Carolina Investment Property Blog

Well, times have changed (like they always do) and now we have to decide how we CHOOSE to react.  The nice thing is that the Real Estate market in Charlotte is still a tremendous market for our long term Real Estate values.  Yes, the lending changes have made it “funner” to find ways to put together deals, however all that means is those people that aren’t up for the small challenge of finding new ways to put their deals together just make investing easier for those of us committed to making our investment portfolio grow.  I was with a client yesterday and we were looking at a package of properties that cold be purchased for $1,000,000 including ALL the repairs and it would return over 11% cash on cash per year and over 50% ROI in YEAR 1!  I’m all ears for any other investing options that can return that, you can’t.  It brings me to the theme of this message:  Finding ways to put your deals together.  So many people (myself included) had assumed for so long that their IRA and other investment vehicles could ONLY be used to purchase stocks and bonds.  Well, there are great alternatives and now using your Self Directed IRA to purchase Real Estate is a GREAT option!  I have clients that are utilizing their 401K’s to act as their own “Hard Money Loans” for investments.  Don’t let your IRA work against you, let it work FOR you by using it wisely and funding some of your Real Estate Investing.  The deals are great and our market outlook is great, take advantage of this opportunity NOW.  Contact me for more information.

The Real Estate turn around-in some cities quicker than others (edit/delete)

The local economy directly affects the housing market. Land values increase as the value of production results of that land increases. This land value carries through to all land-including housing.  While the market seems to have crashed in many cities, some cities are expected to rebound very quickly.   

Some cities have overbuilt and will not see the turn around in the market for a couple of years.  This is not the same for all cities, however. A person’s buying power is directly related to their income. A stronger local economy equals stronger housing market.  According to FORBES and MSN Real Estate, here are the Top 5 cities where the local economy’s strength and growth are likely to cause a rise in home prices in the very near future: 

•1.)    Albuquerque, NM

•2.)    Charlotte, NC

•3.)    San Antonio, TX

•4.)    Portland, ORE

•5.)    Austin, TX 

Nice to see Charlotte consistently make the list of growth in local economy and housing!  The question is, will you take advantage of let opportunity pass you by?

Now is the best time in years to purchase investment real estate. I was at a seminar this week in Charlotte concerning the current housing market and some interesting statistics were presented to us about the mortgage situation in the US. You know the one that every news market in the country wants you to believe is at its worst levels in history, the same one that says the sky is falling every night.  Well just to put some insight on this for you:

50% of all house are in Prime Loans - these are your normal everyday 15 or 30 year loans.

6%  of all homes are on FHA/VA Loans

35% of all homes are owned free and clear

9%   of homes are on Sub Prime loans -  These are the loans that that are supposedly ruining Real Estate in our country. The interesting fact with all of this is that only 4% of the sub prime loans are defaulting.

Now the last bit of information I am going to leave you with is that even with all of the doom and gloom problems you hear about, 2008 will be one of the top 10 all time years for home sales in the US. In 5 years despite what the news is saying homes will have a higher value in 5 years than they have right now.

Wow, Kannapolis and Concord, hold on to your seats….and home values! I had the fortune of attending the Bio Tech Conference held at the University of North Carolina at Charlotte and was able to hear the top Civic Leaders and Scientists and Business Professionals from around the Region and some of the US speak about the growing Bio Tech Center being built by Mr. Murdock in Kannapolis. This complex is being hailed as the “Cathedral of Science” and is a testament to what can be accomplished when the Region and State back a project 100% mixed with the determination and passion of a self made Billionaire. I attended this meeting with a good friend: Taylor Barden with Morgan Stanley and we were amazed at the incredible development that is occurring here in our region. Here are just a few highlights:Here is the web site, http://www.ncresearchcampus.net/. It is a massive place, expected to employ ~5000 research, scientist, doctors (the majority of these initial jobs will be at a Doctorate level….and a Doctorate PAY LEVEL which is excellent news for this portion of the market and obviously housing values for our investors and ~30,000 other jobs that will be all different levels of skill/pay and many of these new jobs will be a tremendous boost to an already healthy rental market. Kannapolis now is just a town of 40,000. David Murdoch is spending $1B plus adding another $100M to start a Biotech Venture Fund. It is simply incredible to hear about the different Universities taking place and their very amibitious plans for different types of projects including creating/designing better foods/crops, cellular research, and many more.

Here’s what’s planned;
• Kannapolis government center
• Town Hall
• A municipal library that will provide interconnectivity among the major research universities throughout the state
• A 350-acre mixed use development in downtown Kannapolis – 25 miles north of Charlotte
• An $80 million, state-of-the-art, 311,000-square-foot Core Laboratory now under construction and estimated to be complete by December 2007
• 1 million square feet of office and lab space for lease
• 350,000 square feet of retail and commercial space for lease
• Experimental greenhouse facilities available for lease
• Over 700 residences, including townhomes, apartments and single-family homes
• A golf course designed by pro golfer Davis Love located less than 3 miles from the campus
• A 1,000 seat auditorium
• A 125-room hotel
• A world-class wellness center
• A retail area that will include shops, restaurants and a movie theater

This is GREAT news for our Region and GREAT news for investors as this is yet another major drawing point for outside business, economic drivers, and overall improvement of our region.

1. Cash FlowCash flow is defined as the money that you have left over after you have received rent from a tenant and paid mortgages, taxes, and insurance. The tenant pays you rent, and that money pays off these items, known collectively as PITI (Principal, Interest, Taxes, and Insurance). Whatever is left over goes into your pocket……that is cash flow.

2. Depreciation

Though many people buy rental property for cash flow, the real benefits that will build your net worth lie elsewhere. The second main benefit of buying rental property is the tax shelter that it creates for you. The IRS allows you to depreciate investment property over 27.5 years. In other words, you can take this depreciation expense against your active income from your job.
For example:Let’s say that you buy a $100,000 rental property. The IRS lets you depreciate the building, not the land. Generally speaking, 85% of the purchase price is used to determine the building’s value. In this example, the IRS lets you depreciate $85,000 (the house) over 27.5 years. This is equal to $3,090 per year that you can take as a depreciation expense against your active income. If you make $80,000 in income from your job, you can subtract this $3,090, which gives you $76,910. This is the income that you pay tax on, $76,910, not $80,000 (which you actually made.) You can see how by buying this one rental property, you have reduced your taxable income significantly. If you buy two houses of the same value, this number doubles, three, triples, etc.

We hope you’re having a great week and appreciate your support.

Some advice on wholesaling. Have you ever driven down the street and seen all of those “we buy houses” or “1800BuyKwik” signs on the side of the road? Attached to telephone poles and stuck on stakes in some front yards? Well, often wholesalers may consider those the “competition”….well stop and think: many of those people want to BUY properties and so they may also be BUYERS for your investments, NOT competition. Keep their numbers and call them and see what their buying criteris is and keep a record of it for your next investment that you come across and need to find a buyer for.What about driving through town and seeing a property with a “Sheriff’s Eviction” sign on the front door AND a “For Rent” sign in the front yard? You might think oh well, it’s for rent and no big deal, well it could be eviction #3 in the last year and these owners are tied of being landlords and this might be the opportunity you have been looking for to secure a property at a great option price.

Best Investing to you!

Many times when I see new investors buy investment properties, I see some oversights that turn a positive deal into negative. One of these ways is by overpaying for the rehab of a property. I have a couple pieces of advice that I’ve picked up along the way in my investing and rehabbing here in the Charlotte NC Investment Market. I recently shared these during my speech to the Robert Kiyosaki-Russ Whitney Group and it reminded me to share them here:Carpet-CHEAP Carpet, Thickest Padding…again: CHEAP Carpet and the Thickest Padding. You will be amazed at what tenants can do to carpet in a short amount of time, it literally defies physics. The thicker your padding, the more it will absorb the “blows and weight” that your tenants will place on it and this will prolong your carpet AND MORE IMPORTANTLY prolong your wallet.

Paint-My advice here is to always use the same “model” and “paint number”. This is so that you can always go to ANY of your investments to paint, touchup, etc and never worry about “now what color do I have at 123 Main Street…is that where I have the off-white or is that where I have the yellow?” These questions don’t arise because you have the SAME paint in all your properties and this enables you to act quickly.

Well, good luck with these tips and with your investing. As always, please visit our site for more information: Www.CarolinaInvestmentProperty.com for more tips and properties and more.