Silicon Valley Update

I wrote this article for the Bruce Norris Newsletter and decided to include it here also - it is a perspective on the real estate market here in the valley and where the opportunities lie for 2009. 

What a year it has been both locally and nationally for real estate and for the economy in general. No one could have anticipated the large quantity of banks and financial institutions that have become insolvent this year!

The Silicon Valley, home of many multi-national corporations appeared to be navigating the storm pretty well, but finally the housing marketwent into double digit declines this year locally and in outlying Bay Area counties, some of which have lost more than 50% of their previous value. This created opportunities for investors from the Bay Area as we wait for our local market to reach affordable levels that make financial sense.

Every economy presents opportunities, and this type of recessionary climate has provided opportunities in past cycles and will do so today for those who are educated,savvy, self-reliant, and ready to take action. Being your own biggest ally and having the ability to analyze deals

is critical in this rapidly changing environment. If you have a criterion where, for example, you are happy to invest if you can get a 15% return on your money, then regardless of what the market does if the deal meets your criterion then you can participate. Additionally, this is a way to dollar cost average into the market.  

A lot of our members are sitting on the sidelines watching how things unfold, but those who are participating are buying in sub-markets that they have been watching and tracking. Every area is unique, and each market is declining at a different rate. It is important to stay in touch with the market you are exploring. At some point, when one can purchase houses at 50% of replacement value – this is something that makes sense financially, particularly if it cash flows in addition to that. Some ofour members are licking their wounds as a result of bad investments they made doing deals at the wrong time, or doing the wrong types of deals, and essentially not staying close to sources that predicted this market downturn.  My take on 2009 is that there will be lots of great deals available as jobs are lost, and REO inventories mount - newer properties will be discounted, and investors poised to act will reap the benefit. Recently we have noticed that the quality, location, and condition of REOs has improved dramatically with the increasing job losses; executive homes that are going back to the banks are available at substantial discounts from the peak.

In a market where prices are declining it makes sense to have multiple exit strategies. Buying properties that you plan to flip, but will be fine holding long-term makes sense in this environment as it gives you choices inthe event that things play out in a different way than

originally anticipated. Recently, we purchased a house at an online auction for $68,000, originally valued at thepeak at $400,000. I doubt this house was ever worth$400,000 – a 3/bed, 1/bath, 1,000 square feet, but at$68,000 it is well priced and in the event that we do not flip it, we can rent it out for at least $1,200. Further, it was purchased for cash in an Individual RetirementAccount (IRA), and however you look at it, it will be a better return than the stock market right now...  Happy Investing for 2009!

SJREI Update

What a great SJREI luncheon at Maggianos last week - everything was perfect from the food, attendees, and the insightful contributions by participants.  Additionally, thank you so much for your generous donations for the Toys for  Tots program, and the non-perishable items for Second Harvest Food Bank.  Both of those organizations do a  great job in our local community,  and it feels good to support others in this difficult economic climate. 

We have been so busy doing deals that I have not had the opportunity to blog - we have to make hay while the sun shines.  It has been a hectic couple of months in our family – we bought three houses rehabbed two, leased them to tenants, and are  closing on the third one this week.  We will hopefully have that rehab completed by end of the year. I will keep you posted and have photos for that at our January meeting.   This is a great time to review the market for deals that make sense, or at a minimum start educating yourself on an area that appeals to you so that you are ready to take action at the appropriate time.

We are also doing some SJREI strategic planning for 2009, and will have some new updates to share over the coming weeks. Our goal is to continue to be the premier resource for Real Estate Investors in the Bay area, and that requires constantly updating and incorporating the newest data and information that keeps you abreast in this changing business environment.  With that in mind, we are attending the Jack Miller cruise on Saturday for a week, and will be bringing back some updated information on creative financing, deal structuring, how to evaluate prospective properties, essentially how to be your own best advocate when it comes to investing.   It is a week-long cruise and I reviewed the schedule yesterday and it includes three days of seminars that run from 8am-10pm - yikes!  That is typical Jack Miller, 78 years old and more energy than the rest of us put together...

Bruce Norris Update.

Bruce Norris, Investor, CA expert, presented to a sell out crowd at the SJREI recently. His predictions for the CA market are that there currently are, and will continue to be, for the next couple of years plenty of opportunities available in CA. Information is power and understanding the fundamentals of the market you want to enter is key, as there are many sub-markets in CA and each are at a different place in the cycle.A good is Stockton which has deteriorated dramatically from the peak in 2005, and is still declining and not a market to enter right now. Take a look at http://www.thenorrisgroup.com/ for additional details and interviews with key players in the real estate market. Bruce recides in Southern CA and bought 12 houses last month last month some of which he will resell and some he will hold for the long-term.

There is so much negative news in the media, but at the SJREI we are optimistic as investors – upbeat and expectant for what 2009 will bring. Bruce shared his thoughts on the CA market, and the discounted real estate that has been appearing in our market place locally providing solid investment opportunities for those who are poised and ready.

Now Is the Time...

We got both of the houses that we purchased in the last month rehabbed and set to go. One already has a tenant in, I signed the lease agreement yesterday and the rent is $1575 - we paid $144k for the house so do the numbers that is not bad... Cashflow in CA .

We bought in Contra Costa County - I have had lots of questions regarding that. You have to come to the SJREI meetings for all the specifics. We completed the rehab in breakneck speed and the second house will be ready on Friday. I am doing a lease option on that - 99% sure at this point. The market is great right now for investors to start to dabble. It does not mean that the prices will not deteriorate further, but I am comfortable that these houses which sold for over $400k at the top of the market are a good buy. Additionally there is a great pool of tenants - people who have had to move for the following reasons:

1. Their landlord lost the house to foreclosure
2. The landlord lost him primary residence, and needed to move back into his rental
3. The landlord's family member lost their home and he needed to have them move into his rental
4. The owner occupant lost their home to foreclosure, and now need a rental
5. Section 8/ government assistance tenants looking to move up
6. Regular renters looking for a home that is nice and well situated

Interesting list - how things have changed this past couple of years. Craig's list is a great way to get tenants, and in this area potential tenants are very tech savvy and are always online.

Investor Tip of the Week:
Say you have a $150k in an IRA - you could buy a house for cash and have $1575 flowing into your account on a monthly basis - that sure beats the stock market and you don't need to freak out if you have a vacancy - you paid cash for the house, no mortgage due...just something to ponder. Make it a great week!

Possibilities Abound in CA...

It has been a busy couple of weeks – we closed on a house 10 days ago, and have already completed the rehab this past weekend. My husband, Stuart who is a meteorologist by training, got his Real Estate Broker’s license last year and he did the research and found these two properties. He put offers on approximately 50 to find 2, so it has been a lot of work but the payoff is there if you know what you want and you go for it.

I hosted an open house yesterday and it looks like we have some potential tenants. I need to run the credit and background checks. We are closing on a second house tomorrow, and hope to get started on that and get a tenant in there ASAP. Our tenant in Colorado bought our house, and so it motivated us to find some cash-flowing opportunities in CA – there are plenty of possibilities particularly now when a lot of people are running scared – those who are poised to take action will benefit long term. We bought both houses in the $135k to $145k and the rent is $1575. Nice houses in solid neighborhoods requiring no major fix-ups. Not bad…

The Uncertainty Continues...but you can thrive!

The government has revealed their plan to inject a $700 billion into the financial markets to stabilise things, unfortunately it will take several weeks to implement this plan, and essentially time before the markets are feeling the effects of that. This lack of certainty is creating havoc in the stock/financial markets across the world.

Lack of financing is causing problems in all areas - if there are no short term funds available for businesses of all sizes to cover day-to-day expenses - this is exacerbating the problem, and is contributing to a recession so the sooner we can loosen up those funds the better. Investors (not speculators) are not able to participate with the tightening credit markets - investors have historically helped to burn through these inventories. Let's hope those funds will be made available to all.

The huge sell off and declines in the the stock market highlight the emotion in the market place creating further instability. Fear is the predominant emotion right now with the economy and the stock market - fear & greed are not good guides. They often lead to the fall of markets because people act irrationally when fear is the primary motivator.

If you have made some mistakes recently with real estate or other investments here are a few important things to consider.

• Take responsibility: Own up to errors in judgement - if we don't take ownership of the problems that we create we cannot effectively move on from them.
• Don't dwell on past mistakes: Everyone has made mistakes and the the main thing following one is to determine how to logically navigate it to remain whole financially, or move forward and leave it behind.
• Learn the lesson involved: There is something to be learned from every setback. Very successful companies/ventures have oftentimes been born because of failure initially. Understanding why the failure occured is critical in order to ensure that the same mistake does not occur again.
• Educate yourself in the areas that you need more knowledge. Learn - hear what the experts are saying - reliable ones with a good track record. Read a book a week - you will soon become an expert and be your own best advisor.
• Stick with your core competencies: Know your strengths and work from your core competencies. We all have them - be familiar with your strengths, stick with what you know and are good at.
• Be creative and in action: There are always opportunities no matter what the market is doing - start a side business, buy an REO (real estate owned by banks) - create financial security for yourself and your family...you can do it!

International Reverbations for the Financial Markets...

I just returned from a trip home to Ireland to find the financial landscape is as uncertain here as it was there. It is a small world and indeed people wondered if the US encountered a downturn how/if that would impact world markets, and unfortunately now we can see that it definitely does. The financial markets are fragile worldwide - Ireland and England (and other European countries) have enjoyed tremendous growth for the last several years, and now things have come to a grinding halt.

The proposed bailout by the US government is about to be unveiled later this week, the first draft of which was rejected. As investors we need to monitor things closely and not get caught up in the predominant emotion which is fear. As author and philosopher:

Jim Rohn says "we all experience winters (financial, personal, social), they always come after a harvest. Some are short, others long...learn to think negatively when things are positive; learn to think positively when thing are negative. You'll be in better shape to survive your next winter."

This is the time to really stay close to the market to determine how you as a savvy investor can participate. Nearly three years ago now, we sold all of our properties in CA and that was the right move, we thought it at the time but there is always an element of doubt. In retrospect, it was perfect timing and all because we were privy to expert information that assisted us with making those decisions.

There is a strong contrarian element to real estate investing, and fear is the dominant emotion currently in the market place. When the bloom is off the rose professional investors pay serious attention. We have taken action ourselves by purchasing two houses recently, and are looking to find more deals that make sense. In November, we will host one of my favorite CA experts at the SJREI Association to here what he sees ahead for the market. Bruce is one of the people who predicted the downturn and warned us in advance of this crisis. Keep an eye on our website to hear Bruce at http://www.sjrei.net/ and hold on for the ride, and be prepared to act when something really makes sense financially...

Fannie Mai & Freddie Mac Meltdown

Wow, this is bigger than we anticipated - even though Bruce Norris talked three plus years ago about the fragile nature of the real estate market, and the fact that banks and financial institutions would soon reap the reward of their reckless lending practises. At that time, the real estate market was thriving, multiple offers were still common place, and people were reluctant to believe that things would take such a dramatic turn for the worst.

But here we are today and more disastrous news for the American tax payer. This recent news on Freddie and Fannie and their financial woes is important to stay on top of – interests rates have gone down, and stock markets are rallying on the news of the bailout by the federal government. This could turn out to be the biggest and costliest government bailout ever of private companies...

All of the information in the news seems to indicate that the majority of home owners in the US are experiencing financial troubles, or are in various stages of foreclosure. The truth is that 50% of homeowners in the US own their homes free and clear, and approximately 10-15% are experiencing financial hardship. Banks are lowering payments for people and assisting them to reduce their payments - if you are having difficulty in this regard banks are the first port of call - they want to work with you. Additionally, a large percentage of properties on the market today (in CA) are short sales or REO's. This will present many opportunities for investors to participate in this recovery - just be patient and educate yourself as to how you will finance these deals -the non-traditional financing options available. At the SJREI Association http://www.sjrei.net/ we will be focusing on this topic over the next couple of months. This is the way to go right now for us investors.

Tom Wilson DFW Update

What a great presentation by Tom Wilson at the Mid-Peninsula meeting this month - for those who love data Tom more than performed with a very comprehensive Power Point presentation on Dallas Fort Worth market. We have had many requests for a copy of the presentation - that is available in a PDF format below. Enjoy!

Tom Wilson Presentation Aug 19th, 2008

The Insider Scoop - British Perspective...

I am in San Diego with my family vacationing at the moment. My brother John, his wife, and three girls are here visiting from London also. John owns a Electrical Contracting company in London, and is also a real estate investor. I talked him into flying back to San Jose with me for the Mid-Peninsula meeting on Tuesday evening to chat with him on stage. His company is an electrical contracting one, and they are working on the Olympic tube station currently, as the Olympics will be held in London in four years.

This financial crisis that we are experiencing is not limited to the US - it is becoming more and more apparent that certain European countries have been similarly impacted. John shared his insights particularly on the Irish and English real estate segments. Britain historically has had under-supply with housing, and this is present today also, the one difference is that the financial markets have tightened up so dramatically that it is very difficult to get loans.

Ireland, on the other hand, has been over-build and economically there are lots of issues - larger companies are relocating from there to cheaper locals. Foreign nationals are leaving, chasing the work to other areas, including areas like Poland/Eastern Bloc countries which are beginning to develop economically and create vibrant economic climates for their own citizens. The huge growth that the Irish economy has experienced over the last several years was dubbed the "Celtic tiger" because it took off like a roaring tiger and created a huge amount of wealth there over the years. The foreign nationals that came to work there needed housing, but now those jobs are evaporating, they are moving onto greener pastures, and vacancy rates are increasing. There should be some solid investments available there in the next couple of years.

It is always interesting to hear from someone on the ground what is going on in a given market. John also chatted about the socialized health care system that Britain enjoys, the costs involved, and the high taxes that people pay for that - he pays 45% in taxes...everything comes with a price.

Our speaker Tom Wilson did an excellent presentation on DFW, and the reasons why that market continues to attract a lot of interest. What a great meeting!

Jack Miller Update

We have not done a lot of seminars or events this year as the market is changing and there are not a lot of substantive speakers available to educate on how to approach the real estate market today. There are plenty of marketers out there, with a lot of fluff and no substance, who follow a presentation with a heavy sales pitch for product as this is how they are making their money now. Jack Miller is the real deal and is well worth your time. I recently attended an 3-day event that he hosted, and never once heard him refer to a product that we should buy...

This market is very different to what we have experienced the last several years, and it is the old-timers with the gray hair who can assist us with navigating this cycle successfully. So that being said - I am very pleased to announce that we are indeed going to host the legendary Jack Miller on Saturday, September 6th, (and at our SJREI meeting on September 4th) for an all day purely information seminar. Jack is an internationally known speaker who has done creative financing deals that most of us cannot conceive of yet, and I know that his presentation will be so very helpful to us investors. Creative financing will be the key to success this cycle so mark your calandars. Click here to listen to this 79 year old share his wisdom.

Starting Out From Ground Zero (5 minutes, 30 seconds)

The cost is only $197 pre-registered. for us. So sign up today to secure your spot - you will not be disappointed. Click here to register. We hope to see you there!

Jack Miller

Jack is an internationally known speaker who has done more creative financing deals than most of us cannot conceive, and when he presented at the SJREI in September, his presentation will was very helpful to us investors. Creative financing will be the key to success this cycle. Below is a great audio from Jack that gives you an idea of the quality of his content rich material.

Check out this 6 minute audio link to listen to him speak.

Announcing a Special Jack Miller Seminar Experience! The Mexican Riviera Seminar Fun Cruise December 13-20, 2008

Combine a 7 night cruise from San Diego to Puerto Vallarta, Mazatlan and Cabo San Lucas - all while attending seminars by Jack Miller on: Negotiation Techniques, Lawsuit & Asset Protection, and Portfolio Strategies while at sea.

Enjoy this week of education, fellowship, and fun while on board Holland America Cruise Line's 'Oosterdam', described as a 5 Star Floating Resort.

Click Here to Register

Starting Out From Ground Zero (5 minutes, 30 seconds)

REO Status Update

It is a dicey market out there - lots of banks are closing their doors and getting financing is no small accomplishment. Realtors are making little or no money since the market has changed, but those who are focused on REO's are doing just fine. REO inventories are climbing rapidly - we need to understand what that means for us. Our SJREI meeting on Thursday will feature several succcessful professionals who will address these changes and share ideas on how we can navigate those successfully as investors. We will also discuss areas that are hot and areas that are not, and present the numbers and facts so that decisions to invest are made based on good solid data.

Check out the first article below - commuters are no longer willing to commute to work, it costs too much. Those houses purchased in Modesto and beyond are going into foreclosure and the occupants are moving back to the Bay area for jobs. Gas prices are a key factor in this decision. As investors we need to understand the dynamics of why we are buying? What are the economic drivers in the area? Who will our renters be? Where are the job centers? We will address all of these and more at our meeting this week. We hope to see you there!

Click here to register

Real Estate in the News:

Foreclosures forcing commuters from San Joaquin Valley back to Bay Area, The Modesto Bee

Volunteer Project Update

We just completed our community service project this past Saturday, rehabbing a local home here in San Jose – mainly working on the exterior of the property. We painted the house, cleaned, and did some landscaping as well as removing a ton of junk from the property. A barbeque following the project which was fun, and it felt good to provide this service to a little old lady in our community.

We did this rehab in concert with Rebuilding Together who help people to rehab their homes, as opposed to Habitat for Humanity who build new homes. Rebuilding Together focus on older, disabled residents who really need the help. Thank you to all of the volunteers and to our sponsors - Richard Smith & Associates, and Howard Bloom from Intero Real Estate. We hope this is the first of many such projects.

BEFORE

AFTER

LENDER STATUS

The banking melt-down continues as we see that homeowners aren’t the only ones struggling with loans taken out in the past few years. From 6/2005- 6/2007 the region's top 10 mortgage lenders made 176,451 purchase, refinance, and home equity loans in the Sacramento area. Here is the latest on those finnciual institutions according to DataQuick Information Systems:

Countrywide Financial Corp.
· Former Rank #1
· $7.7 Billion in loans.
· Status: Countrywide imploded this year, purchased by B of A – they are retiring the name as it has been tarnished.
· Has been sued by four states over its lending practices - CA, FL, Illinois & Washington

Wells Fargo
· Former Rank #2
· $6.5 billion in loans
· Status: RBC Capital maintained an outperform rating on Wells Fargo stock saying they are like to survive the downturn better than their peers

WAMU
· Former Rank #4
· $4.6 billion in loans
· Investors have rushed for the exits even though the banks have issued statements saying it is adequately capitalized. Share prices fell from $42.90 to $4.99 last Thursday Wall St. analysts suggests the institution is troubled because of its exposure to failed mortgages.

Golden 1 Credit Union
· Former Rank: Unknown
· $1.2 billion in loans
· The Sacramento based statewide credit union says conservative practices helped steer clear of loan problems that other competitors are experiencing.

World Savings Bank
· Unknown
· $2.9 billion
· Bought by Wachovia Bank in May, and the CEO Ken Thompson referred to it during a annual shareholders meeting as a “bad acquisition”. He resigned in June...

Make sure you are in an FDIC insured institution, and that your funds are covered. $100,000 per individual, $200,000 per couple. There were a ton on Indy Mac customers who had lost money due because they did not keep this fact in mind.

JACK MILLER coming to the SJREI

I attended the Jack Miller & Peter Fortunado seminar in Reno a couple of weeks ago - it was very informative and there were lots of seasoned investors to network with which made it even more enjoyable. These two have been around for multiple cycles and have a good solid approach to teaching without the fluff, and no upselling. It was well worth attending.

Jack is 79 years old, and has done every creative deal imaginable in real estate - the seminar was chock-a-block with insights including the fact that Jack has done 500 plus deals with only one traditional loan in all of those transactions. We also got clarification on the fact that sales numbers are up because foreclosures are now being included in the numbers as sales. There are opportunities that we need to be gearing up for and increasing our creative financing knowledge is key with all of the banking meltdowns that are occuring around us.

Jack spends his summers in Reno, and winters in Florida - so before he leaves to hibernate in Florida this Fall we have secured him to come do a day seminar at the SJREI on Saturday, September 6th. This is really a coup for us as we have never had him present to our group before. Jack is old school with lots of great information to share; no product sales just content - so mark your calendars.

Options when things go wrong...

Options When things Go Wrong...Presented by : Attorney Shawn Parr
This is the topic of our meeting on Thursday night - I selected this subject because of the large number of people who are calling me, asking for advice and direction on how they should handle investment properties, and primary residences, that they are up-side down in. It really is a moral dilemma as well as a financial one - should one continue to pay a $5,000 mortgage and eventually file for bankruptcy by taking the high road? Or should one walk away once they decipher that they are in over their head, and they will be ruined financially if they continue to make the payments with borrowed money or by accumulating additional debt.

These are difficult situations to navigate and every circumstance is different and has it own special nuances. For me it really highlights how tenuous real estate investing is - when it is good it is very, very good but when it is bad it is horrid! A couple of years ago novice investors were making $100k with very little effort or strategy involved - those days are gone and real estate is not the hot topic it once was with people bragging about the huge equity gains in short periods or time.

The current market is confounding - financial markets gone awry, gas prices skyrocketing, the economy slowing down, and real estate inventories climbing at a pretty rapid pace, yet multiple offers are common and houses are certainly not being given away by the banks. But hang in there our day is coming - for those with cash give it 12-24 months and opportunities will present themselves, and those who have educated themselves and are poised to act will be able to create some nice gains and long-term wealth with good solid investments. Having patience is the difficult part right now...

The Art of the Deal

I am attending a seminar -"The Art of the Deal" in Reno this weekend with Jack Miller and Peter Fortunato presenting - two of the more creative minds in real estate investing will share how to create profits through the use of seller involved concepts (AKA creative financing) that will enable investors to buy, sell, manage, and trade properties without cash or credit. I have not seen them present before, but most of the heavy hitters that I know including many of our speakers have been trained by these guys. It is $330 for SJREI members to attend-not a sizable sum for three days training - it should be worth the time. I will update you with a post next week on how it goes.

Click here for Flyer

People spend thousands of dollars on seminars and do not use the information or are subjected to other "sales presentation" at the seminars which is all about increasing gross revenues. A lot of investors that I know are attending this one, so in addition to valuable information being shared at the seminar, it will be a great opportunity to network. I often find the information that I learn from other attendees is sometimes more useful than the actual presentation...Be leery of spending large sums of money on real estate education - there is lots of great material available at your local library.

IRA Investing...

This is a great article by Walter Wofford - expert Individual Retirement Account (IRA) investor. Read to gain some great insights on how to maximize your IRA's. Walter is creative and insightful with how he approaches building his retirement account.


Strategies for Tax Free IRA Investing

Foreclosure buyers - BEWARE

A young couple, with a small child, purchased a house that was a foreclosure recently. When they got the keys after closing escrow they went to view their new home, they found it completely flooded.

There are often problems buying foreclosure & bank owned properties, people who are in foreclosure are not happy campers, and can oftentimes destroy a property causing significant damage when the bank evicts them. The problem for the family who purchased this property is that it can be difficult to get out of these contracts after the fact. The banks are very savvy, and they modify the documents so that they protect themselves (the seller) by giving the buyer shorter periods to conduct the inspections, and having them sign off rights very quickly. If a buyer is uneducated - they can really get caught for a lot of $$$.

Always complete the inspections - surprises can be costly and stressful to navigate once the contract is closed. Additionally, it is important to understand foreclosures and REO's and how they work. It is best to have an experienced realtor to represent you if you are are not a seasoned buyer...

Acres of Diamonds or A Perfect Storm?

We have included the PDF file from the presentation by John Citrigno as our speaker from the mid-Peninsula meeting recently. Click on the link to download.

Acres of Diamonds or A Perfect Storm?

Enjoy!

Auction Update - Bruce Norris latest comments...

Below is a communication from Bruce Norris and his updated thoughts on the auction market. I have had a similar experience with the auction companies also - we won two bids at two different auction companies just to be strung along for several weeks and finally have the offers rejected. It is also a challange to get your deposit check back from them at the appropriate time. They seem to be arrogant and less than communicative which is frustrating. This communication from Bruce is heartening - the deals are coming down the pike here, patience is the best strategy right now.

It is interesting because the banks are also getting more flexible and the wave of opportunities is moving toward the Bay Area, something that was confirmed by Sean O"Toole founder of Foreclosure Radar.com when he addressed our group recently. One of the things that we do well at the SJREI is provide the relevant facts and information so people can make educated decsions with regard to their investing.

There are a lot of investors hurting out there at the moment, and paying the price for purchasing properties for the wrong reasons or jumping on the real estate band wagon. I have heard all of the stories and some of them are heartrending - people who are retired going back to work because they blew their retirement funds on real estate at the top of the market and now have to let the property go back to the bank. If we can prevent any of these irrational purchases we are accomplishing our mission at the SJREI. Right now is a good time to become educated on the market so that you are poised for action when the right opportunity presents itself...

Bruce Norris Comments
"I just wanted to let you know of an important development. This is extremely important if you have won bids at a Hudson and Marshall auction this week or are planning on bidding at the auction this weekend.

We were the winning bidder at the Hudson and Marshall auction on seven houses. The auction company had countered our offer on five and rejected the other two. We refused their counter offer in each case and stuck with our original winning bid.

On one particular property in Riverside, Hudson and Marshall countered our winning bid of $112,000 at $139,500. We held firm at $112,000. Hudson and Marshall got back to us today and accepted our original winning bid! We also know this has happened to a few other investors that we spoke with today.

This makes me very happy, not just because of the profitable deal but it signals the capitulation of the lenders. The auction produced multiple 60% deals. I think that trend will continue. The fact that the lenders are learning they better take the final bid is very exciting. FINALLY!!!

I wanted to let you know this information in case you are attending the auction this weekend. From what we've heard of the many days of the auction so far, the audiences have shrunk and the majority of the bids are lower then they have been in the past.

If you win, expect to get countered. If you get a counter, don't take the bait!" Bruce Norris

Pitfalls that you need to be aware of in foreclosure market

We have included a copy of Tony Earle's newletter for you this posting which addresses in details the pitfalls that you need to be aware of as you navigate the foreclosure market. Click on the link below for details.

Potential Pitfalls of Purchasing Properties in Foreclosure
by Anthony F. Earle, Esq.*

SJREI IS MOVING UP…

We have out-grown our current facility, and will be moving to a beautiful new facility, the Biltmore in Santa Clara, on July 10th. We will no longer include the dinner component at the meetings, but will gather for an optional dinner at the bar prior to the meetings, which are scheduled to start at 7pm sharp. The cost is $20 in advance, and $25 at the door.

Starting July 10, 2008, SJREI meetings will be relocated to:

Biltmore Hotel
2151 Laurelwood Rd
Santa Clara, CA 95054
408-988-411 (San Thomas & 101 freeway)

We will continue to have the networking component that our attendees have always enjoyed, Geraldine’s presentation, & real estate update, timely interviews etc, followed by an informative guest presentation.

Become a SJREI Member TODAY!

Whether you are just starting out in real estate investing, or are working on your hundredth deal, you need the latest information, the right "tools" for the job, and a support group of other people who share the same goals and are willing to help you reach YOUR goals. San Jose Real Estate Investor Association can help you learn more, make more, and have more fun doing it!

SJREI Premium Membership

• Connect and network with all level investors to share ideas, experiences and to do business with
• Easy registrations after you sign up for membership
• Free admissions to monthly meetings
• Special discounted pricing for workshops & events
• Access to Exclusive Articles & Audio Downloads, and conference calls
• Discounts provided by SJREI National REIA membership

SJREI Premium Membership---$198 per year

Mid-Peninsula Premium Membership---$198 per year

SJREI & Mid-Peninsula Premium Membership---$380 per year

Ready to join

Questions? Contact us at 408-264-3198

Barbara Corcoran comments on foreclosure market on CNBC

According to Barbara Corcoran on CNBC this week 1 in 30 homes in Stockton are in foreclosure - this is causing lots of problems with vandals stealing from the homes, and vagrants moving into them and camping out.

Sacramento is one of the top cities for homeowners with the highest density of debt which is driving the foreclosure market there. Both Stockton and Sacramento are included as two of six cities across the country with these outstanting features. (The other include two in Michigan, one in Florida, and on in Illinois).

Click on the link below to watch the video.

http://www.msnbc.msn.com/id/21134540/vp/24839477#24539239

Creative Financing - the new game on the block!

Freddie Mac has changed their guidelines for loan qualification (which would go into effect on Aug 1, 2008) and this will impact investors - previously we could qualify for ten loans (20 per couple in some cases) now we are limited to four per family - yikes! Most of us have four loans already...What do we do now? Essentially this means that creative financing will have to be a major part of our investing strategy going forward. These include but are not limited to the following:

1. Buying subject to the existing financing
2. Owner Financing
3. Lease Option purchase
4. Sell on a wrap
5. Equity share

These are all topics we will be exploring over the coming months at the SJREI - understanding these are key to your success over the next couple of years investing in CA. In the meantime start reading up about these different ways to creatively finance properties.

Click on the link below summarizing the Freddie Mac changes.

http://www.freddiemac.com/sell/guide/bulletins/pdf/bll042208.pdf

Mid-Peninsula Meeting

We had a very informative panel present at our meeting on Tuesday evening last, and learned lots of interesting tidbits about creative financing, and getting investor loans. We included the top 10 items to keep in mind for investors as they apply for loans.

Top 10 Do’s & Don’ts during a loan process by Raffi Soghomonian

Included also is Raffi's Power Point Presentation in a PDF format for your review.

Check these graphs out for information on numbers of homes for sales in Santa Clara versus sold or pending. Compare sold price versus list price and the average days on market. The third graph addresses the months of inventory based on closed sales.

Facts and TrendsTM by Nomita & Jagi Shahani Alain Pinel

Foreclosure Rising Locally

According to an article in yesterday's Mercury News forecosure are on the rise in CA - 1,000 were put on the auction block each weekday in April. In Santa Clara there were 500 such sales in April, things are hearing up that is a 47% month over month change in the foreclosure numbers, and a whopping 585% increase over last year's numbers.

Number of foreclosures surging in South Bay, throughout state

Business Week noted recently that no U.S. Metro had slashed home prices more in the past year than Sacramento - no surprise then that investors are flooding that market which is beginning to see multiple offers again. Is it better to burn through surplus inventory - this lead to a quicker recovery. Is Sacramento is seeing the bottom - I believe the the entry level houses are looking good right now especially if you can get them where they become close to cash-flowing, but the higher end homes have a way to go.

Recipe for Disaster

Investing is a business - when one is over-leveraged and completely out-of-step with the direction the market is headed this is a recipe for disaster. The article below gives some insights on this from an investors perspective. I have heard many stories like this except the ending is not so upbeat - this investor is still married with a new baby moving back home to start over. Bankruptcy, divorce, foreclosure, pain is what most often happens in situations where people invest blindly and lose their shirts. REI (real estate investing) can be very profitable with hard work, understanding the market fundamentals, multiple exit strategies, and having money in the bank for the hard times. Real estate is cyclical and the hard time inevitably come so being prepared for those is key to your longevity as an investor.

California man losing nine homes in mortgage mess

Economic Indicators

How do I time the market? This is a question that I am frequently asked. It is not necessary to get in at the bottom of a cycle and out at the top, but there are ways to simplify your ability to correctly analyze and anticipate future market trends. By understanding the five vital signs for the real estate market - you can track develop a clear picture on where the market is headed. Here they are:

Existing home Sales

• Buyers play a dominant role when existing home sales decline, buyers lose interest in the market, and prices decline

New home building permits

• Real estate construction is the largest single industry in US, and homebuilders are keenly aware of the demand for housing
• When demand falls, price reductions and loss of profits are likely to follow

Mortgage loan defaults

• When mortgage loan defaults go up, the economy goes down, and unemployment rises

Foreclosure sales

• When foreclosure rise, demand for real estate goes down
• Foreclosure sales are far more likely to help market watchers buy low than to sell high

Interest rates

• The higher interest rates climb, the greater the downward pressure on prices

Cited from "Timing the Real Estate Market" by Robert Campbell

Market Update

According to the most recent data released from C.A.R., (California Association of Realtors) the median price of an existing home fell 26.2% in February compared to the same period last year. More interesting is the fact that the median price of exiting single family homes for February 2008 was $409,240, a 4.8% drop from January's median price.

Some locals in the Silicon Valley feel that we will not see significant declines in the local real estate market particularly in the most desirable areas, yet we are seeing some dramatic price reductions in certain zip codes - I believe that is it just a matter of time until we see a larger impact. Further, a couple of years ago it was difficult to find anything in the $500,000 range, that has changed and there are lots of houses to choose from in this price category currently. In a recent conversation with a broker, he shared that a local two bedroom condo that he sold 2.5 years ago for $450,000, sold just recently for $260,000 further highlighting how condo prices rise in an appreciating market, and decline rapidly in a deteriorating market. A simple strategy to build wealth may be to buy a condo or two at the bottom of the market especially if it cashflows. How do you determine the bottom of the market? There are key indicators that indicate the direction the market is headed, more on that to follow.

Volunteer Opportunity

We have been blessed at the SJREI, and would like to continue to give back to our local community. Hence, we are joining forces with Rebuilding Together - this is an non-profit organization offering home repair and modification in the Silicon Valley to families or individuals who cannot for one reason or another complete the work themselves. We will rehab a San Jose home with them, it will be a full day project followed by a barbeque after the work is complete. This is scheduled for July 26th, and we already have several volunteers signed up to participate in that, and the barbeque efforts that will follow. All of the materials will be provided so only your hard work will be required. Please send an email to gerbarry@earthlink.net if you would like to participate- this will be a fun and fulfilling event, so mark your calendars!

6th Anniversary Celebration - Big Hit!

We had a wonderful meeting last Thursday with our 6th anniversary celebration - thank you for all of your support with making the SJREI the thriving organization that it is. Additionally, we had a very insightful presentation from Dr. Glenn Mueller, real estate professor - in case you missed that meeting you can find the handout from that presentation on our website.