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Monday, September 28, 2009
Economic UpdatesLast Week in the News
The index of leading economic indicators — designed to forecast economic
activity in the next three to six months — rose 0.6% in August after an upwardly revised 0.9% gain in July. It was the
fifth straight monthly increase.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the
week ending September 18 rose 12.8% to 668.5, the highest since the week ending May 22. Purchase volume rose 5.6% to 288.3.
Refinancing applications increased 17.4% to 2,881.5.
Initial claims for unemployment benefits fell by 21,000 to 530,000
in the week ending September 19. The figure was lower than the 550,000 that economists had forecast. The number of people
continuing to claim jobless benefits in the week ending September 12 fell by 123,000 to 6.14 million.
Existing home sales fell
2.7% in August to a seasonally adjusted annual rate of 5.1 million units from 5.24 million units in July. The inventory of
unsold homes on the market fell 10.8% to 3.62 million, an 8.5-month supply at the current sales pace, and the lowest level
in more than two years.
Orders for durable goods — items expected to last three or more years — fell 2.4% in August
after rising 4.8% in July. Economists had anticipated orders for durable goods would rise 0.5%.
The Reuters/University
of Michigan consumer sentiment index for September rose to 73.5 from 65.7 in August. Economists had forecast a reading of
70.3. It was the highest reading since January 2008.
The Commerce Department reported new home sales rose 0.7% in August
to a seasonally adjusted annual rate of 429,000 from a downwardly revised rate of 426,000 in July. Economists had expected
a sales pace of 440,000 units.
Upcoming on the economic calendar are reports on consumer confidence on September 29, pending home
sales on October 1 and factory orders on October 2.
Provided by:
Judy Haller
Senior Loan Officer
Prospect
Mortgage
3985 Prince William Co. Pkwy. Suite 104
Woodbridge, VA 22192
Office: (703) 590-7132
8:22 pm edt
Monday, September 21, 2009
ECONOMIC UPDATESLast Week in the News
The Commerce
Department reported that the combined construction of new single-family homes and apartments in August increased 1.5% to a
seasonally adjusted annual rate of 598,000 units. This follows a 1% decline in July and a 6.5% increase in June. According to the ICSC-Goldman Sachs index, retail sales were flat
in the week ending September 12. However on a year-over-year basis, retailers saw sales increase by 1.6%, the best showing
in a year. The producer price index, which
tracks wholesale prices, rose 1.7% in August, following a 0.9% decrease in July. The increase in August was largely due to
a 23% surge in gasoline prices. Retail sales
increased 2.7% in August following a revised 0.2% decrease in July. It was the largest gain since January 2006. Economists
had expected retail sales to rise 2% in August.
Industrial
production at the nation’s factories, mines and utilities rose 0.8% in August following an upwardly revised 1% increase
in July. It was the biggest back-to-back gain since 2005. The overall factory-operating rate rose to 69.6% of capacity in
August, the highest level since February.
The Labor
Department reported consumer prices rose 0.4% in August. For the year, consumer prices are down 1.5%. The National Association of Home Builders / Wells Fargo housing market index rose one point in September
to 19. It was the highest level since May 2008. An index reading below 50 indicates negative sentiment about the housing market. Initial claims for unemployment benefits fell by 12,000 to 545,000
in the week ending September 12. The figure was lower than the 557,000 that economists had forecast. The number of people
continuing to claim jobless benefits in the week ending September 5 rose by 129,000 to 6.23 million. Upcoming on the
economic calendar are reports on the index of leading economic indicators on September 21, existing home sales on September
24 and new home sales on September 25.
Provided by:
Judy Haller Senior Loan Officer
Prospect Mortgage
3985 Prince William Co. Pkwy. Suite 104
Woodbridge, VA 22192
Office: (703) 590-7132
6:44 pm edt
Thursday, September 17, 2009
WHOLESALE TO US... HERE'S OUR BUYING CRITERIA
Wholesaling is a great way to start
out in real estate. To be successful you need to proudly embrace the position of middle man or woman.
You need to network. Your success will depend on your buyers list and your ability to find good
properties. That is where your value lies. You need a buyer who is serious and moves
fast on good deals. This market won’t wait around for indecisive buyers. I’m
one of those serious buyers. I move fast on good deals and once I commit to a deal I very rarely walk and,
if I do, it’s only as a very last resort and with great pain and deliberation.
You have
got to have confidence in your buyer and your buyer has to have confidence in you, the wholesaler. The
only reason I would pay finder’s fees is if a wholesaler is saving me the time and hassle of pursuing dead end after
dead end looking for an acceptable deal. I want deals presented on a silver platter. I
want wholesalers who have deals when they call me, not another dead end.
I think new
wholesalers often neglect or under price 3 key general aspects of a rehab deal. Many newbie investors only
account for the purchase price and the repair costs on their deals, but there is more. Make sure you also
account for closing costs when you – or I- buy the home, holding costs, and closing costs when I sell the home (including
realtor fees and possible closing costs paid for by the buyer.) These three items can easily add up to
23% of your end sales price. You won’t be in business if you neglect or even undervalue these costs.
Base your deals
on the numbers. Know the value of your property “as is” and know the value after repairs (I
can assist you with this.) Know the value and costs
of your repairs. Know the costs of the transaction. Make sure you (or in this case your
end buyer, me) have at least a 20% net margin after all costs. Here is how I figure most of my flips.
Take the after repair value or what you think you can sell the home for after it’s fixed up and then deduct:
(1) 20% for your buyers profit. Some people
require thicker margins, but I really recommend not going any less than 20%. (2) 6.5-8% for closing costs when you sell ( I normally pay 4% for a realtor and 1/2% in misc
closing costs and I like to budget 2-3% for the buyers closing costs at least in my market)
(3)
The cost of your repairs (get estimates) or, at least a good list of repairs. I’ll help you with
those costs if you put together a good package. Pictures, and lots of them, are also helpful.
(4) 6 months of interest costs. Take the purchase price and multiply it by .12 and divide
that number by 12 and then multiply that number by 6. That will give you a good ballpark of what my interest
costs for 6 months will be. You should also add in taxes and insurance but I can help you with that.
For a rule of thumb, on this last deal I completed I spent about $5,000 on taxes and insurance for 4 months on a home
that sold for $420,000. Or, 1% of the end sales price will be close enough for our purpose at this point.
(5) 7% of the purchase price for closing costs when I buy it. I pay 4- 5
points and usually about 2% for closing costs (title fees, title insurance, tax stamps, lenders lawyer, etc.
(6) Your finder’s fee
The resulting number will be the minimum price you (the wholesaler) should be willing to offer on a property.
I know step 4 and 5 is confusing since at that point you won’t know the purchase price, but you should have a ballpark idea. Just put a good estimate in for step 5.
Example
Scenario: You find a home that will be worth $500,000 after it’s fixed up. After repair
value = $500,000
Deduct: Step 1) 500,000 X 0.2= $100,000 this removes the 20% profit needed to make a deal
worth while. Step
2) 500,000 X 0.08= $40,000 this is the closing cost for when I sell the property Step 3) Good estimate of repair
costs Step
4) Say $250,000 X .12=30,000 divided by 12= 2500 (my monthly interest costs) x 6 months = $15,000.
Throw in $5,000 for taxes and insurance. This is a good estimate for the projects
interest costs. Step 5) $250,000 X .07= $17,500 this is my closing cost when I buy the home. Step 6) Your finder’s fee. I
would say 10% of the end profit would be reasonable. $10,000. Or, whatever you feel you can get.
So your math
will look like this:
500,000
-100,000 Minimum Profit requirements
-40,000
closing costs at sale -50,000 Repairs (I just made up a number for this example) -15,000 6 months interest -5,000 taxes and insurance -17,500 closing
costs on the purchase -10,000 finder’s
fee
262,500 is your maximum purchase price.
Once I go through the above backwards plan and get a purchase price; I then go through it again starting
with my newly discovered purchase price and adding all the costs to make sure the price falls within a good window for a fast
sell. Holding costs can kill you. Cash flow is one of the biggest rehabber killers.
These are
not absolute numbers. Some deals I would have to see thicker margins. For instance if
the comps were really uncertain, the neighborhood is particularly risky, if the project is a long distance from me and therefore
more difficult to manage, and an endless number of other factors. Some deals are attractive enough that
I would feel comfortable cutting it a little tighter. Every deal is different. However,
if you bring me a deal that looks like this then we have a really good chance of getting it done. Flipping
is more art than science. The numbers above are about as much science as you get and offer a good starting
point. Happy
hunting. Justin Pierce
Snow Goose
Homes LLC
703-587-8929 cell
888-680-6881 office
Monday, September 14, 2009
Economic UpdatesLast Week in the News
According
to the Federal Reserve, consumer credit debt fell in July by $21.6 billion, an annual rate of 10.5%. It was the biggest decline
since recordkeeping began in 1943. Economists had forecast consumer debt would drop $4 billion. Total consumer credit debt
in July was $2.47 trillion. Meanwhile, the figures for June were upwardly revised. Consumers reduced their borrowing in June
by $15.5 billion.
The
Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending September 4 rose
17% to 648.3 from 554.1 in the prior week. Purchase volume rose 9.5% to 304.1. Refinancing applications increased 22.5% to
2,651.2.
The Commerce
Department reported gains in both trade imports and exports, which indicates that the worst recession since the 1930s may
be ending. Imports in July rose 4.7% to $159.6 billion. It was the largest monthly advance since recordkeeping began in 1992
and the second monthly increase after 10 monthly declines. Exports rose 2.2% to $127.6 billion, the third straight monthly
increase.
Initial
claims for unemployment benefits fell by 26,000 to 550,000 in the week ending September 5. The figure was lower than the 560,000
that economists had forecast. The number of people continuing to claim jobless benefits in the week ending August 29 fell
by 159,000 to 6.09 million.
The
Reuters/University of Michigan consumer sentiment index for September increased to 70.2 from 65.7 in August. Economists had
forecast a reading of 67.5.
The
Commerce Department said wholesalers reduced their inventories by 1.4% in July, following a revised 2.1% drop in June. It
was the 11th straight monthly decline. Meanwhile, sales at the wholesale level rose 0.5% in July, the third consecutive monthly
gain.
Upcoming
on the economic calendar are reports on retail sales on September 15, the housing market index on September 16 and housing
starts on September 17.
Provided by:
Judy Haller Senior Loan Officer
Prospect Mortgage
3985 Prince William
Co. Pkwy. Suite 104
Woodbridge, VA 22192
Office: (703) 590-7132
Tuesday, September 8, 2009
Economic UpdatesLast Week
in the News
The
U.S. manufacturing sector grew for the first time since January 2008. The Institute for Supply Management reported the monthly
index of manufacturing activity rose to 52.9 in August from 48.9 in July. A reading above 50 signals expansion. The increase
was driven by new orders, which was up 9.6 points to 64.9, the highest reading since December 2004.
The National Association
of Realtors reported that its pending home sales index, a forward-looking indicator based on signed contracts, rose 3.2% to
97.6 in July from a revised 94.6 in June. It was the sixth consecutive monthly increase and the highest reading since June
2007.
The Commerce Department reported total construction spending fell 0.2% in July to $958 billion. Economists
had expected a flat reading. However, construction of homes and apartments rose 2.3%, posting its best showing since September
2008.
The Labor Department said that productivity jumped at an annual rate of 6.6% in the second quarter of 2009.
The increase was the biggest quarterly gain in nearly six years. Labor costs fell at an annual rate of 5.9%, the largest drop
since the second quarter of 2000.
The Commerce Department reported factory orders rose 1.3% in July,
after a revised 0.9% increase in June. It was the fourth consecutive month of growth. Economists had expected a 2.2% increase.
Initial claims for unemployment benefits fell by 4,000 to 570,000 in the week ending August 29. The figure
was higher than the 560,000 that economists had forecast. The number of people continuing to claim jobless benefits in the
week ending August 22 rose by 92,000 to 6.23 million.
The Institute for Supply Management reported the monthly
index of non-manufacturing activity rose in August to 48.4 from 46.4 in July. Economists had expected a reading of 48. Figures
below 50 indicate contraction.
Upcoming on the economic calendar are reports on consumer credit on September 8 and wholesale trade on September
11.
Provided by:
Judy Haller Senior Loan Officer
Prospect Mortgage
3985 Prince William
Co. Pkwy. Suite 104
Woodbridge, VA 22192
Office: (703) 590-7132
3:46 pm edt
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