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Mark Evans, REALTOR

Well the housing market decline and everything attached to it, has reared its ugly head now from Wall Street to Main Street. And everyone’s going to feel some pain. Home prices still searching for stable ground, 401K’s in the trenches, the job market in a spiral, etc. Seems like a never ending stream of dour news. But…there is light emanating from the end of the tunnel. Thankfully, though some may disagree, the government has stepped in to at least try revive our once vibrant economy.

With all of this being said, it’s time to take a good look at the other side of the equation. The side of opportunity that is readily apparent for those who have vision beyond the current economic whirlwind in which we now reside. But this will pass and better times will prevail somewhere down the road. And for those who maintain this vision and see value for what it really is, whether stocks or real estate, the rewards should be very handsome over the course of time.

 

For the here and now, we still have a lot of clean up work to be done. And it won’t be easy by any means. But it can and will be done. Now, I’m no economic expert by any means, but I do have a few suggestions that I see as viable jumpstarts to help stem the slide we’re currently in.  So if anyone has ideas, suggestions, please feel free to share them with myself at Mark@EimersGroup.com or anyone else here at Eimers Group. If nothing else, it sure does help to vent. So here are a few of my suggestions:

 

1)   How about a 1 year moratorium on Capital Gains Taxes including gains on Real Estate and Equities purchased within that one year window. Any of these purchases would be recognized as free from Capital Gains Tax as long as the sale occurs outside of the one year window. Note that the sale would have to take place outside of the one year window to discourage trading within the tax free time frame. And this should encourage more investors to adhere to the buy and hold theory. 

 

2)   One of the biggest, if not the biggest, culprit behind the wave of defaults and foreclosures in the real estate market has been the free-wheeling , foot loose and fancy free world of finance over the last handful of years. Buyers purchasing beyond their means based on the temptation of ARM financing that was the enabler. Credit markets were open to just about any takers who had a pulse and credit checks were no longer a qualifier, but a determining factor on the initial interest rate to be paid.  Then came the reality…ARM’s, or Adjustable Rate Mortgages, began to reset with the teaser interest rates gone. So the best hope was to refinance…yet the home could no longer appraise at the necessary value to enable a refi. So the owner is now stuck with a whopping increase in house payment on a house that is no longer worth what he paid. In other words, upside down. And to make matters worse, the housing market continued to head south as more investors and upside down owners defaulted and walked away from their property. So now you have this two-headed monster that has encroached onto Wall Street infecting the lending institutions that encouraged the chaotic lending that began the cycle. SO…..I suggest that we need to try to keep owners in their property and slow the defaults on real property. And one way to do so would be to freeze all ARM rates at a number established by the Treasury and Federal Reserve and covert the loans to fixed rate long term notes. And this number would have to be no more than the teaser rate that enabled owners to purchase in the first place. Maybe, just possibly, this could slow defaults and we could start working through the credit mess from the bottom up.

 

3)   With the Treasury and Federal Reserve freeing up capital for the lending institutions, somehow some of this capital needs to be earmarked for the mortgage market. And I don’t mean to clean up the mess driven by the greed on Wall Street. I’m talking about this capital flowing downhill to the Every Day Joe in the form of very low rate mortgage loans that would enable real, qualified buyers to enter the market.

 

4)   Wake up Fanny Mae to the realization that we need more FHA financing available to the Jumbo product to help clean up some of the mess created by investors and second home owners who overbought and are now left holding the proverbial bag. So in  a nutshell, increase the FHA Jumbo numbers to realistic numbers that would entice qualified buyers to come off the fence and help clean up some of the overpriced inventory that exists in many markets across the country. And even though there has been an upward adjustment of the FHA Jumbo product, the number still isn’t nearly enough. With rigid qualification standards and favorable rates, I believe we’d see quite a bit of high end property begin to filter from the market into the hands of stable ownership.

That’s my quick, down and dirty take along with a few suggestions. Again, feel free to let me know if you agree or disagree with any of these ideas. I can take the good and the bad. Thanks and best of luck to us all.

Mark Evans, REALTOR
mark@eimersgroup.com
850-837-8880 Office | 817-637-2453 Cell

Mark Evans, REALTOR

As an out of state rental property owner, I can relate some of pros and cons of hiring a property management company to oversee your investment and maximize revenue.

The first decision you will have to face , as an owner of rental property, is whether to self manage or hire a professional property management company. Some may see this as a no-brainer when faced with the property management fees you’ll encounter in the interview process. Generally for our area at the beach, the number will run from 20%-30% of Gross Revenues. This is revenue that could flow directly to the bottom line net for you as the owner. But at what expense? By this I mean the value of time…your time and the effort you have to expend to secure desirable rentals for your property.

Some owners would rather invest their time and effort to secure their own rentals via the web (VRBO.com, Homeaway.com, etc) and keep the proceeds from Gross Revenues flowing into their own pocket. What is the impact of this approach as it applies to you and your your time? In just about every case, the impact will be time consuming if you want to ensure you maximize your rental revenue flow.

The first item on your agenda will be to secure a marketing website using a popular vacation portal such as VRBO.com. This process includes stating the price of your rental adjusted for seasonality, the terms of the rental agreement, check-in/check-out times, photos, property description, etc. This process is time consuming during the initial registration of your property, then it’s just a matter of maintaining the website.

Next you have to locate a very dependable maintenance company for repair items that are the norm for rental properties. Changing air filters, light bulbs, running toilets, A/C issues, etc. When these issues arise, you must have a dependable company to ensure items are addressed in rapid fashion for your tenants. And you, as the self appointed property manager, will be the point of contact for any repair issues that may occur during the rental period. So be prepared to answer your phone at any time, day or night.

Securing desirable rentals is also very important. And by desirable, I’m referring to tenants that you would welcome back on an annual basis. These are the renters you will want staying in your home and you want to maintain contact to keep them coming back. This is where you have to learn the screening process to find the right tenants. And trust me, the spring breakers are not the clients you’re looking for when it comes to your property. Your screening process must be fine tuned and adhered to or you could find your phone ringing constantly with complaints about your tenants.

I’ll wrap this article with a recommendation based on my experience self managing and using a property manager. Having done both, I would always recommend the use of a professional property manager. They’ll have their own website, have an office staff to secure bookings and handle any issues or complaints. Maintain the property with contracted housekeepers and maintenance staff. They know the local market and will make sure you’re pricing is competitive when rentals may be slower than the norm. Books are maintained by the property manager where they handle all finances including rental income disbursement to the owner and filing of state and local bed taxes. And foremost, they are your eyes and ears at the beach, overseeing a very valuable asset…your beach house.

Mark Evans, REALTOR
mark@eimersgroup.com
850-837-8880 Office | 817-637-2453 Cell

 

Dana

It is a great time to be a real estate buyer right now, but it can be overwhelming because there are so many options from which to choose. (Even though you get your “pick of the crop”, it can be hard to decide which one is best.) You know you are ready to start looking for a rental property to purchase, you have decided on the beautiful Emerald Coast, you search online in your price range and you find 300 properties available…how do you decide?

Well, having been a front desk manager at a local Resort, being a rental manager for short term properties, and now being a Real Estate Sales Associate, I have seen the rental market from all aspects. There are a few important factors to consider for finding the best rental property.

Amenities: Is there a pool, is it large enough to accommodate all guests comfortably, is there a hot tub (everyone likes to “relax” when on vacation); these are the minimum amenities to look for, but there are numerous others that can add even more value. These are fitness centers, indoor pools, heated pools, on-site shopping and/or restaurants, entertainment, covered/garage parking, kids’ activities, wine coolers, flat screen TVs, internet access, grilling areas, etc…

Simplicity of beach access: Obviously, if you can afford to be right on the beautiful beaches, this is the ideal, but if not, the next best thing is a property with a view. And, regardless of the view and location of the property, the beach access needs to be easy—quick walk, bike, golf cart, or tram ride to the beach.

Heads in beds: When it comes to a vacation rental, people want to be able to sleep as many people as possible in one condo/house. A lot of guests who visit our area have families with kids, so if you can find a unit with bunk beds and/or a sleeper sofa, you are likely to get better rental numbers than a similar sized unit with no bunk beds or sleeper sofa. Most vacationers would rather spend less money on the condo rental, and spend money out doing fun things while they are here.

Resort atmosphere: The Destin area is well known for its high end, luxury homes and resorts. When most renters come to visit they are looking for that Resort feel also. So, whether you can purchase a property in a resort or at least make your property feel like a Resort getaway, you will get better rental numbers. Decorating inside the unit and if a house, the exterior, will catch the eye of the vacationer, as they all like to see pictures of the place they are renting online before they arrive.

The above aspects are all important, but if you are going to be using the property yourself, then you need to make sure the property meets your needs also…not only now, but down the road a few years. The bottom line is…find and purchase a property that you would love to vacation at, and the rental guests will come too!

Dana McIntosh, REALTOR
dana@eimersgroup.com
800-775-5914 Main | 850-428-0243 Cell

Since 1975, the Employee Retirement Income Security Act (ERISA) has permitted self directed Individual Retirement Plans to purchase real estate and notes.  Today, less than 3% of the four trillion in retirement accounts is invested in real property. 

The Entrust Group (www.theentrustgroup.com), with corporate offices in Reno, Nevada, is the leading third party administrator of self directed IRAs (SDI).  With franchised offices across the country, The Entrust Group provides superior customer service, local educational events, and faster transaction time for Investors, Realtors, CPAs, Attorneys and Financial Planners.  Entrust does not promote any product or assets, only offers Self Directed Plans and provides record keeping for all assets within the plan.  This allows the taxpayer control to invest in all types of assets, just not securities but in what the taxpayer knows best. 

Types of retirement plans that can be self directed include:

  • Traditional IRA
  • Roth IRA
  • Individual (k) including the Roth Individual (k)
  • SEP
  • SIMPLE
  • Rollover IRA
  • 403(b)
  • 457
  • Coverdell Education Savings Accounts
  • Health Savings Accounts

Self directed investment choices include:

  • Land
  • Rentals
  • Real Estate Options
  • Pre Construction Contracts
  • Private Placements
  • LLC and Partnerships
  • Privately Held Stock
  • Tenants in Common
  • Timeshares
  • Notes/Mortgage Receivables

Prohibited investments are collectibles such as art, antiques, metals or gems, stamp, coin and alcoholic beverages.  The asset held by the SDI cannot be used personally or by family members and friends.  Nor can the taxpayer receive any benefit such as compensation for providing property management or repair services.

It’s an easy process to open an Entrust account.  To start an account is opened, funded with proceeds from either partially or fully liquidating a retirement account.  Enter into a purchase contract for the asset, funds are wired to the closing and the property is deeded to “Entrust FBO Richard Eimers.”  Upon the sale of the asset, the net equity is wired to Entrust and follows your instructions to purchase another asset or to open a securities account with your broker. 

A self directed account can fund a limited liability company (LLC) with the sole member as the Individual Retirement Account.  Real property could be purchased and held be the LLC.  Expenses can be paid and rental income received by the LLC.  Once the property is sold the equity is returned to the LLC.  No capital gain or recaptured depreciation taxes are triggered given the LLC is owned by a self directed retirement account.  This is better than a 1031 tax deferred exchange!

The fee to open an account is $395 which includes the first year maintenance fee of $250 per asset.  If the value of the asset is less than $32,000, the percentage fee option can be selected for the annual maintenance fee.  All expenses such as home association fees, taxes are paid from your Entrust account.  Your Entrust Administrator will alert you to an upcoming expense and request a contribution. Or you may hold additional cash to pay for the expenses.

To learn more about how an Entrust Self Directed Retirement Account can benefit you, contact Andy Gustafson in Destin, Florida at 850-837-1031 or andgus@atlas1031.com.  To learn more about Andy and Entrust go to www.atlas1031.com

The Entrust Group does not offer investment, tax, financial or legal advice to clients.  Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area.

 

Dana

It is not uncommon for a buyer to tell me, ‘Wow, I can’t believe we are under contract and buying this property already. How did this happen so fast?’  The answer is it didn’t.  Real Estate buyers start the search long before they even realize it.  Here’s what you can expect from your property shopping experience, and how to get the most out of the process in order to find the right property for you:

  1. Figure Out the Benefits: Are you buying your first home and this will be much better than renting? Are you buying a second home or investment property so you can enjoy the beach without wondering where you will be staying each time, and realize the appreciation down the road? Whatever your goal, you should have weighed the benefits and decided the purchase option is the best decision for you.  This is a major hurdle overcome, and you are now focused and certain.
  2. Talk To a Local Lender: Determine the price you can afford so you don’t waste time searching for a property only to find out it is too expensive, or you could have afforded more and got that extra amenity or bedroom you wanted. Most sellers in today’s market will be more negotiable in the purchase price if the offer is not contingent on financing.
  3. Define Your Search Parameters: What is important to you…gated community, near work/school, Gulf front or Gulf view, rentability, age of property, available amenities, etc…
  4. How Long Should it Take to Find What you Want?  Depending on your goals & needs, with the amount of inventory on the market it should only take a couple weeks to find the right property.  This is if you have done your homework in reviewing the area’s comparable properties and recent sales and have realistic expectations.
  5. How Many Properties Will You See?  The average number of properties I show on a given day to any buyer is seven.  Any more than that and the brain is on overload.  Therefore, don’t expect to see 20-30 properties at one time.  It may be physically possible to do so, but you won’t remember details about any of them.  If you have a list this long it is helpful to do drive-bys of the properties first to determine if you like the property from the outside.
  6. The “Perfect Shoes” Experience:  Women will relate to this one.  Say you need a new pair of shores. You go to the mall. At the first store, you find the perfect pair.  You try them on and they fit perfect.  They are glamorous, exactly what you had in mind, and the best part…they are priced right!  Do you buy them? Of course not. You go to every other store and try on all shores until you drop from exhaustion.  Then, you go back to the first store and buy the perfect shoes, as long as someone else didn’t buy them already.  Don’t shop for a property this way.  When you find the perfect property, buy it.   There is a reason you like this property, and other buyers will like it to.
  7. How To Rate & Compare Inventory: Bring a camera and start at each property with a close up of the house/unit number. Take notes of unique features of each property. Pay attention to surroundings-what is nearby? Do you like the location? Immediately after leaving each property, rate the property on a scale of 1 to 10, with 10 being highest.
  8. View Top Choices a Second Time: After viewing properties for a few days, you will probably know which ones you would like to buy.  Go back and view those again because you will notice elements you didn’t see the first time.  At this point your agent should find out the motivation level of each seller and double check to see if any offers have come in to make sure the property is still available.
  9. Make the Selection:  I can usually tell out of a list of choices which property a buyer is going to purchase.  But I do not want to steer them in any direction, it is our job as agents to provide the facts so the buyer can make an informed, educated decision.  I do, however, like to point out any defects so we can utilize this in our negotiating.
  10. Write the Offer: I use an online forms program that makes it very simple to put together an offer in the most professional manner. So, with just a few pieces of information and about 15 minutes we can present our offer in the best light.

How do you make your offer the best?  Find out in next month’s newsletter, or call me at 850.428.0243 to discuss.

 

 

Dana McIntosh, REALTOR
dana@eimersgroup.com
800-775-5914 Main | 850-428-0243 Cell

Richard Eimers

The real estate market is all a buzz; most buyers that the agents in my brokerage talk with are hearing all kinds of amazing stories about the great deals that are to be had by going through the short sale or foreclosure process either with the mortgage holder or waiting for the foreclosure on the courthouse steps.

I speak from experience; we are selling about 1-2 Shore Sales per month in addition to our regular sales with “motivated” sellers. I am also certified as an Asset Preservation Consultant with Titanium Solutions. Titanium Solutions is an intermediary/short sale company who has relationships with most of the national, regional and local lenders’ “Asset Mitigation” or “Workout” departments. The lenders do not want to take the homes/properties back from the owners and would rather work something out but if a workout is not possible we are given 2 – 4 months to sell the property short before it is foreclosed.

As I look at the statistics of sales of improved properties sold since the beginning of this year, I find that properties are selling at about 90% of the asking price closing in 30 days or less. The only seller owned properties that are selling are those who have reduced their asking prices to a point that represents today’s values. If we look at how today’s value is determined; it is based on Comparable Properties SOLD with in the last 3 to 6 months.

The question of what type of transaction a buyer should concentrate their efforts on buying is simple once the buyer understands the realities of value and the position of the sellers/lenders.

  1. The lenders in both Short Sale and Pre-Foreclosure transactions will generally base the eventual selling price of the subject property on Sold Comparables and will typically negotiate with the buyer somewhere between 8% – 12% off that new fair market value. This new fair market value will be determined by a BPO or by a qualified appraiser and in most cases the outstanding mortgage balances do not enter into this calculation.
  2. When a property is Sold at the Courthouse steps the lender has a representative there protecting their asset, bidding on the subject property against the other bidders in an attempt to insure that the selling price will be at or above the mortgage amount.
  3. Unlike traditional Courthouse step auctions that most people are familiar with the value of the property in today’s real estate climate is less than the outstanding balance of the mortgage. So the eventual selling price will be more representative of current market values and less like a bargain.
  4. Motivated sellers, those who have been reducing their asking prices in an attempt to find today’s fair market value do so by having their REALTORs provide them with Sold Comparables, that is properties sold that most closely resemble their property and they typically increase that amount by about 10% in an effort to give a little back to the buyer during the negotiations. Most sellers believe that buyers feel as though they are getting a value if the seller comes off his price 5% – 15%.
  5. I hear many times from unrealistic buyers that they will wait until they can get a real “Deal”. Here is the quick math. If an owner’s property (including REOs) costs them $50,000 per year on a property valued @ $500,000 (assuming the property is priced at current fair market value) why would they come off their number $100,000? It has become common knowledge that this real estate market is at or pretty close to the bottom of the cycle; if over the next 18 months inventory and values stabilize the only direction left to turn is upward. If an owner opts to keep their property for this period and then sell they lost $75,000 rather than the $100,000 they were going to lose. If they choose to hold it longer, based on appreciation their losses will begin to diminish; the longer they keep the property the more their position improves.

My recommendation: buyers should look for properties priced at fair market value and negotiate aggressively. The deals are found when price, terms and conditions of the sale are outlined in a contract. The sellers respond best when they can see the pain and suffering they are going through is about to end, this is the motivation. Expect that properties that were bought by the sellers prior to 2003 to have equity and more wiggle room compared to properties bought in 2004 and 2005 where the sellers in nearly all cases are upside down and have to come out of pocket at closing – that’s no wiggle room – if the sellers have the money or the assets to bring a check to closing you’ve got a deal. If they don’t then there is a Short Sale on the horizon and the eventual selling price of the property will have little or no change.

Richard Eimers, Lead Agent
richard@eimersgroup.com
Main: 800-775-5914 |  Cell: 850-259-1798

John Holahan, REALTORBecause I continually am asked similar questions about the current state of the market, I thought it makes sense to share some opinions with you regarding the real estate market in this area.

The market still has a long way to go down?

Some areas do and some areas are actually appreciating. It all depends on whether the market has embraced a building or subdivisions pricing structure. I know of several condo buildings and residential developments that have had more sales in 2008 than in 2006 and 2007 combined. The pricing is lower than in those two years, but units are moving and every time one sells a new “higher low” is established.  Adagio, a Gulf front development located in Blue Mountain Beach is a great example of this trend. SeaCrest Beach, WaterColor, and WaterSound are examples of subdivisions where the market has responded well to current pricing. Most of these developments have corrected
between 30% and 50% from the peak market pricing.

Foreclosures and short sales represent the best deals?

Most of the properties in this category are the result of people who bought in an 18 month time frame at the absolute peak of the market and are far upside down relative to mortgage balance vs. property value. There are some diamonds in the rough. The process is long and tedious–banks have no sense of urgency, and properties are sold “as is” so what you see is not necessarily what you get. No repairs are usually offered and no warranties apply. The true best deals are from people who bought prior to 2004 and didn’t use their property as a piggy bank to enhance their life style. These people are realistic with the market and will still walk away from a closing with a check in their hands.

Why is buying real estate a good investment?

Real estate was never intended for a short term investment, just like stocks or any other long term holding. Every investment has a cycle which typically lasts about seven years. What happened in 2004 to 2006 was no different than what happened with the Dot com frenzy in the 90s. Prices were driven up by speculation and there was no value associated with the appreciation. I remember stocks that traded at very high P/E ratios and had negative earnings! Our real estate market was no different.  We peaked at the end of 2005 and 2006 and now have gone through a correction phase. Well priced properties are selling as the long term potential is significant. One has to remember we are dealing with Florida resort coastal real estate–not a
primary residential product in a market like Detroit. There will always be buyers for second homes in a resort area. People do not want to eliminate vacations and quality of life components for which they work very hard to accomplish.

The New Panama City Airport:

Slated for completion in 2010, this airport will provide direct flights to the Mid-Atlantic and Northeast markets. This is where the majority of the U.S. population lives and has above average demographics. If you compare the current real estate pricing in this area vs. that of comparable markets in south Florida, Naples, Jupiter, West Palm Beach, Marco Island, Sanibel, etc., this area is significantly less expensive for similar products. As soon as people in the above markets can have direct access to this area and discover how much nicer the beaches, water, amenities, and people are, the next significant appreciation phase should occur. Smart Money just named the Panama City beach area as the number one place to buy a second home due to some of these factors.

The profile of today’s buyer:

Today’s buyer is one who has done extensive research and by no means overextends themselves with this purchase. They make their decisions based on financials, extensive data and research, and as to how the property best addresses their needs. They realize that there are current opportunities in today’s market and whether the pricing goes down another 5% is of little concern as their holding timeframe is long term. They are end users that will actually enjoy the property, afford the property, and possibly rent it out to offset some expenses, but are not dependent on rental income to cover costs. More people today are paying cash than ever before, and real estate provides diversification in their overall investment portfolio. As one of my
clients put it simply, “At least I can use my property if it depreciates. To date, I haven’t established any long term memories with my stock shares.”

How can I help?

If you are considering real estate in this area, I will provide you with all the data that is necessary to see if this is something that makes sense for you at this time. I will take the time to fully understand your  objectives and to see if we can accomplish them together. I don’t subscribe to any hard sales tactics and have pretty much been involved as an owner with any aspect of a real estate transaction that is possible. My direct success depends on building relationships with success people like yourself, who one day may
purchase real estate in this area. My goal is to provide you with every tool that is needed to accomplish this objective.

John Holahan, REALTOR
john@eimersgroup.com
850-837-8880 Office | 850-582-2893 Cell