Category Archives: Housing Prices

Florida Rental Rates to Rise in 2012

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From the Sarasota Herald Tribune:

This could be the year great rental deals on apartments, condominiums and single-family homes disappear as rents move upward. Statewide, a mixture of an improving employment picture, a lack of new apartments being built and falling vacancy rates has commercial real estate broker Marcus & Millichap forecasting hikes in rental rates in Florida’s major markets this year.

After a large decline in rents that began in 2007, rates started recovering this year and will likely go up 3 percent to 5 percent in 2012.

The article goes on to summarize forecasts for rental rate increases in various markets for the year 2012, including:

  • Orlando- 3.6% increase
  • Miami- 4.3% increase
  • West Palm Beach – 3.8 % increase

To read the full article, check out the Herald Tribune’s post.

So what do you think?  Do YOU expect rental rates to go up this year?  Please leave a comment or share this post!

 

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Proud to be a Vulture?

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Have you ever wondered why people look down on flippers?

Foreclosure Flippers are called “scavengers” or “vultures” by others in real estate.

Flipping certainly isn’t the glamorous side of real estate.

But every ecosystem needs scavengers….Otherwise dead stuff starts to pile up.

With foreclosures, the alternative to a flipper buying the house is the bank taking it back:

  • Banks don’t spend time and money, so the house turns into an ugly, empty eyesore.
  • Banks unload houses at rock bottom prices, preventing the market from recovering.
  • Banks limit properties to occupants, preventing landlords or investors from buying.

The dead stuff needs to be cleaned up quickly.

Flippers fix a home fast, then sell or rent the house right away.  That cleans up neighborhoods, removes eyesores, and helps a market recover.

A world without scavengers would get ugly real quick.

So if someone calls you a vulture, does that offend you or make you proud?

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Seven steps to pricing your foreclosure flip

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From the Noobie mailbag:

“How do I determine the sales price of my foreclosure flip”?

Obviously, pricing a property right is the most important element of a successful flip.  Price it too high and nobody notices.  Too low and you left cash on the table.  So how do you price your flip?

House Price teeter totter

1.  Estimate price BEFORE you buy

Your max foreclosure bid should be the price you can sell the home for after it is fixed up, less the cost of repairs and closing, less the profit you hope to make.

So you should never buy a rehab property without having a very good idea about your after-repaired sales price. Price BEFORE you buy, not after.

2.  Start with comparable recent sales

Appraisers use comparable sales of similar properties to determine fair market value.  In a perfect world, the appraiser uses close-by comps the same size, age and style, that sold in the past three months.  Good luck with that.

So how do you find comps?  If you have access to a local Realtor board’s MLS, that is obviously your best source of info.  If not, you will need a Realtor or appraiser to pull  comps for you, or find another source.  Even if you have MLS access, you  want a second source of info, because your MLS only covers Realtor-listed sales, and plenty of houses sell without a Realtor.

Other sources of information:

  • RealtyTrac
  • Redfin
  • Zillow
  • Trulia
  • Property Appraiser
  • Tax Collector
  • Official Transfer Records

3.  Then consider ACTIVE sales

Appraisers are going to look at comparable recent sales, so if you have a financed buyer, your house better appraise based on the comps.

But comps are not your competition.

You sell against the other houses on the ACTIVE market, not the closed market.  So before you price your home, you better know what other homes your potential buyer will be looking at along with your home.

4.  Learn neighborhood differences

We buy homes in several large developments with over a thousand homes each.  Within these developments, there are areas where identical homes have a price difference of about 10%-15%… within two blocks of each other.

It’s a small enough difference that you would never see the trend until you are actively working that neighborhood.  But it is a difference you can’t afford to ignore.  And only experience is going to teach you to recognize the subtle differences.

5.  Cheaper, Better… or Both

Once you have a clear idea of past sales and active competing properties, it’s pretty simple to price your house competitively.

We usually try to price flips about 5% below similar active houses.  If everybody else is at $80k, we price at $76k.  That makes our property noticeably cheaper and grabs attention.  And no… we are not leaving money on the table.  The cheaper price results in multiple offers, and we end up with the maximum possible price.

The other way to go, is to make your house the nicest house on the block, with options the other houses don’t have.  An extra bedroom.  A pool.  Larger garage.  If the home has these extras, then we usually price 5% higher than the typical competitor.

But for a quick sale, nothing beats a house with extras AND a price 5% lower than the other available homes.

6.  DON’T price emotionally

Want to screw up royally?  Price your house based on:

  • “what I want to make”
  • “what I think it’s worth”
  • “what I have in it”

Irrelevant.

Yet I’ve seen investors make pricing decisions based on these irrelevant emotional factors too many times to count.  And a few months later, they are still sitting on a house that should have sold in a couple weeks.

If you overpaid for the house and ran over-budget on repairs… those are sunk costs.  Your buyer isn’t responsible for your screw up.  Sell the house, acknowledge the mistake, and try not to do it again.  But price your house to sell, not to recover from your mistake.

7.  Tweak the price as needed

If we’ve priced a house correctly, we have offers within a week.

If we don’t have at least one offer in seven days, we tweak the price.  We might only drop it by $100, but this keeps it on the MLS “Hot Sheet”… the list of recently added or changed listings.  So a new group of real estate agents add our house to their showing list for the next weekend.

The market will quickly tell you if you’ve priced correctly.  If we are not getting offers, we are priced too high.

The exception to this rule of thumb?  One-offs.  When you are flipping a large home, a farm, vacant land or a commercial property, you may just need to be patient.  The price may be perfect, but you need to wait for the right buyer to come along.

But with a typical single family home, price is what moves the house.  If the house isn’t moving, change the price.

 

 

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