“The intent of the new law is to force more filers into Chapter 13 plans. These plans require more filers to make payments to their creditors as opposed to a Chapter 7 filing that completely discharges their debt,” said Jeffery Freedman, senior partner at Jeffery Freedman Attorneys at Law, according to Buffalo Business First.
The legislation provisions allowing for six months of pre-bankruptcy credit counseling has made little impact on directing people away from bankruptcy. The Baltimore Sun reports that, at the time, critics of the new law claimed few people were actually abusing the system. This supported their complaints that the law would not significantly reduce bankruptcy filings.
On the other side of the issue, banking proponents who pushed hardest for the legislation saw the early numbers as vindication for their efforts. Now they are saying that the rising numbers do not reflect the long-term efficacy of the law and that the levels being seen are lower than those in recent times when personal bankruptcies numbered more than a million annually, according to the Baltimore Sun. Bankruptcies rose 30 percent, to 2 million, before the new law took effect, last year.
Fritz Elmendorf, spokesman for the Consumer Bankers Association, told the Baltimore Sun that the decline in filings “does not suggest that there was a lot of discretionary filing, which was the key argument that we put forward. It’s often become something of a financial planning tool, and it’s not necessarily people at the very end of their ropes.”
Still, Senator Charles Grassley (R-IA) told the Des Moines Register that current filing statistics leave him “hard-pressed that we’d be at the 2004 numbers by the end of the year.”
Bankruptcy attorney Rory Ellinger told Black Enterprise that although experiencing a reduction in bankruptcies lately, a reduced number of filings should not indicate there is any automatic reduction in the number in creditors starting collection actions on people and families experiencing financial hardship.
The critics, including attorneys, respond that rising energy costs, as well as increased credit card minimums and how higher interest rates will impact adjustable–rate and interest-only mortgages, will seriously affect those currently living on the borderline, according to the Baltimore Sun.
Brad Botes, executive director of the National Association of Consumer Bankruptcy Attorneys, told the Baltimore Sun, "Congress tried to cure the sickness of too much debt by making it harder to get to the hospital." He finished, “There is no other viable alternative. People have significant money problems.”
The Memphis Daily News reported that the reason people and companies, especially, file for bankruptcy protection are the “unknowables.” These are variables, like the arrival of well financed competitors that can dissolve a business’ solvency.
Bankruptcy attorney Norman Hagemeyer told the Memphis Daily News, “I’ve been told by the principals that these big box, or whatever you call them, retailers came into town, and that puts a strain on a lot of smaller places that were specialized.”
Tuesday, August 15, 2006
Bankruptcy Filing Reports Paint Misleading Picture
Bankruptcy Filing Reports Paint Misleading Picture
July 19, 2006 Posted By Tiffany Sanders J.D. http://blog.totalbankruptcy.com/
Since the first quarter 2006 bankruptcy statistics were released, newspapers across the country have been headlining stories with lines like "Bankruptcy Filings Plummet!", but the comparison of 1st quarter 2006 statistics with 1st quarter 2005 statistics paints a very misleading picture.
In November, 2005 (the first full month after the law change), 5,460 personal Chapter 7 cases were filed. In January, that number climbed to 13,033, and in March there were 30,626 new personal Chapter 7 filings. It's true that Chapter 7 filings are down considerably when compared to the first quarter of 2005, but with March filings totalling nearly six times the November filings, it appears that the numbers are quickly normalizing. And that's no surprise, since the law change created some additional complications, paperwork, and attorney responsibilities, but it didn't solve anyone's financial problems.
July 19, 2006 Posted By Tiffany Sanders J.D. http://blog.totalbankruptcy.com/
Since the first quarter 2006 bankruptcy statistics were released, newspapers across the country have been headlining stories with lines like "Bankruptcy Filings Plummet!", but the comparison of 1st quarter 2006 statistics with 1st quarter 2005 statistics paints a very misleading picture.
In November, 2005 (the first full month after the law change), 5,460 personal Chapter 7 cases were filed. In January, that number climbed to 13,033, and in March there were 30,626 new personal Chapter 7 filings. It's true that Chapter 7 filings are down considerably when compared to the first quarter of 2005, but with March filings totalling nearly six times the November filings, it appears that the numbers are quickly normalizing. And that's no surprise, since the law change created some additional complications, paperwork, and attorney responsibilities, but it didn't solve anyone's financial problems.
Monday, August 14, 2006
Katrina, the Gulf Coast and Bankruptcy
August 08, 2006
Bankruptcy in the Wake of Katrina
posted by Rafael Pardo http://www.concurringopinions.com
I’ve recently been thinking about the difficulty researchers will face in studying Hurricane Katrina’s effects on bankruptcy filing rates in New Orleans. A couple of weeks ago, over at Credit Slips, Bob Lawless (University of Illinois) discussed the importance of extending credit relief to natural-disaster victims. Lawless’s empirical work on bankruptcy filing rates after a major hurricane has found “that for every two new bankruptcies that occur in areas unaffected by the hurricane, there are three new bankruptcies in the judicial district where the hurricane made landfall.” The study focused on hurricanes from 1980 – 2004, so I’m curious to see whether in the case of Katrina this finding will hold to be true for the Eastern District of Louisiana (E.D. La.), within which New Orleans is located. My hunch is that it won’t. Since the New Orleans diaspora involved hundreds of thousands of individuals, many of whom would be likely candidates for bankruptcy but have not returned (and may never return) to the city, the increased volume of bankruptcy filings will not materialize in E.D. La. A preliminary look at recent bankruptcy-filing data from the district suggests as much.
As an initial matter, there has recently been a national downward trend in bankruptcy filings. According to statistics from the Administrative Office of the U.S. Courts, bankruptcy filings for the second quarter of Fiscal Year 2006 (1/1/06-3/31/06) were down approximately 71% nationwide compared to the second quarter of FY 2005. This dramatic downturn has been attributed to the deluge of bankruptcy filings prior to October 17, 2005—the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which was intended to make it more difficult for certain consumer debtors to obtain bankruptcy relief. However, bankruptcy filings for E.D. La. had dropped approximately 86% for the same period of time—15% more than the nationwide figure. In terms of absolute numbers, there were only 340 total bankruptcy filings (60 business and 280 consumer) within the district.
It strikes me that these figures, in addition to being a product of strategic behavior by debtors in anticipation of BAPCA, also reflect the fact that the majority of individuals who have returned to New Orleans probably have had the financial means to stave off a bankruptcy filing. On the other hand, many of the New Orleans evacuees who remain away from the city have probably lost much (if not all) and either (1) have less of an incentive to return or (2) do not have the financial means to return. It’s these individuals whom researchers will have to track down—in places like Houston, Birmingham, Atlanta and Nashville—in order to understand fully the effects of Hurricane Katrina on financial distress. Moreover, any comprehensive study will have to analyze the impact of the diaspora on the communities where New Orleans residents relocated. The economies of these communities will simultaneously have experienced financial gain (e.g., influx of consumer dollars, workforce expansion) and financial strain (e.g., increased demands on public services such as health care and education). Considering the latter, it could very well be the case that financial distress leading to bankruptcy will be experienced by individuals in communities that were not directly in the path of Hurricane Katrina. If the numbers are large enough, the Katrina experience could force us to reconsider our prior understandings of a natural disaster’s impact on bankruptcy filing rates.
Posted by Rafael Pardo at August 8, 2006 02:42 AM
Bankruptcy in the Wake of Katrina
posted by Rafael Pardo http://www.concurringopinions.com
I’ve recently been thinking about the difficulty researchers will face in studying Hurricane Katrina’s effects on bankruptcy filing rates in New Orleans. A couple of weeks ago, over at Credit Slips, Bob Lawless (University of Illinois) discussed the importance of extending credit relief to natural-disaster victims. Lawless’s empirical work on bankruptcy filing rates after a major hurricane has found “that for every two new bankruptcies that occur in areas unaffected by the hurricane, there are three new bankruptcies in the judicial district where the hurricane made landfall.” The study focused on hurricanes from 1980 – 2004, so I’m curious to see whether in the case of Katrina this finding will hold to be true for the Eastern District of Louisiana (E.D. La.), within which New Orleans is located. My hunch is that it won’t. Since the New Orleans diaspora involved hundreds of thousands of individuals, many of whom would be likely candidates for bankruptcy but have not returned (and may never return) to the city, the increased volume of bankruptcy filings will not materialize in E.D. La. A preliminary look at recent bankruptcy-filing data from the district suggests as much.
As an initial matter, there has recently been a national downward trend in bankruptcy filings. According to statistics from the Administrative Office of the U.S. Courts, bankruptcy filings for the second quarter of Fiscal Year 2006 (1/1/06-3/31/06) were down approximately 71% nationwide compared to the second quarter of FY 2005. This dramatic downturn has been attributed to the deluge of bankruptcy filings prior to October 17, 2005—the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which was intended to make it more difficult for certain consumer debtors to obtain bankruptcy relief. However, bankruptcy filings for E.D. La. had dropped approximately 86% for the same period of time—15% more than the nationwide figure. In terms of absolute numbers, there were only 340 total bankruptcy filings (60 business and 280 consumer) within the district.
It strikes me that these figures, in addition to being a product of strategic behavior by debtors in anticipation of BAPCA, also reflect the fact that the majority of individuals who have returned to New Orleans probably have had the financial means to stave off a bankruptcy filing. On the other hand, many of the New Orleans evacuees who remain away from the city have probably lost much (if not all) and either (1) have less of an incentive to return or (2) do not have the financial means to return. It’s these individuals whom researchers will have to track down—in places like Houston, Birmingham, Atlanta and Nashville—in order to understand fully the effects of Hurricane Katrina on financial distress. Moreover, any comprehensive study will have to analyze the impact of the diaspora on the communities where New Orleans residents relocated. The economies of these communities will simultaneously have experienced financial gain (e.g., influx of consumer dollars, workforce expansion) and financial strain (e.g., increased demands on public services such as health care and education). Considering the latter, it could very well be the case that financial distress leading to bankruptcy will be experienced by individuals in communities that were not directly in the path of Hurricane Katrina. If the numbers are large enough, the Katrina experience could force us to reconsider our prior understandings of a natural disaster’s impact on bankruptcy filing rates.
Posted by Rafael Pardo at August 8, 2006 02:42 AM
Some new data on bankruptcies
Bankruptcy Filings are on the Rise
After experiencing a sharp drop in the first quarter of 2006, the rate of bankruptcy filings has begun to rise. The lull in late 2005 and early 2006 is thought to be a result of tough new bankruptcy legislation. Given the recent uptick, however, it looks like the bankruptcy legislation did little more than temporarily stall the flow of new filings.
On average, 1 in 60.16 households nationwide filed for bankruptcy in 2005. Here’s a look at the states with the highest bankruptcy rates:
1. Indiana (1 in 34.41 households filed)
2. Ohio (1 in 37.79 households filed)
3. Utah (1 in 39.52 households filed)
4. Tennessee (1 in 39.7 households filed)
5. Oklahoma (1 in 40.86 households filed)
And here are the lowest rates:
51. South Carolina (1 in 123.16 households filed)
50. Alaska (1 in 122.64 households filed)
49. Vermont (1 in 119.61 households filed)
48. District of Columbia (1 in 115.93 households filed)
47. Hawaii (1 in 109.54 households filed)
To be honest, I was a bit surprised that the top five was completely devoid of states in which the housing market has gone nuts over the past few years. As mortgage rates continue to rise and more and more adjustable rate mortgages start floating that could change dramatically.
Staff article.
After experiencing a sharp drop in the first quarter of 2006, the rate of bankruptcy filings has begun to rise. The lull in late 2005 and early 2006 is thought to be a result of tough new bankruptcy legislation. Given the recent uptick, however, it looks like the bankruptcy legislation did little more than temporarily stall the flow of new filings.
On average, 1 in 60.16 households nationwide filed for bankruptcy in 2005. Here’s a look at the states with the highest bankruptcy rates:
1. Indiana (1 in 34.41 households filed)
2. Ohio (1 in 37.79 households filed)
3. Utah (1 in 39.52 households filed)
4. Tennessee (1 in 39.7 households filed)
5. Oklahoma (1 in 40.86 households filed)
And here are the lowest rates:
51. South Carolina (1 in 123.16 households filed)
50. Alaska (1 in 122.64 households filed)
49. Vermont (1 in 119.61 households filed)
48. District of Columbia (1 in 115.93 households filed)
47. Hawaii (1 in 109.54 households filed)
To be honest, I was a bit surprised that the top five was completely devoid of states in which the housing market has gone nuts over the past few years. As mortgage rates continue to rise and more and more adjustable rate mortgages start floating that could change dramatically.
Staff article.
Bankruptcy Statistics
Bankruptcy filings slow to trickle; lull not expected to last...
According to the U.S. Bankruptcy Court, District of Kansas, the number of bankruptcy filings between November 2005 and February 2006 dropped 82 percent from the same period a year ago: 785 compared to 4,336 between November 2004 and February 2005.
The number of filings began their steep fall after a new federal law went into effect last October.
But Zimmerman and other bankruptcy experts don't expect the trend to last. While the rules for filing bankruptcy have changed, the conditions that caused them haven't.
That's why Zimmerman, his peers and a bankruptcy court official say the pause in filings will be short lived.
"Everybody in the business believes that by the end of summer or early fall we'll be very close to historical numbers," says Zimmerman, a partner in the law firm of Case, Moses, Zimmerman & Wilson PA.
'Need IS still there' Despite the drop in filings, Zimmerman isn't hurting for business. Nor is Ed Nazar, a bankruptcy attorney and a bankruptcy court trustee.
A rush in filings last October -- before the new law took effect -- has carried them through.
"The truth is we never really did slow down that much," Zimmerman says. "Certainly I'm getting the calls. The need is still there."
Nazar agrees and predicts a similar second quarter or third quarter return to pre-October filing levels.
"There's no question the filings are creeping up," says Nazar, a partner at law firm Redmond & Nazar LLP. "In my mind it ought to be rising more than it is."
Fred Jamison, clerk for Kansas' bankruptcy court, says activity at the front end of bankruptcy court reflects fewer filings.
"But there's a whole lot of the activity that has moved from the counter to the courtroom," Jamison says. "Our judges are real busy."
Jamison says the October rush, in which Kansas bankruptcies topped 7,252, most in the first 10 days of the month, "cleared the pipe up."
All the new law did was create a rush by people to file Chapter 7 bankruptcy before it took effect on Oct. 17, 2005, Jamison says. Nearly 80 percent of bankruptcy filings in the state are for Chapter 7, a liquidation bankruptcy that involves appointing a trustee to sell all of a debtor's assets to pay creditors.
The new law is delaying people from filing Chapter 7, Jamison says, by requiring them to first try credit counseling to clear up their debt or to enter Chapter 13 bankruptcy. Chapter 13 means people pay off their debt by arranging payment plans with their creditors.
But Jamison says that nationally, only 1 percent of bankruptcy filers have entered into credit counseling and been referred to a Chapter 13 filing.
"I think it may have been a part of the belief in building the new law that there was a substantial number of people filing bankruptcy and didn't need to file bankruptcy," Jamison says. "At this point, that's not what's been coming across in the statistics nationwide. And we're consistent with what's going on nationwide."
Nazar and Zimmerman think news of the act scared some people into filing bankruptcy early -- and led them to believe that under the new act that it would be nearly impossible to file for bankruptcy.
That was due to the credit counseling requirement and the new caps on median income for individual filers: $61,515 for a family of four to $37,795 for individuals. Nazar says according to data provided to trustees by the U.S. Bankruptcy Court, more than three-quarters of Kansans have income that fall within those limits.
Zimmerman says the factors that bring people to bankruptcy haven't changed, either. Most filers get into uncontrollable debt because of medical bills, layoffs and divorces, he says. It's not all from racking up debt on credit cards.
"There isn't anything in the bankruptcy code that changes that," Zimmerman says. "My sense is the filings are coming back up because the need is still there."
According to the U.S. Bankruptcy Court, District of Kansas, the number of bankruptcy filings between November 2005 and February 2006 dropped 82 percent from the same period a year ago: 785 compared to 4,336 between November 2004 and February 2005.
The number of filings began their steep fall after a new federal law went into effect last October.
But Zimmerman and other bankruptcy experts don't expect the trend to last. While the rules for filing bankruptcy have changed, the conditions that caused them haven't.
That's why Zimmerman, his peers and a bankruptcy court official say the pause in filings will be short lived.
"Everybody in the business believes that by the end of summer or early fall we'll be very close to historical numbers," says Zimmerman, a partner in the law firm of Case, Moses, Zimmerman & Wilson PA.
'Need IS still there' Despite the drop in filings, Zimmerman isn't hurting for business. Nor is Ed Nazar, a bankruptcy attorney and a bankruptcy court trustee.
A rush in filings last October -- before the new law took effect -- has carried them through.
"The truth is we never really did slow down that much," Zimmerman says. "Certainly I'm getting the calls. The need is still there."
Nazar agrees and predicts a similar second quarter or third quarter return to pre-October filing levels.
"There's no question the filings are creeping up," says Nazar, a partner at law firm Redmond & Nazar LLP. "In my mind it ought to be rising more than it is."
Fred Jamison, clerk for Kansas' bankruptcy court, says activity at the front end of bankruptcy court reflects fewer filings.
"But there's a whole lot of the activity that has moved from the counter to the courtroom," Jamison says. "Our judges are real busy."
Jamison says the October rush, in which Kansas bankruptcies topped 7,252, most in the first 10 days of the month, "cleared the pipe up."
All the new law did was create a rush by people to file Chapter 7 bankruptcy before it took effect on Oct. 17, 2005, Jamison says. Nearly 80 percent of bankruptcy filings in the state are for Chapter 7, a liquidation bankruptcy that involves appointing a trustee to sell all of a debtor's assets to pay creditors.
The new law is delaying people from filing Chapter 7, Jamison says, by requiring them to first try credit counseling to clear up their debt or to enter Chapter 13 bankruptcy. Chapter 13 means people pay off their debt by arranging payment plans with their creditors.
But Jamison says that nationally, only 1 percent of bankruptcy filers have entered into credit counseling and been referred to a Chapter 13 filing.
"I think it may have been a part of the belief in building the new law that there was a substantial number of people filing bankruptcy and didn't need to file bankruptcy," Jamison says. "At this point, that's not what's been coming across in the statistics nationwide. And we're consistent with what's going on nationwide."
Nazar and Zimmerman think news of the act scared some people into filing bankruptcy early -- and led them to believe that under the new act that it would be nearly impossible to file for bankruptcy.
That was due to the credit counseling requirement and the new caps on median income for individual filers: $61,515 for a family of four to $37,795 for individuals. Nazar says according to data provided to trustees by the U.S. Bankruptcy Court, more than three-quarters of Kansans have income that fall within those limits.
Zimmerman says the factors that bring people to bankruptcy haven't changed, either. Most filers get into uncontrollable debt because of medical bills, layoffs and divorces, he says. It's not all from racking up debt on credit cards.
"There isn't anything in the bankruptcy code that changes that," Zimmerman says. "My sense is the filings are coming back up because the need is still there."
Monday, July 10, 2006
The Perfect Storm
Are you ready for the "Perfect Storm" of foreclosures?
"It is clear that many homeowners, especially those with adjustable rate mortgages, are being pushed closer to the edge as interest rates rise at such a consistent clip," said a ForeclosuresMass.com executive in the announcement. "We may be witnessing a 'perfect storm' scenario where a flat real estate market, higher interest rates, rising energy costs and specialty loans are causing significant difficulty for thousands of Massachusetts property owners."
"Interest only loans and so-called option adjustable rate mortgages with very low initial rates and high negative amortization are financial time bombs," Foreclosures.com President Alexis McGee said in a recent announcement. "When these loans reset to full amortization and market rates, the payment shock to homeowners is severe."
The huge opportunities you have been waiting for in foreclosure investing have arrived. Foolish homeowners who bought with Option ARM and adjustable rate mortgages are feeling the pain of increased interest rates and falling into foreclosure. This creates huge opportunities for the smart foreclosure investor.
Let me explain how it works. About five years ago crafty mortgage lenders came up with special loans to help buyers borrow more money than they could afford using a traditional thirty year mortgage. They did this with specialty loan products called "option arms" or "pick a payment loan." These are loans that give the borrower a choice on how much to pay – anything from interest only to fully amortizing payments.
The lure is that in the first five years the payments are artificially low "interest only" payments. The catch is that after five years the loans are "recast" to become fully amortizing loans. This means that the borrower's loan payment goes through the roof at the end of year five. Can you imaging your mortgage payment increasing 175% in one month!
That's what one mortgage commentator University of Pennsylvania Wharton Professor Jack Guttentag calculated. He predicted that in some scenarios the borrower’s payment would increases up to 175% at the end of the fifth year of the mortgage.
Homeowners cannot afford a 175% increase in their mortgage payment and this is leading to a huge increase in the number of foreclosures. The reason this opportunity is RIGHT HERE AND RIGHT NOW is that option arms started over five years ago and borrowers are now receiving their enormous new mortgage bills. Those loans started recasting at the beginning of 2006.
This is only the beginning. One out of every 1,247 households in America is in foreclosure. That number is up 28% from the same time last year. In some states it is much worse – in Colorado one out of every 436 houses is in foreclosure, in Georgia its one in every 537 houses and in Texas one in every 555 houses is in foreclosure. The numbers are at record highs all across the country –if your state is not listed, don’t feel left out! In Massachussets foreclosures are up 105% from last year, Florida has the highest number of properties actively in foreclosure and California leads the nation in notices of default (the beginning of the foreclosure process), with Los Angeles county alone having 14,000 recorded notices of default!
REO's, fast moving auctions and the "Perfect Storm" of foreclosures are just around the corner! Are you ready?
Awesome Investing!
See what's new at http://www.bobdiamond.com/eventsindex.htm
"It is clear that many homeowners, especially those with adjustable rate mortgages, are being pushed closer to the edge as interest rates rise at such a consistent clip," said a ForeclosuresMass.com executive in the announcement. "We may be witnessing a 'perfect storm' scenario where a flat real estate market, higher interest rates, rising energy costs and specialty loans are causing significant difficulty for thousands of Massachusetts property owners."
"Interest only loans and so-called option adjustable rate mortgages with very low initial rates and high negative amortization are financial time bombs," Foreclosures.com President Alexis McGee said in a recent announcement. "When these loans reset to full amortization and market rates, the payment shock to homeowners is severe."
The huge opportunities you have been waiting for in foreclosure investing have arrived. Foolish homeowners who bought with Option ARM and adjustable rate mortgages are feeling the pain of increased interest rates and falling into foreclosure. This creates huge opportunities for the smart foreclosure investor.
Let me explain how it works. About five years ago crafty mortgage lenders came up with special loans to help buyers borrow more money than they could afford using a traditional thirty year mortgage. They did this with specialty loan products called "option arms" or "pick a payment loan." These are loans that give the borrower a choice on how much to pay – anything from interest only to fully amortizing payments.
The lure is that in the first five years the payments are artificially low "interest only" payments. The catch is that after five years the loans are "recast" to become fully amortizing loans. This means that the borrower's loan payment goes through the roof at the end of year five. Can you imaging your mortgage payment increasing 175% in one month!
That's what one mortgage commentator University of Pennsylvania Wharton Professor Jack Guttentag calculated. He predicted that in some scenarios the borrower’s payment would increases up to 175% at the end of the fifth year of the mortgage.
Homeowners cannot afford a 175% increase in their mortgage payment and this is leading to a huge increase in the number of foreclosures. The reason this opportunity is RIGHT HERE AND RIGHT NOW is that option arms started over five years ago and borrowers are now receiving their enormous new mortgage bills. Those loans started recasting at the beginning of 2006.
This is only the beginning. One out of every 1,247 households in America is in foreclosure. That number is up 28% from the same time last year. In some states it is much worse – in Colorado one out of every 436 houses is in foreclosure, in Georgia its one in every 537 houses and in Texas one in every 555 houses is in foreclosure. The numbers are at record highs all across the country –if your state is not listed, don’t feel left out! In Massachussets foreclosures are up 105% from last year, Florida has the highest number of properties actively in foreclosure and California leads the nation in notices of default (the beginning of the foreclosure process), with Los Angeles county alone having 14,000 recorded notices of default!
REO's, fast moving auctions and the "Perfect Storm" of foreclosures are just around the corner! Are you ready?
Awesome Investing!
See what's new at http://www.bobdiamond.com/eventsindex.htm
Monday, May 08, 2006
Be sure it's a deal...
I was reminded today how important it is to do your research before leaving your house to look at a potential purchase.
I received a call from a new real estate investor who told me he had a pre-foreclosure deal that he could not fund. He asked if I was interested in taking over the transaction from him.
He told me that the house was worth $350,000.00. The house is in a nice section of town, so it didn’t sound unreasonable. He told me the owner was willing to walk away for just a few thousand dollars and only owed $230,000.00. He said that it needed some paint and carpet, totaling about $10,000.00 worth of work.
Some quick math indicated a cost including purchase and renovations of $240,000.00 and a resale price at $350,000.00, which sounded good. I arranged to meet with him and drove about a half an hour to see the property. I had my realtor print out some comparable sales and hit the road as it was getting late in the day.
I arrived at the property to find that it was on a busy street and very dog-eared. The property needed a complete cosmetic redo, including carpets, paint, lighting and a new kitchen. The work would cost at least $40,000.00. I took a careful look at the comparables and found that the value was closer to $300,000.00 maybe a few thousand less. In further discussions with the investor, he informed me that the property had been appraised within the last month at $295,000.00.
The trip was a waste of my time and helps me to remember that it always pays to ask questions and do your research before getting in the car to go see a property.
Don’t forget your goal is not to purchase a property, but to locate a property you can buy at a cheap price so that you can make a profit. The profit is the goal, not the acquisition of the property.
At my basic seminars and in my books, I teach how to accurately gauge the value of properties from the comfort of your home.
Until next time, good investing,
Bob Diamond
For more informations visit:
http://bobdiamond.com
I received a call from a new real estate investor who told me he had a pre-foreclosure deal that he could not fund. He asked if I was interested in taking over the transaction from him.
He told me that the house was worth $350,000.00. The house is in a nice section of town, so it didn’t sound unreasonable. He told me the owner was willing to walk away for just a few thousand dollars and only owed $230,000.00. He said that it needed some paint and carpet, totaling about $10,000.00 worth of work.
Some quick math indicated a cost including purchase and renovations of $240,000.00 and a resale price at $350,000.00, which sounded good. I arranged to meet with him and drove about a half an hour to see the property. I had my realtor print out some comparable sales and hit the road as it was getting late in the day.
I arrived at the property to find that it was on a busy street and very dog-eared. The property needed a complete cosmetic redo, including carpets, paint, lighting and a new kitchen. The work would cost at least $40,000.00. I took a careful look at the comparables and found that the value was closer to $300,000.00 maybe a few thousand less. In further discussions with the investor, he informed me that the property had been appraised within the last month at $295,000.00.
The trip was a waste of my time and helps me to remember that it always pays to ask questions and do your research before getting in the car to go see a property.
Don’t forget your goal is not to purchase a property, but to locate a property you can buy at a cheap price so that you can make a profit. The profit is the goal, not the acquisition of the property.
At my basic seminars and in my books, I teach how to accurately gauge the value of properties from the comfort of your home.
Until next time, good investing,
Bob Diamond
For more informations visit:
http://bobdiamond.com
Tuesday, May 02, 2006
Foreclosures up 50% in March Nationwide
by the Associated Press
Published April 29, 2006
NEW YORK - In what could be a crack in the housing market's sturdy foundation, the number of foreclosed homes put up for sale rose 50 percent between February and March, according to a new study by Foreclosure.com.
The increase is one of the biggest monthly spikes Foreclosure.com has seen since it began tracking the market in 1999, according to Jim Houston, vice president of the foreclosure listing service.
The survey, released Wednesday, showed 28,190 foreclosed homes were put up for sale across the country in March, which is 50 percent more than in February.
The total number of foreclosed properties available for sale stood at 80,757 at the end of March, up 10 percent from the previous month.
Foreclosure.com tracks government and financial institutions when gathering data on foreclosed properties.
The number of foreclosed properties rose in 47 states in March. Houston attributes this increase to a rise in interest rates during the latter half of 2004 and a slowdown in home price increases.
Houston said it's "possible" this is a sign that the market is turning. However, it's too early to call definitively at this point, he cautioned.
Sometimes, foreclosures are delayed during the holiday season, which may have pushed some February foreclosures into March, he said.
"There are a lot of late filings and some of them take up to 90 days," he said.
If the spike in foreclosures continues in April, he said, it could signal a trend that the housing market is turning down.
The surge in the number of homebuyers opting for adjustable-rate mortgages over the past few quarters could pose a problem for homeowners as interest rates tick up. "We're starting to see repercussions because of that," Houston said.
Indeed, the markets seeing the largest number of foreclosed properties are those whose home values have stopped rising, such as Ohio, Texas, South Carolina and Michigan.
However, certain other markets, such as California, Washington, D.C., and South Dakota, saw larger percentage increases in foreclosures between February and March, which could indicate a turn in those markets. Although the total number of foreclosures remains low in those markets, the percentage increase rose more than 45 percent.
Fitch Ratings analyst Bob Curran expressed surprise at the increase reported by the study. However, he noted that foreclosed properties still represent a very small percentage of the overall housing inventory, which totaled 2.8 million homes in February. He doesn't see the foreclosure numbers as reason for alarm.
"It may simply reflect our overleveraged society and the fact that people are carrying more debt on everything and it doesn't take a lot to affect a small percentage of them in terms of moving them from homeownership to not," Curran said.
"It's hard to make a case, based on what I see here, that all of a sudden it's become an enormous trend." He said the economy is improving and employment is growing, which bodes well for a homeowner's ability to make mortgage payments.
Published April 29, 2006
NEW YORK - In what could be a crack in the housing market's sturdy foundation, the number of foreclosed homes put up for sale rose 50 percent between February and March, according to a new study by Foreclosure.com.
The increase is one of the biggest monthly spikes Foreclosure.com has seen since it began tracking the market in 1999, according to Jim Houston, vice president of the foreclosure listing service.
The survey, released Wednesday, showed 28,190 foreclosed homes were put up for sale across the country in March, which is 50 percent more than in February.
The total number of foreclosed properties available for sale stood at 80,757 at the end of March, up 10 percent from the previous month.
Foreclosure.com tracks government and financial institutions when gathering data on foreclosed properties.
The number of foreclosed properties rose in 47 states in March. Houston attributes this increase to a rise in interest rates during the latter half of 2004 and a slowdown in home price increases.
Houston said it's "possible" this is a sign that the market is turning. However, it's too early to call definitively at this point, he cautioned.
Sometimes, foreclosures are delayed during the holiday season, which may have pushed some February foreclosures into March, he said.
"There are a lot of late filings and some of them take up to 90 days," he said.
If the spike in foreclosures continues in April, he said, it could signal a trend that the housing market is turning down.
The surge in the number of homebuyers opting for adjustable-rate mortgages over the past few quarters could pose a problem for homeowners as interest rates tick up. "We're starting to see repercussions because of that," Houston said.
Indeed, the markets seeing the largest number of foreclosed properties are those whose home values have stopped rising, such as Ohio, Texas, South Carolina and Michigan.
However, certain other markets, such as California, Washington, D.C., and South Dakota, saw larger percentage increases in foreclosures between February and March, which could indicate a turn in those markets. Although the total number of foreclosures remains low in those markets, the percentage increase rose more than 45 percent.
Fitch Ratings analyst Bob Curran expressed surprise at the increase reported by the study. However, he noted that foreclosed properties still represent a very small percentage of the overall housing inventory, which totaled 2.8 million homes in February. He doesn't see the foreclosure numbers as reason for alarm.
"It may simply reflect our overleveraged society and the fact that people are carrying more debt on everything and it doesn't take a lot to affect a small percentage of them in terms of moving them from homeownership to not," Curran said.
"It's hard to make a case, based on what I see here, that all of a sudden it's become an enormous trend." He said the economy is improving and employment is growing, which bodes well for a homeowner's ability to make mortgage payments.
Wednesday, January 25, 2006
Florida, Colorado, Utah Foreclosures Up
National Real Estate Foreclosures Up in 2005
Florida, Colorado, Utah post highest foreclosure rates
Reprinted from Inman News
Monday, January 23, 2006
--------------------------------------------------------------------------------
National real estate foreclosures increased in every quarter of 2005, according to an industry report released today.
RealtyTrac, which provides an online marketplace for foreclosure properties, today released year-end data showing that 846,982 properties nationwide entered some stage of foreclosure in 2005, and there was a 25 percent increase in the number of new foreclosures from the first quarter to the fourth quarter.
"Overall, U.S. foreclosure numbers climbed steadily over the course of the year, with more new foreclosures reported in every quarter," said James J. Saccacio, CEO of RealtyTrac. "This trend appears to be moving the real estate foreclosure market back to its historic levels."
Saccacio noted that the number of 2005 foreclosures needed to be kept in context. "Even with almost 850,000 properties entering some stage of foreclosure across the country over the course of the year, this represents less than 1 percent of all U.S. households. And the increase in U.S. foreclosures from Q3 to Q4 was just below 5 percent."
Report highlights included:
Despite a 29 percent decrease in new foreclosures from the first quarter to the fourth quarter, Florida documented the nation's highest foreclosure rate and accounted for more than 14 percent of the nation's new foreclosures in 2005. The state reported 121,843 properties entering some stage of foreclosure -- 1.67 percent of the state's households.
New foreclosures in Colorado decreased 4 percent from the first quarter to the fourth quarter, but the state's annual foreclosure rate ranked second highest nationwide thanks to consistently high foreclosure numbers throughout the year. A total of 29,630 Colorado properties entered some stage of foreclosure in 2005 -- 1.62 percent of the state's households.
1.5 percent of Utah households entered some stage of foreclosure in 2005, the nation's third-highest annual foreclosure rate. The state reported 11,536 properties entering some stage of foreclosure during the year, but new foreclosures dropped 27 percent from the first quarter to the fourth quarter.
New foreclosures in Texas increased 54 percent from the first quarter to the fourth quarter, and the state documented the nation's fourth highest annual foreclosure rate. A total of 115,643 Texas properties entered some stage of foreclosure in 2005 -- 1.44 percent of the state's households and more than 13 percent of the nation's new foreclosures in 2005.
Other states with foreclosure rates ranking among the 10 highest nationwide were Georgia, Arizona, Indiana, New Jersey, Ohio and Tennessee. All of these state documented annual foreclosure rates of at least 1 percent of total households and reported new foreclosures increasing from the first quarter to the fourth quarter
Although their foreclosure rates ranked below the nation's 10 highest, California, Illinois, New York and Michigan were among the 10 states reporting the most new foreclosures in 2005. California reported 61,563 properties entering some stage of foreclosure, and new foreclosures increased 16 percent from the first quarter to the fourth quarter. Illinois reported 46,723 properties entering some stage of foreclosure, and new foreclosures decreased 14 percent from the first quarter to the fourth quarter. New York reported 37,068 properties entering some stage of foreclosure, and the state reported more than twice as many new foreclosures in the fourth quarter as in the first quarter.
"Over the past few years, we've seen historically low mortgage rates, consistently escalating home prices and steady, strong employment," Saccacio said. "This has translated into relatively low levels of foreclosure properties -- particularly bank-owned properties. With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006."
The RealtyTrac 2005 U.S. Foreclosure Market Report provides the total number of homes entering some stage of foreclosure nationwide and by state for each quarter of 2005. The report includes properties in all three phases of foreclosure: pre-foreclosures – notice of default (NOD) and lis pendens (LIS); foreclosures – notice of trustee sale and notice of foreclosure sale (NTS and NFS); and real estate owned, or REO properties (that have been re-purchased by a bank).
***
For more information on foreclosure investment opportunities visit:
http://bobdiamond.com
Florida, Colorado, Utah post highest foreclosure rates
Reprinted from Inman News
Monday, January 23, 2006
--------------------------------------------------------------------------------
National real estate foreclosures increased in every quarter of 2005, according to an industry report released today.
RealtyTrac, which provides an online marketplace for foreclosure properties, today released year-end data showing that 846,982 properties nationwide entered some stage of foreclosure in 2005, and there was a 25 percent increase in the number of new foreclosures from the first quarter to the fourth quarter.
"Overall, U.S. foreclosure numbers climbed steadily over the course of the year, with more new foreclosures reported in every quarter," said James J. Saccacio, CEO of RealtyTrac. "This trend appears to be moving the real estate foreclosure market back to its historic levels."
Saccacio noted that the number of 2005 foreclosures needed to be kept in context. "Even with almost 850,000 properties entering some stage of foreclosure across the country over the course of the year, this represents less than 1 percent of all U.S. households. And the increase in U.S. foreclosures from Q3 to Q4 was just below 5 percent."
Report highlights included:
Despite a 29 percent decrease in new foreclosures from the first quarter to the fourth quarter, Florida documented the nation's highest foreclosure rate and accounted for more than 14 percent of the nation's new foreclosures in 2005. The state reported 121,843 properties entering some stage of foreclosure -- 1.67 percent of the state's households.
New foreclosures in Colorado decreased 4 percent from the first quarter to the fourth quarter, but the state's annual foreclosure rate ranked second highest nationwide thanks to consistently high foreclosure numbers throughout the year. A total of 29,630 Colorado properties entered some stage of foreclosure in 2005 -- 1.62 percent of the state's households.
1.5 percent of Utah households entered some stage of foreclosure in 2005, the nation's third-highest annual foreclosure rate. The state reported 11,536 properties entering some stage of foreclosure during the year, but new foreclosures dropped 27 percent from the first quarter to the fourth quarter.
New foreclosures in Texas increased 54 percent from the first quarter to the fourth quarter, and the state documented the nation's fourth highest annual foreclosure rate. A total of 115,643 Texas properties entered some stage of foreclosure in 2005 -- 1.44 percent of the state's households and more than 13 percent of the nation's new foreclosures in 2005.
Other states with foreclosure rates ranking among the 10 highest nationwide were Georgia, Arizona, Indiana, New Jersey, Ohio and Tennessee. All of these state documented annual foreclosure rates of at least 1 percent of total households and reported new foreclosures increasing from the first quarter to the fourth quarter
Although their foreclosure rates ranked below the nation's 10 highest, California, Illinois, New York and Michigan were among the 10 states reporting the most new foreclosures in 2005. California reported 61,563 properties entering some stage of foreclosure, and new foreclosures increased 16 percent from the first quarter to the fourth quarter. Illinois reported 46,723 properties entering some stage of foreclosure, and new foreclosures decreased 14 percent from the first quarter to the fourth quarter. New York reported 37,068 properties entering some stage of foreclosure, and the state reported more than twice as many new foreclosures in the fourth quarter as in the first quarter.
"Over the past few years, we've seen historically low mortgage rates, consistently escalating home prices and steady, strong employment," Saccacio said. "This has translated into relatively low levels of foreclosure properties -- particularly bank-owned properties. With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006."
The RealtyTrac 2005 U.S. Foreclosure Market Report provides the total number of homes entering some stage of foreclosure nationwide and by state for each quarter of 2005. The report includes properties in all three phases of foreclosure: pre-foreclosures – notice of default (NOD) and lis pendens (LIS); foreclosures – notice of trustee sale and notice of foreclosure sale (NTS and NFS); and real estate owned, or REO properties (that have been re-purchased by a bank).
***
For more information on foreclosure investment opportunities visit:
http://bobdiamond.com
Tuesday, January 17, 2006
Foreclosure Market Update
South Drives Foreclosure Spike
24,124 foreclosures started in December
January 13, 2006 release by Foreclosure.com
As new foreclosures rose during December, the inventory jumped by the highest amount since March 2005. Foreclosure.com announced Wednesday that 24,124 U.S. residential properties joined the foreclosure list last month, 8 percent more than in November.
The total number of foreclosed homes available for sale shot up 13% from the prior month to 91,905 in December, the Boca Raton, Fla.-based company reported.
Both the inventory and the newly-listed increases were the highest month-to-month boost since last March, according to the announcement. "The relative stability of U.S. foreclosure inventory ended in December," said company President and CEO Brad Geisen in the statement. "With lending institutions closing their books at the end of the year, it is somewhat common for the foreclosure inventory to rise."
And while it is "premature to predict that December's inventory indicates a foreclosure crisis," the rise, "which is higher than in recent years, should be closely monitored as 2006 begins," he added.
Inventory will very likely remain high in the early months, if waning investor confidence in the housing market, high interest rates and a weakening sellers market persist, Geisen said.
The South, which includes Florida, Georgia, North Carolina and Texas, led the country with a 9 percent increase in inventory and a 17.4 upturn in new foreclosures, Foreclosure.com spokeswoman Tristam Wallace said in an e-mailed statement. The Midwest showed the second highest percentage increases, followed by the Northeast and the West, according to the announcement.
Texas had the highest foreclosure inventory -- 11,458 -- followed by Ohio's 8419 and Michigan's 7,955 properties. They also had the largest amount of new foreclosures in the month, 2,997, 2380 and 2064, respectively, the announcement said.
"Regardless of what happens in the first quarter, the current foreclosure inventory represents a very strong buyers market for investors and individuals," Geisen concluded.
For Free Information on buying and selling properties in Foreclosure visit: http://bobdiamond.com
24,124 foreclosures started in December
January 13, 2006 release by Foreclosure.com
As new foreclosures rose during December, the inventory jumped by the highest amount since March 2005. Foreclosure.com announced Wednesday that 24,124 U.S. residential properties joined the foreclosure list last month, 8 percent more than in November.
The total number of foreclosed homes available for sale shot up 13% from the prior month to 91,905 in December, the Boca Raton, Fla.-based company reported.
Both the inventory and the newly-listed increases were the highest month-to-month boost since last March, according to the announcement. "The relative stability of U.S. foreclosure inventory ended in December," said company President and CEO Brad Geisen in the statement. "With lending institutions closing their books at the end of the year, it is somewhat common for the foreclosure inventory to rise."
And while it is "premature to predict that December's inventory indicates a foreclosure crisis," the rise, "which is higher than in recent years, should be closely monitored as 2006 begins," he added.
Inventory will very likely remain high in the early months, if waning investor confidence in the housing market, high interest rates and a weakening sellers market persist, Geisen said.
The South, which includes Florida, Georgia, North Carolina and Texas, led the country with a 9 percent increase in inventory and a 17.4 upturn in new foreclosures, Foreclosure.com spokeswoman Tristam Wallace said in an e-mailed statement. The Midwest showed the second highest percentage increases, followed by the Northeast and the West, according to the announcement.
Texas had the highest foreclosure inventory -- 11,458 -- followed by Ohio's 8419 and Michigan's 7,955 properties. They also had the largest amount of new foreclosures in the month, 2,997, 2380 and 2064, respectively, the announcement said.
"Regardless of what happens in the first quarter, the current foreclosure inventory represents a very strong buyers market for investors and individuals," Geisen concluded.
For Free Information on buying and selling properties in Foreclosure visit: http://bobdiamond.com
Tuesday, January 10, 2006
Anatomy of a Deal ~ How to Analyze a Deal in Thirty Seconds
Anatomy of a Deal
From the Down and Dirty to the Nitty-Gritty and
How to Analyze a Deal in Thirty Seconds
Many students get “stuck” somehow when they leave a seminar or finish a home study course. They are unable to go out and make their first deal. I think it is mostly fear – fear that they do not know enough, fear of losing money, and fear of change – even if that change is success. Stories of how others overcome their fear and how deals are actually done can help you work through some of those fears.
How would you like to sit in the co-pilot seat as my partner and I make our way through our newest deal – acquisition, purchase, and rehab of a twelve-unit apartment building? One where we can make hundreds of thousands of dollars in one year?
In this series I am going to take you with me – step by step, as I analyze the deal, locate financing, insurance, work out issues with my partner, and close on the deal. We’ll then go on through emptying out the apartments, renovating them and refilling them with new tenants at a higher rental rate.
In today’s blog I am going to tell you how I got started and how I generated the lead. In subsequent newsletters I will take you through all the details – A to Z as I work my way through the deal.
So sit back, get a cup of coffee, and enjoy the ride.
Time to Get Started finding the deal
I am just wrapping up my renovation on my new primary residence. I like to do no more than one or two deals at a time so I have time to spend with my family, law practice, and students. After all, why be an entrepreneur if I cannot make time for the people in my life and the things I want to do other than work? I make margins of $60,000 - $90,000 in each flip, so it does not take many deals to keep me happy each year.
I do not do large mailing campaigns, telemarketing, billboards or radio advertising. Those things are expensive and time consuming. I find my deals by networking through the people I know and meet. Networking is effective and inexpensive marketing.
I started my networking about a month before my current project will be finished. I have been telling everyone I know that I am looking for a new property to renovate. I have told my neighbors, all the workers at my site, my general contractor, and fellow investors.
I received a call from Neal my general contractor today. He heard about a twelve-unit apartment building down the street from my house. It is being offered at $750,000 and just came on the market. He wanted to know if I wanted to look at it with him as something to do together.
First I have to decide whether to leave the office to look at this deal. My time is valuable and I try not to waste it. So how do I do an initial screening in less than 30 seconds? The answer is my 1% rule©.
I know rents in the neighborhood are $1,100 or so for a two-bedroom apartment in this area. The units rent easily and it is easy to find responsible tenants. I know those facts because I already have rental properties in this neighborhood. The potential rents for all twelve units in the building are approximately $13,100 per month (exact figure will depend on the breakdown of units by number of bedrooms).
Using my 1% rule©, I figure if my monthly rents are 1% of my purchase price I will break even on the building. The resulting figure is also a good approximation of the “retail” price of the property. In this instance the retail price of the building with good tenants at full market rent will be approximately $1,310,000.
I do not pay retail for properties. You shouldn’t either. For a rental property you want at least 20% off retail so you have an equity cushion and good positive cash flow.
Using my 1% rule© the “retail” price for the building of $1,310,000 and a “Bob Diamond” price of $1,048,000 (the 1% rule less 20%).
Since the asking price for this building is $750,000, and the potential retail value is $1,310,000 there is potentially $560,000 in equity in the building. I am definitely interested in the building! Time to go out and see the building!
In my next installment I’ll tell you about the inspection of the building and how we calculated our offer.
Until then…
Awesome Investing!
Bob Diamond
http://bobdiamond.com
Want to know more?
Do you want to make hundreds of thousands of dollars in cash and equity in properties? Do you want to learn from an attorney and ACTIVE investor who will give you all the details and “real” information you need to succeed?
If so, I really am your guy.
Find out more at:
http://bobdiamond.com
You can also hear me live at my next FREE tele-seminar. My staff and I are always producing monthly conference calls that deliver FREE content and actions plans for the novice investor or the seasoned pro! Just get on our newsletter list at:
http://bobdiamond.com
From the Down and Dirty to the Nitty-Gritty and
How to Analyze a Deal in Thirty Seconds
Many students get “stuck” somehow when they leave a seminar or finish a home study course. They are unable to go out and make their first deal. I think it is mostly fear – fear that they do not know enough, fear of losing money, and fear of change – even if that change is success. Stories of how others overcome their fear and how deals are actually done can help you work through some of those fears.
How would you like to sit in the co-pilot seat as my partner and I make our way through our newest deal – acquisition, purchase, and rehab of a twelve-unit apartment building? One where we can make hundreds of thousands of dollars in one year?
In this series I am going to take you with me – step by step, as I analyze the deal, locate financing, insurance, work out issues with my partner, and close on the deal. We’ll then go on through emptying out the apartments, renovating them and refilling them with new tenants at a higher rental rate.
In today’s blog I am going to tell you how I got started and how I generated the lead. In subsequent newsletters I will take you through all the details – A to Z as I work my way through the deal.
So sit back, get a cup of coffee, and enjoy the ride.
Time to Get Started finding the deal
I am just wrapping up my renovation on my new primary residence. I like to do no more than one or two deals at a time so I have time to spend with my family, law practice, and students. After all, why be an entrepreneur if I cannot make time for the people in my life and the things I want to do other than work? I make margins of $60,000 - $90,000 in each flip, so it does not take many deals to keep me happy each year.
I do not do large mailing campaigns, telemarketing, billboards or radio advertising. Those things are expensive and time consuming. I find my deals by networking through the people I know and meet. Networking is effective and inexpensive marketing.
I started my networking about a month before my current project will be finished. I have been telling everyone I know that I am looking for a new property to renovate. I have told my neighbors, all the workers at my site, my general contractor, and fellow investors.
I received a call from Neal my general contractor today. He heard about a twelve-unit apartment building down the street from my house. It is being offered at $750,000 and just came on the market. He wanted to know if I wanted to look at it with him as something to do together.
First I have to decide whether to leave the office to look at this deal. My time is valuable and I try not to waste it. So how do I do an initial screening in less than 30 seconds? The answer is my 1% rule©.
I know rents in the neighborhood are $1,100 or so for a two-bedroom apartment in this area. The units rent easily and it is easy to find responsible tenants. I know those facts because I already have rental properties in this neighborhood. The potential rents for all twelve units in the building are approximately $13,100 per month (exact figure will depend on the breakdown of units by number of bedrooms).
Using my 1% rule©, I figure if my monthly rents are 1% of my purchase price I will break even on the building. The resulting figure is also a good approximation of the “retail” price of the property. In this instance the retail price of the building with good tenants at full market rent will be approximately $1,310,000.
I do not pay retail for properties. You shouldn’t either. For a rental property you want at least 20% off retail so you have an equity cushion and good positive cash flow.
Using my 1% rule© the “retail” price for the building of $1,310,000 and a “Bob Diamond” price of $1,048,000 (the 1% rule less 20%).
Since the asking price for this building is $750,000, and the potential retail value is $1,310,000 there is potentially $560,000 in equity in the building. I am definitely interested in the building! Time to go out and see the building!
In my next installment I’ll tell you about the inspection of the building and how we calculated our offer.
Until then…
Awesome Investing!
Bob Diamond
http://bobdiamond.com
Want to know more?
Do you want to make hundreds of thousands of dollars in cash and equity in properties? Do you want to learn from an attorney and ACTIVE investor who will give you all the details and “real” information you need to succeed?
If so, I really am your guy.
Find out more at:
http://bobdiamond.com
You can also hear me live at my next FREE tele-seminar. My staff and I are always producing monthly conference calls that deliver FREE content and actions plans for the novice investor or the seasoned pro! Just get on our newsletter list at:
http://bobdiamond.com
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