Bernard Zick's REIT REAL ESTATE REPORTOctober 2003The REIT Real Estate Report is published about once a month. It is intended to serve no special or worthwhile purpose. It is just my way of telling you what is going on in the world of real estate education. My only goal is that I don't get sued and you are entertained a bit. For an e-newsletter of merit, our next issue of Advice for the Impatient Investor will be out the first week of November. |
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Editors: Bernard "Barney" Zick bernard@zick.com, Karen Zick and Amy McIntee |
In this issue:Do You Really Want to Get a Good Deal in California? I Don’t Think So!!! |
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Let’s Get Real. Prices Go Up and Down. There are lots of problems facing real estate investors. It is not easy. But it is the only way that I can be sure to build my wealth. If you don’t know that by now as being true for you too, you will soon find out. I will admit I worked so long trying to get rich quick; I could have gotten rich slow! In my early years I tried day trading. Great a few years, huge losses in others. I did cattle feeding, oil drilling, mutual fund switching, overseas investing, you name it. And real estate is not a straight line. I can not believe that prices will keep going as they are now. San Diego will be soft first and all the coast will follow. Why? Too much too fast. Secondly, we have had cheap interest rates for so long that all the tenants have purchased homes or condos. That is a double whammy on real estate investors. As lenders fight for more and more loans, they get sloppier and let anyone borrow. Then they say that less and less down is okay. Then the foreclosures go up. I have seen this cycle before. Our markets in Texas are having the same problems. What should you do? That is up to you. I love softness in the market because it is a GREAT TIME TO BUY especially if you have been hiding away a little cash as I have. Thank Heaven A.S. got elected. I know some of you think the new governor of California must have a middle name of Stupid, which would give him a very interesting set of initials. However, I have talked to people who do business with him and he is a no nonsense businessman and he will be good for the state. The insiders and left wing liberals have almost ruined that state and they need an outsider. He is more a Democrat than a Republican but that is not why he got in (although it helped.) It is the same as when Ronnie got in. They picked Reagan because they wanted a political outsider who could clean house. But Arnold is better than Reagan because Arnold can not run for President. This is not as likely to be a stepping stone, so he can step on toes. Business has been leaving the state for years and maybe he can slow or even reverse that. We will see. Where do you invest? It is best to invest where you live. If I lived in California I would invest there. But then it is very hard for new investors to get started in some high priced areas. That is one reason we started the Platinum Program. Our Platinum Program, which really is framed as signing up for all the education I can offer you, has appeal because we buy a property for you here in Texas. We have opportunities here and the market will be very strong for buyers here in two to three years. Then prices will jump. (If you are interested in this, email Terrie at editor@kingwoodcable.net. We will not respond until the first of November but we will be back to you then with the details of our program.) What about where you are? I believe the economy overall will be getting stronger over the next two years. An improving economy and softer markets are real opportunities. If I lived in LA or San Francisco, I would sell one of my houses and buy five houses in Texas or the other low priced areas. (Yes, Texas has the second fastest predicted growth for the U.S., but there are other good spots too.) But I would not give up on the coast. Over the next ten years they will have great markets. The unbelievably high prices there are low by world standards. I also would give a good look at lease options. The option is a right to buy and not an obligation to buy. If the market gets soft, the options price can be re-negotiated. When the market comes back, you have a lower price and appreciation too. I had a student in Northern San Diego County that got a one year lease option with four rights to renew. At the end of the first year, prices had gone down and he got his option price reduced from $500,000 to $450,000 in return for his renewing the lease for the out of state owner. The next year he got it down to $400,000! At the end of the third year, values were back to $500,000 so he just renewed and did not say anything about the $400,000 price. To make a long story short, he sold for over $650,000 at the end of the lease option. This great tool has great power in many kinds of markets. And if you have the ability to get tenants in a soft market, it is a double edged sword. Sellers can not sell as fast and they can not get tenants. You buy under a lease option and get enough income to cover the payments. You get the appreciation and as the market comes back, a positive cash flow. All this for little down and almost no risk! Learn the short sale too. I will have more on short sales next month. But they will become more important in softer markets. They take a lot of work and the steps are simple but take time and conviction. |
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BUT DON’T GET TOO GOOD OF A DEAL IN CALIFORNIA!!! I’VE WARNED YOU!! Did you know there is a law in California that stops you from buying a person’s home, which has had notice of default sent to them, at any less than 70% on the dollar? According to California foreclosure expert Bruce Norris, if you dare to get a better deal than that, you are asking for a law suit. Seems that the legislature, in their left wing zeal to protect the consumer, set out a law (Code 1695 if I remember right) that outlines when a home owner has the right to sue because someone has taken advantage of him. Court cases seem to have set the bench mark at 70% of value. Below that you have taken advantage of the seller. And in their brilliance, the courts don’t seem to pay attention to the condition of the house. The rule of thumb is 70% no matter if it is a palace or it has been used as a stable! IT GETS WORSE!!! You can not flip properties either! There is a part of a newer, lesser known law; anyone that FINDS deals needs to be bonded and no one can get the bond. So you think you have a solution, you are going to loan the money to the person behind on their payments. One lady did, hoping to buy time to buy the property. This well meaning person got sued and lost $250,000 for her efforts. Seemed she did not fill out all the correct paper work! SO DEAR CALIFORNIA INVESTOR, what can you do? A. Don’t work with people in default of their Deed Of Trust unless you make it your specialty and know the laws cold. B. Only buy one house every 18 months or so and move into it. Seems the laws do not apply if you are buying as your residence. It is considered a fair fight if you are buying a house to live in and they are losing theirs. C. Send me your money. We respect people that clean up other peoples financial messes in Texas. We call the person that is behind on their payment the VILLAIN and the VICTIM is the Lender, where you and I have our savings stored. (In California, the Victim is the dead beat debtor and the Villain is the person buying the house and bringing it current. Go figure.) This is one of the reasons we came up with the Platinum Program. You not only get invested, you learn to invest at the same time. It is not for all comers; in fact, we have had 29 apply and we have only taken seven. But, I’m serious. Let me know if you want a deal in Texas. I’ve been a broker here since 1971 and we are open for business! (For more information, send an email to editor@kingwoodcable.net; put Platinum Info. in the subject line. Don’t expect a quick response, but you will get a response. If you give us your phone number and address, you will learn more quickly. But your email address and your name only will be enough to start the process.) BOTTOM LINE: The bottom line is you need to learn your local and state laws. Don’t think the “ignorant” consumer will not know their rights. In California, lawyers send out letters to everyone in foreclosure saying, “if you have sold your house while in default on your loan, you may be entitled to a big settlement. You could get up to three times the illegal bargain you gave away! Call us today.” So the consumer does not have to know their rights! The suit crazy lawyers will light the fire under them for you! And I suppose, if you live in California, plan on retiring without doing pre-foreclosures or any foreclosures unless you read the rules and fill out all the forms. Sorry to be a wet blanket, but how can I help you get rich if you step in a legal hole and lose all of it! Remember, my slogan for years was “REALISTIC business and investment advice.” |
The Fine Print...We will publish the REIT Real Estate Report, containing Real Estate Education Industry News and a lot of personal opinions, and Advice for the Impatient Investor, approximately once a month. (However, keep in mind, our newsletters are free so don't get upset if we skip one occasionally!) Advice for the Impatient Investor has been published for thirteen years (but, not in a row). Folks smarter than us told us to say: We take no responsibility for the accuracy of the postings. All contents of the postings are the responsibility of the posting party. The foregoing material is strictly for informational purposes only and does not provide legal, financial, accounting or investing advice or services. Use of any of the foregoing information does not create a client relationship. You should not act on the information provided without seeking legal, accounting and tax counsel of your choice. We reserve the right to terminate the subscription of anyone at any time. Copyright note: Submission of an email message or art work affirms that you are authorized to and have given Bernard Zick, et al, non-exclusive permission to reprint the content of your message in all forms, electronic or otherwise, in all languages throughout the world. Copyright © 2003 by Real Estate Investors Training Corporation, Kingwood, TX ISSN # 0272-8559 All Rights Reserved, no reprints to other email lists or websites without Bernard Zick's permission. You have permission and are encouraged to forward this e-newsletter in its entirety to a friend! Check out our website: http://www.zick.com/ To MANAGE YOUR SUBSCRIPTION, please send e-mail to: newsletter@zick.com. Please type, 'change account information' in the subject line if you have an address change or if you no longer are interested in receiving this e-newsletter, type 'no thanks' in the subject line of your e-mail. Notice: Out of thousands of people who subscribe to our e-newsletters, only 15 have decided to opt-out. However, we're currently experiencing some difficulties with maintaining their opt-out status. So, if you are one of those folks who asked to be deleted from our mailing list, please send e-mail to newsletter@zick.com and we will delete you manually until we get this problem fixed! Our lists are NEVER sold. Article submissions and questions are welcome and should be sent to amy@emcii.com Mail to:
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