If you’re buying your first property with an eye toward investing in the future or are actively investing into rentals, this seminar can save you thousands of dollars in tax payments when you sell. Yes, yes, it’s perfectly legal. Section 1031 in the Internal Revenue Code allows you to defer all of your capital gain taxes to the IRS (15%) and the Franchise Tax Board of California (9.3%) if you buy another property of equal or greater value.

But you must know what you’re doing. And you must use a qualified intermediary.

So attend the seminar and empower yourself.

Consumers usually believe these are better deals than the regular homes in any particular neighborhood. (Why I’m still trying to understand!)And so, there are a lot more buyers for short sales priced the same as a “normal” or individually owned house.

But that being said, not all short sales are going through. Just last week, I canceled my own listing in Colonial Village although it was priced well because the lender would not respond to the offer which was “too low” according to their appraisal. Problem with the appraisal: too high.

So between the offers being too low and the lender’s appraisals being too high, a lot of homes that are technically short sales are not going through. Which means they will either be auctioned or be back on the market as bank owned properties. Unfortunately because they will be left vacant for long lengths of time, they may have issues with deferred maintenance and / or vandalism.

However, it is important to note: if you made an offer on a house and it didn’t go through during the short sale phase, you might be able to revisit it and make the same offer after it is a bank owned property (if it didn’t sell in auction). The earlier rejection may have been because the seller didn’t qualify for a short sale and have nothing to do with your offer.

Something to think about.

Which makes me think about the new club of buyers I’ve been running into lately. This market sure has created a new surge of investors and as well as first-time buyers. I guess every new market downturn brings with it its own club of new investors. What I’m seeing is the new buyers are not as scared of a market turnaround. They’re in it for the long haul. Even the first-time buyers today have an eye to retiring with their real estate intact. They understand the value of a home and are aware of the advantages of rental properties.

Like the clients I met today said, “Owning real estate in California is like owning gold. Why would you EVER sell?”

Well said! I thought. My thoughts exactly.

The answer is, it depends.

It depends on a lot of things, the most important being of course – will it even go through? I had the unfortunate experience yesterday of having to withdraw one of my listings because the home had two mortgages on it and the first lender could go into auction and sell the home to recover all of their principal. The second note however might not get anything. In other words, the first lender had no motivation to sell short and the second lender was getting nothing anyway.

The other thing the answer to the above question depends on is of course, what are the comps? How much are the comparable properties in the neighborhood selling for? The seller of the short sale may have paid exorbitantly more and the place might not even be worth a look unless it really is a good price for the buyers.

Thirdly, and probably the most importantly, what condition is the home in? Chances are, if the sellers haven’t been able to pay the mortgage, they haven’t been able to make any repairs to the home. How many of these repairs are serious?

If it were me, I would look elsewhere. There are many properties on the market that are not short sales that are still good deals. To look for short sales in particular seems to me a huge undertaking of patience for not a very high return. But if you are determined, they sure are out there!

So anyway. I picked up Frank Gallinelli’s “What Every Real Estate Investor Needs to Know About Cashflow” and found it absolutely fascinating. If you like numbers (or if you like the RIGHT numbers) and analyzing the heck out of every deal, this is the book for you.

The writer also has a website where you can buy software that can track your investments and a few other free calculators. Worth a visit.

This was our first investment property bought by my husband near Fruitridge. It is a 2 bedroom, 1 bath home, fairly typical of the neighborhood. About 1000 square feet with one purple bedroom and one blue bedroom. The kitchen was green – all in high-gloss paint. But since it was his first home he bought it from HUD in early 2001.

For $50,000.

It was a foreclosed home and everything was in pretty bad shape. But my husband understood instinctively that the rent in his apartment would continue to go up. The payments on this home however would remain the same.

He bought it with $500 of his own money. Since it was a foreclosed home, and he was a first-time buyer he put the rest of his 10% downpayment – $4500 on a credit card (getting a first trust deed for $45,000) and no one noticed. He moved in.

This is what we proceeded to do with the property: we fixed the holes in the walls, refinished the original hardwood floors, changed the drywall in the bathroom, replaced the windows, repainted the inside and the outside, changed the light fixtures, put in a new sprinkler system, landscaped the front and back, tore down the back patio. Then we refinanced and pulled enough money out to use as a downpayment on another house.

In today’s market, that first home is still valued at right around $235,000. Do you want to venture a guess on the return on our original investment?

But it doesn’t end here. We now have monthly mortgage payments of about $1100. The rent we collect is $1050. In a few years, the home will be paid off (or leveraged again to buy another piece of excellent real estate) and we’ll do it again.

So tell me first-time buyers, would you buy a home that looked like this?

In a short sale, the lender is usually willing to look at only one offer at a time, so of the ones that come along, I’m hoping we get a decent enough offer to submit to Countrywide. That being said, there has been genuine interest. Yesterday and Monday felt like a hearkening back to the real estate boom market we had in 2004, what with the number of Realtors® and others interested.

Want a closer look at the property? I plan on showing it Sunday between 9:30 and 10:00am. Feel free to come!

… That sentence got too long, so let me begin again. While talking about our potential buyers, Huck – my preferred mortgage consultant – and I got into an email commentary of the Sacramento real estate market and how it will end eventually. Here’s a direct quote:

“Here’s what will happen: Without [the buyers on the fence] constantly in (watching) the market, inventory in a neighborhood of interest will drop, then some house will sell
for a comparatively high price, it will then become “the comparable” for
everything selling subsequent, and we’ll be off on the upswing again. I’ve
seen it happen over and over…

“There’s one almost identical to mine that did just that and it closed about
2 wk ago, driving mine from about $850,000 to $900,000 in one shot. Now
there’s another one like mine pending for $895,000.

“Truly savvy investors are willing to buy BEFORE that happens, and are
willing to see lower prices for a short time before the rise…”

Something to think about!

My ambition, like someone else mentioned in the SacBee a while ago, is to own entire streets. Monopoly player, for a long time (and Scrabble too, which is the right combination for a Realtor®, I guess!) This real estate investor owned all the houses on the street he lived on and the Bee cautioned him that he was not “diversified!”

Let me fall back on my favorite quote from Warren Buffett again: “Diversifying is insurance against ignorance.”

But, back to the neighborhood: the Colonial area is largely ignored by investors and first-time homebuyers today for two main reasons:
1. There seems to be a general look of untidiness in the neighborhood, thanks to the vacancy factor of foreclosures, and
2. The zip code 95820 is shared by Oak Park, which we know not too many people want to move to because of the crime.

To combat that, I say:
1. Foreclosures have hit this area hard – which makes it perfect for you investors! and
2. 95817 is also shared by Oak Park – these are postal codes, not crime or wealth codes.

And the fact remains, if you’re looking for great deals, they’re all here! The average home is about 1000 sq. ft. with 3 bedrooms and 1 bath. Backyards are modestly sized and streets are cleaned every month on third Thursdays. (Yes, I did live there for a while – in a home we knew would be a good rental in a couple of years.) Most homes have real hardwood floors and if you get lucky, homeowners have put on new roofs and central air. Rent hovers right around $1250 a month. Property values are depressed now to about $180,000 but generally have been hanging around $250,000 for a turnkey home.

If you have an extra $50,000 to invest, you should be looking around Colonial! Consider these!

Which is pretty good. But here’s what a lot of people are not aware of with the current market – sales suck, but rents are good. All those people with foreclosed homes have to go somewhere! And chances are they will end up back in the same neighborhood they left.

So, for the first time in a while, rents have inched up a little! Although the aim of buying an investment property is always to make it cash flow, that’s not always the case in Sacramento. But in this market, that dream might just become a reality! So, come on investors – there are a lot of houses out there just waiting!