Thursday, August 23, 2012
Straight talk! Should I buy or should I sell?
Straight talk! Should I buy or
should I sell?
BY: Payam Raouf
President/Designated Broker
Arizona Property Managements
& Investments
(888) 777 6664 ext 114
INFO@AZEZRENTALS.COM
It has been a while since I have
given you my opinion on the market condition in Phoenix Metropolitan Area. I
think it is time to have another straight talk with our investors. I don’t have
a crystal ball to predict the future and I don’t claim to be right 100% of the
time but if you look back at my posts through the past three years and read my
predictions, you will see they have been right on the dot most of the time.
Here we go. It is time to sell if
you have bought an undesirable property in Phoenix metro between mid 2009 to
mid 2011. Had you followed our recommendations, you should be fine to exit at
the next opportunity. Had you not and bought into the hype, let’s help you find
a strategy to exit now and reinvest it into something else.
As we went through different
phases, we recommended our investors to buy with a clear exit strategy in mind.
It is useless now to go over that again as we have already gone through those
phases. I will try to be more specific as to where we are going from here later
on.
We have had a considerable spike
in the market, somewhere between 15 to 30 percent in the past two months. It is
time to sit down and do some hard core math. Is it a keeper or is it time to
part with it?
Do I own a unique piece of real
estate? It is a very difficult question to answer when you live thousands of
miles away and in most cases bought in without even looking at all your options.
The only consideration was, it was cheap to pass on. Most often cheap cost more
in the long run. It may be time to get an expert’s opinion.
You have now owned it for some
time and should have a really good idea what it has cost you. Should you take
some money off the table here and reinvest it in something else with a better
outlook or could you afford to keep up with it?
To give you more specifics, there
will be a link to MY EMAIL below this post. Don’t be afraid to drop me a couple
lines. Give me the address of the property you own and let my team go to work
for you. It won’t cost you a dime. I review their findings and give you my
opinion to help you make an informed decision.
Part two:
If you bought a property in mid
2007 to mid 2009, you are most likely upside down but not by much specially
after the recent price increase in the market. The bad news is, the rents
haven’t caught up with the prices and even when they do, they won’t by much.
You still have to cough up the difference between the rental proceeds and your
monthly mortgage. Have you considered talking to your financial adviser or an
attorney to see if you benefit by short selling it? If the answer is yes, why
wait? We have investors who would make you a reasonable offer that is
acceptable by most financial institutions. Please let us know if that is the
case by FILLING OUT THIS FORM and we even help you with the entire short sale
process.
Part three:
This is for you speculator investors!
If you bought a property at the top of the market, from late 2004 to mid 2007,
you are in it for the long haul, think 5 to 7 more years before you can break
even. It is a tough call as many of you cannot afford to short sale it. The
best you can do is to keep your carrying costs manageable. Our property
management division understands how important it is to keep your expenses under
control. We are proactive. To compare
our services and fees please click here and FILL OUT THIS FORM and one of our
area managers will show you the savings.
There are a few other groups that
we have not mentioned here such as the folks who bought homes for their
retirement or the calculated investors with specific plan of action.
Who should be buying in this
market you may wonder? Let’s first see who is doing most of the buying these
days. I break them up into three groups. Believe it or not the tenants who sold
their homes through a short sale process a few years ago are now qualifying to
buy again. Last month 9 of our tenants with similar circumstances bough their
own homes. The dilemma is, in most cases they need to come up with a larger down
payment to qualify since they have to compete with their number one competitor,
institutional investors with deep pockets.
Did I mention institutional
investors? Oh yeah. Almost every cash offer we get on our listings these days
are over the asking price with the proof of funds attached in excess of 3,000,000
and I have seen as high as $30,000,000. They are selective. For the right
property, they pay as much as it takes especially one with a good tenant in
place.
Did you know banks are now
getting into rental business as well? They haven’t come up with the most
attractive program yet but they will in time. Anything is better than nothing.
In addition to properties we
manage on behalf of several banks and financial institutions, We were recently
interviewed by a large hedge fund that purchased 2500 homes directly from
Fannie Mae to rent out.
In the case of banks, financial
institutions and hedge funds, they fix up the homes and rent it back to the
tenants or the owners already in place with lower or no deposits. They have
deep pockets to pay for major repairs when it is needed and can afford to keep
up with the demand of today’s tenants. The other thing is, they most likely
sell it back to the tenants sometimes down the road.
The number of homes for rent both
on MLS and property management sites is increasing by the day. It is taking
longer to rent them out to qualified tenants especially when they are asked to
pay larger deposits.
In addition to tenant’s moving
out of rentals buying their own homes, more homes are being purchased by
investment groups to be rented out. The question now is, are there still
opportunities out there that make sense to average investors?
You bet they are and plenty of
them if you ask me. I will be doing my investors injustice if I lay them all
out here. Just a quick hint, remember, location, location, location and a 3
year exit strategy! Contact me and I can show you how.
We take pride in what we do,
selective when it comes to picking our players and loyal to those who have
confidence in our team. Whether you have been holding off for the right opportunity,
or want to improve your position or simply exit the market, please email me at payam@azezrentals.com with your
information and your request. It will be answered promptly to help you make an
informed decision.
With Pleasure,
Payam Raouf
Payam Raouf
President/Designated Broker
Arizona Property Managements
& Investments
Wednesday, August 8, 2012
Phoenix home prices surge higher in past year to lead nation
Phoenix Business Journal by Kristena Hansen, Reporter
Date: Tuesday, August 7, 2012, 10:50am MSTThe latest housing report released Tuesday by CoreLogic shows Phoenix-area home values, including distressed sales, surged nearly 17 percent year-over-year in June -- the fastest rate of any metropolitan area nationwide. Trailing far behind in second place was the Houston metro area’s 4.5 percent increase, followed by the 3.3 percent rise seen in the Washington D.C. market.
Home values across Arizona, including distressed sales, also posted the biggest year-over-year leap of any state in June at 13.8 percent, the report said. Idaho came in second with its 10.4 percent jump from a year ago, which was closely followed by South Dakota’s 10.1 percent hike.
Nationwide, home prices in June rose an average 2.5 percent year-over-year and were up 1.3 percent from May.
Only nine states saw declines for the month with Alabama posting the biggest drop at 4.8 percent, the report said.
CoreLogic economists said in the report that the widespread price appreciations are a response to the nation’s notable reductions in both visible and shadow inventories, meaning the number of homes currently listed and not yet listed on the market.
“At the halfway point, 2012 is increasingly looking like the year that the residential housing market may have turned the corner,” Anand Nallathambi, president and CEO of CoreLogic, said in the report. “While first-half gains have given way to second-half declines over the past three years, we see encouraging signs that modest price gains are supportable across the country in the second-half of 2012.”
To inquire about purchasing or managing an investment property in phoenix please contact Payam Raouf, Desiganted Broker at 8887776664 ext 109.
Tuesday, July 31, 2012
Mystery buyer snaps up foreclosure homes
Mystery buyer snaps up foreclosure homes
Catherine Reagor - Jul. 27, 2012 04:30 PM
The Arizona Republic
A few days ago, 275 foreclosure houses across metro Phoenix were purchased through a very quiet $34 million cash deal. But it's not clear yet who the buyer is.
In February, Fannie Mae announced it would auction 2,490 foreclosure homes in Phoenix, Atlanta, Chicago, Florida, Los Angeles and Las Vegas. It was the first time the government-owned mortgage firm agreed to openly sell groups of foreclosure houses located in just one metro area. Since the crash, Fannie Mae and Freddie Mac usually have sold homes they get back from lenders one by one, or in bulk with houses located all over the country.
Several buyers were interested in the Phoenix houses Fannie Mae was selling. Originally, 341 in the region were to be sold to one buyer, according to the federal government.
The sale of the Fannie Mae foreclosure homes became apparent to data guru Tom Ruff of AZBidder on Wednesday night, when he tracked metro Phoenix's REO inventory -- homes taken back by banks that haven't been resold -- and realized it had dropped by 5 percent.
In the latest sales filings, he discovered that a group called SFR 2012-1 US West LLC, located at 135 N. Los Robles Ave., fourth floor, in Pasadena, Calif., purchased 275 foreclosure homes from Fannie Mae that day. Each deal was individually recorded. Fannie Mae's Dallas office is listed as the seller.
More research shows the buyer is an LLC created by Fannie Mae.
Fannie Mae declined to comment. But a source close to the deal said Fannie Mae is transferring the properties to an LLC that the winning buyer will invest in through a private placement deal.
That means the actual sales of these homes may not be recorded in Arizona.
The Federal Housing Finance Agency, Fannie Mae's overseer, announced earlier this month that winning bidders in the foreclosure auction had been chosen, with transactions expected to close early in the third quarter. But it didn't release names.
Before February, to get 10 foreclosure homes in Phoenix, an investor might have gotten a bundle of 30 in Detroit, five in Kansas City, two in Los Angeles and one in Boise, Idaho. Most of those are not foreclosure hot spots like Phoenix.
Now that foreclosures have slowed and metro Phoenix's median home price has climbed more than 30 percent in the past year, fewer deals are available for investors. To get 275 foreclosure homes without having to individually bid on each would be a coup if the houses are priced right.
Here are few examples of the 275 Fannie Mae foreclosure houses that sold individually on Wednesday: $265,000 for a Queen Creek house; $78,000 for a Scottsdale condominium; $59,000 for an El Mirage house; and $458,000 for a Peoria house.
Most of the 275 homes are leased.
The way the sales are being handled could be problematic for the Valley's housing market because the deals could be used as comps, and its not clear yet what the winning investor will actually pay for the houses. Ruff is pulling the sales from his data so they don't skew the area's median home price.
Catherine Reagor - Jul. 27, 2012 04:30 PM
The Arizona Republic
A few days ago, 275 foreclosure houses across metro Phoenix were purchased through a very quiet $34 million cash deal. But it's not clear yet who the buyer is.
In February, Fannie Mae announced it would auction 2,490 foreclosure homes in Phoenix, Atlanta, Chicago, Florida, Los Angeles and Las Vegas. It was the first time the government-owned mortgage firm agreed to openly sell groups of foreclosure houses located in just one metro area. Since the crash, Fannie Mae and Freddie Mac usually have sold homes they get back from lenders one by one, or in bulk with houses located all over the country.
Several buyers were interested in the Phoenix houses Fannie Mae was selling. Originally, 341 in the region were to be sold to one buyer, according to the federal government.
The sale of the Fannie Mae foreclosure homes became apparent to data guru Tom Ruff of AZBidder on Wednesday night, when he tracked metro Phoenix's REO inventory -- homes taken back by banks that haven't been resold -- and realized it had dropped by 5 percent.
In the latest sales filings, he discovered that a group called SFR 2012-1 US West LLC, located at 135 N. Los Robles Ave., fourth floor, in Pasadena, Calif., purchased 275 foreclosure homes from Fannie Mae that day. Each deal was individually recorded. Fannie Mae's Dallas office is listed as the seller.
More research shows the buyer is an LLC created by Fannie Mae.
Fannie Mae declined to comment. But a source close to the deal said Fannie Mae is transferring the properties to an LLC that the winning buyer will invest in through a private placement deal.
That means the actual sales of these homes may not be recorded in Arizona.
The Federal Housing Finance Agency, Fannie Mae's overseer, announced earlier this month that winning bidders in the foreclosure auction had been chosen, with transactions expected to close early in the third quarter. But it didn't release names.
Before February, to get 10 foreclosure homes in Phoenix, an investor might have gotten a bundle of 30 in Detroit, five in Kansas City, two in Los Angeles and one in Boise, Idaho. Most of those are not foreclosure hot spots like Phoenix.
Now that foreclosures have slowed and metro Phoenix's median home price has climbed more than 30 percent in the past year, fewer deals are available for investors. To get 275 foreclosure homes without having to individually bid on each would be a coup if the houses are priced right.
Here are few examples of the 275 Fannie Mae foreclosure houses that sold individually on Wednesday: $265,000 for a Queen Creek house; $78,000 for a Scottsdale condominium; $59,000 for an El Mirage house; and $458,000 for a Peoria house.
Most of the 275 homes are leased.
The way the sales are being handled could be problematic for the Valley's housing market because the deals could be used as comps, and its not clear yet what the winning investor will actually pay for the houses. Ruff is pulling the sales from his data so they don't skew the area's median home price.
Thursday, June 28, 2012
Mixed bag: Investors spark local recovery
Mixed bag: Investors spark local recovery
A market overview from a longtime Phoenix
real-estate expert, who recently became an analyst, Mark Stapp, director
of the Master of Real Estate Development program at Arizona State
University's W. P. Carey School of Business.
Question: Is metro Phoenix's housing market recovering?
Answer: When you look at the statistics, it's obvious the housing sector is recovering. My concern lies specifically with how it has recovered. It is investors who dug us out of the hole, not homeowners. We currently have a single-family housing stock that is about 30 percent renter-occupied. Normally, we are at about 10 percent. Our full recovery will come when homeowners can buy existing homes, and that requires more appreciation at all price levels, and more importantly, the ability for homebuyers to get a mortgage.
Q: Are you concerned the low supply of homes for sale has made bidding wars among investors and regular buyers the norm now?
A: Yes, this puts upward pressure on prices, which is good and bad. It is good because it helps resolve the "underwater" home-value issue that persists. It is bad because it impacts affordability. Unless we see significant wage growth, appreciation at current rates will not be sustainable. It's impossible to separate regional economic development from the health of the housing market.
Q: Do you think the 30 percent-plus increase in home prices since last year is sustainable?
A: No. But, this type of appreciation will continue for a while, especially in certain sub-regions. It is important that appreciation does continue. As prices rise, as long as demand persists, new homebuilding will become more feasible, and volumes will increase, and that will start to dampen some of the appreciation.
Q: Are there now too many investor-owned homes in metro Phoenix?
A: I'm concerned about the reason why there are so many renters. Many are not renters by choice. For every foreclosed home, there is a family that has faced stress. That impacts the entire community. We cannot afford, as a community, to be seen simply as a place to buy cheap real estate. In the long run, we need to build on community infrastructure that makes the Phoenix metro area a highly desirable place to live.
Q: What about all the vacant homes? Are they finally filling up?
A: Yes. Homes that were marginal in quality and location become more desirable as prices increase. Some houses may never be desirable again or have physically deteriorated to the point they may need to be demolished. However, I don't see that problem as much in this metro area as in others.
Q: Do you think the real-estate industry has changed since the boom and crash?
A: The industry has been dealing with a down cycle for six years. The shift resulting from socioeconomic and demographic changes in our population is very significant. Now we need to pay closer attention to how these changes impact what we do, how we communicate about what we do, the value proposition we offer and the design of our products. You can't simply pick up where we left off six years ago. The market is more competitive, and buyers' attitudes have shifted. Demand has changed, so the developer, to be successful, must better understand how buyers have changed and what they want and need.
Question: Is metro Phoenix's housing market recovering?
Answer: When you look at the statistics, it's obvious the housing sector is recovering. My concern lies specifically with how it has recovered. It is investors who dug us out of the hole, not homeowners. We currently have a single-family housing stock that is about 30 percent renter-occupied. Normally, we are at about 10 percent. Our full recovery will come when homeowners can buy existing homes, and that requires more appreciation at all price levels, and more importantly, the ability for homebuyers to get a mortgage.
Q: Are you concerned the low supply of homes for sale has made bidding wars among investors and regular buyers the norm now?
A: Yes, this puts upward pressure on prices, which is good and bad. It is good because it helps resolve the "underwater" home-value issue that persists. It is bad because it impacts affordability. Unless we see significant wage growth, appreciation at current rates will not be sustainable. It's impossible to separate regional economic development from the health of the housing market.
Q: Do you think the 30 percent-plus increase in home prices since last year is sustainable?
A: No. But, this type of appreciation will continue for a while, especially in certain sub-regions. It is important that appreciation does continue. As prices rise, as long as demand persists, new homebuilding will become more feasible, and volumes will increase, and that will start to dampen some of the appreciation.
Q: Are there now too many investor-owned homes in metro Phoenix?
A: I'm concerned about the reason why there are so many renters. Many are not renters by choice. For every foreclosed home, there is a family that has faced stress. That impacts the entire community. We cannot afford, as a community, to be seen simply as a place to buy cheap real estate. In the long run, we need to build on community infrastructure that makes the Phoenix metro area a highly desirable place to live.
Q: What about all the vacant homes? Are they finally filling up?
A: Yes. Homes that were marginal in quality and location become more desirable as prices increase. Some houses may never be desirable again or have physically deteriorated to the point they may need to be demolished. However, I don't see that problem as much in this metro area as in others.
Q: Do you think the real-estate industry has changed since the boom and crash?
A: The industry has been dealing with a down cycle for six years. The shift resulting from socioeconomic and demographic changes in our population is very significant. Now we need to pay closer attention to how these changes impact what we do, how we communicate about what we do, the value proposition we offer and the design of our products. You can't simply pick up where we left off six years ago. The market is more competitive, and buyers' attitudes have shifted. Demand has changed, so the developer, to be successful, must better understand how buyers have changed and what they want and need.
Valley home values soar 32 percent in past year
Posted: Thursday, June 28, 2012 6:39 am
Valley home prices have
skyrocketed by nearly one-third in the past year as a growing shortage
of units for sale keeps boosting housing values.
Median sales prices were 32
percent higher in May compared with a year ago, according to the W.P.
Carey School of Business at Arizona State University. Prices were up 9
percent since April, $147,000.
The recent trend of soaring prices is likely to end as summer settles in as people are less willing to move in 110-degree temperatures, said Mike Orr, a real estate expert at ASU.
“We’ll still see a pretty healthy transaction rate, but I think we’ve got to let people catch up a little bit on pricing and it wouldn’t surprise me if we went sideways on pricing for a month or two,” Orr said. “After all, there is a limit.”
The number of homes on the market dropped to an unusually low 8,550 on June 1. That’s down 50 percent in one year. The tight supply has led to bidding wars and buyers getting flooded with offers.
One Chandler home garnered 84 offers and a house in Glendale had 95 — only to sell for 17 percent higher than the asking price.
“If I was in the business of trying to buy a house, I’d focus on going to a new subdivision,” Orr said.
The East Valley remained the hottest portion of the market for new homes. Gilbert held the record with 187 houses, followed by Chandler’s 49 and Mesa’s 49. Phoenix logged 60 new homes in May.
However, overall home sales fell nearly 6 percent because of a short supply of listings.
Orr said looming economic woes could dampen the market, but he wouldn’t predict the market’s performance more than a few months ahead. Even if interest drops among buyers who plan to live in the home they purchase, Orr said strong investor demand will fill that gap.
New home construction shot up 57 percent in the last year as homebuilders are responding to the shortage.
“They’ll go as fast as they can but that’s not very fast because of the shortage of labor,” Orr said. “It’s not clear how quickly the labor shortage can be filled.”
To inquire about our sales, leasing and property management services, please contact Payam Raouf, President/Designated Broker of Arizona Property Management & Investments at 888-777-6664 ext 109. Thank you.
The recent trend of soaring prices is likely to end as summer settles in as people are less willing to move in 110-degree temperatures, said Mike Orr, a real estate expert at ASU.
“We’ll still see a pretty healthy transaction rate, but I think we’ve got to let people catch up a little bit on pricing and it wouldn’t surprise me if we went sideways on pricing for a month or two,” Orr said. “After all, there is a limit.”
The number of homes on the market dropped to an unusually low 8,550 on June 1. That’s down 50 percent in one year. The tight supply has led to bidding wars and buyers getting flooded with offers.
One Chandler home garnered 84 offers and a house in Glendale had 95 — only to sell for 17 percent higher than the asking price.
“If I was in the business of trying to buy a house, I’d focus on going to a new subdivision,” Orr said.
The East Valley remained the hottest portion of the market for new homes. Gilbert held the record with 187 houses, followed by Chandler’s 49 and Mesa’s 49. Phoenix logged 60 new homes in May.
However, overall home sales fell nearly 6 percent because of a short supply of listings.
Orr said looming economic woes could dampen the market, but he wouldn’t predict the market’s performance more than a few months ahead. Even if interest drops among buyers who plan to live in the home they purchase, Orr said strong investor demand will fill that gap.
New home construction shot up 57 percent in the last year as homebuilders are responding to the shortage.
“They’ll go as fast as they can but that’s not very fast because of the shortage of labor,” Orr said. “It’s not clear how quickly the labor shortage can be filled.”
To inquire about our sales, leasing and property management services, please contact Payam Raouf, President/Designated Broker of Arizona Property Management & Investments at 888-777-6664 ext 109. Thank you.
Tuesday, April 3, 2012
Arizona Property Management & Investments
(888) 777 6664
info@azezrentals.com
RIVERSIDE, Calif. — At least 20 times a day, Alan Hladik walks into a
fixer-upper and tries to figure out if it is worth buying.
As an inspector for the Waypoint Real Estate Group, Mr. Hladik takes about 20 minutes to walk through each home, noting worn kitchen cabinets or missing roof tiles. The blistering pace is necessary to keep up with Waypoint’s appetite: the company, which has bought about 1,200 homes since 2008 — and is now buying five to seven a day — is an early entrant in a business that some deep-pocketed investors are betting is poised to explode.
With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants. Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes.
But the new investors believe the rental income can deliver returns well above those offered by Treasury securities or stock dividends. At the same time, economists say, they could help areas hardest hit by the housing crash reach a bottom of the market.
This year, Waypoint signed a $400 million deal with GI Partners, a private equity firm in Silicon Valley. Gary Beasley, Waypoint’s managing director, says the company plans to buy 10,000 to 15,000 more homes by the end of next year. Other large private equity investors — including Colony Capital, GTIS Partners and Oaktree Capital Management, in partnership with the Carrington Holding Company — have committed millions to this new market, and Lewis Ranieri, often called the inventor of the mortgage bond, is considering it, too.
In February, the Federal Housing Finance Agency, which oversees the government-backed mortgage companies Fannie Mae and Freddie Mac, announced that it would sell about 2,500 homes in a pilot program in eight metropolitan areas, including Atlanta, Chicago and Los Angeles.
And Bank of America said in late March that it would begin testing a plan to allow homeowners facing foreclosure the chance to rent back their homes and wipe out their mortgage debt. Eventually, the bank said, it could sell the houses to investors.
Waypoint executives say they can handle large volumes because they have developed computer systems that help them make quick buying decisions and manage renovations and rentals.
“We realized that there is a tremendous amount of brain damage around acquiring single-family homes, renovating them and renting them out,” said Colin Wiel, a Waypoint co-founder. “We think this is a huge opportunity and we are going to treat it like a factory and create a production line to do this.”
Mr. Hladik, who is one of seven inspectors working full time for Waypoint’s Southern California office, is one cog in that production line.
On a recent morning, he walked through a vacant three-bedroom home with a red tiled roof here about 60 miles east of Los Angeles, one of the areas flooded with foreclosures after the housing market bust. Scribbling on a clipboard, he noted the dated bathroom vanities, the tatty family room carpet and a hole in a bedroom wall. Twenty minutes later, he plugged these details into a program on his iPad, choosing from drop-down menus to indicate the house had dual pane windows and that the kitchen appliances needed replacing.
The software calculated that it would take $25,413.53 to get the home in rental shape. Mr. Hladik adjusted that estimate down to $18,400 because he deemed the landscaping in good shape. He uploaded his report to Waypoint’s database, where appraisers and executives would use the calculations to determine whether and how much to bid for the house.
With just three years of experience, Waypoint is one of the industry’s grizzled veterans. But critics say newcomers could stumble. “It’s a very inefficient way to run a rental business,” said Steven Ricchiuto, chief economist at Mizuho Securities USA. “You could wind up with an inexperienced group owning properties that just deteriorate.”
The big investors are wooed by what they see as a vast opportunity. There are close to 650,000 foreclosed properties sitting on the books of lenders, according to RealtyTrac, a data provider. An additional 710,000 are in the foreclosure process, and according to the Mortgage Bankers Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.
With so many families displaced from their homes by foreclosure, rental demand is rising. Others who might previously have bought are now unable to qualify for loans. The homeownership rate has dropped from a peak of 69.2 percent in 2004 to 66 percent at the end of 2011, according to census data.
Economists say that these investors could help stabilize home prices. “If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” said Diane Swonk, the chief economist at Mesirow Financial. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”
Until now, Waypoint, which focuses on the Bay Area and Southern California, has been buying foreclosed properties one by one in courthouse auctions or through traditional real estate agents.
The company, founded by Mr. Wiel, a former Boeing engineer and software entrepreneur, and Doug Brien, a one-time N.F.L. place-kicker who had invested in apartment buildings, evaluates each purchase using data from multiple listing services, Google maps and reports from its own inspectors and appraisers.
An algorithm calculates a maximum bid for each home, taking into account the cost of renovations, the potential rent and target investment returns — right now the company averages about 8 percent per property on rental income alone. By 5:30 on a recent morning, Joe Maehler, a regional director in Waypoint’s Southern California office, had logged onto his computer and pulled up a list of about 70 foreclosed properties that were being auctioned later that day in Riverside and San Bernardino Counties.
Looking at a three-bedroom bungalow in San Bernardino, he saw that Waypoint’s system had calculated a bid of $103,000. Mr. Maehler, who previously advised investors on commercial mortgage-backed securities deals, clicked on a map and saw that rents on comparable homes the company already owned could justify a higher offer. The house also had a pool, which warranted another price bump.
By the time the auctioneer opened the bidding on the lawn in front of the San Bernardino County Courthouse at $114,750, Mr. Maehler had authorized a maximum bid of just over $130,000.
As the auction proceeded, Waypoint’s bidder at the courthouse remained on the phone with Mr. Maehler in the company’s Irvine office about 50 miles away.
“Stay on it,” Mr. Maehler urged as the bidding went up in $100 increments. The bidder clinched it for $129,400.
The sting of the housing collapse, driven in part by investors who bought large bundles of securities backed by bad mortgages, makes some critics wary of the emerging market.
“I don’t have a lot of confidence that private market actors who now see another use for these houses as rentals, as opposed to owner-occupied, are necessarily going to be any more responsible financially or responsive to community needs,” said Michael Johnson, professor of public policy at the University of Massachusetts, Boston. Waypoint executives say they plan to be long-term landlords, and usually sign two-year leases. Once the company buys a property, it typically paints the house and installs new carpets, kitchen appliances and bathroom fixtures, spending an average of $20,000 to $25,000. It tries to keep existing occupants in the house — although only 10 percent have stayed so far — and offer tenants the chance to build toward a future down payment.
Waypoint’s inspectors are evaluating hundreds of properties that Fannie Mae and Freddie Mac are offering for sale. Because the inspectors are not allowed inside these homes, they are driving by 40 of them a day, estimating renovation costs by looking at eaves, windows and the conditions of lawns.
Rick Magnuson, executive managing director of GI Partners, Waypoint’s largest investment partner, said “the jury is still out” on whether Waypoint — or any other investor — can manage such a large portfolio. But, he said, “with the technology at Waypoint, we think they can get there.”
(888) 777 6664
info@azezrentals.com
Investors Are Looking to Buy Homes by the Thousands
By MOTOKO RICH | New York Times –
As an inspector for the Waypoint Real Estate Group, Mr. Hladik takes about 20 minutes to walk through each home, noting worn kitchen cabinets or missing roof tiles. The blistering pace is necessary to keep up with Waypoint’s appetite: the company, which has bought about 1,200 homes since 2008 — and is now buying five to seven a day — is an early entrant in a business that some deep-pocketed investors are betting is poised to explode.
With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants. Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes.
But the new investors believe the rental income can deliver returns well above those offered by Treasury securities or stock dividends. At the same time, economists say, they could help areas hardest hit by the housing crash reach a bottom of the market.
This year, Waypoint signed a $400 million deal with GI Partners, a private equity firm in Silicon Valley. Gary Beasley, Waypoint’s managing director, says the company plans to buy 10,000 to 15,000 more homes by the end of next year. Other large private equity investors — including Colony Capital, GTIS Partners and Oaktree Capital Management, in partnership with the Carrington Holding Company — have committed millions to this new market, and Lewis Ranieri, often called the inventor of the mortgage bond, is considering it, too.
In February, the Federal Housing Finance Agency, which oversees the government-backed mortgage companies Fannie Mae and Freddie Mac, announced that it would sell about 2,500 homes in a pilot program in eight metropolitan areas, including Atlanta, Chicago and Los Angeles.
And Bank of America said in late March that it would begin testing a plan to allow homeowners facing foreclosure the chance to rent back their homes and wipe out their mortgage debt. Eventually, the bank said, it could sell the houses to investors.
Waypoint executives say they can handle large volumes because they have developed computer systems that help them make quick buying decisions and manage renovations and rentals.
“We realized that there is a tremendous amount of brain damage around acquiring single-family homes, renovating them and renting them out,” said Colin Wiel, a Waypoint co-founder. “We think this is a huge opportunity and we are going to treat it like a factory and create a production line to do this.”
Mr. Hladik, who is one of seven inspectors working full time for Waypoint’s Southern California office, is one cog in that production line.
On a recent morning, he walked through a vacant three-bedroom home with a red tiled roof here about 60 miles east of Los Angeles, one of the areas flooded with foreclosures after the housing market bust. Scribbling on a clipboard, he noted the dated bathroom vanities, the tatty family room carpet and a hole in a bedroom wall. Twenty minutes later, he plugged these details into a program on his iPad, choosing from drop-down menus to indicate the house had dual pane windows and that the kitchen appliances needed replacing.
The software calculated that it would take $25,413.53 to get the home in rental shape. Mr. Hladik adjusted that estimate down to $18,400 because he deemed the landscaping in good shape. He uploaded his report to Waypoint’s database, where appraisers and executives would use the calculations to determine whether and how much to bid for the house.
With just three years of experience, Waypoint is one of the industry’s grizzled veterans. But critics say newcomers could stumble. “It’s a very inefficient way to run a rental business,” said Steven Ricchiuto, chief economist at Mizuho Securities USA. “You could wind up with an inexperienced group owning properties that just deteriorate.”
The big investors are wooed by what they see as a vast opportunity. There are close to 650,000 foreclosed properties sitting on the books of lenders, according to RealtyTrac, a data provider. An additional 710,000 are in the foreclosure process, and according to the Mortgage Bankers Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.
With so many families displaced from their homes by foreclosure, rental demand is rising. Others who might previously have bought are now unable to qualify for loans. The homeownership rate has dropped from a peak of 69.2 percent in 2004 to 66 percent at the end of 2011, according to census data.
Economists say that these investors could help stabilize home prices. “If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” said Diane Swonk, the chief economist at Mesirow Financial. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”
Until now, Waypoint, which focuses on the Bay Area and Southern California, has been buying foreclosed properties one by one in courthouse auctions or through traditional real estate agents.
The company, founded by Mr. Wiel, a former Boeing engineer and software entrepreneur, and Doug Brien, a one-time N.F.L. place-kicker who had invested in apartment buildings, evaluates each purchase using data from multiple listing services, Google maps and reports from its own inspectors and appraisers.
An algorithm calculates a maximum bid for each home, taking into account the cost of renovations, the potential rent and target investment returns — right now the company averages about 8 percent per property on rental income alone. By 5:30 on a recent morning, Joe Maehler, a regional director in Waypoint’s Southern California office, had logged onto his computer and pulled up a list of about 70 foreclosed properties that were being auctioned later that day in Riverside and San Bernardino Counties.
Looking at a three-bedroom bungalow in San Bernardino, he saw that Waypoint’s system had calculated a bid of $103,000. Mr. Maehler, who previously advised investors on commercial mortgage-backed securities deals, clicked on a map and saw that rents on comparable homes the company already owned could justify a higher offer. The house also had a pool, which warranted another price bump.
By the time the auctioneer opened the bidding on the lawn in front of the San Bernardino County Courthouse at $114,750, Mr. Maehler had authorized a maximum bid of just over $130,000.
As the auction proceeded, Waypoint’s bidder at the courthouse remained on the phone with Mr. Maehler in the company’s Irvine office about 50 miles away.
“Stay on it,” Mr. Maehler urged as the bidding went up in $100 increments. The bidder clinched it for $129,400.
The sting of the housing collapse, driven in part by investors who bought large bundles of securities backed by bad mortgages, makes some critics wary of the emerging market.
“I don’t have a lot of confidence that private market actors who now see another use for these houses as rentals, as opposed to owner-occupied, are necessarily going to be any more responsible financially or responsive to community needs,” said Michael Johnson, professor of public policy at the University of Massachusetts, Boston. Waypoint executives say they plan to be long-term landlords, and usually sign two-year leases. Once the company buys a property, it typically paints the house and installs new carpets, kitchen appliances and bathroom fixtures, spending an average of $20,000 to $25,000. It tries to keep existing occupants in the house — although only 10 percent have stayed so far — and offer tenants the chance to build toward a future down payment.
Waypoint’s inspectors are evaluating hundreds of properties that Fannie Mae and Freddie Mac are offering for sale. Because the inspectors are not allowed inside these homes, they are driving by 40 of them a day, estimating renovation costs by looking at eaves, windows and the conditions of lawns.
Rick Magnuson, executive managing director of GI Partners, Waypoint’s largest investment partner, said “the jury is still out” on whether Waypoint — or any other investor — can manage such a large portfolio. But, he said, “with the technology at Waypoint, we think they can get there.”
Subscribe to:
Posts (Atom)