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|INVESTMENT RESEARCH ANALYSIS||As of||2/10/14|
|Asset Address||Housing Type||Asking Price||ARV less SC||Spread||Const Ass||Net Spread||Decision||20% ROI Analysis||Cap Rate||Per Unit|
|351 Montague Place, South Orange||1||$289,000.00||$352,500.00||$63,500.00||$28,900.00||$34,600.00||Reject||$63,580.00|
|16 Garrabrant Rd, Clifton||1||$209,700.00||$281,060.00||$71,360.00||$28,106.00||$43,254.00||Reject||$47,561.20|
|51 Sussex Rd, Clifton||1||$225,000.00||$305,000.00||$80,000.00||$30,500.00||$49,500.00||Reject||$51,100.00|
|80 Chatham Terrace, Clifton||1||$335,000.00||$450,000.00||$115,000.00||$90,000.00||$25,000.00||Reject||$85,000.00|
|9 Lennon Pl, Clifton||1||$349,000.00||$409,000.00||$60,000.00||$40,900.00||$19,100.00||Reject||$77,980.00|
|75 Union Street, E. Rutherford||2||$239,500.00||$291,400.00||$51,900.00||$29,140.00||$22,760.00||Reject||$53,728.00||7.4%||$119,750.00|
|10 Cutler St, Clifton||2||$189,000.00||$200,000.00||$11,000.00||$20,000.00||($9,000.00)||Reject||$41,800.00||6.9%||$94,500.00|
|117 Forest Street, Montclair||4||$585,000.00||$500,080.00||($84,920.00)||$50,008.00||($134,928.00)||Reject||$127,001.60||7.4%||$146,250.00|
|181 Harrison Avenue, Montclair||1||$169,000.00||$249,100.00||$80,100.00||$62,275.00||$17,825.00||Reject||$46,255.00|
|11 Ivy Lane, Parsippany-Troy Hills||1||$438,000.00||$427,700.00||($10,300.00)||$42,770.00||($53,070.00)||Reject||$96,154.00|
|46 Centerton Drive,Parsippany-Troy Hills||1||$275,000.00||$282,235.00||$7,235.00||$28,223.50||($20,988.50)||Reject||$60,644.70|
|27 Highwood Road, Parsippany-Troy Hills||1||$250,000.00||$347,800.00||$97,800.00||$69,560.00||$28,240.00||Reject||$63,912.00|
|88 Lawrence Road, Parsippany-Troy Hills||1||$245,000.00||$203,980.00||($41,020.00)||$20,398.00||($61,418.00)||Reject||$53,079.60|
|19 Morris Avenue, Morristown||1||$389,000.00||$404,200.00||$15,200.00||$40,420.00||($25,220.00)||Reject||$85,884.00|
|236 Hillside Avenue, Livingston||1||$325,000.00||$399,500.00||$74,500.00||$39,950.00||$34,550.00||Reject||$72,990.00|
|5 Cypress Street, Maplewood||1||$325,000.00||$376,000.00||$51,000.00||$37,600.00||$13,400.00||Reject||$72,520.00|
|59 Virginia Avenue, Montclair||1||$172,900.00||$300,800.00||$127,900.00||$60,160.00||$67,740.00||Review||$46,612.00|
|33 Grenada Place, Montclair||1||$180,000.00||$366,600.00||$186,600.00||$109,980.00||$76,620.00||Review||$57,996.00|
|93 Riggs Place, South Orange||1||$275,000.00||$376,000.00||$101,000.00||$56,400.00||$44,600.00||Reject||$66,280.00|
|181 Mapes Avenue, Newark||3||$114,900.00||$235,000.00||$120,100.00||$58,750.00||$61,350.00
|59 Mapes Avenue, Newark||3||$139,000.00||$211,500.00||$72,500.00||$42,300.00||$30,200.00||Reject||$36,260.00||7.3%||$46,333.33|
|178 Parker Street, Newark||2||$148,000.00||$159,800.00||$11,800.00||$7,990.00||$3,810.00||Reject||$31,198.00||8.5%||$74,000.00|
|52-54 Cortland Place, Newark||2||$149,900.00||$164,500.00||$14,600.00||$8,225.00||$6,375.00||Reject||$31,625.00||6.8%||$74,950.00|
|46-48 Church Street, S. Orange||3||$399,000.00||$517,000.00||$118,000.00||$51,700.00||$66,300.00||Reject||$90,140.00||5.6%||$133,000.00|
Dealing with tenants can be a pain… which is why on today’s show we’re going to go beyond tenants and look at some “no-tenant” methods of investing in real estate.
I had an opportunity to talk with the guys at Biggerpockets.com about my journey from real estate agent to a syndicator to house flipper to landlord and finally to tax lien investor. I hope you guys find the podcast useful and entertaining. Click the link below to hear the podcast.
Learn more by visiting Biggerpockets.com
With 2013 coming to an end in less than 2 weeks, is the US housing market poised for true demand growth recovery in 2014?
The state of US finances in 2013 has been a little too exciting for many people, with the government being forced to shut down for two weeks in October because a budget agreement could not be reached in time. The country was in danger of defaulting on its debts, a disaster narrowly avoided. Just as in a domestic household, big expenses can have a serious impact on funds available, and there is another round of payments due in February 2014, meaning there could be another shutdown next year. This is bad news for government employees, and wise investors may be asking if this is a good time to enter the housing market. However, the good news is that you do not need to be a millionaire with spare cash sitting under the mattress to invest in real estate. Small investors can take advantage of the housing opportunities without risking a lot of capital, so the future of the housing market really affects everyone.
This time last year, improvements in household formations were being predicted, meaning that people are forming groups, whether it is couples getting married or granmoving in with the kids, and this is good news for the housing market. Of course, a lot happens in a year, so have these predictions come true?
New families, new houses
According to Reuters, house building is at its highest rate for six years, with single family homes showing the fastest growth, at building rates not seen since March 2008 levels. This is an important consideration, as single family homes are the biggest segment of the housing market, so if growth in this area is healthy, this is a good indicator for the rest of the market. All of this is despite mortgage rates increasing in anticipation of the Federal Reserve cutting back its bond purchases. As we know, if the interest rates rise, fewer people will be able to afford their monthly mortgage payments, so higher rates are a bad thing, right? Not necessarily. The fact that the Federal Reserve is considering cutting back is a good sign that finances have improved. A decision on whether to pull out of the bonds, which effectively guarantee payments for the lowest income households, is imminent at the time of writing, but most financial experts expect the Federal Reserve to continue with its bond buying for the moment, with a view to tapering payments through the early part of next year.
Although interest rates may be on the rise, these have to be seen in some perspective. Currently, the rates in the US are around 4.42% on a 30-year mortgage, and 3.43% on a 15-year mortgage. Historically, our interest rates are very low. In October 1981, they were a frankly terrifying 18.45%, but have been falling with small peaks and troughs ever since. The best advice is to shop around to get the right deal for your needs. “Simply sticking a pin into a list of the top 10 mortgages isn’t enough,” advises money.co.uk. You need to do your homework and make sure you qualify before you apply, to avoid unnecessary rejection and expenses, not to mention a failed application on your credit history.
First sign of recovery is in commercial real estate
Whether renting or buying, Americans want to have somewhere to call home. If, as already mentioned, new household formation is on the increase, where are all these people going to live? A recent report by Forbes Insight and CIT Group Inc claims that where the commercial market goes, the domestic market follows, so they are looking optimistically at the figures. It is not all good news; although 57% of the 208 commercial real estate industry executives interviewed for the report thought the commercial market is improving, there was still a cautious third that thought the trend is still downwards. However, stronger investment in commercial properties suggests that employment levels will become higher, and once people feel secure in their jobs, they are happier to release the stranglehold on savings and put down some roots.
In the Forbes/CIT report, the biggest deciding factors in their predictions for commercial markets are interest rates and unemployment. Almost 60% of the respondents cited the Affordable Housing Act as a market depressant, and two fifths cited the Dodds-Frank Act, which introduced greater financial regulation. However, this was more a focus of the depressants on their own businesses, rather than on the commercial and housing markets themselves, so the prognosis for homebuyers and investors remains cautiously optimistic.
Be a tortoise, not a hare
The aim this time has got to be steady growth, without the bubble-effect of the last decade. Without the boom and bust, people will be able to build up confidence in the housing market once again. For most, a house is the biggest purchase they will ever make, and yet investment is not their primary aim; people want a home. Things change, jobs relocate, families move. People need to be able to sell when necessary, and buy where the new opportunities are, and this can only be done when the market is both realistic and steady. The same applies to the investor. Rentals that show a slow but steady growth are a better investment than ones where the rates spiral out of control until no one can afford them, leading to empty properties. Let’s hope we have all learnt our lesson, and look forward to a realistically prosperous 2014.
Real Estate is an attractive asset class with several barriers to entry. A few of those barriers are: market savvy, cash reserves and financing may all be required to be a success within the asset class. Even seasoned investors face challenges in managing dynamic real estate markets.
So, how can you gain real estate exposure without a large budget or leverage? An affordable solution is real investment trusts, or REITs.
What are REITs?
A REIT is a corporation that owns properties and earns rental income or collects mortgage interest from lending activity. Many REITS are hybrids that manage real estate and mortgage portfolios.
Public REITs trade on major exchanges, which make buying easy and relatively affordable. You can purchase as little as one share through discount brokers or choose a specialty mutual fund. With a small amount of money, you gain professional management and real estate exposure to various markets that may not otherwise be possible.
The IRS requires that REITs pay out 90% of taxable income to shareholders, making these shares a liquid and dividend paying means of passive real estate investing. Even well-heeled investors may consider REITs for exposure to particular markets without tying up capital or increasing leverage.
Depending on risk factors such as interest rates and vacancy data, income investors can find yields exceeding 6% with monthly or quarterly dividends. The risk premiums for international REITs or focused portfolios may exceed double digit yields.
Selling real estate can take time and comes with high transaction costs. Hiring an agent, property listing and the closing process must be completed. Institutional, private syndicate owners and money managers such as Elliott Broidy may utilize a REITs as a disposition alternative to directly selling assets through agents or auction houses.
Once the assets are transformed to REIT securities then they can simply be sold like other securities, which allow you to quickly sell holdings for cash as needed. From a management standpoint, you can easily unwind and invest in positions based on dynamic conditions.
This facilitates response to economic indicators that may require portfolio tweaks.
Owning a diversified real estate portfolio requires capital and time, among other needs. Owning such a portfolio through direct investing is out of reach for most individuals. You can gain access to different asset classes and geographic regions through REIT investing. This enables you to quickly fill portfolio gaps or take shorter term positions if needed.
International real estate exposure is also made easier by REIT investing. Many countries have restrictions on foreign ownership of real estate in promising property markets. Buying international REITs helps you more easily benefit from foreign real estate.
Investment Ideas for 2014
Idea I: Investing in Foreign REITs with currencies stronger than the dollar
Given a weak dollar, you can enjoy even higher dollar adjusted returns when converting dividends from foreign currencies. If you choose to reinvest dividends, capital appreciation can also be magnified when converting to dollar terms.
Ideas II: Growth in healthcare coverage and needs given Baby Boomers and Obama Healthcare
Locate REITs that specialize in nursing homes and assisted living help capitalize on the real estate aspect of an aging population. Buying REITs focused on healthcare properties can complement your healthcare equities. This may help you benefit from divergent trends between stock performance and real estate.
Idea III: Impending Interest Rate
Locate Mortgage REITs that have a high exposure percentage to long dated mortgage loans with low prevailing blended interest rate. These REITs would have the highest risk of NAV devaluation as interest rate increases thus allowing you to profit on them by buying put options or shorting the stock.
Income investors with capital and time restrictions may use REITs to diversify their portfolio.
Even if you have adequate financial resources or knowledge, a real estate investment trust increases liquidity and diversification at a low cost.