The June numbers for the Houston apartment complex continue to show improvement. The big news is that the property almost broke even last month – it was in the red only by $200. There were no more one-time administrative or maintenance charges. Total income rose almost a thousand dollars over last month while total expenses only rose $500. Looking over the whole year, total income has risen every month and we the current monthly income is now $13,000 over the monthly income number from January. Over the same time, expenses have remained relatively flat, only raising about $1,500 per month over January's number. We didn’t get an occupancy figure, but it looks like it might have dropped slightly – the vacancy loss increased about $3,000 over last month. At the same time, rent concessions dropped by $1,200 – which could play into the lower occupancy figure. All in all, the property is operating very close to the projections management provided a couple months ago.
Monday, July 23, 2012
In the comments to my last post, Jason asked me what books I would recommend. I'm assuming he was referring to real estate investing books. That's actually a fairly tough question. I've been investing in real estate for 8 years now. I started out by reading a bunch of books, but looking back, I realize I've gained the majority of my knowledge from experience and from reading other people's experiences via blogs and forums on the internet.
But if I had to pick a couple books for a real estate investor newbie, I would pick these two:
Rich Dad, Poor Dad by Robert Kiyosaki. This was the book that launched his empire and really, the only one of the series that is worth reading now. (The rest of the Rich Dad books start repeating the same stuff over and over) There are questions about how true his story is and if "Rich Dad" was one person or an amalgamation of multiple people, but that doesn't really matter. There are two things to take away from this book: the difference between passive and earned income and the idea of having your money work for you. (And those two are really the same thing, when you get right down to it.) The book is almost completely bereft of practical, step-by-step instructions for investing in real estate and that frustrates some people. But I look at this book as more of an inspirational book than an instruction manual. Nowadays, Kiyosaki has moved on and his preaching has changed quite a bit from when I followed him 7 to 8 years ago. Back then (and this was way back when he would give presentations wearing Hawaiian shirts instead of suits), his persona was that of a rich guy trying to help the poor masses think like and get rich like millionaires. The last time I looked at what he was doing, I got the sense he was just another massively wealthy guy trying to convince his followers the standard Republican Party line of lower taxes is always better.
Freakonomics by Steven D. Levitt and Stephen J. Dubner. I wrote about this book previously and there is a chapter or two specifically about how to increase the price you get for selling a property by carefully wording your listing. The thing to take from this book is that people don't behave rationally and there are all sorts of cause and effect relationships between events that you might not expect.
You'll notice both those books were originally published several years ago. I've stopped reading real estate books, for the most part. I read a bunch in the past and came to the conclusion that books about real estate investing, almost by definition, have to be somewhat generic. You won't find a book with step-by-step guides on how to do it. This is mainly because real estate laws and procedures are different in each state. If you are interested in buying properties at foreclosure auctions, for example, the methods vary wildly from state to state. The standard real estate contract varies by state and you need to become familiar with what is in the contract used in your state (or state where you investment property is located).
This isn't to say I think my real estate education is complete. I simply find I get more value from following blogs and discussion forums on the internet than I do from books. I list the blogs I follow in the sidebar. I'd start there. See if you can find some blogs written by people in your state or area and follow them for a while. Learn from their mistakes. Ask questions. The reason people blog is because they want to share their knowledge and experiences. They are usually happy to answer questions (within reason, of course).
The corollary to the above, of course, is you have to be careful whose advice you take. Like all things on the internet, you have no idea of the person's true knowledge or experience level. You don't want to end up following a Casey Serin. So be a lurker for a while. I read forums and blogs for a year before I bought my first property. Keep your BS-detector finely tuned.
Of course, the quickest way to get an education in real estate investing is to buy some real estate. That's the quickest, but not necessarily the cheapest :-)
Posted by Shaun Stuart at 8:25 AM
Friday, July 06, 2012
Tuesday, July 03, 2012
Because all my hard money lending is done in California and to people who buy, rehab, and sell foreclosures, this news story caught my eye. The California legislature recently passed a law making it harder to banks to foreclose on property owners. According to Reuters, the bill prohibits banks from "dual-tracking" loans - proceeding with the foreclosure process while also in loan modification negotiations with the owners. The bill also lawsuits against robo-signing. The bill still has to be signed by the governor before it becomes law, but he is expected to sign it.
On the surface, this law sounds good to me. I will freely admit the first I heard about it was from the above linked article and the facts in that article are the extent of my knowledge of it. I do think robo-signing is a big problem. When your actiosn can result in people losing their home and being forced out onto the streets, you need to have someone carefully look over the documents before foreclosing. This just stands to reason. As to the prohibition against dual-tracking, I'm OK with that as well. Yes, it may result in longer times to foreclose on a property. But if a borrower is in talks with a bank to modify their loan, I think they would reasonably conclude that the bank would pause foreclosure proceedings while they are attempting to work out a settlement. Further, without this restriction, the bank has a huge advantage at negotiating - they would be able to drag out the talks until foreclosure was a day away, leaving the borrower with no choice but to either accept the terms the bank offered or lose his or her house.
How will this affect my lending? I expect to see a slowdown in houses for sale at auction for the 6 or so months after this bill becomes law. This will represent the time banks have to wait while they attempt to reach a loan modification deal before proceeding. There is nothing in this law, to my knowledge, that requires the banks change what loan modification terms they must accept, so they will still be reaching the same decision on modifying loans or not, resulting in about the same number of houses going to foreclosure. There will just be a delay lasting the length of those negotiations.