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Tag Archives: Real estate

Is It “Worth” a Million Dollars?

Other hot news of the day is that we are under a cloud of African dust, which makes for interesting sunrises.

I heard a feature on the radio this morning that mentioned that Austin had the highest percentage of million-dollar homes in Texas. It could be worse (or better), of course. San Jose, CA has a median home price of over a million. This may explain how I know people who have lived in the same apartment there for 25 years. The article was about the whole US, and according to research by LendingTree, the most cities with a high percentage of homes over a million dollars are in states along the coasts. Denver and Phoenix are exceptions.

I got a chuckle out of the article in some ways. It was sort of like a “don’t move here if you want affordable housing” list. It was also a “Sue Ann will avoid these crowded cities” list, but that’s just me. Basically, in much of the US, a house doesn’t have to be a mansion to be “worth” a million dollars anymore. Wow.

Implications?

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Tax Plan Update: Corporations vs. Pass-Through Entities

Scissors cutting the word TAX

The language of the current tax proposals is changing daily, if not hourly. The Senate plan currently has any benefits accruing to the middle class or small businesses expiring by 2025. Why? Why do you think?

No matter which party is in power, I’m always nervous when they start meddling with the tax code. Everybody agrees that we need tax reform; it’s just that we can seldom get two people to agree on just how that reform should look. If you ask three members of Congress, you’ll get at least five answers.

The “tax cut” bill currently before the Senate dramatically favors large corporations over the middle class and small business. As Gary Cohn, President Trump’s Chief Economic Advisor, said, “When you talk to all the CEOs — they’re the most excited about this.”

Why Is That?

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People We Work with: Real Estate Pros

This is the first in a series about the kinds of people the Hermit Haus Redevelopment team works with on a regular basis. We will cover everyone from all aspects of our work.

Working with our real estate friends Judy and Jennifer is one reason we love what we do.

First, let’s think about real estate professionals. These include brokers, agents, Realtors®, etc. It’s true that we have an experienced, licensed agent on our staff, but neither Carol nor the rest of us could do a good job without being connected with a wide variety of colleagues in the areas we work in.

Why Would They Work with Us?

Some real estate folks hesitate to work with investors, since there are some who give us a bad reputation. Many feel that the lower prices we try to get for homes will cut into their commissions, or worse, we would keep them from getting commissions at all. (And plenty more biases.)

To the contrary, we want our real estate agent friends to get all the commissions they deserve for their hard work. Our goal is to help them out with houses they know they won’t be able to sell on the retail market, you know, the sad houses. We’ve had agents refer us to clients with all kinds of issues, and when we have people who contact us with houses we don’t need to help them with, we refer them to an appropriate agent in their area.

Since we work over a wide range of metropolitan areas in central Texas, we need contacts with access to different MLS systems, as well. When we all work together, everyone gets to make money. Knowing professionals who can help out in Killeen, San Antonio, Cameron, and Bryan/College Station helps us help more home owners. We’re grateful to these friends.

For Example, Take Judy!

One real-life example (out of many) is Judy Todd, an agent who lives in Milano Texas, but works the College Station/Bryan and Cameron areas and in between, along with her daughter, Jennifer. As a former school teacher, she knows LOTS of people in the area! The very first deal we did with her was to take off her hands a rather difficult parcel of four houses in Cameron. It was going to be hard to sell the traditional way, but we negotiated with the seller and got that deal taken care of so fast her head was almost spinning!

Since then, she has shown us many interesting projects, including the Roadrunner house we just closed on. Because she knew about us, she was able to get permission show it to us before it went on the MLS.  When we made our offer, we were able to get a good price, because the owner had to pay fewer fees and knew he wouldn’t have to make a lot of upgrades and repairs in order to sell the place. Sure, we don’t buy all the houses she brings to us, but she knows we are easy to work with, and we know she has a good eye for sound houses that just need some love.

We look forward to working with Judy more in the future, and are very grateful to the rest of our network of real estate agents and brokers who know the kinds of properties we specialize in and are happy to refer them to us.

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The Pros and Cons of Real Estate Wholesaling

Part of an Assignment of Contract form

When you have a property under contract, you have a marketable interest in that property: the contract. You can sell that contract in most states, but you can’t sell the property until you own it. Talk to your lawyer.

Many “experts” recommend real estate wholesaling as a quick, inexpensive, and easy way into the business. While it may be the lease expensive way to start out, wholesaling isn’t all that easy. For a complete explanation of what wholesaling is, see “What Is Real Estate Wholesaling?”

Pros

You can raise money fairly quickly.
Because you use very little of your own money and you collect on your investment quickly, it is possible to raise money very quickly. The amount of money you can raise depends primarily on your skill as a negotiator. How cheaply can you put the property under contract? How little of your money can you tie up in the process?
Risk is lower than renovating or buy and hold.
Again, because you use very little of your own money, you risk very little of your own money. But there are other risks.

Cons

It is not without risk.
Wholesaling can be very close to practicing real estate agency. You have to be very careful of your practices and wording to avoid this risk. Further, you will probably have at least a little of your own money at risk. And you risk your credibility with your peers if you don’t perform a fair amount of due diligence before marketing your contract.
It takes a significant amount of effort.
Wholesaling requires more effort than just about any other kind of real estate investing and sales. It is a full-time marketing gig with very little repeat business. No seller will ever sell you more than one house. How would that sound? “Hey, Lee. You bought my house when it was being foreclosed on a few years ago. Guess what?”
You have to be willing to invest in marketing.
Because wholesaling is lead-driven, you have to generate a lot of leads for every deal that comes along. This part really isn’t any different than other parts of the investing game, but it is something you have to be aware of. That means you have to be prepared to spend money and effort to generate those leads.
You can’t do it on the MLS.
I see a lot of novice wholesalers trying to remarket a house they found on the Multiple Listing Service (MLS)—or from one of the big real estate sales websites like Realtor.com. The honest truth is, if it’s on MLS, it’s probably a very thin deal—usually too thin—for any investor already. By the time you add in a wholesaling fee, it probably isn’t a deal any longer—if it ever was.

The point of this post isn’t to try to scare you away from wholesaling. I want you to wholesale. We buy a good chunk of our deals from wholesalers. My business would be much smaller without reputable, reliable wholesalers.

The point is for you to understand what wholesaling is, what you’re getting yourself into. You can make good money wholesaling, if you work at it and maintain good relationships with your buyers. But you will get much more out of it if you understand the needs of the people you buy from and figure out how to satisfy those needs.

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Market Update – Austin Area

Wilco median price graph

The Austin area and Williamson County continue to experience growth in the real estate market.

It’s no secret that we are operating in a very competitive up market right now. That makes it challenging to buy houses right, but gives us a little margin for error on the selling side. As our friend Shenoah Grove puts it, “We’re currently eight years into our five-year cycle.” A “typical” real estate cycle is five years of increasing prices followed by two or three years of “market correction.” The Austin area is in its eighth year of increasing prices, and there’s no indication of a change anytime soon.

In May, the median cost of a home in Williamson County, where we do most of our work, was  about $288-thousand. In Travis County, it was $346-thousand, and in Austin proper it was $355-thousand. Although those numbers are averages and some neighborhoods experience more or less (or even negative) price growth, prices were up about 5% throughout the area.

Our current low inventories should keep prices rising for a while. Inventory is figured by taking the number of houses available for sale and dividing it by the number of houses sold in a month. Williamson County and the City of Austin have only 1.9 months of inventory. That means if there were no new listings, every house available would be sold in less than two months! A “stable” market normally has about six months of inventory. The worst area in the greater Austin region has only three months of inventory.

All this is great news if you’re a seller, not so much if you want to buy.

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