US RE Investors Better "Wake Up & Smell The Damn Coffee"

I decided to write a this post today out of a somewhat emotional state of anger. I am so sick of wanna be investors looking at Real Estate as a hustle to buy, fix and flip. If you are looking at the market from this stand point you are missing the whole point of where the value is in Real Estate. The irony is that our folks across the pond "Get It". If you are a so called Real Estate Investor then invest in our Real Estate. Stop looking at the market as a way to get rich over night. These real estate gurus are doing people a great disservice as well. Telling tales of their systems to make money in Real Estate. Don't get me wrong there are situations that warrant a good buy, and flip scenario but that is not the normal everyday way of dealing with real estate as an investor. In my opinion for what is worth, the game is quite simple: When Rents get out of control meaning too high, people start buying. When Home sales are too high, people start renting. In this market tons of  American people no longer qualify for a home loan, for a few reasons: 1. Credit issues (meaning they do not qualify for a traditional loan). 2. Home price that they can afford is not within the banks minimum loan amount (most banks won't lend under $50k). This is the whole point of this post! Many American need affordable housing and the best way to cure the foreclosure and vacant housing issues are to Buy, Fix, Rent. Yes, I said it if you are looking to make money in real estate, invest in it don't flip it. Take a look at what is happening right here in your own backyard and tell me what you think. I encourage your comments

U.S. Multifamily Real Estate Best Option For Foreign Investors

I say it time and time again! If you really want to be on deck for the next hottest trend in Real Estate you have to pay attention to Multifamily investments. There is no greater way in my opinion to be involved in the business. If you are not looking at Multifamily you are missing the wave.
U.S. remains the best option for capital investors as they get high return of investment (ROI). As per the survey conducted by Wisconsin School of Business, the percentage has gone down to 42.2 percent compared to previous year. The survey conducted included investors who have more than $874 billion global investments in real estate sector out of which $338 billion in U.S.

 “Foreign real estate investors have made clear there is considerable pent-up demand for U.S. real estate awaiting better real estate fundamentals and relief from FIRPTA regulations,” said James A. Fetgatter, chief executive officer of AFIRE. “If the investing environment improves, the U.S. is poised to return to its ‘safe haven’ status.” Stated in AFIRE’s press release. (Read Entire Article)

Could Multifamily Investing's Future Be In Jeopardy?

Multifamily properties have outperformed other commercial property types in the past two years, benefiting directly from the continuing travails of the for-sale housing market.

Unlike the office and retail sectors, which sport vacancies unseen in two decades, the apartment sector has bounced back impressively. After hitting a 30-year high of 8.0 percent at the end of 2009, national vacancies have plummeted to 5.6 percent by the third quarter of 2011, and are expected to dip below 5 percent by early 2012. Asking and effective rents have both posted gains on a consistent quarterly basis since the start of 2010.Occupancies and rents have improved consistently, in seeming defiance of slow economic growth and the lethargic pace of job creation. Signs of weakness have begun to appear, however, for certain segments of the apartment market, suggesting that even the best performing property type in real estate nowadays is still subject to fundamental economic rules.

Multifamily properties will continue to benefit from a convergence of positive factors: first, as the for-sale housing market continues to struggle, fewer households will make the transition from renting to owning a home. Despite record-low mortgage rates, credit still remains tight except for those with the best credit histories and capacity for large down payments. Although the rate of job creation remains moribund, the economy has created over 2 million jobs since 2010, and on the margin individuals are moving out of doubled-up households to rent their own places. (read entire article)

3 helpful Tips To Manage "Hood Rehabs"

  If you have ever wondered about flipping projects in the "HOOD" then read some helpful tips I use to avoid common problems associated with tough neighborhoods. If you have already encountered some of these issues, well I guess you know what's up!
I know a lot of people may say just get an alarm system on your units. The problem with this is that most alarm companies want to put you on a contract that will still be enforced after you sell or dispose of the project. And there are also the sub contractors that you have to account for. There will definitely be several subs in and out of your project during rehab. It is very impractical to have a security system installed on a property that is undergoing construction. With that being addressed here are some techniques I use to help minimize loss of material and time.


1. Rent or Purchase a UHaul truck. 14ft-17ft is great for rehabbing projects in less desirable areas. I use them to do dump runs with the tare out and demo. Afterwards I use them as a mobile locker for materials. They are absolutely great for pick up of lumber and things like doors, tubs, vanities, cabinets, windows etc. At the end of the day you can always drive it off the site to a more secure location with all the goods in side. I purchased my first one directly from U Haul for $3500 and it was worth its weight in gold.

2. Plumbing  is one of those things that tend to disappear when copper is used. A great alternative is PEX piping or ABS. Some areas of the country you really need to use copper. In these cases spray paint the copper black. Vandals and thieves won't take pipes that have been sprayed black. They usually mistake them for gas pipes.


3. Air Conditioners- If you have ever flipped a house in areas where air conditioners are mandatory, then you know how fast they can come up missing. These units can run $1500-$3000 depending on which ones you buy. Vandals will not only steal the whole unit but they will often times destroy a valuable unit for $20-$40 worth of copper on the inside. Solution build an iron gate around the unit with concrete footings. This is a fairly easy and inexpensive cure. I have never had one taken once I employed this technique.


All in all things are bound to happen when you flip distressed properties in challenging neighborhoods but with a little creativity and common sense you can mitigates some of the opportunities vandals and thieves take. It may seem like a hassle to do some of these things but nothing is worse than having to replace some of these items in a market that already has smaller appreciation then previous years. Take it from me the old saying "an ounce of prevention is worth a pound of cure" really works.

US Government Proposes To Rent Out REOs

Vacant home in Las Vegas forclosed by BOFA

Its been a long time coming! But I knew this was going to be a reality in the not too distant furure. We have only touched the "tip of the iceberg" with the whole housing crisis issue. In fact I have been saying for yrs now that it will come a time when these foreclosed homes will have to be rented out to save face with the credit crunch and banking collapse of the mortgage and housing industry. Here is a little evidence that should support my claims

Dec. 27 (Bloomberg) -- Fortress Investment Group LLC and Deutsche Bank AG, whose executives played roles in the housing bubble, are among the hundreds of firms that responded to a U.S. government request for proposals to rent out foreclosed homes.

The Federal Housing Finance Agency asked for ideas as Fannie Mae and Freddie Mac, the mortgage companies seized by the government in 2008, seek to reduce losses, stabilize neighborhoods and support housing values by turning into rentals a portion of the more than 180,000 repossessed homes in their inventory. The submissions were due by Sept. 15.

Carrington Holding Co., Barclays Capital Inc., Neuberger Berman Group LLC, Ranieri Partners LLC and UBS AG also were among the financial and investment companies that responded to the FHFA, according to a list of 439 proposals. The agency released the names in response to a Freedom of Information Act request filed by Bloomberg News.

“We're obviously big proponents of this program,” Rick Sharga, executive vice president of Carrington, said in a telephone interview from his office in Santa Ana, California. “We think it meets a market need.”

Demand for rentals is rising as more homeowners lose their properties to foreclosure and fewer buyers qualify for mortgages. About 6 million homes with a current market value of $750 billion will be repossessed by banks or sold at distressed prices by 2016, according to Oliver Chang, a San Francisco-based analyst at Morgan Stanley. FHFA's plans for a foreclosure-to- rental program are significant because Fannie Mae and Freddie Mac service more than half of U.S. home mortgages, he said.

‘Most Important' Program

“In our opinion, this is the most important housing- related program under consideration,” Chang wrote in a Dec. 6 note to investors. “The hope is that a larger unified program is established that could move the needle a year or two down the road.”

The FHFA won't discuss specific submissions or give a firm timeline for structuring its program, said Corinne Russell, a spokeswoman for the Washington-based regulatory agency.

“FHFA is proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012,” she said in an e-mail.

Home values are down 32 percent through October from their 2006 peak, according to an S&P/Case-Shiller index of 20 cities, the New York-based group said today. They probably will continue falling next year, with a recovery unlikely before 2013, according to property-data provider Zillow Inc.

Maintaining Foreclosed Homes

Fannie Mae, based in Washington, had 122,616 foreclosed homes on its books with a carrying value of $11 billion as of Sept. 30, costing $733 million to maintain in the third quarter, according to a Securities and Exchange Commission filing. Freddie Mac controlled 59,616 foreclosed homes that cost the McLean, Virginia-based company $221 million to operate and manage in the third quarter.

Carrington, a real estate and mortgage services company founded by hedge-fund manager Bruce Rose, is “actively raising” about $1 billion to purchase foreclosed homes that will be renovated and held as rentals, with or without the government program, said Sharga, who worked at foreclosure- tracking firm RealtyTrac Inc. before joining Carrington in September.

He said that Carrington's submission outlined three options for turning foreclosures to rentals in bulk: selling directly to investors who agree to repair and hold the properties as rentals, hiring managers to oversee rentals to be sold at a later date, or structuring transactions so the government and investors share revenue from seized properties.

‘Split the Proceeds'

“At the end of a period, you'd sell the property and split the proceeds,” said Sharga, whose company collects mortgage payments and manages about 4,000 rental homes, including properties repossessed by Fannie Mae.

The FHFA received more than 4,000 submissions, about 10 percent of which were considered valid, according to a Nov. 30 agency statement. Among the proposals were joint-venture partnerships, sales, auctions and asset-disposition strategies similar to those used by the Federal Deposit Insurance Corp. as well as by the Resolution Trust Corp. after the savings-and-loan collapse of the early 1990s, the agency said.

Executives from some of the companies that submitted proposals to the FHFA held influential positions when the housing bubble burst.

Sued by SEC

Daniel Mudd, chief executive officer of Fortress, took a leave of absence from the New York-based asset management company after being sued Dec. 16 by the SEC over his role as CEO of Fannie Mae from 2005 to 2008. Fannie Mae and Freddie Mac have drawn more than $170 billion in aid from the Treasury Department since they were seized by the federal government in 2008.

Mudd and Richard Syron, Freddie Mac's former CEO, were accused by the SEC of understating the subprime loans held by the firms by hundreds of billions of dollars. Mudd has said that the government and investors were aware of “every piece of material data about loans held by Fannie Mae.” Tom Green, Syron's attorney at Sidley Austin LLP, said there “was no shortage of meaningful disclosures” by Freddie Mac.

Gordon Runte, a Fortress spokesman, didn't respond to a request for comment on the firm's FHFA submission. The company said in a Dec. 16 statement that the complaint against Mudd “does not relate to Fortress.”

Betting Against Market

Greg Lippmann, a Deutsche Bank trader, hosted the first meeting of investors and lawyers who devised contracts and financial instruments used to bet against the housing market. During the financial crisis of 2007 and 2008, Lippmann helped Deutsche Bank offset losses on mortgage investments with wagers against subprime debt that made $1.5 billion, according to an April report by a Senate panel.

Renee Calabro, a Deutsche Bank spokeswoman, declined to comment. LibreMax Capital LLC, a New York-based hedge fund where Lippmann is now chief investment officer, wasn't on the FHFA's list of submissions.

Representatives for Ranieri Partners, Neuberger Berman, Barclays and UBS all declined to comment on their FHFA proposals.

The agency provided five examples of submissions with the content, names and contact information redacted. That information was withheld to protect trade secrets and the privacy of people who submitted proposals, the agency said.

“Our program, when fully implemented, has the potential of having a significant impact on the stabilization of real estate values across the country,” according to one of the proposals. The plan has been endorsed “by financial institutions, staffers of U.S. Senators and Congressmen, and real estate related people across the country,” according to the letter.

Harvard Professor's Recommendation

“My former Harvard Business School finance professor recommended I contact you,” wrote a self-described “former banker” in another proposal. “Officials from the Federal Reserve and HUD have favorably evaluated the following asset/loan disposition functionality & proposal for my client's real-time, forward-looking analytics real estate asset/note transaction platform.”

No contracts will be awarded based on the submissions, which “will be used for planning and market research purposes only,” the FHFA said in its solicitation for proposals.

Amherst Securities Group LP, a New York-based mortgage broker-dealer, opted not to submit ideas to the FHFA because “we did not feel we would be adequately protected” from Freedom of Information Act requests, Laurie Goodman, senior managing director in charge of research for the firm, said in an e-mail.

Find Investors: Swimming Naked In This Economy

Now that I have your attention, here is the whole quote from Warren Buffett: “You only find out who is swimming naked when the tide goes out.”

A rising tide lifts all boats, and in bull markets every investor looks like a genius. From March 2009 through April 2010, the Dow rose 70% and almost everyone holding stocks made money.

Just as individual investors look smart in across-the-board bull markets, so do investment advisors. But never confuse a good market with a good advisor. Advisors too could be swimming naked… with your money!

When they find investors to work with, an advisor’s job is to understand their financial goals and develop an investment plan that balances risk, rewards them when markets rise and protects them when markets fall as they inevitably do. A good advisor is also someone they can lean on for trusted advice during uncertain economic times.

The problem is many advisors, perhaps even most, do not give much consideration to investing in real estate as part of a conservative portfolio. Their emphasis on liquidity seems to most often far outweigh the future inflation concerns we absolutely face now. It is quite impossible for any economy to have engaged in such massive government spending, with such large deficits as we now have here in the United States, without triggering inflation.

Solid, conservative, performing real estate is the best conservative inflation hedge there is. Nothing is better. All investors with any significant amount of net worth should also be investors in real estate!

Of late, the markets have been tricky.  The Dow dropped significantly, recovered to some degree, and then dropped again. It has most recently been trading in the plus or minus 1,000 ranges. Market experts are divided on future outcome – some predict far steeper declines, others believe markets will now stabilize. At this juncture, investors must honestly reevaluate their portfolios. Are you confident about your investments? Will your holdings survive a steep decline in the market?

The tide is changing. It is now going out. What are you wearing? Or… are you swimming naked? In my opinion if you do not hold hard assets, particularly residential real estate of some kind as an inflation hedge for a big part of your portfolio, you’re naked. Now is the time to consider that and do something about it.

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Sam Joseph, CEO
SJoseph Development Grp. LLC

5 Reasons Multifamily Investing is Better than Single Family

Most people enter into the real estate world because of the  “make a quick buck” factor. What are the secrets to finding success is the ever-changing market of commercial investing? SJoseph Development Group suggests these 5 reasons that are sure to change your mind about Real Estate investments:

1. Cash flow- Cash flow is much higher in multi-family housing rather than single family housing because of the consistent flow of rent checks.

2.  Economies of Scale are crucial in Multi-Family housing- In multi-family, an investor only needs to be concerned with the maintenance of one roof or one landscape instead of having to deal with 6 different renters and their properties all over the city.

3. Competition is less in Multi-Family- Everyone thinks that Single family investing is the way to go in the real estate world with the latest trend of “house flipping.” What many don’t know is that the serious money can be made in investing in Multi-Family properties giving your expanding  real estate portfolio that much more.

4. With the large amounts of cash flow, investors can afford to hire a team- A team can consist of assistants or managers to maintain your properties giving you the ability to invest in more properties.

5. The profit on selling your investment property yields a much higher return- The profits that can be made upon selling your multi-family property can be huge and much higher than a single family home. Initially, you will pay more for an apartment complex, but I promise you that your large return will be worth every extra penny.

Sure, flipping houses produces a quick and easy buck at the time, but the Real Multifamily Moguls who consistently are building their real estate portfolio are the ones who have been investing in multi-family properties making them much wealthier individuals than an occasional house flipper.

Olivia Apartments Joplin, Mo.
Owned by Sam Joseph 2004-2008