BEFORE ENTERING INTO A REAL ESTATE PARTNERSHIP, DO YOUR HOMEWORK

January 15, 2014 on 12:07 am | In Buyers, Curious, Experts Say, Fascinating Information, fUNNY...mONEY, Investment Opportunities, Problem Solving, Uncategorized | 1 Comment

by Naomi Shaw

A real estate partnership can be a lucrative venture for many individuals with a limited amount of money to invest. Forming a partnership will increase your working capital, and you’ll be able to buy properties you couldn’t afford on your own.

However, there are some significant risks that can come with forming a partnership. If you choose the wrong person or company to do business with, you could find that your investment quickly becomes a loss.

Before entering into any sort of real estate business partnership, make sure you do your homework on who you’ll be working with.

Knowing Your Partner

Entering into a real estate partnership with another person or company is something you should do only after you understand who you’re working with. While helpful to work with people you know and trust, there are some questions you should ask any person or company before considering a partnership.

● How much money do you have to invest? How is your credit score?

● How many properties do you currently own?

● When do you expect to make a profit from your properties? Do you plan on holding properties for years or do you want a quick turnaround to leverage into other ventures?

● Have you had other real estate partnerships in the past? Do you currently have other real estate partners? Do you have references to any past or current partners?

Understanding Your Partnership Agreement

Before you commit to any type of partnership, it’s essential that you come up with an agreement as to how the partnership is going to work. The most important things you need to discuss when setting up a real estate partnership include:

● How partners will get paid and when. Do partners share profits or are profits tied to resale only?

● What your responsibilities in the partnership are. Usually, one partner will manage properties while another is responsible for finding new properties. Of course, all partnerships differ. Defined roles are important.

● Is the partnership going to be reviewed at certain times? Many partnerships review profits about once per year. After all, not all partnerships are worth maintaining if there’s no growth or profit.

Hire an Attorney

If you form a good partnership, chances are you won’t ever need to consult your attorney. However, you do need to hire a qualified attorney who will help you setup your partnership.

Trying to do it yourself will most likely leave big gaps in your contract, and unless you’re incredibly well versed in business partnerships, those gaps could create potential problems down the road when it becomes time to sell properties, split profits, or dissolve the partnership and its assets.

Hiring an attorney seems costly, but it’s going to cost you a lot less than a business partnership gone wrong.

A real estate partnership is often an excellent way to make more money than you ever could on your own while balancing the work that real estate investing takes. However, partner with the wrong person, and you could end up losing all of the money that you had to invest.

Do your homework and ask questions, and always set up a binding legal agreement that helps both partners understand how they’ll be working together and how they’ll be able to exit the partnership if needed.

Naomi Shaw is a freelance writer in Southern California. She loves real estate and home design, and enjoys covering both topics in her writing. She contributes to HarrisHousePainting.com often.

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HEARD ABOUT THE NEW LOAN RESTRICTIONS? HERE ARE QUALIFIED MORTGAGE (QM) BASICS

December 26, 2013 on 9:23 pm | In Buyers, Experts Say, Fascinating Information, For Your Purchasing Pleasure, fUNNY...mONEY, Government, Lenders + Vendors, Uncategorized | 2 Comments

edited by Jodi Summers

Now that getting a loan has finally returned to a more comfortable process, the new Qualified Mortgage (QM) rules happening January 10, 2014 add a new twist to the lending game.

QM is a newly created set of restrictions on lending guidelines and the products that are available in the secondary market.  For example, there will be no more:

-           Interest Only

-           Prepayment penalties

-           Loan terms longer than 30 yrs

-           Generally no debt ratios over 43%

“The effect of QM will be that many qualified borrowers will have more difficulty in obtaining financing,” reveals Caroline McPherson, Senior Mortgage Consultant @ RPM Mortgage.

Fitch Ratings believes that after the Qualified Mortgage rule goes into effect, it will help to protect investors and provide incentives to originators and issuers to maintain high-quality originations while upholding guideline compliance.

Borrowers are still able to apply for Non-QM loans. Most mortgage brokers will continue to offer Non-QM loans, including interest only, higher debt ratios and other unique programs.

The forthcoming ability-to-repay and qualified mortgage rule will have direct consequences for the primary and secondary mortgage markets. Experts say processes will need to be developed to satisfy secondary market participants, including loan aggregators and residential mortgage-backed securities investors.

For borrowers with a debt ratio is over 43%, solutions include paying down debt so that they can qualify under the new debt ratio guidelines. Another option is FHA Loans.  Mortgages insured by the federal government will have somewhat looser restrictions.

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http://www.housingwire.com/articles/27925-qualified-mortgage-rule-may-help-protect-rmbs-investors

www.rpm-mtg.com/cmcpherson

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HAPPY HOLIDAYS A TODOS

December 23, 2013 on 9:26 pm | In Curious, Rents, Uncategorized, WOW | 1 Comment

TWO NEW BREEDS OF RENTERS, AND WHAT THEY WANT

December 15, 2013 on 7:14 pm | In Uncategorized | 3 Comments

by Jodi Summers

During the Great Recession, a new breed of renter was brewing…the Echo Boomer. There are more than 65 million Echo Boomers ages 20-34 crawling out from their parent’s basement entering the real estate market. Many parents didn’t love the idea of having one or more of their adult children move back home. also helps stimulate demand for rentals that serve the echo boom market, and some of the lucky ones got their parents to subsidize their rent as a motive to leave home.

Specialists at the Urban Land Institute have concluded that these are the features most likely to appeal to echo boomers who can afford to rent or buy a new multifamily unit:

  • High-powered internet connections for all spaces in the building; fast connectivity is a must.
  • More open, flexible space within the units.
  • High-quality kitchen and bathroom countertops but less closet/storage space.
  • Shared amenities, such as communal space for informal get-togethers and parties; gym/sports equipment; bike storage; and dog parks/walks. Multifamily rentals that permit dogs ought to consider including outdoor dog washes in order to avoid clogged sinks from dog hair.

As far as the size of the space – this group doesn’t need a lot.

  • Compact, less-expensive rental or condo studio units in the 250- to 450-square-foot (23–41 sq m) range.
  • Two-bedroom, two-bathroom units that can be shared by three to four echo boom renters.
  • High-amenity one-to two-bedroom condos for higher-income echo boomers.

Savvy developers note that the needs for echo boomers and their downsizing boomer parents are not that different. The trick is to build two types of products within the same building, with the larger, 2+ bedroom / 2.5+ bathroom units located on the higher floors. The larger, boomer units should also contain more closet/storage space, more formal entertainment space, and larger bathrooms.

The needed size of space should largely separate the two age groups within the building.  Keep in mind there will always be the tech crowd, who have received large stock payouts, moving to the larger units, or that some boomers will not choose small pieds-à-terre on a lower floor.

There’s a whole new breed of renter out there. Grab hold of this market.

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http://www.costar.com/News/Article/Renter-Demand-Holding-Fast-So-Far-As-Apartment-Supply-Wave-Begins-to-Break/151551?ref=100&iid=351&cid=383F14EEE265B182474DA2442BACBBBF

http://www.marcusmillichap.com/Services/Research/

http://urbanland.uli.org/Articles/2013/Jul/GruenMillenials

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http://www.forbes.com/sites/peterjreilly/2011/12/21/housing-the-echo-boomers-next-big-real-estate-opportunity/

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SOCAL MULTIFAMILY REAL ESTATE SNAPHOT ~ DECEMBER 2013 > TOO MUCH OF A GOOD THING?

November 30, 2013 on 5:19 pm | In Charts + Statistics, Curious, Experts Say, Fascinating Information, Market Snapshot, Rents, Trends, Uncategorized | 3 Comments

by Jodi Summers

Is the party over? The apartment market has been on an exceptional run for the past four years. During the Great Recession we stumbled through a for-sale housing market in tatters, a weak recovery in the labor market that created mostly middling jobs for young workers, and benign supply growth. Combine all of the lackadaisical factors and you’ve hit the recipe for impressive strength it the apartment sector.

As they always say, all good things must come to an end. The for-sale housing market  in Los Angeles County has again become vibrant…but that’s not the main use. Over-construction is.

For example, builders have completed another 1,400 rentals in the Westside Cities over the past year, representing a 1% rise in inventory. Research from Marcus and Millichap notes that the largest project to come online in the past year is Marina Del Rey’s Shores > 12 buildings, 544 units.

During the past year, vacancy jumped to 3.2% percent. Net absorption was negative > rents have peaked for the time being. Looking forward, experts expect Westside vacancies to rise to 3.4% in 4Q 2013. Average effective rents at developments constructed since 2000 dipped 5.3% year-over-year in the third quarter to $2,769 per month.

The trend toward excessive unit construction is a national phenomenon. New completions in the top 82 markets in the country averaged just 10,623 units per quarter in 2011 and 19,585 units per quarter in 2012. Over the first three quarters of 2013 new completions averaged 27,411 units per quarter. This is the highest quarterly average since 2009.

New completions in the top 82 markets for 2013 are expected to total roughly 124,000 units. 5,400 units were added in L.A. County. These amounts  is on par with the long-term annual average of +/-120,000…but just wait,  in 2014, new completions are expected to total about 164,000 units, well above the historical long-term average. Expect 9,000 units in L.A. County in 2014.

Although demand for apartment units will remain rather robust, it is unlikely the market will be able to absorb this many units, causing vacancy to increase. This would represent a pronounced change from the past four years, when vacancy was compressing rapidly as demand far outpaced a subdued level of new completions.

For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

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http://www.multifamilyexecutive.com/multifamily-building/new-construction-threatens-multifamilys-good-run.aspx?dfpzone=home&day=2013-11-21&utm_source=newsletter&utm_content=jump&utm_medium=email&utm_campaign=MFEBU_112813&day=2013-11-28

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MORE HOUSEHOLDS ON THE WAY

November 15, 2013 on 11:53 pm | In Buyers, Charts + Statistics, Economy, Fascinating Information, Rents, Trends, Uncategorized | 2 Comments

by Jodi Summers

A lot of people needed to get out of the house. The economy is in forward motion, there has been a positive turn in U.S. household formation and a rising demand for all types of housing, including multifamily and single-family rentals…but a lot of people who should be forming their own households are not.

Think of a house as one or more people who live in the same home. Before the housing bust, an average of 1.1 million new households were formed each year in the U.S.

Household formation plummeted during the Great Recession, as young adults moved in with their parents and older adults moved in with their children, people took in roommates. From the first quarter of 2008 to 1Q 2011, around 450,000 households formed each year. 2011 went back to the norm of 1.1 million and new household formation swelled to 2.4 million in 2012.but there’s more to come.

Pontificators believe there is still an estimated 2.4 million missing households that should be forming in the near future. For more than two years, housing permits, housing starts, resales and new single-family sales have been on the rise. Only household formation is still lagging.

Job growth is the primary driver for household formation and the steady employment growth of the past three years is another impetus for new household formation. Young adults between 18 and 34 years old are itching to get out on their own and start living their lives.

“You’re just seeing a lot more people getting reengaged,” said Sterne Agee analyst Jay McCanless. “Housing demand, whether its rental or ownership, is a positive indicator.”

Grow up. Go forth. Get on with your life. Good luck.

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http://trends.truliablog.com/

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http://www.inman.com/2013/06/24/experts-doubt-surge-in-mortgage-rates-will-derail-housing-recovery/#sthash.tIYOmxTO.dpuf

http://www.inman.com/2013/07/24/missing-households-represent-big-source-of-pent-up-demand/

http://www.housingwire.com/news/2013/07/15/conditions-are-ripe-household-formation

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