America will see a huge demand for student housing in the next decade © ekaterinaupit - Fotolia.com

Real estate investor Doug Fath invests in student housing and apartments, and he claims it’s an untapped growth market for the foreseeable future.

Fath paints a rosy picture of the future potential in the student housing, real estate investing niche: In the next decade, about 80 million echoboomers (the children of baby boomers) are expected to graduate from high school and make their way to college campuses all across America. When they arrive on campus, they’ll need a place to stay. The problem? Currently, on-campus student housing capacity can only accommodate about 30% of the expected rush of incoming echoboomer students.

While Fath’s investing model focuses on student housing because of the potential for growth in the coming decade, he also finds that today’s real estate investor can tap into the demand for apartments fueled by the foreclosure crisis. “I think apartments and student housing is the best sector for investors to make money in the next 3-5 years,” Fath said.

“Similarly, apartments are favorable due to supply and demand.  Because of the current economic environment and the financial irresponsibility of many Americans, it’s more difficult for people to purchase a home so they are forced to rent.”

While this double-barreled demand promises to fuel strong growth in both real estate sectors, Fath says he’s not having difficulty locating good investment properties. Rather than using real estate brokers to locate investment properties, Fath said, “We purchase the majority of our properties directly from the owners who are in a distressed situation.  Typically the properties are abandoned, dilapidated and have debts owed to the property.”

One of the secrets to Fath’s success is to purchase properties at significant discounts, then make improvements to increase the value of his investments, although he says he doesn’t focus as heavily on the current value of the property.

“Since I normally purchase properties that need a full gut renovation, I’m more concerned about the value upon completion. I want my total costs to be 65%-75% of the ARV (After Repair Value).  The formula I use to make my offer is
(ARV *65%) – Construction Costs – Negotiation Room = Initial Offer.”

He says it’s also important to be aware of the cashflow an investment property will produce on a monthly basis when making investment decisions. By investing in the cashflow a property will produce, Fath also doesn’t worry too much about possible changes in the federal income tax code.

“The majority of talk is about additional taxes on earned income and capital gains income.  I primarily invest in cashflow (passive income).”

Although some investors are hesitant to invest in real estate – student housing, apartments or other investment types – Fath doesn’t share their pessimism. Even though he believes the market has yet to hit bottom, he clings to his faith in the opportunities available in today’s market.

“There are still plenty of good money-making opportunities in a down market. Now is an opportunity to increase your financial education, get experience and make money. Developing the ability to make money in a down market is an invaluable and empowering experience because you now know you can make money in any market.”

In addition to being a fulltime real estate investor, Fath also teaches students how to invest in student housing.

Danilo Rizzuti / FreeDigitalPhotos.net

Find the sweet spot that will get the lender to agree to your offer

Hertzog says lenders don’t just pick a figure out of thin air – they do their homework. So you’ll have to do yours. Lenders will either order an appraisal or request a BPO (Broker Price Opinion) to estimate value, so Hertzog recommends offer amounts within about 5%-8% of fair market value.

“This doesn’t mean banks won’t accept an offer that’s below their target price, but it does mean you’ll have to make a compelling case for the price you bring. Guessing will only get your offer rejected, so make sure you can back up your price with cold hard facts,” Hertzog said. Hertzog says this includes providing accurate rehab estimates (if known).

Know the reasons short sale offers are rejected

Reasonable short sale offers are rejected – sometimes in record time. Hertzog says the number one reason he sees short sale offers rejected is one most real estate agents don’t consider: fuzzy math.

Because mortgage insurance guarantees so many mortgages, lenders have to decide whether to foreclose on the borrower, collecting on the insurance policy, or consider a short sale as a viable alternative. “Lenders will never tell you this, but they keep their trusty calculators handy. If they’ll profit more from a mortgage insurance-backed foreclosure than they will a short sale, that’s what they’ll do. And it doesn’t matter how much you offer.”

Constant Communication is crucial

Because short sale transactions have so many moving parts, it doesn’t take much to derail a short sale. For this reason, Hertzog recommends short sale agents rely on an effective system of keeping all parties informed of a short sale’s progress.

“I use Short Sale Genius because it was built specifically for short sales. It’s not as important that you use a specific software application as it is that you develop and implement a system that works for you. If you can’t keep everyone informed along the way, your short sales won’t go smoothly, or buyers could get jittery. If this happens, or the buyer isn’t kept in the loop, they could walk away from the deal. Then you’d have to start over from scratch, and hope you can find a new buyer before the foreclosure process plays out.”

Hertzog sees short sales dominating the real estate market for the foreseeable future. He said Phoenix is currently seeing more short sales processed monthly than REOs and foreclosures – combined. “Short sales are currently 27% of closed transactions. In Phoenix, this is huge.”

Hertzog notes that, while short sales can be a great way for real estate professionals to increase their incomes for the foreseeable future, not everyone should try. He recommends only experienced, knowledgeable real estate agents dip their toes into the short sale pool.

“You need to know what you’re doing. Short sales aren’t for brand new agents. Remember, you’re supposed to be looking out for your clients’ best interests. To be honest, until you have some experience under your belt, you should stick to doing what you know – selling houses traditionally.”

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Ken Speegle is a direct response copywriter, ghostwriter, and conversational writing specialist. He works with real estate agents, brokers and investors to expand their reach with conversational writing. By working with Ken, his clients are able to focus on their strengths instead of trying to figure out the best way to use the written word to make more money. For more about Ken Speegle, visit him on the web at www.therealestatewriter.com or by email at info@therealestatewriter.com. Ken personally responds to all inquiries.

Phone etiquette for foreclosure marketing © Komissar52 - Fotolia.com

Before putting together a winning script you’ll use to convince distressed homeowners that you can offer effective foreclosure avoidance strategies, it’s crucial that you have at least a working familiarity with potential legal pitfalls. Here are some things to keep in mind.

Do You Have to be a Licensed Real Estate Agent in Order to Call?

Because of the patchwork of state laws in existence, it’s crucial that you be able to wrap your head around the laws in your state. Some states have passed legislation requiring that you be a licensed real estate agent in order to call homeowners in any stage of the foreclosure process. This effectively means that unlicensed real estate investors are prohibited from calling. You’ll need to check state laws in your state in order to comply with applicable laws.

National Do Not Call Registry

Millions of homeowners have opted out of marketing calls by signing up for the National Do Not Call List (and related state Do Not Call registries). Real estate professionals sometimes assume that they’re exempt from these rules. Unless you have an existing business relationship with a person, you have to scrub any calling list against federal and state calling registries. One of the best ways to comply with these rules is to purchase pre-scrubbed foreclosure leads or to manually scrub your leads against these databases. Important note: Purchasing pre-scrubbed leads doesn’t absolve you of legal responsibility for anyone you call. Before you let your fingers do the walking, make sure the talking you’ll do will be with people who haven’t explicitly said “thanks, but no thanks”.

Hours You Can Call

Marketing calls are only permitted during certain hours of the day. National calling rules require that you call only between the hours of 8 AM and 9 PM, although some states have more stringent calling requirements. Again, check the law in your state before picking up the phone and making your first call.

TCPA

The one step most real estate professionals miss with marketing calls is the Telephone Consumer Protection Act. These rules require that anyone making marketing calls:

• State their name;
• Their business name;
• The nature of the offer (in the case of foreclosure calls, what you want from them);
• Full disclosure of any costs; and,
• Customer service information

One of the most important aspects of TCPA is the TCPA close. In short, it requires you to say something like, “Thanks for talking with me. If you have any questions about this call, you can call (your number). Have a great day!”

Here’s an important TCPA consideration: If you get your prospect or a household member on the phone and you give your name, your business name or begin explaining the reason for your call, the law requires that you give the TCPA close in its entirety even if they hang up on you. Give the required TCPA close even if it sounds like your prospect has hung up on you. To do otherwise is to risk being fined for failing to comply with the terms of the law.

You may determine that the telephone is the fastest, most effective means of reaching property owners in foreclosure. If this is the case, it’s imperative that you familiarize yourself with all applicable rules surrounding calling. While you might not think of yourself as a telemarketer, most states treat marketing-related calls as telemarketing, and fines for non-compliance can quickly add up.

Do you use the telephone when marketing to foreclosure prospects? If so, how compliant are you with legal requirements?

© Katrina Brown - Fotolia.com

It depends on how you look at it. First, a reduced foreclosure rate is good news; however, this drop comes as a result of Assembly Bill 284, which dramatically increases the time it takes for Nevada’s non-judicial foreclosure process to play out. AB 284 forces lenders to vouch for each foreclosure they initiate, with severe penalties for falling asleep at the switch.

At the same time, the number of “sweet spot” properties available – listings priced under $250,000 – is also way down. In a city that once had a glut of unsold listings in this price range, today there are barely 5,000, compared with more than 10,000 just half a year ago.

While those seeking primary residences prefer properties that are move-in ready, many real estate investors are willing to do the legwork necessary to get a property ready for occupancy. For investors, this means that there are still numerous opportunities in Las Vegas distressed real estate – short sales, REOs, etc.

In order to thread the success needle, it’s a good idea to maximize the odds of success. For some investors, this means learning how short sales really work. Others choose to dip their toes into the investing pool as buy and hold investors. Still others mix and match their strategies based upon ever changing market conditions.

In the short term, short sales are a good place to focus investing energy. There are still a lot of homeowners struggling to find solutions to impending foreclosure. AB 284 has temporarily slowed the foreclosure rate. But it won’t indefinitely stop foreclosures. The reason? While many lenders are being exceptionally cautious about documentation in the early days of this bill, and are being careful to comply with the letter and the spirit of the law, foreclosures that should proceed – will.

Because of this, there’s a legitimate place in the Las Vegas real estate market for investors. Homeowners facing certain economic ruin want and need to avoid foreclosure. And the short sale remains one of the best ways for them to do it. For this, the Las Vegas real estate market needs investors.

Obama's help comes at a cost... © iQoncept - Fotolia.com

Here’s the problem with this thinking: Government has no money of its own. The only way government has two (borrowed) nickels to rub together is by asking the rest of us to pay for the rescue. Guess what? All homeowners are impacted by President Obama’s grand rescue schemes. HAMP, HARP (and HARP2.0, among others) are all funded by taxpayers. Not only do we pay for these ill-advised housing rescue programs, we’re also on the hook for the bailouts offered to Fannie Mae and Freddie Mac, to the tune of $170 billion. When you add in the potential for even greater future losses – up to $7 trillion – it’s easy to see that the stakes couldn’t be higher.

Millions of homeowners have seen the values of their homes hit the basement. There’s no dispute about this. There’s also no dispute that millions of Americans either can’t find jobs or can’t find jobs that pay enough to support their families. But throwing good money after bad isn’t the solution.

I understand that the ultimate goal with all of these housing rescue programs is to stabilize the U.S. housing market (and maybe even win a few votes for the president’s reelection). But it’s simply not working.

Yes, it’s true that each of these ideas has a temporary stabilizing impact on the U.S. housing market. But each time government tries their latest, greatest “guaranteed fix”, it doesn’t take long for reality to hit our policymakers in the face: There are no easy fixes to this complicated problem.

Instead of artificially propping up the housing market with expensive schemes that do no more than give talking heads fodder for often boring debates, government needs to get out of the way and let the chips fall where they may. Make no mistake: this will be a painful process. People will lose their homes. Prices will fall in the short term. But we will recover.

There is something the Obama administration could do for the U.S. housing market that doesn’t involve spending phantom dollars and borrowing even more money. It could stop talking about how dedicated it is to helping deserving homeowners keep their homes while continuing to fine lenders for not foreclosing in a timely fashion. Call me crazy but this looks hypocritical.

Fixing the U.S. housing market is about more than pleasing certain taxpayers. It also includes making hard decisions. Like deciding that it’s patently unfair to favor the wants and needs of some homeowners over others, while asking all taxpayers to pay for these social experiments.

It’s time politics is unceremoniously kicked to the curb. As an Independent, I’m tired of government thinking it can solve problems for a few on the backs of the many. I don’t care if the money government wants to spend is designed to provide a bailout to a few worthy homeowners, Freddie Mac or Fannie Mae, or even lending institutions. Manipulating the housing market with borrowed cash and good intentions is a good way to drown us all.

And there simply aren’t enough life jackets to go around – or money to pay for them.

What do you think? Should we keep borrowing money to try to artificially prop up the housing market, or is it time to step back and let the market correct itself naturally? Here’s your chance to sound off now!

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Ken Speegle is a direct response copywriter, ghostwriter, and conversational writing specialist. He works with real estate agents, brokers and investors to expand their reach with conversational writing. By working with Ken, his clients are able to focus on their strengths instead of trying to figure out the best way to use the written word to make more money. For more about Ken Speegle, visit him on the web at www.therealestatewriter.com or by email at info@therealestatewriter.com. Ken personally responds to all inquiries.