Hot Spot Homes

Using Personal Assets for Funding

2005-11-14T16:27:00.000-08:00

The realities of tapping into life insurance, CDs, mortgages, IRAs and 401(k)s

By David Newton

Many budding entrepreneurs want to know about the realities of funding their business by tapping into nonsavings areas of their personal assets, such as life insurance policies, certificates of deposit, home mortgages, individual retirement accounts and pension plans. Be careful to recognize upfront that this type of funding strategy is definitely going to blur the lines between personal wealth and enterprise development. Ideally, it is best to keep clear distinctions intact for individual assets and the objectives for these funds, compared to capital raised for the business. However, when a funding strategy with these kinds of assets is executed within a comprehensive plan for both the business and the personal assets, it can provide much-needed cash for the venture without completely throwing personal common sense aside.

The first rule is to understand that if funds are diverted from these traditional products to a business, it should be viewed as either a temporary or intermediate-term remedy for funding. This kind of funding does not constitute a good long-term approach to venture capital. There must be a plan in place to return these funds to these other financial products, or to replace these products at a later date once the venture is producing solid revenue and positive cash flow. I cannot emphasize this enough. There are tremendous risks involved in funding a business. Bringing personal assets into the picture only adds to that risk exposure, because it can further complicate personal risks by reducing insurance or retirement benefits or jeopardizing the status of one's primary residence.

The place to begin is with some brief qualifications on these products. Today, most people buy term life insurance, and very few, if any, individuals purchase traditional whole life insurance. Term life insurance simply provides a cash payment to beneficiaries. Whole life insurance is more expensive and accumulates a "cash value" over the long term (like a traditional savings account). Whole life policies allow the owners to borrow cash value for personal use (i.e. funding a business), but the funds borrowed must be paid back. Whatever is not paid at time of death will reduce the death benefit by that amount. And interest must be paid (typically monthly or quarterly) on the outstanding principal balance until it is paid back. Interest rates tend to be relatively low, so that an entrepreneur could access the funds for one to three years and pay interest only on the outstanding loan, and then pay back the cash value in full once the company becomes profitable and regular compensation can be drawn. Term insurance has a much less expensive premium compared to whole life and accumulates no cash value over time, so there are no funds to borrow against such a policy.

This same general format holds true for pension plans as well. The fund value for a 401(k) or 403(b) retirement account can be typically borrowed for the short term to midterm without penalty, but must be paid back, and interest charges will be incurred during the loan period. The same holds true for IRAs. One major concern is that if funds are borrowed on insurance or retirement funds and the business goes bust, interest must still be paid on the outstanding loan balance. The death benefit will be reduced by that outstanding loan, and of course in the case of the pension funds or IRA, the retirement benefit will be reduced proportionate to the borrowed funds still not paid back.

A certificate of deposit is a midterm to longer-term savings vehicle, where the bank agrees to pay a stated contractual interest rate for a specified time period of the deposit. Banks offer higher rates when funds are kept on deposit for a longer period of time (and lower rates when the term is shorter). Pulling money out of a CD prior to its maturity generally incurs significant penalty fees. However, some institutions will allow a CD balance to serve as collateral on a short-term to midterm loan. If interest is paid regularly on the loan, funds remain in the CD accumulating interest. When the loan is paid back in full, there is no effect on the CD's balance or interest earned. But if the business had difficulties and the loan could not be paid back, the bank would liquidate all or a portion of the CD to cover the loan, and that would include penalty fees for early withdrawal.

When the entrepreneur's primary residence has accumulated sufficient equity (the difference between the home's market value and the outstanding balance on the first mortgage), it is possible to borrow some or all of this equity with either a home equity line of credit or a second mortgage. The lender will have a secondary lien on the residence and typically requires interest only paid each month or quarter. And in many cases, this interest is tax-deductible on the individual's personal tax form. The word of caution, again, is that if the business fails, the interest payments on the second or equity line are still due, and the equity in the house has been reduced by the amount of that loan outstanding.

If a venture idea needs some funding for the near term, borrowing against personal savings, retirement plans and a primary residence can be an easy way to access much-needed cash. When the business begins to generate positive cash flow, then is the time to begin paying back these outstanding principal balances. Remember, too, that it is important to have a legal written loan document between the company and the entrepreneur lending the funds. If the funds are invested into equity, then stock certificates should be issued, as these funds are not a loan. If the business needs money for a longer term, or if the risks are significant, it would probably still be prudent to obtain funding through banks and/or capital investors and leave the lines of distinction in place between personal assets and the company's funding needs.

David Newton is a professor of entrepreneurial finance and head of the entrepreneurship program, which he founded in 1990, at Westmont College in Santa Barbara, California. The author of four books on both entrepreneurship and finance investments, David was formerly a contributing editor on growth capital for Industry Week Growing Companies magazine and has contributed to such publications as Entrepreneur, Your Money, Success, Red Herring, Business Week, Inc. and Solutions. He's also consulted to nearly 100 emerging, fast-growth entrepreneurial ventures since 1984.

--------------------------------------------------------------------------------
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

Take a bite out of closing costs

2005-11-13T14:13:00.000-08:00

Take a bite out of closing costs

Hold the fees please. How to save if you're buying a new home or just refinancing.
April 22, 2004: 4:30 PM EDT
By Sarah Max, CNN/Money senior writer

BEND, Ore. (CNN/Money) - With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?

Not if you pay a fortune in closing costs.

As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.

The U.S. Department of Housing and Urban Development (HUD) has been working on regulations that promise to simplify the mortgage process and save consumers as much as $1,000 off a typical mortgage transaction. When such rules will be rolled out, if ever, is still anyone's guess.

With no regulation in sight, borrowers should consider these strategies for keeping their closing costs in check.

Get friendly with your current lender
If you're looking into refinancing, the first call you should make is to your existing lender, who already has critical information about you and your house on file, said Keith Gumbinger, vice president for HSH Associates.

Since you have an existing relationship, a "streamlined" process might be possible. That can save you a lot of extra paperwork and money on everything from application fees to appraisal fees.

Fee-ed Up?
Here are just some of the costs of closing on a mortgage.

Fee Average cost*
Application $272
Appraisal $310
Credit report $28
Document preparation $206
Processing $288
Recording $86
Underwriting $236

*Based on a $100,000 loan. Not every lender surveyed charges all of these fees.
Source: HSH Associates December 2003 survey of lenders

Although fees for title search and title insurance are not determined by the lender, you may also get a break there. If you recently refinanced or took out a loan, you can save as much as 50 percent on title insurance by asking for a reissue rate, which your lender can request on your behalf.

If you're a homeowner shopping for a new house, you should also try giving your existing lender first dibs on the new business. Assuming you've been a good client and your lender originates the kind of mortgage you're interested in, it's possible to get a better-than-market deal, according to Gumbinger.

Get nitpicky about fees...
There are more than a dozen kinds of fees that could show up on your final closing statement, including credit report fees, appraisal fees, document preparation fees, title fees, recording fees and underwriting fees.

Related articles

• Big homebuying regrets

• Are you buying at the top?

• Why credit matters

All told, fees on a $200,000 mortgage could add up to anywhere from $1,000 to $3,000 – that's not including any "discount" points you pay up front to get the best interest rate. (A "point" is a fee that equals 1 percent of the loan amount.)

Lenders are required to give you a good-faith estimate of your closing costs within three days after you apply for a loan. Some will give you such an estimate even before you apply if you ask for one. Even if it is no guarantee, this written estimate will give you an idea of what kind of fees you can expect to pay, as well as an opportunity to negotiate for a better deal.

"If you're a good credit borrower you can challenge fees if they seem excessive," said Gumbinger, noting that lenders don't control many fees that show up on your statement.

Keep in mind that the good faith estimate doesn't include such out-of-pocket costs as state mortgage taxes, homeowners insurance and property taxes, which you may be expected to pay at the time of closing. In fact, your total tab at closing could be several times more than originally estimated, said Gumbinger.

... but keep the big picture in view
Closing costs are certainly a consideration for both new loans and refinancing. But it's important to not lose sight of what should be your first priority – getting the lowest rate possible.

Indeed, the difference between paying, say, 6 percent and 5.5 percent on a new loan adds up to nearly $23,000 in total interest on a $200,000 30-year loan. If you have to pay a few hundred dollars in closing costs to get that rate, you can rest assured that it is a worthy investment.

It may even be worth it to pay a point or so up front in order to lock in the lowest rates. Let's say that you'll knock your rate down to 5 percent on that $200,000 loan by paying an extra point ($2,000) up front. Considering that you'll cut $62 off your monthly payment and about $22,000 from total interest by going from 6 percent to 5.5 percent, it makes sense as long as you plan to stay in the house long enough to recoup those up front costs.

In fact, if you're short on cash you might even consider rolling the closing costs into your loan, if that is an option. You'll want to consider how much more you'll pay each month as well as in interest over the life of a loan.

If you roll $2,000 in finance costs into a loan with a 5.5 percent rate, for example, you'll pay an extra $11 a month and about $2,000 extra in total interest. In this case you're still better off than if you had not refinanced at all.

Avoid these rookie renovation mistakes

2005-11-13T14:10:00.000-08:00

Avoid these rookie renovation mistakes

You'll save money and grief -- and improve the odds that your project will turn out as planned.
August 15, 2005: 4:09 PM EDT
By Jeanne Sahadi, MONEY Magazine

NEW YORK (MONEY Magazine) - You've just parted with serious cash to buy your first home. Now you need to part with more so the place no longer screams bad taste, broken pipes and bathrooms circa 1970.

Or maybe, with real estate prices through the roof, you can't afford to trade up from the starter home you bought two children ago. So you've decided to upgrade instead.

Whatever your reasons for renovating, take heed: Rookies often "don't understand how much it will cost, how long it will take or how proactive they should be," says Sal Alfano, editor of Remodeling magazine. Here are the pitfalls to avoid.

Mistake no. 1: Underestimating the cost
No matter how carefully you budget, count on spending at least 10 to 20 percent more than your initial estimate. That's because expenses invariably pop up that you couldn't anticipate beforehand.

Once workers knock down walls or rip up flooring, for instance, they may find mold, rotting pipes or other structural problems that need repair.

When Marc Siegel, a corporate underwriter in New York City, wanted to put a new floor on top of an existing tiled one, he was told by his contractor once work began that the tiles were too loose and the old floor would have to be ripped out. Extra cost: $3,000. Siegel agreed -- but only after negotiating the price down to $1,500.

To help minimize unexpected outlays, research the materials and brands you'd like to use before commissioning work, so you don't have to rely solely on contractor estimates. That $2,000 high-end fridge you choose after your kitchen remodeling begins may cost twice as much as the standard appliance he assumed you'd buy.

Mistake no. 2: Pinching pennies
Sure, you want to save a few bucks where you can. But sometimes it doesn't pay to scrimp, says Danny Lipford, host of the syndicated TV show "Today's Home."

With contractors, go with someone who's highly recommended and experienced in your type of renovation, not the cheapest guy. Favor quality products for anything installed in your walls; the cost to replace, say, a faulty shower valve is high since it involves breaking the wall and calling in a plumber.

Nor should you stint on items you'll use every day. Buy what you love. Otherwise, you'll kick yourself every time you turn on a faucet or open a cabinet.

Mistake no. 3: Failing to anticipate chaos
The stress of a renovation builds as the dust mounts, workers traipse through your home and everything takes too long.

"Remodelers count on at least one [client] explosion per job," says Alfano.

To minimize surprises, ask potential contractors lots of questions about the process, like "What's your time frame?" and "What time do you start and finish work?" Be clear too about your preferences, such as how often you'd like updates and how much the contractor can spend without consulting you.

Then tame your inner Felix Ungar. Good contractors will clean your place every day. But remember, "broom clean" doesn't mean "mop clean," Alfano says. Some dirt and debris are inevitable.

Mistake no. 4: Overestimating the payback
Not all renovations are equal equity builders. Typically, you'll recoup the most on bathroom and kitchen jobs. But the exact payback depends as much on where you live as on the project itself. Talk to local real estate pros for the lowdown on what you can expect in your area.

What you can't measure in dollars and cents, of course, is the pleasure you'll derive from the improvements to your home. In the end, since you are the one who will be living there for a while, that's the payback that matters most.

A tool kit for new landlords

2005-11-13T14:08:00.000-08:00

A tool kit for new landlords

Many professions have their own special tools. Here's some for the well-equipped landlord.
November 2, 2005: 2:50 PM EST
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - "You know you're a landlord," says Matt Martinez, a real estate investor from Boston, "when you get a new drain snake for your birthday."

Landlords face daunting problems, from tenants behaving badly to leaky pipes and clogged drains (that's where the snake comes in) to unexpected vacancies.

It takes more than plumbing tools to run a home-rental business. With all the complicated paperwork and governmental filings landlords are responsible for, they need a lot of do-it-yourself help to keep everything organized.

This subject is of more interest to more Americans every day. Some 15 million now own rental properties in the United States, according software maker Intuit, which makes property management software. About nine million of these investors are small property holders, owners of 10 units or less.

Some are accidental landlords -- they've inherited or otherwise taken possession of a property and decided to keep it and rent it out.

Many of these, and other new landlords as well, are less than fully prepared to run their business.

For them, there are a few items essential for making running their small business empire run smooth. Call it a tool kit for small landlords.

Getting organized
Since many real estate investors spend a lot of time in the field, either on site at their properties or looking at new buildings to buy, a laptop is one of the most useful of these tools. Making instant entries – the cost of a repair, a rent paid – as they occur can help landlords keep more accurate records.

Loaded into that laptop should be a robust software program. Many small landlords try to track their records by creating their own paperwork with worksheets, ledgers, and hand-written notes.

These "systems" are usually hard to keep up to date, error-prone, and often difficult to decipher – even for their author. It's better to get some information technology to help.

Martinez says first time owners can start out with a simple Excel spreadsheet, if they only have one or two tenants. Any more than that and it pays to invest in a more sophisticated package.

Jeff Zimmerman, product manager of Intuit, says property owners face three problems: keeping tax records, knowing whether properties are profitable, and keeping track of payments, leases, and expenses. Property management software helps landlords do all three.

Quicken's Rental Property Manager tracks expenses, organizes taxes, and performs housekeeping duties such as flagging problem tenants and keeping track of expiring leases.

At tax time it can automatically export that information to a Schedule E tax form that landlords must fill out, making the process of filing, normally a hellish one for even small operations, a little more agreeable.

The Quicken software can be used by landlords owning as many as 100 separate units. Other property management software, such as IDEAS Property Clerk or RentRight's Property Management Software, comes in several different flavors and price points, based mainly on the number of units under management.

Packages cost as little as about $99 for one designed to manage 10 units or less. The price of software for more robust operations can run into the thousands.

Other hardware
There are three other essential pieces of hardware for an active small landlord. Martinez always carries a digital camera on his prospecting forays for new properties. He'll snap several pictures of any potential buys to help document all the building's virtues and shortcomings.

Martinez also likes to carry a Blackberry-type device that enables him to e-mail and text message, send digital photos, access the Web, and organize his calendar.

Meanwhile, back at the office, he has a combination scanner, FAX, and copier. He can receive, send, and save all his bills, leases, contracts, bids, and other necessary paperwork.

Strength in numbers
Finally, although it doesn't qualify as either hardware or software, a support group is a great tool for many landlords new and old. Small landlords associations exist all over the country and can provide all sorts of useful information and resources for a fledgling property investor.

Martinez believes in these organizations so much that he started his own in Boston, the Landlord and Investor Group. His members talk over problems, trade information about properties, and offer advice to each other. They recommend contractors and share where the best buys are in building materials. More experienced members often act as mentors to newbies.

All that can make the difference between success and failure. Being a small landlord can be an extraordinarily complicated operation. Having the right tools can make a difficult job much more manageable.

Good news for landlords

2005-11-13T14:05:00.000-08:00

Good news for landlords

After two years of falling rent and rising vacancies, the rental market may finally be on the mend.
September 15, 2004: 1:42 PM EDT
By Sarah Max, CNN/Money senior market

BEND Ore. (CNN/Money) – Landlords haven't had it easy over the past few years. A weak economy and an attractive housing market sent vacancy rates up and rental prices down.

In 2003 rental prices declined nationwide, according to M/PF Research and Torto Wheaton Research. Prices fell 6 percent in the San Francisco Bay Area and more than 5 percent in Denver. The national vacancy rate, meanwhile, reached 10.4 percent during the first quarter of 2004, its highest level since the Census Bureau began tracking it in 1960.

Now, however, landlords may be getting some relief.

"Rental markets have appeared to turn the corner after more than two years of declines," said Gleb Nechayev, an economist with Torto Wheaton Research. Nationally, rents are up 0.5 percent so far this year. In hard-hit rental markets, such as San Francisco, rents are still declining, though at a slower rate.

"Growth is negligent, but positive nonetheless," said Nechayev, adding that the slow recovery in the rental market reflects slow improvements to the economy overall. At the same time, interest rates have remained low, meaning that buying is still more attractive than renting in many markets.

After a recent survey of builders and property owners, the National Association of Home Builders (NAHB) concluded that demand for apartments is stronger than it was the same time last year. To track supply and demand, the NAHB rates responses on a scale of 1 to 100 with 50 representing a neutral response. Based on that index, demand for the average rental property was 50.6, a 7-point increase from a year ago.

Oversupply is still an issue in some markets, however. The NAHB's index tracking the number of apartments jumped more than 10 points between the second quarters of 2003 and 2004 to 64.
At the same time low interest rates prompted renters to become homeowners, real estate investors flooded the market with new rental properties. Although housing has cooled in some places (See "Leaving Las Vegas") rental prices won't improve significantly until supply levels off.

"As interest rates slowly rise, both the for-sale and rental multifamily sectors will approach new points of stability," says NAHB chief economist David Seiders in a release.

Nechayev, meanwhile, is forecasting a slow recovery during the remainder of 2004 and a full recovery in the rental market during the second half of next year.

"Essentially the recovery is on track," he said. "It's just a matter of slow and steady improvements."

Fewer new buyers can afford a home

2005-11-13T14:04:00.000-08:00

Fewer new buyers can afford a home

Housing affordability for first -time buyers dives as rates rise.
November 8, 2005: 8:34 AM EST
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - Although earnings have risen about 2.6 percent, housing is even less affordable for first-time buyers than it was a year ago, according to the latest findings from the National Association of Realtors.

The NAR found that the average price nationally for a starter home rose to $183,500 in the third quarter, up $23,500 in the past year.

With a 10 percent down payment and a mortgage rate of 5.83 percent (the average in the quarter), the monthly cost to finance the purchase of the average starter home would be $999 a month.

A new homebuyer would need income of $47,952 to qualify for such a mortgage, but the median income of first-time buyers was just $32,781 nationwide last quarter, yielding an affordability index value of 68.4 -- down from 74.8 a year ago and 80.9 for all of 2003.

According to other surveys, home affordability has fallen even more drastically in some of the hottest U.S. markets. According to the California Association of Realtors, the situation is particularly dismal in that state.

The CAR report, which covered all houses, not just starter homes, revealed that a homebuyer in the state would need annual income of $133,800 -- factoring in a 20 percent down payment and interest rate of 5.87 percent -- to afford a median home ($568,890 through August 31). Only about 14 percent of Californians had that much income.

Interest rises hurt affordability
Since the NAR data was compiled, mortgage interest rates have jumped considerably and have made already expensive housing even less affordable for working Americans.

At the beginning of July, a 30-year fixed-rate mortgage carried a rate of about 5.53 percent. The national average is now 6.3 percent, according to Freddie Mac. That has added nearly $100 a month to interest payments on a $200,000 mortgage.

That extra $100 means borrowers can not afford to pay as much for a house; they might have to settle for one costing about $15,000 less or find some other way to make up the shortfall.

Bob Moulton, founder of Americana Mortgage Group, said the higher rates have already had a significant impact on his business. "Monday morning is usually my busiest time," he said. "I've had only a half dozen applications today."

For homeowners with existing adjustable-rate mortgages, the rise in interest rates comes as especially bad news. When the rates to these loans adjust higher, monthly bills can leap. Homeowners with interest-only ARMs may see an especially large increase.

Moulton says that for some ARMs that have recently come up for adjustment, the adjusted rates were actually higher than the rates for 30-year fixed-rate mortgages.

These trends point to a softening housing market, especially in the especially overheated markets. It also could spell trouble for the overall economy since cash from refinancing has helped fuel consumer spending, which has, in turn, helped prop up the economy.

College towns are more affordable than the average city. For more, click here.

A house in Killeen Texas costs one/fourteenth what it would in La Jolla California. For a look at the least and most expensive U.S. markets, click here.

Can you afford to pay $1 million for a home. Here are some that are on the market.

Good house, cheap house

2005-11-13T13:58:00.000-08:00

Good house, cheap house

Adventures in creating extraordinary homes at everyday prices.
October 13, 2005: 1:39 PM EDT
By Kira Obolensky, for MONEY Magazine

NEW YORK (MONEY Magazine) - Great American homes, built or made over at prices you won't believe!

There is good cheap and there is bad cheap. You know bad cheap when you encounter it. Good cheap can be more elusive, although its best qualities surely include simplicity (a 20-cent Bic pen, for instance), practicality (a $27 set of stackable Tupperware bowls) and style (the $21,500 Mini Cooper convertible).

So too with homes, as you'll see from these construction and renovation projects profiled in the following gallery. Good cheap work requires durable yet inexpensive building materials -- those highlighted in this story include steel, concrete, glass, metal and plywood -- often borrowed from industrial or commercial contexts.

But the most essential material is resourcefulness. The owners here made magic happen, delivering flair and personality as well as durability, because they could successfully re-imagine what they initially thought they needed in a home.

For some, that meant forgoing square footage; for others, it meant rethinking their definitions of quality. Must it always be granite counters, hardwood trims and gold-plated faucets?

No way, says professional appraiser John Bredemeyer of the Appraisal Institute. "Quality is not in itself one style or another."

Bottom line: Simple, practical and stylish design can offer more value than high-end finishes -- words to live by when you're planning your next big renovation or doodling your latest dream house.

________________________

Kira Obolensky is the author of "Good House, Cheap House: Adventures in Creating an Extraordinary Home at an Everyday Price" (Taunton Press), available at bookstores in mid-October.

2005-06-03T13:58:00.000-07:00

Concerns Mount
About Mortgage Risks
Latest Data Show Move Toward
Alternative Loans Is More Pronounced
Than Previously Thought

By RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
May 17, 2005; Page D1

In the latest sign of how frothy the housing market has become, new data show the degree to which people are stretching to buy homes in a hot housing market.

The data, from the Mortgage Bankers Association, show that adjustable-rate and interest-only mortgages accounted for nearly two-thirds of mortgage originations in the second half of last year. Both types of loans have helped fuel the strong housing market since they carry lower initial monthly payments than do fixed-rate loans, enabling borrowers to purchase more-expensive homes.

With such loans accounting for an increasing portion of consumer borrowing, some mortgage analysts worry that the growth of these loans could cause problems for the housing market and broader economy. "The situation with interest-only ARMs is just one of several very scary things going on in the mortgage industry," says Stu Feldstein, president of SMR Research Corp., a market-research firm in Hackettstown, N.J. The rise of interest-only loans, combined with other factors such as higher debt levels and changing bankruptcy laws, are likely to cause foreclosures to rise, he says, "possibly dramatically."

LOAN HAZARDS
If you borrow $350,000 with an interest-only mortgage that carries a fixed rate of roughly 4.8% for the first five years, here's what you will pay:

The monthly payment on the loan would be $1,403 during the initial period.

Even if interest rates don't rise, the monthly payment would jump to $2,008 after five years.

If rates jump by two percentage points instead, the monthly payment would jump by 73% to nearly $2,500.

Source: Dominion Bond Rating Service

Though it has been clear that borrowers in high-priced markets have been gravitating to products that make homes more affordable, the shift has been greater than expected. In California, where home-price growth has been sizzling, interest-only loans accounted for 61% of the mortgages taken out to buy homes in the first two months of this year, up from 47.1% in 2004 and less than 2% in 2002, according to an analysis prepared for The Wall Street Journal by San Francisco researchers LoanPerformance, a unit of First American Corp. Just 18% of California households can afford to buy a median-price house using a conventional 30-year fixed-rate mortgage, according to a report issued this month by the California Association of Realtors. In another report issued this month, mortgage strategists at UBS AG called the shift to ARMs and nontraditional mortgage products such as interest-only loans "symptomatic of...the end of the housing cycle. The thing that all of these loans have in common is that they allow homeowners to buy a more expensive home than they could have qualified for with a 'traditional' loan."

The Mortgage Bankers Association conducted the survey of the interest-only and ARM share of mortgage originations in an effort to provide more accurate information about the housing market. The group's survey found that interest-only mortgages accounted for 17% of loans originated in the second half of 2004. And 46% of loans were adjustable-rate loans that don't carry an interest-only feature. The data reflect dollars lent, not the number of mortgages.

This is the first time the group has measured the share of interest-only loans, in which borrowers lower their monthly outlay by paying interest and no principal in the loan's early years. It also is the first time it has looked at loans actually granted, not merely applications.

Mortgage Tips
What Can I Afford?
Get Your Home's Value
New Loan or Refi?
15-Year vs. 30-Year Term
Fixed vs. Adjustable Rates
Estimated Payments
The findings are the latest evidence that borrowers have moved decisively away from traditional 30-year fixed-rate mortgages and have embraced ARMs and, in particular, interest-only loans, which used to be a niche product. Though borrowers take out these loans for many reasons, the shifts come at a time when both home prices and competition among mortgage lenders has climbed. The MBA's weekly surveys -- which look only at application volume, not loans that are actually made -- had put the share of ARMs, including interest-only loans, at roughly 40% to 50% this year. That is up from as little as 18% of application volume in early 2003.

The surge in ARMs and interest-only loans is particularly notable because rates on 30-year fixed-rate mortgages remain below 6%, still low by historical standards. Borrowers typically turn to ARMs as interest rates climb, but so far the increase in rates has been modest. Many economists see the current popularity of ARMs and interest-only loans as the latest sign of how borrowers are stretching to buy homes they couldn't otherwise afford -- and of how lenders are more than willing to accommodate them.

Partly because of these products, mortgage originations are expected to total nearly $2.5 trillion this year, according to the MBA, down slightly from $2.6 trillion in 2004.

Products such as interest-only mortgages can be riskier than fixed-rate mortgages, particularly when interest rates are rising. If home prices fall as rates rise, some borrowers with interest-only loans could wind up owing more than the value of their home. Even if the growth in home prices simply flattens or slows, some borrowers could be squeezed by rising mortgage payments.

In another sign that worries about lending practices are increasing, federal banking regulators yesterday issued new guidance for lenders making home-equity loans and lines of credit. The guidelines require banks to do a more in-depth analysis of borrowers' income and debt levels and their ability to repay the loan -- instead of relying simply on credit scores.

Initially aimed at sophisticated borrowers who wanted to free up cash for other purposes, such as investing in the stock market, interest-only loans have come to dominate some segments of the mortgage market. A report issued in January by UBS found that the interest-only share of jumbo loans -- currently, loans exceeding $359,650 -- had tripled since the end of 2003.

Michael Menatian, a mortgage banker in West Hartford, Conn., says he is seeing some borrowers opt for interest-only loans over mortgages that carry a lower interest rate but result in a higher monthly payment.

If home prices continue to surge, affordability could this year reach its worst-ever levels in hot markets such as Los Angeles, Boston and Miami, according to recent report by Goldman Sachs Group Inc. senior economist Jan Hatzius.

The MBA survey highlights other changes in the mortgage market that may increase risks to borrowers and lenders. More than half of the adjustable-rate loans were "traditional" ARMs, meaning the initial interest rate is fixed for less than three years. Borrowers who opt for these loans typically get a lower initial interest rate in exchange for giving up protection from future rate increases.

Until recently, so-called hybrid ARMs had been a more popular choice. These loans typically carry a higher initial interest rate, but are considered a more-conservative option because the interest rate is fixed for the first three, five, seven or 10 years. That makes it more likely that the borrowers will move or see their incomes increase before they face higher payments.

The shift to short-term ARMs has occurred even as the difference between rates on ARMs and fixed-rate loans has narrowed, reducing the attractiveness of adjustables. "To have a lower initial monthly payment, people have gone for shorter-term ARMs," says Fannie Mae Chief Economist David Berson.

As the use of more novel lending programs becomes commonplace, some mortgage analysts worry that borrowers are adding to the risks by combining a number of features -- using, for instance, 100% financing and an interest-only mortgage or a no- or low-documentation loan to buy a property for investment. "These things layer on each other," says Mark Milner, senior vice president and chief risk officer of PMI Mortgage Insurance Co., a unit of PMI Group Inc. During the past year, PMI has increased its charges for insuring riskier loans, Mr. Milner says.

Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.

2005-06-03T13:57:00.000-07:00

The miracle mortgage

How do you buy a home in a boom? The answer may be a new loan that's part blessing, part time bomb.
May 16, 2005: 12:02 PM EDT
By Cybele Weisser, MONEY Magazine

Mortgages and home equity loans
Search for rates from hundreds of lenders.
No points only

Select Loan:
Select a Mortgage15 Yr Fixed Jumbo - $385K15 Yr Fixed Conforming - $165K30 Yr Fixed Conforming - $165K30 Yr Fixed Jumbo - $385K1 Yr ARM Conforming - $165K1 Yr ARM Jumbo - $385K3/1 Yr ARM Conforming - $165K3/1 ARM Jumbo - $385K5/1 Yr ARM Conforming - $165K5/1 ARM Jumbo - $385K7/1 Yr ARM Conforming - $165KARM Jumbo - $385K
State:
Select StateAlaskaAlabamaArkansasArizonaCaliforniaColoradoConnecticutWashington DCDelawareFloridaGeorgiaHawaiiIowaIdahoIllinoisIndianaKansasKentuckyLouisianaMassachusettsMarylandMaineMichiganMinnesotaMissouriMississippiMontanaNorth CarolinaNorth DakotaNebraskaNew HampshireNew JerseyNew MexicoNevadaNew YorkOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVirginiaVermontWashingtonWisconsinWest VirginiaWyoming

Top things to know

Are you ready?

Lining up cash

Picking a team

The hunt

Closing the deal

For sellers only

Interest-Only Mortgage Loan - E-LOAN
E-LOAN offers loans for new home purchases or refinancing. Variety of fixed-rate...
www.eloan.com

Interest Only Loans
No doc loan, 100% financing, zero down COSI, COFI, CODI, interest only.
www.familyfirstmortgage.us

Instant Interest-Only Refinancing Loans
Refinancing only - no home purchase loans available. Fast form and no credit...
www.loansrc.com

Shop Low Interest Only Mortgage Rates
Submit a mortgage request and get rate quotes from multiple lenders for free....
www.interestratesonline.com

Video More video

CNN's Allan Chernoff explains the risks involved with interest only loans.
Play video

NEW YORK (MONEY Magazine) - Six months ago, Chris and Suzanne Bernier were just getting by. The couple's debt load had grown to more than $9,000 in four years as they relied on credit cards to fund a new camper, vacations and stuff for children Eryn, 16, Dylan, 13, and C.J., 3.

Though they had already refinanced their mortgage -- to a low 5.5 percent interest rate on a 30-year fixed loan -- and consolidated their high-rate credit-card debt into a bank loan, they simply weren't getting ahead.

"We were still living month to month," says Chris, 37, a desk officer with the county sheriff's department.

But now, by paying only the interest on a 4.85 percent adjustable-rate mortgage, the Berniers have an extra $400 a month that they are using to whittle down their debt and build up their savings. And they are confident that they will be able to buy a new, larger home within five years.

"We feel like we are finally on track to getting somewhere," says Suzanne, 36, a manager at a mortgage processing company. Chris agrees. "We've chosen to use the power of the interest-only loan for our own benefit."

Growing popularity
Like the Berniers, tens of thousands of Americans have recently discovered the power of paying nothing but interest on their home loans.

The appeal is easy to understand: When you don't pay down principal, you can save hundreds, even thousands, of dollars a month. Interest-only payments let you shoulder a bigger mortgage and buy a home you might not otherwise be able to afford. Or you can use the extra cash to pay down debts or fund a child's education.

Whatever the reason, consumers are finding the lure of lower payments hard to resist. According to mortgage data firm LoanPerformance, nearly a third of home loans made last year nationwide included an interest-only option, up from almost none four years ago.

In the hottest real estate markets in the country (particularly on the coasts) lenders say that as many as 70 percent of new loans are interest-only.

The problem: Those low payments don't last. Eventually, every interest-only mortgage converts to a regular one, and unless you sell or refinance before that time is up, you'll see a steep rise in your monthly payments. And because most IO mortgages are also adjustable, that increase could be doubly harsh if rates go up.

"I think there is a day of reckoning coming for these loans in the hands of the wrong people," says Patricia Houlihan, a financial planner in Reston, Va.

Still, an interest-only mortgage can be a sensible choice at times. If you are tempted to grab one -- or already have and wonder what comes next -- read onto learn more about this hot loan.

How the loan works
What people commonly call an interest-only mortgage isn't one particular type of loan. Rather, interest-only is an option that can be attached to any mortgage.

And in every case, after a certain time (usually five, seven or 10 years) the mortgage becomes fully amortizing, and you must pay both interest and principal. Because you're repaying the principal in 20 or 25 years, not 30, those principal payments are higher than they would have been.

Other than that, the terms are as varied as those on any other mortgage -- anything from a one-month adjustable rate to a 30-year fixed. IOs generally have a slightly higher rate (about a quarter of a percentage point) than the same loan without the interest-only feature (one reason lenders like them). But for most borrowers, that's a small price to pay for the deep savings that interest-only payments represent.

What can go wrong
The biggest problem is payment shock: Someday you will have to write a check to your mortgage company that's hundreds of dollars higher.

Take a $300,000 interest-only ARM that has a fixed rate for five years and then converts to a regular one-year ARM. If the one-year rate is 6 percent (a typical rate over the past 15 years), your payment would go from $1,335 to $1,933.

Another minus is that you don't accrue any equity during the interest-only term. Yes, it's true that you pay mainly interest in the first few years of any mortgage.

On a $300,000 traditional mortgage at 6 percent, for example, only $3,684 of the $21,584 you pay in the first year goes toward principal. But that quickly adds up. You'd have built about $21,000 of equity in five years, $50,000 after 10 years.

"The attractive feature of amortization is that it's automatic and every month the savings go up," says Jack Guttentag, a Wharton professor who runs www.Mtgprofessor.com, a mortgage information Web site.

Of course, this torrid real estate market has seemingly eliminated the need to pay down equity. Many home buyers figure they can quickly reap huge equity gains simply by owning a house. An interest-only loan is a foot in the door.

2005-06-03T13:51:00.000-07:00

Appraisal fraud: your home at risk

Appraisers say they're being pressured by lenders to inflate their estimates of home values.
June 2, 2005: 9:56 AM EDT
By Sarah Max, CNN/Money senior writer

SALEM, Ore. (CNN/Money) – Anyone who's ever bought or refinanced a home knows the sense of relief when the appraisal comes in with high marks.

The appraisal tells bankers, brokers and, ultimately, investors whether a house is a sound investment.

But, as the Appraisal Institute recently testified to Congress, appraisers are under increasing pressure from lenders, mortgage bankers and real estate agents to "hit their number" when appraising property.

Rather than come up with an independent estimate of a home's value, appraisers -- who are typically independent contractors -- say they are being told to base their estimate on a predetermined value.

Alan Zielinski, owner of FAST Appraisals in Lake Barrington, Ill., said he's surprised if he doesn't get a call questioning his estimate.

"All [lenders and brokers] want to do is hit the number because if they don't hit the number the deal doesn't go through and if the deal doesn't go through they don't get the commission," said Zielinski.

In theory, it's in a bank's best interest to make sure its loans are based on accurate appraisals, said M. Thomas Martin, of the National Mortgage Complaint Center in Seattle. "But if you're selling the loans to the secondary market, you really don't care," he said. "The higher the value, the better."

(In the secondary market for mortgages, primary lenders sell off the loans they originate to other institutions, including Fannie Mae and Freddie Mac.)

If a lender sells a loan to the secondary market knowing that the appraisal is inaccurate, said Tim Doyle, director in government affairs with the Mortgage Bankers Association, the lender is held accountable.

"Our position is that we have the same concern with inaccurate appraisal as does the conscientious homebuyer," he said.

Trouble is, pressure on appraisers is often subtle and not easy to prove, said Don Kelly, vice president of public affairs for the Appraisal Institute, which is calling for stronger regulation at the state level and legislation prohibiting lenders from meddling with the process.

The problem is so widespread, that more than 8,000 appraisers – roughly 10 percent of the industry – have signed a petition asking the federal government to take action.

Appraisers, like auditors, are supposed to follow a strict standard of professional behavior, said David Callahan, senior fellow at the public policy organization Demos and author of a recent report about appraisal fraud. "What is actually happening is lenders and brokers are telling them what value they want," he said. "If [appraisers] don't play ball, they don't get paid or don't get work again."

Inflated values
A puffed up appraisal can have serious consequences for a homeowner down the road.

"There are a lot of people who have refinanced for more than their homes are actually worth and they're effectively already upside down even without a real estate bubble bursting," said Callahan. Down the road if they have to sell or decide to refinance, a more accurate appraisal might show that they owe more than the house is worth.

"The real issue is on the refinance side where people are cashing out of their equity on the basis of higher and higher values," said Zielinski, who before accepting a job e-mails lenders and brokers to remind them that he is obligated to appraise property based on market conditions, not a predetermined value. "Conservatively, I'd say that 10 percent of the houses I appraise are worth less than the mortgage on them."

One overvalued appraisal can skew home prices throughout a neighborhood, according to the Appraisal Institute's Kelly. "If a house is appraised for 10 percent or 15 percent more than it's actually worth and the sale closes, it may be used by another appraiser as a comparable sale the very next day," he said. "It has a ripple effect."

That could have even greater implications, said Martin. "The cumulative effect of appraisal fraud is you may have investors holding mortgage debt that's backed by real estate worth less than they think it is," said Martin. "It's a train wreck waiting to happen."

2005-06-02T11:14:00.000-07:00

A Bane Amid The Housing Boom: Rising Foreclosures

By Michael Powell
Washington Post Staff Writer
Monday, May 30, 2005; Page A01

PHILADELPHIA -- To walk Thayer Street in northeast Philadelphia is to count, door by door, the economic devastation afflicting a working-class neighborhood. On a single block, 18 of the 42 brick rowhouses have gone into foreclosure in the past three years.

There's Marciela Perez, who fell ill with cancer, lacked health insurance and stopped making mortgage payments. Barrel-chested Richard Hidalgo, who got divorced and could no longer make his monthly nut. And Mike O'Mara, a rawboned and crew-cut truck driver who took on too much debt, lost his job and fell behind on his mortgage.

Cynthia Boyd 42, is barely holding on to the house she bought in Philadelphia. Boyd, who had problems making her mortgage payments after she became sick and had family problems, tried unsuccessfully to file for bankruptcy. (By Barbara L. Johnston For The Washington Post)

"Mortgage companies convinced us to refinance, and each time our bill went up," O'Mara said as he surveyed his narrow street from his shaded front porch. "You fall behind and they swoop down on you."

Philadelphia, its suburbs and indeed much of Pennsylvania have experienced a foreclosure epidemic as low-income homeowners take on mortgage debt they cannot afford. In 2000, the Philadelphia sheriff auctioned 300 to 400 foreclosed properties a month; now he handles more than 1,000 a month. Allegheny County, which includes Pittsburgh, had record auctions of foreclosed homes, and officials speak of a "Depression-era" problem. The foreclosures fall particularly hard on black and Latino families.

For some American homeowners, the greatest housing boom in U.S. history has delivered riches. They repeatedly tap their homes for equity and use the cash to purchase granite countertops, a BMW, even a trip to the Super Bowl. But there's a dark side -- a sharp rise in foreclosures that is destroying the single greatest generator of personal wealth for most Americans.

Foreclosure rates rose in 47 states in March, according to Foreclosure.com, an online foreclosure listing service. The rates in Florida, Texas and Colorado are more than twice the national average. Even in New York City and Boston, where real estate markets are white-hot, foreclosures are rising in working-class neighborhoods.

Virginia, Maryland and the District have relatively low foreclosure rates -- analysts say troubled owners in those booming markets can still sell their homes before facing foreclosure.

Should the nation's housing bubbles deflate, as many economists and federal officials expect, the foreclosures could prefigure a national crisis. Americans now shoulder record levels of housing debt -- more than 8 percent of homeowners spend at least half their income on their mortgage.

"We are clearly seeing a spike in foreclosures in a number of our major urban areas," said Julie L. Williams, acting U.S. comptroller of the currency, whose agency regulates the nation's banks. "It can lead to a downward spiral for neighborhoods. If we are not careful, the American dream can quickly turn into the American nightmare."

A recent study in Chicago found that rising foreclosures, and attendant social dislocation, fuel increases in crime rates.

State and federal regulators place much of the blame for the foreclosure problem at the feet of mortgage brokers and bankers, who have crafted ever-riskier ways for Americans with poor credit to buy homes. Interest-only and adjustable-rate mortgages account for 63 percent of new mortgages.

But many policymakers say the rise in foreclosures leads to a larger question: Is the push to boost homeownership -- successive presidential administrations have strongly promoted it -- backfiring? As home prices and personal debt rise to record levels, they note, homeownership has become an albatross for millions of Americans, destroying rather than creating wealth.

A Bane Amid The Housing Boom: Rising Foreclosures
Officials at Fannie Mae, the federally chartered mortgage giant designed to expand homeownership, suggest that the solution lies with more counseling and fine-tuning of mortgages for lower-income families. But the Pennsylvania Banking Department is skeptical. It commissioned a study of 14 counties -- urban, suburban and rural -- and found that foreclosures had spiked in each county in the past four years.

"We've had a national agenda that's putting people into homeownership who are not ready for it," said A. William Schenck III, Pennsylvania's secretary of banking and a former bank president. "This is a fact that the nation must deal with unless we want to wreck the credit of a lot of middle-class Americans."

A Rude Awakening

--------------------------------------------------------------------------------

Cynthia Boyd 42, is barely holding on to the house she bought in Philadelphia. Boyd, who had problems making her mortgage payments after she became sick and had family problems, tried unsuccessfully to file for bankruptcy. (By Barbara L. Johnston For The Washington Post)

Six years ago, Cynthia Boyd, 42, signed mortgage documents and lived a dream. The food aide at St. Christopher's Hospital for Children had taken ownership of a three-bedroom rowhouse in the Olney neighborhood of Philadelphia.

"This was the first house I'd ever owned," she said. "I didn't think it'd ever happen."

Then Boyd got sick and had family problems. She fell down a mortgage hole. She asked the original mortgage company to cut her a break, but it had already sold her mortgage to another lender. She tried -- unsuccessfully -- to file for bankruptcy in hopes of forestalling foreclosure. Soon her monthly payment doubled because she faced penalties for falling behind. She also owed $10,000 in back payments and attorney fees. Then the sheriff's office added a charge for processing the foreclosure: $4,000.

Boyd felt like curling into a fetal position. "I was fighting so hard to save my house," she said. "I just kept thinking to myself: You're going to lose your house." For now, she is holding on to the house, but just barely.

Stories like this are heard again and again in Philadelphia. "When a lot of homeowners get into trouble, it doesn't take long to turn into big trouble," said John Dodds, director of the Philadelphia Unemployment Project.

At first glance, the high foreclosure rates in Pennsylvania seem paradoxical. The average Pennsylvania homeowner has one of the highest credit scores in the nation, saves more than the average American, and is less likely to be unemployed or divorced.

But the Reinvestment Fund, a Philadelphia-based think tank, analyzed 22,979 foreclosures for the state Banking Department and found a more problematic profile. Those homeowners, most of whom are blacks, Latinos or working-class whites, live close to the economic margin.

They have low incomes and little or no health insurance -- 40 percent of those who sought emergency foreclosure help cited medical costs as the cause of their distress.

"For lots of these folks, homeownership is a dangerous, precarious existence," said Ira Goldstein, policy director for the fund. "Foreclosures can become like a contagion in these neighborhoods."

Few of these homeowners were tutored in home buying, and 70 percent relied on "subprime" mortgage brokers, which specialize in buyers with bad credit and charge interest rates between 8 and 12 percent, far above market interest rates of 6 percent or less.

Said Williams, the acting comptroller of the currency: "We've produced a new class of lenders willing to take on riskier and riskier borrowers at a very high price. Many of the products are nothing more than time bombs."

On average, at-risk Philadelphia homeowners purchased their homes in the mid- to late 1990s and faced a foreclosure filing four years later. Benigno Diaz, 55, was one of them. He cleans floors at the Philadelphia airport every night. A few years ago, he hurt his knee and went on disability -- which paid 60 percent of his annual $28,000 salary. He fell behind on his home loan.

His mortgage company demanded that he make double payments to catch up. He couldn't manage that. Then he found his house was on a foreclosure list. "I'm like, wow, are you kidding me, man?" Diaz said. He never bounced a check, he said -- "I'm just two months behind." He is hanging on for now.

Irv Ackelsburg, a lawyer with Community Legal Services in Philadelphia, sees people like Diaz every week. They come in with folders stuffed with papers and panicked expressions.

"You see these people come in with huge costs and health problems and it breaks your heart," he said. "A lot of time you have to tell them, 'You're going to lose your home.' "

Hard Times in the Suburbs

--------------------------------------------------------------------------------

Pennsylvania's foreclosure problem is not just an urban phenomenon. Montgomery County contains a genteel stretch of suburbs north of Philadelphia. But from 2000 to 2003, county officials recorded almost 5,000 foreclosure filings, a 14.6 percent increase. Arline, Woodland and Lindbergh avenues run through Abington, a pleasant lower-middle-class town with ranch houses and cherry trees, children's slides and neatly tended gardens. On each of these blocks, three or four houses have gone into foreclosure in the past four years.

Unlike those in northeast Philadelphia, the houses are easily resold -- the foreclosed-upon homeowners tend to simply fade away. "We bought this in a foreclosure auction a year ago," Becky Morrison, a mother of three, said as she stood in the doorway of her house in Abington. "We rented it back to the previous owner. She was pretty sick -- I think she had trouble with her bills. I'm not sure where she went."

Losing a home is particularly destructive of personal wealth. A foreclosure often costs upward of $10,000 in various legal, sheriff and bank fees. And people who have gone through foreclosure end up paying more for insurance and credit card interest and can get turned down for jobs that require good credit.

Fannie Mae, the home loan giant, has devised several programs to help distressed homeowners. It also has started its "American Dream Commitment," which aims to drive the percentage of homeowners still higher. Spokesman Alfred King acknowledges that many lower-income homeowners are experiencing trouble but says his company has no plans to temper its homeownership push.

"Sure, some people are being done a disservice when they get mortgages when they are not ready for it," he said. "But the desire for ownership is there. And there's compelling evidence that there's probably a mortgage product that works for them."

But few of those who work with the tens of thousands of distressed low-income homeowners in Pennsylvania see much evidence to support that proposition.

Philadelphia Sheriff John D. Green has a front-row seat as these dramas play out. In mid-June, he will auction another thousand or so foreclosed homes. "My staff and I watch the suffering every day," he wrote recently in a letter to residents posted on his Web site. He said they "witness the heart-wrenching scenes as families lose their primary means of wealth building and face eviction."

http://www.washingtonpost.com/wp-dyn/content/article/2005/05/29/AR2005052900972.html?nav=rss_business/economy

Locating Affordable Luxury Homes

2005-06-01T18:17:00.000-07:00

Thinking of buying a high-end house in, say, San Francisco? Look out. BusinessWeek's latest reading shows that luxury housing is extremely expensive in San Francisco and many other markets -- even in comparison to the generous incomes of the kind of people who buy pricey homes in those areas.

Luxury homes are most expensive in relation to top-range incomes in San Francisco, San Diego, Los Angeles, and Orange County, Calif., according to the BusinessWeek Luxury Housing Affordability Index, based on first-quarter data. On the East Coast, New York and Miami are nearly as expensive. Boston, Washington, and Seattle are just a little behind (see our real estate slide show, "What a Million Bucks Gets You").

At the other extreme, high-end homes are still affordable to wealthy buyers in such cities as Cleveland, Detroit, Pittsburgh, and St. Louis.

AFFORDABLE ST. LOUIS. To calculate the index, BusinessWeek uses the 90th-percentile house price in each metro area -- that is, the price that's lower than 10% of all homes sold but higher than 90% of homes sold (prices are supplied by Fidelity National Financial). We compare the 90th-percentile price to the 90th-percentile family income -- the earnings that are lower than 10% of all incomes in the metro area but higher than 90% of incomes. Taking into account prevailing interest rates, it calculates whether the 90th-percentile family income is high enough to afford a 90th-percentile home.

The higher the index value, the more affordable the homes are. By our measure, St. Louis is tops in affordability among major metro areas with an index of 237, while San Francisco is dead last at 64. Texas cities are excluded from the comparison for lack of data.

So if you're hunting for your slice of high-end real estate heaven, beware the two coasts.The BusinessWeek Luxury Housing Affordability IndexMetro Areas Luxury-Home Price* Affordability Index
Atlanta $346,000 203
Baltimore $561,748 119
Boston $ 765,000 110
Chicago $465,000 147
Cleveland $260,000 223
Denver $430,000 156
Detroit $298,250 218
Los Angeles-Long Beach $890,000 71
Miami $580,000 92
Minneapolis-St. Paul $411,300 168
New York $848,500 80
Newark, N.J. $620,000 139
Oakland, Calif. $869,000 96
Orange County, Calif. $1,191,500 65
Philadelphia $340,000 202
Phoenix-Mesa $450,000 129
Pittsburgh $254,900 212
Portland-Vancouver $384,000 167
Riverside-San Bernardino, Calif. $540,000 100
San Diego $922,900 70
San Francisco $1,575,000 64
Seattle $600,000 110
St. Louis $265,600 237
Tampa-St. Petersburg-Clearwater $350,000 154
Washington, D.C. $737,000 114

* First quarter 2005

Data: Fidelity National Financial, Housing & Urban Development Dept.

Hampton homes offer oddest of amenities

2005-05-27T14:04:00.000-07:00

BY TAMAR ASEDO SHERMAN
Tamar Asedo Sherman is a freelance writer.
May 20, 2005

The hottest of the hot real estate markets on Long Island is the Hamptons, where if a house doesn't sell in a couple of months, brokers advise sellers to drop the price. Yet amid the hottest of the hot are some homes that might get a cool reception from a typical buyer.
Read entire article.
http://hamptonsny.blogspot.com/
Search the hamptons 4 sale listings
www.4saleinthehamptons.com

20 Properties by 2020

2005-05-27T11:13:00.000-07:00

Can Our Landlord Score
20 Properties By 2020?
By JANE HODGES

Jeff Jones says he is on a mission. The Microsoft Corp. sales executive and Seattle-area landlord plans to own 20 investment properties by the year 2020. In the short-term, he expects that he'll lose money on his first two home purchases, but says he's passionate about watching his investments cross the line from red to black one day.

Mr. Jones, 33, already owns two Seattle-area rental homes and is considering buying out-of-state. He knows his plans fly in the face of conventional real-estate investment advice that you buy only within a short radius of home. But for Mr. Jones, focusing just on Seattle's high-priced housing market contradicts another piece of property-investor philosophy: If you can't generate cash flow from a property immediately, why buy it?

So now, he is researching real-estate markets across the country. "I'm looking [anywhere] in the U.S," he says. "I don't want to be automatically tied to a particular area. If the numbers are positive, I'll look."

To rate cities, he's using socioeconomic factors like income and population growth and vacancy and crime rates, while keeping an eye on land-use and development issues. Sprawl -- widespread, low-density suburban growth -- is a turnoff for him in markets like Atlanta (where he once lived) and Las Vegas, he says. However, he believes local governments' efforts to cap sprawl with "growth management" and zoning laws can only help investors. When such cities create tighter boundaries and tougher zoning laws, that makes the housing inside city limits more attractive to investors, he says.

For instance, Mr. Jones says he has learned in his research that the Raleigh, N.C., area has agricultural zoning restrictions that curb developers from converting large tracts of farmland into residential developments. Raleigh is also part of a triad of cities known as the "Research Triangle" that hosts North Carolina's technology sector and several universities -- which, paired with generally declining apartment vacancy rates (the apartment vacancy rate for the Triangle area was at 9.8 % in March according to The Triangle Apartment Association and Karnes Research Company) -- creates potential continued demand for rentals among upwardly-mobile tenants.

Mr. Jones's priority is to find markets where he can put 10% down and get a cash flow that exceeds the costs of mortgage, taxes and other expenses. In addition to Raleigh, he's interested in a few other small cities, including Tulsa, Okla.; Oklahoma City; Cheyenne, Wyo.; and Manchester, N.H.

Assembling a Portfolio

Mr. Jones says he wants to build a portfolio of properties that contains a range of risk levels -- some aggressive choices tempered by moderate- or slower-growth investments. He says he considers his Seattle home purchases, which will be in the red until at least 2007, to be "high risk" because he currently can't demand a rent higher than the cost of each property's mortgage, taxes and related expenses.

Like many investors, he says he has struggled with the question of how to make money from his properties. For example, he says, should he put a small down payment on an expensive property in a hot market, taking a loss on cash flow initially but hopefully making a profit at resale, or should he invest in less-risky property in a slower-growth market to get positive cash flow and a smaller profit at resale?

While Mr. Jones predicts that eventually he will have a healthy cash flow from his first investment-home purchase in Seattle's Lakeridge area and that he will garner a hefty profit on his rental home in Seattle's Leschi neighborhood at resale, he doesn't want to buy new properties unless they generate immediate positive cash flow. So, he wants to invest his money in multifamily properties, which he says could make money from the outset.

Mr. Jones says that based on his research, a Raleigh four-plex in good repair costs about $239,000, with each unit renting for $376 to $625 per month. Meanwhile, he says, in Seattle, a fixer-upper triplex can be purchased for $375,000 and fetches about $600 to $800 per unit per month. If he put 10% down on a Raleigh multifamily and employed a resident property manager, he'd make positive cash flow, he says. If he put 10% down on a Seattle property, he'd lose money for years, he says.

Based on his research, he says a "half decent" four-plex in Tulsa goes for $150,000, and that the city's residential real-estate prices have appreciated 4% yearly. That's modest compared to the minimum 10.5% annual increases he says Seattle has shown since 2003. But a property in Tulsa -- or in slightly less expensive Oklahoma City -- can be an immediate moneymaker, he says. Perhaps the property won't sell at five times its original purchase price, but if the rental income outpaces mortgage costs from the outset, he can still profit, he says.

Unknowns Aplenty for Out-of-State Investors

Mr. Jones says the most difficult aspect of researching an out-of-state market is calculating associated property expenses. While mortgage, tax and rent prices are predictable, utility costs, for instance, are not -- especially in an out-of-state market where pricing structures are different and climate variations can have an impact on rates, he says.

"The expenses piece is the biggest mystery we face," he says.

Out-of-state properties also require another cost that he would have to consider. "I'd have a resident property manager," he explains. "I'd have to have someone there." He doesn't have cost estimates for that piece of the puzzle, but expects he'd offer a rental discount in exchange for on-site management.

Though he has specific strategies for his current properties -- holding the Lakeridge rental until the end of its 30-year mortgage and holding his Leschi rental in an adjustable mortgage that makes a refinance or sale easy in seven years -- he wants to remain flexible so he can capitalize on any profitable out-of-state markets he uncovers. For now, however, he doesn't want to pull equity from his primary residence through a second mortgage. "As much as I don't want to sell anything, I may end up trading the (Leschi) property in within the next seven years," he says.

Buy or Sell?

2005-05-27T09:52:00.000-07:00

Is It Time To Buy
Or Sell in Real Estate?
By JAMES B. STEWART
From SmartMoney

When Federal Reserve Chairman Alan Greenspan used the word "froth" in connection with the current real-estate market last week, he was rather late to the party. Economists, pundits and journalists have been saying for months that the real-estate market is overheated. About the only people who aren't fretting about soaring real-estate prices are the ever-upbeat real-estate brokers (and even they will say, off the record, that the market is crazy) and, of course, investors making their deposits on unbuilt Florida condos.

Can all these Cassandras actually be right? After all, markets usually factor in the conventional wisdom, and prices are set accordingly. If everyone believes that real-estate prices are about to implode, they already would have imploded.

Despite the current chorus of caution, buyers still are lining up to buy real estate. Just yesterday, we learned that existing home sales jumped 4.5% in April to a record 7.18 million units, according to the National Association of Realtors -- far stronger than the flat reading economists were expecting.

I'm not convinced that real estate is in a bubble, or that prices necessarily are headed for an imminent collapse. I'm not selling my apartment or my weekend house in upstate New York to try to capitalize on a market peak.

On the other hand, I wouldn't dream of putting more money into real estate right now, and I wouldn't want to be overleveraged with big mortgages in order to cash in on rising home prices. I can't foresee the future, but I can say to a near certainty that real-estate prices won't keep soaring at an annualized rate in excess of 20%, as they did last year in some areas.

But all of this prompts an important question for first-time home buyers, people who just want a decent place to live and some security for their families. What's someone to do who's stuck paying rent and watching his or her savings steadily fall behind rising home prices?

I know the feeling. I remember vividly trying to save the money for a down payment on a New York apartment during the early and mid-1980s, another period of fast-rising real-estate prices. The more I saved, the more I fell behind. Finally, after 10 years of renting, I landed a book advance that, along with all my savings, became the down payment on a modest apartment. I was convinced I was buying at the top.

New York real-estate prices did plunge, but not until 1991, and they never got as low as the price I paid. So despite my own concerns about high real-estate prices, my advice to first-time buyers who want to purchase a primary residence and who can manage the down payment and monthly mortgage payments, is to ignore all this talk about an overheated market and the likelihood of a coming collapse in prices. Think of real estate less as an investment, and more as a consumer durable -- a necessity.

Even if prices go down, you still will own an asset. If you enjoy it and can meet the monthly payments, what difference does the market value make? I feel the same way regarding people who boast about the soaring value of their homes. So what? Unless they plan to sell it now, and downsize, or move into a less expensive place (highly unlikely), they're no better or worse off than they were before prices took off. And if they're planning to trade up, the even bigger or more luxurious place down the block has appreciated even more than theirs.

First-time buyers can take some comfort that even if they do buy at the top and prices drop, other real estate also will decline. If they want to sell, even at a loss, and trade up to something better, that new home also will have dropped in price. Whatever happens to prices, owning real estate at least puts you on the elevator. You won't be stuck waiting in the basement while everyone else ascends to the penthouse.

Let me emphasize that this advice goes only for first-time buyers of primary residences, though I might also make an exception for buyers who are looking for a second home for their own use and can comfortably afford the payments.

It's true that the real-estate market isn't like the stock market: It moves in longer cycles, and it is le

Housing Boom

2005-05-27T09:50:00.000-07:00

Housing Boom
Transforms Cities
By JAMES R. HAGERTY and KEMBA J. DUNHAM
Staff Reporters of The Wall Street Journal

From The Wall Street Journal Online

Last year, Terence Trader and a friend paid $77,000 for a crumbling, six-bedroom home in Baltimore with garish yellow asbestos siding.

After partially renovating the property, which abuts two boarded-up homes, the former social worker agreed to sell it last month -- for roughly $300,000. The buyers, a young couple from Washington, D.C., say they plan to settle down here.

"It's kind of a diamond in the rough," says Jennifer Hoover, a doctoral student in psychology, who is buying the house with her husband.

The transaction marks a small victory for Baltimore as the city recovers from one of the nation's most relentless urban declines. Over the past 50 years, Baltimore has lost about a third of its population amid an exodus of industrial jobs and the flight of middle-class people to the suburbs. As recently as last year, the city housing department kept five crews busy boarding up abandoned homes to shut out prostitutes and drug dealers.

Now the national real-estate boom is starting to transform some neighborhoods long resistant to government or philanthropic recovery programs. The five-year-old boom in residential housing initially was concentrated heavily on economically vibrant cities like San Diego, Miami and New York. In the past couple of years, it has spread to some less obvious places, including long-distressed sections of Baltimore, Philadelphia and Oakland, Calif. Parts of these cities have turned into hot real-estate markets largely because their house prices still seem like bargains compared with those in more glamorous cities nearby.

The lowest mortgage interest rates in four decades have spurred spending on housing across the country and sent individual investors searching for real-estate opportunities much as they used to scour the financial news for the latest initial public offering. Cities are promoting blighted areas as investment opportunities, offering a lure many prosperous suburbs lack: vacant property suitable for developers.

Philadelphia offers property-tax breaks to people who build new houses or rehabilitate old ones under a program created about five years ago. In Oakland, the city government has long offered low-interest loans to low- and moderate-income people who renovate homes. A few years ago, Oakland also tried to lure residents from San Francisco with ads touting far lower prices and less fog. Now, says Samee Roberts, the city's marketing manager, "the housing market is so hot we don't really need to spend dollars on advertising."

It's not clear whether real-estate fever will translate into long-term gains for poor urban neighborhoods. Some buyers are absentee landlords who hope for quick profits and may not be much more willing or able than their predecessors to invest heavily in renovation. Moreover, a spike in interest rates could cool investors' interest in marginal neighborhoods.

But officials in Baltimore say the rush of investment in housing is helping them turn the city around. The population, estimated by the U.S. Census Bureau at 636,000, has nearly stopped shrinking. In 2004, the median home price in Baltimore jumped 20% to $90,000, according to Metropolitan Regional Information Systems Inc., Rockville, Md., which tracks sales made by real-estate agents. That compares with an 8% rise nationwide.

'A Moat of Despair'

Baltimore helped lay the groundwork for a recovery in the late 1990s by beginning to tear down high-rise public-housing projects that Mayor Martin O'Malley says ringed downtown "like a moat of despair." The 42-year-old mayor has pushed forward with the redevelopment of those sites to provide a mix of subsidized and market-rate housing.

His administration also has acquired thousands of vacant houses and begun selling them to people willing to renovate the properties. It has brought in experts from other cities including New York to shake up the city housing department. And the city is concentrating government aid on the most promising neighborhoods, such as those near Johns Hopkins University, rather than spreading it thinly throughout the city.

Mr. O'Malley acknowledges that none of these efforts will suffice if the city can't make the streets safe. He has embraced the New York approach of using statistics to pinpoint high-crime areas that need more policing. In 2003, the latest year for which comparable statistics are available from the Federal Bureau of Investigation, Baltimore reported 11,183 incidents of violent crime, down 40% from 1999, the year before Mr. O'Malley took office. That compares with a nationwide decline of 3.5% in the same period. But the homicide rate has stayed relatively high. In 2004, Baltimore had about 44 homicides per 100,000 residents, compared with 7.3 in New York.

Baltimore gets a lift from its proximity to Washington, D.C., one of the nation's strongest job markets, where home prices are more than three times as high. Some people with jobs in Washington now commute to Baltimore, about 45 minutes away by train.

To promote the idea of Baltimore as a haven for people priced out of the Washington market, Mayor O'Malley works closely with a nonprofit organization called the Live Baltimore Home Center, funded by the city and private foundations. Live Baltimore markets Baltimore as a trendy urban lifestyle choice. The organization has run ads in Washington publications showing flower pots crowding a few square feet of pavement. "If you call this a yard," the ads say, "you need to get out of D.C."

Tracy K. Gosson, executive director of Live Baltimore, says gay people are among her targets. For most of them, she says, Baltimore's weak public schools aren't a big issue. "They really value historic architecture, which we have a lot of," says Ms. Gosson, a native of Syracuse, N.Y., who moved to Baltimore in 1993 and renovated a row house.

Even for people who have school-age kids, Ms. Gosson has a ready pitch: "You're going to pay so much less for the house here that you can afford private schools."

Attracted by Location

In some areas, the city is trying to acquire run-down houses and string together large parcels of land that can be offered to private developers. One big developer recently drawn to Baltimore is KSI Services Inc., Vienna, Va. KSI is a partner in two projects that involve plans for a total of about 1,500 new residential units, including townhouses and condominiums. Robert Kettler, chairman of KSI, says he was attracted by Baltimore's location near the booming Washington area and by Mayor O'Malley's enthusiasm. "If you need to talk to the mayor, he'll call you back in three minutes," Mr. Kettler says.

Terence Trader purchased this six-bedroom Baltimore property for $77,000, renovated it and recently agreed to sell it to Jeffrey Humin and Jennifer Hoover for $300,000.

The city is also drawing hundreds of small property investors and speculators. In one blighted but promising neighborhood, Barclay, between the city's main rail station and Johns Hopkins, the U.S. Department of Housing and Urban Development recently scheduled an auction of 56 rental properties it had acquired through foreclosures. The Baltimore housing department feared that the homes would attract a new generation of slumlords, people without the resources to transform the neighborhood, says Christopher Shea, a city planning official.

Rather than letting the homes fall into what he calls "weak hands," Mr. Shea persuaded HUD to cancel the auction and sell the properties to the city. Mr. Shea says those properties and others nearby will be offered to developers willing to renovate several city blocks.

One determined investor is Donna Meeks, a 56-year-old college English professor who grew up in Washington but now lives in Pasadena, Calif. Ms. Meeks, alerted by friends to the investment potential of Baltimore housing, arrived here around 6 a.m. one day in mid-March and headed directly for an auction of rental homes. She was struck by how low the prices were in comparison to California, where the median home price is about $509,000. At the auction, she quickly bought three houses, sight unseen, for a total of $73,000.

By the end of the day, after a quick exterior inspection of her three new properties in blighted neighborhoods, Ms. Meeks was suffering from a mild case of buyers' remorse. "I just took the red-eye in from L.A., walked in, slammed down some money and put my auction card up," she said. "Later, it was sort of like, 'Have you lost your mind?' "

The auction house where Ms. Meeks bought her properties, Alex Cooper Auctioneers Inc., sold all of the 112 houses on offer that day for prices ranging from $25,000 to $147,000. Alex Cooper, which also auctions antiques and Oriental rugs, began holding regular large-scale sales of houses last year after some local landlords decided it was a good time to unload their properties on eager newcomers.

Paul Cooper, who runs the auction firm, estimates that more than 80% of the buyers at his March auction were from out of town, and he plans more such sales. "These people are insatiable," Mr. Cooper says.

Like-Minded Investors

Stephan Allen, an engineer from Washington who has attended the Cooper auctions, began investing in Baltimore houses early last year and now owns 13 of them. He expects property prices in Baltimore to soar in the next few years and takes comfort from the presence of like-minded investors. "I can name 10 people who live in D.C. who own properties in Baltimore," he says.

It's too early to judge whether these new landlords will maintain homes better than their predecessors, often disparaged as slumlords. Mr. Allen says he aims to improve the neighborhoods where he has invested. He figures he has spent $40,000 so far on improvements to his 13 houses in Baltimore. One elderly tenant cried with joy when Mr. Allen replaced a door, he says.

City officials hope to keep the new crop of landlords in line through "targeted enforcement" of building codes. That means concentrating enforcement actions on neighborhoods that are generally in good shape but threatened by the neglect of some properties. It's pointless, Mr. O'Malley says, to enforce codes strictly in neighborhoods where most of the houses are already abandoned.

When the city sells homes it has acquired through tax foreclosures or other means, it sometimes requires that buyers rehabilitate the houses within 18 months and that the homes must be sold to owner-occupiers rather than landlords. To further encourage renovation, the housing department set up a one-stop center for building permits and offers free parking to people seeking them. Permits for residential rehab projects totaled 17,521 last year, up 48% from 1999.

One neighborhood filled with the clamor of renovators' nail guns and sledgehammers is Reservoir Hill, whose roomy Victorian homes once belonged to some of the city's wealthiest residents. In the 1960s, Reservoir Hill declined as affluent people moved to the suburbs and old houses were turned into warrens of small apartments. Pioneering renovators bought some of the homes in the 1970s and 1980s, but those boomlets fizzled, partly because crime scared away too many buyers.

Green Spaces

Mr. Trader, the social worker, first bought a property in the neighborhood in the mid-1990s, when he says the area at times resembled an "open-air drug market." One day, he came home to find someone had shot his Bouvier dog to death. Yet Mr. Trader felt sure that the neighborhood's architectural charm and green spaces eventually would bring back affluent people. He bought more boarded-up houses and hired some of the neighborhood's junkies to help him renovate.

Now Mr. Trader, who has become a full-time property investor and rehabilitator, is selling some of his houses in Reservoir Hill and moving on to projects in other parts of the city.

The big yellow house Mr. Trader is selling remains a work in progress. Vandals long ago ripped out the fireplace mantels, and some of the sinks lack spigots. But the buyers, Ms. Hoover and her husband, Jeffrey Humin, love the parquet floors and were impressed by newspaper stories reporting that the writer Gertrude Stein once lived there. They say they have no idea how much it will cost to renovate the house. But, Mr. Humin says, "it's our intention over time to bring it back to its former glory."

The Forgotten Coast, Florida

2005-05-27T09:43:00.000-07:00

The housing deals can be sweet on this largely underdeveloped strip of the Gulf.
May 13, 2005
By Jon Birger,
MONEY Magazine.
Additional reporting by Sarah Max.

NEW YORK (MONEY Magazine) - The 50-mile gulf coast stretch from Port St. Joe to Carrabelle has about as much in common with Miami or Fort Lauderdale as it does with Paris. There are no glam discos or high-rises -- just lovely beaches and very cheap real estate, at least by Florida standards.

Locals call it the Forgotten Coast. The onetime reason: an old paper mill that used to smell as bad as it looked.
"Nobody wanted to come on vacation and look at a paper mill," says local broker Diane Peevy of Port Realty.
Well, the mill closed in 1999, and home prices have been rising ever since. Among the nicer, still affordable homes is a two-bedroom condo in Barrier Dunes, a gated community on Cape San Blas. Steps from the beach, the Gulf-view unit is listed at $425,000. Just below the Cape, where the beach is less susceptible to erosion, a two-bedroom townhouse lists for $475,000.

But the area's undiscovered gem is Dog Island, an 1,800-acre barrier island three miles from Carrabelle. The island is accessible only by boat or small airplane. (A pair of local captains operate ad hoc ferries.)
Pam Housholder, Dog Island's resident realtor, believes today's prices will be recalled as bargains. She's probably right.

Click here for a gallery of affordable beach homes
Most of the island is owned by the Nature Conservancy and cannot be developed -- a big draw for both nature lovers and supply-conscious investors. Dog Island's dirt roads look more like hiking trails, and the beaches are just about perfect. (Yes, there are phones and electricity, but most people use water-purification systems to compensate for so-so drinking water.)

Gulf-front houses start at $650,000, but interior lots -- all with beach rights -- sell for $225,000 to $275,000. Another $200,000 could build you the cozy getaway of your dreams.
North Padre Island, Texas

The last affordable beach house

2005-05-27T09:40:00.000-07:00

Surf, sand, salt air and a price under $500,000.
You can still find it all in these special places.
May 16, 2005
By Jon Birger,
MONEY Magazine.
Additional reporting by Sarah Max.

NEW YORK (MONEY Magazine) - Making fast friends over sand castles...Lying in the surf as the waves wash over you...trying to keep up with Mom or Dad as you comb the shoreline for shells. There's something about the beach that makes childhood memories fonder.

For many people, those mental snapshots are more than just happy moments. They're personal touchstones -- symbols of what good financial planning and a little luck might someday afford them. For the one thing that so many of us want most in life (at least in the material realm) is a home on the beach.

You know the one. It's a cedar-shingled cottage built high on white sandy dunes. There's a weathered walkway to the shore, an outdoor shower on the landing. It's the place where the ocean's sounds waft through open bedroom windows. It's a retreat for family and friends -- where Mom and Dad might someday retire. Above all, it's where children and grandchildren can make sweet memories of their own.

Trouble is, too many people have the same dream. Nearly two-thirds of vacation home shoppers say they'd like to be near an ocean beach, according to EscapeHomes.com. Combine that demand with a fixed supply of coastline, and the result has been beach house prices that are truly stratospheric.
"We're nearing the point where the dream of owning a beach front home is simply not achievable for an average upper-middle-class American," says Van Davis, a onetime vacation home broker who now heads the East Coast realtor Foxtons.

Click here for a gallery of affordable beach homes
Actually, we're well past that point in most locales. In Destin, Fla., for instance, the average asking price for homes on the beach is $2.1 million, according to data compiled for MONEY by Realtor.com. It's $3 million in Bar Harbor, Maine, and $6 million in Malibu, Calif.

"We get calls all the time from people who say that all they want is a little house on the beach, nothing too fancy." says Patty Slater, an agent with Kinlin Grover GMAC Real Estate in Cape Cod, Mass. "It's heartbreaking, but the problem is that even those homes come with a fancy price tag."

Is the great American beach house dream truly dead? MONEY spent several weeks scouring North America for what at first seemed an oxymoron -- an affordable beach house (our definition of affordable: under $500,000).

We consulted with dozens of brokers as well as noted beach expert Stephen Leatherman, an environmental studies professor at Florida International University and author of "America's Best Beaches."
We narrowed our search to five regions that on paper offered the best beach for the buck: the Oregon Coast, North Carolina's Outer Banks, Florida's "Forgotten Coast," the south coast of Texas and Canada's Prince Edward Island. (We passed on Mexico, where homes north of Puerto Vallarta can go for $300,000 to $400,000, because foreigners legally can't own coastal land there; the property must be purchased through a Mexican bank trust, which is renewable every 50 years.)

Then we traveled to each area, and we're happy to report that you needn't be a CEO or a cardiologist to afford a home on the ocean. We saw beachfront houses, townhouses and condos priced from $100,000 to $500,000.

While you won't find perfection in this price range, you can still find a good enough home base to start digging for sand crabs and making future family memories.

Rent a Home in a Hot Spot "Brigantine,NJ"

2005-05-26T07:28:00.000-07:00

Brigantine,NJ
4 Bedroom, 2Bath Ocean front
http://www.brigantine4rent.com/default.asp_Q_f_E_cpg_A_pg_E_ViewListings

No-money down mania

2005-05-25T17:43:00.000-07:00

Wannabe millionaires are flocking to gurus who say anyone can get rich in real estate. Not exactly.May 16, 2005: 11:46 AM EDT By Joan Kaplan and Scott Medintz, MONEY Magazine

NEW YORK (MONEY Magazine) - An afternoon session of the Ron LeGrand Massive Income Strategies Boot Camp is about to begin. LeGrand himself, a tall, well-tanned 58-year-old, sits onstage in the ballroom of a Florida golf resort.

His 400 students are settling into their seats when, from the back of the room, a thirtysomething man in a T-shirt strides up the aisle waving a piece of paper. Is he part of the show? If so, LeGrand doesn't let on.
Introducing himself as Todd, the man presents LeGrand with the document, a copy of a $92,821 check, and announces, "This is from my latest deal." Todd explains that he'd been a truck driver before turning full time to real estate two years ago. Since then, he says, he's made $1 million. The crowd goes wild. Boot Camp is in session again.

Get-rich gurus like LeGrand have been preaching the no-money-down gospel for decades, of course. But in today's housing boom, people have been listening like never before. In April an estimated 40,000 people flocked to the Learning Annex Real Estate Wealth Expo in Los Angeles. In New York, the same event attracted 25,000, up from 1,000 the year before.

And real estate advice rarely comes cheap. LeGrand's students pay $2,995 for a weekend course. The Enlightened Millionaire Institute (EMI) charges well into five figures for premium packages that can include the opportunity to do deals with the gurus themselves.
It's tempting to dismiss seminar mania as just another hustle. But that's not entirely fair. Whether or not Todd was a plant (LeGrand's spokesman says no), the techniques LeGrand and others teach have indeed created millionaires.

"There really is the opportunity to do extraordinarily well," says Dartmouth business professor John Vogel.
But what this inspiration industry downplays is that most students don't have the talent or timing or temperament to strike it rich. With real estate seminars turning out thousands of would-be moguls every month, all pursuing the same no-money-down schemes on the same fringes of a market bound to slow sooner or later, the odds of making a quick fortune in real estate are becoming vanishingly small.
What exactly do you learn?

Considering how much seminars vary in style and tone, their substance is strikingly uniform. Nearly all start with a single premise -- that you don't need money to make money in real estate -- and then walk their audiences through get-rich plays that require little or no capital.
"Bird-dogging," for example, is an entry-level technique that consists of scouting for other investors on a per-property basis. Find a fixer-upper, pass along the lead, and get a few hundred dollars if a deal results.
A more advanced method is "wholesaling," where you contract to buy a home and then -- before laying out cash -- sell your contractual rights to a rehabber for a few thousand dollars' profit.

More complex is a "subject to" contract, where the buyer gets the title to a property in return for making payments on the seller's mortgage. Or a "short sale," in which you offer a bank less than what's owed on a soon-to-be-foreclosed property.

To make any of these gambits profitable, you must buy the property for far less than its market value. The standard formula: Your "maximum allowable offer" (or MAO, as in "ham on rye, hold the") is 70 percent of a property's projected "after-repair value" (ARV) minus the repair costs.

So lots of seminar time is spent on tips for finding what speakers euphemistically call "motivated sellers" -- owners who, for whatever reason, are desperate to unload their homes. Every seminar recommends monitoring public death, divorce, bankruptcy and foreclosure notices, as well as cultivating relationships with realtors, brokers, lawyers and bankers who can tip you off to fresh cases of homeowners in distress.
Some have gimmicks for drumming up prospects. Dwan Bent-Twyford sells a line of "certified investor gear" -- T-shirts, tracksuits and tote bags emblazoned with "I buy houses ca$h." LeGrand prefers "yellow letter" mailings -- hand-written notes on lined, yellow paper saying "I buy houses. Call me."
Salesmanship is key in no-money-down strategies. LeGrand asks investors with deals in the works to come onstage and demonstrate how they plan to sell their deal to the homeowner; LeGrand plays the role of the owner.

When a student stumbles over his words, LeGrand attacks. "You're reminding me that I'm three months behind on my mortgage payments?" he asks, incredulous.
He brushes the student aside and switches into the investor's role. "'I'm just calling to confirm' -- and then you repeat all the numbers you talked about before," he says. "Then you ask whether they're just looking for a few bucks to move. 'How much?' you ask. 'I can't read [my notes].' They'll probably say a few bucks less."
As the other students nod their heads, the man slinks back to his seat.

What you feel
Marketing and dealmaking advice alone isn't what draws people back to the seminar circuit time after time. Nor is it why people sit at the feet of not one but two or three or four gurus, since so much of the material is identical -- and can be found in books and on DVDs at a fraction of the cost of a single seminar.
As with any self-help movement, the leader's charisma is crucial. The most successful real estate gurus have their share, though in the case of LeGrand and "Rich Dad, Poor Dad" author Robert Kiyosaki, it's a self-deprecating sort of anticharisma. Both come across as regular guys with failure in their pasts, the better for acolytes to feel there's hope for them as well.

The seminars also provide networking opportunities that you can't get with a book or DVD. Between sessions, deals get made and strategies get swapped among potted palms in the hotel lobbies.
But perhaps the seminars' most powerful pull is the sense they confer of membership in a favored group. Real estate entrepreneurs, it's implied, understand the world more clearly than others do. They see that the system is stacked against the little guy, but they've risen above conventional thinking and know how to succeed. Who wouldn't want to be part of that club?

At the end of a recent Real Estate 101 weekend, Vena Jones-Cox shouts to her audience, "What do you do?!" Three dozen folks respond as one: "I buy and sell real estate!" (Never mind that few have ever attempted a deal.)

A pillar of the no-money-down belief system is that nine-to-five work is contemptible drudgery.
"How many of you don't want a job anymore?" asks speaker Glenn Purdy at an Orlando EMI seminar. Hear the whoosh of a thousand hands being raised at once. (Never mind, again, that most seminar participants earn their living behind desks.)

The financial establishment comes in for special scorn as the natural enemy of contrarian, entrepreneurial thinking. Purdy asks for another show of hands: "Who thinks the country is in a recession?" he calls. About a third do. Who thinks it's not? Again, a third respond. "Congratulations," he says with a sarcastic grin. "You're all economists."

Little wonder, then, that seminar junkies rarely have trouble justifying their spending -- not just on meetings, but also on the relentlessly hawked additional courses and materials. Attendees and speakers alike say that the high expense itself helps motivate people to pound the pavement for deals, and that psychological investment naturally follows the financial kind.
"It's a ridiculous amount of money if you're not going to do anything," concedes Craig Cherry, a former engineer from Lusby, Md. who says he's spent about $20,000 on real estate courses and materials. "But all I need is one idea and that $5,000 seminar is paid for."

What goes unsaid
Inspired with a sense of empowerment and armed with manuals full of no-money-down notions, seminar participants emerge into the sunlight all ready to do deals. What they generally do not realize, however, is how hard it is to put what they've learned into action.

"These seminar leaders never talk about how much of your personal time it takes. They don't talk about the sweat equity," says James Webb, director of real estate studies at Cleveland State University.
There's the commonsense fact that homeowners who will part with their property for less than market value are hard to find. And the competition to find them first can be brutal.

Roshell Goodkin, a 30-year-old former chiropractic student who lives in Lighthouse Point, Fla., followed her seminar leader's advice for attracting sellers by including peppermint LifeSavers in each of her "I Buy Houses" letters. She later learned that some homeowners were getting five or six mints a day from other investors. And when the targets did respond, she says, they often played investors against one another.

What's more, new competitors are constantly being launched into business. Stephen Damiani is a 19-year veteran of the Brooklyn county clerk's office.
"Every time a big wave of people comes in looking for foreclosure lists," he reports with a roll of his eyes, "I say to myself, 'Oh, there must have just been a seminar.'"

Newbies can make expensive mistakes. Mickey Higgins, who represents lenders at New York City foreclosure auctions, saw one newly minted investor bid $210,000 on a property thinking it was a condo.
"You should have seen her face when she realized it was just a parking space" in a condo's garage, he says.
When an inspection of their first investment home showed only minor termite damage, Helen and Robert Condry of Indialantic, Fla. went ahead and bought it for $75,000. Fixing the problem turned out to cost $24,000, wiping out their profits and then some.

Even if you find the right place at the right price, motivated sellers aren't always ideal partners. According to Cleveland State's Webb, many don't understand the terms or mechanics of the no-money-down-style deals that seminar graduates propose, and they get scared off. When they do sign, they are more likely than other sellers to back out later.

Most gurus make light of setbacks as mere bumps on an inevitable road to success. At the EMI Wealth Retreat, co-founder Mark Victor Hansen announces with a smile that both he and co-leader Robert Allen had been bankrupt. Then he turns to Allen and asks, "How did you sleep when you were bankrupt?"
"Like a baby," Allen answers on cue. "I woke up every two hours and cried."
The message that's conspicuously absent from most real estate seminars is that some people just aren't cut out for this stuff.

Maybe they can't master the complexity of the transactions or don't have the stomach to push cutthroat deals on vulnerable homeowners, or simply lack the ability to persuade people to do what may not be in their best interest.

Larisa Belliveau of Rochester, N.Y. was an MBA-trained technology-marketing manager at Xerox who lost her job to downsizing. In 2003, after hearing Glenn Purdy at an EMI seminar, she turned to real estate to make a living.

"He has a brilliant way of converting people, getting them excited," Belliveau recalls. "He had good stories that many of us could relate to -- a lot of pain and struggle."
Her first deal went smoothly: She bought a fire-damaged house for $1 in February 2004 and "wholesaled" it to a rehabber the next weekend for $2,500. She then tried buying soon-to-be-foreclosed properties after $15,000 worth of courses and coaching with one popular guru. She pursued more than 60 deals over the next six months; none went through.

Belliveau blames herself for at least part of her failure. "If you want to make it work, it costs a lot," she explains. "And it's not for the faint of heart. I think I was too soft. You need to know how to sell houses quickly, how to talk to lenders, and the cost of repairs. It's a complex system."
All told, she studied under five gurus and three coaches, spending $75,000 on classes, materials and marketing -- nearly all of it in credit-card debt that she hasn't paid off.
"I have no problem paying for what works," she says. "But I spent so much money with them. I did everything they said, and it didn't work."

Six promises they can't keep

1. You don't need money to make money.
Reality: You could easily spend thousands on mailings, newspaper ads and lists of homes near foreclosure. Then there's the cost of your time. Plus, you're often encouraged to borrow to finance your deals -- so by this logic, you don't need money if you have a credit card.

2. Real estate prices never go down.
Reality: Sure, the U.S. has never seen year-to-year housing price declines. But that's a national average. Properties in many regions, cities and neighborhoods have gone through periods of decline. And if you're financing your investments with debt, the smallest hits can have a magnified effect.

3. We're letting you in on a secret strategy.
Reality: No-money-down methods are neither new nor unknown. They've now been taught to millions via seminars, books, tapes, investor clubs, the Net and even community colleges, often for far less money.

4. You can get rich in your spare time.
Reality: Even the most seasoned investors say that on average they close only one deal for every 100 properties they see. Between combing the market for desperate sellers, looking at properties, negotiating deals, filling out legal documents and dealing with contractors, this is a full-time job for many people.
5. You can learn this business in a weekend.

Reality: More likely, come Sunday you'll just be dangerously confident. Or you'll have signed up for another course -- a victim of "upselling," the practice by which your guru reveals just enough information to leave you needing and wanting more.

6. Anyone can get rich in real estate.
Reality: Many gurus say that anyone who can't negotiate a good deal just isn't following instructions. But what they don't say is that some people simply lack the persuasive skills and aren't cut out for the aggressive scouting and sales tactics that these deals often require.

Other ways to learn real estate, plus one seminar that's worth it.

Investor clubs Real estate investor clubs can offer practical advice, knowledgeable guest speakers and networking with industry contacts -- without the seminar smoke and mirrors.
How to make sure your club is legit? Membership costs should total less than $250 a year; most speakers should be local market experts (not traveling salesmen); and the focus should be on networking, mentoring and learning the ropes -- not buying books and DVDs. Search for clubs in your area at reiclub.com and nationalreia.com.

Web sites Rei-supply.com Offers one of the best investor discussion forums online. creonline.com Packed with solid info and how-to articles; free contract-form downloads; useful newsletter. realestatecoursereviews.com Seminar reviews by attendees

Seminar Real estate 101 by Vena Jones-Cox (therealestategoddess.com) This $599 package includes an excellent 200-page introductory guide, a CD and a two-day seminar. Jones-Cox is funny, informed, inspiring and honest about risk.

Are home prices really so crazy? Click here to find out.
Click here to read about real estate investment clubs -- how how to tell good ones from bad.

Sharing cash, contacts and contractors

2005-05-25T17:38:00.000-07:00

Fans of Robert Kiyosaki stop playing the board game and partner in real-world real estate ventures.

March 15, 2005: 8:38 AM EST

By Steve Hargreaves, CNN/Money staff writer

NEW YORK (CNN/Money) - On a recent night in midtown Manhattan, a group of people gathered for an exercise in real estate networking that would make any self-help financial guru proud.
Some members of the diverse group knew each other from past meetings where they would play Cashflow, the board game based on the teachings of "Rich Dad, Poor Dad" author Robert Kiyosaki.
But they were through with game playing. That night they were there to pick up the name of a good contractor, the number of a trusted real estate lawyer, or to offer cash, credit or time as one member of a real estate partnership.

In short, they were ready to turn a game about getting rich into a game plan for getting rich.
"It's happening, people are networking and they're sharing resources and they're buying real estate," Ed Patisso, who founded the group, known as NYC Cashflow, told curious members at the start of the meeting. "If you don't have a couple hundred grand in the bank but have a few dollars and want to invest, you can do it."
The deals

Real estate is the most popular investment choice, largely because it's so favored by Kiyosaki. And Buffalo or Philadelphia are the preferred markets, partially owing to New York City's prohibitively high prices.
New York City resident Joseph Patton, 34, met Patisso through NYC Cashflow in the fall of 2003. Soon after they invested $54,000 cash for a rental property in Buffalo; $19,000 to buy, $30,000 to fix up and another five grand in other costs.

Patton says the property is now worth $85,000 and the two pull in $600 a month in rent, after all expenses. Plus they took out a home equity loan on the house to repay their initial investment and free up the cash for other purchases. They have since bought two more similar properties.
Patton says he's learned enough in these first deals to branch out from partnering with Patisso and will look for other people in the Buffalo area, where he plans three more buys. He also says he thinks he's ready to start acting as a mentor himself.

"The group led me from four or five years studying it, thinking about it, to finally taking action," Patton said. "It's worked phenomenally for me."
New York resident Percy Keeley, 49, bought a three-bedroom, one-family house in Buffalo at foreclosure for $11,000. He then spent $22,000 on renovations.
Percy says he now rents out the house, with a property management company taking care of all the details. After all his expenses, including the mortgage, management fees and taxes, he says he sees $250 in income every month.

"I ended up relying on a lot of people in the club to help me do this," said Percy, who listed lawyer, banker and real estate broker referrals as well as general support as things he received from the group.
Risks

Is partnering up with near strangers for such large investments just inviting trouble?
Steve Greene, who is active in the group and also acts as its spokesman, said NYC Cashflow is always on guard for frauds and recently had to remove a posting from its Web site that was trying to lure members into forming a partnership and buying a property. It turned out that the person who posted the ad also owned the house for sale.

The group is also trying to develop a rating system on its Web site that will let members rate each other in terms of honesty or work ethic, patterned after Bay's method of rating sellers. But Greene says the biggest thing keeping people honest is their regular meetings and the bonds that have developed.
"When you're meeting time and again with 40, 60, 80 people in the same room," said Greene, "word gets around."

There's another problem. If buying property on one's own can be full of hassles, partnering with one or two relative strangers could turn into a logistics nightmare.
Patton says to keep things simple, he and Patisso have divided up the basic chores of running a rental property. Patton does the bookkeeping and pays the bills, while Patisso deals with the contractors and property management company. And they pass files back and forth electronically.

"Once the properties are up and running, there is very little maintenance that requires a face-to-face meeting," said Patton. "But we have the same files at all times. As joint owners, you need to have that."
They also have a written contract between the two of them that says if one partner wants out, the other partner either needs to buy out his half at "fair market value" or put the property up for sale.
Interested in attending a meeting? Greene said there is no clause requiring a commitment to join any deals or buy anything. He said that the only cost to attend is the fee for the space, which Greene said is less than $5 when split among everyone.

He also said there has been so much interest from newcomers to real estate that the group is thinking about starting a $160, 16-hour real estate class for beginners.
And a spokeswoman for Robert Kiyosaki said the New York group isn't the only one that has branched out from the board game, although it was hard to tell exactly how many of the 800 loosely-organized Cashflow clubs worldwide were planning real-life deals.

For more information on the New York group, visit www.nyccashflow.com. To find a Cashflow group near you, visit the "our community" page at richdad.com.

Click here for Sarah Max's personal account of playing Cashflow.
Click here for four lessons for successful real estate "flipping."

Real estate geek watch

2005-05-25T17:31:00.000-07:00

At business schools, real estate classes, clubs and internships are a hot ticket.
November 8, 2004: 10:53 AM EST
By Sarah Max, CNN/Money senior writer

SALEM, Ore. (CNN/Money) - Forget Trump. This week, student teams from a dozen business schools will test their real estate savvy in the third annual Real Estate Challenge.

The competition, sponsored by the McCombs School of Business at the University of Texas in Austin, begins on Tuesday morning when teams receive a case study via e-mail concerning anything from what to do with an unprofitable strip mall to whether to invest in a new resort hotel.

Teams have just 58 hours to evaluate the case, organize a presentation and travel to Austin, where a panel of 18 judges from Goldman Sachs and other A-list investment firms will declare a winner.

Real estate, it seems, is all the rage in business schools these days. Courses are full and have waiting lists, schools are rolling out new classes and student-run real estate clubs are doubling and tripling in size.

The real estate club at the University of Southern California has close to 200 members.

Demand for real estate courses at Emory University's Goizueta Business School prompted the school to add a real estate concentration two years ago.

At the University of Pennsylvania's Wharton School of business, where students use points to bid on classes, those related to real estate are "selling" for several times the typical price.

"It's a very popular major right now," said Peggy Bishop Lane, deputy vice dean at Wharton.

Although many of the students focusing on real estate worked in the field before going back to school, she said, many are gravitating toward it for the same reason individuals have been shifting their investment dollars to real estate -- it's in favor.

"We had a record number in the MBA class this semester," said Jeff Fisher, a real estate professor at Indiana University's Kelley School of Business, adding that this is no surprise considering the surge in investor interest in real estate.

Even if students don't plan to make a career in real estate, he said, many want the skills to invest in real estate on their own.

A need for number crunchers

The expectation among students focused on real estate is that the pay will be lower initially, said Stephen Roberts, who is the president of USC's real estate club and working toward a dual masters in business administration and real estate development.

"But there is the potential for higher compensation down the road," he said.

Besides, there are other perks to the job.

"It's a great way to get involved in a community," said Ephram Lustgarten, a first year MBA at Wharton and a competitor in next week's Challenge.

And unlike with, say, consulting, the work is tangible. "You can drive by the property, take a look at it and know you played a role in it," he added.

The art of the flip

2005-05-25T16:49:00.000-07:00

A new reality television show will follow real estate speculators as they buy, fix and "flip."
October 14, 2004: 2:24 PM EDT
By Sarah Max, CNN/Money senior writer

SALEM, Ore. (CNN/Money) –It's one thing to buy a house to call home. It's quite another to buy property with the sole purpose of turning around and reselling for a profit.

It's called flipping, and in the coming months, a dozen aspiring real estate investors experience this firsthand -- on camera, no less -- as they attempt to buy, remodel and sell property within a period of six months.

Flipping is the subject of an upcoming reality television series with the working title "Property Ladder," scheduled to appear on The Learning Channel in May 2005.

"Everyone you talk to seems to know someone who has tried to flip property," said Char Serwa, the show's executive producer. In California, where most of show's subjects are buying, 2.6 percent of all houses sold during the month of May were owned for less than six months, according to DataQuick Information Systems, up from 1.9 percent the previous year.

There are several varieties of flipping, said William Bronchick, author of "Flipping Properties." One is rehabbing, which is the focus of the show. Other flippers buy property that's in foreclosure or under construction and try to resell the property to other investors.

"We're not advocating that people do this," added Serwa, explaining that each homeowner's story will be told in an individual episode, detailing the experience from purchase to sale.

"This is truly an observational documentary," she said. "It's real life."

Indeed, the homeowners featured on the show are not only footing the bill for the property and the cost of renovations, they're managing the projects on their own. Unlike other TLC makeover shows, seasoned carpenters and designers won't be pitching in to help.
What the show's subjects do get is advice from host Kirsten Kemp, an actress, real estate agent and seasoned property investor. Whether the homeowners actually take that advice is another story.

Viewers, meanwhile, may likely learn a few lessons as well, namely that buying, remodeling and selling property is hard work – particularly when done in a matter of months.

"A lot of things can go wrong," said Kemp.

It's also financially risky. A slowdown in real estate means little to a homeowner settled in for several years, but it can be devastating if you're banking on selling for a quick profit. Factor in the transaction and renovation costs and there may be little profit at all. Any profit you do make, mind you, will be taxed at ordinary income if you sell in less than a year, noted Ron Phipps, of Phipps Realty in Warwick, RI.

In seven years, Kemp flipped 40 properties, not always successfully. "I made money about 70 percent of the time, and 30 percent of the time I broke even or lost money."

Here's a sneak preview of some of the lessons Kemp hopes to bring home.

Leave your emotions at the front door
When shopping for investment property, you want to find a house that tugs at you emotionally, said Kemp. If a house rouses your emotions, chances are it will do the same for future buyers will as well.

When it's time to make an offer, however, your emotions cannot get the best of you. "You make money flipping in part by buying low," she said. "The people who say 'I just have to have this house' are the ones who overpay.'"

Don't overdo it when renovating
"This is not the time to create your dream house," said Kemp. "You don't want to fix the property to a level that is not necessary."

This is a dilemma many first-time flippers struggle with. On the one hand, they want to do a good job on the renovation. On the other hand, they don't want to put money in expensive light fixtures or elaborate built-ins if they aren't going to recoup the time or money they spent.

That said, you don't want to cover up serious problems with a new coat of paint or a well-placed picture. "You want to attack anything thing that would be a red flag at closing," said Kemp.

DIY when it makes sense
The more work you can do yourself, the more money you'll make on the flip, said Kemp.

Still, even do-it-yourselfers need help sometimes. Develop a list of reliable contractors, plumbers, electricians, drywallers and other experts to call on. Kemp, for one, says she has her own contractor to thank for getting her through many projects.

While you're at it, find a good real estate agent, she said. "They can help you understand what is selling and what's not," she said. "They'll do a good job because if they do, they know you are going to list the property with them when you're ready to sell."

Price the property to sell
You give your blood, sweat and tears to a house, but it's no excuse to overprice it.

"I encourage people not to get greedy," Kemp said. In fact, she recommends pricing property a little under market value. "Every day your house is on the market you're losing money."

What if "Property Ladder" homes don't sell in time for prime time?

That's just part of the story. And in real estate, sometimes that's the reality.

Chez moi

2005-05-25T16:43:00.000-07:00

I want to buy a home in Europe for a vacation home and rental property. What are the pros and cons?
December 17, 2004: 11:58 AM EST
By Walter Updegrave, CNN/Money contributing columnist
NEW YORK (CNN/Money) - I want to buy a home in Europe that can serve as a vacation home and rental property. I also see it as a way to diversify my portfolio and to hedge against currency risk. What are the pros and cons?

-- Sharon, Atlanta, Georgia

Ah, who among us hasn't daydreamed at one time or another about sipping café au lait on the veranda of our own little villa in the south of France? Or taking in the view from an Alpine cabin in the Austrian Alps? Or, for that matter, perhaps something closer to home, say, sunbathing on the private stretch of beach in front of your own waterfront casa on Mexico's Yucatan peninsula? And if you can justify such an idyllic vision as a wise financial move, well, so much the better.

But before you start plunking down money and signing papers, you'd better consider some of the realities involved in pulling this off -- and some of the potential pitfalls.

Look very carefully at the risks
The first thing to remember is that buying a vacation home in a foreign country is a lot more complicated than buying in the U.S.

Unless you're paying cash (either from assets you already own or perhaps borrowing against the value of a home you already own), you'll likely be getting a mortgage from a lender in the country where you're buying. That may mean coming up with a much larger down payment than is the case in the U.S., not to mention dealing with contracts in foreign languages.

The laws concerning property rights and usage may differ from those here in the U.S.; indeed, some countries have restrictions on what types of property foreigners can and can't own.

And, of course, there's the matter of logistics. The farther you are from a property, the harder it is for you to monitor. You would likely have to hire some local person to monitor and maintain it. These issues can be overcome, but they do add to the hassle factor.

As for investment considerations, it's true that owning a vacation rental property would diversify your holdings. You're not only adding real estate to your portfolio, but real estate whose value isn't tied (directly at least) to the fortunes of the U.S. economy and financial markets.

Not as diverse as you think
But let's not overdo the diversification argument. We're talking about one property here, not a portfolio of different properties spread across many countries around the globe.
In the world of equities, a person who buys just one stock takes on "specific stock" risk. If the one company they've invested in runs into trouble -- the managers turn out to be crooks, new products bomb, whatever -- then boom! There goes the value of that investment even if the market overall is doing fine.

Well, in your case, you would be taking on what I would call "specific property risk." If you happen to buy a property in an area that doesn't thrive for whatever reason, then the fact that property values in other areas of the same country or elsewhere in Europe or wherever are soaring doesn't matter. All that matters is what's happening in the specific area where your property is located.

Which means you've got to do a lot of research ahead of time to be sure the future prospects for price appreciation are solid. That's difficult enough to do in the country where you reside; I'd say it's even tougher to do in a country where you're not as familiar with the economic and political trends.

Currency cuts both ways
As for the currency effect, yes, you could benefit from having an investment whose value is denominated in a foreign currency (assuming that currency doesn't peg its value to the U.S. dollar, as China and some other countries do).
Since January, 2003, for example, the Euro's value has risen from about $1.05 to $1.33 or so, a 27 percent rise. So a U.S. resident who bought a property denominated in Euros back in the beginning of 2003 would be sitting on a 27 percent gain just from currency appreciation (although the actual gain could be more or less, depending on how the property's value fared in Euro terms). In short, the owner would have benefited nicely from the dollar's decline.

Remember, though, currency movements can cut both ways. If the dollar climbs, you'll experience the opposite effect. Remember to that, if you financed a foreign property in foreign currency -- in this case, Euros -- then a rising Euro means your carrying costs will climb. You've got to convert more dollars to Euros to make your mortgage payments and pay for maintenance and property taxes. Before you buy, you'd better be sure your budget can handle the effect of these sorts of currency fluctuations.

Put it all together and my view is that, for most people, owning a foreign vacation property is something to consider more for personal or lifestyle reasons than for financial reasons.

If you would really enjoy owning and living in a house outside the U.S., then fine. Go ahead and buy one. But don't muddy the waters by trying to justify the purchase on investment grounds.

Because if what you really want is an investment that can diversify your portfolio and give you a bit of a hedge against currency fluctuations, you're probably better off just buying a foreign-stock mutual fund.

Global housing boom

2005-05-25T16:34:00.000-07:00

Price gains in some countries make the U.S. real estate market appear tame by comparison.
November 11, 2004: 9:50 AM EST
By Sarah Max, CNN/Money senior writer

SALEM, Ore. (CNN/Money) – The dream of owning property, and making a serious profit selling it, isn't unique to America.
In fact, huge gains in home prices in some countries around the globe make the U.S. real estate market appear tame by comparison.

Speculators in Britain, where home prices increased 116 percent between 1997 and 2004, started flipping for a profit long before it was fashionable in U.S. markets.

In Ireland, home prices shot up 174 percent during that period, according to statistics compiled by The Economist. Prices increased 121 percent in Spain, 113 percent in Australia and 75 percent in the Netherlands.

The U.S. housing market, meanwhile, was up an average of 53 percent.

"The developed world is experiencing an amazing housing boom," said Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School of Business.

A small world in some respects
Low interest rates deserve some credit for the global housing boom. The average prime rate for the United States and a dozen of its largest trading partners fell from 13 percent to 4.4 percent between 1990 and 2004, said Wachter.

While rates have been declining, many countries are emerging from recessions, she added. Country-specific factors have also been a boon for some markets.

"Because countries trying to join the European Union have been forced to get their fiscal policies in order, inflation is now less of a concern for investors," said Wachter. To homebuyers in those countries, that means that credit is more widely available and with more favorable terms.

Eastern Europe and Central America, meanwhile, are emerging as popular second home destinations.

"We're seeing a lot of interest in Nicaragua, Belize, Honduras and Panama because of the proximity to the United States," said Roger Gallo, publisher of "Offshore Real Estate Quarterly" and EscapeArtist.com.

Not all of the world is booming, mind you.
In Germany prices have sunk 3 percent over that eight-year period. The population is stagnant or declining, while unemployment remains high, said John Vogel, adjunct professor at the Tuck School of Business at Dartmouth.

In Japan, home prices are down 22 percent.

It's also worth noting that prices in some of the hottest markets are cooling.

The Commonwealth Bank of Australia recently reported that house prices in Australia fell at an annual rate of 13% in the first half of 2004. And according to the Royal Institution of Chartered Surveyors in Britain, meanwhile, home values have recently declined at their steepest rate in nine years.

"This kind of volatility is to be expected in markets with supply inelasticity," said Wachter.

Still many variations
Rising home prices aside, each country has its own cultural, financial and regulatory quirks.

In many Latin American markets, for example, existing homes for sale may be less common because houses are passed down from one generation to the next. In other markets, such as Italy, news of houses for sale often spreads via word of mouth.

Financing, most notably, varies greatly from one country to the next.

The 30-year fixed rate mortgage that is so popular with American buyers is virtually nonexistent in most other countries, according to Fannie Mae.

In Germany, for example, the most common loan carries a fixed rate for no more than 10 years, and stiff prepayment penalties make refinancing an expensive option. In Britain, loans with rates that adjust annually are still the prevailing product.

"Financing is available in most other countries, but it often doesn't make any sense," said Elizabeth Makatura, vice president for international service and operations for Coldwell Banker. "Interest rates can be as high as 30 to 50 percent in some parts of Latin America or the Caribbean."

Down payment requirements are also more stringent. While it's not uncommon to put down as little as 0 percent to 5 percent in the United States, in many other countries buyers need a hefty amount of cash to qualify for a loan.

According to Fannie Mae, buyers in Italy may need to put down 50 percent of the cost of the house. In Germany, a 40 percent down payment may be needed, and in Mexico a 30 percent down payment is the standard.

"In the People's Republic of China financing is done by the government, and you essentially rent the property for 90 years," said Makatura. "If you move out or stop paying, someone else moves in."

Global Land Grab
Prices have appreciated significantly in most developed countries

Price
appreciation
1997-2004*
Country

Ireland 174%
Spain 121%
Britain 116%
Australia 113%
Netherlands 75%
Sweden 67%
France 59%
Belgium 54%
Italy 54%
United States 53%
New Zealand 47%
Denmark 41%
Canada 30%
Switzerland 11%
Germany -3%
Japan -22%

* as of June 2004
Source: The Economist, based on data from individual countries

Gurus want your money

2005-05-25T16:28:00.000-07:00

Among those making money on real estate are the gurus selling (expensive) words of wisdom.
October 4, 2004: 10:34 AM EDT
By Sarah Max, CNN/Money senior writer

SALEM, Ore. (CNN/Money) – Didn't make the cut for the second season of "The Apprentice?" Rejected from Richard "The Rebel Billionaire" Branson's "Quest for the Best?"

Don't give up trying to give up your day job just yet.

There are more than 100 real estate gurus who want to share their millionaire secrets with you -- for a fee, of course. The business of selling real estate advice via books, CDs, online mentoring and seminars is booming.

"Rich Dad Poor Dad," by Robert Kiyosaki, has been on the New York Times bestseller list for four years running. His $195 board game CashFlow 101 is being played around the world.

While the book and game don't give specific real estate advice, "The ABC's of Real Estate Investing" by Rich Dad-endorsed author Ken McElroy, does. (Both books are published by Warner Books, a division of CNN/Money's parent company.)
Student attendance at the Whitney Education Group, founded by Russ Whitney, author of "Millionaire Real Estate Mentor," increased 189 percent between the second quarters of last year and this year. Revenues of the publicly traded Whitney Information Network (RUSS: Research, Estimates) rose 151 percent.

Mentor Claude Diamond has a waiting list for his $15,000 one-on-one mentoring program, which gives students round-the-clock access to Diamond via phone, fax and email.

Meanwhile, more real estate gurus are coming on the scene.
"There's a new one a week," said John T. Reed, who as publisher of the newsletter Real Estate Investor's Monthly is a guru in his own right. "For a while I tried to keep track, but there's just so many of them."
Reed lists and critiques these authors and mentors on his Web site. "There are hundreds of thousands of people out there trying to do these bogus programs," he said. "These programs were designed to work in the seminar room, not in the real world."
To be fair, this isn't always the case. Some of the gurus listed on Reed's site are regular sources of CNN/Money and seem pretty down-to-earth. But it always pays to be wary.

"There are some who are straight up charlatans and some who are straight shooters," said Scott Whaley, president Real Wealth Seminars, which produces real estate investing events. "In that regard it's no different than any other industry."
From books to boot camp

Wanna-be real estate investors are typically introduced to gurus via books or DVDs sold in bookstores, online and through infomercials. These low-cost products help drum up interest in free or low-cost seminars, or generate calling lists – both of which are used to recruit consumers to two- to three-day seminars ranging from $1,500 to $5,000.

"Before you spend that kind of money, do some due diligence," Edward Johnson, president and CEO of the Better Business Bureau, adding that some of these seminars have revival atmospheres with high-pressure sales pitches. "Chances are the offer they're making today is going to be around tomorrow."
This is not to say that all of the companies selling these seminars are problematic, said Johnson. "But this is an industry we get complaints about," he said "Some of the businesses have unsatisfactory ratings with the BBB and other companies have FTC actions against them."

In August, the Federal Trade Commission charged guru John Stefanchik, author of "The Stefanchik Method" and "Wealth Without Boundaries," and a business associate with making false earnings claims.

According to the FTC complaint, an estimated 7,000 consumers paid between $5,000 and $8,000 for materials and mentoring about how to buy and sell privately-held mortgage notes. The strategy, according to Stefanchik.com, "the easiest way to make $10,000 every 30 days... guaranteed."

Yet, when the FTC surveyed 1,000 customers, of whom 500 responded, it found that Stefanchik's method wasn't so easy after all.

"Virtually no one made money," said Nadine Samter, an FTC attorney based in Seattle. Stefanchik's attorney Rodney Umberger said his client strongly disagrees with the allegations, adding that educational courses depend as much on the students as the educator.

"I just hope the other people running these programs are aware of this case," said Samter. "I suspect there are others out there using the same formula and I would venture to say [their customers] aren't making money."

If you're interested in real estate but don't have a clue where to start, considering first joining a real estate club. Not only will you have access to mentors – who don't charge anything – you may be able to check out guru materials from the club's lending library at no cost. (Word of caution: Club organizers say that gurus often speak at real estate club meetings, but that is not necessarily an endorsement.)

Be suspicious of any pitch that promises to make you a lot of money in a short period of time and a no cost to you. "There is no way to get rich quick," Samter said.

Unless, of course, you can uncover the next millionaire secret and package it with a slick sales pitch.

Where landlords go to schmooze

2005-05-25T16:24:00.000-07:00

Real estate clubs are drawing a diverse mix of pros and rookies interested in one thing; property.
September 30, 2004: 1:25 PM EDT
By Sarah Max, senior writer

BEND, Ore. (CNN/Money) - Every Friday morning, 15 to 20 members of the Central Oregon Investment Club in Bend, Ore. convene in a conference room of a local title company to discuss their latest deals and add to their three-ring binders of real estate investing lessons.

The group's leader, a general contractor, real estate investor and "poor country boy" (wink, wink) Don Loyd, passes his hat and asks members to throw in a buck to help pay for the room. Then, men and women ranging from their late teens to their early 60s, introduce themselves as they do every week. "Hi, I'm (fill in the blank) and I am a real estate investor."

There are now hundreds of real estate investment clubs, according to the National Real Estate Investors Association, which is affiliated with about 150 groups representing more than 20,000 individuals. That's just scratching the surface, says Rebecca McLean, the association's executive director. "We estimate that we don't even account for a quarter of all the clubs that exist."
Membership has shot up right along with home prices. "A lot of money has come out of the stock market and been directed toward real estate," says Randy Steadham president of the Realty Investment Club of Houston (R.I.C.H.), whose membership over the past four years has quadrupled to nearly 2,100.

Real estate club members pay anywhere from $50 a year to $200 a year to join these groups, which are typically nonprofit education or trade organizations.

Members attend regular meetings and roundtables at title companies, buffet restaurants, synagogues, hotels and, in the case of larger clubs, their own facilities. The national convention for these land lovers is, ironically, held at sea for a weeklong all-inclusive cruise through the Caribbean.

"When groups began the mainstay was monthly meeting," says McLean. "Now they've gone well beyond that." The largest of such clubs, Georgia Real Estate Investors Association, holds meetings or workshops nearly every day of the week.

Even smaller clubs, like the Central Oregon Investment Club, meet every single week. "It's a very down to earth group," says Loyd, who started the club in January 2004 with two members and now has 34 regulars who include doctors, cleaning people and entrepreneurs.

Though every club has its own personality, leaders say members are a diverse group with a wide range of real estate experience, or inexperience for that matter.

"I would say that 80 percent of our members are 'newbies' who have done one transaction or less," says Mark LaNore, president of Northwest Real Estate Investors in Portland, which has 450 members, up from 30 members in late 2001.

Education is the primary focus of club gatherings, where members learn about everything from finding a good rehab to putting property in a land trust, not to mention hear the scuttlebutt on local real estate markets. Members also receive discounts on everything from paint to office supplies, and they have access to lending libraries stocked with books and real estate "kits."

Networking also a key perk. "Members of our group can learn about property before it goes on the market, consult with contractors about rehab property and get advice from attorneys who are members," says LaNore.

Looking through club's calendars of upcoming topics, just one element appears to be missing: skepticism.

While the groups speak to specific risks of investing in real estate – such as getting sued by a tenant, not having enough insurance or spending too much on a rehab – most don't address the risk of, say, putting all of your net worth in real estate.

"We tell people this is hard work and you have to do it the right way," says Steadham of R.I.C.H., a former oil services executive who says that he, for one, has moved all of his money out of the stock market and into real estate.

In the interest of steering members clear of "get-rich-quick" strategies, club leaders say they are also careful about what gurus they invite to speak at their meetings. "Our gal in charge of our convention has great knowledge of who these people are and what they have to say," says Jerry Conley, executive director of the Ohio Real Estate Investors Association, whose convention in October will draw about 1,800 people to hear as many as 20 speakers.

Then again, with themes like "How to turn an ugly house in to a pot of gold" and "Super size your short sales" attendees will need extra reminding that real estate is hard work.

April Home Sales Set Records

2005-05-25T16:22:00.000-07:00

WASHINGTON (May 25) - Sales of new homes hit an all-time high in April, the Commerce Department reported Wednesday.

Sales, which were already at a record level in March, inched even higher in April, rising 0.2 percent to a new record annual rate of 1.316 million units. The median price of a new home jumped 6.1 percent to a new all-time high of $230,800.

The strong report on new home sales followed a report Tuesday showing that sales of existing homes shot up 4.5 percent in April to an all-time high annual rate of 7.18 million units. The median price of an existing home sold last month hit a record as well of $206,000, up 15.1 percent from a year ago, the biggest price jump in nearly a quarter century.

The big increase in prices of both new and existing homes has raised worries among some economists that the housing industry could be in the grips of the same type of speculative fever that pushed Internet stock prices up to dizzying heights in the last decade, only to see them come crashing back to earth when the bubble burst in early 2000.

In a speech last week, Federal Reserve Chairman Alan Greenspan said he did not believe there was a national housing bubble similar to that stock market bubble, but he said there were a ''lot of local bubbles.''

Michael Carliner, senior economist at the National Association of Home Builders, said bubble was the wrong metaphor for the housing industry. He said prices wouldn't suddenly pop one day. He said in past periods when there were sharp increases in prices, some local areas have seen price increases slow and even stagnate for a prolonged period.

But Carliner predicted that with mortgage rates remaining at lower-than-expected levels this year, 2005 could see the fifth straight year for record sales of both new and existing homes.

The strength in new home sales last month was led by a 37.2 percent surge in the Northeast, which pushed the sales rate to 107,000 homes, the strongest pace since January 1997. Sales were up 2.8 percent in the West to an annual rate of 368,000 units.

However, sales fell by 5.3 percent in the South to an annual rate of 630,000 units and were down 0.5 percent in the Midwest to an annual rate of 211,000 units.

In a second report Wednesday, the Commerce Department said orders to U.S. factories for big-ticket manufactured goods rose a solid 1.9 percent last month, the best showing since November.

The department said the increase for durable goods was propelled by strong demand for transportation equipment, especially airplanes, which helped push the overall number up by $3.71 billion to a seasonally adjusted $200.3 billion. Excluding transportation, orders would have edged down a slight 0.2 percent.

Economists said the strength in both reports showed that worries of a serious slowdown from this year's oil shock were overblown.

''In March we had a combination of bad weather and bad seasonal adjustment problems which made that month look too weak,'' said David Wyss, chief economist at Standard & Poor's in New York.

He said based on the data so far, economic growth for the first three months of the year will probably be revised up in a government report Thursday to around 3.5 percent, compared with the originally reported 3.1 percent growth. Wyss said based on the strength already seen in April, he will increase his estimate for second quarter growth as well.

''It looks like we will get around 3.5 percent growth for the first half of this year, which is pretty darn good,'' he said.

A Coast Guard Flyer

2005-05-23T07:28:00.000-07:00

Tycoon in the making

Former Coast Guard officer finds you can go home again -- and make money buying homes.
February 23, 2005: 3:26 PM EST
By Les Christie, CNN/Money staff writer

The Elliotts

NEW YORK (CNN/Money) - Contrary to what another North Carolinian wrote, you can go home again. At least Jim Elliott did.

After years traveling as a Coast Guard flyer, Jim Elliott moved back to his hometown of Elizabeth City, N.C., to a life made a little more interesting – and lucrative – by real estate investing.

Elliott had already started, albeit slowly, well before he moved back home.

He bought his first house in 1995, paying $135,000, for himself and new wife Cindy on the northwestern coast of Puerto Rico, where she hails from and where he was stationed at the time. It commanded a sea view and came with swimming pool.

Three weeks later, Elliott went into a meeting with four other pilots where they were told the Guard had eliminated one of their jobs.

"They looked around the room, saw me, and said, 'you're leaving,'" says Elliott. The Coast Guard transferring him to Hawaii.

After heading west, he and Cindy tried to turn the Puerto Rico house into a vacation rental property – a mistake.

"You cannot manage a property from 6,000 miles away," Elliott says. "The rent only covered half the mortgage and we only got that one out of every two months, on average."

He gave up on it after two years, selling it for about what he paid.

Look homeward
By the late 1990s, the Elliotts began looking to move back to North Carolina. A friend in the real estate business there pointed Elliott to a 2,500 square foot, four bedroom, 2-and-a-half bath, contemporary.

The house was a VA foreclosure. At first, Elliott thought it was too expensive, but the VA dropped the price every two weeks by $4,000 or $5,000.

After more than four months, it had fallen to $175,000, and Elliott pulled the trigger.

He transferred to a nearby Coast Guard base in 1998. The family, including daughter Jasmine, now seven, lived in the house until its sale, for $213,000, in September 2002.

Meanwhile, there were other deals. The VA had another foreclosure that Elliott bought for $70,000, with $500 down. He rented it out for two years, breaking even after figuring mortgage, taxes, and expenses, and sold it last summer for $101,000, realizing a net profit of about $25,000.

The next deal involved a neighbor of his grandmother. He bought the house, "mostly to be able to control who moved in next to her," for just $25,000. He also got his father involved.

"He was complaining that the bank was paying a half-a-point interest on his savings." Elliott remembers. "I said, 'why don't you lend me the money for this house.' It's a win-win."

Elliott got a no-money-down mortgage at a competitive rate and his father gets a big boost over the return the bank was paying him. He recently had it appraised for $55,000.

Elliott also bought a house a bit further out in the country, paying $150,000 for 2,000 square feet, a two-car garage, and a greenhouse.

Making it a business
In September of 2002, the Elliotts took their biggest real-estate step, a $425,000 purchase of the Culpepper Inn, a 12-bedroom, 13-bath, brick colonial, bed and breakfast. They now live in several of the rooms and run the rest as an inn.

Some rooms rent on a monthly basis for about $700. The guests often come from one of several military bases in the area. In the summer, the Elliotts rent out as many as nine rooms, nightly, to vacationers for between $85 and $135 a night.

Elliott figures their net from all the properties at about $30,000 annually, a nice piece of change considering that they haven't had to invest very much up front.

The Elliotts spread their investment risk. They have a total of nearly $300,000 invested in IRAs, Roths, 401(k)s, stocks, and mutual funds.

Not that Elliott is worried about his real estate investments. Since this area of North Carolina has not had a big price run-up, a severe drop seems unlikely. Plus, he believes he bought well enough that even if markets decline, income from rents can tide them over until conditions reverse.

Long range, Elliott wants to expand his lodging business. A local businessman has been trying to develop a 6,000-acre plot of land outside of Elizabeth City for three years. If that goes through, Elliott plans to be a part of it, building a 60-to-80-unit hotel.

Not only can you go home again, but you can have lots of places to sleep when you get there.

More Tycoon Profiles

2005-05-23T07:27:00.000-07:00

More Tycoon Profiles
•
Rob and Nicole Adams
•
The Kennedy family
•
Chris Sontaie Ferrell
•
Todd and Suzanne Egress

Still in College

2005-05-23T07:25:00.000-07:00

Tycoon in the making

Still in college, real estate investor Saverio Fulciniti is a young man in a big hurry.
February 14, 2005: 10:16 AM EST
By Les Christie, CNN/Money staff writer

Saverio Fulciniti

NEW YORK (CNN/Money) - Some people are ambitious from a young age. They're early onset entrepreneurs who can't wait to start making money.

Take Saverio Fulciniti, 21. He came to the Boston area as a three-year-old from Calabria, the region forming the toe of the Italian boot. His mother was returning to America, where she had lived from age nine until after high school. Saverio's father was strictly Italian and spoke no English when he immigrated, at 28, to the States.

He was a trained electrician though, and soon obtained a license to practice the trade in the United States. Saverio's mother made her career in real estate, first in sales, then in property management.

"Both parents have had a big influence on me," says Saverio. "My mother is a tenacious business woman. I think her tolerance for risk and her business skills have made me the business person I am."

Like father . . .
The immigrant work ethic rubbed off.

"I started working as soon as I could," Saverio says, "first in a supermarket when I was 14 and then in a Target at 16." He also toiled weekends and summers with his father and uncle as an electrician's apprentice. Even now, he acts as a private-function deejay and emcee.

During his freshman year at Northeastern University (from which he's scheduled to graduate in spring 2006) he started his own company called Level 5 Productions, which planned parties at local clubs and bars -- even cruise liners.

He says he made about $3,500 to $4,000 a month, but it was very stressful. He had other students working with him and they could be an undisciplined lot. "It's difficult trying to manage young college kids when you're just an 18-year-old yourself."

Saverio has a double major in Entrepreneurship and Marketing and lived on campus for two years. "I wanted to spend the first years on campus." But he knew he wanted his own home after that.

His mother helped by finding a place for him to buy – a condo 30 minutes from campus in Danvers, Mass. – and with a little financial help at closing.

Saverio himself met the bulk of the expenses, a considerable undertaking for a 19-year-old. The price was $130,000, not bad for 500 square-foot, one-bedroom with an open layout, but his mortgage lender looked at his age and minimal credit and wanted him to put nearly 30 percent down to avoid private mortgage insurance. He wound up spending $37,000, a sum he had managed to save from his many jobs.

That deal went through in July 2003. Since then, judging from sales of comparable apartments in his 45-unit complex, he says his apartment is worth about $160,000.

Irresistable impulse
He thought he was finished buying real estate until after graduation. Then his mother ran across a very undervalued apartment in a complex in nearby Amesbury in July 2004.

"It was being shown by an out-of-town broker who didn't know that comparable condos were selling much higher," says Saverio. He and a partner, Chris Limauro, "got an agreement to buy it in less than two weeks."

They picked up the one-bedroom place for $82,500, not underbidding by too much because they were anxious not to lose the deal. They put in some cosmetic repairs – new hardware,painting, recessed lighting – and had an offer on the place a week later. They sold it in less than a month and netted more than $20,000.

They turned around and bought another condo, this time a two-floor, two-bedroom townhouse, for $122,500. This one needed a little more work. They refinished foors, painted, put in new carpeting, and did electrical work. They also put on a new deck and windows. They sold it for $166,500 a month later.

With winter coming, Saverio and Limauro slowed down. But they are eying condos at two more complexes. "We're trying to put together a five-unit purchase for a spring closing," says Saverio.

Looking toward the future
After he gets his degree, Saverio plans a career in commercial property finance. But his home town region is becoming a tough place to find investment properties. Building sales prices have outpaced rentals.

"Not many places in the Boston area can really generate cash flow," says Saverio.

In the meantime, he's in a co-op semester at school. Northeastern is a five-year program, in which students spend multiple semesters in the work force.

Right now, Saverio is working for a commercial mortgage broker, in addition to his property buying. He also will be going for his broker's license next month.

It may be tempting to think of Saverio as money conscious and frugal. But he is not a super saver by any stretch; he has very normal spending patterns for a college student.

There may be something in the name, though. Saverio is Italian for Xavier, a Spanish name that means – "New House."

Tycoon in the making

2005-05-23T07:22:00.000-07:00

Tycoon in the making

For the young immigrant Tamara Garber, real estate opens the golden door.
March 10, 2005: 8:26 AM EST
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - Like generations of immigrants before her, Tamara Garber arrived in the United States with little more than intelligence, courage, and desire to succeed

Garber grew up in the ancient silk-road city of Tashkent in Uzbekistan, the former Soviet republic. After the breakup of the Soviet Union, the central Asian country became increasingly inhospitable to non-Uzbeks. As someone of Russian-Jewish ethnicity, educational and career advancement there seemed unlikely for Garber.

So in 1994, she, her mother, and her brother came to New York, where her older brother was studying medicine.

Immigration was wrenching. "It was most difficult to know and realize that there's no life here yet and there's nothing to go back to," she says.

At first, her version of the American Dream seemed more like a nightmare: Up every weekday at 4:30 so she could open a coffee/bagel shop, pre-med classes in the afternoon at NYU, home rarely before 10:00, and weekends filled with baby-sitting jobs. She had to earn a living and help support her mother and brother.

"When you're an immigrant you have no one to rely on," she says. "You have to make your own way."

After she realized that a career in traditional medicine was not for her, she switched to acupuncture, which she still practices.

First blood
Garber was working in a computer store and going to school full time when, in 1999, she bought a co-op apartment in the Bronx for her mother. Her first venture into real estate was not an altogether happy experience.

She was 22, with no credit history, and little money. Mortgage loan officers gave her the runaround. Four co-op boards turned her down. Finally, she found a sponsor's unit in a building in Riverdale that didn't need board approval.

Garber paid down $8,000 and took on a $32,000 mortgage, which "seemed huge," she says. Her mother stayed for a couple of years. Tamara then sold the apartment for a profit of about $25,000.

She began to study motivation -- the desire to succeed and taking action to make it on your own. She also got into her next real estate venture, buying a three-story, single-family house in Englewood, New Jersey at a foreclosure sale for $125,000, a week after the World Trade Center catastrophe.

"I had no idea what I was doing," she says. "I didn't see the house prior to bidding, I didn't know basic things such as needing to check the title history for liens." She found that she had bought a wreck -- with the previous owner still on premises.

She had neither the time nor the money for legal bills to force the old owner out. Tamara weighed her options and made her an offer. "I paid her to move out," she says. "At $3,000, it was cheaper."

The house was structurally sound, but filthy. ("It had cans of food from the 1950s in the kitchen," says Garber.) After six months of work -- a new roof, siding, drywall, floor, kitchen and baths, and fresh paint -- the house sold for $259,000, a profit of about $70,000.

Knowledge is power
Her next purchase was a single-family unit in Englewood Cliffs that she wanted to tear down and rebuild. Over the next year she experienced the pain of navigating a maze of variance approvals, public hearings, and publishing notices in local newspapers. She bailed out more than a year later without starting the project, but she received $80,000 more for the property than what she paid.

She began to make it her business to learn more about the business. She read books and magazines, listened to motivational CDs, and talked with others in the business. Eventually, she even took a job with a mortgage lender.

"I learned everything I needed to know about financing," she says. "Now, when talking with bankers, I know exactly what they're saying."

Garber started to think about getting into home construction. She bought an old house in Edgewater, razed it, and built a duplex, the biggest house in town. She needed to bring in a partner to accomplish this, and the deal yielded more than $400,000 in profits.

Since then she has begun constructing three more two-family houses in Edgewater. Her latest step is buying a five-lot property, where she will build three duplexes and two single-family homes.

Garber has certainly benefitted from the rapid expansion of real estate prices. She insulates herself from short-term downturns by selling quickly.

Determination and an ability to act characterize her temperament. "My banker told me that other people say why this deal or that deal won't work," Garber notes. "She said, 'But you, you just go out and make it work.'"

Garber still feels like a rookie. She wants to learn more and recently enrolled in her first real estate course, a seminar at NYU conducted by leading developer. She's looking for her next project.

"I love the challenge of real estate," says Garber. "I take so much pride when I pass a house I built, knowing that families are living there."

----------------------------------------------

California Tycoon

2005-05-23T07:15:00.000-07:00

Tycoon in the making

Bo Apostolache likes real estate investing so much, he's starting his own club.
March 30, 2005: 9:23 AM EST
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - These days, investing in Southern California real estate is no walk in the park. "Overheated jungle" is more like it.

That hasn't kept people like Bo Apostolache, a 28-year-old mortgage banker in Orange County, out of the market.

A few years ago, Bo and his wife Ana decided that she would become a stay-at-home mom to their twin 3-year-old daughters Alina and Jordyn. They realized they would need extra earnings to offset her loss of salary.

Given his profession, Bo chose to expand his focus on real estate. Instead of just helping other people finance their purchases, he wanted to start making deals of his own, as well.

For advice, he turned to a local investment club. But the first meeting proved less than illuminating.

"It was too technical. I'm a mortgage banker and even the mortgage information was hard to understand," says Bo. "It was not the general information that you need."

Attending the meeting did, however, put him together with others who were doing just what he wanted to do. That was enough encouragement to push an on-the-fence investor over the top.

"A lot of people like me don't have the knowledge – and courage – to start their own investments," says Bo. The club showed him that he could overcome inexperience.

Diving in
His first real estate purchase took place in 1999 when he bought the family home, a three-bedroom, two-bath in Santa Margarita. His father, Gabriel, sold it to him.

Dad, a Romanian immigrant who works in the computer business, gave Bo a great deal on the property, selling it for the $200,000 he himself had paid. An appraiser pegged its recent worth at more than $650,000.

Orange County prices have nearly tripled over the past five years. Last year, the median home price in the Anaheim-Santa Ana area rose 19.1 percent to $627,500.

It takes some guts to take the plunge into such a market, though. Apostolache says his purchase of an investment property in Orange City for $374,900 last December, "led to some sleepless nights."

It got worse after he took possession. The previous owner, a contractor, left the duplex condo in A-1 condition, and a week after Bo bought it, an appraiser pegged its value at $400,000.

Bo made some improvements, like a marble fireplace, plantation shutters, and Pergo flooring, then put it on the rental market.

He even inked a lease, at $1,850 a month, before disaster struck.

"My next-door neighbor called and said, 'I have some bad news: Your apartment is ruined,'" Bo remembers. A flood left five inches of water on the first floor, the ceiling caved in, and everything ruined. "They had to gut the ceiling to the 4-by-6 beams."

It cost more than $20,000 to repair and Bo had no insurance, so the loss was paid for out-of-pocket. He now has to sell the condo. Fortunately, real estate values have continued to climb and he has it listed for $400,000, which should be enough to cover most of his loss.

No throwing in the towel
Apostolache inherited a good dose of fighting spirit from his family. It was difficult for them to secure permission to leave Romania. Bo says his mother, Eugenia, had to go on a hunger strike to persuade authorities to let them go.

That spirit, plus an MBA, has left Apostolache with an itch for his own business. After his less than perfect investment-club experience, he thought he could do better by starting his own investment club, which he has christened the Orange County Investor.

He put a link on a Web site that listed investment clubs and got about 80 responses. That was enough to have him plan the kick-off meeting, which he hopes will attract about 500 people.

"We'll talk about real estate trends, the rental market, mortgage rates," he says. "For keynote speakers we'll have real estate agents, certified financial planners, mortgage bankers, but there won't be anything too technical."

He's planning to address the potential real estate bubble at the first meeting. He busy arranging sponsors – he has a couple lined up already – creating ads, and building a Web site at www.ocinvestor.com

Bo's spending quite a bit to get the club off the ground. He expects to get some of that back in referrals for his mortgage lending and perhaps from attendance revenue as the club becomes a monthly staple for local investors.

His target audience is the higher-than-average income household and he hopes to expand the club's scope beyond real estate in future meetings. It's all his party, but a mentor is providing him some free advice.

It all sounds like a big undertaking, but Apostolache has energy and enterprise. He also plans other property purchases.

"Entrepreneurship is in my blood," he says.

A NYC Tycoon in the making

2005-05-23T07:09:00.000-07:00

Tycoon in the making

When the Internet bubble burst, Dave Goldoff left the industry and headed out into real estate.
April 19, 2005: 11:30 AM EDT
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - Dave Goldoff once shunned the real estate business, despite the success his father and uncle had with a few buildings they bought together in lower Manhattan.

For Dave, real estate seemed too conventional.

Instead, he worked in Internet entertainment, a fast-paced world where he rode a roller coaster of different jobs. Projects ended with mass layoffs or a neat corporate crash-and-burn.

When the bubble burst, he found himself idle and living in a family apartment building on Water Street in Manhattan. His uncle suggested he earn back some rent by running the building.

"I liked it because I could see things happening," he says.

"In 2000, they were getting $1,800 a month for a one-bedroom apartment," he recalls. "I spent $20,000 to $30,000 to renovate and the rent went up to $2,300."

Then came September 11.

The building lies eight blocks downwind of ground zero. Goldoff had been at the Twin Towers that morning. Back home, he heard the first plane crash. "I thought the cooling tower on our roof had fallen." He was outside when the second plane hit.

Everyone evacuated, but authorities called Goldoff back in because they wanted to use the roof for communications devices.

"I saw a warship in the river, fighter planes patrolling overhead, and armed guards around the building, which was covered with soot," he says. The stench from the burning buildings lasted for weeks.

"A lot of tenants were stressed out and walked away from their leases," he says. "But we couldn't go after them for leaving."

Getting started
Managing the building piqued Goldoff's real estate instincts. He decided to go back to school at night for a degree in the field. He's now nearing the end of a four-year course of study at NYU.

Early on, he took a job with a real estate investment firm. "My uncle told me to learn how people buy and sell properties," he says. "What I learned was that I didn't want to be a broker."

He started going around the city, trying to get a handle on prices. He looked at many dilapidated buildings with an eye toward buying them cheap, doing a quick fix-up, and selling fast.

"I met people doing foreclosure flips," he says. "I went to auctions, and I sat and listened. I had no money and no clients."

He decided the best, low-risk proposition would be to buy land. He and a high school friend, Erik Orsino, partnered up to start a company, D&E Management.

They bought their first property in June 2003, a commercial-zoned lot in Far Rockaway, paying $80,000 at a foreclosure auction for it, putting down 10 percent. They planned to sell the contract within 30 days -- to avoid closing costs -- to a client who was willing to pay $125,000.

It sounded great: Put down $8,000 and get back $45,000 less than a month later. But title problems plague foreclosures.

"I would guess that 99 percent of auctioned properties don't have a clear title," says Goldoff. Either an old owner is still on the deed or there's a tax lien or the land has wetland issues.

The lack of a clear title is not always a disadvantage. According to Goldoff, it can buy time. Ordinarily, you must complete the deal within 30 days, which means coming up with the balance of the money.

"Auctioneers are responsible to make sure the title is clear," he says. "If it's not you can delay the closing or get your deposit back."

In the end, that "quickie" first deal took a year. But they came out of it with a $20,000 profit and a learning experience. They completed three more deals like that, before the auction game grew too crowded to continue.

"There was no room to make money," says Goldoff. "We pulled out. We had to figure out a new vehicle."

Greener fields
They turned to upstate New York. The first house they bought there was a three-bedroom, one-bath summer home on a lake in Orange County. They paid $225,000, spent $70,000 winterizing and modernizing it and putting in a second bath. It's on the market now for $450,000.

They've closed on three houses upstate, and are in contract to acquire an estate on the water in Bridgeport, Conn., where they hope to build several townhouses. Then there's an old brewery in Watkins Glen, N.Y., which they intend to buy and develop into a condo complex and resort.

"I target lakes and golf courses," says Goldoff, "places with better schools and good access to transportation."

The now 29-year-old Goldoff, who recently married Beth, a creative director he met in art school, strives to make money with each purchase. He doesn't count on a hot market to bail him out.

"I always have to look at the worst case scenario," he says. If the deal is profitable under those conditions, "Everything else is gravy."

Eventually Goldoff hopes to be in all three categories of real estate – management, development, and sales, a "turn-key operation," as he calls it.

"Two years ago I was out looking to network," he says. "Today, people are calling me."

Tycoon in the making

2005-05-23T07:05:00.000-07:00

Ted Theodoropoulos learned early how lucrative real estate investing can be.
May 2, 2005: 2:26 PM EDT
By Les Christie, CNN/Money staff writer

Ted Theodoropoulos

Flipping Real Estate the Easy Way
Every legitimate method of flipping properties, plus many other investing...
www.intellibiz.com

Make Money Flipping Properties
Flipping Properties is a step-by-step system for making money in profit by...
www.business-marketing.com

Repo Properties For Sale
Search for real estate foreclosures in your area and get property details,...
www.realestateforeclosures.net

Earn $97,645 in 7 Months Flipping Houses
Flip real estate to generate huge profits. You too can earn $97,645 in 7 months...
www.cashinhouses.com

NEW YORK (CNN/Money) - When Ted Theodoropoulos was about 10 years old, he learned a valuable lesson.

"My father bought a corner house in Chapel Hill for $60,000," says Ted. "He intended to knock it down and build another. But before he had a chance to do that, they announced that a mall was going in directly across the street."

His father wound up selling the property six months later for a cool $200,000 profit.

"It was mostly luck," says Ted. "But it made a big impression on me."

Perhaps it has helped focus Ted's entrepreneurial attitude. The 32-year-old North Carolinian has invested in three properties during the last two years and is looking for more.

Ambition and Ted are well acquainted. His mom and his dad have both been business owners, in addition to dabbling in real estate. Ted himself started a company, a collection agency, when he was still in college.

It was his mother who made the suggestion that launched his company. She was a restaurant owner who had taken some bad checks and she didn't have the time to pursue them herself. She told Ted she would give him a fee for any accounts he was able to make good.

Ted was so successful that he dropped out of school and started a collection agency. It began with restaurant clients, then branched out to corporations, such as Lucor and Time Warner Cable, for which he collected equipment when customers moved away or fell behind in bills.

At the peak, Ted employed 15 to 20 people. He ran it full time for a year as he attended night classes. It proved lucrative enough that his mother and a brother joined the business.

After college, where he studied information technology, Microsoft offered him a good job, "50 percent more than I was making at the collection agency," he says. So he turned the collection business over to his brother and mother, and went to work at Microsoft's Charlotte office.

He stayed there for a year or so and then went to work crunching data for a major bank, where he is a vice president today.

First foray
In 2001, Ted made his first real estate purchase, a one-bedroom condo in downtown Charlotte. He he paid $145,000 and it's now worth about $235,000.

Watching the value soar "got my wheels turning." At the time, a bank colleague was supplementing her income flipping properties regularly. "She was not hitting the ball out of the park," he says, "But she was doing well."

Through her, he met a broker who asked about Ted's means and goals: How much did he have to invest? Did he want to manage the property? What return was he looking for, and in what time frame?

"He gave me a realistic picture of the business," says Ted. "A lot of it -- like cleaning up after tenants and chasing them for rent -- is undesirable."

But Ted was used to working with credit reports and "skip traces," which enable collectors to track down people. So in early 2002, he bought a three-bedroom, one-bath, brick ranch near a gentrifying part of town. He paid only $72,000 plus a little more fixing the cosmetics and installing new air and floors.

"I rented it out for a year," he said. "Then my mother and brother moved down to Charlotte and started living in the place." The two had put up some of the money for the house, as they have with subsequent ventures. The home's value has risen to the low $90s.

Shopping for foreclosures
The next step was to plunge into the foreclosure market. This is always a gamble because home inspections can be difficult to arrange making it tough to analyze how much more cash will have to be invested. On the other hand, foreclosures can be great bargains.

Ted, for example paid less than $40,000 for two condos near downtown Charlotte. The first, a one-bedroom, was just $17,000. He rents it for $500 a month and values the property at $35,000 today.

The second is a two-bedroom, one-bath, 900-square-foot he closed on last December. One of the reasons it interested him is that the condo board was spending to improve the property.

"There's an undesirable neighborhood next to the condos and it's keeping the property values down," says Ted. "But the board was talking of a special assessment to pay for a fence to block it off from the bad area."

He felt that with such steps the apartment would be worth much more than the $22,000 he paid. Ted wants to sell this apartment and has put it on the market for $44,500, which would mean a profit of $20,000.

Although he has proceeded cautiously, Ted envisions expanding more rapidly. Right now, he wants to do more low-risk deals until he learns the real estate business inside and out.

Ultimately, he would like to involve his two other brothers in it as well.

"When you're working with your brother, you know you're going to get a straight deal," he says.

Housing Bubble

2005-05-23T06:59:00.000-07:00

Are you living in a bubble?
Study ranks 99 housing markets as over, under and fair valued.

PLUS:
Million-dollar homes
•
Should you buy now?
•
Tycoons in the Making
•
Renovation tips

NEW YORK (CNN/Money) – Home prices in Chico, Calif.? "Too high."

Home prices in Salt Lake City? "Too low."

But, in Tucson, Ariz. "Just right."

These were the conclusions of study by Richard DeKaser, chief economist for National City Corp., who ranked 99 major real estate markets based on how much they are under or overpriced relative to what he deems "normal housing values."

In 2004, houses in Chico, Calif. sold for 43 percent more than their fair value, according to DeKaser, while houses in Salt Lake City sold for 23 percent less than their fair value.

To come up with each market’s fair value DeKaser studied data going back 25 years. Among other things, he looked at how much buyers are paying today relative to their incomes verses how much they paid in the past. This helps take into account the premium buyers are willing to pay for such things as location, weather and amenities.

For example, historically residents of Los Angeles have spent four to six times their income while residents of Kalamazoo have spent only twice their annual income, he said.

His conclusion: 27 of the markets in his study are overvalued, 29 are undervalued and 43 are fairly valued, with prices no higher or lower than 10 percent of their fair value.

"There are two ways these valuations can be corrected," he said, explaining that his valuations are not unlike the price-to-earnings ratios used to value stock. "Either prices decline or the underlying fundamentals improve."

City/Metro Area percent
over/under
fair value* City/Metro Area percent
over/under
fair value* City/Metro Area percent
over/under
fair value*
Chico, CA 43% Philadelphia, PA 6% Austin, TX -5%
Stockton, CA 34% Milwaukee, WI 6% Charleston, SC -5%
Santa Barbara, CA 34% Providence, RI 5% Dayton, OH -5%
Los Angeles, CA 32% Toledo, OH 5% Hartford, CT -6%
San Francisco, CA 30% Bakersfield, CA 5% Cincinnati, OH -6%
Modesto, CA 30% San Antonio, TX 3% Madison, WI -6%
San Diego, CA 28% Jacksonville, FL 3% Charlotte, NC -6%
W. Palm, FL 26% Rockford, IL 2% Columbus, OH -7%
Sacramento, CA 25% Orlando, FL 2% Davenport, IA -7%
Las Vegas, NV 24% Visalia, CA 2% Columbia, SC -8%
Portland, OR 24% Raleigh, NC 2% Nashville, TN -8%
Miami, FL 23% Phoenix, AZ 2% Omaha, NE -9%
Sarasota, FL 22% Canton, OH 1% Des Moines, IA -10%
Detroit, MI 22% Louisville, KY 0% Tulsa, OK -10%
Saginaw, MI 21% Tucson, AZ 0% Harrisburg, PA -10%
Bellingham, WA 21% Tampa, FL -1% Lincoln, NE -11%
Fresno, CA 19% Atlanta, GA -1% Houston, TX -11%
Reno, NV 19% Daytona Beach, FL -1% Dallas, TX -11%
New York, NY 16% Richmond, VA -1% Wichita, KS -11%
St. Louis, MO 16% Greensboro, NC -1% Buffalo, NY -11%
Greenville, SC 15% Colorado Springs, CO -1% Topeka, KS -13%
Boston, MA 14% Boise City, ID -1% Birmingham, AL -13%
Honolulu, HI 14% Fort Collins, CO -2% Rochester, NY -13%
Denver, CO 14% Spokane, WA -2% Oklahoma City, OK -13%
Seattle, WA 14% Allentown, PA -2% Baton Rouge, LA -14%
Eugene, OR 13% Kansas City, MO -2% New Orleans, LA -14%
Chicago, IL 11% Peoria, IL -3% Albuquerque, NM -14%
Washington, DC 10% Richland, WA -3% Syracuse, NY -16%
Minneapolis, MN 10% Lancaster, PA -5% Beaumont, TX -16%
Lansing, MI 8% Indianapolis, IN -5% Little Rock, AR -16%
Kalamazoo, MI 8% Norfolk, VA -5% Macon, GA -17%
Cleveland, OH 7% Pittsburgh, PA -5% Memphis, TN -20%
Grand Rapids, MI 6% Fort Wayne, IN -5% Salt Lake, UT -23%

* Figures represent 2004 prices relative to those implied by fundamentals.

Housing prices defy forecasts

2005-05-23T06:54:00.000-07:00

NEW YORK (CNN/Money) - Housing prices continue to defy forecasts of a slowdown.

Nationally, median home prices gained 8.8 percent in the fourth quarter versus the same period in 2003, according to a National Association of Realtors (NAR) report.

The median price was $187,500, which means that half the homes tracked cost more and half cost less. Of the 129 markets tracked, 62 areas had growth of more than 10 percent.

Over the past 12 months, Las Vegas home values showed the biggest gains. The median price of an existing single-family home in and around Sin City were up 47.3 percent. In Riverside and San Bernardino counties near Los Angeles prices were up 34.7 percent.

Six of the top-performing markets are in Florida with West Palm Beach and Boca Raton up 34 percent.

Not all markets have seen these kinds of gains. In nearly 17 metro areas, prices inched up less than 3 percent. In four metros, prices declined.

The NAR report for the fourth quarter was released on Feb. 15; first-quarter results are due on May 12.
ving in a bubble?

• Latest mrtgage rates

• Home improvement tips

NEW YORK (CNN/Money) - Housing prices continue to defy forecasts of a slowdown.

Nationally, median home prices gained 8.8 percent in the fourth quarter versus the same period in 2003, according to a National Association of Realtors (NAR) report.

The median price was $187,500, which means that half the homes tracked cost more and half cost less. Of the 129 markets tracked, 62 areas had growth of more than 10 percent.

Over the past 12 months, Las Vegas home values showed the biggest gains. The median price of an existing single-family home in and around Sin City were up 47.3 percent. In Riverside and San Bernardino counties near Los Angeles prices were up 34.7 percent.

Six of the top-performing markets are in Florida with West Palm Beach and Boca Raton up 34 percent.

Not all markets have seen these kinds of gains. In nearly 17 metro areas, prices inched up less than 3 percent. In four metros, prices declined.

The NAR report for the fourth quarter was released on Feb. 15; first-quarter results are due on May 12.

Realtors Group Must Add More Web Listings

2005-05-15T15:06:00.000-07:00

By Jayne O'Donnell, USA TODAY

(May 13) -- Home buyers who use lower-cost Internet sites could view as many home listings as those who use traditional brokers' Web sites, under a deal the National Association of Realtors says it's drafting to head off a federal antitrust lawsuit.

Laurie Janik, the Realtors' general counsel, said Thursday that the association would no longer let home sellers and their brokers "opt out" of listing their homes on the Web sites of Internet-based brokerages. Sellers could still choose not to display their listings on the Internet. But the decision would have to apply to all Web sites, including those of traditional brokerages.

The Realtors' online rivals have been pushing for the change, arguing that it would boost competition and serve consumers.

NAR and Justice Department officials met this week to discuss how to resolve the matter. NAR's amended policies still must be authorized by its board at a meeting Saturday and accepted by the Justice Department's antitrust chief, R. Hewitt Pate. Justice officials did not return calls seeking comment Thursday.

"They wanted us to come up with a new rule," says NAR spokesman Steve Cook. "That's what we're doing."

Over the past year, Justice officials had asked some online brokers if they'd testify against the traditional brokers in case a lawsuit was filed. The officials saw no choice but to sue if the association didn't come up with a solution that allowed for online competition, according to two lawyers involved in the investigation.

NAR has argued that the Realtors own their listings and that Justice was forcing them to share this information. But Justice officials have expressed concern about the influence the Realtors have over the market.

The officials opposed any solution that stopped short of allowing the Internet-based brokers to compete on a level playing field, according to the attorneys involved in the discussions.

Web-based brokers, who tend to charge less than the 5% to 6% commissions that traditional brokers do, have complained that they can't adequately compete with off-line brokers if buyers can't see all the homes available in an area. Many traditional real estate firms are adding "virtual office Web sites" so they can interact with customers online, rather than only on the phone or in person.

Bob Butters, a Chicago-based attorney for several Internet brokers, acknowledges that most consumers who receive hundreds of listings online might not know they didn't get a few dozen more that were available only to off-line brokers. But Butters says NAR had no justification to withhold listings other than the argument that "it's my listing, and I can do anything I want with it."

Tom Reddin, CEO of RealEstate.com, a sister company to LendingTree, says he hopes NAR's solution will "open the real estate market to all forms of competition." But he lamented that there are still "disturbing trends" in barriers to competition in real estate in several states.

Homes: Hot markets get hotter

2005-05-14T11:38:00.000-07:00

Home prices rallied in the first quarter; record number of areas had growth of more than 10%.
May 12, 2005: 1:04 PM EDT
By Les Christie, CNN/Money staff writer

The top 10
Home price appreciation from the first quarter 2004 through the first quarter 2005.

Metro Area Price gain
Bradenton, FL 45.6%
Sarasota, FL 36%
W. Palm Beach/Boca Raton/Delray Beach, FL 35.9%
Riverside/San Bernardino, CA 32.6%
Ft. Lauderdale/Hollywood/Pompano Beach, FL 31.8%
Las Vegas, NV 29.4%
Melbourne/Titusville/Palm Bay, FL 29.3%
Orlando, FL 28.7%
Miami/Hialeah, FL 28.4%
Ocala, FL 27%

Source: National Association of Realtors

QUICK VOTE
What will home prices do in the United States over the next 18 months or so?
Spike higher
Rise modestly
Fall
Tumble View results

NEW YORK (CNN/Money) - U.S. residential real estate markets lost no steam in the first quarter of 2005, according to statistics released Thursday by the National Association of Realtors.

The NAR's quarterly report covers 136 metro areas (see how they all rank). A record 66 of these have experienced double-digit jumps in home prices over the past year.

The previous record was 62 in the last quarter of 2004. Only six areas showed a fall in prices and those declines were fairly modest.

The median price of a single-family American home hit $188,800 at the end of the first quarter, a rise of 9.7 percent compared with a year ago.

The NAR, the nation's biggest real estate agent group, pointed to tight inventories as a major factor in the continued strong growth.

"We simply don't have enough homes on the market to meet demand," said David Lereah, the NAR's chief economist, in a statement. "We think the supply situation may improve next year when interest rates are expected to be higher – that should result in a lessening of demand and cooler price appreciation."

Florida heat
Three Florida metropolitan areas led the charge; home prices in Bradenton jumped 45.6 percent from a year earlier to $275,100. Sarasota was up 36 percent to $326,300 and the West Palm-Boca Raton area rose 35.9 percent to $362,800.

Beaumont, Tex. led the list of six declining metro areas with a loss of 6.5 percent to $90,000. Other losers included Canton, Ohio (down 4.5 percent to $103,400), Syracuse, N.Y. (down 2.6 percent to $92,600), and Waterloo-Cedar Falls Iowa (down 2.6 percent to $86,500).

Prices ranged from a low of $82,400 in the Youngstown-Warren area in Ohio, to more than eight times that in the San Francisco Bay area where the median price was $689,200. Anaheim-Santa Ana (Orange County, Calif.) was the second most expensive metro area at $656,900 and San Diego was third at $584,100.

Regionally, the West showed the fastest growth at 16.9 percent. In the Northeast, prices rose 14.0 percent. The Midwest had increases of 7.8 percent and the South had a 6.6 percent price rise.

The median house price was highest in the West, at $282,900, and lowest in the Midwest at $148,800.

Separately, U.S. antitrust regulators are preparing to sue the National Association of Realtors over policies they believe will illegally restrict commission discounting and harm online competitors, The Wall Street Journal reported Monday, citing lawyers close to the case. See more.

See the latest stats on 136 markets.

------------------------------------

Real estate market cooled in Britain. Is the United States next? Click here. Click here.

Fastest growing U.S. counties

2005-05-14T11:33:00.000-07:00

Florida has more of the nation's fastest-growing counties than any other state.May 5, 2005: 5:15 PM EDT
NEW YORK (CNN/Money) - Florida has 14 of the 100 fastest-growing counties in the United States, more than any other state, according to a study released Thursday by the U.S. Census Bureau.

Flagler County, in Northeast Florida between Daytona and Jacksonville, is No. 1, with population growth of more than 10 percent in the year ending June 30, 2004. The neighboring county to the north, St John's, was No. 9, with 6.7 percent growth. The oldest city in the United States, St. Augustine, is in St John's County.

Texas (12), Georgia (12), and Virginia (10) each had 10 counties or more each on the list. A total of 21 states did not have a single county among the 100 fastest growers.

Texas (12), Georgia (12), and Virginia (10) each had 10 counties or more each on the list. A total of 21 states did not have a single county among the 100 fastest growers.

Four midwestern counties made the top 10: Kendall in Illinois, Hanson and Lincoln in South Dakota, and Dallas in Iowa.

The evidence that America's bolt to the sun belt continues, as 60 percent of the fastest growing counties are located south of the Mason-Dixon line. The West was represented by 23 top 100 members and the Midwest had 17. The Northeast drew a goose egg.
Los Angeles is still the biggest U.S. county

Los Angeles continues to be the nation's most populous county with nearly 10 million residents. It grew by only 77,357 people in 2004, however, a gain of less than 1 percent. Maricopa County in Arizona had the largest numerical gain, with an increase of 112,233, or 3.3 percent, to a total of 3,501,001. Those two, plus Houston's Harris County, were the only three counties in the United States that ranked in the top 10 in both population and numerical increase.

No. 2 in total population gain was Riverside County, east of Los Angeles, which is attracting Angelenos fleeing high real estate prices there. Riverside gained 5 percent, a total of 89,128 people. Riverside is California's fastest growing county by percentage as well.

Hot Links

2005-05-11T23:08:00.000-07:00

www.4rentinnyc.com Live in New York

www.brigantine4rent.com Vacation at the Jerseyshore

www.4rentinthehamptons.com Go to the Hamptons this summer

www.4rentinlosamgeles.com Move to LA

www.publicpod.com Upload your ipod

What makes a hot zip code hot?

2005-05-11T23:01:00.000-07:00

The hot zip codes aren't all glitz and glam. They're affordable, close to the city or on the coast.
May 5, 2005: 10:56 AM EDT
By Sarah Max, CNN/Money senior writer

Mortgages and home equity loans
Search for rates from hundreds of lenders.
No points only

Select Loan:
Select a Mortgage15 Yr Fixed Jumbo - $385K15 Yr Fixed Conforming - $165K30 Yr Fixed Conforming - $165K30 Yr Fixed Jumbo - $385K1 Yr ARM Conforming - $165K1 Yr ARM Jumbo - $385K3/1 Yr ARM Conforming - $165K3/1 ARM Jumbo - $385K5/1 Yr ARM Conforming - $165K5/1 ARM Jumbo - $385K7/1 Yr ARM Conforming - $165KARM Jumbo - $385K
State:
Select StateAlaskaAlabamaArkansasArizonaCaliforniaColoradoConnecticutWashington DCDelawareFloridaGeorgiaHawaiiIowaIdahoIllinoisIndianaKansasKentuckyLouisianaMassachusettsMarylandMaineMichiganMinnesotaMissouriMississippiMontanaNorth CarolinaNorth DakotaNebraskaNew HampshireNew JerseyNew MexicoNevadaNew YorkOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVirginiaVermontWashingtonWisconsinWest VirginiaWyoming

Median Home Prices at Shopping.com
Compare home loan types, rates and points to find a great deal on your home...
www.shopping.com

Home Median Price
Discover your optimum selling price for maximum profits. Free Service is fast...
median-home-selling-price.com

Salem, Ore. (CNN/Money) – Scrutinize our latest list of zip codes with the strongest price appreciation and you might wonder how some of these places could ever be considered "hot."

The neighborhoods are still a little rough around the edges. The houses need updating. Yoga centers and martini bars are few and far between. Paris Hilton, the aficionado of all things "hot," has never heard of these places.

(Click here to see the original story on hot zip codes.)

So we asked local real estate agents to tell us what they saw happening in New Jersey's 08008, Seattle's 98126, Chicago's 60632 and other zips that made our list.

Three distinct trends have influenced home prices in these zip codes, said David Stiff, senior economist for Fiserv CSW, which provided the data.

1. Affordability is everything.

Looking closely at the zip codes with the most appreciation over the past five years, you won't see places like Beverly Hills, Beacon Hill or East Hampton because home prices in these areas – though increasing – are just too dear.

In the priciest metros, buyers must search far and wide for affordable housing.

"In Boston, all of these zip codes are far from downtown," said Stiff, referring to New Bedford, Lawrence and Worcester. "They are former mill towns that are having a resurgence in price because they're so affordable."

In Los Angeles, the hot 'hoods are in the eastern suburbs where median home prices are still under $500,000. Prices in Rialto, Calif., have appreciated 191 percent, but the median home price, $270,000, is still extremely low for the area.

The same is true in the San Francisco Bay Area, which has some of the highest home prices in the country.

"People are trading distance for dollars," said Ray Brown, a real estate agent with Pacific Union, explaining that some of the zip codes with the greatest appreciation are near Sacramento, which is about 80 miles away. Some people commute the distance.

2. Urban trumps suburban.

While buyers in the priciest metros have no choice but to head to the suburbs, in cities where housing is relatively affordable buyers are shopping for property within city limits.

In Chicago, married couples are no longer fleeing the city for the suburbs and empty nesters are leaving the suburbs and moving back into the city, said Nancy Suvarnamani, president elect of the Chicago Association of Realtors.

"People want to live in Chicago and are willing to explore and purchase in areas that were once, not long ago, considered undesirable," she said. Because a lot of the established areas are too expensive, buyers are going to Logan Square (zip code 60639) and Uptown (60640).

"Irving Park and [the areas near it] are highly desirable areas because they contain large older, single homes, with a lot of character," she said. "People can purchase single-family homes in this area for under $500,000, and this is no longer possible in many Chicago neighborhoods."

Archer Heights (60632) and adjacent Brighton Park (60638), meanwhile, have experienced tremendous appreciation because of the expansion of Midway Airport, she noted. People want to live close to where they work, which has a ripple effect on the entire neighborhood.

The same trend is playing out in Seattle.

There, the neighborhoods with the strongest appreciation range from still-affordable West Seattle (98106), where the median home price is $233,000 to the more established Queen Anne-Magnolia (98109) where the median priced home is $556,000.

"But what's similar is they are all within a stone's throw away from downtown," said Edward Krigsman, a real estate agent with John L. Scott. Although Microsoft and other large employers are east of the city, he said, buyers are looking for reasonably priced areas within the city.

"The closer the better, the cheaper the better," Krigsman said.

3. Go coastal.

In the New York and Philadelphia metros the zip codes with the most price gains are primarily New Jersey shore towns.

"There is huge demand for waterfront homes," said Stiff. "Right now, if you look at the Florida coast, the Jersey shore you see second-home buying driving appreciation."

According to Bonnie Fitzgerald, president of elect of the New Jersey Association of Realtors, buyers have been buying what were once year-round houses, fixing them up and turning them into vacation homes.

Although prices in these New Jersey shore towns have increased tremendously, she said, they're still a relative bargain compared with beach towns on Long Island.

"Some of these places have some stigma of 'Well that's not the best area to live,'" she noted. But if they're on or near the beach, stigma doesn't matter. "People renovate the houses and the whole demographics of the town changes."

On the market: homes in hot zip codes

2005-05-11T22:52:00.000-07:00

A look at zip codes from all over America where real estate is going up quickly.
May 5, 2005: 10:58 AM EDT
By Les Christie, CNN/Money staff writer

NEW YORK (CNN/Money) - Sales of existing homes were up one percent in March, according to the National Association of Realtors. Homes were sold at an annualized rate of 6.89 million, the third highest on record.

Prices have kept up with the red-hot volume. The national median price for a single-family home was $195,000 in March, up 11.4 percent in the last 12 months from $175,000 in March of 2004.

As real estate prices continue to fly, neighborhoods all over the country have undergone a vast increase in housing values. Whether they will continue their unprecedented rise is anybody's guess.

Many of the biggest percentage increases have come in zip codes that are undergoing revitalizations. Newcomers are taking solid old housing stock and renovating. Other hot areas are found in popular recreational centers on the shore or in the mountains.

Of course, some metropolitan areas are hotter than others. Of the 10 spotlighted here, Los Angeles has experienced the largest price increases in housing prices, a125 percent increase over the last five years. Miami, at 106 percent, and Washington D.C., at 99 percent, have also had dramatic rises.

On the other end, prices in Detroit have risen a modest 23 percent over that period and Seattle prices went up 38 percent.
http://money.cnn.com/2005/04/25/real_estate/buying_selling/hot_zip_code_homes/index.htm

This year's hottest zip codes

2005-05-11T22:42:00.000-07:00

This year's hottest zip codes
By Sarah Max, CNN/Money senior staff writer

SALEM, Ore. (CNN/Money) - Whether home prices will rise or fall in the coming year is anyone's guess. The housing market continues to stump experts on both sides of the bubble debate.Even so, economists at Fiserv Case Shiller Weiss think they have a pretty good idea what's in the cards for most metros in 2005.

Their prediction: Los Angeles will fizzle. Miami will sizzle.

There's some reason to believe them. Fiserv CSW has been forecasting annual home-price growth at the metro level for more than a decade, with a not-too-shabby record: the group's median forecast error is less than 2 percent.

To track housing performance, the researchers look at repeat sales data for a sample of houses in each zip code, a method they consider more accurate than simply looking at changes in an area's median home price.
They also consider past price changes, employment trends and interest-rate trends to devise a forecast for the coming year.

Finally, they make adjustments to individual areas to account for other factors that could influence an area's housing market.

What's up in L.A.?

Over the past five years home prices in the Los Angeles area appreciated 125 percent, with prices in a handful of zip codes up nearly 200 percent.

But Fiserv CSW is predicting that prices in the greater Los Angeles area will increase by only 5.8 percent in 2005, with slightly better appreciation in some L.A. markets and price declines in others.

"There is anecdotal evidence that the market there is weakening," said David Stiff, a senior economist with Case Shiller Weiss. "It hasn't worked its way into our model yet."

For that reason, the firm declined to give a forecast for individual zip codes in Los Angeles. "We are very uncertain about what will happen to home prices in Los Angeles this year," Stiff added.

Miami's market, however, may still have room to grow.

Home prices in the Miami-Fort Lauderdale metro have doubled over the last five years, and Fiserv CSW is forecasting that they will appreciate another 16.4 percent this year. "Unlike L.A., Miami has a higher ceiling [for price appreciation] because affordability is less of an issue," said Stiff.

What's the forecast for your hood? For each of the 10 largest metro regions tracked by Fiserv Case Shiller Weiss, here are the 10 zip codes with the largest median five-year price increases -- and their prospects for the coming year.Data on five-year price change are through the fourth quarter of 2004, while the forecasted change is for the first quarter of 2005 through the first quarter of 2006.
http://money.cnn.com/pf/features/lists/topzipcodes/fiveyear.html

Hot Spot Homes

2005-05-01T19:07:00.000-07:00

Hot Spot Homes

Using Personal Assets for Funding

Take a bite out of closing costs

Avoid these rookie renovation mistakes

A tool kit for new landlords

Good news for landlords

Fewer new buyers can afford a home

Good house, cheap house

Top Investors Secret Housing Links

Locating Affordable Luxury Homes

Hampton homes offer oddest of amenities

20 Properties by 2020

Buy or Sell?

Housing Boom

The Forgotten Coast, Florida

The last affordable beach house

Rent a Home in a Hot Spot "Brigantine,NJ"

No-money down mania

Sharing cash, contacts and contractors

Real estate geek watch

The art of the flip

Chez moi

Global housing boom

Gurus want your money

Where landlords go to schmooze

April Home Sales Set Records

A Coast Guard Flyer

More Tycoon Profiles

Still in College

Tycoon in the making

California Tycoon

A NYC Tycoon in the making

Tycoon in the making

Housing Bubble

Housing prices defy forecasts

Realtors Group Must Add More Web Listings

Homes: Hot markets get hotter

Fastest growing U.S. counties

Hot Links

What makes a hot zip code hot?

On the market: homes in hot zip codes

This year's hottest zip codes

Hot Spot Homes