Two bad economic reports this morning reinforce today’s call by 300 economists and policymakers urging the president and Congress to “redouble efforts to create jobs” through investment in infrastructure, sending aid to the states and creating public service jobs.
First, the bad news.
- U.S. poverty hit its highest rate since 1994, according to the U.S. Census Bureau. In 2009, one in seven people were in poverty, and one in five children were in poverty.
- U.S. home seizures reached a record for the third time in five months in August as lenders completed the foreclosure process for thousands of delinquent owners, according to RealtyTrac Inc. Bank repossessions climbed 25 percent from a year earlier to 95,364. RealtyTrac sees a record 1.2 million repossessions this year, up from just under 1 million last year, with more than 3.2 million homes in some stage of foreclosure.
Such data make all the more relevent the statement by 300 prominent economists, “Don’t Kill Growth and Jobs in the Name of Deficit Reduction.” In short, the statement urges the president and lawmakers:
- Don’t kill growth and jobs in the name of deficit reduction.
- Target what drives deficits. Don’t fix what isn’t broken.
- Restore fiscal responsibility, while investing in the future.
- Take the high road to fiscal balance.
In a conference call today with some of the signers, Campaign for America’s Future co-director Robert Borosage said the statement is:
a cry action on the economy—for a return to common sense.
In urging Washington to focus on bold initiatitves and massive job creation rather than deficit reduction, Borosage said the reason is simple: More unemployment will only reduce government income, which in turn will lead to a higher budget defict.
Robert Reich, former labor secretary, put it this way on today’s conference call:
Some people point to the fact that U.S. economy is tech growing…but what we learned is that it’s slowing.
Last quarter’s sorry 1.6 percent growth in gross domestic product (GDP):
should be a warning sign to everyone that we are not just in danger of a double dip recession, but that we are not getting out of the hole at all.
What you expect when an economy is getting out of the hole is rapid economic growth [because so many people are ready to jump into the production process]. But this time it’s not happening. This is a very dangerous sign.
Borosage says in contrast, the position of House Minority Leader John Boehner, who says he and the Republicans will cut $100 billion from the budget if they get a majority in the House this November,
condem us to higher unemployment and continued stagnation.
With more than 26 million unemployed and underemployed U.S. workers, a dire need to rebuild the nation’s infrastructure and shore up vital socal services, Borosage said:
Anyone with a wit of business sense would grab this moment as the time to rebuild America.
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Need-to-know No. 1: The fine print associated with the type of auction you're attending. If you plan to score your bargain-basement unit at the foreclosure auction on the steps of the county courthouse, consult with a local real estate attorney and make sure you conduct an exhaustive title search before you make your bid. It's possible to purchase one of these properties and still have to contend with other liens still on the property, like second (or third) mortgages, back property taxes and Homeowners Association (HOA) dues unpaid by the former owner.
Under the law in nearly half of the states, when you buy a place at the foreclosure auction, the former owner has anywhere from six months to a year after the auction to "redeem" their rights to the property, meaning they have the legal right to buy it back from you.
If you're buying the property at an auction of REO properties (Real Estate Owned by the bank), make sure you read 100% of the terms and conditions of the auction. Many auctions will allow you to get a property inspection -- go figure -- so you should. They will also often allow you to use a mortgage to finance your purchase, which the courthouse foreclosure auctions do not.
However, most of these REO auctions do take a non-refundable cash deposit from the auction winner, and do add some sort of "buyer's premium" on top of the winning bid -- some as high as 5%. That extra cash can make it tougher to get positive cash flow out of the place.
Get clear on the fine print before you buy at any property auction.
Need-to-know No. 2: Your numbers. Many a wanna-be investor thinks, "Hey -- it's a $50,000 condo. If I get $1,000 in rent -- I'll be making cash hand-over-fist." And there ends their cash flow analysis. Seasoned investors know, though, that there are always more line items to the story. If you're thinking about investing in even the cheapest of cheap condos, you still need to create a written cash flow projection, or pro forma, to see how feasible it is that the investment will actually pay off.
If you plan to finance your investment with a mortgage, you must factor in the mortgage payment, mortgage insurance (if you put less than 20% down), and closing costs. And, even if you are able to buy a cheap condo with cash, you still need to take into account the costs of HOA dues, property taxes, landlord's insurance, any utilities landlords pay in your neck of the woods (like water and gas), a property manager and repairs.
You should also include an allowance for long-term maintenance, possible special assessments by the HOA and vacancies -- every landlord deals with occasional months where no rental payments come in. And you should definitely have a chat with your tax adviser about the deductions you should factor in, and the income tax you may incur on the rental income.
Then, offset that -- on paper -- by the average rents being received by other landlords in the complex or the area. If you're only making $3.75 per month in the projections, you might decide that other investments are more sensible.
Need-to-know No. 3: Whether the HOA and the complex are healthy. Sacramento, Calif., real estate agent Stacey Wilson thought she'd scored, big-time, when she invested in a two-bedroom, two-and-a-half bath condo for $40,000 in September of 2009, especially since the place had gone for $175,000 in 2007. After closing, though, it quickly dawned on Wilson that the complex and the HOA were both broke.
"Take a look around and see whether things are in working order," Wilson advises prospective condo investors. "When things are broken, find out how long they've been broken." Wilson's complex has two pools and a sauna, but "none of them works -- and they haven't worked in years."
Also, Wilson's unit is in an HOA riddled with a sky-high rate of delinquent dues, so it can't afford to repair the pools and sauna, nor does it have the cash to replace the wood shake roofs on all the buildings. "We only have a couple of years of roof life left, and now the hazard insurance company is threatening to drop our coverage, because they see the wood roof as a fire hazard," Wilson explains. "It's really important to read every page of the HOA disclosures you get during escrow, and make sure they're solvent. If the HOA is broke, it can create a domino effect of problems."
Need-to-know No. 4: The landlord-tenant laws and restrictions of your city or HOA. Many urban areas, in particular, have rent-control and eviction-control laws that limit your ability to raise the rent, or to evict a tenant without having a particularly strong reason for doing so -- sometimes even requiring landlords to pay tenants to move out.
And because the percentage of owner-occupied units impacts the ability of an HOA's members to resell and refinance their homes (many banks won't offer mortgages in complexes with fewer than 75% of the units being owner-occupied), many HOAs put a cap on how many units can be rented out. If you're planning to buy the condo as a rental property, it behooves you to know how feasible and how desirable it is to be a landlord in that complex and town before you buy.
Need-to-know No. 5: Where goes the neighborhood. Wilson's foray into dirt-cheap condo investing turned into a true adventure when circumstances led to her moving into the property she thought she'd never live in. Turned out, the nighttime goings-on in her new neighborhood were unlike anything she ever expected from her exclusively daytime experiences in the area. Before investing in a discount condo, Wilson advises, act like someone house hunting for their personal residence, and "go by the place at night and on the weekends. You'd be surprised at how different a place can be at night."
The fact that a condo is so inexpensive might actually be a signal that the neighborhood may not be one you want to spend much time in, even as a landlord. Wilson says, with 20/20 hindsight, "If it's really cheap, it's probably not in the best place."
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Astronaut Barbie, Newborn Baby Doctor Barbie and Rock Star Barbie, get ready to answer some tough questions asked by journalist Barbie. The 125th -- and newest -- career path for Mattel's 51-year-old doll is news anchor, and she's ...
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<b>News</b> Anchor Barbie: 'A flair for journalism -- and power pink <b>...</b>
Astronaut Barbie, Newborn Baby Doctor Barbie and Rock Star Barbie, get ready to answer some tough questions asked by journalist Barbie. The 125th -- and newest -- career path for Mattel's 51-year-old doll is news anchor, and she's ...
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News & Notes about the Dallas Cowboys for Thursday, Sept. 23rd.
Two bad economic reports this morning reinforce today’s call by 300 economists and policymakers urging the president and Congress to “redouble efforts to create jobs” through investment in infrastructure, sending aid to the states and creating public service jobs.
First, the bad news.
- U.S. poverty hit its highest rate since 1994, according to the U.S. Census Bureau. In 2009, one in seven people were in poverty, and one in five children were in poverty.
- U.S. home seizures reached a record for the third time in five months in August as lenders completed the foreclosure process for thousands of delinquent owners, according to RealtyTrac Inc. Bank repossessions climbed 25 percent from a year earlier to 95,364. RealtyTrac sees a record 1.2 million repossessions this year, up from just under 1 million last year, with more than 3.2 million homes in some stage of foreclosure.
Such data make all the more relevent the statement by 300 prominent economists, “Don’t Kill Growth and Jobs in the Name of Deficit Reduction.” In short, the statement urges the president and lawmakers:
- Don’t kill growth and jobs in the name of deficit reduction.
- Target what drives deficits. Don’t fix what isn’t broken.
- Restore fiscal responsibility, while investing in the future.
- Take the high road to fiscal balance.
In a conference call today with some of the signers, Campaign for America’s Future co-director Robert Borosage said the statement is:
a cry action on the economy—for a return to common sense.
In urging Washington to focus on bold initiatitves and massive job creation rather than deficit reduction, Borosage said the reason is simple: More unemployment will only reduce government income, which in turn will lead to a higher budget defict.
Robert Reich, former labor secretary, put it this way on today’s conference call:
Some people point to the fact that U.S. economy is tech growing…but what we learned is that it’s slowing.
Last quarter’s sorry 1.6 percent growth in gross domestic product (GDP):
should be a warning sign to everyone that we are not just in danger of a double dip recession, but that we are not getting out of the hole at all.
What you expect when an economy is getting out of the hole is rapid economic growth [because so many people are ready to jump into the production process]. But this time it’s not happening. This is a very dangerous sign.
Borosage says in contrast, the position of House Minority Leader John Boehner, who says he and the Republicans will cut $100 billion from the budget if they get a majority in the House this November,
condem us to higher unemployment and continued stagnation.
With more than 26 million unemployed and underemployed U.S. workers, a dire need to rebuild the nation’s infrastructure and shore up vital socal services, Borosage said:
Anyone with a wit of business sense would grab this moment as the time to rebuild America.
Print This Article
| E-Mail This Article
|Comments
(2)
Need-to-know No. 1: The fine print associated with the type of auction you're attending. If you plan to score your bargain-basement unit at the foreclosure auction on the steps of the county courthouse, consult with a local real estate attorney and make sure you conduct an exhaustive title search before you make your bid. It's possible to purchase one of these properties and still have to contend with other liens still on the property, like second (or third) mortgages, back property taxes and Homeowners Association (HOA) dues unpaid by the former owner.
Under the law in nearly half of the states, when you buy a place at the foreclosure auction, the former owner has anywhere from six months to a year after the auction to "redeem" their rights to the property, meaning they have the legal right to buy it back from you.
If you're buying the property at an auction of REO properties (Real Estate Owned by the bank), make sure you read 100% of the terms and conditions of the auction. Many auctions will allow you to get a property inspection -- go figure -- so you should. They will also often allow you to use a mortgage to finance your purchase, which the courthouse foreclosure auctions do not.
However, most of these REO auctions do take a non-refundable cash deposit from the auction winner, and do add some sort of "buyer's premium" on top of the winning bid -- some as high as 5%. That extra cash can make it tougher to get positive cash flow out of the place.
Get clear on the fine print before you buy at any property auction.
Need-to-know No. 2: Your numbers. Many a wanna-be investor thinks, "Hey -- it's a $50,000 condo. If I get $1,000 in rent -- I'll be making cash hand-over-fist." And there ends their cash flow analysis. Seasoned investors know, though, that there are always more line items to the story. If you're thinking about investing in even the cheapest of cheap condos, you still need to create a written cash flow projection, or pro forma, to see how feasible it is that the investment will actually pay off.
If you plan to finance your investment with a mortgage, you must factor in the mortgage payment, mortgage insurance (if you put less than 20% down), and closing costs. And, even if you are able to buy a cheap condo with cash, you still need to take into account the costs of HOA dues, property taxes, landlord's insurance, any utilities landlords pay in your neck of the woods (like water and gas), a property manager and repairs.
You should also include an allowance for long-term maintenance, possible special assessments by the HOA and vacancies -- every landlord deals with occasional months where no rental payments come in. And you should definitely have a chat with your tax adviser about the deductions you should factor in, and the income tax you may incur on the rental income.
Then, offset that -- on paper -- by the average rents being received by other landlords in the complex or the area. If you're only making $3.75 per month in the projections, you might decide that other investments are more sensible.
Need-to-know No. 3: Whether the HOA and the complex are healthy. Sacramento, Calif., real estate agent Stacey Wilson thought she'd scored, big-time, when she invested in a two-bedroom, two-and-a-half bath condo for $40,000 in September of 2009, especially since the place had gone for $175,000 in 2007. After closing, though, it quickly dawned on Wilson that the complex and the HOA were both broke.
"Take a look around and see whether things are in working order," Wilson advises prospective condo investors. "When things are broken, find out how long they've been broken." Wilson's complex has two pools and a sauna, but "none of them works -- and they haven't worked in years."
Also, Wilson's unit is in an HOA riddled with a sky-high rate of delinquent dues, so it can't afford to repair the pools and sauna, nor does it have the cash to replace the wood shake roofs on all the buildings. "We only have a couple of years of roof life left, and now the hazard insurance company is threatening to drop our coverage, because they see the wood roof as a fire hazard," Wilson explains. "It's really important to read every page of the HOA disclosures you get during escrow, and make sure they're solvent. If the HOA is broke, it can create a domino effect of problems."
Need-to-know No. 4: The landlord-tenant laws and restrictions of your city or HOA. Many urban areas, in particular, have rent-control and eviction-control laws that limit your ability to raise the rent, or to evict a tenant without having a particularly strong reason for doing so -- sometimes even requiring landlords to pay tenants to move out.
And because the percentage of owner-occupied units impacts the ability of an HOA's members to resell and refinance their homes (many banks won't offer mortgages in complexes with fewer than 75% of the units being owner-occupied), many HOAs put a cap on how many units can be rented out. If you're planning to buy the condo as a rental property, it behooves you to know how feasible and how desirable it is to be a landlord in that complex and town before you buy.
Need-to-know No. 5: Where goes the neighborhood. Wilson's foray into dirt-cheap condo investing turned into a true adventure when circumstances led to her moving into the property she thought she'd never live in. Turned out, the nighttime goings-on in her new neighborhood were unlike anything she ever expected from her exclusively daytime experiences in the area. Before investing in a discount condo, Wilson advises, act like someone house hunting for their personal residence, and "go by the place at night and on the weekends. You'd be surprised at how different a place can be at night."
The fact that a condo is so inexpensive might actually be a signal that the neighborhood may not be one you want to spend much time in, even as a landlord. Wilson says, with 20/20 hindsight, "If it's really cheap, it's probably not in the best place."
robert shumake
Real Estate <b>News</b>: Existing Home Sales Rise - Developments - WSJ
Here is a look at real-estate news in today's WSJ.
<b>News</b> Anchor Barbie: 'A flair for journalism -- and power pink <b>...</b>
Astronaut Barbie, Newborn Baby Doctor Barbie and Rock Star Barbie, get ready to answer some tough questions asked by journalist Barbie. The 125th -- and newest -- career path for Mattel's 51-year-old doll is news anchor, and she's ...
Dallas Cowboys <b>News</b> & Notes - Blogging The Boys
News & Notes about the Dallas Cowboys for Thursday, Sept. 23rd.
robert shumake
Real Estate <b>News</b>: Existing Home Sales Rise - Developments - WSJ
Here is a look at real-estate news in today's WSJ.
<b>News</b> Anchor Barbie: 'A flair for journalism -- and power pink <b>...</b>
Astronaut Barbie, Newborn Baby Doctor Barbie and Rock Star Barbie, get ready to answer some tough questions asked by journalist Barbie. The 125th -- and newest -- career path for Mattel's 51-year-old doll is news anchor, and she's ...
Dallas Cowboys <b>News</b> & Notes - Blogging The Boys
News & Notes about the Dallas Cowboys for Thursday, Sept. 23rd.
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