Are You Advertising For Your Agent?

How long has that sign been in your yard?  Are you advertising for your agent or are you selling your home?  The January sales figures are out and they are not good if you look at them for raw numbers.  If you dig a little deeper you see three different stories developing.

The first story line is aggressive agents promising low commissions and high prices to get signs up.  This makes them look busy and makes them look like they "own" part of an area.  At the end of the day though, most of those "sellers" are simply advertising for the agent whether they realize it or not.

During a recent meeting with a potential seller, he asked "How come {Agent X} has so many more listings than your whole office?".  My answer was simple.  "How many days have those signs been up and when was the last time you saw one of our signs go over a couple of months?"  We sell homes, the other agent lists homes.  The more agents I talk to around the country, the more we are seeing this phenomenon.  It might be partially the sellers fault though.

The second story line is about the sellers.  The average listing price per square foot took a big leap at the end of the year, and the number of new listings dropped.  Some sellers saw a market rise last year and simply said "Hey if I can get $XXX for my home, I'll sell it." so some agent slapped up a sign and there it sits.  Other sellers decided that it was a good time to sit and wait a bit longer while prices keep rising.  Fewer listings and fewer sales equals a stalled market.

The third story line is about the buyers and their banks.  New rules limit how much a house can go up in value when an investor buys it to sell it in less than six months.  The quick clean and flip is essentially gone.  Also the FHA changed the minimum down payment to 5% but does allow a "gift".  Some banks are using seller points to offer some similar programs that help with closing costs and down payments.

The real problem here is a combination of cash and credit.  Even with rates hovering in the 4% range, banks are still quite cautious about a buyers real income, and many buyers simply don't qualify.   More simply don't have the spare cash for closing fees and a downpayment making it an excellent investment market for those who do.  Rents in many areas are very close to PITI payments on the day of closing.  Normally it takes 5 years or more to get positive cash flow out of a rental.  Now If you buy right you can have positive cash flow day one.

If you want to sell your house, the NAR statistics show a couple of interesting trends.  The homes that are priced right sell within 10 days or 10 showings.  If they don't, they are overpriced.  If you want a top of the market price, you are likely going to pay top of the market commissions for a very aggressive marketing campaign by your agent or you are going to end up being a billboard for them.

Another option is to price low and take the high offer.  The risk here is not paying enough commission for great marketing to get the best price.  The MLS alone won't do it.

At the end of the day as a seller, it is your choice.

For more information about buying or selling a home feel free to call, email or post a question on my Facebook page.

Can You Get A Deal On A Short Sale Now?

Welcome to 2014, and a recovering Real Estate Market.   So what is an investor or buyer to do to make sure they get a deal?

When markets go up, speculators jump in making the markets go up faster.  Phoenix and Las Vegas are seeing a huge surge in volume of homes being sold, and yet they both still offer great deals if you do your homework.  And yes investors that have no business being in real estate, and speculators are buying homes.

My advice now is still buy and hold.  Leave the flipping to the people who do it for a living.

The key to success in the Real Estate game just like any other area you want to achieve success, is doing your homework.  It doesn't matter if you are buying your first home or buying your 15th investment property.  Doing your homework and buying right is where you make your money.

As a homebuyer looking for your own home, schools, location, commute and other factors are added to the equation.  As an investor, it is strictly a money question.  I know several investors who will buy property site unseen if they get the right numbers on paper.

Short sales are still happening although banks are more reluctant to approve them in recovering areas.  The banks are also taking a closer look at the sellers finances to make sure they really can't afford to be there.  If they can, you aren't getting the house.  If you need help with a short sale, there are a lot of resources out there, but the key is an aggressive agent who will make the banks nuts so they'll make a deal.

Short sales are where listing agents really make their money.  Otherwise it is the buyers agent that is doing the work to sell the house.  If you are selling a property and have it priced right in this market, the listing agent won't have a lot of work to do unless the property is over the FHA loan limits.

So how do you buy a short sale and get a deal?  The key here is to do your homework and know the property up front.  Ideally if you have an aggressive buyers agent, you won't have much work to do.  Most of the time when I talk with frustrated buyers, I find their agent telling them "It already has offers".  That is just a lazy agent.

Patience and Persistence Pay

I bought my own house after I lost out on the bidding war when the winner backed out the same day the bank approved the sale.  I watched the house for nearly a year while the other buyer tried to work with the bank and gave up.  I kept in contact with the listing agent and less than two hours after it was back as an active listing, he had my offer agreeing to all of the banks terms in his hands.  By the end of the day, the offer was accepted and the deal in escrow.

Short sales are funny, if they are an "approved short" that means that the bank has already agreed to the price.  Most of the time, these are at market value, and not a deal to an investor.  You can spot these because they are listed for more than about 14 days.

Aggressive Short Sale agents will price the house slightly low, and get a bidding war started.  Using the top 5 bids and solid market data, the sellers agent will approach the bank and explain why they should take the deal.  Sometimes it is very difficult to get to the person at the bank that has any authority.  When agents do this they can get a dozen or more bids on the very first day, and may not accept any other offers.

This is where having your own agent can hurt you.  Short sale agents might have to give up part of their commission in order to get the deal done.  If you walk in the door with your own agent, the selling agent may not be inclined to work hard on your offer for half the commission.  This isn't always ethical, but it is the reality.

If you are after any kind of standard sale, having your own agent is normally the smart way to go.  Some listing agents will push the limits to try and bring in their own buyer, most of the time this isn't the case.  If it is, you don't want to work with that agent anyway.

A good buyers agent will ask to present your offer to the seller directly, and explain to them how you came up with their price.  This face to face negotiation is invaluable in a standard sale, and pretty worthless in a Short or Foreclosure situation.

More than once at these face to face negotiations, I was able to learn something the sellers agent didn't know that I could use to get the deal done.  Money isn't the only motivator in the real estate game.  Kids changing schools, move date flexibility and other financial stresses are just some of the aspects of a deal that you can use to help the seller out.

If you don't get a short sale offer accepted the day it goes up, keep in touch with the listing agent.  Let them know that you are interested in the property, that you know they have other offers and remind them things change as you leave your card.  Use property watch alerts on Realtor.com or your favorite real estate site to see when the house closes or doesn't.  If the sale doesn't close in 45 days, remind the agent you are still interested, and then every 30 days after that until the house closes or pops back on the market.

For my personal investing and buying, I am still focused on shorts, and foreclosures.  I think this is still where the best deals are for right now.   I am starting to look more at standard sales for friends and clients.  The recent market changes have motivated several investors and second home owners to be very flexible when it comes to selling terms.

The difference in costs of being an agent/contractor and getting the work done in house to fix up a foreclosure and what my clients pay is closing the gap, making standard sales more cost effective at the end of the day.

If you are looking for a deal, watch your target area, and the minute a short sale pops up, jump on it.  If you miss out, keep a watchful eye out, you still might just get it.  The deals are out there, you just might need to work a bit harder to get them.

Is A 4% Home Loan A Good Deal?

It is amazing how many people think rates will keep dropping.  Personally, I think the printing press economics of the Obama administration are going to catch up with stagflation like we saw in the late 70's and early 80's.  I think that Obama is handing his replacement a bigger economic mess than Carter handed Reagan. 

So is 4% a good deal?  If you are in investor, the question is can you make money with it?  Or can you sit on the property until you can?  If you are a home buyer the real question is, can you afford the payment?  If you can answer yes, then 4% is a good deal.

As a Real Estate investor and agent, anything below 4% is a smoking deal when it comes to financing real estate.  Why?  Inflation has been historically calculated at 3% per year.  Since the loan is fixed at 4%, as the home increases in value, the money is essentially free after just a couple of years.  On a 4% loan, nearly half of the payment is going directly to the principle.  You don't get much of a tax deduction but you get a great savings account in your house.  It might even be tax free or tax deferred.

I bought my home at 4% and refinanced at 3.25% a year later.  I did it because if rates went up to just 4.5% I couldn't get the loan for my house.  Remember the late 70's and early 80's?  If you don't, loan rates jumped from 8% to 14% and peaked right at 18%. 

The trick to surviving in the real estate game is to leave some wiggle room.  When money was really easy to borrow from 2004 to 2006 home prices went up based on greed, not economics.  People bought what they couldn't afford on the assumption they could use their home like an ATM and just keep taking money out to keep up with the bills.  Bad plan.

Think of it this way.  If you have a home with a $1000 monthly payment, over $400 is being used to pay down the loan on a 4% loan.  If you had the same loan at 8%, you would have a $1480 monthly payment that still only paid $400 of your loan that first month.  When prices go up or interest goes up, rents usually follow.  If you get transferred in just two years, and rates climb to 6%, the chances are good you can rent the house out for a nice profit.

At 4%, a $200,000 home only needs to rent for $600 a month to cover your real expenses.  Remember, the other $400 is buying you a house.  Think of it as a forced savings account.  If you can afford it, historically it is much better than a savings account.  If you rent it for $1000 per month meaning you have zero cash flow, you are still growing your equity at $400 per month plus the increase in the home value.  That is free wealth.  After five or ten years if you can rent it for $1200, then they are buying you a home and you are getting $200 a month for letting them do it.

So is 4% a good deal?  That is all up to you and your goals.

Are Sellers Being Serious Or Are They Testing?

Lately there is a little trend happening.  First as you probably know interest rates have been creeping up.  Yes, they came back down a little, but I still can't find a 30 year fixed with a 3.25% APR and APY.  I have seen some fixed loans at 3.625% APR with up to 7.25% APY!

The other thing that is slowing the market that is clear, at least along the beach, is that the seller/buyer mix has changed radically.  The high end remodeled homes are now listing at very high prices.  Agents are taking the listings and letting the sign sit, if nothing else for advertising.  Not something I do or suggest in my office but it happens.

The Question Of The Day - So are the sellers of the nicer homes serious or are they testing?

More than one seller that I talked to have given me the "Well the market is hot so I thought I would give it a try"speech.  A couple others said they need to sell, but don't need the money.  Don't ask me how that works, because it makes no sense at all.  Either you need to sell at any price or want to sell for a specific price.  All of these people are clearly testing.

There is still a little middle ground left though.  I have seen a few homes that were close to bull dozer ready sell for slightly higher prices, and the buyers did a minor or middle remodel and moved in.  When I talk to them they said things like "I wanted in the area, but couldn't afford to do it any other way."  This I understand since it is how I bought several homes in areas that were above my income.  This is part of the slow and quiet way to make real money in real estate.

Buying a home is a little like poker, if the seller thinks that you can make money without bull dozing it, they might change their mind and try it themselves.  Twice I have opened my mouth just a little too much and the sellers have tried to back out at the last minute.

Wit a little practice and thought,  seconds after you walk into a home, you will know pretty quickly if the seller is serious or not.  In some cases the agent might be invested and be trying to hold the price up.  In other cases an investor might have "clouded" the title thinking they could get a better price. Either way, with a little practice you'll know the difference between a seller and a tester the minute you walk in the front door.

Oh yeah, I am working on an ap for that.....

 

No Inventory in Real Estate - Now What?

In just the last thirty days, there has been another noticeable change in the Southern California Real Estate market.  Homes are selling.

I know, in 2012, more home sold than anytime since 2007, but there is more to the story.  If you look all around the county, homes that have been sitting for a year or more are now moving into escrow.  When these homes leave the market, then the average Days on Market or DOM drops further.  The key here is with fewer homes on the market these homes moving off market will have an even greater impact statistically.

What does all of this mean?  It means a clear shift in the market is happening.  The bottom diggers have scrapped everything off the bottom there is.  So now the big investors who are a little more conservative are putting up money for people to buy.  One loan agent says that even though "liar loans" have gone the way of the DoDo bird, there are still ways to do creative financing.

Private equity is once again pushing the limits on payment to income ratios' allowing people to buy into the more expensive homes that have been sitting.

A billboard in downtown LA proclaims "Home Loans Up To $10 Million".

The tide is shifting.

From the agents perspective, I am seeing a few very smart agents start to roll with this new market.  Mass marketing in Real Estate hasn't been cost effective since 2007.  Mass mailing email lists to thousands of people is a waste of time, since there are a dozen other agents and websites that will do it for them.

The agents that are starting to roll are adding value.  Private open houses, active buyer lists with qualified buyers and very direct person to person marketing is working.  This will be the new reality for a while I believe and it will filter out the incomes of many agents even further.

Online and mobile marketing tools that reach directly to sellers and buyers are going to continue to grow in popularity and importance.  Why?  Simply put these tools allow the buyers to keep a bit of anonymity until they feel like they have met the right agent or found the right deal.

Agents will need to know everything about a property.  "It is really a great house" won't cut it anymore.  If the internet can tell the prospects more than you can, chances are an internet agent will get the sale.

An app for that?

While the big websites have mobile aps for their potential customers, individual offices and agents have been behind the curve.  New tools are emerging that will change that.

Getting listings may really have to go all the way back to door knocking, which in some areas is very difficult.  Agents will likely need to live in their neighborhood and really know everyone in order to get a listing.   Listings are going to be life for agents moving forward.

Agents who mass market will spend too much time chasing maybe's where the agents that hold the line and only work with qualified buyers are going to move homes.  Imagine someone knocking on the door with three familys that want in your neighborhood and an agent with three signs that have been up for six months.  Who do you want to talk too?  One moves homes, one has signs.

The tide is shifting.

The Big SECRET Of Buying A Foreclosure

With all of the information on the internet about buying a foreclosure, you wouldn't think there are any secrets left would you?  Now I have to ask, If there aren't any secrets, how come everybody isn't buying foreclosed houses at half price and getting rich?  There must be a secret to buying foreclosures.

Easy access to information online and a subtle change in the market have made for an interesting real estate market.  Right now many people are  getting information about foreclosures online without understanding what it means.  They look at NOD, REO and Foreclosure listings on sites like RealtyTrac.com and many consider them the same thing.  The first part of the secret to buying a foreclosure is understanding what these things are.

Last year the market was very different.  Stocks were up so investors were staying in the stock market.  One day, Warren Buffet says he would like to own thousands of single family homes and then investors started throwing money at real estate again.

At least once a week I get a call or a lead from a website that starts the conversation with "I want to buy one of those million dollar foreclosures for four hundred thousand that I saw on somecrazyforeclosuresite.com", when can I get one, and oh by the way it needs to be stunning, with a three car garage and ocean views."  Do those "foreclosure deals" exist is what they should be asking.

Under the right conditions, I can help you get one of those houses if you are ready to make a wholesale buy.  Otherwise, you might pay eight hundred thousand for a home that someone else paid over a million for.  The conversation then goes to NOD's and Pre-Foreclosures.  Everyone wants a deal and they think the deals are everywhere and they are for everyone.

Unlike most other markets, real estate presents a different level of risk.  Especially when it comes to speculation.   I usually start  with  "So, do you invest in stocks?" most of the time the answer is "Why?".  I then ask "Do you borrow money for investing in stocks on margin?"  That is usually followed by a puzzled look or silence on the phone.

When you buy a foreclosure site unseen and ask the bank to invest money, that is exactly what you are doing.  Right now, banks aren't really happy doing that kind of loan.  That is what "hard money" is for.

So what does all of this mean to you, and what is the Secret?

I said the first part of the Secret is understanding the terms.

1. NOD - Notice of Default - This is not a foreclosure.  All the filing of an NOD means is the banks told the homeowner that they aren't paying their mortgage and the bank would like their money.  They are also filing a copy at the county recorders office so they can eventually maybe someday start the actual foreclosure process.

Most of the NOD's filed are for people who are trying to get a better deal from their bank.  It is a tactic used to negotiate a reduction on the loan.

At this point about 1 out of 80 homes that get an NOD end up on the market, as a short sale, and at least a dozen agents will call in the first two weeks to get the listing.

2. Pre-Foreclosure.  This is where the home is easier to read.  By this point it is either for sale as a short sale and the owners are making an effort to get out, or they are running a gamble to see if the bank will go all the way to foreclosure.  The grey starts getting a little more black and white.  Picking up a house in this area that isn't already listed is highly unlikely.  I would put the odds in the 1000:1 range that you could convince an owner and a bank to sell you the house at a great price during this phase.

3. Foreclosure Auction Date Set - Well not really.  Even when the "auction date" is set a deal can be made and the home won't make it to auction or it can be delayed.

4. Foreclosure Auction - This is the cash only auction on the courthouse steps, not the auction at auction.com or Williamsauction.com.  Investors and banks bid for the house on that day.

At the auction there are two outcomes.  1. The bank bids to keep it or 2. An investors bids for it.

In the first case, this is where every agent that has a relationship with the bank scrambles to get the listing.  If the house is in good shape, the banks will clean it up to FHA standards and try to sell it at a "retail" price.  The home is good enough to get a loan on.

If the house is a dump, the bank then assigns a "wholesale" price, which is what investors are looking for. The house won't qualify for a "standard" or "FHMA compliant" bank loan.  You need cash or very expensive "hard money".  Unless you have a lot of time on your hands and are a good contractor, it is tough to get in as a wholesale buyer.

This is where the confusion is.  A lot of people think that they should be able to get a "normal" home loan and buy a house "as-is" and fix it up.   The reality right now is that banks are not allowed to, nor do they want to accept this risk.  The bank doesn't want to get the dump back and go through all of this again.  It is expensive.

This is where information without understanding is a problem.  People spend dozens of hours scouring sites to get a "deal",  and then they call an agent because they don't understand that buying wholesale houses is a business, not a hobby.  If you are going to borrow "hard money" at very high interest rates, you have to be dead on your budget and flip the house quick or get a good tenant in there fast.

Bursting The Bubble.

So now the big answer.  There isn't a secret.  When you see an investor make $5,000, $50,000 or even $500,000 on a deal, they didn't just work that deal.  They likely worked hundreds or even thousands of deals and offers to make some good money.  The more they practice, the better they get.  Like Art Williams says, they "Do It" a lot.

The big risk is that you might not make money for a while.  Day trading, you might make money in an hour, with home flipping or investing in can take weeks or years.  When you leverage with other peoples money. The upside percentages can be phenomenal and the downside can be devastating.

That isn't to say you shouldn't buy Real Estate.  There are always great deals once you learn the business, and with interest rates under 4% I feel strongly that it is time to buy.  Last year when I posted that the market had bottomed in Orange County along the coast, I dove in head first and bought the most expensive house I could afford at a short sale. 

So how can you put this market to work for you?

If you have the patience, the best way to come close to a wholesale deal is to buy a short sale.  A short sale means that you are going to buy the house for less than the bank is owed for it.  The average in Orange County CA is just under 300 days right now from open to close on a short sale.  Nationally it was 308 days last month.  That is why you need patience.  As a general rule, the closer you are to the amount owed, the faster the sale happens.

The bottom line is if you need to move anytime soon and are using the banks money, my advice is find the best house you can afford and be happy.  If you have some time and would like to trade that time for equity while hoping the loan rates don't jump up, take a shot at a short.  Finally if you have cash and aren't a professional investor, buy wholesale very carefully with an agent who has been an investor themselves.

Happy Hunting.

Rental Real Estate

I am sitting here in Maui enjoying a condo just across from the beach.  The condo is one of hundreds that are here on the islands which are available by the week.  A well run vacation rental can be a great money maker that lets you have a condo or a house in a great location for up to 14 days a year basically for free.

Basically there are a couple of things to keep in mind, both have to do with 14 days.  The first is how often it is rented each year.  If you rent your property for more than 14 days each year, it triggers tax rules for rental property.  If you use it 14 days each year or less yourself then you get the better deductions like depreciation if you want them.

There are another set of local rules that have to do with sales taxes and hotel taxes.  Hawaii is considering legislation to force vacation rental owners to use a local property manager because they believe the mainland owners are renting properties and not paying taxes.

Nothing good can come of this.  The assumption is that more people are cheating than following the rules.   If that is the case then maybe the rules should be reviewed.  As an agent, forcing owners to use a local property manager only will increase the cost and decrease the benefit of owning a vacation rental.  Generally these increased costs drive down value.  Driving down value drives down price.  When you drive down price, you drive down property taxes and real estate sales commissions.

All of this sounds counter productive to long term revenue generation which is what Hawaii is really looking for isn't it?

This is a case where I don't know the good answer.  The hotel industry of course wants a fair playing field and if they have to pay a hotel tax, then the condo owners should pay some taxes too.  I get that.

The reality is that the income from the tourism, food, drink, souvenir and tour sales is money they don't want to lose either.  If Hawaii is going to force the owners to use a local property manager, then they may need to cap the rates much like many areas do for Taxi cab drivers or smog check stations.  Say some fixed cost of $20 per rental when the owner finds the renter?  How much more work could collecting the checks be for the property manager than smoking an old car?

Your thoughts?

Has Orange County CA Bottomed Out

I have been saying for some time that we are near the bottom in Orange County.  Last May I bought a home near the beach at a price that I thought was pretty good.  More than once I heard something like "You are nuts, what if prices go lower and interest rates drop?"

My answer then was simply "So What?".  I didn't think that prices would drop much further.  I could easily stomach a 10% decrease in my home value if that really did happen, and a 4.25% fixed loan was pretty cheap. In the world of retail finance, 4.25% is as close to free as I think you are going to get.

The big banks hold the cards right now, so my crystal ball is filled with a giant logos for the big three banks.  Rumor has it that BofA and Wells Fargo are sitting on over 1 Million homes each that are over 120 days late and waiting for foreclosure, in addition to the 1 Million homes they already have foreclosed on or are in the process of foreclosing.

Now those numbers are pretty much conjecture as far as I can tell.  Time Magazines Business blog last August said "There are nearly 1.7 Million homes in the U.S. in some state of foreclosure."  Which is probably a more realistic number.  In the big scheme of things, that number isn't that bad.  Another tracking agency I use to find foreclosures for my wife and her investor clients says that in Southern California, the number is 1 out of every 687 homes.  Last year it was 1 out of 542 according to the same site.

That means there are fewer foreclosures.  Keep in mind there will always be some.

I said it before and I will say it again now.  If you can buy, and you live in Southern California, by all means buy everything you feel comfortable that you can afford.   If you are thinking about moving up, call my wife, get your home listed and start looking.  Inventory is thin.  The good deals go in less than two weeks.  Great deals in a couple of days.

The difference between a good deal and a great deal isn't $50,000 anymore, it is condition.  Any home in really good condition at a fair price doesn't last.  If your home is on the market and sitting for more than 30 days without an offer, there are one of two problems.  Your agent isn't doing their job, or it is priced too high.  The good news is someday the market will catch up to your price again.

For those of you that walked away from your home, I am sorry you did it.  A quick economic lesson here.  When the U.S. Government prints money, there is a short term boost to the economy of 2-3 years and then inflation follows.  In simple terms if there is $100 in the world, and there are two houses, then each house can only be worth $50.00.  If the government magically creates $300 and convinces two people to build to more homes at $50 each, there are now four homes and $300 in circulation.  When the people figure out what is going on, then instead of building two more home, the existing owners raise the prices.  Each house is now worth 1/4 of $300 or $75.

In the last three years, to slow the economy's downward spiral, it is estimated by several sources that the U.S. Government tripled the money supply.  The economy hasn't grown much and now inflation is rearing it's  head.  This is going to be one big inflationary baby.  Home prices will follow.

If you are on the verge of losing your home, and it is worth at least 80% of the current market value, Call Your Bank.  Work out a deal.  They don't want anymore foreclosures, and you don't want the headache of moving.  At the very least get an agent and consider a short sale.

Already I have seen several investor newsletters saying the courthouse auctions are getting more competitive and it is time to start getting creative.  Investors are now approaching the owners and the banks directly to try and work a deal.  These same newsletters are also saying in Southern California "low balling" isn't working because there are other buyers for just about every house.

I am not saying we are back to the craziness of 2006-2008, but I am saying, the banks are tired, the people are tired and the government has pumped up the money supply.  This is as close to bottom as I can ever see it getting.  That means one thing.  Buy if you can, hold if you can't, and if you don't own, now is the time.  We all know that rising inflation means rising rents, no matter what the price of houses does.

There is one other variable, but I'll save that for later in the week.

Is there money to be made in Real Estate Today?

For nearly 20 years I have been investing in Real Estate.  If you own a home, you too are an investor in my mind.  I have read just about every "get rich in real estate" book out there.  They really all say the same thing, but once in a blue moon something new comes off the pages.

Since most of my friends don't like to read, they are always asking me for the highlights of different books when they see the bookshelves in my office.  I don't mind sharing because the highlights won't get them the understanding they need.  As Malcolm Forbes famously said "With all thy getting - get understanding."

Just a few months ago, my wife finished her real estate license, and entered the field as a Realtor.  I of course handle all of her online marketing thought my SEO and online marketing company, the Bourquin Group.

People give us all kinds of peculiar looks when they find out we are moving head first in todays Real Estate market.  We are both amazed at how many people say something like "I was an agent but after the crash I quit and let my license expire."

The next question out of their mouths is "Do you think there is money to be made in Real Estate today?"  Now I really wonder how I should answer that question.  Should I say "No of course not, we are just plain stupid."?

So as Mr Forbes said, it is clearly time for them to get understanding.  Most people measure a market incorrectly in my opinion.  They look at how fast they can buy something and "flip" it for a profit.  Short term gains like that are simply gambling.  No real value is added to the market so it will eventually cost somebody some money.

The real answer to the question "Is there money to be made in Real Estate today?" is the same as always, "Yes".  Every market will dictate what method you need to use in order to make money in a market.  What most people want to know is "How do I make a quick buck in Real Estate today?".  That I can't answer.

What I can tell you is that if you are an investor or just starting out, now is the time to buy.  Nobody will know the exact bottom of the market, but Dean Graziosi uses "Days on Market" as a key trend indicator.  I would like to add "year over year inventory".  Both numbers are starting to shrink.

Banks still hold the wold card with unreported foreclosures.  Those are foreclosures where people still live in the house, and haven't made a payment in years.  The banks are just waiting to protect their investments .  Empty houses attract problems.  Letting people live there rent free is an interesting approach, but they are doing it.

Given all of the key indicators, we are nearing the bottom or possibly past the bottom of the market.  My bet is that in real dollars we are past the bottom.  Inflation alone will hold house prices right where they are.  In adjusted dollars, there may be one to three more years of price erosion.  That means that while everything else will go up in price, home prices might be flat.

So I can hear you asking "If home prices stay flat, how can there be money in Real Estate?"

The answer is simple.  I don't think real estate should ever be used for gambling unless you have a lot of cash to risk.  In the long run, Real Estate will always go up.  If inflation drives up wages and the price of lumber, building a new house will cost more, and that adds price pressure to existing homes.

History says, Real Estate always goes up.  More specifically with a couple of exemptions, any given piece of land will always go up in value over the long run.  Stocks that is not true.  Any company can go bankrupt.  Look at the names littering the grounds outside of Wall Street like American Airlines and Enron, in fact 87% of the Fortune 500 in 1987 aren't there any more.

Now the one Caveat to Real Estate.  Government intervention and Environmental Hazards, which usually result from Government intervention.

The city of Detroit is a stellar example of the freebie program gone silly.  hundreds of millions of dollars line the pockets of corrupt politicians and there are city blocks that are totally worthless because the government is attempting to control those areas.

Rent Control.  Another great social experiment to give more to those who haven't earned it at the expense of the those who worked for it.

Sometimes even environmental problems are caused by government intervention.  California made MTBE mandatory in gasoline to save the environment and reduce smog.  That was until the MTBE leaked out into the ground all over the state.  The gas station owners lost everything and the bureaucrats kept their jobs.  If the gas stations added MTBE on their own, the owners would all be in jail.

So as an investor, it is in your interest to limit the governments involvement to the bigger picture like zoning and safety.

Where does that leave us today?  There are two methods I am encouraging everyone to use to make money in real estate today.  The first is the method I call the path to retiring on the beach.  It is a simple method and will be expanded in my next book.

The short course to the "Path to retiring on the beach" is this.  Step one, buy a house that you can afford now, no matter if the price goes up or down.  Step 2, save money so that in 5 years you can buy another house.  Step 3. Buy another house and rent out the first house.  Step four, repeat at step 2 for 20 years.  At 20 years, the first house is paid off, and if inflation is normal, it is making the payments for the 5th house, your retirement home on the beach.  Every 5 years as each subsequent house is paid off, you get a pay raise in rents.

The second method is for people with great credit and already own a home. Go to step 2 and start there.

You can hope that your retirement is there in 20 years, or you can buy a house today and have four money makers when you retire.  The best part is, if you really dig and find good deals, you might not have to wait 5 years.

I used a VA loan, to get my first house.  Two years later I bought an FHA and rented out the house with the VA loan.  I bought a VA repo as my third home.  I paid about $5,000 more than it was worth but the VA interest rates and low down payments for investors made it worth the extra risk.

As home prices went up, I refinanced the VA loan to a 15 year so that I was still making $125 a month in positive cash flow and then used the VA loan again to buy a third house.  T

Even if you don't have VA benefits, FHA loans can do the same thing. You just need to pay PMI which means you keep more cash up front and pay a little more over time.

So is there money in Real Estate, the answer as always is "Yes", as long as you don't gamble and can keep the government from trying to "help" you or your neighbors.

The clouds are clearing up, so time to go to the beach.  Would you like to join me?