Baltimore Real Estate Investing Blog

Do you know what drives real estate values? (OK besides the silly speculation we saw over the last few years). It is jobs. Jobs drive population growth. Population growth fuels demand. More demand drives up prices.

Pretty simple huh? Jobs also drive the demand for office and industrial space. More rooftops drives the demand for retail space. Those homeowners, renters and office workers need places to shop.

All of these classes of real estate do not go up at the same time however. Retail space for example is likely the last to appreciate because retail is not developed until a critical mass of people (demand) is there. But as homeowners move in one at a time more homes need to be built. The effect of housing demand is almost immediate.

So with a simple understanding of economic cycles and population shifts you can make a lot of money in real estate. One of my partner’s best friends made a fortune in real estate. He knew where the Capital beltway was going to be built and bought up property long before others saw the value.

I am currently negotiating with some partners for an apartment building out of state. Some have identified the area as one that is in an ideal part of the business cycle to buy. Economic growth and new jobs will fuel demand. I will have guaranteed windfall profits   .   .   .   Ah, if it were only that easy.

The Wall Street Journal recently had an online article that said formerly fast growing areas have slowed. The article starts out “Population increases in many fast-growing counties, particularly in the South and West, started slowing last year, suggesting that the housing crunch may be forcing many Americans to stay put.” People can’t buy a new house if they can’t sell their old house. They can’t move to an area with more jobs if they can’t sell what they have. This is just another example of how the current housing crunch can affect the economy in ways we wouldn’t expect.

Be smart about your investing,

Ned

Here is PowerPoint explaining the sub-prime mortgage problems and how they came about. It is quite funny but contains language that some may find objectionable.

The Subprime Primer

Again, I caution about the language. Imagine the type of language you might use if your house was foreclosed upon. I found this on Cass Tyson’s blog MarylandRealEstatePage

Ned

Tenant screening is one of the keys to being a successful landlord.  Sadly many landlords do a poor job of this. Sometimes it’s lazyness, sometimes ignorance, sometimes simply desperation to get someone tenant back in the property to help make mortgage payments. Trust me on this one, it is time well spent. You simply can’t make up the time and expense of a bad tenant by filling your rental a few days or even weeks faster.

So how do you screen a tenant. Here’s a great checklist. Tenant Screening

This is from Josh Dorkin’s Bigger Pockets blog

Happy landlording,

Ned

Surfing the web lead me to Scott Ficek’s Minnesota Investment Real Estate Blog. He has a number of tips about landlording. He had an interesting post about a tenant that claimed that the rent was no longer due on the first because the landlord regularly accepted rent later. He includes a link to the court case.

Here’s the link
Cant evict if always late on rent

He’s got several other good posts on landlording and investing. It’s worth checking out.

 Ned

I was speaking with attorney Jim Goodrich from the firm of Saul Ewing today and he had a great line. “Attorneys do not see the glass as half empty or as half full. We see thousands of shards of glass anxious to get free.”

Who says attorneys don’t have a sense of humor.

Keep laughing,

Ned

Do you ever feel like your life is so hectic that you are juggling elephants? I just finished a book with just that title. One of my resolutions this year is to be more productive. I want to do a better job of execution.  I know what I want. I know what to do. I need to get better at doing it. This is one of the books I read to help me in that goal.

This book is about being more productive and happy in your life by keeping your life in balance. It is a quick, fun to read book. Juggling Elephants is in the same vein as  Who Moved My Cheese, The One Minute Manager or Fish, in that a story is used to get its point across . The circus is used as a metaphor where, Mark (the dad), talks to a ringmaster at a circus he is visiting with his daughter. The ringmaster teaches him lessons about life by drawing analogies to the circus.

If you read a lot of success literature there is nothing earth shattering or new here, but often hearing a message in a new way is what will make it “click” for us.  This book does a great job of presenting solutions to common issues in a unique way.

 One message I could relate to is “There is no shortage of acts for the Circus” The acts must add value to and compliment the circus. Adding an act that doesn’t fit or is not as good as an existing act makes no sense. So it is with life. We need to prioritize and keep only the most valuable things in our life. We need to replace that which doesn’t fit.

I really enjoyed this book.  It is easy to read, lighthearted and fun. I would rate it four stars. On amazon it is rated 4 1/2 stars, which is actually higher than both Who Moved My Cheese or The One Minute Manager  mentioned above.

Buy it here from Amazon

   Happy reading,

Ned

Earlier I spoke about getting insurance for a vacant house I bought at auction. It’s important to understand that most typical landlord policies will not cover a vacant house.  Most landlord policies assume the property is livable and someone is in it.  Most will not cover a property that has been vacant over 30 days.

If you are renovating a property you will typically need what is called Builder Risk insurance. This is substantially more expensive than traditional insurance. For a building that might cost $600 a year, builders risk could cost $1500 for 6 months. This should be budgeted into your construction costs. You lender may require it. In Baltimore I have used Chris Scarlett (410) 727-2211, from HU Dove for my Builders Risk. He was easy to deal with and set me up over the phone. Keep in mind builders risk covers the property from damage. It does not cover liability of someone getting hurt on the property. So make sure you get liability coverage also.

Builders risk assumes that you are actively working on the property. If you are not, your property may not be covered.  So what do you do if you have a property that will be vacant for a long time? I recently started to use APIA, inc. They specialize in insurance for bank owned homes and will insure vacant property. Their website is :

 http://www.reoins.com/

Happy rehabbing,

Ned

Have you ever typed your own name into Google? You should try it. An old girlfriend clued me into this trick. She said was checking me out. I had to see what she found.  It’s fun to see what your own ranking is. Do you make the first page of results?

I just tried it again and a video of me comes up number four.   I was doing a roundtable discussion at Steve Cook’s Flipping Homes Bootcamp.

You can click the video above and see a little bit about how I go about finding owners of vacant houses.

Ned

If you purchase a property at auction you are likely to see the following terms: 

“Purchaser shall be responsible for obtaining physical possession of the property and assumes the risk of loss or damage to the property from the date of sale forward. ”

This is a good test to see the quality of your insurance agent. The first agent I called said I could not insure the house because I did not own it. Well of course you can insure the house. When you put a property under contract you have what is known as “Equitable Interest” in the property, and an equitable interest is an insurable interest.

Equitable interest means you have some rights in the property but you do not have legal title. Another example of equitable interest would be in the case of a trust. The trustee has legal ownership of the property but the beneficial interest in the trust would have equitable interest in the property.

This may not be important if you only have a $100 deposit on the line. However in an auction you may be legaly liable for the full auction price even if the property burns down. Make sure you get that property insured and don’t let the agent tell you that you can’t do it.

I was recently invited to participate in a panel discussion in front of my local Real Estate Investor Association (REIA). We were asked “Where do you see the market going?”  I answered:

1)   We will see a continuing of the recent market; slow sales in terms of quantity and moderately dropping prices.

2)  You will see more bad deals

3)  You will see more good deals

Continuation of the current market

Even if the current Mortgage crisis corrects itself quickly we need to remember the underlying softness in the market started long before August when the current crisis started. As I take my morning walks through my neighborhood  I see several vacant houses; some are in foreclosure, some bank owned, some expired listings and some just listed properties that have been on the market seemingly forever. Now we have reports of a recession and consumer confidence lags. I think we will see weakness in the market for some time yet.

You will see more bad deals

As investors who overpaid get caught in the current market they will try to sell. Since they are upside down in their properties, owing more than they are worth, they will try to sell at prices that don’t make economic sense. Don’t bail out an investor (or homeowner for that matter) by getting into a bad deal yourself.

You will see more good deals

As sales slow and inventories of properties rise, owners that must sell must also drop their prices. Banks in particular do not want to hold properties for a long time. As foreclosure increase it will cause a downward pressure on all properties. Short sales (negotiating a lower payoff with the bank) may be an option for people who are stuck and an opportunity for buyers that know how to negotiate them.

So as we move into a buyers market there will be many good deals to be had. But not all deals will be good. You need to be more diligent in selecting and negotiating your deals. You can no longer count on a great market bailing you out of your mistakes.

This is the time of year many of us make “New Years Resolutions.”  Unfortunately those resolutions are quickly forgotten by most people. The problem is most people quickly decide a few things they want to change in their life without taking the extra steps to make a plan on how they will keep those resolutions.

I admit it. I did not achieve all of my goals last year. So now I am taking the time to review last year and make new goals and plans for the coming year. I am spending more time on this process than I ever have before. The problem was poor execution. I knew what to do, I simply didn’t get enough of it done. My solution for the coming year:

1. A clearer plan on the specific activities to reach my goals
2. Better productivity habits
3. Better use of other people and resources to reach my goals.

What are your plans for the year? Do you have one yet? January is a great time to reassess and plan for the coming year. Use this time wisely.

If you are interested in Real Estate investing particularly in the Baltimore, Md area, this blog is for you. The blog is written by Ned Carey.

Ned is a successful full time real estate investor. He is also a licensed real estate agent, specializing in investor and commercial properties. Being an active wholesaler, rehabber and landlord, he knows what it takes to make a profitable transaction.

Because of his depth of knowledge and variety of experience you will see insights that you don’t see from the average real estate Guru. This is exactly why several investing organizations in the Baltimore Washington area have asked him to speak to their groups.

Welcome and come back often.