Philadelphia Realty Services LLC - Short Sale Specialists - Rental Inquiry - Great properties for our Tenants!
August '11
Purchasing a short-sale with your Self Directed IRA
One of the derivatives of the current housing market is that many homeowners owe more than their home is worth. Also, many of these homeowners have had their mortgages reset from the earlier "teaser rates" and are now paying higher monthly payments or worse due to the economy they have lost their jobs. There are a myriad of reasons but with unemployment still near 10%, many homeowners cannot afford their homes and are forced to sell or abandon them to foreclosure. A short-sale is the lesser of two evils when the alternative is forclosure and allows the homeowner sell the property to a buyer for less than the mortgage owed. The bank approves the transaction in order to avoid a long protracted and expensive foreclosure process.
 
Like in sports there is a winner and a looser and it is the same in this housing market. The winner in the housing market today is the investor that is sitting with "dry powder" ie cash. These investors can take advantage of properties being sold at 50-75% of their prior value and either fix them up to make a profit or buy and hold for rental income.
 
But who has the kind of money to buy homes for cash?
Banks certainly are not lending money, especially to investors like they used to even though ironically the investor market today is much better than it was back in the heyday of the speculator when "easy money" from banks was the order of the day.
 
So how do you go about purchasing a short-sale with your IRA?
You first must establish a relationship with a "trustee" that will grant you checkbook control. So, if you have an IRA in money market funds or cash, or an old 401k plan that you have not rolled over, you can send these funds to a trustee that will administer your retirement cash to diversify into other investments such as gold, a new business, trust deed loans to other investors....or you can buy real estate directly with your IRA..FOR INVESTMENT PURPOSES ONLY. This is the key as investments made from your IRA have to be for your future retirement and you would be subject to early withdrawl penalties if you used this money for personal use ie if you were to live in this house yourself.
 
All profits (eg rents) from the purchase would then flow back to your trustee and into your retirement fund. In fact, many of the people who lost their homes to a short-sale still need a roof over their head and it is not uncommon for these prior owners to become your new tenants. See what I mean about winners and losers?
 
So, let me give you a concrete example of a foreclosed property we have under contract in Germantown. Lets imagine that instead of this being our own funds, we were to use a Self Directed IRA and lets examine the ROI that you could expect.

  • Acquisition Costs $68,000
  • Rehab Costs       $15,000 (needs to come from your IRA funds)
  • Total Investment  $83,000
  • Monthly Income
    • 6 BR House: $1,900 (next door neighbor 5BR rents for $1,800)
    • Total Monthly Income $1,900
  • Operating Expenses
    • Management Fee (10%) $190
    • Property Taxes $100
    • Insurance $100
    • Total Monthly Expenses ($390)
  • Net Operating Income per month = $1,510
  • Annualized net Operating Income = $18,120

    Total Annual ROI or dividend on your Investment:
18,120/83,000 = 21.8% Annual Return
 
Now, buying a short sale is not going to be a simple process and we certainly encourage investors to use property management companies as we have above to manage their properties plus realtors knowledgeable in short sales. And rental property is not going to be the savior of your retirement portfolio! But what investment is? And will you ever get a monthly statement where 30% has been removed from the top of your building!? Will riots in Greece or the UK cause you to loose the back yard!? If you are considering diversifying your retirement portfolio and looking to purchase some property, a short sale is worth considering. Conversely, if you have a property in mind and you're wondering where to find the cash from, placing it in your retirement may be the answer.
Note also, your returns above are not subject to taxes and they go right back into your IRA every month.

If you do have a specific investment in mind and would like to discuss this in more detail, call us or follow the link below. We are knowledgeable on both short sales and can guide you on how placing a property in your IRA might work.
email us at brian@makebetterinvestments.com or call (800) 730-0845
 

May '11
Dealing with banks.....and a little secret.
It's been a few months since we last posted buy boy has it been busy. My partner and I have picked up 3 short-sale bargain properties since the start of the year and we are planning on buying several more!  It is quite simply the best time to be buying real estate for long-term buy and hold. It is true, we are becoming a renter nation. Try the following link to read a great article about the increase in the numbers of people renting http://makebetterinvestments.com/2010/11/25/renter_nation/
 
My partner John and I are in the middle of several short-sale negotiations, both helping buyers buy a short sale and also helping sellers with pre foreclosure help. It's been truly hectic but rewarding at the same time.
 
Let me let you in on a little secret that not many of your agents will tell you. It is darn difficult to get the bank to agree to a short sale and even harder to get them to agree to a value that will get your home sold. In many instances, the BPO (Broker Price Opinion) agent who often does not have a great knowledge of your area might give back an unrealistic figure that could cause your house to sit unsold for 6+ months. So, how do you prevent this? Our advantage is the knowledge my team has of the Real Estate Appraisal Code and North American Building Code. How many of your agents can say the same thing? We will often produce a report 20+ pages long for the agents representing the bank. Most RE agents do not have this knowledge but we do and they love us as we make their lives easier.
 
Last week we handed a deal in Schwenksville to one of our investors on a plate. The Bank had initially approved this for $450K per the BPO Agent and by the time we were done, we had this down to $335K with all closing costs paid!! Not bad, eh??
 
If you have a problem property and the mortgage modification route just has not worked, give us a call. Don't just sit back and let a foreclosure happen.
 
 
 
February '11
US Housing Bottom???
By Corbett B. Daly
WASHINGTON, Jan 28 (Reuters) - U.S. house prices are likely to continue to slide before bottoming out sometime in the middle of this year but will rise just over two percent in 2011 as a whole, according to economists polled by Reuters. Asked when they see a bottom for U.S. house prices, 14 of 26 economists said they would trough in either the second or third quarter of 2011. Three saw the bottom coming as early as this quarter, while one did not see a bottom until the first three months of 2014.
"A pullback in prices following the expiration of the homebuyers tax credit was not a surprise. Ultimately, a recovery in the housing sector will depend critically on the job market, which should improve over time," said Scott Brown at Raymond James.
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas, which has struggled since home-buyer tax credits expired earlier this year, declined 0.5 percent in November from October on a seasonally adjusted basis, the fifth straight monthly decline in home prices.
Asked how much further prices would fall before stabilizing, the median response of 24 economists who answered was another 3.3 percent drop from current levels. Two economists saw a further decline as sharp as 10 percent.
But medians showed prices, which economists say will have lost a third of their value from peak to trough, would rise 2.1 percent this year, up from the 1.0 percent prediction in a poll taken in November.
Economists saw house prices as fairly valued now. Asked to rate current prices on a scale of 1-10, with 10 being overvalued and 1 being undervalued, 27 of 32 respondents answered with a 4, 5 or 6. Just one responded with a 7 and one responded with a 2.
The average home sales price in the United States was $169,800 in the fourth quarter of 2010, according to the National Association of Realtors.
Sales of U.S. new homes raced to their highest level in eight months in December, but gains were driven by a surge in the West. Even with last month's gain, new-home sales are down 75 percent from their peak of 1.283 million-unit pace in 2005.
"Housing is showing a ray of hope, but is still far from healed," said Diane Swonk of Mesirow Financial. "The level of activity in the market, in particular new home sales, will take much longer to recover to reasonable levels."
 The poll was conducted over the past week and included a total of 33 economists.
 
 
December '10
Urban Land Institute - Emerging Trends 2011.
The Urban Land Institute (ULI) has recently released their report, entitled `2011 Emerging Trends in Real Estate. This report is highly anticipated each year, ULI along with PricewaterhouseCoopers interview the top real estate leaders across the US identifying trends across nthe country and in local markets.
 
Overall the report was pretty positive but there were some very clear themes for real estate investors
  • real estate recovery is all about jobs
  • 2011 will see another banner year for home foreclosures as lenders step up activity
  • Multifamily rental apartments easily outrank other property investments for returns
  • Demographics shifting toward renting - rent spikes expected by 2012
  • Private Money Lenders providing bridge funding for investors that need conventional refinancing will see rates of return 12%-14%
  • "Era of less" is upon us, apartment living, no "humvee style" huge properties
  • Investors with well leased cash flowing properties will have easier access to financing in 2011
  • Investors with cash will have excellent opportunities to invest by buying properties from floundering owners who are foreclosed on
For the full report, click HERE
 
November '10

Renter Nation.
Did you catch the recent cover of Barron's magazine?
The recession and shifting demographics will swell the ranks of people who will rent, not buy, housing over the next five years.
Experts project substantial growth in households formed by people under 35, who mainly rent rather than own. Worsening the shift will be a decline in the number of households led by people 35 to 49 years old—the very ages when there is normally a huge jump in ownership. Now is the right time to invest in apartment foreclosures and investment property in general.
We have helped Philadelphia investors purchase 100+ apartment units in 2010 alone!! Call us if you are interested in multi-family apartment investing.
Click HERE for the full article
 
September '10

Foreclosure rates holding steady.
Lenders are still repossessing homes at a steady level and despite the economy leveling off, the number of homes are up from one year ago. 
"It appears that lenders are allowing delinquencies to go on longer before they issue notices of default" according to RealtyTrac
Click HERE for the full article
 
 
July'10
 
Bankruptcy can save your house from Foreclosure.
There are basically two types, Chapter 7 and Chapter 13. Click here for more details on this option to deal with overwhelming debt.
Click HERE to read the article
 
Many don't qualify for Obama's foreclosure prevention.
Launched with great fanfare, Obama's foreclosure prevention plan calls for servicers to reduce eligible troubled homeowners' monthly payments to no more than 31% of their pre-tax income. However, it has come under persistent fire for being slow to launch and for not helping enough people. Many homeowners complained that servicers continuously lost their applications and then left them hanging. Financial institutions said borrowers didn't provide the necessary documents.
Click HERE to read the article
 
Philadelphia Sheriff John Green takes a stand for homeowners in foreclosure.
In a city where foreclosures have drained small fortunes from working-class neighborhoods, a police officer-turned-politician decided to take on the financial institutions and protect homeowners’ rights.
Click HERE to read the article
 
 
March '10
 
Short Sales are the new foreclosure.
How you might loose your home matters. A Foreclosure can hurt your credit for years and cause a huge hit to your FICO credit score. President Obama's new mortgage program will help homeowners and says that lenders must offer borrowers the option of a short-sale, if their mortgage does not qualify for a modification. This article gives a great synopsis of the new Mortgage Help program, the advantages of a short-sale over a foreclosure
If you would like to learn more about short-sales, give us a call to learn how The program will pay you some money to help you move, if your short-sale is approved. We can take care of all the paperwork for you. No cost to you. Give us a call today.
Click HERE to read the article
 
Don't Foreclose! Do a Short Sale.
There has been much discussion comparing Foreclosure v Short Sale in the past year but the recent moves by The US Govt should accelerate the boom in short-sales in the coming months. Under the new "Home Affordable Foreclosure Alternatives" the mortgage servicers will receive an incentive subsidy for handling a short-sale.
Click HERE to read the article
 
Who's eligible for Mortgage Assistance under Obama's new Program?
The Homeowner affordability and Stability Plan is designed to offer assistance to as many as 9 million homeowners making a "good faith effort" to stay current on their mortgage payments.  
Click HERE to read the article
 
Obama's new Loan Modification plan: 7 things you need to know.
The President is launching a new $75 billion initiative aimed at keeping struggling borrowers in their homes. Reports on earlier modification programs have been mixed. Many people were caught up in the massive amounts of paperwork and banks were ill-prepared to cope. There are many home-owners that wish to stay in their homes and there are others that realize home-ownership has become a stressful situation and would prefer to move on with their lives without a mortgage. Here are some things you should know about this new program.
Click HERE to read the article
 
The sage from Omaha Warren Buffett is revered and often quoted. We have found a really interesting take on his words translated into advice for real estate investors.
This article comes from Doug Smith Founder of MyHouseDeals.com blog
Click HEREto read the article
 
 
Feb '10
 
"As values slide, more people walking away from their mortgages"
I was watching Meet the Press on Sunday Feb 7th and Henry Paulson and Alan Greenspan were talking about our economy, the effects due to job losses and also the real estate market. They were both asked to comment on this NY Times article. The discussion centered on who "wanted" to stay in their homes and Secretary Paulson discussed the balancing act that is helping people stay in their homes and the burden tax-payers to subsidize this. Greenspan had a very interesting insight. In 2005 and 2006, there were 6million+ conventional mortgages(ie 20% down). These down-payments have now been eroded. If House prices are to drop from here, will these people walk away from their homes or continue to make payments on homes that are upside down?(ie the mortgage is higher than the homes worth)
 
Click HEREto read the article
 
 
Jan '10
 
"What's the best last resort: Short Sale or Foreclosure?"
A Philadelphia Inquirer artcle examines your options, some good independent advice for you!
Click HERE for all the details
 
"US Govt. Loan Modification Efforts is seen as adding to housing woes"
Some Economists are questioning whether The Govt's modification efforts are doing anything other than "kicking the can down the road" as the program has largely failed to provide permanent relief. Recently the Treasury Department started the Foreclosure Alternatives Program where Mortgage Companies are provided financial incentives to provide tools such as short-sales to distressed borrowers. Foreclosoures continue to increase and 2010 is projected to see that number increase. Check out the following NY Times article for more information on this topic.
 
Dec '09
 
“Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP"
There are lots of "experts" out there, predicting which way the markets will move and often orthogonal viewpoints depending on which TV Station, Newspaper or analyst you read. Who do you listen to? How about the people that predicted we were in trouble with Alt-A loans, the implosion of the credit markets and the plunge in the stock market. One such economist is John Hussman, President Hussman Investment Trust who produces a weekly market commentary that is well worth reading. Read this article about the
Second Wave of Mortgage resets and their implication.
 
Short Sales get's boost from Obama Administration
The Obama administration recently released their long-awaited guidance on a plan for mortgage companies to speed up short sales of homes and other loan modification alternatives to stem the rising tide of foreclosures. The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed. The announcement can be found. While a short sale may be preferable to a foreclosure, they have been frustrating for borrowers, buyers and Realtors, because they are often hung up by lengthy negotiations with multiple lien holders and mortgage insurance companies. For the full story, check out this Here.
 
 
7 Tips for Buying Foreclosures
Investors often search for foreclosed homes to bid on, figuring they’ll get a bargain deal. But if you don’t bid wisely on a foreclosure, your bargain deal might cost you more money than you have budgeted.
Don't get into a bidding war......network with asset managers....BE SURE to get a Real Estate Attorney(let me know if you need a referral, we have a great guy that does our work).....Click below for 7 practical tips to guide you through what can be a thorny process!
Check out this CNN article for more info.
 
Nov '09
Mortgage Loans: Record numbers are late
Even with the availability of foreclosure prevention programs by both the government and charitable organizations, the percentage of mortgage loans with at least one late payment reached 9.64% in the third quarter. That’s roughly 4.5 million people who didn’t pay their mortgage.This doesn’t include those homes already in foreclosure…that figure makes the percentage of delinquent mortgage loans jump to 14.41%. Job loss is the major contributor and even though some refinancing might be able to help some families, the fact remains that those homeowners not collecting a paycheck cannot afford to pay their mortgage.The states hit hardest with foreclosures are California, Florida, Nevada, and Arizona, mostly due to the fact these four states have the highest number of prime loans that went bad. Check out this CNN article for the full story.
 
Philadelphia Region Housing Market’s Recovery Slows in Q3...But, recovery remains relatively stronger in suburbs than in city. After experiencing the first increase in region-wide house prices in nearly two years this past spring, the Greater Philadelphia region slowed in the rate of appreciation this past summer.
 
Even movie stars fall victim to foreclosure.....
Lesson of the Day: Even if you make millions of dollars…either in a lucrative business or by winning the lottery…these millions do NOT guarantee financial security. Apparently actor Nicholas Cage has lost two homes in New Orleans to foreclosure, owes significant back taxes on other homes, and is about to lose properties in California and Las Vegas.
How does this happen? The same way it happens to all of us “regular people": living above our means, not saving enough, and experiencing stretches of unemployment.
 
Oct '09
Check out this article on CNBC recently released by Zillow.com which examines the hottest zip codes in The US for Home Price performance. Philadelphia has 2 zip codes in the Top 3!! All the news is not bad in our City!
 
Expect Housing Prices to drop even more!
We’ve all seen the prices in the housing market drop across the country. No location was left untouched by the loan and mortgage scandal and many economists are predicting that home prices will drop even more during the next year. Many housing reports offer differing forecasts, with some predicting that prices have stabilized. But other reports say the foreclosure crisis isn’t over yet and areas with a high concentration of foreclosures will see the steepest price drops. The idea that the housing market had reached rock bottom and things were starting to improve is due, in part, to the $8,000 new homeowner tax break that many new buyers have taken advantage of. This tax credit encouraged people to shop around for houses and made home buying a reality.
However, does this increase in activity truly indicate the prices have leveled off or will this activity cease once the tax credit expires on December 1, 2009, thus causing prices to dip lower?
 
To read more about the continued housing price drop, click here
 
 
Sept '09
Kevin Gillen, Econsult Vice President and Philadelphia area real-estate expert, appeared on WHYY’s Radio Times, September 23, 2009 for a show devoted to the Philadelphia-area housing market. He was joined by Ira Goldstein, previous Director of Fair Housing at US Dept Housing and Urban Development. Topics included the current state of the market, what effect the federal homeownership tax credit may be having, and local housing policy issues such as the City of Philadelphia’s ten-year tax abatement and the citywide property re-assessment.
When Kevin talks.....people usually listen!
 
To listen to the podcast, see the link below.
 
 
Tax Consequences of a "Short Sale" v Foreclosure
We get asked this question a lot and this is a great article that outlines the scenarios you may face. A short-sale will almost always be a better option for you than going through foreclosure. Even if it falls off your credit, a foreclosure stays with you for years. You could be filling out an application in 15 years time that will ask you if you have ever had a bankruptcy or foreclosure.
 
 
Aug '09
Mountain of modifications: Industry tries to keep up with avalanche of troubled mortgages. 
If you are frustrated dealing with your bank on a mortgage modification, you are not alone. The Mortgage and Banking Industry is having a real hard time keeping up with the mountains of modification requests they are receiving. "You can't modify someone's mortgage to 31% of income if they have no income." Until our Economy recovers enough to get people back to work, the Govts modification programs will not have the effect they would hope for.
 
 
 
May '09
Are short-sales hurting home values?. One womans talks about her neighbors house but Tara-Nicholle Nelson from www.rethinkrealestate.com has an interesting perspetive in response.