Archives for May 2009

Grow Your Real Estate Business With Independent Contractors

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Seven Reasons You Want to Use Independent Contractors To Grow Your Business

There are dozens, maybe hundreds, of strategies that we've used successfully over the years to save our clients taxes. One such strategy is to use Independent Contractors to build your business. I'm going to cut right to chase here and just jump into this.

Reason #1: It's easier to ramp up your business

You can contract with Independent Contractors (ICs) for short term, month-to-month work or just by project. You don't have to worry about training them or providing tools for them to work with.

There is an assumption that they can hit the ground running. If they can't, the worst case is you've tried it out for only 30 days. You didn't have to invest time in training them and providing salary & benefits during this time. They either can perform, or not. If they don't, they're gone.

Reason #2: It's easier to change the business model if you need to change quickly

If your real estate investing business goes down, it's a lot easier to stop using an IC than it is letting an employee go. Besides the emotional issues of letting go an employee who depends on you completely for their income, there are also legal and benefit issues. You might be forced to cover the employees under the new COBRA laws. Your unemployment rates will go up. [Read more…]

Existing Homes Sales Rise, While Mortgage Applications Fall

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According to the National Association of Realtors, the number of sales of previously owned homes in the U.S. rose by 2.9% in April to an annualized pace of 4.68 million. The gain, the second in three months, was spurred by foreclosure auctions and cheaper prices which attracted bargain hunters. Distressed properties accounted for 45% of all existing home sales and the median price of a home fell 15% from a year earlier. The number of houses on the market climbed 8.8% to 3.97 million in April, and at the current rate of sales, it would take 10.2 months to sell all those homes, Bloomberg reports.

At the same time, the Mortgage Bankers Association's index of mortgage applications decreased 14.2% in the week ended May 22. The share of applicants seeking to refinance existing loans fell to 69.3%, from 73.6% in the prior week, as the average rate on a 30-year fixed-rate loan rose by 12 basis points (bps) to 4.81%, the highest level in more than two months. The average rate on 15-year fixed-rate and one-year adjustable mortgages rose by one basis point to 4.44% and 17 bps to 6.55%, respectively, Bloomberg reports.

How to Keep a Positive Perspective in a Negative Market

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I am sure you've heard the expression, “Attitude is everything.”  This is very true. Right now, it's simply your attitude and mentality that will give you the edge over others who are trying to invest in real estate in this highly volatile market.

You've undoubtedly heard the importance of thinking positive and having the right attitude.  Most people are intelligent enough to know that this statement is true.  Some people reading this will argue that a positive attitude doesn't always work.  Well, maybe not, but I know one thing for sure – negative thinking and a negative attitude NEVER works!  So your only choice and your only chance for success in this market are to pick the positive things in life and maintain a positive attitude at all times.

I once read a fortune cookie that said, “An optimist is someone who tells you to cheer up when things are going his way”.  I know that if you are reading this article, times may be difficult and you need serious answers to your burning questions such as, “How do I profit in a slow market?”  There are many answers to this question, but first I need to impart to you some relative perspective.

A History Lesson on Real Estate Cycles

About every ten to twelve years, as an average, real estate values tend to double in most major metropolitan areas.  For example, in the 1920's, the original colonial homes sold for just under $2,500 in Long Island, New York.  Since then, real estate prices have doubled almost eight times over the last 80 years.  That averages out to a 100% increase approximately every ten years.  An interesting note to this is that about every ten to twelve years, real estate values must correct before they enter their next “doubling cycle”.    [Read more…]

Greenspan Chimes In on Bank Stress Tests

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One of the architect's of the financial crisis issued a warning that banks still have unfunded liabilities that were not properly accounted for by the Treasury Department's “stress tests.”

Yesterday evening, Alan Greenspan also said that “…until the price of homes flattens out we still have a very serious potential mortgage crisis.”

Lest we forget, it was the maestro's absurd interest rate policy earlier this decade that helped fuel the housing market bubble in the first place. And his comment that systemic risk was balanced across the globe through the use of derivatives (like credit default swaps) gave tacit approval to practices that have proved to be absolutely disastrous.

Personally, if I were Greenspan, I'd keep my mouth shut and ride off into the sunset. I wouldn't want to call attention to just how badly I misjudged the economy at the end of my term. But maybe that's just me…

Total Housing Starts Dive 12.8% in April to Record Lows

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Housing starts dived downward in April, falling 12.8% compared to the previous month, to a new record low and a seasonally adjusted level of 458,000, according to data released today by the U.S. Census Bureau. On an annual basis, that qualifies as a 50.2% drop.

The drop was driven primarily by the volatile multifamily sector, where starts for buildings of five units and more dropped 42.2% to a seasonally adjusted pace of 78,000 last month. Starts for buildings with two to four units also declined 62.5% to a level of 12,000 units. Combined, the two represent a 46.1% reduction in multifamily activity last month, to 90,000 units.

“The market for multifamily homes is in a deep slump,” observed Patrick Newport, U.S. economist for IHS Global Insight. “Multifamily starts and permits both fell to all-time lows in April. The recent drops have been mind-blowing. Multifamily starts averaged 380,000 over the first half of 2008; in June 2008, they jumped to a 423,000 annual rate. They have dropped steadily since, and [last month] plummeted to 90,000 units. This sharp decline is related to financing. Some builders are overwhelmed with debt. Others cannot find funding to finance projects with positive net present values.”

In contrast, single-family starts picked up 2.8% on a monthly basis to a seasonally adjusted level of 368,000 units. On an annual basis, that figure represents a 45.6% slide, but this second monthly increase for single-family starts appears to be generating optimism in some industry watchers.  Additionally, single-family permits showed a small gain in April, increasing 3.6% to a seasonally adjusted pace of 373,000 units. (That’s 42.3% below April 2008’s numbers.) [Read more…]