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Tuesday, July 30, 2013

Secrets of the Home Flippers

Secrets of the Home Flippers: The Housing Boom Is Back

"Flip This House," "Flip That House" and other home-flipping reality-TV shows went dark when the housing boom went bust.

But home flippers--investors who buy a property, make some repairs and sell it quickly in hopes of a profit--never really left the scene.

Now the housing market is back and the flip is on. Sales of new homes in May rose to the highest level since July 2008, according to Commerce Department data. The Standard & Poor's national housing price index, which tracks existing home sales in 20 major markets, was up 12.1% in April compared with a year earlier. That's the biggest gain the index has recorded since it started in 2006.

We checked in with three experienced home flippers to find out how they got their start, why they do it--and what you need to know about the ins, outs (and ups and downs) of flipping.

Rule of Flipping #1: Find the Sweet Spot

No. 1 rule of thumb? "Never overimprove a house." He aims to find the "sweet spot," he says, "where you can get a good price on the sale, without overspending on the renovations."

It's sage piece of advice for any homeowner who's eventually looking to resell. Berger applies it to everything from the grade of carpet to the roof titles he chooses.

For example, in the process of a recent flip, he and his partners considered tearing down the house's carport and putting up a garage instead. But after driving around the neighborhood, he saw that most of the homes still had carports. "The improvement wouldn't stand out," he concluded, a decision that saved him and his partners thousands of dollars.

Of course, not every flip is a success: He had to hold onto four houses that didn't sell during the downturn. He rented them out to keep the cash flowing, a common way for flippers to bide their time while they're waiting, because, he says, "We knew that the market would eventually turn around."

House Flipping Rule #2: Crunch the Numbers
"When you're doing these deals, it's not about falling in love with the drapes--it's a math problem," she says. "If the numbers work, it seems less risky."

What's changed from the last housing boom is that most flippers are now unable to buy homes with 0% down. Banks will not finance a deal without 25% down, Pape says. She puts down 30% or more for her purchases.

Rule of Flipping #3: Have Plenty of Cash
 "If I get into a problem, it doesn't cost me anything to sit on a property," he says. "For example, if I have a mold issue, it might be two months late getting to market."

In the meantime, he has no mortgage to pay.
Plus, he adds, most banks typically won't lend money to buy a dilapidated property. If they do, a bank will charge higher interest rates than they would with a standard mortgage.

On his first deal, he bought a fixer-upper for $200,000 and spent $90,000 on repairs. He made sure he had enough cash on hand to pay for the property, plus the renovations, something he recommends for all first-time flippers. He then sold the house a few months later for $540,000, earning an 86% return on a $290,000 investment. He's been hooked ever since.
"[It's] probably the best thing I've ever done. It's satisfying to take something ugly and make it great," he says.

What to Know Before You Flip
While the flippers above have each employed their own strategies, and often met with success, home flipping is a risky business dependent on rising real estate prices and low mortgage rates. In short, it's not as easy as it looks.

Flippers must also be careful of the tax consequences in their quest for a quick buck. If you sell a property in less than a year, which most flippers do, profits are taxed as short-term capital gains, which are taxed at the same rates as regular income. (If you were to hold on to the property for a year or more, you would typically be taxed at a lower rate on those capital gains.) Plus, the Internal Revenue Service may consider you a real estate dealer, instead of an investor, if you are successful enough at flipping. That means your profits would be taxed at the same rates as ordinary income and you'll have to pay Social Security and Medicare taxes on those earnings. Plus, there is a real estate commission to pay as well.

So before you start a flipping empire--or decide to spring for even one investment property--make sure you have an adequate emergency fund and are maxing out your retirement account. It will make things easier if the red-hot real estate market starts to chill.

Please contact me if you have any questions about investing in this market.

Wednesday, July 24, 2013

Rates are at 2 year high and going higher according to

Rates are at 2 year high and going higher according to Bloomberg News.
The avg. cost of a 30-year, fixed-rate home loans rose to 4.36% on June 21, from a record low 3.36% in December.
Yields on Fannie Mae and Freddie Mac mortgage bonds guiding U.S. home-loan rates extended increases sparked by a potential slowing of the Federal Reserve’s debt purchases.
The yields have risen from a record-low of 1.68 percent reached Sept. 26, after the Fed announced it would start buying $40 billion of government-backed housing debt a month (hey, say, instead, they give us $40 billion A MONTH-I think that would make us spend! HAH) , embarking on its 3rd of so-called "quantitative easing" to spur growth.
Bonds are tumbling worldwide as the central bank moves closer to scaling back its $85 billion in monthly debt buying, which includes $45 billion of Treasuries.

Friday, July 19, 2013

Some Nice Land

 A view to die for for your new dream home! 10 private acres, gently sloping downward near the end of the road. Ideal spot for the view seeker with huge views of the Sierra Nevada Mountain Range.... amazing snow cap views. Great potential for off the grid living with eastern solar exposure, yet relatively close to town. Owner may carry with acceptable offer and terms, so bring your imagination and a picnic to explore the possibilities.

Great view parcel overlooking neighboring lake and vineyard. Good well on property. Some meadow area. Nicely treed. Paved road frontage. Some fencing. Great location. Expensive homes in neighborhood. Access off Indian Springs Road or Saddleback Court at end of cul-de-sac.

Wednesday, July 17, 2013

Fast Facts

Fast Facts
Calif. median home price: May 2013:
  • California: $417,350
  • Calif. highest median home price by region/county May2013: Marin, $963,110
  • Calif. lowest median home price by region/county May 2013: Siskiyou County, $115,000
Calif. Pending Home Sales Index: May 2013: Increased 0.3 percent from a revised 121.7 in April to 122.1 in Mary

Calif. Traditional Housing Affordability Index: First Quarter 2013: 44 percent (Source: C.A.R.)

Mortgage rates: Week ending 6/20/2013 (Source: Freddie Mac)
  • 30-yr. fixed: 3.93% fees/points: 0.8%
  • 15-yr. fixed: 3.04% fees/points: 0.7%
  • 1-yr. adjustable: 2.57% Fees/points: 0.4%

Friday, July 12, 2013

Grass Valley Homes and Land Picks

You're going to love this wonderful, move in ready residence on nearly 5 Acres. The terrific open great room floor plan with vaulted ceilings is bright, cheerful and all freshly painted. Fantastic upgraded kitchen with beautiful cabinetry, abundant counter space, and storage plus a wonderful breakfast bar. Large master suite features a roman style tub and separate shower. 2 great decks and an oversized garage and a fenced garden add to the benefits of this property. Gated and partially fenced plus a small seasonal pond. While the acreage is not all use-able there is plenty of room for a couple of horses, RV and a shop. Easy access to both Grass Valley and I-80/Auburn.

Near Beale Afb New Subdivision Consisting Of 13 Lots. Each Lot Will Have Perc Mantle Complete, Power To The Property Line, On A Paved Road. Unit 1 Will Have Wells Drilled Unit 2 Will Have Some Drilled. . Call For Price List Of Other Available 11 Lots, 6.10 Acres And Up. Two Lots Are Available For Immediate Building. Public Report Must Be Signed Prior To Offer. Owner Will Build A 1800sf Home On Lot 2 For $328,500 Comp. Or Any Lot You Choose Price Tbd. Great Price For A New Home! Topo-Site Desc.: Mountain View Valley View

Thursday, July 11, 2013

Renaissance Faire for children

The Children’s Festival July 19 On Friday, July 19th, The Children’s Festival will return to Pioneer Park in Nevada City. The park will be transformed into a lively Renaissance Faire for children. The festival will include over twenty arts and crafts tables, strolling minstrels, face-painters, a bridge-guarding troll, a bevy of faeries, medieval fencing, Queen Elizabeth and her court

Nevada County AirFest July 12 & 13

Nevada County AirFest July 12 & 13 2013 The Nevada County AirFest is back July 12 & 13. Come on out and enjoy the fun! For more information go to

Grass Valley and Nevada City Home and Land Picks

Fantastic opportunity for ownership in a terrific setting! This well maintained home offers an open floor plan with large kitchen with center island and vaulted ceilings. Large, sunny, and open parcel is a gardener's paradise. Large detached garage with workshop space inside. Perfect starter home or investment opportunity. Don't miss out!

Mountain view! Pretty wooded setting. Well is in, perc and mantle done for standard septic system. Nice Peardale area location.

Gardeners Paradise!!! Choose from multiple building sites to place your home amongst the fabulous rock outcroppings. Property has southern exposure with deeded (per seller) two miners inches of NID irrigation water available, so having a huge vegetable and irrigated pastures are a must. 30 gpm well (per seller when drilled) with well house. Pump and pressure tank ready to be hooked up to permanent power (available). This beautiful property was recently brushed (masticated) so you can get a true feeling of all it's potential. 800' frontage on Keller Road (easier access). Nice homes in the area. Out of area seller started developing property over ten years ago for their retirement. Their plans have change.

Mountain Home Among The Pines. This Cedar Sided Farmhouse Style Residence Is Perfectly Suited For This Beautiful Private 5 Acre Setting. The Land Is Useable Around The House But Is Primarily There For Forest Views And Privacy. Great Room Floor Plan With Open Spacious Family Kitchen. 3 Generous Bedrooms Plus 2 Bonus Rooms. Bonus Rooms Can Be Used As Office/Hobby Or Extra Bedrooms. Kitchen Appliances: Convection Oven Range Hood

Wednesday, July 10, 2013

Equity home sales post higher in May

Equity home sales post higher in May

The share of equity home sales in California continued to grow in May, making up nearly four of every five home sales, C.A.R. reported this week. Meanwhile, sales of REOs fell into the single-digits for the second straight month and registered levels not seen since October 2007

The combined share of all distressed property sales continued to decline in May, dropping to 21.8 percent in May, down from 24.4 percent in April and down from 44.2 percent in May 2012.

The share of equity sales – or non-distressed property sales – increased further in May and now makes up more than three-fourths of total sales, the highest share since January 2008. The share of equity sales in May increased to 78.2 percent, up from 75.6 percent in April. Equity sales made up more than half (55.8 percent) of all sales in May 2012.

Of the distressed properties, the share of short sales was 14 percent in May, down from 14.8 percent in April and down from 21 percent a year ago. The May 2013 figure was the lowest since July 2009. The continuing decline in short sales indicates more previously underwater homes are moving into positive equity.

The available supply of homes remained tight but was relatively unchanged from April. May’s Unsold Inventory Index for REOs was unchanged at a 1.7-month supply. The supply of short sales dipped from 2.7 months in April to 2.3 months in May. The May Unsold Inventory Index for equity sales was 2.8 months, down from 2.9 months in April.

Thursday, July 4, 2013

Mortgage rates would have to be nearly 7 percent before

According to the Outlook, interest rates for 30-year fixed-rate mortgages have risen about 0.5 percentage points over the past several weeks and are expected to hover around 4 percent during the second half of 2013.

With rising mortgage rates, expect a sharp decline in refinance volume in the second half of this year; refinance originations are expected to total about $1.1 trillion in 2013, down from $1.5 trillion in 2012.

At today's house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country

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