Raleigh-Durham Investment Property Alert

RALEIGH-DURHAM INVESTMENT PROPERTY ALERT
SHORT-SALE PURCHASE OPPORTUNITY…Tenant already in place!
Instant Equity + Cashflow
Visit www.tiffanyelder.com/shortsaleinvesting  for more information on short-sales
Rathie, Durham NC
The 2  adjoining  townhomes sold in 2007 for 147k and 151k.  Close to POPULAR Brier Creek.
Other sales prices in the neighborhood reach as high as 156k.   4 year old townhome.
3 beds/2.5 baths/a[\pprox. 1400 sq ft.  TENANT IN PLACE!!  Lease expires October 2008
Proforma Estimates:
Purchase Price (***target shortsale price***)	$125,000.00
% Down	20%
Mortgage interest rate (blended rate)	6.50%
Amort.Period (Years)	30
Monthly Gross Rents (if fully occupied)	$1,000.00
Monthly Other Income	$0.00
% Property Management	8%
Annual Homeowners Assoc. Dues (HOA) or PMI	$960.00
Annual Taxes (previous year actual)	$1,555.00
Annual Insurance Estimate	$300.00
Current occupancy	100%
Interest only financing? (y/n)	y
MONTHLY INCOME: (assuming full occupancy)
Rents	1,000.00
Other	0.00
TOTAL MONTHLY INCOME	1,000.00
MONTHLY EXPENSES:
Mortgage Payment	541.67
Tax and Insurance	154.58
Property Management	80.00
HOA/ Other	80.00
TOTAL MONTHLY EXPENSES	856.25
ESTIMATED MONTHLY CASHFLOW	143.75
Year 1  Cash-On-Cash Return	6.90%
Cap Rate (includes 8% vacancy and repair allowance)	6.58%
If this property fits your investment criteria, contact Tiffany while it's still available!
Tiffany Elder, MBA, Realtor
Investment Consultant / Broker Associate
Realty Executives Southpointe
tiffany@tiffanyelder.com
Notes: All information is assumed accurate but not guaranteed.
Full due diligence is recommended before purchasing any investment property.
Cashflow and returns are based on financing and assumptions listed above.
Your financing for this property will depend on your creditworthiness.
These rates are for illustrative purposes only and may differ from your financing options

 

Limited Offer for Instant Cashflow on New Construction

Hello All,

I have just received information from some of our local builders that the following builder lease-backs are now available.  As many of you know, these haven't been available for a while, and when they do pop up, are often snatched up very quickly by savvy investors.  These are all new construction.  The Builder's monthly lease will cover your interest payment (and principle if you choose to amortize).  The builder will pay all taxes, insurance and HOA fees during the time of the lease. 

This is a great opportunity to walk into instant cashflow with the builder's model homes. Many of these are being built at the early phases of the neighborhood, which is prior to the builder's price increases this can mean built in equity down the line for you).  Leases are 12 months on average.  In addition, the builder may be open to letting you to keep furnishings used in the models at the end of the lease.

This is a perfect option for those looking for guaranteed income on rental opportunities with built-in cashflow, or anyone with  1031 exchange funds looking for a place to reinvest.  In addition, if you are interested in moving into a new home in the Triangle in the next year or so, this opportunity is perfect for you.

The numbers are below.  I have verified non-owner-occupied with one of my local lenders at 10% down with no mortgage insurance at 6.125% interest only. Call or email with any questions, although I don't think these will last long. 

Price	Mortgage	Interest Payment @ 6.125%	Monthly Lease	Monthly Cashflow
319900	287910	$1,469.06	$1,933.00	$463.94
729900	656910	$3,351.88	$4,410.00	$1,058.12
499900	449910	$2,295.67	$3,020.00	$724.33
399900	359910	$1,836.44	$2,416.00	$579.56
419900	377910	$1,928.29	$2,537.00	$608.71
499900	449910	$2,295.67	$3,020.00	$724.33
459900	413910	$2,111.98	$2,779.00	$667.02
719900	647910	$3,305.96	$4,349.00	$1,043.04
639900	575910	$2,938.58	$3,866.00	$927.42

Tiffany Elder, MBA
Realty Executives Southpointe
phone: (919) 260-2507
fax: (866) 854-4717
www.tiffanyelder.com
tiffany@tiffanyelder.com

Raleigh-Durham leading the pack with investment oppoprtunities!

Tiffany Elder, MBA
Happy New Year Fellow Investors!

I thought it appropriate to share some joy in the midst of all of the "reported" economic gloom in the US. Good news... Raleigh-Durham is weathering the storm quite well, and the hiccup in the national real estate market seems to have largely passed over this vibrant metro area.

The good news seems endless, and includes continues employment growth, and a strentghening rental market. These items are a plus for investors building portfolios in the Raleigh-Durham market.

While housing starts are down in the Northeast, West and other regions, they are up in the South. This is likely due to the positive outlook for appreciation in this region, along with affordability, an influx foreign direct investment, and local economic and employment growth. Read more on these items at:

http://www.businessweek.com/the_thread/hotproperty/archives/2007/09/rocky_market_ma.html?chan=search

Although Raleigh, Durham, Chapel Hill and surrounding areas make up what is known as the Triangle, each city is very distinct and has different norms, especially when it comes to real estate characteristics and pricing. All 3 offer VERY solid investment opportunities. Durham, however - which is home to Duke University the new Southpointe Mall Commercial District, a revitalizing downtown, and Research Triangle Park - is pulling ahead of the pack and becoming known as a great location for bargain real estate buys. Read more at:

http://images.businessweek.com/ss/07/09/0918_bargains/index_01.htm

Now if you're anything like me, there is no such thing as "too much information". I have to admit, I hoard data to a certain extent but then again, I am a techie at heart, so online research is a must in my day-to-day routine. I've gathered much of this information together for the benefit of my clients and others interested in this market. Feel free to visit www.tiffanyelder.com/TriangleMarketFAQ for a range of information and market data to round out your understanding of the area.

Once again, Happy New Year and Happy Investing!

--Tiffany
www.tiffanyelder.com

Investment Questions - 10/4/07

 

Question 1: "I am interested in purchasing some investment property.  What considerations should I keep in mind as I decide between targeting single family homes versus multi-unit (i.e. duplex, two-flat, three-flat etc.) properties?"

 

There are pros and cons to both single-family and multi-family rental properties:

 

Single Family

Pro:  These properties tend to appreciate well if located in a desirable location.  In addition, upon reselling the property down the line, you will likely have a much larger pool of potential buyers, which can make for a quicker sale.  Keep in mind that your potential pool of buyers will include both investors and individuals who wish to use the home as their residence.

Con: A single-family home will typically have only 1 tenant (except in the case of a rooming house).  This can be a drawback if the property is located in a slow-renting area, given that the exit of one tenant will result in the loss of 100% of rental income until another tenant is found.

 

Multi-family

Pro: A multi-family rental property has several tenants and therefore will not result in the loss of 100% of rental income when 1 tenant vacates. Often the rents on the other units will be enough to cover most, if not all of the underlying mortgage payment until a new tenant is found for the vacant unit(s).

Con: Resale of multi-family properties (3 units and up) require a larger down-payment than single-family units or duplexes. At the time of this writing, 5% down-payment residential funding is available for 1-2 unit rentals, while 15-20% is the minimum down-payment for a 3-4 unit.  Any property over 4 units will require commercial funding, which is another discussion in itself.

 

I’ve found that many new investors find 1-2 unit rentals easier to start with given the availability of financing for these types of purchases.  In the ideal case, an investor’s portfolio will have both single-family and multi-family rentals.  The US tax laws have many loopholes available to property owners, one of which allows the owner of a property to sell without realizing an immediate tax hit on the gain (IRC Section 1031). This mechanism can be a strong ally in growing your investment portfolio.  Leveraging this resource alongside a portfolio with easy-to-sell 1-2 unit rentals and larger multi-family properties can be a powerful resource for buy-and-hold investors.

 

 

Question 2: “A couple of friends and I have discussed pooling our funds to purchase some investment property. How should we organize ourselves to make things, such as the mortgage, taxes, and hopefully the future addition of new properties to our portfolio, go smoothly?”

 

I’m glad you’re considering pulling your group’s resources together to invest in real estate.  Keep in mind that working with friends can make for a fun and fulfilling learning experience, or it can end a friendship, if handles inappropriately.  There’s quite a bit of legwork you need to do upfront to prevent the latter. The key is to be very open with your partners up front to avoid disagreements down the line.

1. Discuss each of your goals to be sure these are in line.  If one of you wants to flip and other wants to buy-and-hold this conversation will offer an early indication that you may not want to venture into this partnership because is unlikely your actions and expectations will line up.
2. Put everything in writing upfront.  Ideally, you’ll speak with an attorney to set up an entity (LLC, Corporation) or a limited partnership (LP) to invest through.  The operating documents for these will spell out almost everything you’ll need to know up front (roles, initial investments and other monies required form each partner) the goal of the entity, etc…
3. Plan your exit are the outset.  Don’t leave this part undone.  When will your company dissolve?  What requirements does the group require before a partner can exit?  Will there be penalties if a partner decides to pull out early?  Given that you are pooling your money together, it might not be fair to allow partners to exit early on because if will leave the remaining partners with a heavy financial burden.  How will liability and profit be split between you?
4. If you plan to purchase property directly into your entity (LLC or Corporation), you’ll need to speak with a commercial banker.  Residential lenders will not allow a buyer to purchase a property in the name of a company, because they want to have direct recourse against the owner in the case of default.  Commercial lenders will allow this (but will likely require a personal guarantee from each partner) but commercial funding typically has higher rates and higher down-payment requirements, so depending on your combined financial strength, there may a drawback to this avenue if you are just starting out.
5. Speak with a CPA - as a group on behalf of the entity, and also individually with your personal CPA/tax preparer.  The way you set up the partnership (C-Corp, S-Corp, LLC with flow-through taxation, LLC taxed as a corporation, LP, etc…) will have a direct impact on your tax burden, so plan accordingly.

 

These are just a few items to consider.  A lengthy and open conversation with your partners is the best place to start.  Then speak with a CPA, corporate attorney (if you choose to set up an entity) and any other professionals related to your cause.  This will be time consuming, but trust me, it will save a lot of headache down the line.  Other than that, sharing the research and learning process with your friends can speed up the learning process and give you an outlet to share ideas and concerns with others who are on the same page, which is a benefit many individual investors don’t have. Keep me posted on your progress and good luck!

 

 

 

 

 

 

 

 

 

 

 

 

Question 1: "I had plans to invest in the real estate market but lately the news stories about its poor performance has me a bit concerned.  Is now a still a good time to invest in real estate?"

Real estate markets are local, so the answer to this question depends on where you live.  Much of the recent press about declining real estate markets has focused on California, Florida, New York and other high-dollar locations that experienced a steep (double-digit) incline in appreciation over the past 5-6 years.  Other markets, including Texas, North Carolina & Utah are still moving strong. 

One thing to keep in mind is that it is always a good time to invest in real estate, you just have to adjust your investing criteria to meet what the market is doing.  When most people think of investing nowadays, they think of “flipping” and “rehabbing”.  This is not the only option for investors.  In addition, given the current market, flipping will likely not offer as solid a return as other investing mechanisms.  For example, the current trend in the US is that the market has slowed down and many of the exotic mortgage programs that prevailed only a year ago are now extinct.  For investors, this presents an opportunity.  Fewer qualified buyers, means less demand for housing.  Less demand for housing means sellers will have to be more flexible in the price and terms they will require to sell their home.  More flexibility from sellers means better deals for investors.  Given that real estate is cyclical (markets typically follow 8 year cycles), buying in a buyer’s market will ensure a bargain-basement price for an asset that, over the upcoming years, will likely rebound and perform very well.  In addition, many would-be new homebuyers are not able to find financing because of the mortgage market meltdown.  These buyers will therefore remain renters for a while longer. This means that rental property owners will fare very well in upcoming years.

So keep in mind, not to think short-term when it comes to real estate.  Given the locality and cyclical movement of real estate, you can still find very good deals that will set you up for early retirement IF you’re able to think outside the norm and learn your market.

 

 

Question 2: "I am interested in starting an investment group among my friends. Should we seek professional help to get things started? If we try to teach ourselves as we go along, what sort of 'newcomer' mistakes should we try to avoid?"

Absolutely.  Unless one of the members of your group is well-versed in the type of investing you’re interested in (stock market, real estate, etc…), you will need to bring in this expertise in from the outside to lower your learning curve and get you started on the right path.  A few additional points to consider:

1. Make sure everyone in your group is on the same page, and put all of your agreements and goals in writing.  A common mistake that friends make is relying too much on their friendship in money and business matters and overlooking some of the smaller items at start-up.  This is the easiest way to kill a friendship, because money matters quickly become personal when disagreements arise among friends.  Visit The National Association of Investors Corporation (NAIC) website and pick up a book on the topic of starting an investment group as a first task for your group.  Their tried and true advice has been used by thousands of investment groups over the years and will help to get you started on the right track.
2. Don’t get attached to the aesthetics of a property or stock investment if the numbers don’t work.  Numbers don’t lie.  No matter how much you like an investment, if your calculations show that it will not make a good investment, no amount of tweaking will fix it.  Move on to the next one.
3. PLEASE don’t take what you read in some of the larger financial publications as gospel when it comes to investing.  For example, that “gem” of a sock that no one knows about is no longer an unknown gem by the time you pick up the magazine.  By then, millions of others are aware of it and the price has probably adjusted to account for this. Real estate is a bit slower to react given the time involved in a purchase, but keep the same in mind.  Many of those headlines are put there to sell the magazine, and you’d probably perform just as well some of the “experts” in these publications, with your own research and that of an investment professional at your side.

 

Question 3: " I recently graduated and started my first job.  I know that it is important to start saving and investing for the future early, but where should I focus my attention now that I am at the beginning of my career?"

Ok, I feel a long response coming, so let me get comfortable.  I’m so glad you asked this question, as it is one of the concerns many recent grads have when stepping out into the real world.  (I had the same concern many moons ago!)  Although I typically focus my advice in the realm of real estate investing and homeownership, given the poor financial investment advice that dominates the air and television waves, I’ll make an exception for this one.  Although I am not a financial advisor, some things just make good common sense, so let’s cover a few of them…

Focus is a good thing. When it comes to financial independence, however, balance is the idea to keep in mind as you start out in your career.  This means not forsaking savings for investing and vice-versa. You may have heard that you should not invest until you have 6-9 months of living expenses saved in a savings or money market account.  This will ensure that you have a comfortable “cushion” in the event that you are injured, lose a job or are otherwise unable to work.  On the other end of the spectrum, you may have heard that you should immediately purchase a home and/or other assets at the start of your career.  Given that real estate values generally go up in stable markets (like the Raleigh-Durham market has in recent years) you should jump in right away and benefit from getting in early.

In actuality, both of these extremes may leave you at a loss.  Focusing only on saving 6-9 months of living expenses, can, depending on your quality of life, take you a year or more.  If this is your sole focus, you will have missed out on a full year’s worth of value increase and tax write-offs in your local real estate market. (Remember, you can write off the interest portion of your home mortgage, which translates into a smaller tax bill for you at the end of the year).  Plus, with the current trend of regular increases in interest rates, you’ll likely pay a higher interest rate on your mortgage (which translates into a higher payment) than you would have a year earlier.  On the flip side, purchasing real estate without having some type of cushion can be considered reckless.  Unless you have long-term disability insurance and at least a few months set aside, hold off on the larger purchases (this includes new car purchases and leases as well).

I commend you for getting your mind in gear to save and invest so early on.  Many of your peers will undoubtedly set this aside for the later years and miss out on the benefits of starting early.  Given that your case is unique to your specific situation, I advise taking on a financial advisor to keep you on track.  As a matter of fact, I have an appointment with mine later today.  Keep in mind that financial advisors are compensated in different ways so be sure to discuss this with them upon your initial meeting (which they will usually offer for free). In addition, following are a few quick do’s and don’s to follow as you get started:

DO:

2. Start to save right away.  It doesn’t have to be overwhelming… $100 per month split evenly between a mutual fund investment earning the historic average of 9% per year, and a money-market account earning 5% a year will land you with over $90,000 in a mutual fund and over $40,000 in cash in 30 years.  Now I’m sure everyone can find an extra $100 a month to make an extra $130,000!
3. Investigate some of the online lenders who offer higher-than-average savings account rates.  ING Direct, Emigrant Bank and HSBC are a few that come to mind.  Since these banks have few, if any brick-and-mortar locations, they pass their cost savings to you in the form of higher returns on your savings accounts.  You may be able to have your savings amount automatically deducted from your check every month and sent directly to your savings account.
4. Interview a few financial advisors and start out during your first 3-4 months of work with the goal of saving as much as you can in a savings or money market account.  This will set you up for success when you do decide to invest in larger assets (real estate included) given that these may require a small out-of-pocket expense up front.

DON’T:

1. Overdo it when the checks start coming in by buying flashy, non-appreciating assets like cars and other toys.  These assets go down in value over time and often, individuals find themselves OWING more on the asset than the asset is actually worth down the line.
2. Put off purchasing a new home or investment property if you are in a market that is on a gradual upswing.  Raleigh-Durham is one of these growing markets and has seen steady growth over the years.  If you are in a NY, CA, FL or similar market, speak with a few real estate brokers in the area to gauge what the market is doing before diving in.
3. Set aside your intent to save and invest.  “I’ll start next month” is an all-to-common phrase that eventually lands many of our counterparts with no savings and no assets decades down the line.  Once you fall into that mantra, it’s hard to get out.  Set your mind to start saving and investing TODAY, and make your investing commitment an amount that won’t be overwhelming for you.  If it feels like you have to deprive yourself of something else in order to do it, you won’t maintain it, so take a close look at your finances and decide what amount works for you.

 

Re: Raleigh-Durham Property Alert: SOUTH DURHAM PRECONSTRUCTION FOLLOW-UP

Hello all,

Thank you for the overwhelming response for the preconstruction townhomes.  It's good to see that many of you act fast when you see a good deal. 

I've received quite a few questions about the rental potential in the area.  I just spoke with one of my property managers and she relayed the following based on another nearby townhome community in the area that went up not too long ago.  She stated that demand in the area for rentals is still very solid.

• 2 bedroom units should rent in the $900 per month range.
• The 2 bedroom unit with the additional sitting area will likely rent for an additional $50/month or so
• 3 bedroom units should go for at least $1000 per month, although with sufficient upgrades (hardwood, stainless steel, etc…) it might fetch an additional $50 or so

Per these numbers, I am forwarding an estimated cashflow analysis.  As you can see it is a breakeven scenario.  Many of you who are currently actively investing in this market already know that new construction in such a desirable area at breakeven is getting harder to find in Raleigh-Durham.

The builder is not releasing the number of investors allowed in the subdivision, and will cut off non-owner-occupant purchases when they reach their desired max.  Let me know if you have an interest and I'll be sure to touch base with you to get you in on the early phases of construction while they are still available to investors.

RALEIGH-DURHAM INVESTMENT PROPERTY ALERT
www.tiffanyelder.com
PRECONSTRUCTION TOWNHOMES
LOCATED IN South. Durham / Research Triangle Park area/ 27713 zip
Proforma Estimates:
Purchase Price	$141,000.00
% Down	20.00%
Mortgage interest rate (blended rate)	6.75%
Amort.Period (Years) (if not interest only)	30
Monthly Gross Rents (if fully occupied)	$1,000.00
Monthly Other Income	$0.00
% Property Management	8.00%
Annual Homeowners Assoc. Dues (HOA)	$1,344.00
Annual Taxes (ROUGH APPROX.)	$1,613.04
Annual Insurance Estimate	$350.00
Current occupancy	0.00%
Interest only financing? (y/n)	y
MONTHLY INCOME: (assuming full occupancy)
Rents	$1,000.00
Other	$0.00
TOTAL MONTHLY INCOME	$1,000.00
MONTHLY EXPENSES:
Mortgage Payment	$634.50
Tax and Insurance	$163.59
Property Management	$80.00
HOA	$112.00
TOTAL MONTHLY EXPENSES	$990.09
ESTIMATED MONTHLY CASHFLOW	$9.91
If this property fits your investment criteria, contact Tiffany while it's still available!
it is still available!
Tiffany Elder, MBA, Realtor
Investment Consultant / Broker Associate
Realty Executives Southpointe
tiffany@tiffanyelder.com
Notes: All information is assumed accurate but not guaranteed.
Full due diligence is recommended before purchasing any investment property.
Cashflow and returns are based on financing and assumptions listed above.
Your financing for this property will depend on your creditworthiness.
Pricing includes possible seller incentives and other closing costs for using their lender and attorney