october, 2011 what not to neglect when you start real estate investing

INC.

(864) 235-6325

October, 2011

Real Estate Investing 2

Useful Web Tip 2

Mortgage Lendingin 2011 3

The Lite Side 5

Available Properties 6

Recent ApartmentSales 6

Greenville AreaOccupancies 6

Real estate investing provides no guarantees. Whereas in some cases real estateinvesting has made some investors very wealthy, it has also (not unlike anybusiness venture) left many others disillusioned; primarily because it didn’t makethem wealthy, and in some unfortunate cases, even lost them money.

In this article, I want to discuss some issues connected with the selection andacquisition of investment properties which, if neglected, can get real estateinvestors into trouble by serving the investor less-than-desirable cash flows andrates of return.

1) Do Not Neglect to Run the Numbers

Because a rental property’s financial performance determines investing success orfailure, it just makes sense that you must be able to run the numbers adequatelyso you can measure a property’s vital signs and judge its health as an investmentopportunity before you spend the money.

Whether you’re an experienced income property investor or beginner, you mustdevelop proficiency for measuring such basics as rates of return, cash flows, andestimates of value. Otherwise you’re just guessing as to whether a specificproperty is profitable, meet your investment objectives, and at the end of the daywill make you money.

Understand that the prudent investor always seeks a return on investment. It’snot an emotional matter (physical aspects of the rental property are secondary).Real estate investing concerns buying the property’s anticipated economic benefitscalled the income stream. Therefore you must be able to examine revenuestreams along with expenses, net operating income, and cash flows carefully withsome serious number crunching before you make a purchase.

2) Do Not Neglect the Price

It seems unnecessary to warn investors not to over pay for income propertybecause it’s difficult to conceive that any reasonable person would pay more forreal estate than fair market value—but they do, perhaps not knowingly, but bydefault.

Investors that buy income property based on emotion, for instance, or becausethey are told that it’s a good buy (without credible data to substantiate the claim),always run the risk of paying too much for rental property.

Before you invest, you must always research the fair market value in a givenmarket area for the type of investment property you’re interested in beforehandand then base your offer accordingly. At the very least, do a comparable soldsurvey. You need to know the price per unit and capitalization rate comparable

WHAT NOT TO NEGLECT WHEN YOU START REAL ESTATE INVESTING

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rental properties recently sold so you don’t get caughtup in sentiment and sales hype.

3) Do Not Neglec t a Tendency to Accept Unrealistic Expectations

A tendency to accept, or unwittingly fabricate, highand unrealistic expectations surrounding thepotential benefits of a rental property commonlyoccurs in real estate investing when investors becomemore anxious to make an investment than they are tomake a good investment.

When considering an income property with low rents,for example, don’t jump to the conclusion that youcan raise the rents and still maintain an occupancylevel able to produce the income stream you arecounting on (at least not overnight). Furthermore,look for underlying reasons why the rents are lowand only afterward, base your rent estimates on

comparable income properties in the surroundingarea.

Also, don’t count on a bump in property value basedon what the local planning department tells youwithout thoroughly researching it. Rezoning aproperty, for instance, generally requires a favorablevote from agencies other than the planningdepartment such as traffic control and the firedepartment.

Here’s the bottom line.

If you want to succeed at real estate investing,always do your homework. Bear in mind that thatone-in-a-million investment opportunities topurchase a rental property guaranteed to makemoney is going to happen to the next real estateinvestor, not to you. So remain diligent.

USEFUL WEB TIP

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with suggestions and finally presented with a ton of information regarding your complaint.

Good way to gather information and become an informed patient in advance of a doctor or hospital visit!

http://symptoms.webmd.com/default.htm

(continued from page 1)

"Security is mostly superstition. It does not exist in nature, nor do the childrenof men as a whole experience it. Avoiding danger is no safer in the long runthan outright exposure. Life is either a daring adventure, or nothing. To keepour faces toward change and behave like free spirits in the presence of fate isstrength undefeatable."

— Helen Keller

INC.


The best summary that can be made of themortgage markets in 2011 is that we are livingin the midst of a “manipulated market”. Themanipulation comes from the Federal Reserve,whose policy has been to keep interest ratesartificially low by entering into the Treasurybond and mortgage bond markets, and buyingbonds whenever rates threaten to rise. In anormal free market, the more buyers there arefor a product, the cheaper the product becomes.Interest rate markets are no different, andinterest rates fall when there are more buyerschasing the same bond. The Feds create anartificial demand by their intervention in thebond markets, driving rates downward whenthe market is trying to take them up.

Different names have been given to theFederal Reserve policy: QE 2, QE 3, TWIST,etc., but by any name, it is an artificialintervention. If experience is any guide, thelaws of unintended consequences willeventually kick in. For instance, a homeowneris able to secure a 3.25% 15 year fixed rate intoday’s market. Three years from now he maydecide he wants to move to a more expensivehouse. But if interest rates have risen to 6.5%by that time he faces not only the prospect ofpaying for a more expensive house, but facesthe doubling of a payment due to interest ratesrising. He is more likely to just sit where he isand finish paying off his present mortgage.

What does all of this mean for the currentand future homeowner and housing investor?Well, the rates we have today (3.25% 15 yearfixed rates for residential loans, upper 3% to

lower 4% rates for Fannie Mae multi-familyhousing loans) represent 80+ year lows. If youwere ever going to buy, certainly now is thetime. Take the ‘gift” that the Feds are givingyou and run with it. On the other hand,realize that the artificial intervention of theFeds is going to create an unpredictablemarket in the future. If it is going to be moreexpensive to move in the future, there will beless moving. How will they then choose tomanipulate THAT market? We just don’t know.

In the final analysis, the free market is bestwhen left to itself. It is sometimes a painfuland punishing force, but far better that thanthe detritus and waste that a manipulatedmarket leaves in its wake. The dream of totalfinancial control is the socialist’s paradise, butthe true result is easily seen in the wrecks ofEast Germany, North Korea, Cuba, and theSoviet Union. All reflect the attempt atcentralized control and its complete failure. Atsome point we need to understand again thatthe risk of the free market system is also thesource of its reward. The return to a trust ofthe free market system also means a return topersonal liberty. Liberty means we will have toaccept responsibility for our decisions. Thatmay hurt, but far better to live that way, thanin a nanny state that is determined to runevery aspect of our lives.

Mark Wells, Preferred Financial Services,311 Pettigru St., Greenville, SC 29601

(864) 235-9596,[email protected]

MORTGAGE LENDING IN THE 2011 ENVIRONMENT

"If we knew what it was we were doing, it would not be calledresearch, would it?"

— Albert Einstein


These professional, commercial and investment real estate service providersare considered Endorsed Service Providers by Crawford Associates.

Owen Appraisal & Consulting Services, Inc.10 Lavinia Avenue, Greenville, SC 29601

Post Office Box 9187, Greenville, SC 29604(864) 232-5393 • Fax (864) 232-5395

E-mail: [email protected]

R. Bruce Owen, MAI

Specializing in Industrial, Retail and Apartment Propertiesas well as Estate Valuations and Tax Appeals.

Apartment Loan Financing

• 5-35 Unit Small Apartment Lending with large apartment lending terms • 36+ Unit financing with FNMA Multi-Family housing programs • 30 and 40 year Amortizations • Rates fixed for up to 10 years • Refinance Loans available • Rehab Loans available • Bridge financing for under-performing properties

CALL MARK WELLS TODAY FOR COMPLETE INFORMATION 864-235-9596

MANAGEMENT FOR THE APARTMENT INVESTOR

Emphasizing hands on property management

with practical asset management.

Working to increase the bottom line.

864.235.2224

[email protected]



The Haircut

A teenage boy had just passed his driving test and inquired of his father as to when theycould discuss his use of the car. His father said he'd make a deal with his son: 'You

bring your grades up from a C to a B average, study your Bible a little, and get yourhair cut, then we'll talk about the car. The boy thought about that for a moment,

decided he'd settle for the offer, and they agreed on it.

After about six weeks his father said, 'Son, you've brought your grades up and I'veobserved that you have been studying your Bible, but I'm disappointed you haven'thad your hair cut. The boy said, 'You know, Dad, I've been thinking about that, andI've noticed in my studies of the Bible that Samson had long hair, John the Baptisthad long hair, Moses had long hair and there's even strong evidence that Jesus had

long hair.'

Son, did you also notice they all walked everywhere they went?


"Plenty of people miss theirshare of happiness, notbecause they never found it,but because they didn't stop toenjoy it."

— William Feather


Available Properties

9.6 acre multi-family site, Zoned RM off White Horse Road - $14,500 per acre, $139,200.(Reduced from $23,000 per acre)

19.5 acre multi-family site, zoned RM in Berea - $40,000 per acre.

12 units in three four-plex buildings in Liberty, SC ($23,166/unit), late 1970’s construction,$278,000. (Reduced from $293,00).

30 unit Townhouse style apartment property in Taylors, SC ($28,667/unit), early 1970’sconstruction, under renovation. $860,000.

10 unit Townhouse style apartment property in Taylors, SC ($33,900/unit), early 1970’sconstruction. $339,000

106 unit complex in Greenwood, SC ($46,698/unit), 1970’s construction, renovated in 2009.$4,950,000.

2 unit duplex in downtown Greenville ($80,000/unit). $160,000.

For additional information, please contact us at

[email protected]

reduced

reduced

"It is not the strongest of the species that survive, nor the most intelligent, but the one mostresponsive to change."

— Charles Darwin

"The future belongs to those who see possibilities before they become obvious."

— John Scully

GREENVILLE AREAOCCUPANCIES —

SEPT. 2011• Class C 94.1%• Class B 95.0%• Class A 96.9%• Overall Market 95.0%

* These listings do not necessarily represent sales of Crawford & Associates, LLC, but

rather are an attempt to provide the most complete information available on multi-family

sales in the market.

9/13/2011 Greenville County – 308 units,($10,356/unit), Grove StationApartments, 1 Lakeside Road,$3,189,655.

8/22/2011 Greenville County – 12 units($23,750/unit), Fortner Park, 19 Fortner, $285,000.

Recent Apartment Sales*

october, 2011 what not to neglect when you start real estate investing

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