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My 41st birthday is this Saturday. I’m not telling you so that you can rush out and purchase me a present. (Though if you do I really like Wizards tickets.) I bring that up because New Year’s Eve and birthdays always remind me to stop and think about my future both personal goal wise and financial wise.

I own my own home. (And most of you do, as well.) And I am counting on that home to help fund my retirement plans either through home-equity loans or a reverse mortgage. So the plan is to have it, or whatever personal residence I may have at the time, completely paid off by the time I “hang it up”. I also own a duplex and have shares in other properties. These and the others I will acquire over the next ten years will also help to fund my retirement by going beyond the necessities of life. With these properties I am hopeful that I will be able to help my kids get a good start, that I will be able to leave to charity enough to make a difference, that I will finally get to take my Bride to the islands she has dreamed of.

It’s not always easy dealing with properties in the here-and-now. Sometimes with vacancies you can wonder if you have enough cash flow to pay the bills. Or would the money be better invested in a sporty new convertible? (Not likely.) I’ve chosen to live a comfortable life and to invest in my future. I also get to have a large payoff in the end and in the mean time provide good, safe, clean housing to people who want or need to rent.

What are you planning for your future? Of course, we all know how fragile life can be and that the future may end this afternoon. But just in case you might want to take some time, sit down, and do some math.

HUD properties can be excellent purchases. But you need to know a few guidelines.

First, most HUD homes come on the market available at first primarily to owner/occupant bidders. Very recently I helped a first time home-buyer purchase a HUD home for $63,000. We figure it will need some improvements/repairs (as most HUD homes will) in the neighborhood of $9,000-$10,000. We figure the ARV (after repair value) to be somewhere in the neighborhood of $85,000-$87,500.

So basically, this first time home buyer will put 3% down on an FHA loan and have approximately 16% equity! How great is that?

Investors, too, can purchase HUD homes but must be second in line to owner/occupants during the first round of bidding. After that, HUD is generally only interested in highest net bidder. But, as you can imagine, the “cherry” properties will be gone to the owner/occupants during the first round. What is generally left to investors are the homes with major structural problems, mold infestations, or worse. So you have to be careful.

Also, you purchase HUD properties “As Is”. Inspections are okay. However, you should look over the properties pretty well before you bid.

If you have any more questions about this field of real estate, just give me a call.

A couple of things to keep in mind when negotiating for real estate;

1. Unless it’s win/win the deal will probably not happen. Both sides have to get enough out of the transaction to make it work. Not everything they want. Just enough to make it work. (I have seen deals so one sided that one party really thought they got by with one. However, those deals seldom actually closed because the other party came to their senses and figured out a way to get out of the deal.)

2. Time is your biggest friend. Time allows the other party to get used to the thought of owning/selling that property. Once they are invested, it is easier to ask for “just a little bit more”.

This information is from the Heartland MLS which serves as a very important tool for real estate agents and their buyer/seller here in the Greater Kansas City area.

January 2006 Statistics

Total Homes for Sale 21,284
Total Multi-Dwelling Homes for sale 692
Average List Price for Homes $195,723
Average List Price for Multi $198,934

Sales of homes 2,178
Sales of multis 69
Average sales price for homes $184,893
Average sales price of multis $229,839

Average Days on Market for homes 54
Average Days on Market for multis 44

Study these numbers. They will tell you a whole lot. I can see many things in these numbers, including a very important trend.

If you would like numbers from just your part of town, drop me an email or give me a call. I would be happy to send you your neighborhood’s specific statistics.

From Robert Irwin’s Tips & Traps When Negotiating Real Estate – Second Edition:

I want an agent who represents me to be hard-nosed, irritating and determined; to have learned his or her business in the backrooms; and to tell it like it is and get what he or she goes after. I want the other guy to have the “nice” agent.

Which am I? Feel free to call me for a list of references. Or, you can ask my wife. I must possess both qualities. Because she says she loves me know matter how irritating I can be!

If you haven’t read today’s Kansas City star, you should. On the front page there is an article titled Bogus Appraisals Stress Housing Market. It is an excellent introduction on what can happen when you choose to not use a professional REALTOR or you use a real estate agent with less than professional ethics.

But more than anything you should make sure you choose a reputable loan company.

Appraisals have been a problem for me in the past. And quite often I have raised an eyebrow when people have told me about their refinances. Let me give you an example.

For a while in Oklahoma I owned a property in a neighborhood where the highest a home had ever sold for was $119,000. The average price of homes in the neighborhood was about $102,000. Almost all the homes were 1400-1600 square foot ranches. The $119,000 home had been extensively updated and added on to. Anyway, a gentleman I knew and like in that neighborhood was telling me that he had refinanced his house and “pulled out some cash”. Curious, I asked him what his house had appraised for and he told me $144,000! Are you kidding me? His house was almost identical to the property I owned that I valued at about (and in fact sold for about six months later) $103,500. Yes, he had an inground pool. But not a $40,000 pool! This was an obvious case of a guy being taken advantage of. He is now locked into that home for the next 15 years while it appreciates to that level.

Another experience I had, and continue to have, is when appraiser’s use non-comparable homes to come up with value. These appraisers and their mortgage officers want to use homes from different neighborhoods and social circles. In other words they will use houses that have nothing to do with each other.

Read the article. Choose your lenders and real estate agents with care. A responsible real estate agent will look out for your interests and warn you when he sees a red flag. Yes, the house may cost you a few dollars more than getting the “deal” without representation. But are you sure it is such a deal?

Owner Financing can be a profitable enterprise that will help you to sell properties at a higher price, if done correctly. You need to do your homework and make sure that the person taking the owner financing can pay the loan back. And if they are asking you to be a bank you should have the right to delve into their personal finances.

Generally, I recommend to my clients that if they are going to do owner carrybacks that they do it for only a partial amount of the home, like 5% or 10% or 15% down. That way you still get most of your money up front and on the carryback portion, which you will secure with a mortgage (second in line), you can earn an additional 6%-9%, depending on the situation.

If you would like to find out more about this particular way of maximizing you sales proceeds, just give me a call or drop me an email. I’ld love to discuss how this can be beneficial to you and your buyer.