New Tenants

I have a vacancy right now so I was showing a rental to perspective renters this week.

As we wandered through the house, we chatted about the house and what was going on in their lives. Turns out, they had purchased a house a couple years ago. They loved the house, put all their money into updating it and landscaping. They figured they would be there forever.

A year or so in, they were visiting friends in Tahoe and wondered if they could buy a second home. It was at this time that they pulled out their mortgage papers to figure out what they owed on their home. After reviewing the loan statements, they realized they were in a negatively amortized loan AND it would re-adjust within the next few months - raising their monthly payments to over $4000/mo.

These are very responsible parents of teenagers. They have perfect credit and have stable long term jobs. It took them a few months to reconcile their disappointment and consider their options but, they were able to put their home on the market and are currently in contract with expectations of closing by the end of May.

These people relied on their Realtor and Lender and didn't know enough about the process to know the questions to ask.

Frankly, it pissed me off. I have been to signoffs where I read and explained the loan to my clients, they weren't getting what they thought, and we extended escrow to work it out. I've also been to signings where I explained, it wasn't what they thought and they chose to close anyway. Either way it's the clients' decision but, it pisses me off that someone that is working as my agent sells me a book of goods so that they get paid.

I understand that I don't get paid unless we close but, I need to feel like I am helping my clients - first and foremost. I have been in this profession for 20 years and I have clients from 20 years ago. What I don't have is clients that are losing their homes because I didn't review their loan docs.

Before this I thought these people in crappy loans were just stupid or lazy or deserved their fate, somehow. I believe in caveat emptor and personal responsibility. I also believe in full disclosure and taking care of your clients.

Do you know someone that is in a crappy loan? How did they get there and where did the system break down?

Why The Worst May Be Over

I found this article interesting because it has some compelling arguments for economic recovery.

Also because, just like a depressed Seattle-ite in March that hasn't seen the sun for 8.67 months, I am dying for a little sunlight and cheer to break through all the grey economic overcast.

Change = Opportunity

I love times of change. I've watched my clients leverage themselves into some amazing deals.

If you make the right decisions now, you'll reap the rewards within the next 5 years. Two years ago a buyer couldn't buy anything because they were outbid on everything that looked attractive. I had clients with 30% down, excellent financials and Letters of Credit from SIVB - that couldn't buy anything!!

Today, the buyer with the cash is queen.

What are the chances that San Jose Home Prices Will Be Lower In Two Years?

About 51%, according to the PMI group report.

I found it interesting that Dallas Fort Worth had a less than 1% risk while Riverside came in at the top with a 93% probability of lower home values in two years.

Profiting From The Market Misery

I love a down market. All this uncertainty has property values dropping faster than a womanizer drops a date that says the "L" word.

The statistical figures are starting to show some significant drops - in the 20-30%ranges - and I don't see daylight yet.

I like this NNN leased investment. It's got a lease guaranteed by CVS corporate. It's 2.3M and returns a 12.58 cap rate. Unheard of only 2 years ago!

Or 48 units in Los Gatos for $12.22M, net income of $568,277 and 4.61 cap. based on actual rents. Just a year ago we were seeing 3-4 caps based on proforma rents.

So, there are a lot of investment opportunities in the market. It hasn't been this great a time to buy since 1993-1994! If I only would have kept the house I bought in 1993, in willow glen, for $172K.....

Talk Like a Physicist Day

Happy Albert Einstein's birthday!

It is all relative you know :-)

The Glamorous Landlord Life

People think that since I own income property, I live the rich and luxurious life. So, let me just give you a glimpse into this cushy job.

First off, I am a professional, have been doing this more than 20 years, and I ought to know better than to manage my own property.

The first issue is that whenever you see a tenant you think it's a problem - when normally it's just a great friendly tenant that wants to say "hi" and catch up.

Second, there is always something that needs fixing.

Third, I hate evicting people.

So, this trip to Dallas was a quick four day jaunt. I had two tenants that were behind and it was an opportunity to touch base with my Dallas contacts.

Thursday I flew in. Met with my handyman about the work done this last month and went to dinner with clients.

Friday, I filed eviction on one tenant and a judgment against another, I broke into the abandoned property, assessed the damages, hauled all his junk out to the garbage can - including melted fudgesicles in the freezer, put out the "for rent" sign, made calls for bids and had dinner with colleagues.

Saturday, I chatted with tenants. Got some bids, shopped materials. Got new keys and a lockbox on the door, collected rents and went to the bank.

Sunday, after church, I checked on a NNN Investment that looks VERY promising, I cleaned my apartment, did the laundry, replaced a key, changed a mailbox lock, got new blinds and a mercury vapor light bulb for the security light and chatted with tenants before I hit the airport.

Sure, I love the weather in Dallas. I went running two out of four days, ate at some great local restaurants, read, worked with clients in San Jose and enjoyed the heck out of my time. I wouldn't change one bit of my glamorous life.