To sell investment Real Estate, sellers know investors must make a profit. The first place to look for profit is income. Rented Real Estate generates income. The more the income the more they can sell the property for.  The best properties have income and potential. In the three big cities there is not only income but the value of the properties increases. This is the major difference between the rest of the country and the big cities I mention. Because of the potential, the income is lower. But these properties sell fast with low income because of the fact they will double or better in value over time. Something the rest of the country doesn’t do.

In many states like Ohio, Michigan, Georgia to name a few prices are very low( Houses are around $10,000. ) and the return is pretty good. The bad news is the prices of the properties almost never go up. Because of this if they want to sell, the price must be cheap, so the return is good.  So some investors see this and know they can get in cheap and make money on the income, but don’t realize the bigger profit is in the potential to sell for a lot more.

This is true and a good way to go except some major pitfalls. In a perfect world you invest your money and make a great return no problem. But in this world, when you have a problem and you can’t get there in less than twenty minutes you are trusting other people to do the right thing for you. This is not always the ideal situation.  I have been to court more than once to help clients resolve these issues.

Another issue is economy, these states are really struggling job wise and often the tenant base suffers this poverty and makes it tough to collect rents. In states with low income/tough economy Real Estate is cheap because it has to be.

The better the investment, usually the worse the immediate return. Units in a great neighborhood/”Trophy Properties” command a better price than those in a weaker area. But the income from the weaker area is better. Why? To give an investor motivation to buy in a weaker area.

I came to Los Angeles in 1969 houses were selling for about $14,000.. Now the same houses are about $600,000. Similar houses across the country are still about $14,000. So if you buy in Los Angles or any of the big three and I am sure there are a few more, not only will the higher income tenants buy it for you, but at some point the value will probably double and you don’t get that in very many places.

As an example if you want to buy in the San Fernando Valley where I work you can get a building South of Ventura Blvd/the better area for a negative return. Not only won’t you make money at first, you might have to invest every month for a few years. But these properties tend to have tenants that are easier to deal with and a location where the value goes up a lot more than others.So in the end you will have fewer problems, ut will be easier to raise rents and a much greater return when you sell.

As you get farther North of Ventura Blvd the area gets a little worse/lower income families and the income/return on the building gets better to tempt the investor to buy. As you go further North the income goes up and the neighborhood gets worse. Properties across the country in weaker areas have to offer higher return on investment monthly because raising values don’t happen in those areas and investors won’t invest without some return.

Another issue on distance is, if it’s close you will drive by occasionally and know it’s ok. If there is a problem you hire the contractor and it’s someone you know and can watch him or her work. Not have to hope someone else is doing it right or at all.

So if you are lucky enough to live in one of these great metropolitan areas take advantage of the potential and don’t get fooled by good income without that potential.

When seeking a dentist, barber, surgeon I really hope you don’t seek the cheapest. If you hear someone raving about the fantastic job someone did for them and they also were the cheapest great. But to call them all and take the cheapest? Maybe a notary? But title, escrow, inspections, realtors need to do a good job and care. If they don’t you suffer. Usually the person who sells them self as the cheapest isn’t the best. They use price to get the job, not quality of work.

I have dealt with “Full Service Escrow” that didn’t return calls. Made mistakes on the paperwork and just didn’t seem reliable. I have called title companies checking for liens for a clients property, after getting the all clear, I found out that there were liens!! Wanna get sued?

So if you can save a few bucks or go with the person your best friend or agent recomends I hope you will be wise. The home inspector I used for twenty years was the most expensive I know of. I also know he blew a lot of deals for me and saved my clients from a lot of nightmares. My Geologist Jeff Holt of Mountain Geology is I am sure one of the more expensive. But in my opinion by far the cheapest out there. He has blown many a deal for me and saved my clients huge dollars. I have seen many other geo guys go out and it seems say anything.

I hope you never know the pleasure of saving a few hundred bucks and dealing with an escrow that rarely calls back or is only open afternoons a few days a week. I hear the guy had migraines? I have.

Find someone you can trust. Preferable a good Realtor like myself and let them help you make the deal easy. How many times have I seen a home inspector flipping a switch telling me the garbage disposal doesn’t work, and I am telling him, the light he is turning on and off is working fine.

Your questions and comments are appreciated.

Best

Scott

For the 56th straight month, Nevada continued to have the highest foreclosure rate in the country, where one in every 118 homes received a foreclosure filing during August, according to the latest figures from RealtyTrac.

Nationally, 1 in every 570 households received a foreclosure filing in August.

Meanwhile, five states accounted for 53 percent of the foreclosure activity in August, led by California. In California, 59,383 properties received foreclosure filings last month. The state saw a 55 percent month-over-month increase in default notices.

The following are the states that posted the highest foreclosure rates in August, according to RealtyTrac’s latest report:

1. Nevada

One in every 118 households received a foreclosure filing during August.

Total foreclosure filings in August: 9,677

2. California

One in every 226 households

Total foreclosure filings in August: 59,383

3. Arizona

One in every 248 households

Total foreclosure filings in August: 23,569

4. Georgia

1 in every 346 households

Total foreclosure filings in August: 11,743

5. Idaho

1 in every 348 households

Total foreclosure filings in August: 1,860

6. Michigan

1 in every 349 households

Total foreclosure filings in August: 13,016

7. Florida

1 in every 376 households

Total foreclosure filings in August: 23,569

8. Illinois

1 in every 424 households

Total foreclosure filings in August: 12,493

9. Colorado

1 in every 439 households

Total foreclosure filings in August: 4,933

10. Utah

1 in every 450 households

Total foreclosure filings in August: 2,119

By REALTOR® Magazine Daily News

At real estate auctions, trustee sales and probate sales it’s mostly investors, because they are the one’s with cash. But some auctions will let regular loan buyers play. The more open auctions are a great way to sell a house. This allows the agent to advertise the property at a very low price, causing great interest in the real estate buying group. Some people actually think they can out bid everybody and win the house. When this happens it makes the owner bank or seller very happy.

I am sure there are some emotional reasons to “win” the house. But I can’t believe a logical argument like, “I can get you a better house cheaper.” Wouldn’t stop this type of thinking. Most buyers like this that overpay, drop out after the home inspection puts dollars on their dream.

So how do you “Win at real estate auctions?” Like in all things important, do your homework. Fist find a good agent like me;=} who knows this stuff and start learning about what you are doing. You should be able to find many sources of knowledge on the internet. I am not really into taking courses, they are not always as accurate as you would hope. The best knowledge is first hand learning. Do the research.

“Research” would include learning and understanding the “foreclosure” process. Getting pre approved. Finding neighborhoods you like. Learning a little about the appraisal process, reading and getting familiar with the contracts, read a book or two on home inspection…. I have no problem explaining all of these things as we go. But the more you know the better.

I like to guide people through the process, because I have done the research and do the deals.

Once you get the process you need to find the deals. I or any knowledgeable agent can find REO that the banks will sell for less than market or at auction. REO that is not bought in bulk from the bank (The best way to buy next to inheriting.) is listed in the MLS (Multiple Listing Service used exclusively by Realtors.

Now comes the fun part, deciding what the value is. Besides the actual basic appraisal process, there are many issues regarding REO properties. Many have tenants the bank can’t kick out and you may need to relocate! You might want to read up on this process. In most cases the bad tenants don’t pay rent and you can legally evict them in about 100 days. The good ones pay the rent and you keep them.

There are few issues in my opinion that should stop you from buying a house. The only one I can think of is that it is so contaminated that you can never use it. I believe “Meth” labs fall into this category. The other I think of is a house falling down a hill. On that one it really depends on how fast it’s falling. It might just need water diversion or retaining walls. So other than that type of thing, you have to “appraise the situation” with the property.

Many issues; Some properties have tenants to deal with, property damage from angry owners or unmaintained property, cracked slab, leaky roof, termites……

If you are a seasoned investor you know issues cost money. So if you add the cost of the issue to the appraisal price you then have a very good idea as to your max bid. And if you don’t go to auction with a max bid and stick to it, I can promise you the chances are you are going to “win” a lot of problems you won’t enjoy solving. Because you will lose money.

I sold a client a house in Agoura a few months ago. It was listed for auction at $599,000 I believe. I comped it at about $780,000. I thought that because there was a tenant in the property and we couldn’t inspect the inside that we should figure $100,000 for damages to the inside. The outside was well maintained so I hoped for no malicious damage (Things like epoxy down the drains and toilets, removing all the plumbing and wiring.) inside.

I also advised to put in another $20,000 for kicking them out. You only have to relocate them if they are paying rent. And then about sixty thousand for profit for yourself. As I remember that’s why we do all this fun stuff. I like to estimate high on everything but the profit.

So our top bid going into the auction on this $780,000 house was going to be $625,000. We were lucky to get it for $624,000..

When we got there the tenants asked us to prove we owned it. Once we did they needed about $500. of repairs and payed the rent.

Careful planning can cause you to reap a great outcome.

I think you will find that there is competition and upward pressure/competition in the under $600,000 price range. So the deals are hard to come by.

In the over $600,000 price range there are some amazing houses from $800,000 up. Buy one of these and hold for a few years( In this case a few years could be two to seven.) and I bet you can double your money.

This may or may not be the bottom. The stats below show a pretty strong market, but either way with low interest rates and prices you can’t go to wrong.

Email me at Scott@RobinsonRealty.net if you have any comments or questions;-}

Testimony from an unsolicited non professional would be considered hearsay evidence and doesn’t even need to be checked out by the agent.

Might sound a little scary at first, but look at it the other way. Did you ever have a strange neighbor? Or have you ever had somebody say something about you that wasn’t true? Would you like to have to pay large sums of money to check something out that your neighbor said??

I don’t think so, and neither does our legal system.

On the other hand, I would definatly do some checking to find the truth. If I discover something with my research I will start asking for more information from the property owner, city..etc. Then it might  be time to move on if I find nothing or ask for inspections if I do. But on hearsay information, you can’t expect your client to spend their money on inspections.

I hope I answer your questions in the blog. But will appreciate your questions and comments.

Best

Scott

Mr Girard erected pillars at Topanga Canyon Blvd and Ventura Blvd with a big sign calling it Girard land or something like that. As I understand it he sold very small 2000 sq. ft. lots out of cereal boxs? Our city tried to clean that mess up with an Ordinance called the “Girard Tract Ordinance”. It among other things forced builders to have a five foot setback on the sides of the house so the fire department can get around the house. One car parking for every 700 feet of house. All good things really. Nowadays they make you put in a curb that’s legal distance and it can really set back.

Mulholland Drive East of Canoga Ave is interesting. It’s about ten feet wide with a culvert to drain water on the South side. Being a highway it’s two hundred feet wide. So you have this row of houses going East from Canoga Ave. on the North side of Mulholland Drive with all of these huge many walled in and gated front yards. These house really have about six foot front yards and the city could come and pave it anytime. I don’t think they ever will but..

Another interesting something on that row of houses is that most of the houses except the first two from Canoga, and two others are move ons. Old houses, usually hotels, moved to a new location. Kind of weird, moldy old wood, moving breaks all the windows? They move them in the middle of the night, very weird if you ever see one.

We have an amazing park, Serrania Park. As I understand it was once a movie ranch and then a tree farm. It has three separate areas and a large play area for kids. Most days you will find it full of dogs running free. Feel free to bring your dog and enjoy the day, but please be aware that it is not legal to have your dog off leash and the rangers raid the place occasionally and give out expensive tickets.

Keep your eye out for little four by six inch signs on street signs. They are yellow with black letters, stating “No Trespassing” this street has been abandoned by the City of Los Angeles since 1922. This street is supposed to get no city services. Street repair, lighting, sewer may be all seperatly paid for by the homeowners. Trash pick up could be at the end of the street. I see these signs all over, Kim Bassinger lives on one.

I have noticed no difference on these streets, but do know the city doesn’t have to provide services. I have often asked people that live of these streets if they know about it, and most don’t?

This area is called the “Girard Tract” and the “Girard Cabins” are called “Girard Tract Homes”.  If you live in or drive the area you can’t help but notice the streets are from about eight feet wide to about twelve on Canoga Ave.. In the Girard Tract the street are a minimum of forty feet wide and the main ones sixty.

When the physical street is eight feet wide and the title report says it’s forty feet wide interesting things can happen. I have seen houses with big front yards and circular driveways. That actually have no front yard and the house in-cringes (overlaps) on the street, legally.

This is no big deal in one way because the city will never be widening these streets and make you move your house. But on the other hand if you are going to want to change the footprint of the house, say add a bedroom, the city would make you move the house however many feet off the street and then back the five foot setback. That’s a lot of money especially if you weren’t thinking of remodeling the front of the house.

So as you can see it’s very important to know your title report very well and have a Realtor who knows the area really well.

I hope I am doing a good job for you and you will make comments and ask questions.

Thank you, I hope you are enjoying this awesome day.

Scott

A raised foundation is accomplished mostly with a foundation around the perimeter of the house with supporting structure under the house. In real old houses say before the 1950′s they used I think it was called “post and pier” foundation. There would be the foundation around the house and little posts holding up points inside inside the piers.

My step dad had some buildings like this when I was a kid. He had settling problems on a building once and we got under there with a car jack and leveled it. We then leveled  other spots and left wood supports where we had used the jack. He said it lasted through the earthquakes?

A slab foundation is when they dig out the area you are going to build the house on, lay the plumbing and some electrical, steel supports to tie into and then pour the cement foundation. As I understand four inches thick. A very solid structure held together with a network of long steel rods called re bar.

Raised foundations are good because if you have a problem with plumbing or electrical you can crawl under the house and fix it. If an earthquake or settling takes the level out of the house you can fairly simply level it. Much more expensive to re-pour part of your slab.

The bad news is that over time a raised foundation is subject to dry rot, fungus, termites and rat infestation among other things I am sure. Nothing that can’t be dealt with, just information.

A slab foundation is what is mostly used to day. Cheap, easy and efficient, less edible and at the mercy of the elements.

In our area of  Southern California we have mostly expansive. clay soil. When it gets wet it expands, when it dries is shrinks. In Southern California we go through about seven to ten years of a lot of rain and then is seems seven to ten years of none called drought. That’s when they make us conserve water.

If the water is getting under your house the clay expands when it rains and shrinks when it  dries. This does not happen evenly and causes your house to be out of level and have cracks. At some point doors and windows won’t open or close properly. This mostly happens with raised foundations, slab foundations tend to crack and can have water come through. When a slap goes out of level it’s a major issue.

Gutters that are properly set up and day lighted to the street, then kept clean will totally remedy the water problem. Unless live by a hill or have other water issues(Some areas have ground water issues that may cause you to need to divert water.) The hill drainage might need a French drain, which will also divert water to the street or other system to get water away from the house.

It’s not legal to divert water onto a neighbors property and you could be liable for any damage it causes.

I hope this clarifies any questions you had on this issue. Your questions and comments are appreciated.

Best

Scott

A few years after I passed the real estate test and started selling properties a famous lawsuit occurred. Ask your agent, they should be able to give you all the details. This is important stuff. So, somewhere in the mid 1980′s there was a lawsuit called “Easton vs. Strassburger’ an agent sold a property to a buyer and missed “red flags’ (Something an agent sees that should cause them to question if it effects the value of the property. We are not trained in inspection. So when we see something odd we must ask questions and tell our client, by law, this law.) The red flags were big plastic sheets covering hills surrounding the property to stop the hills from sliding. Well they slid and the buyer sued.

The interesting thing about the case was that the agents aren’t expected to be trained in home inspection, geology or law. But the court held the agent liable because he should have seen it, questioned it and told his client. So our Department of Real Estate in Sacramento created the TDS for us to give to the seller to fill ot and disclose what they might know that could materially effect the value of the property. Then the agent must inspect and write/fill in his or her opinions also. Not ‘see home inspection.”

As much as I really appreciate this document, I must point out that it fascinates me that the buyer in that case was not expected to do any of his own due diligance? He must have seen the plastic sheeting also. He should have had concerns about something as odd as that and asked his agent to look into it?? But the usual thing is something the seller tried to fix and couldn’t or has some knowledge of and hide’s it. I like dealing with issues out front when I have some control. Waiting to get caught and lawyers are nightmares I never want to have.

It probably won’t amaze you to think that the next person who lives in the house will discover what you hid and maybe sue you for not telling them. So this document can save you a lot of making a lawyer rich. If you say had some settling around the pool, you called a few contractors and couldn’t afford the fix. Now you are selling for whatever reason. If you disclose it a repair will be negotiated fairly (If your agent is on your side.)(But either way fixing at this point is almost always cheaper than later with their contractor and property.)  and repaired in most cases. Or we don’t disclose the problem gets worse, maybe some real damage. So now it”s going to cost more to fix. If it gets worse lawyers and expanded damages become involved. Now a couple of a thousand dollar problem is a couple of hundred thousand dollar problem.

If you used a local contractor to do the inspection and they told Building and Safety there is a record of it. Either way if they happen on to the contractor you used or inspector and they come out and tell them what they told you…. Their lawyer will appreciate you. Fraud costs a lot of money to defend and pay for.

Disclose, disclose, disclose.

To the buyers I must point out. This document the TDS is supposed to be given to you within three days of getting the deal. You then have three days to cancel the contract for any issue that bothers you on the TDS. This could get pretty sticky if the agent and seller never give one to the buyer. This happens more in one agent or “dual agency” deals.

I really hope this helps.

Please share your questions and comments. They are appreciated.

Best

Scott