Category Archives: Investing

The Best Time to Buy/Invest in Sacramento Real Estate

Posted on June 12, 2009 | 1 comment

1) Right now Sacramento consumer confidence is on the rise.

2) The interest rate is extremely low (about 5%, maybe lower).  And everyone predicts that it will not stay this low, and in fact may skyrocket (according to Obama, as we continue to borrow from other countries).  As the interest rates go up, even if the prices go down, this will take many potential buyers out of the market.

3) One report shows that the housing affordability index is the best it has been in 40 years.

Call me or write if you want to see the numbers OR discuss your scenario.

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Common Investor Questions – Sacramento Real Estate

Posted on May 29, 2009 | Leave a comment

I get many questions from interested investors, so I thought I’d start posting them, as I’m sure others have the same questions.

Question/Inquiry from potential investor [May 27, 2009]

I heard that it is possible to achieve ~ $600 per month positive cash flow.  I would like to develop in my mind a profile of these types of properties so that I have a better idea of what I am looking for.

Here this is how I responded:

1) Cash flow will always depend on your finance situation.  For instance, the more money one is able to put down, the more cash flow (up to 100% cash flow).  My first question for you is, how much are you able to put down?  Or, what is your comfort level?  Or what is your budget?  Are you obtaining a loan?  Or would this be a cash transaction.

2) One way many investors are generating big rewards and high cash flows is to buy under valued properties that need value added.  This demands cash reserves to do put toward renovations.  Also, many times these types of properties do not qualify for a loan due to the poor condition of a property.

3) Also, $600 cash flow might be on the high side of expectations.  I have closed a few deals with investors that have received that kind of cash flow by putting 20% down and at times buying their rate down.  One recent scenario was a duplex that sold for $105K; 20% down; $10-12K in renovation; bought the rate down to about 5.25% – his total housing payment (including taxes and insurance) is about $700/mo. and he’s getting $1600 in rents.  This is a dream scenario, but as you can see it takes some reserves to pull it off.

4) A very common situation is a SFR in the $80-120K range that needs $2500 in repair, and would cash flow $300-$400/month.

What questions do you have?

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What to Expect When Buying a Bank Owned Property in Sacramento

Posted on March 12, 2009 | 6 comments

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While there are always better and worse case scenarios, I’m speaking from my experience. You can expect when buying a bank owned property:

1) A low price tag! Everyone loves this aspect of bank owned properties. Most banks are pricing their inventory at the low end of the market. I know one bank that specifically prices their homes 10% below the market. They want their inventory sold and off of the books as fast as possible. Their loss, your gain!

2) An As-Is sale. This is what most people don’t like… Banks will most always sell their properties as-is – I have not seen one that is not listed this way. This means that the bank will make no representations or warranties on the property, as they usually don’t know much about it, more than the address and the appraised value. Ninety percent of the time a bank will do no work or make no repairs on a property. Of the 10% of the time,

a. There may be a health or safety issue with the property that would cause potential future liability.

b. They may do a pest inspection and at times clear the Section 1 work (dry rot, termite damage, infestation, etc. that is present).

c. There may be some cosmetic work that is done before the home is listed or after it has not sold in several months, such as, re-painting or re-carpeting the house.

3) A one-sided transaction. In a buyer’s market, where the buyer should have all the negotiating strength, bank owned transactions do not behave as such.

a. It usually starts with a lack of responsiveness from the listing agent (not always). The agent, most of the time, is just a go-between and has little control or influence on the bank’s actions.

b. Many times because the property is priced so low, there may be multiple offers. Many times the final purchase price will be more than the asking price. Are you seeing how these transaction do not behave differently in this market? Most of the time a buyer is asking, “How much do you think the seller will come down on their price?”

c. If you get your offer accepted, expect the bank to send you an addendum, which is another contract that is written by their attorneys to safe guard their own interests.

i. Much of the time inspection time frames are shortened (say from the traditional 17 days to 7-10 days)

ii. There is always a Per Diem charge (any where between $50-$300) if the buyer does not close escrow on time as a fault of the buyer.

iii. Many times there is a “silent” contingency removal clause. This states that contingencies (loan, appraisal, inspection, etc.) will be removed automatically once they pass stated time frames in the contract. This is oppose to the normal signed contingency removal. Once contingencies are removed, whether formally or silently, the buyers deposit money is in jeopardy if the buyer backs out of the deal without good cause.

4) Some frustration. I have stories to tell…

While many things are out of my control, I’ve managed to successfully navigate bank owned properties on behalf of my clients. Give me a call to discuss your options.

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Local Area Specialist?

Posted on March 9, 2009 | Leave a comment

You may see for sale signs around your neighborhood with the additional ride message attached – “Area Specialist,” or it might say “Neighborhood Specialist.”  Now I don’t think these agents are being dishonest, because quite a few have been doing business in a certain area (usually the one where they live) for many years.  Or the agent might just pour most of their effort and marketing into a specific area (usually ones with high priced homes – ha ha ha).  With this said, there are many others that put this attachment on all their listing, as if to say, “I know more about this area than others – hire me.”  It must be a strategy that works,  because if you keep your eyes open you will see this sign flashed everywhere.

I was reminded of this when an investor client of mine asked me if I specialize in a certain area.  The reality of it is, I don’t know many agents, including myself, that won’t list a property or assist a buyer to purchase a property if it’s in their general region.   Unless an agent is a liability to the sale due to there unfamiliarity with the area or it is just too far from the normal book of business, that agent will usually take on the client.  Makes sense right?  A good agent will either be honest about there understanding (or lack thereof) of an area or special type of property, and either hustle to learn and serve the client to the best ability or refer it to someone who knows what they are doing.  Bottom line, what’s best for the client?

I’ve successfully sold homes and assisted buyers in finding homes all over the Sacramento region.  However, I probably know the most about the Midtown and closely surrounding areas of Sacramento (95811, 95814, 95816, 95818) due to the fact that I’ve lived and worked in these areas for over 10 years now.  Also I own property and manage several others in this area, so I am familiar with the streets, businesses, and flavor in each little nook and neighborhood.  Especially with income property, the “area specialist” label may be more important than in other arenas of real estate, becuase the future income, vacancy rate, expense and headache are all associated with the intricate details of that location.

The interesting thing too about working with investors, many are looking for the bargains and the least expensive thing that they can get there hands on.  Investors want the best neighborhood, at the cheapest price (doensn’t everyone?).  I’ve worked with one particular investor that only bought in Oak Park.  Last year I closed a half a dozen deals or more for them (both on the buy and sell end) and really got familiar with Oak Park.  And probably wrote 50 plus offers.  Am I now an Oak Park Specialist?  For a while this is the only area that would cash flow, and now it’s the main area that someone can buy a home for under $30,0o0 and have many from which to choose.

Let me know if you have any questions about the Midtown/Downtown areas or surrounding neighborhoods – and I would include Oak Park in that category.

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Buying Real Estate in Sacramento CA

Posted on December 10, 2007 | Leave a comment

Quote of the day – I heard this while listening to a seminar entitled Real Estate 2.0 –

The more educated the consumer, the more likely to use a Realtor.

I thought this was interesting because usually one would conclude the opposite – the less sophisticated or informed, the more apt to use a real estate professional.

A majority of buyers that I am working with these days are searching for and many times finding their property on their own. I can find out further details on a property and may see it hit the market a bit sooner, however, information on residential housing is now easier to acquire than ever. In the past, it seemed as though Realtors were the gatekeepers of information. Now someone with a computer and an internet connection and a little time on their hands can do much of the leg work on their own. I even find many clients really enjoy hunting for a home or next property. Many have commented, “I love looking for and at home… I should get my license.” And many no doubt do – the market is saturated with Realtors (I think I figured out that one out of every ten people in CA have a real estate license).

You may be asking in the back of your mind, “Why then do I need a Realtor to buy a home?” Or I’ve heard many comments like, “Your job is easy,” and “Soon no one will use agents any more to buy their home.”

Finding a home is the fun part and just a small portion of the job. Realtors are no longer the “gatekeepers” of information. For a buyer, I believe that you need an agent primarily for:

1) Consulting – To have someone as a sounding board, someone to give objective feedback, and someone who can assist you in making an educated decision is invaluable. This is the same reason why a struggling couple will usually not be able to fix their relational problems – they need an outside, unbiased counselor to speak truth and help develop skills for a successful partnership. Oh by the way, run away from the “desperate agent” – the one that will attempt to sell you anything and everything. Find someone who listens well and acts upon what you have told them.

2) Negotiations – Find an agent that is a skilled negotiator, one that will act diligently on your behalf to find and get you the best possible deal.

3) Contractual Guidance – Getting the best deal and navigating through the transaction with grace and the least amount of hassle are two separate things. Most people are not aware of the deep legal issue that can ensure over lack of contract knowledge.

4) Orchestration – A good agent has built a network of associates that will facilitate putting the pieces of the transaction together. This factor is indispensable and has helped save many deals that would have gone sour.

One recent transaction almost fell apart because the buyer (whom I represented) wanted the pest report cleared, and the company that performed the report wanted upwards of $10K to remedy the problem. Neither side wanted to pay this money to have the work done. We were at a standstill. I had our contractor, that we use for all of our property management jobs, come in and do the work and clear the pest report for almost half price. I negotiated with the buyer and seller’s agent to split the repair work.

I have saved many deals through sound consultation, timely negotiation, and a strong network of professionals that will assist in making each transaction as fluid as possible. Contact me to discuss your situation in more detail.

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The Real Estate Market in the Winter – The current position of a buyer.

Posted on December 8, 2007 | 1 comment

I showed a home this morning (an REO – that is bank owned). It’s amazing how the shift in the market changes how one views a property. The typical buyer is now saying:1) “How low can I go with my offer?” – Everyone wants a deal. The reality is, sellers have not compromised as much as the buyers hope. While it is no doubt a seller’s market the economy has not fallen into the decline that creates a situation where seller realize that they have to grab the first offer, no matter how low. Also, the general public sees “Bank Owned” of “Foreclosure” and they translate that to mean “Half Price” or “Going out of business sale.” Think about it, bank are the tightest group of people on earth. Do you really think that a bank is going to let go of a property they own for 50%, 40%, 30%, even 10% off the asking price. Okay, there are times when 10% is reasonable, but in most cases the bank has several reliable appraisals done prior to listing the property. And there is an account executive who scrutinizes all offers and whose job may depend on getting every nickel possible out of that property. A quick caveat… Banks do generally list their properties slighty below the market, so as to move it fast.

We have investors that get great deals on REO’s, but that is usually all cash offers closing in the shortest time frame possible to accommodate the the bank.

After pricing a listing of mine, at what I thought was pretty aggressive, in order for it to sell, we got an offer the first week! However, it was $30K under asking on a home under $300K. The agent said, “It’s only 10% under asking.” I replied, “We all know that it is a buyer’s market, but there is a difference between negotiable, or should I say motivated, and desperate.” We countered saying we’d meet them half way, and the buyer walked away, saying, “no thank you.”

The answer to this question of “how low?”is related to many other factors”

– What is price of the property? What are the comps.? It’s easy to think that one should just arbitrarily offer 10% lower than asking. Go ahead, but making random offers is different than getting an offer accepted on a good deal. How long has it been on the market? Some sellers and agents actually price properties a little below the market – ask your agent to give you the comparative sales in any given area to help determine your offer.

– Why are you buying this property? Investment? Short-term living situation? A place to raise your family? Your motive for buying will play a big part in what you offer. I paid full price for my home in a declining market. Call me crazy, but the house was priced right; there was other interest; this is where I will raise my family; and most important, my wife wanted to live there! It’s a long term hold, so I am not worried about the market going down.

– What is your time line? A long period of time to make a decision gives the buyer more power in the negotiation.

I begin negotiations based on the situation and scenario of the buyer and seller. Sorry, there is no standard dollar amount or percentage to begin negotiations.

2) What else is available?” is the other question that the buyer is asking. This is RE or economics 101 – Supply and Demand. Right now there is more supply (inventory/housing) than demand, which drives prices down. As a result, the buyer has much to choose from and has the freedom to take their sweet time.

I still counsel the buyer to hone their “criteria for buying.” We discuss their top 3-5 priorities – their must-haves in a home. Unless you find your perfect location, design and have your home built from ground up, you will never find the “perfect” home. I cannot tell how many times the buyer says to me, “If only I could have THIS home THAT location with the OTHER home’s features…. Keeping focused on your top 3-5 buying priorities will bring you into a realistic frame of mind and save much frustration.

Good counsel is essential in making wise decisions – this is one of my strengths.

Contact me to discuss fine

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Short Sales on Sacramento Properties

Posted on August 30, 2006 | Leave a comment

We were camping/boating this past weekend with the family and a bunch of new friends. What was one of the topics of discussion around the fire? REAL ESTATE and of course INVESTMENTS. Once again, I do not bring up the topic, but all eyes turned to me to answer questions and be the “camp fire” guru. As our firm, Burmaster RES, deals with a huge number of investors and those that want to become investors, the question remains, “Where are the deals in this market?” OR “What’s the next good investment?” My answer that I’ve been giving for the last six month is, SHORT SALES. Most of the time people give me a blank stare, or ask, “A short what?” Now theSacBee is even writing about short sales, and they did an excellent job of defining and explaining the process of a short sale. (see article).

The Bee says this about the investor that got over his head… “Webber has one last hope to avoid foreclosure — selling the houses for what he can get and persuading his bankers to accept less than he owes.” This quote is a little misleading, as the article progressed the author pointed out that it’s necessary to seek out a professional and even a specialist to do the negotiating and for you. Similar to a person trying to sell their own home – it’s definitely an option, but considering the time and expertise involved to complete the transaction successfully, most opt to use a real estate professional. Here’s where I want to draw your attention. At Burmaster Real Estate Services we have agents that have gone through extensive training and h ave negotiated many short sales on our clients behalf. We know the process inside and out. Whether you are faced with the unfortunate situation and hardship of not being able to pay your mortgage and must turn to a short sale to avoid foreclosure, OR are looking for a great investment with instant equity, let us be the one to negotiate on your behalf.

Visit our website at http://www.burmasterres.com or call 916.595.7900.

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