Greg's Blog

Deals of the Week 5-24-12

Greg Traub (Time Realty LLC) — Thu, 24 May 2012 11:20:48 -0700

Some of the best deals I’ve seen in a while this week, certain to go quick so if you are interested let me know ASAP!!!

12984 Daughtery @ $190,000

A NORMAL sale! No short sale wait, no bank shenanigans, just offer and buy this house without hassles! Great upgrades throughout, large fenced yard, great condition, and in one of the best areas of town, right next to the Winter Garden Village! VERY good ROI on this one with estimated rents between $1700-$1800/mo. Note though the seller already has offers and will choose one this eveneing! If wanting to make an offer call me now!

7018 Mapperton @ $249,900

A little overpriced right now, but could easily attempt to negotiate down to ~230K, the seller has room! Also a normal sale with this Windermere home WITH POOL. Amazing upgrades throughout with nothing needed, get the keys and rent in less than 2 weeks in this area. Estimated Rents between $1800-1900

13633 Emeraldview Dr @ $150,000

I should have put this one first because it already has 2 offers and the seller is choosing one TONIGHT! If interested in this upgraded, pond front home in the established and beautiful Waterford Lakes neighborhood then we have to get our offer in now. May have to go a bit over asking on this one though. Estimated Rents between $1250-$1325.

278 Winter Nellis @ $127,500

This bank owned townhome backs to an open field and conservation for peaceful backyard. Looks to need some new carpet and appliances, so the price should definitely be negotiated lower, but is in one of my favorite neighborhoods for rental. Estimated Rents between $1200-$1300/mo.

507 Lakehaven Cir @ $213,800

A short sale home in Waterford Lakes with over 2400 square feet, a beautiful pool, upgrades throughout, and a pond view! It doesn’t get much better than that, except that its estimated monthly rent is between $1650-$1800!

10347 Kristen Park Dr @ $269,900

Looking to break into the Lake Nona area without having to pay new home prices? Here it is, a bank owned, 3800 square foot home with new carpet, new paint, appliances, and a pond view! Nemours Children’s hospital and the VA hospital are slated to open beginning of 2013 and the home builders in the area are ramping up with sales, current estimated rents are just $1700-$1900 but this area has growth almost in the title.

10016 Caroline Park @ 254,900

Another Lake Nona Bank owned home to get into at just over 3500 square feet. This one backs to conservation and could rent for $1650-$1850.

Deals of the Week 5-18-12

Greg Traub (Time Realty LLC) — Fri, 18 May 2012 07:45:15 -0700

FIVE deals of the week this time. From high yielding townhomes to unique Lake Nona single family homes.

Click here for Property Details

260 Winter Nellis Cir @ $115,900

Large Winter Garden Townhome that backs to field and conservation in great condition at an excellent price! Upgraded kitchen and baths, this has higher than average yeilds with estimated rent between $1250 and $1300.

10870 Spider Lily @ $129,900

These units just don’t come on the market anymore in Lake Nona! Original builder is back in the neighborhood finishing up the final few lots in the neighborhood and are re-selling at $165K to $175K. This re-sale 3 bedroom townhome is asking under 130K and if history is any indicator, this won’t last a few days. Estimated rents between $1150-$1250 with the first stage of Medical City set to open and bring thousands of jobs by the end of the year.

14433 Chinese Elm @ $137,500

This Move-in ready highly upgraded home is a bike ride to downtown Avalon Park. Bank owned and ready to sell, tenants in place! Estimated rents between $1200-$1300

4614 Hickory Stone @ $159,900

This single family POOL home also backs to conservation with upgrades galore and near move-in ready is just north of Lake Nona’s medical city and just south of East Orlando’s technology corridor. This unique home is definitely worth a look with estimated rents between $1400-$1500.

9825 Old Patina Way @ $178,602

This pre-approved short sale in Lake Nona just needs a little paint and can be your premium Lake Nona investment. Estimated rents between $1300-$1350.

Also be sure to check out this weeks “Low Ball Specials”.

"Low Ball Specials" of the Week 5-18-12

Greg Traub (Time Realty LLC) — Fri, 18 May 2012 07:40:30 -0700

“Low ball specials” are properties I believe have great potential for investment, the problem is they are overpriced! So take the list prices on these properties with a grain of salt, because I recommend offers well below asking!

Property Details Click Here

2806 E Washington St #2 @ $186,000

This downtown townhome has tons of upgrades, a private backyard, 1 car garage, and a high demand for rental. The problem….this particular property shouldn’t sell for more than $150K even in today’s hot market. Prepare for some negotiation on this pre-approved short sale, but the effort could definitely pay off. Estimated rents between $1400-$1500/mo.

1306 S Pennsylvania Ave #5 @ $99,999

Another close to downtown short sale just to the north in beautiful and prestigious Winter Park. A large 2/1 condo right in the middle of million dollar winter park homes, but with a current value I estimate at no more than $70,000. Estimated rents between $900-$1000, though little competition for rentals in this area to compare with.

Premium Deals of the Week 5-4-12

Greg Traub (Time Realty LLC) — Fri, 04 May 2012 13:23:03 -0700

Link to Properties - 02-Res Customer Synopsis

12717 Lexington Summit @ $115,000

Great 3 bedroom townhome walking distance to the Waterford Lakes Power shopping center. Gated community that appeals to young families, students, and young professionals with well run HOA. Only 115K with $1150-$1250/mo rents.

10175 Pointview @ $299,900

An excellent property in the high end Dr. Phillips area with all A rated schools, “restaurant row” along Sand Lake Dr, and the prestigious Bay Hill Golf course and country club. This move-in pool home has estimated rents of $2,200-$2,400/mo

9869 Heron Pointe @ $259,900

Another great candidate outsized leveraged returns in the up and coming Lake Nona “Medical City” area. In a gated Golf community with A rated schools just minutes to the Medical towncenter. Rents between $2300-$2450/mo

6208 Talaria @ $289,000

In the Prestigious Windermere address this Providence home boasts over 3,000 square feet with upgrades throughout and 3 car garage. This short sale is already pre-approved so a quick closing is possible. With rents between $2100-$2200.

13029 Penshurst @ $188,000

This Windermere home under 200K also backs to conservation with good returns. Rents between $1550-$1600

525 E Jackson St #501 @ $222,500

Downtown purpose built condo with excellent views, and near move-in ready. You simply don’t find 3 bedroom purpose built condo’s in this zip code for this low, most 2 bedrooms are above 300K! Likely one of the last chances to get into the downtown premium condo market before prices go up again. This Bank owned home is ready to close! Estimated rents between $1900-$2100.

Deal of the Week 5-1-12

Greg Traub (Time Realty LLC) — Tue, 01 May 2012 13:12:17 -0700

I am back in town, and there’s plenty to catch up on! We have a great new batch of Properties for this week as well.

Link to Homes all under 150K - 02-Res Customer Synopsis

15333 Harrowgate @$125,000

In one of the least expensive neighborhoods in an A+ area. Being the smallest homes in an area of larger more luxury homes gives excellent potential for this home with estimated Rents between $1200-$1250.

211 Brightview @$159,900

Nice neighborhood in the Lake Mary area, another employment center area around Orlando with great schools and great ROI. Estimated Rents between $1350-$1400

9918 Bennington @ $145,000

Larger 4 bedroom newer home in the Lee Vista area north of Lake Nona. Looks to be in good condition with all tiled floors great for durability, and backs to conservation for uniqueness. Estimated Rents of $1300-$1400

13807 Golden Russet @ $128,500

Bank owned townhome ready to go in the Winter Garden area, In one of the two townhome communities (The Orchard) many of my other investors have had great success in. Estimated Rents of $1200-$1250/mo

2733 Wild Tamarind @ $109,900

Just back on the market after a previous contract fell apart on this short sale. A HUGE 2 bedroom townhome (upstairs loft can be made into 3^rd bed). This one is unique with upgraded living areas, and because the 2 car grage was professionally converted into a recreation room (I have additional pictures). Extremely well priced at 109K as others in the neighborhood have recently sold for 10K+ more. Estimated rents of $1200-$1250/mo

2225 Heathwood @ $134,900

Great East Orlando single home in Stone Forest with a pool on double premium lot backing to pond and conservation. Smaller and built in 1999 but offers a lot of uniqueness with the pool and lot for an amount much lower than what nearby neighborhoods go for. Pool homes in this neighborhood are rare, so no good rent comps for pool homes are available, so it may be able to be rented for much more than my estimate ($1200-$1250/mo), or lowered maintenance costs if tenant takes care of pool.

1941 Stone Abbey @ $125,000

Another home in the Stone Forest neighborhood, a bit larger, a few more upgrades, and backing to conservation. Higher ROI with lower maintenance cost of a pool though. Estimated rent of $1250-$1350/mo.

Deal of the Week 4/18/12

Greg Traub (Time Realty LLC) — Wed, 18 Apr 2012 07:44:37 -0700

All great deals well under 150K!

12326 Lexington Summit:02-Res Customer Synopsis

Location: East Orlando, Waterford Lakes Area

Rental Rate: $1150-1250/mo

Pro’s: Walking distance to Waterford Lakes Towncenter shopping and entertainment. Great rental area with quick rent to young families and nearby UCF students. Well Run HOA with gate, pool, basketball, playground, and all exterior maintenance included.

12233 Upstream: 02-Res Customer Synopsis

Location: East Orlando, Waterford Lakes

Rental Rate: $1150-1200/mo

Pro’s: Single Family Home in the very desirable Waterford Lakes neighborhoods with newly replaced roof and A/C. Private yard, and walking distance to Waterford Lakes Community recreational park.

113 Razorbill: 02-Res Customer Synopsis

Location: East Orlando, Eastwood

Rental Rate: $1300-1400

Pro’s: Single Family home in the Eastwood Golf community of Oak lined streets, A rated schools and on a quiet cul-de-sac.

2209 Heathwood Cir: 02-Res Customer Synopsis

Location: East Orlando, Waterford Lakes Area

Rental Rate: $1200-1300

Pro’s: Traditional Sale single family home in move-in condition on premium lot backing to pond and conservation.

3026 Wild Tamarind: 02-Res Customer Synopsis

Location: East Orlando, Avalon Park

Rental Rate: $1150-1225

Pro’s: Bank Owned townhome ready to close ASAP in the highly rentable Avalon Park neighborhoods. Bike to Avalon Town center, jog along one of the neighborhoods many nature walks/parks, or swim in one of the several community pools.

13638 Mirror Lake: 02-Res Customer Synopsis

Location: East Orlando, Avalon Park area

Rental Rate: $1200-1250

Pro’s: A single family home in the Avalon Park area for ~120K! Gated community with tons of amenities and move-in ready.

1202 Cherry Valley: 02-Res Customer Synopsis

Location: East Orlando

Rental Rate: $1200-1275/mo

Pro’s: Bank owned home in the great neighborhood of Bridgewater for under 130K! With a little cosmetic work this home would make a great long-term rental.

9788 Tivoli Villa Dr: 02-Res Customer Synopsis

9799 Biscotti Ave: 02-Res Customer Synopsis

Location: Lee Vista Area

Rental Rate: $1150-1250

Pro’s: Two Short sales ready for re-approval (quicker closing) with great rental returns. Large townhomes that back to conservation and under 113K!

355 Lansbrook: 02-Res Customer Synopsis

Location: Seminole County, Winter Springs

Rental Rate: $1350-1450

Pro’s: In the Extremely desirable Winter Springs area, this 3 story unique townhome is located right across the street from Winter Springs’ Town Center and faces the community pond. Comes with tenant! Leased at $1400/mo with move in May 1^st through May 1 2013, This highly cash flowing property for under 130K already had offers, so move quick!

Deal of the Week 4/12/12

Greg Traub (Time Realty LLC) — Thu, 12 Apr 2012 12:05:46 -0700

This week’s deals are all A+ and under 150K! – 02-Res Customer Synopsis

13724 Phoenix Dr - This short sale is just back on the market and needs to close before the end of April! Upgrades throughout, granite, wood, the works…and little needed to get rent ready for between $1350-1450.

9971 Shadow Creek - This short sale already has multiple offers as it is priced well below market value. Would have to move quick to have a chance on this one. Rent for between $1300-1400

9854 Lake District - Bank Owned property, a rare smaller single family home in the East Park neighborhood in Lake Nona. Homes in this great neighborhood simply don’t sell for this low! With great rents between $1250-1350 this Lake Nona home has above average returns for this area.

9128 Camden Gardens – This is one of the best neighborhoods in Lake Nona, and these townhome units don’t come on the market every day. A bit overpriced this townhome is a great opportunity with rents between $1250-1300

370 Fieldstream North – another short sale, currently a bit overpriced, this home can likely be purchased for ~135K with rents between $1200-1300, close to all that East Orlando has to offer.

169 Lakebreeze Cir – This Lake Mary home is a rarity at under 130K! Re-plumbed, new A/C and zoned for some of the best Seminole county schools. Rents between $1100-1200

8941 Silk Bay – Another Lake Nona townhome, this lowball special should sell for closer to 150K than it’s current list price, give less competition for the buyer ready to negotiate hard for this luxury townhome that rents for $1300-1400/mo.

Some Deals of the week that just missed the list (because they are already under contract!) - 02-Res Customer Synopsis

706 Pine St – This tiny studio is in one of the best locations in downtown Orlando and upgraded to be a modern beauty that rents for $700-800/mo….showing extremely high returns, unfortunately this one went under contract in 24 hours.

525 Jackson #501 – You simply can’t find a downtown 3 bedroom condo in a modern building for less than 225K.

13109 Lexington Summit – One of my favorite townhome neighborhoods in Waterford Lakes, Walking distance to The Waterford lakes towncenter, a highly rentable townhome with upgrades throughout, this one was bound to go pending quickly. Rents between $1050-1150.

Deal of the Week 3/10/12

Greg Traub (Time Realty LLC) — Sat, 10 Mar 2012 14:05:55 -0800

Our newest deals are just days on the market, and in the lower price ranges that yield the higher returns! (Still keeping us in the great area’s that attract great renters of course)

Link to all Deals of the week, click the top left of the screen for a drop down of all 6 - 02-Res Customer Synopsis

13205 Briar Forest asking $110,000

Across from the prestigious Stoneybrook East Golf community and in the highly attractive 32828 zip code this property will rent very well with little needed to get rent ready between $1200-$1300/mo. giving it far above average returns.

530 Pinebranch Cir #530 asking $99,900

Located within highly sought after Seminole County school districts, this suburb of Orlando is just a few minutes to major employment centers, set in a developed but extremely quiet, rural feeling town of Oviedo. This property is sure to provide above average returns renting for between 1100-1200/mo.

296 Solaris Wharf asking $102,000

Also in highly desirable Seminole County, across the street from the Tuskawilla Town center. The builder is successfully building the last few units in the neighborhood, and selling them at 137K+! Renting at $1100-$1175/mo providing average to slightly above average returns while holding, and the built in appreciation potential gives this property quite an edge.

277 Short St asking $152,900

This single family home located in the city of Lake Mary is one of the lowest priced newer homes in the city that was voted the #4 best place to live in the nation by CNN and Money Magazine. With an estimated rent between 1500-1700/mo this home has what a good investment likes. Unfortunately this home already has offers on it and the seller is closing out bids first thing Monday 3/12/12!

831 N Ferncreek #101 asking $154,900

This downtown condo is just north of all the hustle and bustle of the city, but still biking distance to all it has to offer. Very quiet and safe area of higher end homes, this high end condo will attract all the tenants you will want with rents estimated between 1350-1500/mo. With no-where else to build in the area, this type of property definitely can’t be built for this low a cost, pressuring future appreciation. Additional pictures available.

13935 Daniels Landing asking $96,900

One of the most consistent neighborhoods to produce “deals of the week” this one is a rare 3 bedroom unit that demands a premium rent between 1150-1250/mo and rents within days. Be prepared to compete for properties in this neighborhood though, especially with this bank owner not accepting offers from investors until 3/23/12.

Your Orlando Home Expert

Direct: 407-222-7281

GregMTraub@gmail.com

New Deals of the Week 3/3/12

Greg Traub (Time Realty LLC) — Sat, 03 Mar 2012 12:42:09 -0800

MANY deals to talk about this week. Unfortunately there would have been even more, but homes today have been selling sometimes within hours of being put on the market. Prices are definitely rising in these areas with many selling prices being 5-20% above asking prices if underpriced, and even selling for up to 5% over estimated values! The numbers still work out though to buy and hold these homes as rentals while still making a good positive cash flow, but be prepared to move FAST and be competitive! Especially in the $0-200K price range. *Starred* homes are likely to be my favorite deals and/or the ones most likely to sell within a day or two.

*12707 Somerset Oaks asking 99k - 02-Res Customer Synopsis

This townhome located walking distance to the Waterford Lakes Shopping super center has always proven to be a great rental area with nice townhomes for a great price. Not many sales in here recently meaning the listing agent priced it at a 6-12 month ago level, this one is going to sell QUICK. Corner unit, with tile flooring downstairs and granite counters. The house needs an exterminator, good cleaning, carpet replacement, Garage door Repair and light touch up paint to make an A+ rental. Additional pictures Available

*9833 Oak Crest asking 125k - 02-Res Customer Synopsis

Great Single homes at this price simply don’t come up for these prices anymore. Smaller at ~1500 square feet, this lee vista area home backs to conservation, has a private fence, tile flooring, and vaulted ceilings. Only needs carpet in the bedrooms and this house could be rented next week. Highly recommended! Additional pictures Available

*248 Winter Nellis asking 120K - 02-Res Customer Synopsis

In one of my favorite townhome communities in Winter Garden, this larger than normal 2 car garage townhome also backs to a rare conservation lot, and has proven to be an A++ rental area. Only needing minor handyman work and appliances to make rentable, this home has a very high ROI.

*9663 Fenrose Terrace asking 135K - 02-Res Customer Synopsis

One of my Favorite neighborhoods in the Lake Nona area of Northlake Park, this townhome has a great view of the pond and park from it’s front porch. Excellent condition as well with upgraded cabinets, counters, laminate and tile flooring, all with an open floorplan. Additional pictures Available

13858 Phoenix asking 147K - 02-Res Customer Synopsis

SPEEDY! This townhome I thought was Way overpriced, I went out to see today, and was it a great looking home. It was a flip bought only 3 months ago for ~100K as a short sale in need of work, with just cosmetic upgrades done. To my immense surprise, when I got back, I found this home had gone under contract! If this ends up closing close to the asking price it would represent a ~20K increase in current values…..and still would provide a small return while renting. (will be writing more about this seeming trend later)

On to some Higher end Deals that provide moderate positive cash flow, and EXCELLENT appreciation potential. In the >200K range homes don’t sell as quick, but still within a few days when priced right.

12648 Cragside asking 193K- 02-Res Customer Synopsis

A great Windermere property that may have some negotiation room in its price. This home only needs appliances to be move-in ready in one of the fastest renting and sales neighborhoods in Central Florida. Newly Carpeted and Newly Painted, this bank owned home is ready to close ASAP. Additional pictures Available

1901 Kodsi Ct asking 250K - 02-Res Customer Synopsis

PREMIUM home in Winter Garden this Open Home has an extended lot with conservation and cul-de-sac to view from the front porch, a pond to the left, and hill to the rear. Inside is expansive living area’s with up to 20 foot ceilings, tile and carpeted flooring, and kitchen with granite counters, upgraded appliances and cabinets that opens to the living room. A pre-approved short sale in one of the best neighborhoods in Winter Garden. Additional pictures Available.

*6225 River Fruit asking 269K - 02-Res Customer Synopsis

One of the Nicest homes in the Summerport area with premium lot, upgrades and features. From the front porch of this home you can view a neighborhood open area/park with gazebo and private road. To the rear a conservation lot for privacy and beauty, a boat launch onto Lake Speer, and all in the gated community of Eden Isle, the third entrance to Summerport.

Inside it doesn’t stop, with premium real wood flooring, premium chair railing throughout the formal area’s and office, stone and tile flooring in the wet area’s and living room with 2 story ceilings and windows all the way up to provide lots of natural light. All with an open view from the kitchen and a downstairs master bedroom. A NORMAL sale, this home won’t need anything at all to be move-in ready. Negotiate the price a bit and this home will prove to be an amazing return in the short and long term. HIGHLY recommended and additional pictures available.

9445 Candice asking 185K- 02-Res Customer Synopsis

Not my favorite neighborhood in the La Vina neighborhoods but still nice with great location in Lake Nona. In good condition generally with mostly tile downstairs and the carpeting in the home being in good condition, only needing a steam clean. The interior walls however were very individualized and would likely need to be completely repainted a more neutral tone. The home backed to conservation, though there were not many upgrades inside. Additional pictures Available

9625 Moss Rose asking 189K – 02-Res Customer Synopsis

In east park neighborhood, this bank owned home was in good condition, Only needing ceiling fans, a refrigerator, washer/dryer, and blinds. The home looked to have new carpets, laminate flooring in the wet areas, tall cabinets, and an open backyard. Not to upgraded but nicely done large home for a great price in the Lake Nona area. Additional pictures Available

9738 Lake District asking 199k - 02-Res Customer Synopsis

Only on the market a day, this short sale already has offers (like all of the other homes likely as well) but the agent will be holding offers open until Sunday at 4pm. This one needed a bit of work, but must cosmetic things. A very good cleaning, new carpet, washer/dryer, ceiling fans, a few walls painted. Other than that the home has potential with laminate wood floors, upgraded cabinets, and back porch. Additional pictures Available

9818 Lake District asking 210k - 02-Res Customer Synopsis

Just on the market today, this pool home looks great with laminate wood flooring, open floor plan, and great shape. Home likely just needs a few rooms re-carpeted, and maybe paint over the faux paint in the kitchen (though may want to leave it). I usually don’t recommend pool homes, but this one has great potential for resale down the road. Additional pictures Available

Your Orlando Home Expert

Direct: 407-222-7281

GregMTraub@gmail.com

Deals of the Week 2-3-2010

Greg Traub (Time Realty LLC) — Fri, 03 Feb 2012 14:52:22 -0800

Link to Properties - 02-Res Customer Synopsis

208 Sandhill Crane Runin East Orlando. This home is in the Eastwood neighborhoods in the general Waterford Lakes area. Eastwood itself is a large golf course community with planned oak shaded streets, neighborhood grocery center, “A” rated schools and proximity to all of the east Orlando employment centers.

The home itself is in excellent condition, needing nothing to put directly on the rental market. Upgrades were throughout the home as well, from the kitchen cabinets, counters, and appliances, to the bathroom vanities, laminated wood and tile flooring all throughout. I give this home an A+. Built in 1996, the home likely has about 5 years left until the roof will need to be re-shingled, but otherwise the home looks nearly new with the advantage of being in an established mature neighborhood. Rents between 1200-1300 with the higher end being likely, provides up to 5.5% cash return without financing (based on my ROI estimate including vacancy factor, maintenance, taxes, insurance etc….) with excellent potential for appreciation. Additional pictures available and this home is NOT a short sale or bank owned so a quick and easy closing is available!

13211 Moss Hollow Ctin East Orlando. This home also is an absolute gem with more upgrades than any other I have seen in this neighborhood. On a cul-de-sac, this home is also Move-In ready with nothing needed to put it on the rental market. The kitchen has been entirely professionally re-done with cabinets and stone countertops and stainless steel appliances. The flooring is slate tile and laminate wood throughout the entire home for durability and beauty, only the secondary bedrooms are carpeted. The upgrades continue in the master bathroom and are topped off with a large fenced in back yard.

Estimated rents for this 4 bedroom home are between $1250-$1325/mo providing up to 6% on cash return with great potential for appreciation. Additional pictures available

9588 Silver Buttonwood Stin the Lake Nona “Medical City” area. This townhome offers the chance to get into the lake nona area for well below 150K…currently asking $129,500, this property will contract quickly. Practically new, built in 2007 this townhome was quality built with lots of upgrades in the kitchens and baths as well as laminate wood flooring downstairs. A short sale that is likely to go relatively quickly as well, this home can be rent ready with just adding a washer and dryer. The only downside to the property is that it does back to a brick sound wall to which the other side is Narcoosee Rd. Additional pictures available.

Other than that, rents estimated to be $1200-1300/mo for this home as well, providing potential returns of up to 5.5% for cash purchases; and the appreciation potential of Lake Nona

30 N Lawsonais a diamond in the rough in Downtown Orlando. An amazing property in one of the best parts of Downtown, the interior is modern with upgraded kitchen cabinets and solid surface counters, a Jacuzzi garden tub with separate shower in the bathroom, and vaulted ceilings with recessed lighting throughout. This property is physically a detached single home with 1 bed, 1 bath, and plenty of room, the property is legally a condo…which is where the rough part comes in. The other detached single family home in the condo (just the 2 properties) is also in distress, not paying for any association dues or the upkeep of the common area’s (lawn and reserves for roof/painting), showing on the MLS as the HOA dues are $400/mo. This property will require legal legwork to get the association in order and to provide additional upside and ability for the new owner to get first crack at the other unit in the condo. This property is not for the casual investor and will require professional assistance to maximize. VERY worth the effort. Additional pictures available.

Your Orlando Home Expert

Direct: 407-222-7281

GregMTraub@gmail.com

Deal of the Week 1-29-2012

Greg Traub (Time Realty LLC) — Sun, 29 Jan 2012 17:07:47 -0800

The market has been moving to quick too write up to much about my DOW on the best properties. So all I can send out nowadays is a quick blurb on the best ones I come across. If interested contact me ASAP for additional information and pictures if available.

Link to the Deals of the Week - 02-Res Customer Synopsis

First up, Three in the Suburbs:

10065 Oak Quarry Dr @ 220K asking price is definitely the #1 deal of the week! Go in with a strong offer and quickly because this one is not going to last. This HUGE 5/4 3157 Square foot home with tile roof and quality construction also has no rear neighbors backing to a pond with fountain. Right in the Lake Nona “Medical City” area these properties have great potential as real growth happens in the area. For now rents only support a 3.8-4.8% all cash return but with lots of appreciation potential at this price point on this level of home! A Short sale so prepare to wait for the banks approval, but WHAT A DEAL. Contact me immediately about this one.

12210 Upstream Ct @130K asking in The Waterford Lakes Area of East Orlando. Just about move in condition, great fenced in yard, very well maintained. Just a bit outdated cabinets in good condition for rental, should be re-faced for re-sale. Offering a 5-6% All cash return. Financing is available for this single family home offering positive leverage to raise cash on cash returns to 7-9%. Pictures Available

14222 Sonco Ave @160K asking in Windermere. This3/2 townhome offers the uniqueness of an additional rental apartment above the garage making the property a total of 4 bedrooms and 3 baths with second kitchen in the rental apartment. Property is rare in the neighborhood so rent comps aren’t available, but other 3/2’s rent for $1200-$1300, and the previous owner rented the separate apartment for 600-800. Estimated total rental income at 1500-1700/mo Cash returns of 5-6.5%. Financing possible for cash on cash returns up to 6%-10.5%. Pictures available.

Now to Downtown Gems:

The Vue Unit 6S-11 @129,900 these studio lake side units always sell quickly and rent VERY quickly at 1100-1200/mo. For those that don’t know of or haven’t toured the VUE with me before, this is one of the top 2 premier high rise condos in downtown. Call for more information. Cash returns of 4-5% currently, financing is also available (rare for condos) for 3-6.2% possible returns.

Lowball Specials:

1409 Minnesota St @250K Asking is likely overpriced for this single family home in downtown Orlando. But offers amazing potential with huge 2000+ sq ft, and additional lot to expand. No HOA to pay for this property. @ 230K however the cash returns on 1950-$2000/mo rent estimated at 5-5.25% financing is of course available to increase returns, with possible under-estimated rent

101 Eola #808 @ 146K Asking price, currently in line with what these units sell for from the developer “as new”. Meaning This property as a short sale should go for a good discount. A larger true 1 bedroom condo in downtown Orlando’s High end Thornton Park District, this unit should sell closer to 125K-130K. Cash returns between 4-5% and FINANCING IS AVAILABLE in this building.

Intro To Group Real Estate Investment

Greg Traub (Time Realty LLC) — Mon, 09 Jan 2012 00:17:42 -0800

Ever wonder how someone is able to purchase that skyscraper office building downtown, or the 300+ unit apartment complex down the street for multi millions of dollars? Well, I can tell you, it’s not typically someONE that purchases these properties it is usually a group. It’s an age old concept, if something costs $200,000 but you only have $100,000; then find another person with $100,000 and partner. When it comes to large properties that require say, $1,000,000 to purchase, and you partner with several others in a group investment it is called syndication.

Syndication can add some complexities but also offers some huge advantages that can far surpass the minor hassles of some additional paperwork. After all there is a reason why 95% of large properties are owned in some kind of a group structure, in fact some of the largest real estate tycoons you may know of (like Trump) made most of their wealth by being involved with and leading investment syndications.

The Advantages:

Bigger Property, Bigger Profits

The larger a property, the more efficient the property can be managed, income maximized, and expenses minimized. A 300 unit apartment complex is only going to need 2-3 managers that can be located on site and be paid a wage, a few maintenance personnel on staff, one roof to worry about ( well maybe several, but much fewer than 300), one insurance policy, one property tax bill, and one marketing budget. Contrast that against the prospect of managing 300 individual homes spread throughout a county or state, and the economies of scale become apparent.

Add to that, the fact that most large multi-family and commercial properties are purchased by professional investors looking to make a profit, and you will notice that cash flow and returns are typically higher. With individual homes the competition from inexperienced investors, speculators and homeowners themselves can drive investment returns as low as 0% or negative in a hot market as these part-time investors are happy just “breaking even” while they chase unpredictable and uncontrollable market appreciation.

With a group investment you may be “splitting the pie” with your partners, but the partnership itself allows everyone to split a much larger pie, creating a win-win for all.

Multiple Exit Strategies

With individual properties, your strategy is limited to some combination of buy low, sell high. And in the middle there are either renovations done to the home to appeal to an end user (in the case of a short-term flip) or a period where the property is rented until such time as the market has increased the value of the property.

With syndication into larger multi-family and commercial properties you have several additional options and more control over your returns.

There is the traditional strategy of single families; Buy, renovate, and Sell, though slightly modified. Buy, reposition/renovate (like updating a property and marketing to a different demographic of people), increase your rents (which has a direct relation to the value of the property…see article on “Advantages of Multi-Family Investing”), then re-sell to another investor. An added bonus with multi-family is that since your property can be big enough to essentially “be the neighborhood” in some sense, you may be able to move a property from being a class “C” to a “B” or “B+”. Take a distressed property with some repairs needed, higher vacancy, or a complicated deal; and turn it around into a stabilized property that now may fit into an institutional investor’s guidelines and you can re-sell the property to them. Institutional investors can and will purchase properties at lower CAP rates than most other investors, which directly correlates to a higher selling price. (See “Adv of Multi-Family” for an example)

The next strategy involves the long-term holding of a property. Buy, increase rents either through repositioning or a gradual market rise, and then simply re-finance the property at its now higher value, pulling out all or most of your original investment. Then continue to collect the income the property produces indefinitely. You can do this over and over again, and because proceeds from a loan are not taxable, you are in effect receiving this money tax free (or at least deferred until the eventual sale). This strategy works best with Multi-Family and Commercial properties because the financing you would use with this strategy would be non-recourse financing, meaning you have no liability to personally pay back the loan on the property should anything go wrong (see limited liability below). What this essentially adds up to is that you can have your original investment only tied up for a short period of time before you get it back. And on top of that you would still be receiving an income from the property without your money still being tied up.

One more possible strategy (and there are many more not mentioned here), is “Buy, Split, Sell”. Certain properties are more suited to this strategy than others, but you may be able to purchase a Multi-Family property with many units as one, split up each unit into individual properties (condos), and re-sell the condo’s to end users. Essentially buying in bulk, then selling off each piece in smaller increments at a much higher total price. These properties are called condo-conversions, during the last real estate bust this term took on some negative connotation (rightly so) as properties were hastily and poorly converted leaving the end buyers with a bad property, but with the right property or the right market, this strategy can prove to be very successful.

Smaller Investment Lower Risk

There is a reason even those people with $1,000,000 don’t invest it all in one property all at once. Diversification is a powerful risk mitigation strategy that is one of the most powerful reasons why large property purchases are typically structured as a group investment, as no one person will typically have the risk tolerance to put $1,5,10, or 100 million into one investment all at once. Even banks won’t do this on larger loans, they bring in several other banks to “participate” so they don’t have to put too much of their assets at risk in one loan.

Group Investment, Limited Liability

When investing in an individual property alone, there are of course ways to limit your liability, from as simple as purchasing it in a corporate name or land trust (no financing possible this way though), to insurance policies and overall asset protection strategies. However, as long as you are the sole owner of that property and are the operator, if something bad enough happens you may have some liability. Plus if you ever want to finance or re-finance an individual property, the only attractive financing available is going to require you to personally sign on the loan, putting liability on your personal wealth to ensure that loan is paid.

With a group investment however, when set up properly, as an investor your liability is limited to the amount of money you have invested. Similar to if you own shares of IBM; if someone sues IBM you wouldn’t be personally responsible to pay that person. Plus on commercial and multi-family properties, there is attractive financing available without anyone having to sign personally on the mortgage, and if personally liable financing is needed, typically only the sponsor signs for the mortgage, and not the other partners in the group (meaning they are not personally liable for the debt, only the sponsor).

Limited Time Investment

When investing with a group, typically the groups’ sponsor is the one that finds the property and performs due diligence on the property for presentation to the members of the potential group. An investor’s time can be limited to the amount of time it takes to review the property proposal. There is no interviewing realtors, searching for properties, endlessly making offers until something is accepted, negotiating with sellers, arranging financing, inspections, insurance, property repairs or finding and overseeing a property manager. All of these tasks (each of which can make or break an investment) is taken care of and usually paid for upfront by the sponsor of the group.

Again similar to purchasing stock in a company, you can think of the sponsor as the CEO of the syndication. They take care of running the property and making sure the original strategy stays on track and stays relevant in a changing market.

Professional Involvement/Ownership

You may have noticed by now I’ve mentioned that there is a “sponsor” and that they are at the center of a group investment. A sponsor basically takes on the leadership role of the group as well as takes on the main liability of the investment and the property. A sponsor by definition should be a professional with the experience and the resources to pull together a successful deal and operate the business profitably (make no mistake, owning an income property is a BUSINESS!)

In the corporate world CEO’s of course make quite a bit of money running a profitable company. They are motivated internally to excel (hopefully) and more importantly they have their interests aligned with those that own the company (shareholders) because their compensation is tied to the performance of the company, and in many cases the CEO is also a partial owner of the company. The same is true for the sponsor, but even more so. In most group investment structures the sponsor isn’t compensated at all unless the property performs at or above expectations and the best sponsors will invest their own money into the property alongside their investors. This ensures the alignment of the interests of the group with that of the sponsor. If the group loses money, the sponsor loses money…and in some cases, more money than the investors.

For more on the structure of a Syndicated Group Investment check out “Structuring a Group Investment” and "Participating in a Group Investment"

Structure of a Group Investment

Greg Traub (Time Realty LLC) — Mon, 09 Jan 2012 00:14:36 -0800

By now hopefully you’ve read “Intro to Group Investment in Real Estate” and have additional interest. By now you are likely wondering how it is actually structured, how you make your money, and when. Be sure to read on to “Participating in a Group Investment” as well.

Every group investment (Syndication) is structured a bit differently. How profits, losses and management are handled is always determined and agreed to before the group is ever formed, so be sure to read the Private Placement Memorandum (PPM - basically a business plan for the property) and operating agreement of the Syndication to fully understand the specific opportunity being offered. However, below is the most typical way everything is set up. For this example we will assume the group is investing in a specific property instead of an opportunity fund where only the criteria of what the group will invest in is known.

Corporate Structure

The investment property being purchased is not typically held in the individual names of those in the group but held in the name of some form of corporation or trust. The individual investors own the interests of that corporation. There are several corporation statuses that can be chosen, but for all intensive purposes, the most common structure is that of a Limited Liability Company (LLC) as it offers limited liability to investors, as well as being treated as a pass-through entity for taxes. Meaning the profits of the company are NOT taxed, then whatever is left over distributed to investors, which is again taxed on the individuals tax return (double taxation). With the LLC the deductions, losses, and profits are passed straight through to the investor’s individual tax statement.

Minimum Investment

A property has been found by the group’s sponsor, it is under contract, and due diligence has been completed; you have reviewed the PPM and determined you would like to be a part of the investment. To participate with the group there is almost always a minimum investment with the ability to invest in any specified increment above that as the investor desires. The total amount one invests determines the percentage ownership in the group they have.

Example: A group needs to raise $1,000,000 to purchase and renovate a property. The sponsor sets the minimum investment in the group at $50,000 with additional units in the syndication available in increments of $1,000. In this case, an investor can simply put in the minimum of $50,000 or could put in $72,000, really any amount to the nearest thousand above $50,000.

Minimum (Preferred) Return

Not all Syndications have a provision like this, but the one’s I would invest in would. As mentioned in the Intro the sponsor of the group is basically the CEO of the investment, and they share in the profits as incentive to make as much profit as possible for the group. However, I personally think it is best to set a minimum standard for the sponsor to further ensure they don’t get complacent with mediocre or underperforming returns. This is where a minimum (technical word is preferred) return comes into play. It sets the minimum returns the investors will receive before the sponsor can participate in any of the profits….then not only does the sponsor not make money unless the investors make money, but they don’t make money unless the investors make at least a minimum return on their money. This preferred return is typically a negotiation between the sponsor and the investor, and based on the potential a particular property may provide. Preferred returns are typically between 5% and 8% for smaller syndications. There are NO MAXIMUMS however, if the property ends up yielding 50%+ over time, the investor will collect their entire share of the profits.

Example: An investor has put in $100,000 in a group investment. The group has a set the preferred return at 6% annually. So before any profits are split with a sponsor, that investor must receive a $6,000 profit, and not only does the sponsor not make any money if this minimum return isn’t met, but if there is a shortfall in the early years (which can be common on some properties that require a repositioning), that short fall is added to the next years minimum return. So over a 10 year investment lifetime, the minimum an investor should receive would be $60,000 in profit.

Percentage Ownership

An investor’s ownership stake in the property will be determined by the total percentage of their investment divided by the total amount of funds raised in the syndication.

Example: An investor has put in $100,000 of a total $1,000,000 group investment. That investor owns 10% of the Syndications LLC and is entitled to 10% of the profits, 10% of the tax deductions, and 10% of the capital gains due the investors in the group.

Sponsor Profit Share

The better Syndications have a preferred return to investors; the amount of profit generated over this return however, is split with the group’s sponsor. It is their compensation for finding, evaluating and managing the property on behalf of the group. These splits are typically between a 70/30 (70% of profits to investors, 30% to the sponsor) up to 50/50 or more. The split can be further segregated to profits generated out of on-going cash flow, and capital gain when the property sells for a profit; and may not be the same split for each. Generally, the better the deal the sponsor finds, the higher the profit split will be.

Example: A sponsor has put together a $1,000,000 syndication with a 6% preferred rate of return. The investment is doing well however, and this year there are $100,000 in profits. $60,000 of those profits goes straight to the investors to satisfy the preferred rate, but the remaining $40,000 is subject to a 70/30 split with the sponsor. This leaves an additional $28,000 due to investors (a total of $88,000), while the remaining $12,000 is the sponsors compensation for a successful year.

In the next year, after much effort by the sponsor to renovate and fill the property with tenants, the investment has greatly increased in value and is sold. The total cash left after the sale is $2,000,000. $1,000,000 is returned to the investors as their original investment and the extra $1,000,000 in profit will be split between the investors and the sponsor. At a 50/50 split (this property required much more effort and skill to renovate and lease up than a more simple property, so the split is higher for the increase in value attributed to the sponsor’s effort) $500,000 would be due the investors and $500,000 due the sponsor.

Lifetime of the Syndication (Exit Strategy)

A purchase of an interest in a Syndication is not liquid. In fact most of the time Securities and Exchange Commission rules prohibit anyone from selling their interest for at LEAST one full year. Add to that there is a very limited pool of buyers that would be interested or able to purchase your ownership interest, and the possibility of being able to liquidate your investment becomes difficult. This is why the Private Placement Memorandum (PPM) will outline exactly how long the group’s lifetime is, specifying under what conditions the sale or refinance of the property will happen and/or setting a specific time period the property must be liquidated by. Typically an investment of this sort will be a minimum of 5 to 10 years, usually with provisions to extend every 1-2 years by vote depending on what the investors and sponsor believe is best for the investment.

There usually are provisions that will allow early withdrawal with limitations. Limitations typical are the ability to only withdrawal during a certain window of time each year, the requirement to first offer the ownership to other owners in the group and the sponsor based on a current valuation of the property and its income, and typically a fee to arrange for the transfer. So it is possible, if the need of the investor is dire enough, but in general, only invest with a group with funds you know you will not need access to for the lifetime of the Syndication.

Participating in a Group Investment

Greg Traub (Time Realty LLC) — Mon, 09 Jan 2012 00:11:20 -0800

Before reading this article, be sure to first read “Intro to Group Real Estate Investment” and “The Group Investment Structure”

A group investment in real estate (also called a Syndication) typically is considered a security under Securities and Exchange Commission guidelines. Because it is a security many laws govern how such an offering can be offered and who can participate in them. One option that allows anyone and everyone to participate in a group property investment is the full registration as a public offering with the SEC, unfortunately this involves months if not years and HUNDREDS of thousands of dollars just to register, and is expensive to maintain (think of Real Estate Investment Trusts on public stock exchanges). Obviously this prohibitive cost causes most group investment opportunities to not register for public sale; so most are set up as a private offering with the SEC under specific exemptions to public registration allowed under law.

“Private registration” usually requires that these opportunities are never advertised to the public and only offered privately directly to “friends, family, and business associates” that already have an established relationship with the sponsor before the opportunity is presented to the investor (So don't expect a sponsor to meet you, and in the same day discuss any specific opportunity they are working on, they have to establish a relationship with you first). In addition to this restriction, those that invest in the syndication must meet certain accreditation or sophistication requirements to make sure they are qualified and knowledgeable enough to evaluate a private offering themselves. So when inquiring about such opportunities, be prepared to fill out a simple form that asks about your financial status and expect the group sponsor to talk with you about your investment experience and general financial condition….They are required to do so under the law!

Once a sponsor has qualified you are an “accredited” or “sophisticated” investor, you can then start discussing the opportunities the sponsor has available and cal receive the Private Placement Memorandum (PPM) and subscription agreement. These documents basically amount to the business plan of the investment. What the property or properties are that the group is going to purchase, the financials, the operating plan, the risks, the expected profits, and all other information that could affect the investment are included in the PPM. The subscription agreement will outline how the group is structured (profit distributions/splits, lifetime of group, etc). These documents should be reviewed thoroughly before making your investment. Once you are ready, you simply fill out how much you would like to invest and send it to the sponsor.

Depending if the group is going after an already identified property under contract or if it is an opportunity fund where only the criteria of the properties that will be purchased is known, will determine when your full or partial investment will be wired to the group bank account, held in an escrow account until a property is identified, or if it is just a commitment to fund once property is identified (or some combination of the three).

Once you are part of the syndication, expect at least quarterly reports of income, expenses, market challenges, opportunities and the general performance of the investment. The better sponsors will also have the ongoing financials and anything else an investor may want to see available and open for the group to view at any time they wish….the more open the better!

Deals of the Week 1/6/12

Greg Traub (Time Realty LLC) — Sat, 07 Jan 2012 11:06:35 -0800

9763 Doriath - 02-Res Customer Synopsis

This home is located in the 32825 zip code, right between the Waterford Lakes and UCF retail and employment centers and the new Lake Nona Medical Center. In an excellent, quiet community that rents very quickly. This short sale may take some time to close once we get it under contract but would be well worth the wait. In EXCELLENT condition, all this home needs to be ready for rental is a carpet clean and washer/dryer. Huge backyard, tiled throughout the common area’s for easy maintenance, and fenced for tenant privacy in there large backyard. Priced under market value currently at $135,000 with likely rental between 1300-1400/mo. Additional pictures available by emailing me @ GregMTraub@gmail.com .

546 Hardwood - 02-Res Customer Synopsis

You can’t get in a better neighborhood than this one. In the heart of Waterford lakes in a well kept, low distressed neighborhood. This short sale is move-in ready, nothing needed. Showing as a 3/2, the master bedroom has an attached office/nursery for making a practical 4^th bedroom. Laminate floors are throughout for easy maintenance and on a rarely sold premium lot that backs to the community pond. Currently priced a bit high at $157,000 it may go for as low as $145-150K, and rents for between $1300-1400/mo. Additional pictures available.

2733 Wild Tamarind - 02-Res Customer Synopsis

Avalon Park townhome with lots of room. In great condition only needing some appliances, carpets to be cleaned and light touchup paint. The home has lots of upgrades throughout, from the higher end carpeting, higher quality wood laminate flooring, granite counter tops, and a professionally converted garage into a theatre/recreation room! All in a short sale that is being worked under a special program that likely ensures approval and a relatively quick process. Excellent returns as well with rental rates likely to be $1200-1250/mo. Additional pictures available.

Disadvantages of Apartment Investing and How to Overcome Them

Greg Traub (Time Realty LLC) — Sat, 24 Dec 2011 20:42:03 -0800

Following up on my previous post “Advantages of Multi-Family Property Investing”, nothing is ever risk free and there are two sides to EVERY investment. How each investor overcomes or mitigates a disadvantage is what separates the mediocre from the great investments. The following are some things to consider before investing in Multifamily Property.

1. Investment amount:

Although the per unit cost is typically small, apartments are only sold as a whole, making the entry cost to purchase a building higher than some are willing or able to meet. Since the larger the property the more economies of scale there are, for an investor to reap the highest returns the larger the property they should purchase.

Solution 1: Finance

Because financing is backed by current government programs, mortgaging a part of the property with attractive terms is still very possible in today’s market. However don’t expect the process to be easy, and in the best case you are looking at a maximum loan of 70% of the purchase price. The time it takes to obtain financing can leave many of the best opportunities from distressed sellers out of reach as well. And the more the leverage you use to purchase the property, the higher the risk you take with the additional expense of a mortgage.

Solution 2: Group Ownership

It’s an age old principal, if something costs $300,000 but you only have $150,000, than get another person with $150,000 and partner. The principal is commonly used in real estate and is called syndication. There are legal issues to work through when putting together a group to purchase property but with a good attorney, common investor goals, full disclosures, and a bit of pre-planning; group investment can be a huge win-win for everyone involved.

2. Acquisition:

Apartment buildings are considered closer to a commercial transaction than a residential single family home transaction. For one, it is very “buyers beware”, properties are usually sold as-is so proper due diligence is essential. Plus, there is not a large open market for apartment buildings as there is for homes. Very few properties are openly advertised on the web or in any MLS system (there are some but not many). A lot of properties are listed with brokers but for a variety of reasons the broker doesn’t, or isn’t allowed by the seller to openly market the property for all to see. So you won’t locate the majority of properties on the internet or advertised extensively. A buyer really needs someone “on the ground” contacting building owners directly and networking with local brokers to find the best available deals.

Due Diligence:

BUYER BE AWARE! There are much fewer if any protections a buyer has in the realm of commercial real estate. A smart buyer has to request and review all kinds of documents that confirm a seller’s “story” on the property, then independently confirm rental rates, vacancy rates, capital improvements, and a whole host of other things as part of due diligence. Trust but confirm! Again, being on the ground or having someone on the ground, with a vested interest, is the best way to handle due diligence.

Solution 1: Invest locally in what you know

If you are able to do all the due diligence yourself, this is the best way to go. I’d still recommend working with a local agent that can plug you into the market and assist you with diligence though. This of course limits you to certain areas and requires a larger investment of your time.

Solution 2: Group Investment

When investing in a group, the group will have a sponsor that acts as the CEO of the investment. The sponsor should of course be local, and be the person on the ground with the experience and connections to find, and properly underwrite a deal on behalf of the investors. Of course making sure the sponsor has a vested interest in the short and long-term prosperity of the investment is crucial to aligning the group’s goals with the sponsors.

3. Management

With any third party manager there will always be an inherent conflict of interest between the manager wanting to rent and manage the property for the least amount of effort and time and the owners desire to rent the property in the least amount of time, but for the highest amount possible. This conflict should be a very important issue to the owner of an apartment building not only because they are not realizing all of the income possible, but as mentioned in the “Advantages of Apartments…” blog, any potential rental income not realized directly affects the value of the property by a large multiple.

Solutions to this issue are similar to that of acquisitions. Either the investor should be close to the property or invest in a group structure with a local sponsor.

4. Capitalization Rates

Remember, when buying and when you eventually sell a property the capitalization rate that investors are demanding at any given time will directly impact how much your property will be worth. There is no way to determine exactly what cap rates may be in the future, there are however several ways that an individual can mitigate changing cap rates.

Mitigation Strategy 1: Value Add

By increasing the value of the property through improvements and cutting operating costs, large value gains can be made on mismanaged or ignored property. Fixing up, increasing rents, decreasing vacancy and reducing costs can cause a property’s value to be increased substantially even if cap rates rise. By also jumping property class levels, improving a “C” property to an “B+” property, an investor may perceive the risk of your property to be less, and thus will demand a lower cap rate than someone looking at “B-“ or “C” properties.

Mitigation Strategy 2: Time Exposure

By limiting the time you hold on to a property you are exposing yourself less to changing cap rates over time. Many people make a very good return by purchasing, improving and re-selling apartment buildings with 2-5 year holding periods for just this reason.

Mitigation Strategy 3: Buy Right!

Historically cap rates for multi-family buildings have been relatively low. During the boom apartments could sell as low as a 2% or 3% cap....but in today’s market where the general public may perceive much higher risk in the apartment market than they should, cap rates can be as high as 8%+ (adding in today’s low cost of leverage these 8% cap rates can translate into double digit cash on cash returns). So buying at a high enough cap rate is critical to mitigating the downside.

Mitigation Strategy 4: Plan for the Long-Term

By planning or expecting for an extended long-term hold you simply don’t have to worry about short-term cap rate changes, the best defense is to simply hold onto the property, enjoy the monthly cash flow and wait out the market until the next cycle comes around.

Advantages of Investing in Apartment Complexes

Greg Traub (Time Realty LLC) — Sat, 24 Dec 2011 20:21:05 -0800

Single Family homes offer good returns and excellent potential for appreciation. As demand for housing raises so does the price of your investment property. So long as your home is in a desirable area for an end user you should see great appreciation as the market recovers from this most recent downturn. Appreciation however, is completely dependent on the subjective desires and financial ability of the “perfect buyer” and directly related to uncontrollable market forces.

Multi-Family apartment property however, while partially driven by subjective value assessments; is more heavily driven by objective facts that can be counted and quantified. Since this kind of property is almost never purchased by an end user to live in personally, the value of such a property is directly related to the amount of income the property produces after all expenses and a risk premium.

Here’s how the math works:

Apartment building “A” consists of 10 separate rental units. Each unit rents for $500 a month, giving the total amount of rents the building could earn per year of $60,000 (also called Gross Potential Rent - GPR).

Let’s say the cost of running the building however (including maintenance, insurance, management, property tax, leasing fees, vacancy etc…) is about $25,000 a year

$60,000

-$25,000

$35,000

$35,000 represents the Net Operating Income (NOI) of the property, or the cash flow the investor may receive per year by purchasing the property.

To calculate what this means to the value of the property, you simply need to divide the Net Operating Income ($35,000) by the rate of return the investor looking to buy it is going to want in order to justify the risk they perceive in owning this property over other investments. This rate of return is also called a Capitalization or Cap Rate.

For this example let’s assume we would want to make at least an 8% return on this investment. Take $35,000 and divide by 8%.

This gives us the value this particular investor would be willing to pay for the apartment complex: $437,500

This of course is a simplified version of the formula, but it illustrates the concept of Multi-Family valuation, and helps bring us to my first advantage an apartment building can have when it comes to appreciation.

Inflation Multiplier

Over the long term, Single family homes during normal times appreciate at or about the rate as inflation (excluding peaks and troughs). So a $100,000 home after a year with about 3% inflation would be worth ~$103,000.

Rents also have a direct connection to inflation. So our property “A” with $500/mo rent the first year could raise rents ~3% a year, so after your first year rents might be able to be raised to $515/mo. Plug this new rent into our value formula….and that 3% rise in rents translates to the new value of property “A” to be $460,000, a $22,500 increase in value, or 5.1%; Multiplying the natural dollar increase in market value from year to year.

This multiple increase in value based on rents translates to several creative ways to significantly increase the value of a property; particularly, property repositioning and cost saving.

Value Add

Absentee owners, bad management, loss of owner interest or complacency, over-leveraging, personal or business need for cash….these are just a few of the reasons an apartment can be ignored, left to degrade, demand less rent or have a higher vacancy than it would otherwise demand.

Let’s build on our previous example, “Property A”, that we just purchased at an 8% capitalization rate for $437,500.

Units are renting for $500/mo, but just down the street similar sized units rent for $700/mo. We identify that the exterior of the apartment looks bad, needs to be painted, there is trash in the parking lot, and it generally just doesn’t have any curb appeal. The insides of the unit’s have also not been updated in 25 years and could use new counters, cabinet faces and some electrical updates. You decide that investing into the property to fix these issues, and re-position the property to attract higher rents is the best way to improve value.

Over the first year you clean up and update the property for a cost of $100,000 to bring it up to par with the apartment down the street and are able to successfully raise rents up to market at $700/mo. Also during your renovations you were able to decrease your maintenance expenses and found less expensive insurance, decreasing your total cost from $25,000 a year to $20,000.

Now that the property looks great and is fully rented, you do the math and realize you are now seeing about a 12% return on your investment!

$84,000 GPR

-20,000

$64,000 NOI

But even better, you realize that the investor market is still looking to purchase apartment buildings at an 8% cap rate. You apply our valuation formula and realize your $537,500 total investment is now worth $800,000!!!

Again, this is a simplified example but the principal is illustrated well and shows the powerful concepts behind making a great return on Value-Add Multifamily Property. It’s not all easy money of course and re-positioning a property requires skill and expertise, so be sure to read my follow up “Disadvantages of Apartment Investing, and How to Overcome Them”.

Holiday Deals of the Week

Greg Traub (Time Realty LLC) — Sat, 24 Dec 2011 16:40:39 -0800

December is the slowest month of the year for buyer traffic. While we are still in a shortage of inventory with a likely increase early in 2012….this lull has yielded some EXCELLENT Deals of the Week!

Deals Details Link: 02-Res Customer Synopsis

261 Doe Run

Located within walking distance to the super center of Winter Garden Village this area is high demand and rents out very quickly (est. $1600-1700/mo). The home itself has been upgraded by the previous owner; marble, travertine and wood flooring on the ground floor and up the stairs. Upstairs is laminate wood in the halls and carpeted bedrooms. Most bathrooms have also been tiled in natural stone and the general condition of the home is excellent. To top it off the estimated ROI is higher than almost every other single family home I’ve come across so far and the comparables suggest the home is worth at least 160-170K…but I think can be purchased for ~150K.

The catch? The bank selling this home is only accepting cash offers, no financing. Why? The home was previously under contract, but the previous buyers inspector noticed some discoloration around the air conditioning vents and said it was mold…which a later test by the seller confirmed slightly elevated levels in the home (I have a copy of the report and pictures of the vents in question). I have seen this before and last time it was an EXTREMELY MINOR fix that cost less than a few hundred dollars….but the mere mention of “mold” scares off many. This means OPPORTUNITY for the right buyer. Call me for details.

411 Winter Nellis

Also located walking distance to Winter Garden Village, this large end unit townhome feels like a single family home and offers a much higher than normal ROI at the current asking price. Estimated rental amount between $1250-$1300, the current asking price of this short sale is well below similar sales in the neighborhood, so expect it to go under contract QUICKLY.

1941 Stone Abbey

You just don’t find single family homes in “A” areas for this price very often. PLUS it is in great condition and backs to a conservation area! Across the street from the prestigious Stoney Brook East Golf Community in the 32828 Zip code. Close to Waterford Lakes Shopping, employers like University of Central Florida, Lockheed Martin, Siemens, the Technology Parkway, and a quick commute to the new Medical City of Lake Nona. An excellent find for an excellent price.

9998 Oak Quarry

Located in the Lake Nona “Medical City” area, this home is in the high end gated section of the La Vina Neighborhood. This particular home backs to the private lake in the neighborhood making it very unique and desirable for re-sell once the full medical city has been built and all the higher paying medical jobs come online. At its listing price however, it is well overpriced and what I consider a “low-ball special”. I would put a good investment value on this home of between $215-230K, with rents of between $1950-$2100 this home will yield lower/moderate but steady returns while holding for rental, with excellent potential for appreciation.

5553 Remsen Cay Ln

In the always in demand Summerport neighborhood, this home offers a great opportunity to take advantage of the selling bank’s mistake. This property is not just a 4 bed 2 bath 2440 square foot home; there is an entire upstairs bonus room and bathroom not reflected in the listing. Making this home truly a 4 bedroom, 3 bath, approximately 2800 square foot home. This size property in this condition would sell for between $215K-$220K today, so even at its current asking price it is a great deal….if an offer no competing offers are on the table though, a discount from that price may even be possible. Rents are between $1700-1800/mo.

I saw this Lake Front Mansion listed for 40K!

Greg Traub (Time Realty LLC) — Tue, 20 Dec 2011 21:26:08 -0800

First let me start off by saying some sites where these listings are have great info. For instance RealtyTrac, there is a reason they have become the leading source of foreclosure data in the country. That being said, the interpretation of their info by the general public is terrible. RealtyTrac as an example has a “learn” button on their site that has some great articles and a good FAQ that explains what NOD, Lis Pendens, and other foreclosure terms mean. Unfortunately, I suspect these articles and FAQ’s go very much unread by a large portion of their visitors. Plus they syndicate their data to several listing websites (like Trulia) where many people confuse their Lis Pendens information for actual homes for sale.

So for everyone out there that gets excited when they see a “listing” for a lake front, 5 bedroom, 3 bath, 3,000 square foot home in Windermere for $40,000 make sure to look at the listing description. If the words Lis Pendens are in there, know that the property is NOT for sale at 40K! Just because there is a Lis Pendens for 40K doesn’t mean that is all that is owed on a property or that the bank will be selling the property for pennies of what it’s worth just because there is a small mortgage on it.

My usual answer to questions involving these “Listings”: I am sorry, but the listing you are referencing is not actually for sale (or is for sale for a different amount). The information you pulled is likely just a public court record of pending foreclosure action and the amount indicated is simply the amount owed to the mortgage holder. This amount has little to no bearing on what the home may eventually sell for when/if it becomes available. If it’s too good to be true IT LIKELY IS!

Estimating Expenses on Your FL Investment Property

Greg Traub (Time Realty LLC) — Sat, 17 Dec 2011 17:30:28 -0800

Many have asked just what kind of expected and unexpected costs may be involved with owning an investment property in Orlando FL? While I provide my clients a spreadsheet breakdown of the estimated costs based on each individual property they are interested in, below is a general breakdown of the 6 direct costs to owning investment real estate……

Cost 1: Mortgage Costs

If you will be financing the property this will likely be your largest monthly expense. Specific costs of course will vary depending on the loan terms you receive as well as if you will even have a mortgage or be purchasing the property in cash. We work with several local lenders with Foreign National loan programs if you where interested in financing your purchase.

Cost 2: Property Taxes

Property Taxes will vary based on the value of the property you buy and where it is located. For a more detailed explanation on how to estimate taxes on any particular property see “How to Estimate Yearly Property Taxes.”

Cost 3: Homeowners/Condo Association dues

These fees can range from $0 to several hundred dollars a month depending on the property. Association dues typically cover community maintenance and amenities and can add value to a property when you re-sell it and while you rent it. Single Family Detached homes typically have the lowest HOA dues as they just cover maintenance of community areas and if they have them, their amenities. Townhomes and Condo’s have higher HOA dues but can reduce your costs in other areas. Most attached townhomes and all condo’s include structural property insurance that cover insurance of the property from the drywall out, so when you purchase insurance you only have to purchase a condo policy for liability and interior improvements. Most also cover exterior maintenance like painting the exterior, replacing the roof, and maintaining your landscaping.

Cost 4: Insurance

When partial insurance is covered in HOA dues this cost can be as low as .25% of the cost of your property per year. Otherwise for Central Florida properties insurance can range from .5% to a full 1% of the cost of the home. Prices can range greatly however depending on a number of factors including the age of the property, how it was built, if it’s in a flood zone, how high a policy limit you want and several others. The only way to be 100% sure of this cost and what insurance you will need or want is to get quotes from several local companies.

Cost 5: Maintenance

This cost will obviously vary by property and with luck. But it is always a good idea to set aside at least 5% (less if exterior maintenance is included in HOA dues) of the rents you collect for unexpected and expected repair costs.

Cost 6: Management

If you won’t be able to handle the day to day management of your property, which can be impossible to do from thousands of miles away, a property manager is a must. A property manager’s costs will vary depending on the type of property you purchase.

For long-term rental properties property management is pretty straight forward. A good manager will get several bids from contractors that can get your property in rentable condition quickly and usually free of charge depending on the extent of repairs needed. They will handle the marketing, background checks, security deposit collection and lease signing with their charge only due upon tenant move-in the initial work to advertise and lease a home will usually cost a leasing fee; I would budget between ½ month and 1 full month’s rent for this one time fee. To handle the management of everything (from collecting rent, to property inspections and handling tenant calls) there is no standard set charge, but for full service property management but I would estimate 10% of collected monthly rents as an ongoing expense. On occasion extra things a manager may collect funds for would be unexpected maintenance costs for repair, or to handle an eviction should it become necessary.

Short-Term Rental properties have some additional issues and costs. Management fees will vary greatly from company to company as each will include certain additional services in their fees while others will charge them separately. The typical company charges a monthly management/marketing fee whether the property is rented or not to cover marketing expenses and checking up on your vacant property. When your management company places a booking they typically will charge another % of the rental amount collected. Be sure to find a company that will only charge a booking fee if THEY actually place the renter; some will allow you to book the property yourself and not charge the fee, others will only allow bookings to go through them. There is also usually a cleaning fee after every booking that can vary. Other costs include state licensing fees for operating a hotel as well as the costs of keeping utilities on while vacant.

Market Update December 2011

Greg Traub (Time Realty LLC) — Fri, 16 Dec 2011 17:36:37 -0800

It has been too long since my last market update! So without further ado, the market as it was for 2011 and what my crystal ball says about 2012 and beyond.

Building on my previous market updates - http://actvra.in/pPn

2011 was certainly a busy year in the real estate market. To get straight to the point, the numbers point to the “bottom” in residential housing prices here in Orlando to have come and gone in early 2011 and is showings signs of upward movement.

1. The number of homes available for sale in October 2010 was 16,359. As of October 2011 we are down to 9,973. A level we have not seen since December of 2005.

2. The number of sales for the past 12 months has averaged 2,324 per month. A sales pace we have not seen since 2006, the HEIGHT of the boom.

3. Approximately 54% of properties sold have been sold for all cash.

4. January and February 11’ the Median home sales price hit an all time low of $95,000 in Metro Orlando and has steadily risen since then to October’s $112,700 median sales price.

The raw numbers speak for themselves really, but let’s go beyond them and into more detail as to what exactly has happened.

It always comes down to Supply and Demand

Simply put, demand for property here in Orlando has outpaced the supplyof homes coming on the market. Since mid 2009 actually, the pace of home sales has been at a historically high normal 2200-2300 sales per month, with a peak in June of 2010 at just over 3,000 homes sold. And anecdotally, I have seen 3-5 buyers for every one well priced property that comes on the market, creating bidding competitions on many properties that has driven prices in the upward direction. The difference now however to the real estate boom, is that most of these offers are without any financing and most buyers aren’t going too crazy with their offer prices (though frequently they are offering above asking price on the best ones).

There of course is no way to tell just how many buyers are out there, but with Orlando unemployment falling, large employment projects beginning (Medical City, Sunrail, etc..) increasing population, and intense international interest in Orlando real estate, I think it is safe to say buyer demand is not going to be an issue for some time to come.

Onto the supply side of things….

In October of 2007 Orlando hit its inventory peak at 26,330 homes available on the market. Since then inventory numbers have bounced around, up and down, but on a generally downward trendas more homes got sold than new homes got on. “But” you say…. “What about all of the foreclosures and shadow inventory?” To that I say Good Point!

The banks do still have a significant backlog of mortgages that are delinquent and have yet to be foreclosed on and put on the market for resale. They have been steadily doing this over the past few years; though have continually hit road blocks in the form of foreclosure moratoriums, paperwork fraud, political pressure, and just good old fashioned understaffing. These blockages however are beginning to lull and we are seeing a major increase in the number of foreclosure filings now beginning to be pushed through the local court systems. I believe that come the beginning of the new year 2012, we will see an increased flow of properties to come on the market that will continue through to when the next election starts to heat up (then political pressure will likely slow them down again). So I believe inventory levels will increase in the coming year.

HOWEVER, I believe that the flow of new bank inventory will have a limited impact on pricesas there will likely be plenty of demand in most of the price ranges to absorb the extra inventory. I think this will be an EXCELLENT buying opportunity. As far as what I think is likely in various price ranges….

Less than $80,000: The bottom came and went in this price range in late 2010 and earlier this year. In fact some neighborhoods saw a very nice price spike of 10-30% or more depending on neighborhood. Currently most of the properties left in this price range are likely to have significant issues with them…or you will just be paying more to get the good ones than others have paid just last year. Next year however, I think we will still see more properties in this price range come on the market as foreclosures, so depending on how these properties hit the market in any particular community will affect whether prices see another dip or not. Many of these properties are condo-conversions, many of which the majority were sold in bulk and/or are being turned back into apartments, so don’t expect a huge flood of listings in many neighborhoods. That being said, I personally don’t see properties in this price range seeing additional large price increases (despite many properties receiving as many as 50 offers within a week) as the majority of buyers are investors looking to rent them out, and the appeal of these properties to an eventual owner occupant is very limited. Smart investors will only pay so much for a home based on how much they can rent them for, given the low chance of being able to re-sell it down the road to an owner occupant not concerned with how much it rents for.

$80,000 to $250,000: Again this price range likely bottomed in late 2010 to early 2011, but without a large price spike. So far I have only seen a slow, but steady increase in valuetrend in this price range that I expect will continue for the coming years. “Normal” sales, in great condition, in this price range are now selling for a discernable premium over short sales and some foreclosures (especially the higher the price point you go). I expect to see the best opportunities in this price range in the coming year.

$250,000-$500,000: This price range is still on shaky ground, especially the higher up the price point you go. In this price range there are still many properties in distress yet to make it through the system, with owners that have been quite adept at delaying foreclosure. More importantly though, in this price range the buyer pool is almost exclusively owner-occupants. While they are certainly out in the market right now, they are not nearly as plentiful as investors, and will typically be financing. So until jobs numbers pick up even more, and financing becomes a bit easier, this price range will be “iffy”.

$500,000+: We are likely to see further price declines. The market for such properties gets quite thin in this range compared to all the other ranges. So when a property comes on the market and needs to sell quickly (i.e. a foreclosure) there is a higher chance the seller will continue to drop the price….dropping the values of the whole neighborhood. This will of course be hyper-local as some high end neighborhoods have such high appeal with so few properties available, that some homes will sell to quick to see significant price drops. In general though, I see a continued slow downward trend in prices for at least another year.

All in all the Orlando market in particular is seeing strong fundamentals in the property market. Should the economy pick up even more, I see very good things happening…though more likely we will just see a steady rise from here on as we make it through this “muddle through” economy.

As with all things real estate……EVERYTHING IS LOCAL! General trends in a large market area and within price ranges are just that…general. Depending on the specific house, in a specific neighborhood, at a specific point in time, the value of the home can be very different. So always consult with your knowledgeable home expertand have them take a snapshot of the local market so they can assist you in evaluating what a home is worth TO YOU.

Halloween+Christmas+New Years = Best Time to Buy

Greg Traub (Time Realty LLC) — Wed, 28 Oct 2009 11:18:16 -0700

Unfortunately it's time for me to write one of my boring statistical posts..... so I'll step out of character and keep it brief, or at least try too...

I'm a numbers guy, numbers don't lie. If you can see the patterns in them and connect the dots you can find the answers to some very interesting things...or even find an answer to something you never thought to ask!

This evening I was just browsing through the monthly market report published by my local Orlando Association of Realtors when I happened to scroll down past the first page to see the graph below.

You can see it charts average monthly mortgage rates going back 3 years...and the pattern is pretty easy to distinguish (mortgage rates are relatively a national market with little variance from state to state, so this applies to more than just my market here in Orlando). Notice what happens to the mortgage rates from October to January EVERY year? Rates have dropped practically 1 FULL percent from peak to bottom every year around the holidays! Translated into money savings, a 200K mortgage at 6.5% is $1264/mo, that same mortgage at 5.5% is $1135/mo or $46,440 in lower payments over the life of the mortgage!

Supply and Demand I think runs the show yet again when explaining this phenomenon. Mortgages are basically just money, and there is a fixed supply of people that are lending it (for the most part) and lending money doesn't stop just because it's the holidays or because it's cold outside. However buying and selling homes DOES. For you poor people up in the snow states I imagine it takes some motivation to get out on an icy day just to check out some houses, and I'm sure a lot of sellers take their homes off the market during the winter as well. Down here in the sunbelt our selling season is year round....but when there are holiday's every other week with family and friends coming to visit and get away from the cold, house hunting tends to take a back seat. Basically what I'm saying is there is a drop in demand for mortgages as people purchase fewer homes from October-January. Drop in demand with a stable supply of money means money gets CHEAPER; you can borrow at less cost (interest).

So, in short, if you have the time and determination to buy a home when no one else is....save yourself a nice bit of dough and shop the last 3 months of the year. ;)

Extending the First Time Home-Buyer Tax credit? Fingers Crossed

Greg Traub (Time Realty LLC) — Thu, 03 Sep 2009 16:14:40 -0700

Let's hope! For those of you sitting under a rock the past year, if you haven't owned a home in the last 3 years you are eligible to receive $8,000 from Uncle Sam if you buy a home before November 30th 2009.

Thus far this program has actually be one of the most successful stimulus programs out there....more stimulative than cash for clunkers in my opinion even if it hasn't received as much press. If you've been working with me over the past 6 months as a buyer you would have noticed this too. Anything under 200K right now is selling like hot cakes (what is a hotcake anyway?). I've had several of my clients outbid multiple times on multiple properties...some bidding tens of thousands OVER asking! And the news is even starting to pick up on the increased sales volume and in some area's we've seen a slight uptick in prices.

But enough about the OLD. That credit is expiring in a couple months, so unless you start NOW, and don't look at short sales, you likely aren't going to close in time to get the credit (but we can still try...I didn't schedule a vacation in the next few months just for the last minuter's out there).

THE NEW news is that there are currently 5 bills sponsored in congress (maybe more by the time I write this) all dealing with Extending or Expanding the credit to further boost the housing market.

Direct from the Congress:

Senate Bill S1230 - the Home Buyer Tax Credit Act of 2009 - Home Buyer Tax Credit Act of 2009 - Amends the Internal Revenue Code to replace the current tax credit for first-time homebuyers with a one-time credit for 10% of the purchase price of a principal residence, up to $15,000. Requires repayment of credit amounts if the taxpayer sells or fails to occupy the residence within 24 months after the date of purchase.

House Bill HR 2619 Amends the Internal Revenue Code to allow until June 30, 2010: (1) a first-time homebuyer tax credit for all purchasers of a principal residence (not just first-time homebuyers); and (2) a refundable tax credit, up to $3,000, for the costs of refinancing a principal residence.

HR 2606 - the Home Buying Credit Expansion Act Home Buying Credit Expansion Act - Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) expand the election to treat a purchase of a principal residence as made in a prior taxable year for purposes of such credit.

HR 2801 - the Home Ownership Move the Economy (HOME) Home Ownership Moves the Economy (HOME) Act of 2009 - Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) repeal the limitation on such credit based on modified adjusted gross income.

Finally, HR 2655 Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) expand the election to treat a purchase of a principal residence as made in a prior taxable year for purposes of such credit.

As of Right now, NONE of these have gone further than being introduced by a congressman, so all of them have an equal chance of being passed or outright rejected. My gut says something will be passed before the current credit expires....definitely something that at least keeps the current credit in place as-is, but I doubt they will up the credit to $15,000.

To tell the Truth, I think HOME act of 2009 is going to be a winner for one reason and one reason only...it's catchy, like cash for clunkers. Face it, you know no one will remember to ask their congressman to pass HR-261849lglb27, but they can remember the HOME bill. In any event, be sure to contact your congressman!!! And ask them to support your favorite one (I like s1230 because it'll stimulate my wallet the most...but I'm biased) either way something needs to be passed. Housing led the economy down, it will likely have to lead the economy up too.

To find your local elected official http://www.congress.org/congressorg/dbq/officials/?lvl=L Don't be shy calling and writing them. They are there to serve YOU.

Estimating Florida Property Taxes on Your Home Purchase

Greg Traub (Time Realty LLC) — Mon, 03 Aug 2009 14:05:34 -0700

The Florida property tax system differs from many other states, and for you out of towners, understanding how to estimate the property tax on your Florida home can be confusing.

The simple formula for calculating taxes is:
(Assessed Value) X (Millage Rate) = Your Yearly Tax Bill.

Finding out a property Millage Rate (millage is just a fancy term for Tax) is relatively simple. All you have to do is go onto the counties property appraisers website and see what the number is. Typical properties throughout Central Florida have a millage rate of between 16 and 20 mils (most commonly 18 mils). The number of mills however must be converted into a percentage rate in order to plug into the above formula....to keep it simple just move the decimal place over ONE to the left. 16 mils is 1.6% and 20 mils is 2.0%. How's that for making something very simple as complicated as it they can! (Remember I only said it was RELATIVELY simple.)

The confusion comes when you start looking at all the ways a properties assessed value can change.

Assessed value in its simplest definition is the value of the property. The county the property resides in determines the value of every property within its borders every January 1st (or at least they are supposed to). The guidelines to determine these values follow similarly to your run of the mill appraisal; taking into account size, location, upgrades, and recent comparable sales. From year to year your value can rise AND fall based on if you add onto the size of your home, build a pool, or a sink hole swallows your neighbor's house. Now I mentioned before that the county is SUPPOSED to reassess your property every year as of January 1, but being as some counties have hundreds of thousands if not millions of parcels to assess, rarely is your one property re-evaluated every year. An automated system adjusts for value changes and the valuation work usually occurs in Sept, Oct, and Nov of the previous year. Since these re-assessments only change on January 1 of any year, the current owner's tax bill is always at least 1 year or more behind in values. This is why if you are looking to purchase a house today you cannot trust the current owner's tax bill.

For example, you find a house for sale at $200,000 and they say the last tax bill was $6,000 for 2008; this doesn't seem right at 1.8% does it? Well in this case, the house was likely worth about 330,000 when the 2008 tax bill assessed values where figured out (likely in October of 2007). Since the property is now obviously only worth at most $200,000 (that is what you are paying for it after all) you have a pretty air-tight case that when your 2009 tax valuation rolls around you can't be assessed at that same $330,000 value. You can estimate your new tax bill come January to be at most 200K x 1.8% or $3600. I say "at most" because in previous years the property appraisers office usually took the market value of the home and subtracted about 20% to arrive at their assessed values, now that the market has turned and budget short falls abound, I doubt you will be able to get your assessed value to less than 100% of market value....but you may get lucky

So that is how you estimate your
property taxes when purchasing a home here in Florida .....Oh wait, I almost forgot, here in Florida we also have something called a Homestead Exemption! There are several legal benefits to claiming a homestead, but we'll only be talking about how it affects your property taxes. First thing is first, a homestead exemption can only by claimed on a Florida property if it is your primary residence (defined as you using the property as your residence for at least 6 months and 1 day of the year). The exemption has two large tax benefits, first being a $50,000 deduction from the assessed value of your home. So if your property is assessed at $200,000 but have it homesteaded, the millage rate will only be applied to a value of $150,000. At a 1.8% tax rate a homestead exemption will save you about $900. The second benefit of the homestead exemption is the "save our homes" tax benefit becomes effective. What save our homes basically is, is a cap placed on the amount your taxes can ever be raised in any one year. The cap is 3% a year, and is yet another reason why you cannot rely on the current owner's tax bill as an estimate of what your taxes may be. If an owner purchased a property in 1985 and has had it homesteaded since then, their taxable value will likely be well below what would normally be assessed.

There is also a new aspect to Homestead Exemption with a "portability" benefit. Explaining portability in itself requires a new blog. But basically, if you acquire significant savings because of the 3% cap on taxes, you may actually be able to carry some of that savings to the next home you purchase.

To look up the most up to date tax bills on any property, to see what millage rates are effective on a property, and in some cases use an "estimate taxes" function, check out the local county property appraiser's office (the office that determines assessed values).

Orange County - Orange County Property Appraiser's Office Home(www.ocpafl.org)
Seminole County - SCPA index.html
Osceola County - Osceola County Property Appraiser's Office
Polk County - Home Page

When will we see "The Bottom" in Orlando FL

Greg Traub (Time Realty LLC) — Tue, 31 Mar 2009 11:18:09 -0700

This is an update to the first blog post I ever made back in late 2007. I've added in some updates for today's market (Dec 2008) in BOLD.

There are is a myriad number of factors that people claim steer the real estate market. Some of the factors I have heard of are area incomes not keeping pace with housing, rent to housing cost ratios, foreclosures, subprime loans, media scare tactics, over building, overpricing, unrealistic sellers, unrealistic buyers, unemployment rate, the overall economy, and the list goes on and on. While all of these factors are valid in one way or another (and I frequently write about each), they all go back to the simplest of economic theories that drives ALL of today's markets: supply and demand.

The law of supply and demand states prices is pressured toward an equilibrium point, where supply and demand meet, illustrated below with a typical Economics 101 Supply and Demand chart.

Simply put: All other things being equal...

An increase in supply causes a decrease in price.

A decrease in demand causes a decrease in price

An increase in demand causes an increase in price

A decrease in supply causes an increase in price

As of the end of November 2007, there were a little over 26,000 homes for sale in the Orlando market of Orange and Seminole Counties. In the same month there were only 963 properties that sold. Down from an average of 1,636 homes sold per month between November 2006 and August 2007; illustrating the sharp drop in demand most likely caused by the implosion of the subprime mortgage market in September 2007. There is currently a 27 month supply of homes.

As of November 2008, there are now 24,408 homes for sale in the same area, with 1078 properties sold. It is interesting to note there was a steady upward trend in home sales from March of 08 thru too October 08, showing over a 37% increase in home sales from the same month last year. For a moment, I had thought we had turned the corner! Then October hit, the other shoe dropped in the credit crisis, a $700B bailout and the stock market crashing 50%+ was all over the press....people got scared, and rightfully so. Sales in September had reached a more normal 1400 homes a month, only to pull back over 20% by November. On a positive note, inventory is down to a 22.7 month supply of homes,

To put these numbers in perspective, the monthly inventory between Oct. 2002 to Oct. 2003 was always between 7,000 to 8,000 properties with an average of 1,860 properties selling per month, representing a market in equilibrium with a 4.3 month supply of homes.

Doing the math, if there are zero net additional homes that come onto the market (supply freezes), and demand for homes comes back to a normal rate of about 1,700 homes selling per month, it will take 10.5 months to sell off the excess home inventory down to a normal 8,000 units. Once this occurs, historical equilibrium will be reached and prices will stop being pressured downward.

Given the normal reasons for the rise in property supply; job relocations, growing or shrinking families, divorce, foreclosure, etc, more homes coming on the market should be expected. And while I personally believe the demand for homes must eventually come back to normal levels, there are still many buyers hesitant about buying in this market. Demand may remain at a low of only 1,000 units selling a month for the foreseeable future. These factors could mean prices will be pressured downward for some time, perhaps closer to 18-24 months.

Unfortunately my prediction is holding true, and the last 12 months have averaged about 1200 homes sold a month. There have of course been more properties put onto the market. There has been an explosion in short sale listings, plenty of bank owned foreclosures, and the normal everyday sellers....some which have been listed since before I first wrote this 12 months ago! Luckily sales have outpaced inventory and the levels have been going down, at today's' sales rate however (1200/mo on average) it will take 13 months to get down to "normal" levels of 8,000 units.

It should also be mentioned that November of 07' had ~1800 homes under contract, while in 08' that is up to 3326. This may be attributed to short sales as they can take 45-90 days to close, and over half of those may not get to closing, so add at least another 800 homes to the inventory number. There is also rumblings about Alt-A and Option ARM's re-setting in the next 12 months, causing a second wave of foreclosures over the next 6-12 months. These concerns are valid in my opinion, though I believe will be blunted by the fact many of these future foreclosures are today's short sales. We are still 6 months away from the earliest I projected we'd be out of the housing slump, unfortunately it looks like the groundhog got scared, and we'll be in for a longer winter. Don't look for a market rebound to occur for at least another 12 months.

Even with all of that, my colleagues and I are receiving more and more calls from real investors, with cash and an appetite for multiple rental properties. For the first time in MANY YEARS, these investors can make money renting single family homes. On many homes in many areas, it is now CHEAPER TO BUY than to rent, by a good margin too! I think when the bottom comes, it will bounce upward quickly. Today, only the amazing homes with the best prices and the marginal homes with amazing prices (foreclosures) are selling. The foreclosures are leading the market down in price and will continue to do so, but there is a LARGE pent up demand just waiting to buy, when that demand is released, I believe it will happen quickly. It will be interesting to see, and ridiculous deals will be made. Just know that the best homes will be sold in the blink of an eye. For the buyer in today's market it comes down to whether or not you want to wait and hope for an amazing deal tomorrow, or settle for a good deal today. For the seller, it's whether or not you want to sell today and not make as much as you wanted, or sell tomorrow and make even less.

All that being said the real estate market is extremely local in nature, sometimes down to a particular neighborhood or even particular home. Some areas have a different supply than others, and some have different demand. There are always areas that are more desirable than others, and at different price points sellers tend to be able to hold out longer for the price they set. This explains why some areas like Winter Park have seen very little if any depreciation since 2005, while others have dropped in value as much as 30%!

Winter Park has now seen a good amount of depreciation and other area's are down as much as 50%!

Only a local market evaluation, factoring your specific needs and time frames, can determine whether selling your home, or buying your next home, makes sense in today's changing market.

You must ask yourself and your realtor some questions before making an educated, thought out decision......

Should you Sell today or wait until the market gets better?

What is your motivation for selling?

How long can you really "wait it out"?

Will your home be worth more or less in 2,3,4,5 years?

Should you buy today, or wait for homes to come down more in price?

How long do you plan to live in the home?

How much of your quality of life depends on the ownership of a home?

How much will it cost you to rent vs. buy?

How much do you value stability; not having to move when landlords decide to no longer rent?

Can you comfortably afford your dream home today?

Will the perfect home you find today, still be available tomorrow?

When it is time for you to make your decision, whether selling or buying, I will be glad to offer my assistance, helping you determine what the market is doing in your specific neighborhood and whether it makes sense to buy now, or wait.