob president, "Job loss remains one of the top issues in our economy and is responsible for half of mortgage defaults, which are the number one debts in America. Our reemployment program is a natural opportunity to make an impact in alleviating this problem."
Courtney explained, "We developed this idea four years ago, and conducted a pilot program two years ago. We now have three banks participating and by December, we will have four. "He said that momentum is accelerating for this remedial program as more banks and lending institutions learn about it.
We think that's heading in the right direction relative to where the banks have been. We'd like to see the banking system create business incubators, including affordable loans and free guidance to the unemployed and others.
- Profitable Apartment List raises $15M Series A, aims to wrap up the rentals market once and for all | PandoDaily
Michael Carney reports:
Two years ago, the apartment search market was Craigslist, the company everyone loves to hate, and not much else worth getting excited about. Today, things couldn't be more different, and the clear leader among the new market entrants is Apartment List.
… Zillow, Redfin, and Trulia are all starting to invest heavily into this space, including through acquisitions, meaning that there is little time to waste in terms of claiming market share.
- Five Years Later: Risky Real Estate Lending Returns | Blog | Bloomberg L.P.
A new report from Bloomberg Brief shows risky lending is back for office, mall and hotel properties. An analysis of 2013 data found that half of all commercial loans bundled into securities are backed by interest-only (IO) or partial IO loans. The same trend prevailed before the height of the financial crisis in 2007 when 80 percent of all commercial mortgages were interest only or partial IO loans.
- Lender propaganda campaign extolls adjustable-rate mortgages – OC Housing News
Here's an example of how much that can cost you. If you took out a 30-year mortgage in January 2003 the average fixed rate was 5.92%, according to Freddie Mac. Ten years of interest and principal payments on a $200,000 mortgage would have cost you $142,660. But if you went with a one-year ARM, which kicked off at 3.99%, according to Freddie Mac, after resetting each year the total cost would have been $119,181. That's a savings of $23,479.
And if the borrower were stupid enough to keep a 5.92% fixed rate mortgage despite the numerous opportunities to refinance at much lower fixed rates, then their own foolish inattention cost them $23,479. It wasn't the loan product that created that problem.
Hmmm, we think he has a point.
- German Court Won't Rule This Year on Legality of ECB Bond Buying – Real Time Economics – WSJ
Germany's constitutional court won't issue a ruling this year on the legality of the European Central Bank's bond-buying program, the central bank's most important weapon against the euro-zone debt crisis, the court said Thursday.
In June, the court, based in Karlsruhe, Germany, heard two days of competing testimonies over whether the ECB has engaged in a power grab not envisioned under European law and the German constitution.
…calm could unravel if the court tries to impose limits on the German central bank's participation in the program or, in an extreme scenario, seeks to bar the Bundesbank from buying any bonds at all. The court can't shut down the ECB's bond-buying program outright, because it doesn't have jurisdiction over EU institutions.
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