MA Supreme Court upholds rule of law in foreclosure case.

Yesterday’s decision by the MA Supreme Court upholding the basic premise that the true owner of piece of real estate is the last legitimate signer on the actual title to the property and that title must be presented to prove ownership before a foreclosure can take place has been widely decried in the financial press as a grave injustice to the bank’s right to unlimited profits no matter what they did to find themselves in such sorry shape..

“WHILE THE BANKS may HAVE FAILED TO SATISFY the letter of THE LAW….” is a typical lead in to a conclusion like “With this ruling, you’re left with the problem that people who didn’t pay their mortgages get to keep their houses BECAUSE OF PAPERWORK MISTAKES”. [Emphasis mine] Continue reading MA Supreme Court upholds rule of law in foreclosure case.

Top Ten Reasons To Own Apartments Now

I believe that apartment building investment should be a core holding for every successful conservative investor. Briefly here are the top ten reasons for low risk investors:

1.       Monthly Income. Properly acquired apartments generate monthly checks in 6-8% or higher annual cash on cash returns.

2.      Straight forward, conservative investment strategy. Buying existing apartment buildings with good due diligence means that you know what you’re getting going into the investment. Apartments are not subject to sudden changes in investor sentiment and/or valuations.

3.      The numbers determine the value. Apartments are valued based on rents less expenses (Net Operating Income) and increases in rents can go straight to the bottom line increasing the value.

4.      Inflation protection. Rents rise with inflation and with 12 month leases every year there is the opportunity to adjust rates. With fixed rate financing your income goes up while your biggest cost stays the same. Continue reading Top Ten Reasons To Own Apartments Now

What to do about the economy.

In a comment to my FB post about the video on QE2 Sean DeButts asked what my solution would be for the economy. It’s an important question that deserves a detailed response.

Jobs are the number one thing we need to get the economy moving and jobs require capital and the willingness to put that money to work. Now …there is plenty of money around, billions and billions sitting on the balance sheets of banks and companies but it is not being put to work. Why not? Let’s look at companies first.

Companies will only invest if they think they can get a return on that investment and are confident that the rules won’t change before they can earn that return. Right now everyone knows that the deficits the US is running will lead to collapse if something doesn’t change but until what those changes will be is decided companies (and individuals) are worried that they might be singled out to pay for those deficits. That’s why I believe the National Commission on Fiscal Responsibility and Reform’s deficit reduction plan must be put into law by Congress and signed by the President. See: http://bit.ly/h1tILt for the Charley Rose interview with the co-chairs of the Commission. Continue reading What to do about the economy.

It’s painful, it’s ugly, it’s what a real estate bottom feels like.

Does the market feel like you are in the opening sequence from Terminator II?  Are you fighting amidst the wreckage of the previous boom? Surrounded by foreclosures, scarce money, economic gloom and doom? Real estate going into nuclear winter? That’s what market bottoms feel like and as investors we need to get comfortable with that feeling because this is our time to make solid, reasoned investments that produce good results on improving fundamentals. Conditions like this create the opportunities for savvy investors who were patient through the bubble and have waited for the speculative, greater fool market to come to its inevitable end.

Many great real estate investors got their start in rough times like Sam Zell of Equity Residential for instance. He started out buying properties from distressed owners in the late sixties. Tom Barrack of Colony Capital waded through the carnage of the S&L meltdown to buy properties at a discount. Barry Sternlicht of Starwood Capital also started in the wake of the S&L crisis buying multifamily properties. What will your story be?  It’s time get to work and seize the opportunities. Put on your hardhat though because it’s about to start raining real estate, and while not every distressed property is worth pursuing  if you stick to your niche and learn your market good deals will surface. Continue reading It’s painful, it’s ugly, it’s what a real estate bottom feels like.

How to lose weight, feel younger, rub shoulders with movers n shakers

How to lose weight, feel younger, rub shoulders with movers n shakers and make friends in city hall.

This past summer I got involved in something that provided all these benefits without joining a cult, going to a seminar or having a drill sergeant like personal trainer yell at me. It was four months of Jim Cramer style intensity and I enjoyed almost every second of it. Interested? Want to get in on it? What if I told you it was also the best networking you’ll ever do? Continue reading How to lose weight, feel younger, rub shoulders with movers n shakers

Is the credit crisis the disease or the symptom?

I am running a friend’s campaign for city council so I’ve been talking to a lot of people the last few months. Most of the conversations have been about our home town of Bellevue WA and the local issues the city is facing but I’ve also had a number of conversations about the economy, real estate and the credit markets. The majority of the people, many of whom are developers, property/asset managers or owners, are searching for the turn in the cycle and are looking forward to the opportunities that will arise when things return to normal.

I too am looking forward to the upswing in the real estate cycle but I’m not sure that back to ‘normal’ is where we headed. I believe for the last two decades we have been and are living in the ultimate payoff of the Marshall Plan and its siblings. We have successfully avoided a third world war by creating market based economies where enemies might have arisen. This is an entirely positive outcome and surprising to me, a child of the cold war era. Continue reading Is the credit crisis the disease or the symptom?

More Positive Indications for Multifamily

At the end of last year (See my Dec. 28 post Why buy Multifamily in ’09) I laid out a number of factors pointing to the opportunity to secure good returns on income producing apartments this year. As time marches on we are receiving more corroborating evidence of a market bottom for multifamily at the same time as the credit market for these properties still has money available for acquisitions.

From a diverse range of reports starting with the ULI/PricewaterhouseCooper’s Emerging Trends in Real Estate 2009, Real Capital’s report published mid-Feb to Marcus & Millichap’s conference call last week (Feb. 24th) we are seeing a real buyers market develop in multifamily.

First of all multifamily starts are projected to be down at least 30% this year on top of being down 50% in ’08, meaning starts are down 85% from two years ago. Balanced against this lack of supply is the fact that Census Bureau projections show the growth in the prime renter segment of the population (20-34 year olds)will accelerate significantly over the next five years forcing rents higher over that period. There will also be a steady if not growing stream of immigrants who tend to long term renters. Continue reading More Positive Indications for Multifamily

Credit Rate Spreads as Indicators

Vince Farrell of Soleil Securities Group sent me his take on what key credit spreads are indicating about the financial landscape and economic prospects. For a little background, a ‘spread’ is trader talk for the difference between two financial instruments, in this case the interest rates offered different debt instruments. As with most spreads these have a historical ‘normal’ range and their trend away from or back towards normal are used to measure optimism or pessimism in hearts and minds of those who create or invest in the referenced instruments.

Vince finds that while most of the credit spreads he follows are wide by historical norms, they are narrowing and the trends are positive for the credit markets and eventually the economy. Here are his comments: Continue reading Credit Rate Spreads as Indicators

Why buy Multifamily in ’09?

As I sit here looking out at the snow while I’m taking time to review and update my goals for the year there are stars aligning to make the new year a positive one. Especially if you are looking for alternatives for your investment and retirement money. The stock market hasn’t been good to us (I look at my account statement from between my fingers!) and the prognosis for the next year or two isn’t much better.

In contrast there are a number of reasons to consider owning multifamily properties, specifically apartment complexes with more than 100 units. Before I go into the reasons why now is a good time let me first be clear about what I’m NOT recommending, the landlording business. The reason to focus on properties with more than 100 units is that they are large enough to support both professional management and professional maintenance; most likely having both onsite full time if not living there. As an owner of this type of property your job is to review the management reports and manage the managers, not unclog toilets or take phone calls from tenants. Continue reading Why buy Multifamily in ’09?

The Bank Bailout Trap

We’ve cornered ourselves trying to bail out the “Too Big To Fail” banks. In trying to keep them alive in the name of saving the financial system we’ve been pumping them full of our childrens’ tax dollars to little effect and we wonder why they’re not really lending. The downward spiral of their balance sheets from both toxic assets and falling stock price continues but how to stop that spiral is being debated hotly in boardrooms, financial markets and congress.

What’s preventing a solution from emerging is the “Too Big To Fail” trap. Until we recognize that these banks have already failed and we are throwing good money after bad we will continue pouring money down a bottomless hole. It’s like lending ‘grocery money’ to a junkie. We can’t allow ourselves to be held hostage by a handful of big banks. Continue reading The Bank Bailout Trap