Technorati Tags: real estate, real estate marketing
Archives (page 278 of 372)
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Rising real estate prices and serial “cash-out” refinance transactions has the IRS licking their chops. Mortgage interest deductions are limited to the acquisition indebtedness plus a maximum of $100,000 for home equity indebtedness. Scofflaws have taken advantage of the fact that the IRS is not able to track the segregation of loan transactions by loan proceeds usage. In fact, your friendly CPA has probably told you “not to worry about it” when you erroneously overdeduct the mortgage interest for the loans you’ve taken against your home.
That’s about to change. The IRS is requiring lenders to report any and all cash-out refinance transactions this year on the Form 1098. This now gives Big Brother an opportunity to segregate new loans by proceeds usage and set a trap for the willing tax scofflaw.
Let me give you an example: Bill and Jacqueline bought a beautiful home in Houston, TX for $250,000 in 1998. They put $100,000 down and took a $150,000, 30 year mortgage. They set their acquisition indebtedness at $150,000 but were reducing it as they paid the loan through an amortizing loan. In 2003, they refinanced $140,000 into a 15 year, low rate loan as their home value grew to $340,000. They plan to refinance their home in 2012 to pay for their twins education at the University of Texas. They recognize that they’ll need about $200,000 for the twins’ education but figure that they’ll be well under the acquisition indebtedness plus home equity indebtedness limit for tax deductibility of mortgages.
They’ll owe about $35,000, borrow $200,000, and be well under that figure…right?
WRONG. Acquisition Indebtedness is reduced by an amortizing loan, in their case, it is reduced to about $35,000. Add the $100,000 for the home equity indebtedness and their limit for the deductibility of interest will be closer to $135,000. The interest on $100,000 of that loan won’t be tax deductible, costing them about $2,000 to $4,000 in extra income taxes each year.
…and they WILL get caught. The IRS is following the money now. If you’ve used your home as an ATM and haven’t reinvested the proceeds or improved your property, you Read more
Addressing several people’s concerns about the state of private equity and the possible assertion that private equity could be the next fallout candidate, I thought I would look into this situation a bit more. For those of you who think that this discussion will be outside of the scope of commercial real estate investing, read on and I am sure you will be pleasantly surprised.
At the 8th Annual US Real Estate Opportunity & Private Fund Investing Forum several very important items of note were mentioned. The most significant item is the increase in fundraising efforts, which has moved up from $35 billion in 2005 to $60 billion in 2006. On the heels of that announcement, Morgan Stately Real Estate has just announced it has raised an $8 Billion fund designed to invest in Real Estate in established and emerging markets.
Before I discuss how these numbers will affect the common investor, I want to take a step back and clearly outline what a Private Equity Real Estate Fund or Opportunity Fund does. First, these funds begin by raising investment capital. The larger funds typically bring in money from pension funds, hyper wealthy individuals and governments all over the world. Then, they take these funds and make leveraged investments. An $8 Billion fund will probably invest in about $30 Billion worth of real estate. Investors typically expect returns of 12-20% based on the investment strategy and they expect to exit the fund within the span of 7-10 years.
These funds make a variety of investments. First, they typically invest in all major commercial property types (hotel, industrial, office, retail, and apartments) and minor ones as well (storage units, trailer parks, malls, etc.). Additionally, they may purchase Real Estate Investment Trusts, Mortgage Companies, Real Estate Services firms, etc. With $30 Billion to invest, any and all real estate investments are fair game.
Over the past 20 years the private equity industry has grown tremendously. While the major players (Blackstone, KKR, etc.) get all the headlines, many smaller private equity firms operate in lower tier investment categories. If KKR looks for Billion dollar deals, these firms will Read more
In commemoration of the Southwest Real Estate Blogging Conference, BloodhoundBlog today launches Real Estate Weblogging 101, a book-in-weblog-form about weblogging for real estate professionals.
The book is built as a WordPress weblog because it seemed foolish to me to write about a deep-linking medium without deep linking. Even so, I believe this is the first time WordPress has been used to publish a book. It seems plausible to me that dead trees are a dead letter, so this won’t be the last book “printed” in an on-line content management system.
In large measure, content for Real Estate Weblogging 101 comes from BloodhoundBlog posts written over the course of the last year by Greg Swann, Teri Lussier, Kris Berg, Brian Brady and Allen Butler. Because the book is written using the “Pages” feature of WordPress, it is built with revisability and extensibility in mind. We anticipate adding appropriate articles to the book as they become available.
From an introductory article to the book:
This is a book about real estate weblogging, but it seems absurd to write about weblogging in the form of a book. The Dan Rathers of the world will finally admit that the old media are obsolete on the day after the last paper-boy dies of old age. The internet is a linked world, and to write about an internet phenomenon without linking is absurd. And the internet is an infinitely revisable world, so to give up the power of instant, infinite revisions seems foolish. Unless you print it out at home, you can’t take this book with you to the beach. But what you can do is pursue all of the supporting links until your understanding of real estate weblogging approaches perfection — where perfection is understood to be a blindingly moving target.
The wonderful thing about a book in the form of a weblog is that you can help make it better, too. Just as Charles Johnson at Little Green Footballs helped Dan Rather discover this strange new world — no matter how much he might rather didn’t — you can set me right when you find me in error — and Read more
First: YouTube on board. We’ll continue to do our listing videos in NTSC video. Anything less stinks in a broadband world. But we’ll do YouTube versions, too, for all the mobile phone vendors who will leap on this bandwagon.
Second: The natives are restless:
June 29 is the day many gear-heads have marked on their calendars as iDay, the release of what independent analyst Richard Doherty calls “the most eagerly awaited consumer technology device of the last 20 years.”
Since January, when it was first announced, the iPhone has captivated consumers, Wall Street investors and the media as the right product at the right time.
Apple CEO Steve Jobs has positioned it as the most advanced meeting of the Internet and wireless technology, with an iPod thrown in for good measure. And it looks really cool, and unlike any phone before it.
For Apple, the release of the iPhone promises to effectively double the company’s revenue within just a few years, based on the worldwide thirst for cellphones. For consumers, the trick is going to be nabbing one of the early iPhones on opening day before stock sells out.
The iPhone is being sold only at Apple’s 200 retail stores, Apple’s website and nearly 1,800 AT&T (formerly Cingular) stores beginning at 6 p.m. local time across the country. AT&T says it will close its stores at 4:30 p.m. and reopen at 6 p.m. Apple would not comment on its plans. No pre-orders are being accepted. Fans are expected to camp out in front of stores for days.
Jobs has projected sales of 10 million iPhones within the first 18 months — worth more than $5 billion retail. Neither AT&T nor Apple will say how many phones initially will be shipped to stores. Doherty expects 1 million units to be available in the first wave. He predicts stores will be sold out by the time they close on June 29.
Third: What else you can do if you intend, like us, to sit on the sidelines for a while.
Technorati Tags: real estate, real estate marketing
From Worse Than Failure, a coder’s redoubt:
Donniel Thomas writes “Javascript isn’t for the weak of heart or those short of patience. What works in one browser may not function properly, or result in a nasty JS error in another (*cough*IE*cough). Which is why I can understand what this programmer meant.”
The following screenshot is from the homepage of Zillow.com, which is one of the most popular and AJAX-y Real-Estate sites on the web. And, as of this writing, the coder’s plea still remains …
Technorati Tags: disintermediation, real estate, real estate marketing, Zillow.com
Two major Bear Stearns Hedge Funds face foreclosure due to their significant exposure to the subprime lending market. While this does not fall under the category of real estate investor, I spent last summer working for Bear Stearns and interacting with many of their hedge funds. Based on the very limited details of the stories out now, I cannot be certain if I have worked with these two particular funds. I can be certain; however, that it would not be a good time to be in the mortgage space at Bear Stearns.
In my three months at Bear Stearns, I met some of the smartest people in the businiess. While this is not an advertisement to work at Bear Stearns, I think they are a very well run organization with smart people. This of course begs the question, how could something like this happen to such smart people? Furthermore, with all of the subprime lending issues out there, what does this mean for borrowers who are less creditworthy?
Simply put, in my humble opinion, the subprime market will be doomed for some years (at least five or more). Since I know this site is filled with a ton of very smart mortgage brokers, I will outline my reasoning.
Consider the following information:
1) Many subprime lenders have filed for bankruptcy
2) Major buyers of Mortgage Backed Securities (like Bear Stearns) are having issues with subprime mortgages
3) Despite what the National Association of Realtors says, the housing market seems to be taking a slow and steady turn for the worse
4) Major Banks have tightened their lending policies
Lets take an example of a typical transaction before the subprime fallout. A low creditworthy borrower applies for a subprime loan. Some intermediary or mortgage broker, supplies them with the best loan for them from either a bank or a conduit lender. The bank/conduit lender then sells the loan to an investment bank (like a Bear Stearns or Goldman Sachs) to free up more money to lend and to remove the risk off their books. Finally, the investment bank packages this loan in the form of bonds that investors looking Read more
…is up at RE Agent in CT. Forgot to mention it yesterday. My apologies.
Technorati Tags: blogging, real estate, real estate marketing
I have never been a huge fan of the status quo. While I have some appreciation for the mundane, I would rather blaze my own trail than do things as they have always been done. Interestingly enough, this really comes in handy when approaching investment properties. Doing what makes sense to me may not be the status quo, but it makes me feel comfortable.
Recently, I was looking to close a deal on a 32 unit apartment complex. When asked by my agent how many of the units I wanted to look at, I remarked, “Uh, all of them.” He seemed taken aback by this, and then mentioned that taking a sampling of the units was the status quo. Perhaps looking at five or ten and then extrapolating what the other units look like is a tremendous timesaver. Lucky for me I had all the time in the world.
Interestingly enough all but four units actually looked good, but those four units looked really bad and had a material effect on my offer and the amount of concession I asked for. Looking at all the units would have saved me about $8,000 had I closed this deal. Even as an investment banker, I cant make $8,000 for three hours worth of work.
I will also take this brief interlude to point out the inherent conflict between realtor and investor. That extra two hours actually cost my realtor about $380 (3.5% x $8,000), plus two hours of actual work he could have done securing additional deals. Clearly the status quo worked in his favor. I don’t mean to suggest that is why he mentioned it, but I do mean to suggest that it is harder for him to work in my best interest when our incentives don’t align.
As investors it is important to remember that a deal and all of its components must make sense to you. While the status quo is surely there for a reason, it may not be in your best interest to follow the status quo. Many first time investors or investors who are unsure of themselves fall back on Read more
To all appearances, the attempt to criminalize Zillow.com’s Zestimations of Arizona real property will be all over when the fat lady signs. Not sings, signs. Arizona Senate Bill 1291, as amended to suffer Automated Valuation Models gladly, passed it’s final reading tonight. The amended bill passed in the Senate by a vote of 28-2. All that remains to be done is for Governor Janet Napalitano to sign the bill into law and things can… continue pretty much as they have all along.
Of late it seemed the legislature might recess without taking up the Zillow amendment, potentially exposing Attorney General Terry Goddard to the embarrassment of having to enforce his own and the Board of Appraisal’s idiotic interpretation of standing law. For all that I’m glad to see better sense prevail, that spectacle would have been amusing to watch.
In any case, assuming Napalitano doesn’t find some previously-unsuspected third foot to shoot herself in, this silly little drama should be over shortly.
Further notice: My details are a little off here, but Cathy Jager at Little Pink Houses has the straight dope.
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Technorati Tags: arizona, arizona real estate, disintermediation, phoenix, phoenix real estate, real estate, real estate marketing, Zillow.com
Reminding you that Jay Thompson, the Phoenix Real Estate Guy, and I will be speaking the Phoenix Area Active Rain Gathering and First Southwest Real Estate Blogging Conference, to be held on Thursday, June 21st, at 3pm.
The event is being put together by Shailesh Ghimire of CTX Mortgage. Visit Arizona Mortgage Guru for more details.
Technorati Tags: arizona, arizona real estate, blogging, phoenix, phoenix real estate, real estate, real estate marketing
The long absence is finally over. After a grueling finals week and graduation, a two week vacation, a move to New York City, and a failed real estate deal, I am back with the pack. Based on the great content that I have seen coming from the site, I can assume my absence has gone unnoticed. In order to come back with a bang, I thought I would share a quick life lesson about real estate. The lesson: Real estate is a people business, so it is important to do what you say you will do, and maybe more, but certainly never less.
Here is a quick example. My latest deal to buy two apartment complexes in Greensboro ended in utter failure because one person simply did not do what they said they would do. Before considering this deal, I wanted to be sure there would be enough financing in place to make it happen. While I could have really stretched, begged, and borrowed to get all of the 20% that I needed for the down payment, my trusted mortgage broker recommended I partner with a local investor. He assured me that he could find me a suitable partner within the 30 day due diligence period, so I proceeded with the deal.
To make a long story short, no partner ever materialized and I was forced to bow out of the deal shortly before the end of the due diligence period. Given my upfront nature, I had already informed all parties that this deal hinged on me finding a suitable partner, which over a group dinner my mortgage broker ensured everyone would happen fairly quickly. Fairly quickly, turned into days, then a month and still a partner had yet to emerge.
In the end the mortgage broker’s reputation was trashed after this deal. My agent, who does a lot of great commercial work in the area, has decided not to work with the mortgage broker again. Additionally, the seller’s broker has also black listed this broker, and I think it is obvious that it will be a cold day in a very hot place Read more
by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
IamFacingForeclosure.com is a weblog created by failed real estate investor, Casey Serin, designed to chronicle how he addresses the lenders he defrauded. I highlight the word “defrauded” because he intentionally misled the lenders by overstating his income and misrepresented his owner-occupancy.
Casey capitalizes on the American hunger for good drama and the time honored tradition of this country of “reinventing yourself”. Casey’s done a pretty decent job at it, too.
He’s monetizing his blog and has a book deal brewing. The publisher of that book has outlined his disputes with Casey as a guest author. The publisher is an apologetic for Casey’s unwillingness to “get a job” explaining his entrepreneurial nature and fame make him an unlikely candidiate for any “good job”.
I think the publisher and Casey are ignoring another time-honored American tradition of “starting at the bottom and working your way up” . I can’t blame him too much. Casey has recognized that this country just LOVES drama and collects over three grand a week for advertising on his weblog.
Now, Casey is kicking it at the beach in Australia.
I suppose I’m pretty old-school. I offer this advice if you’re facing foreclosure and “kicking it” on an Australian beach isn’t a part of it.
Via TechCrunch, here’s a new category for the taxonomy: Home Remodeling/Refurbishing/Restoration. The idea had occurred to me, but I wasn’t sure the category even exists in weblog form. Refurber, the site cited by TechCrunch, is not a weblog. Even so, it is the rarest of things in Web 2.0, a social networking web site that motivates return visits.
Technorati Tags: real estate, real estate marketing
It’s been a wonderfully grumpy week. Please indulge me:
When the NY Times came out with its piece on the Madison, WI FSBO market, the NAR typically over-reacted and sent out another set of talking points. Last time they did that — Sixty Minutes — they received some well deserved ridicule; I’m apparently not alone in finding talking points condescending and wholly counter productive. So this time they added: Please do NOT circulate this document.
Yep. That should help.
On a related note, today’s REALTOR&174; Mag email link gives a wonderful illustration on how spin backfires:
Poll: Few Consumers Know What You Do
A new survey by the Washington, D.C.-based Consumer Federation of America reveals that while 84 percent of consumers have a favorable opinion of real estate agents and brokers, many of them lack an understanding of the services that real estate professionals provide.
From which it’s easy to infer that people love us, even though they aren’t aware of all we do in a given day.
But. Here’s the actual survey. [Note I’m not defending the survey itself since it’s so badly conceived it exists primarily to establish its own conclusion.] The takeaway from the press release:
“Taken as a whole, these survey data suggest that consumers value the services provided by agents and brokers, and have usually had good experiences with these agents and brokers, but that their views are positive in part because of their lack of awareness of specific industry practices that could harm their interests,” said Brobeck.
Juuuuuuust a bit outside.
And the 84%? That’s the percentage of A) The 29% in the survey who’d bought or sold within the last five years; and B) who were rating their own agent. The generic number for all surveyed is 68% favorability, which means a third need a little extra convincing, more than would be required, say, by a set of talking points. One third is a serious number for a profession that begins its appellative with a capital and ends it with a circle R.
Speaking of which: You know the guy you meet at the cocktail party, the one who Read more