Good Morning Folks,

 I have asked Kelly King of Adams Mortgage to be my guest blogger. I figured it was better to hear it from the source than hear my opinions. I too believe investors will pull us out of this housing problem. Investors provide affordable options and can single-handedly bring home prices up. In addition to these ides that Kelly has outlined, Congress should look at relieving capital gains and allow for more deductions. Obviously there are lots of ideas and solutions but allowing investors to go back to 10 properties is a step in the right direction. Thank You Kelly for the following blog.

Brian

Investors are an integral part of the U.S. economy in several ways. Not just the you and me investors who purchase shares of stock through our 401k’s, or the power house investment banks ( of yore ) that gobble up billions of dollars of mortgage backed securities or U.S. Treasuries. No I am talking about Real Estate Investors. They can make a market stand up and get noticed in today’s fast paced world ( think about the States of Florida or Arizona going up 20% or more yearly in value with second vacation homes on everyone’s mind that doesn’t live there in the early 2000’s ).

Real Estate investors are the harbinger of good times. When investors start buying, you should be too. They have done the market research, the due diligence that makes an investment profitable.

So it only stands to reason the best way we can climb out of this real estate funk we are all in is by making money easier to obtain for the investor. Quickly an investor in my mind is someone purchasing a home or multifamily home that will not be occupying the property. That simple. And the Federal National Mortgage Association (FNMA or Fannie Mae ) has recently announced that beginning March 1st they will begin accepting applications for investor properties wherein the investor may own 9 other properties with financing on it. That is BIG news! Previously, is was 10, but with the mortgage meltdown in 2007 the pendulum swung to a more conservative side and that policy was restricted back to only 3 properties can be financed. Re-opening the door will allow capitalism reign once more.

One caveat. The servicers of mortgages ( GMAC, Wells Fargo, Chase ) have the right to adopt the new rules or not. We have found them to be very conservative recently due to their pipeline of foreclosures filling up. While the Government might issue a new ruling, they do have the right to not include that in their underwriting guidelines. Let’s hope mortgage services are as anxious as we are to kick start our economy and get purchases rolling once more.

Sincerely,

Kelly King

Of all the statistics, I have read lately I wanted to point out the Colorado Springs homes sales average. Last year we were in line with the sales average for the last 20 years. It is true that many of the sales that did transpire were either bank owned homes or compromised sales of some sort. This has to happen in order for our market to rebound. This year will be much the same as last year in my opinion. While prices remain low and interest rates at all time lows I believe this will continue to spur activity. I also hoping to see more support for first time home buyers needing down payment assistants with favorable interest rates. If we can get first time home buyers back in the market this will encourage activity in all areas, enabling current home owners to buy up to the next level.

Currently the rental market is stable, encouraging investors to purchase more investment properties. In today’s market you are allowed to finance up to 4 properties including your primary residence. I look for future support from our financial institutions to increase these limitations to get investors back in the market. Prior regulations allowed investors to finance up to 10 properties. We need to get back to this! If down payment requirements are adjusted that should get investors back into the market to help absorb inventory.

When investors come into the market, they provide housing for many people who can’t qualify for a mortgage. This mortgage meltdown has put people out and investors can cure the default and supply affordable housing.

All of this said please give us a call at The Brian Maecker Team so we can explain the pros and cons for your specific situation.

Thanks,
Tony Deppe
Buyer Agent

This is a great market to invest in. I just hung up with Kevin Bent at WR Starkey Mortgage and non owner occupied investor money is at a 5 ½% rate. Can you believe that? This is record lows for investors.

Another piece of good news for investors is Fannie Mae and Freddy Mac is considering lifting the 4 unit maximum. They are seeing the light that “Good Investors” can pull people out of this crisis and provide housing for those that have lost their homes.

Price wise, the best investment opportunities need fixing. Their prices are low because banks want to dispose of these homes quickly and they need work. A good philosophy is to “Fix and Hold.” Fix and flip is not a valid plan because the desired yields cannot be made. An example of fix and hold: Buy a 4 bedroom home for $130,000. The down payment is $26,000. Let’s assume the repairs are $10,000 with you doing the work. Total investment is $36,000. A 4 bedroom home just like this we sold in the Vista Grande area. Rent has been achieved at $975.00 per month. The payment is $740.00. The positive cash flow is $235.00 per month, $2760.00 per year. This is 7.6% return on investment. Hold this home for 4-5 years and another $40,000 in equity can be achieved.

Flipping the home in this market would only have achieved after costs (S.P. = $175,000 – 8% closing cost & commissions = $161,000 – carry cost and initial loan costs $8050.00 = $152,950. Subtract $10,000 in repairs = $142,950 which leaves $6000.00 profit. This is not enough to support the risks.

I hope this helps you. I have been investing in homes for over 30 years. Please give me a call and I can help you.

Thanks,
Brian