I often joke with people when they ask me why most people get into real estate. I usually answer them with this statement “Most people get into real estate because they are afraid of technology”. I usually get a lot of laughs when I make that statement, but the real truth is that statement is closer to the truth for most people than you would think.

A lot of people get into real estate because they lost their job or are afraid of losing their job because of a younger more technology friendly work force. The younger investors getting into real estate have no problem embracing technology and have the ability to create and host and maintain their own websites. However, the younger generation makes up a small percentage of real estate investors in today’s market.

While I am not one of the younger generation, I am computer savvy and I have been building, hosting and maintaining my own websites since the mid 90’s. However, most investors don’t know how to create a website, let alone how to host it or even maintain it on a regular basis. I have even talked to a lot of investors who have websites; some of them have even paid thousands of dollars for them, but have no idea how to make changes to them, so they don’t even use them.

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That is why I set out a couple of years ago to create a very professional, yet extremely easy to use website for real estate investors. And these sites are so good that most people think that they would cost a lot of money, but they don’t. I even realized that there were going to be some people who have no clue how to, or even the desire to learn how to setup a website and maintain it, and then there were the techno wizards who want so much control with their websites that they would literally spend every waking moment working on it. So I created a system to cover both. And the best part is, the less work you want to do with your website, the less it will cost you. And if you are like I have become over the years, Lazy, then you can even get your website for FREE. Get your Free Real Estate Website

One question I get all the time from investors is why aren’t the lenders lending, especially if they got all that TARP bailout money? The answer is quite simple if you understand the complications of the issue. So let’s break it down.

First of all back in the good old days last year, financial institutions were required to maintain 10% liquidity compared to the bank’s assets in order to borrow from the feds to create new loans. Today the fed rate for banks to borrow money for the purpose of lending to consumers is around 0.00% (Zero). So if the lenders can lend at 5-10% and their cost of the money is nothing, they would be able to make a huge profit on the interest spread. It is a banker’s dream come true.

However, after TARP and the financial crisis that started last fall, the federal regulators increased the banks 10% reserves regulation to 12% so that the banks would be healthier incase of default. At the same time, everyone’s credit has been capped or closed all together. And the hardest hit segment was the small business sector. This includes a sole proprietor all the way up to a small company with less than 50 employees. Small business represents the largest source of jobs in the country.

With some many people being laid off and credit being shut off, we have been forced to live off of our cash reserves and now many of us are living off our cash as it is earned so our bank savings accounts, money market accounts and checking accounts have less cash in the banks. This has dropped the banks liquid reserves from the old requirement of 10% down to probably 7-8%.

So banks now need to increase deposits from us by 4-5% or sell off assets to increase their liquidity levels to the new higher 12% regulation. This has created a vicious circle were the banks can not lend to us, which forces us to use our cash now rather than leave it in the banks which further decreases the banks liquidity reserves to assets ratio.

To make matters worse, government is doing everything it can to stimulate the economy and prevent further market corrections. But until the market corrects itself, the banks will not be able to lend to us, and until they can, we have no choice but to live off our cash rather than deposit it in the banks for more than a few days at a time.

The market will correct itself despite the government, but the more the government does, the longer it will take. Many economists, and amateurs who have studied this situation, like myself agree that if the government would have just left the markets do its thing, we would have already seen the bottom of the market and the banks would just now be at a lever were than could start freely lending again.

Apparently So. Recently President Obama signed the Fraud Enforcement and Recovery Act. It also expands the justice department’s authority to prosecute mortgage fraud. See report from CNBC available at . Mortgage Daily News

With the current housing and financing situation in the US, it is not surprising that some have resorted to fraud. It is things like this that give the industry as a whole a bad name and I do not pity those who are involved. The need to be dealt with and I hope they get what is coming to them. The quicker we can take the trash out, the quicker the markets will start stabilize.

All the experts are saying that we are seeing signs of a recovering in the housing market and the declining in the number of lender mitigated sales (foreclosures and short sales). However, what they are not talking about is why?

Back in November, Fannie Mae and Freddie Mac had a moratorium on foreclosures through the first part of January in hopes that the TARP bailout funds would relieve homeowners in default and lenders with all those toxic assets. When everyone realized that the TARP funds were never intended to help out homeowners, the incoming president, Barack Obama stated that the first thing on his agenda was his stimulus package and that was going to save America. So Fannie Mae and Freddie Mac re-instituted the foreclosure moratorium to see what affect the stimulus package was going to have on homeowners in default and the lenders with all those toxic assets.

It soon became obvious that the stimulus package was not intended to stimulate the economy or save America. So Fannie Mae and Freddie Mac removed the foreclosure moratorium in March. That was roughly 4-5 months with virtually no new foreclosure filings from the two mortgage giants. That is why we are seeing a decrease in foreclosure sales right now and why the experts are saying that we have reached the bottom.

There are other reasons why we are seeing what looks like a bottom right now as well.

• Real Estate Values have plummeted in the last 6-9 months or so. This has cause a lot of people who would normally have listed their properties to step back and wait to sell.
   
• The $8,000 first time home buyers tax credit has drove a lot of new buyers to the market right now, before the credit end on December 1, 2009.
   
• Real estate investors who still have the ability to purchase properties have been very active buying up good deals on foreclosures.
   

These reasons and more have caused a decrease in available inventory and an increase in number of buyers. Talk to anyone who is active in the market today, and they are facing multiple offers on good deals.

All this activity is the reason the experts are predicting that we have reached the bottom of the market and that we are in the recovery stage. I hope that I am the foul and they are right. Because I think we have only seen the calm of the eye of the storm. I think that later this year, we will see a huge number of foreclosures hitting the market and the first time home buyers will be out of the market when the $8,000 tax credit expires. I also believe that with all the stimulus and spending that the Obama administration is doing will prolong the housing recovery with all the job losses and the massive tax increases, if they get everything that they want passed.

Later this year and the first part of next year will be a great time for investors. I think there will be plenty of inventory to chose from and a lot less competition in the market. I think that we have only seen about 25% of the total number of foreclosures as a result of our current economic situation.

For months I have been hearing all the experts predicting that we are finally seeing the bottom of the market, and every month they keep saying the same thing. I have even said the same thing, because in small areas, prices have stabilized or even increased slightly. But it seems like the majority of area’s are still falling, just not as fast as other areas.

So when will we see the recover. At this point, your guess is as good as mine. I am positive that if the president’s administration (that includes the current administration as well as the previous one) and congress would have just let the market correct itself, we would already be on our way to recovery and we would have seen prices bottom and very possible start to slightly increase before leveling off.

Now it looks like the current president and congress want to prolong the recovery for political gain. This infuriates me and it should you as well. The housing market is the basis of the American economy and the politicians are doing eveythoin they can to keep driving housing prices down.

You disagree with me, then let’s take a look at a few things congress have either passed or are working on passing as we speak.

• TARP program: This program was sold to the American public as the only way to prevent the housing crisis and they were going to use the $700 Billion dollars to buy up bad loans. However, they never bought up bad loans, but they did buy stocks in the big financial institutions.
   
• The President’s $1 Trillion Stimulus Bill: We were told that if we didn’t pass this bill yesterday, then unemployment would go as high as 9%. There for we needed the stimulus bill to stop unemployment below 8%. As of today, unemployment is almost at 10%. The stimulus bill was also supposed to create 2 million jobs which would help the housing market as more people would be working, there for they would be able to afford their house or allow them to buy a new one. Rather than creating or saving 2 million jobs, we have actually lost over 2 million jobs. That’s a 4 million job swing and the funny part is, they have spent less than 1% of the stimulus money so far. The majority of the stimulus money isn’t supposed to be spent until the year 2011-2012, which just happens to be election year for Obama.
   
• H.R. 1728: Mortgage Reform and Anti-Predatory Lending Act: This bill will prevent investors from selling more than 1 property every three years with seller financing if it passes the senate. This will further decline real estate values because the option of selling on a contract for deed or taking back a small second so the buyer can get a first mortgage.
   
• H.R. 2454: American Clean Energy and Security Act of 2009: otherwise known as Cap and Trade, AKA Cap and TAX. This bill, if it passes the senate will increase all energy cost for everyone. This includes gas and electric utilizes, not just gasoline.
   

Then there is the foreclosures. We have only seen a small fraction of the foreclosures that are yet to come. I think that we may have seen only about 25% of the total number of foreclosures that are expected because of the continuing job losses, tax increases and congressional spending.

These are just a few of the big ones. And all this stimulus combined will drive real estate values down even further. From an investors stand point, things couldn’t be better, because rents are currently holding were there are, so now is the time to cash flow. For the regular home buyer, this is the best time to buy, but for sellers, things don’t look to good in the near future.

I wish I had a crystal ball and could predict what will happen, hopefully I am wrong and real estate values will stabilize and start to increase like all the experts have been predicting for months.

As part of President Obama’s American Recovery and Reinvestment Act the $8,000 First-Time Home Buyer Tax Credit gives first time buyers incentive to buy in an effort to increase demand and get a handle on the falling home prices. This provides investors with another means of getting buyers to buy, which is something we all should take advantage of. The details and requirements are fairly straight forward:

• The buyer must not have owned a home in the past three years
• The new house must become the buyer’s primary residence for 3 years, if not, then you must pay back the $8,000
• This credit will only apply if the buyer buys between January 1, 2009 and November 30, 2009.

The 2009 Credit is a true, money in the pocket deal. Those that bought a home under the 2008 version, which was basically an interest free loan to be paid back over the course of 15 years) cannot claim the 2009 credit.

The income qualifications hinge on the Modified Adjusted Gross Income (MAGI)

Adjusted Gross Income is your total annual gross income less your standard deductions or if you itemize, then the deduction would be your total itemized deductions. Example, if you make $50,000 a year and you have $10,000 in itemized deduction then your AGI would be $40,000.

For single tax payers the breakdown is as followed in terms of MAGI:

• Full Credit - x < $75,000
• Partial Credit - $75,000 < x < $95,000 – Partial Credit
• Not Eligible - $95,000 < x

Married Partners who file separately each having a MAGI <$75,000 are eligible for $4,000 each.

Filing jointly with a combined MAGI of $150,000 < x < $170,000 will be able to get a reduced credit.

When a buyer is looking to take advantage of the 2009 Tax Credit and meet the qualifications they have two options that they can take and in some cases it may be better to do one over the other:

Claim it for 2008 – If the buyer has already filed their 2008 return they can file a 1040x amendment and claim the credit after the purchase. This would be worthwhile if their MAGI fell in the range of getting a full credit and/or if they are expecting to be earning more in 2009 that would push them into partial credit territory.

Claim it for 2009 – The buyer can claim their credit on their 2009 tax return by using the 5405 form. If the buyer isn’t expecting to make as much this year, but made $75,000 < x in 2008 it would be worth considering waiting for the 2009 tax season.

Anyone selling homes should take measures to integrate this incentive into their marketing materials. It would be a savvy idea to incorporate the 2009 First Time Home Buyer Tax Credit into a special report, into your flyers, handouts, internet ads, pretty much anything across the board when it comes to pushing the sale of a property to an end buyer. Those who can do this the best will have an advantage over those who don’t in what will possibly end up becoming a lucrative but competitive field. As home prices fall to levels where renters, who didn’t have their credit ripped apart by the foreclosure wave, will fit these tax credit qualifications will be looking to move up, especially with a $8,000 sweetener.

According to the Star Tribune the Twin Cities area and rural Minnesota will be capitalized with twin $5 million loans from the McKnight Foundation for Foreclosure areas.

These are the type of stimulus incentives that the economy needs to recover and it couldn’t have come at a better time. All indications in the Twin Cities are that we are seeing the bottom of the market in many area’s for. We have been making many offers on bank REO’s at full price in multiple offer situations and we have not been winning. The cost of poker is going up…

It’s that time of year again, when we get the itch to put out Bandit/Street Signs. Why do we get the itch, because of the rush we get from a higher that usually volume of calls from motivated sellers. For many investors, including myself, Bandit/Street signs are the best source of leads and one of the primary forms of marketing that we use to get motivated sellers to call us.

Many beginning investors either don’t believe this or think that Bandit Signs are too expensive. Finally I can help take that fear away. I just found a new source for Bandit Signs with some of the best prices I have seen and right now they are giving away FREE Bandit Signs to new customers so you can give them a try. The only thing they are charging is the shipping. Give them a try at:  www.FreeBanditSigns.com/111

Just when things are looking like they are settling down, the great DFL of Minnesota is at it again. Today, the MN House of Rep. Tax Committee released a "delete all amendment" to HF2323.

Items of note:

1. Eliminate Mortgage Interest Deduction
   • Replaced with a maximum $420 credit
2. Eliminate Property Tax Deduction

Here is a short video with Christopher Galler from the Minnesota Association of REALTORS explaining this.

Contact your Representative (if you live in Minnesota) and urge them to Vote NO on HF2323.

Most newbie investors are scared of making offers because they are not sure of the repair costs. This is completely understandable if you did not come from a construction background. I would venture to say that if most newbie investors were comfortable with repair estimates, then they would be way more comfortable making offers.

There is a way to quickly estimate repairs if you break the repair cost down into major components vs. miscellaneous items. Here is a list of what I consider Major Components:

Everything else is considered a Miscellaneous Item. If you know the total cost of all the Major Components, then I take 25% of that number to determine the Miscellaneous Items and add the two together. This will give you a general ball park number so that you are able to make an offer. However, never close on a property until you have an experienced contractor give you a bid or double check your numbers.