Thursday, July 25, 2013

Sellers: Stay One "Strike" Ahead of Commuters

Good marketing of a home (or any property) for sale should include information about the area and relate to a potential buyer. It's too bad that most of what is out there does not.

One example of this is attracting a "commuter" to a home located within close proximity to a commuter train station. Before you attempt to sell, you should know how close your home is to a commuter train station, whether you personally use it or not.

With gas prices continuing to gouge consumers, a few dollars more in the mortgage could actually SAVE money to a commuter who drives a long distance each day. But that potential buyer won't know that if YOU don't point it out to them.

My long-time readers may recall my column a couple years back about Chicago area research showing a higher home price value of homes specifically located near the main commuter train line. On that same point, a similar column was recently published about proximity to the BART (Bay Area Rapid Transit) trains in the San Francisco Bay area, and its impact, especially right now due to the most recent transit strike.

Maxime Rieman of has provided us with an overview, which is reprinted with her permission:

A 2013 study commissioned by The American Public Transportation Association concluded that close proximity to a fixed-guideway transit system, those like BART, correlated with stable property values during the Great Recession. The study, entitled "The New Real Estate Mantra: Location Near Public Transportation," also found that while homes near commuter stations may command higher prices, they also help the owner save immensely on transportation costs. These factors often add up to a higher demand for real estate in close proximity to commuter lines.


However, there is a downside to living near public transit and, according to the Center for Housing Policy, it comes in the form of "nuisance effects." A particularly loud public transit system, for example, can negatively impact the value of residential property, as can pollution from fumes. But nuisance is often, though not always, outweighed by convenience and mobility; a young person wanting to commute safely to nightlife may fare better living closer to a light rail station, and put up with the noise that may come with it, rather than living in a far-removed suburb.


But these factors don't include strikes—and there's a reason: they're too infrequent and they don't last long enough.


So when would a strike actually affect a local real estate market? Well, there are a variety of answers, but the most obvious one is if the strike were to last months on end, if not for years—an unlikely scenario. More likely, however, is if there is a culture of labor strikes in a given area with transit—like there is in the San Francisco Bay Area. If such a culture exists and strikes become an all too common occurrence, the value of real estate surrounding public transit, both commercial and residential, will likely taper-off if only by a little bit. Again, this is hypothetical: even in the Bay Area there hasn't been enough public transit strikes to show a direct effect on the value of nearby real estate—it may marginally add to the cost of living, and, depending on the success of the strike, to what you pay into local taxes, but it won't have as big of an impact as, say, the number of housing units available.


And the number of housing units available is determined by demand. The Bay Area doesn't have one of the strongest real estate markets in the country without reason: there is a high demand by people in and wanting to be a part of the tech industry, because of the local culture, direct access to various industries and inherently, the well-paying jobs.


Oakland is a great example of this phenomenon: the city has one of the worst police forces in the nation (now being directly watched by the federal government) and a huge crime problem. The city shares BART with San Francisco, and it has its own public transit system AC Transit, on strike. But the real estate market is growing. The reason: cheaper real estate compared to San Francisco and Silicon Valley, direct access to what smaller tech firms need and a growing industry.


Now all this isn't to say that transit strikes don't have an impact. They do. The BART strike alone is estimated to cost the local economy nearly $200 million. But strikes—impermanent and sporadic—have a far smaller impact on the value of long-running real estate market. Strikes, unless they signal a large cultural shift, have little impact on the value of homes.


(Maxime Rieman is a writer for NerdWallet, a financial literacy site that can help you find insurance company and other helpful consumer information.)

 Since we have readers from around the country, chances are the majority of you are not impacted by transit strikes such as the Bay Area is going through. The point here is the significance of selling a home with a "location location location" convenient to commuter transportation.
For those that do not live convenient to commuter trains or buses, information such as this means you should be ready to show potential buyers how other advantages and amenities your home provides would outweigh "commuting advantages".

Thursday, July 18, 2013

Impact of the Improved Rental Market

Some interesting findings in the just released CoreLogic report regarding rentals across the country. Overall, it COULD be good news for the entire real estate industry. Emphasis on "could". Home owners and realty agents need to make it good news. Here is why.

CoreLogic's "Renter Applicant Risk Index" shows a rise in rental applicant scores in terms of credit and "ability to meet lease obligations" among what it terms "prospective apartment renters" over the past year. In addition, the other significant finding from this report is that applicant incomes were up during the first quarter of 2013 compared with last year. (This report includes single family rentals as well as multi-family housing.)

As positive as this sounds, it seems odd that while the economy struggles and job uncertainty and availability has shown little to no change in most areas that more people are better qualified to rent. We need to explore why that is.

My theory is that too many people are afraid of buying a home in this market and plan to wait it out. Part of this is the fear of losing a job and factors not directly tied in to the real estate market. In addition, the days of merely sitting on a home and having the value increase are long gone. Until or unless they return, a percentage of people will be content to rent.

Many of those who fit into one or both of those categories currently have the funds to make a decent monthly payment, but do not wish to commit long term. Hence, the ability to rent for six months to one year and have the flexibility to buy if conditions improve.

Meanwhile, too many home owners who are not able to get what they need for their homes and thus cannot sell, are not interested in renting their homes as a means to get into another property.

This is why the research report COULD be good news. With so many more and qualified rental candidates out there, why can't more sellers offer a "rent to buy" situation for their home?

It will take the realty agents to come around to this way of thinking, and to this point I'm not seeing it. While it does delay a full commission to the agent, an agent having several "rent to buy" situations is setting up for a nice payday down the road even though much of the "work" will have already been done.

Hopefully instead of waiting for the realty association to publish statistics comparing home sales to past years (which is not a motivation for a potential buyer), they will begin to promote a "rent to buy" scenario as an option to get sellers out of their current property.

The fewer homes for sale there are at a given time, the better the chance that home prices will return to previous levels and again show promise of profit potential over the years.

By not doing so, and with the increase in "quality" rental candidates, chances are many current home owners looking to sell are losing out because qualified "buyers" are renting where they know there are availabilities instead.

That is why these renters statistics COULD be good news. But first, the potential renters need the additional choices that current home owners could give them!

Wednesday, July 10, 2013

Getting Your Philly Of A Deal

Residential investors and rehabbers have what looks to be a great opportunity coming up on Tuesday (7/16) in Philadelphia.

The Philadelphia Housing Authority is ready to, for only the third time, allow for as many as 196 vacant homes (or residential lots) to be auctioned off. Winning bidders receive special benefits for handling the rehab work and are being given up to five years to resell.

The PHA has even allowed the auction company handling this to publish a map of each available property and encourage potential bidders to check out the property BEFORE bidding.

For a contractor which specializes in specific forms of rehab, this could literally be a gold mine, with as many as five days to scope out those properties which they could "fix" with the least amount of challenges for them.

Better yet, the Housing Authority has a link to all of the information, as well as providing links to the map of where these properties are:

If I were a home owner in Philly, I'd be checking back to see what nearby plots sold for after this auction, to see if my home could have more to offer, and faster, to a potential buyer for the area. Even if the sale price of a nearby "fixer" is much lower than years, if you can be in the ballpark with what currently exists, this could create a near future sale opportunity for you.

And if I were a realty agent in the area, I'd be on top of property values surrounding these homes to see where the best deals could be. It wouldn't hurt to alert investors who are clients. After all, they would be buying to sell off, and somebody needs to handle that transaction when the time comes.

Hopefully more cities will do this, instead of ignoring eyesore properties and not helping the real estate market at all.

Tuesday, July 9, 2013

Never Mind Home Sales Statistics - Check Local Business News

I've heard enough about how home sales are "inching" up, considering how many of them dropped by feet or yards within the past five years. There are still too many areas where current home prices continue to represent losses of five or even six figures for those who bought them years ago and still could not sell for a profit or even a break even.

Instead of waiting on home sales statistics to make some people believe the real estate market has rebounded, your time should be spent on checking local business news.

Here is another example, this time from Austin Texas. It seems a local investor partnership has just purchased the Vista Lago Apartments, located in the Lady Bird Lake area. This partnership immediately announced plans to renovate and then re-open the property, which currently contains 102 units.

I'm sure you are wanting to ask me what this information has to do with the local home sale market in Austin, or anywhere else for that matter. And I'm here to tell you it COULD have a lot to do with it.

Since most of you do not live or work in this area, here is why this answer could relate to your situation, whether you are a property owner or a real estate professional.

For the near future, the renovation of a 100+ unit apartment building will mean a lot of construction and contractor projects and jobs. In some cases, people prefer to move close to where jobs are or will be in order to save on commuting and be available as needed.

Upon completion of the renovation, this partnership will either sell the "new" building and get out or they will look to rent or sell the "new" units themselves. Either way, the owner of Vista Lago will be advertising for new residents for this area, and most likely at market value or higher for rentals in this "new" building.

If I was a home owner in that area, I would immediately spring into action. I would do my homework and research what apartment rents currently are for that area, especially the more upscale apartments or units. Once I come up with a number, I would compare it with my current mortgage and monthly costs. Next, compare that number with what your home has to offer, and see if or how it compares to what a new rental unit would fetch.

Keep in mind it might not be a direct comparison. (I'm making up these numbers for the sake of example, so please don't quote me.) Suppose you would expect a 2-bedroom unit to rent for $950 per month, but your 3-bedroom home with a garage and a private pool costs you $1,100 per month on your mortgage and other costs. I would contend you have something to offer.

Using that comparison, you could offer a "rent to buy" of your home, and be able to promote how "for only $150 per month additional, you get an additional full bedroom, additional enclosed parking, and your own pool to use when you want". Add in the "And you won't hear neighbors through the walls, be awakened by upstairs neighbors' footsteps......." and other selling points.

If I was a realty agent in that same area, I'd be doing this comparison with homes currently on the market (in an effort to attract buyers for buyer commissions) as well as for past clients who live in the area and might want to jump on such an opportunity.

There has to have been enough potential for that immediate area to attract an investment partnership into renovating a 102 unit building in order to profit from it. The sooner you can pounce on that potential, especially before the Vista Lago opportunity becomes available, the more chances you have to generate sales because of it.

You could have "rent to buy" options, which Vista Lago may not even be offering. You could have outright sale opportunities, perhaps being able to offer a potential renter the opportunity to buy for the same general amount.

Even if you don't live in Austin or in this area, the idea is there for you. The Vista Lago complex is certainly not the only large apartment complex to be purchased for renovation. The concept is to track down upcoming residential construction and renovation and see what you can provide to potential buyers or renters in comparison.

That would be far more productive than waiting for home sales statistics to inch your way.