Norada Real Estate Investments

False Housing Bottom

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Everyone is awaiting the miracle signal of a housing bottom. False media-hyped-market-predictions are certain to play an important role in each of our lives. Listed below are a few of the recent indicators that present opportunities for newscasters to call a market improvement or decline.

  1. May annualized sales pace of home resales expected by NAR are 4.8 million, down 33% from our 2005 peak.
  2. Annualized new home sales expected for 2009 are 360,000, down 72% from our 2005 peak.
  3. Depending on your location, average mean home prices are down by 5% to 38% from the 2005/2006 peaks. May 2008 to May 2009 has the worst statistic with a decline of 14.9% on average.
  4. Commerce Department reported a sales drop of 0.6 percent in new home sales in May.
  5. Sales of existing home sales rose by 2.4 % from April to May 2009. This represents the third monthly increase this year.
  6. The number of unsold homes inventory fell 3.5% in May. This means there is a 9.6 month supply of property at the current sales pace. Normal market is 6 months or fewer, however the 3.5% improvement shows signs of market turnaround.
  7. The worst hit markets are showing inventory improvements. For instance, California has market supply of inventory for average priced homes at a 6 month level. These levels signify a market bottom.

Enough of statistics, the numbers confuse the best economists, let alone you. The bottom line is that real estate has market cycles. What goes up, has its time to go down, and then to stabilize. For those of you who enjoy analogies, we are in the 9th inning of this market downturn. Our next game is market stabilization (usually a 3 year time period). This means prices are somewhat flat while demand and supply equalize.

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Going Broke with Real Estate Education

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You've heard it all before: “YOU can become rich with real estate!” “Live the life you want with real estate!” “Come to my seminar on how to make money from real estate!”

It seems that when you're interested in real estate investing, you find yourself inundated by large font titles with glaring colors promising you the sun, moon and stars if you take their seminar (a bargain at $2,999), or buy their inspirational CDs (a deal at $199), or purchase their motivational DVD and book combo (practically giving them away for only $99).

When the eager investor signs up, the “guru” delivers speeches and media that are long on fantasy and short on reality. Many of these people prey on greed, pure and simple. They capture the attention of wanna-be investors who want to believe that the path to riches is easy. In reality real estate investing is paved with long, hard work — at least in the beginning.

It's certainly true that real estate investing can improve your finances and diversify your portfolio. It is also true that there are many people who are quietly building their wealth as a result of careful investing in real estate. The fact is, most of these people worked hard, gave up many luxuries and invested wisely instead of falling for claims of easy money.

What the “gurus” will do is emphasize the life you “could” have and gloss over the work real estate investing takes. They describe themselves with as many adjectives as possible instead of actually giving you verifiable information as to their competence. Often these gurus do not have first-hand knowledge of the different methods of investing. Therefore the challenges and problems common to investing are glossed over because they simply do not have the answers. They don't make money from your success. They make money when you buy their product.

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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…]

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…]

Asset Protection for Real Estate Investors

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During the early years of my real estate investing I ran my business as a sole proprietor because I was confused about asset protection. All the books and expensive courses only added to the confusion, and the subject of asset protection only became more frustrating for me.

Luckily, I survived with only minimal damage, but there comes a point when it is time to assess the best legal structure to use for real estate investing. This becomes increasingly important as your net worth grows.

Consider this scenario. You are sued for an accidental injury that occurred on one of your properties where you held title in your name personally. You are sued for $2,000,000.Your insurance only covers $1,000,000. That's a very bad day.

The biggest mistake you can make in real estate is to hold title on your property in your own personal name. Title to property is public record. Anyone can look up what you own, determine its market value, and deduct what you owe to determine what they can attempt to sue you for. It's like painting a bulls-eye on your back for prying eyes such as attorneys, creditors and even your tenants.

So what entity provides you the best asset protection? How do you limit your liability exposure? [Read more…]

New IRS Red Flag – Mortgage Interest

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The IRS has begun targeting individuals with larger mortgage interest deductions in an effort to increase their tax revenues. They are currently sending out audit notices to DC residents as part of their test, but will quickly expand to the rest of the country once their audit systems are in place. If you're a real estate investor you need to be aware of this and plan accordingly.

You must meet three criteria in order to legally take the mortgage interest deductions:

  • You can only deduct the mortgage interest on debt up to $1,000,000. This includes your personal and second residence combined.
  • You can claim an additional $100,000 for a second loan or HELOC. (This is completely disallowed for AMT taxpayers.)
  • You can only deduct the original amount of your indebtedness. In other words, once you pay down your loan your deduction does down and stays down. Even if you refinance, you can only claim the original (lower) amount of your loan before refinancing. This is one item that most people forget or don’t know about.

The IRS may strike gold here. They will want to see where you spent the money from your refinances or new HELOC loans. It would be wise to show that the money was used for home improvements or business purposes.

With the economy in disarray and the federal government hungry for additional tax revenues, it’s more important than ever for you to be on top of the real estate tax law changes. Remember that a good tax advisor can help you achieve your real estate investing goals sooner by avoiding the pitfalls along the way.

New Investment Condos – 30 Month Lease-Back with Positive Cash-Flow

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We just announced our latest real estate investment opportunity located in Ocean Springs, Mississippi.

Predicted by CNN Money to average 5% annual appreciation for the next 5 years. Forbes rated the Go Zone market as one of the Top 3 areas to invest, and Realtor.com rated the Mississippi gulf coast as the number one appreciating market of 2008.

This investment opportunity features a unique 30-month lease-back program that covers 100% of your mortgage payment, property taxes, homeowner association fees, management fees, maintenance costs, and utilities!

We also have several lending options available including some private financing options with 90% to 100% fininacing.

The investment is also Go Zone qualified for the 50% “bonus depreciation” provided by the IRS.

Visit our website and download the FREE Property Info-Pak for complete details, or just click here: Ocean Springs Investment Condos.

Top 10 Economic Predictions for 2009

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The U.S. and world economies are about to suffer through some of the worst recessions in the postwar period. Most measures of economic and financial activity look like they fell off a cliff in September and October, and have been deteriorating at an alarming rate ever since. The United States is now officially in a recession that started in December 2007. Japan and many European countries are in the same boat. At the same time, growth in most emerging markets is faltering. IHS Global Insight now believes that global growth will be in the 0.0 – 0.5% range during 2009, compared with 2.7% in 2008.

  1. THE U.S. RECESSION WILL BE ONE OF THE DEEPEST — IF NOT THE DEEPEST — IN THE POSTWAR PERIOD.
    The current downturn is well on its way to becoming the longest in the past six decades. Based on the December IHS Global Insight baseline forecast for the U.S. economy, it will be the fourth deepest in the postwar period (the 1957 recession was the deepest, followed by the contractions of 1973 – 75 and 1981– 82). Nevertheless, given the very negative tone of the incoming data (including the 533,000 drop in November payrolls), the recession could well be the worst in the postwar period. At the same time, the large back-to-back declines in real GDP predicted for the fourth quarter of 2008 and the first quarter of 2009 (down 5.0% and 3.8%, respectively) are the worst since the 1982 recession, and may easily be the worst in more than six decades. Overall, we expect the U.S. economy to shrink at least 1.8% in 2009.
  2. THE FEDERAL RESERVE AND OTHER CENTRAL BANKS WILL KEEP CUTTING RATES.
    The race to zero is on! The Fed has already cut the federal funds rate to 1% and is likely to take it all the way to zero by the end of January. Once the overnight rate is at zero, the Fed may have to engage in “quantitative easing” (direct purchases of long-term Treasuries). It is already engaging (massively) in unorthodox measures such as buying commercial paper, mortgage-backed securities, credit card debt, and loans to small businesses, students, and car buyers. On December 4, the European Central bank joined the fray by cutting the overnight rate by 75 basis points (to 2.5%), while the Bank of England cut by 100 basis points (to 2.0%). IHS Global Insight now believes that the ECB and BoE will push rates all the way to 1.0% and 0.5%, respectively—and could cut all the way to zero. Most central banks around the world have followed suit. Notably, on November 26, the People’s Bank of China lowered rates by 108 basis points, the largest cut in 11 years and the fourth cut since mid-September.

    3. [Read more…]

What You Should Know About HUD Properties

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imageHUD properties are available all over the United States, and make great investments for anybody that is interested. These homes often get a bad rap for being in bad condition, but in all actuality they are not any worse than other foreclosed homes that are available. Just like anything else, there are some HUD properties that are in good condition, and some that are in need of repairs. It is simply a matter of how well the past owner cared for the home.

HUD properties are homes that had loans which were insured by the Department of Housing and Urban Development (HUD). But when the owner fails to live up to the financial obligations that are expected, the bank then takes over the home and it becomes an HUD property. At this point, the Department of Housing and Urban Development is in charge of repaying the lender any money that they lost on the deal. So as you can see, the Department of Housing and Urban Development sticks their neck on the line when they insure the loans on these homes; if the owner doesn’t pay, they are stuck with owing money to the lender.

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Fed Slashes Key Interest Rate to 1 Percent

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In an effort to revive the economy the Federal Reserve cut the federal funds rate today but a half-point (0.5%). This lowers the rate to 1 percent – the lowest rate since 2003-2004. The last time the federal funds rate was lower than 1 percent was during the Eisenhower administration in 1958.

Today’s interest rate cut was the second half-point cut this month. The last one on October 8, 2008 was in a coordinated move with foreign central banks.

This year’s economic weakness has created huge declines in the price of oil and other commodities. While many economists believe the country is in a recession, they also believe the recent rate cuts and other aggressive actions by the Fed will help prevent a prolonged downturn and help unfreeze the credit markets.

If these aggressive moves by the federal government are successful in thawing the credit markets, it will be great news for real estate investors who are having difficulty financing their real estate investments.

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Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
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