Blog

Hines Real Estate Investment Trust Public Stock Offering for $3 billion

2008-07-04T00:05:29Z

During my time in architecture college, at one point I wanted to be a commercial land developer more than an architectural designer. When asked my ambitions by one of my professors, I explained I wanted to be the next Gerald Hines. He directed me to the Bauer College of Business at UH after I made that comment. Coincidentally the last year of my education at the architeture college at UH the building was renamed the Gerald D Hines College of Architecture. Go figure.

Reported this week: Hines Real Estate Investment Trust Inc. has received regulatory approval for a $3 billion stock offering.

The offering prices common shares at $10.66 for shares purchased through commission-based financial advisers and $9.68 for shares purchased through fee-based financial advisers. The sale will be conducted through Hines REIT's affiliated dealer manager, Hines Real Estate Securities Inc. In addition, Hines REIT is offering up to $500 million in shares, initially priced at $10.13 per share, under its dividend reinvestment plan.

The company will use the proceeds from the offering for future property acquisitions. Houston-based Hines REIT currently holds direct and indirect investments in 46 properties, mainly in the U.S. The company has raised $2 billion in two previous offerings.

Now if you will excuse me, I need to contact my stock broker.

Reverse Mortgages

2008-07-03T23:55:31Z

I was recently in a certification course to earn a Realtor designation and another student kept bringing up reverse mortgages for her elderly clients. So I decided to research the topic and share what I learned. The experts reccomend that you ask questions, do the proper homework, and don't get swayed by sales people.

For those considering a reverse mortgage, the message is straightforward: Consider all options, look at consequences of the decision beyond the next few years and ask enough questions to satisfy concerns.

The basic reverse mortgage allows an eligible homeowner to borrow from the home's equity in a lump sum, line of credit or regular payments, while not having to pay a monthly mortgage. The homeowner retains title and must pay insurance and property taxes while living there. A typical owner may own the home in full, or may have a small mortgage balance left.

The loan and fees are due once the homeowner listed on the deed dies or vacates the home for 12 straight months. The home is usually sold by the mortgage company, and the proceeds from the sale are used to pay off the loan - plus interest and those pesky fees. Thus, seniors who want to leave their homestead to their children may not want to enter in a reverse mortgage. Fees and costs associated with reverse mortgages can be up to 4 to 8 percent of the total loan amount.

Many who take reverse mortgages and the monthly payouts are on fixed incomes from Social Security or pensions and want financial help as they work to meet the rising costs of taxes, medicine, utilities and food. Others may take part of a lump sum for home improvements, for example. And the homeowner never owes more than the home's value.

About 90 percent of U.S. reverse mortgages are Home Equity Conversion Mortgages, or HECMs. They are insured by the Federal Housing Administration.

Married seniors should both be listed on the deed, so that one spouse can continue with the reverse mortgage if the other passes away.

The AARP and others note that reverse mortgages should be something of a last resort, partly because of high fees associated with the loans. Those interested in adding to their monthly budget may want to seek alternative types of loans, or even selling the home before settling on a reverse mortgage.

Salesmen persuade seniors to take the cash from a reverse mortgage and use it to fund another investment, such as an annuity, which can tie up retirement savings beyond one's lifetime, Kohl said.

Even the FBI is taking a look at reverse mortgages. In April, the Associated Press reported that the FBI said it has seen an uptick in reverse mortgage cases as part of its mortgage fraud inquiries.

Houston Is Making More Millionaires

2008-06-30T22:57:14Z

The current gas prices at the pump creeping towards $4 and the skyrocking costs of oil continues to pump out more local millionaires.

New wealth generated by the energy industry provided much of the fuel for a 23 percent increase in the regional number of millionaire households in 2007. According to data released this week by Claritas Inc., the greater Houston area currently counts nearly 72,000 millionaire households compared to 58,569 in 2006.

The wealth of the world's high net-worth individuals increased 9.4 percent to reach $40.7 trillion in 2007 according to the 2008 World Wealth Report. A primary driver was market capitalization growth in emerging economies such as India, which led the globe in the highest percentage increase in new millionaires last year.

Houston and the Dallas-Fort Worth Metroplex, with nearly 85,000 millionaire households, are both expected to create new millionaires at a faster rate during the next five years than most of the country's major metro areas. Millionaires in Dallas have made their money in real estate, financial services and technology.

As usual, New York and Los Angeles top the list in 2007 for total number of millionaire households according to Claritas, with 320,184 and 212,895 respectively. But among the 11 metropolitan areas nationwide with the most number of millionaires, Dallas-Fort Worth and Houston are No. 2 and No. 3 respectively in projected growth of millionaire households through 2012, just behind Atlanta.

Texas Commercial Real Estate Market July 2008

2008-06-30T22:44:21Z

Despite the bottomless downturn in the national economy, Texas' real estate market remains resilient as major metropolitan areas continues to post gains in employment and population according to a report by Houston real estate valuation and consulting firm.

Texas is not completely immune to the national economic downturn. But we continue to see positive trends in real estate and growth in the overall economy. Houston, Austin, Dallas/Fort Worth, and San Antonio are the top four gainers in job growth in the nation. Those four cities are also in the nation's top 10 for population growth. When Texas cities dominate the national economic statistics, it signifies that Texas real property is significantly outperforming other regions.

Texas' economy has been bolstered by health care, education and technology, and the hot energy sector is continuing to drive the state's economy, particularly in the Houston and Dallas markets. The domestic rig count, a measure of oil and gas drilling activity, is at its highest point since 1985. This is fueling demand for more office and industrial space by Texas energy companies and manufacturers of oilfield equipment.

Another one bites the dust: Memorial Hermann Fort Bend Hospital to be demolished

2008-06-29T22:48:27Z

After 3 years of being on and off the market, the former Memorial Hermann Fort Bend Hospital has finally sold and will be torn down and redeveloped as it cleared the final hurdles for the city approval. Memorial Hermann first put the Missouri City land on the market in June 2005 as part of the shift to a new Sugar Land hospital in 2006.

SDI Realty Management Inc. of Houston purchased the 20 acre site, located at Highway 6 and FM 1092, on June 9. Financial terms of the deal were not disclosed, but the property previously listed for $13.7 million.

The land consists of the 64,273-square-foot former hospital and a 39,121-square-foot professional office building. This was the last available corner tract at the intersection, with other retail developments on the other three corners.

Plans are to demolish the hospital and office building and redevelop the site into a retail center consisting of a Lowe's Home Improvement store and other retail pad users.

Memorial Hermann had initially planned to convert into a long-term acute care hospital after relocating its Fort Bend campus to a newly built hospital in Sugar Land. The 30-bed Missouri City hospital closed in December 2006, the same month that the 80-bed Sugar Land hospital opened.

Meanwhile the deal leaves Missouri City without a traditional hospital. A potential location should be considered convenient to the rapidly growing communities of Riverstone and Sienna Plantation.

River Oaks Hospital Closed on Physician Investors

2008-06-29T22:32:11Z

A group of physician investors in River Oaks Hospital are extremely upset over the sudden closing of the hospital this week by owner-operator Hospital Partners of America Inc. Investors have been meeting to discuss future legal options. Investment partners are expecting to lose their combined $4 million-plus investment in the hospital.

Both Houston campuses of River Oaks Hospital: located off Highway 59 near Buffalo Speedway and in the Sharpstown area which operated a total of 524 beds in the combined campuses ceased operations on June 23 after creditor GE Capital cut off funding. GE Capital sent notification just before the June 13 payroll was due that it would cut off credit to the hospital. The physicians were given notice 10 days before the closure.

River Oaks Hospital was scheduled to surrender its operating license to the Texas Department of Health and Human Services by the end of this week, after completing shutdown of its emergency room on June 25.

Formerly known as Twelve Oaks Medical Center, the hospital -- located at 4200 Twelve Oaks Drive at the Southwest Freeway -- was acquired by HPA and the physician investors on Jan. 1, 2004. The partnership also purchased the former Sharpstown Hospital at 6700 Bellaire Blvd. and put both properties under the River Oaks Hospital umbrella.

Here is a great opportunity for physicians from River Oaks Hospital to relocate near the Texas Medical Center:

Retail Health Clinics Booming in Houston

2008-06-29T22:17:30Z

Retail health clinics are a booming business in Houston.

Take Care Health Systems, a subsidiary of Walgreen Co., plans to open 3 new in-store clinics in the Houston, Spring, and Woodlands area this summer, adding to the 9 clinics already operating here. Take Care currently operates 172 convenient-care clinics in 14 states, and plans to have more than 400 clinics open by the end of 2008.

MinuteClinic, a subsidiary of CVS Corp., has opened three new clinics in the Houston area in 2008, bringing its total to 11. MinuteClinic's new locations are in Humble, Pearland and on Memorial Drive. MinuteClinic has more than 500 clinics nationwide and said earlier this year that it plans to open up to 250 new clinics this year.

Houston-based competitor is RediClinic LLC, has opened eight new clinics in H-E-B grocery stores since February 2007, for a total of 14 clinics operating in the Houston area. In addition to its H-E-B clinics, RediClinic will be partnering with Wal-Mart Stores Inc. to operate 200 of the 400 new clinics that Wal-Mart has announced it plans to open over the next two to three years.

In 2005, Wal-Mart began leasing in-store space to independent health care providers to operate the clinics. In the Houston area, Wal-Mart has six in-store clinics operated by Houston-based My Healthy Access Inc. The retail giant currently has about 80 clinics operating in its stores.

Earlier this year, Wal-Mart began opening clinics under its own brand name. The company has said it intends to contract with local hospitals and other organizations such as RediClinic to open as many as 2,000 in-store clinics over the next five to seven years.

Retail clinics are usually staffed with qualified licensed nurse practitioners working under the supervision of a physician or hospital. The clinics treat common illnesses and provide routine physicals and flu shots and vaccinations as well as screenings for such conditions as diabetes and high blood pressure. Charges for these services usually fall within a $40- to $60 range at most clinics, which treat uninsured and insured patients.

Florida Palm Beach Home For Sale: 4 bedroom with SINGLE WOMAN INCLUDED

2008-06-29T21:47:29Z

A single woman in Florida has listed her Palm Beach home on the market, and included an opportunity to marry her with the sale. Ironically Deven Trabosh has turned to the housing market which is creating heartbreaks and headaches everywhere, to find love for herself and sell her home.

Her real estate ad markets the 4 bedroom, 2000 sq ft, vaulted ceilings, upgraded tile, gated community home in South Florida with the opportunity to "Marry a princess lost in America". Her ads were posted on Craigslist and Ebay.

Deven Trabosh a former real estate agent insists this is not a sales gimmick in a tough real estate market. According to Trabosh "I'm not selling myself. I'm selling love...to meet that true love. Of course, it's gonna take more chemistry and connection. It's not going to be instantaneous that I'm just going to be automatically for sale...it's a package deal for true love."

Trabosh says "I know I'm putting myself out there. I'm sincere. I believe in true love," she says. "I want to get married again."

Interesting marketing strategy. I may have to try something like this myself. Well, I'm not necessarily going to offer myself up for marriage.

So what does everyone else think? I wish her the best of luck, and hope she finds happinss!

Houston Real Estate Attracting Foreign Investors

2008-06-29T21:21:20Z

A weaker American dollar is attracting international investors in Houston's real estate market because it remains one of the most stable real estate markets in the United States. Many foreign nationals see the weak dollar has given them a good reason to buy in our market.

As the dollar weakens, and foreclosures increase in certain markets of Houston, investors are taking advantage of the deals for long term investments in their growing portfolios. Many foreign investors have already seen this economic cycle occur in thier native countries. Their economies slowed, housing markets declined, and they watched people snatch up properties for a great opportunity.

Property prices tend to be the first to recover when a financial crisis is over. Investors who have witnessed this trend in thier own nations are taking advantage with many seasoned domestic investors.

A recent survey by the Association of Foreign Investors in Real Estate found that foreign investors declared the U.S. as the "most stable and secure" country for real estate investment and the country with the greatest chances for appreciation.

The dollar has dropped about 15 percent against the pound since late 2005 and about 30 percent against the euro since late 2005, prompting some Europeans to look to the U.S. housing market for investment.

It's not just the dollar that's attracting investors to Houston. Houston has one of the most affordable cost of living standards in the U.S. Rental property is in demand and rental rates usually cover the mortgages.

Foreign nationals aren't just buying investment properties for rental. Some are buying second homes so they dont have to transfer a weak dollar out of the country to be converted into thier local currency. Other foreign investors are relocating to Houston to take advantage of the lower dollar and the lower costs of living.

Houston is very popular, because it's a stronger market than others like California and Florida, where rapid appreciation led to much speculation and eventually a crash. Homes and properties in Houston are much larger than in other parts of the country for the same price.

Neighborhood Market Report: The Highlands Sugar Land, TX (First Colony)

2008-06-29T19:01:44Z

Mike's Neighorhood Report for The Highlands (July 2008)

The Highlands is located in the acclaimed City of Sugar Land. A master planned community of homes in First Colony which began construction in 1979. Located off Williams Trace near Lexington, The Highlands consists of 4 sections. The Highlands is convenient to Highway 6 and Highway 59. This subdivision is surrounded by retail and restuarants, and is surrounded by subdivisions such as Edgewater, Sugar Wood, and Englewood Place.

Currently there are only 8 homes on the market for July.
   6 available
   1 option pending
   1 pending sales
   2 rental available

2422 Long Reach Drive FOR SALE CONTACT MIKE WONG FOR DETAILS

2506 Coopers Post FOR SALE CONTACT MIKE WONG 713.935.5800

2627 The Hihglands Drive FOR SALE CALL MIKE FOR A PREVIEW

2603 Planters Row FOR SALE CALL MIKE FOR A PERSONAL PREVIEW

2214 Sentinal Oaks FOR SALE CALL MIKE FOR MORE INFO

1903 Barons Glen FOR SALE CALL MIKE FOR MORE INFO

2800 Pecan Point FOR SALE CALL MIKE FAST BEFORE ITS GONE!

Since Jan 1, 2008:
There has been 13 homeS sold in The Highlands.
Average square footage of sold properties is about 1700 sf.
Actual sold prices ranged from $110,500 - $166,000
Average home sales price was $145,000

Of course if you have any questions, would like to view any of the homes featured above, or would like a free consultation and market analysis of your home to place on the active market, contact Mike your neighborhood Realtor at 713.935.5800

Sugar Land Red Light Cameras

2008-06-28T22:50:18Z

Sugar Land City Council reviewed an update on the department's red-light cameras. After six months of using the cameras in 4 locations in Sugar Land, the department is reporting a 26 percent decrease in the number of red-light violations.

The cameras take pictures and video of cars that cross into the intersection after the light turns red. Those images are then sent to the car owner and a $75 ticket is issued. The cameras have been used to issue more than 10,000 tickets, according to the Sugar Land Police Department. The city has reported a collection rate of about 65 percent on those tickets. City Council has proposed an ordinance requiring residents to pay those tickets before being allowed to renew their car registration.

The gross revenue collected to date is more than $513,000 and the department reports the expense of the program has been $168,000. The city must split the net revenue with the state. The Texas Department of Transportation requires the city provide a report after the first full-year of the program. At that time, the city will be appointing a task force of Sugar Land residents to review the report.

The Red Light Cameras are located at:

West Airport @ Eldridge
Highway 6 @ Highway 59
Highway 6 @ Lexington
Highway 6 @ Williams Trace
(3 of them conveniently surrounding my neighborhood and office!)

Missouri City: Enacts Eminent Domain to Acquire Quail Valley Country Club

2008-06-28T22:37:11Z

City leaders have officially voted to buy The Quail Valley Country Club through eminent domain, to convert it into a city park. City officials sought to acquire the country club because of fears the owners would close the club and redevelop the property into apartment complexes whic concerned local residents. If the club was closed, city officials and many residents feared property values in the city would plummet.

During a special session the council agreed 7-0 Thursday to pay $3.1 million for the 390-acre of the Quail Valley development. A three-member commission appointed by Judge R.H. Bielstein set the appraisal price in a hearing at County Court in Richmond.

The city will take possession of the property as soon as the money for the club is deposited with the court. The club will be closed during the next few days to allow for a transition, then reopen by the July 4th weekend. Mark Voltmann, president of Renaissance Golf Group expects the club to operate as usual until further instructions are given by the city.

Missouri City: Future of Quail Valley Country Club Golf Course

2008-06-25T18:54:16Z

Missouri City has completed of the final steps required in its attempt to finally acquire the Quail Valley Country Club by using eminent domain. A special 3 member appointed commission set the price at $3.1 million on tuesday. The club owners may still appeal the fair marke value, which is expected.

City Council scheduled an executive meeting for Thursday to consider authorizing the purchase and funds to do so. This would allow the city to takeover the 390-acre parcel, which would be turned into a city-run golf course and park.

City officials decided to try to purchase the property because of concerns that the club owners would shut down the site and redevelop the area into apartment complexes. City officials and many residents feared, property values in the city would plummet as a result. However, club owner Mark Voltmann said last year that the company's goal is not to redevelop the course, but to operate it profitably.

The country club opened in 1970 and was the centerpiece of Quail Valley development, which was one of the first master-planned communities in the Houston area. The club had two 18-hole courses, as well as a nine-hole executive course and a par-3 course. Only the 18-hole La Quinta course currently remains open. The Renaissance Golf Group, of Dublin, Ohio, purchased the country club in January 2002.

Houston: The problem will be over soon according to the Greater Houston Builders Association

2008-06-22T22:33:24Z

The slowdown in the Houston area new-home market will continue through 2008, but there are better times ahead being predicted by housing analyst Mike Inselmann. Thursday the Greater Houston Builders Association had a midyear forecast.

Annual housing starts in the Houston area were down 28 percent at the end of the first quarter and are expected to decline sightly more. Sales and construction are anticipated to increase in 2009 after the presidential election, according to Metrostudy a Houston based company.

Inselmann predicts the second half of this year for Houston is probably the bottom of this cycle. A growing local job market, combined with a growing population and the expectation that the mortgage industry could ease some of its stringent underwriting standards, will help lead the market out of its current decline. Some consumers have been unable to get home loans, while others are just too nervous to buy amid a national housing slump.

Our local housing market has fared relatively well compared to other markets that saw their home prices soar and then plummet as the subprime lending crisis hit. The national picture has created a "bad mood," even in Houston, where home prices have remained stable or risen steadily, Inselmann said. "For the man on the street, they misunderstand the horror stories from California and Florida, and visions of Armageddon spring up in their minds," he said. "I think people forget how prosperous we are in Houston."

That's not to say this area has escaped the downturn. People are now struggling to get loans. Freddie Mac reported the national average 30-year fixed-rate mortgage carried a 6.42 percent rate this week, up from 6.32 percent last week. This week's rate is the highest in nearly nine months. The increase followed May's consumer and producer price indexes, which showed stronger inflation, according to Freddie Mac, which bundles residential mortgages for sale to investors. Inflation is creeping into the market, driving rates up, and it's going to hurt home buyers. But as rates go up, they could act as a motivator for fence-sitting consumers. Interest rates coming up will start to drive people to the marketplace, before they get back to the normal rates before the mortgage meltdown.

Following a period of ultralax lending standards, borrowers now must have decent credit, a job with verifiable income and money to put down. The guidelines have gone back to the way they used to be with more rigorious underwriting.

Home builders, who have seen their businesses decline as the market for new homes are trying new strategies to operate in a challenging environment. Higher gasoline prices mean builders who develop near commercial centers will see an increase as consumers will look for houses closer to their jobs.

The rising price of energy is affecting builders in other ways. The costs of building materials such as asphalt, insulation, roof shingles, carpet and other petroleum-based products are climbing. Construction materials are going up and they're going to show in the houses.

With the current forecast, it might not a bad time to buy before interest rates begin to rise as well as home prices again.

Sienna Plantation to get new FBISD High School

2008-06-22T22:14:26Z

FBISD entered into a contract to buy 77 acres of land on which to build Fort Bend Independent School District's 11th high school. The land is being purchased from HW Sienna L.P. Hillwood Development of Dallas.

At a May 22 emergency board meeting they cancelled the district's contract with Hillwood Development. At a June 9 meeting they voted to approve an amended agreement. The search for land in the southeast quadrant of the district began after the redistricting process from 2006. Redistricting showed the growth of the district and necessity for another high school in the area. This was necessary to relieve severe overcrowding at Hightower and Elkins, and accommodate all the new growth in Sienna Plantation S.

The projected opening date for the new high school campus is August 2010. FBISD describes this deadline as very critical. Since the redistricting, the district has made several attempts to approach developers in the area to consider different parcels of land for a new proposed high school.

The district initially purchased a parcel on FM 521. Later Hillwood Development property became available at a higher price. FBISD reviewed both parcels and because one had a much higher price. The board spent several months negotiating with Hillwood Development as the contract got more complicated. It took a number of entities to put this contract together. In the process the district saved almost $5 million because the contract ensures timely completion and the commitment of all parties.

A FBISD spokesperson said everything is down on paper in terms of timely completion and it's a Sienna/Johnson supported deal. Hillwood Development will ensure there are access roads, bridges, drainage.

The contract is for $3.4 million for land south of Sienna Plantation. As for the property trustees bought on FM 521, the district plans to retain it for now for and future need for some other schools.

Chelsea Harbour residents request apartment replat delay

2008-06-22T21:47:46Z

Landmark Apartments at Chelsea Harbor Sugar Land

Representatives from the Chelsea Harbor Homeowner's Association asked Fort Bend County Commissioners to delay a replat request that will allow Landmark at Sugar Land Apartments to construct 8 more units along FM 1464. Landmark at Sugar Land currently consists o 10 buildings with 8 units each totaling 80 units. The expansion would bring the development to 144 units.

Residents are concerned over an increase in crime and traffic problems related to the apartments. Representatives of the Chelsea Harbour HOA, said the subdivision is experiencing traffic congestion along FM 1464 that will get worse if high-density apartments are built in the area and said there had already been an increase in crime since the first project was built.

There are concerns among the residents about non residents utilizing the community's gazebo, tennis courts and children's playground who do not live in the subdivision. Traffic is already proving to be a challenge and the additional vehicles that the eight buildings would bring would create serious safety concerns to the community.

Chelsea Harbor residents complained that notices were only sent to Chelsea Harbor residents who live within 200 feet of the impacted area. Representatives asked the court to delay the decision on the replat because there was not an adequate traffic study and to allow the remainder of the 353 homeowners to be notified of the apartment's expansion plans.

The replat decision will be postponed until June 24 to hear the county engineer's traffic opinion.

Market Report: Colony Cove of First Colony Sugar Land, TX June 2008

2008-06-22T21:30:01Z

June 22, 2008

Mike's Neighorhood Report for Colony Cove (June 2008)

Colony Cove is located in the acclaimed City of Sugar Land. A small community of 28 homes in First Colony which began construction in 1999. Located off Austin Parkway near Grants Lake and Lexington, Colony Cove is convenient to Highway 6 and Highway 59. This subdivision is surrounded by retail and restuarants, and features lake front homes.

Currently there are only 3 homes on the market for June.
   3 available
   0 option pending
   0 pending sales
   0 rental available

3111 Monet Drive FOR SALE CONTACT MIKE WONG FOR DETAILS

3007 Old Masters Drive FOR SALE CONTACT MIKE WONG 713.935.5800

3011 Old Masters Drive FOR SALE CALL MIKE FOR A PREVIEW

Since Jan 1, 2008:
There has been 1 home sold in Colony Cove.
Average square footage of sold properties is about 2950 sf.
Actual sold price was from $407,000
Average home sales price was $407,000 so far

Texas Medical Center Development

2008-06-22T21:03:25Z

The latest project for the Texas Medical Center is a 52-unit townhouse project is being developed on 5 acres of land that once belonged the Wright Morrow Estate on South MacGregor Way east of Texas 288 along Brays Bayou. The Morrow House was built in 1936 for Wright Morrow an early Houston philanthropist and attorney. It was in poor condition and demolished for the townhouse project.

This is the latest project to be announced in the area, as developers rush to cash in on housing demand from employees of Houston's expanding medical community. The developer said the foundation will be poured this week for the first eight units of the project, called "The Modigliani" named for an Italian artist. The project will feature a design of Romaneseque-, Florentine- and Venetian-influenced architecture. The project was designed by BGK Architects.

The developer bought the land at the end of 2006 from the University of Texas for almost $5 million.
The university had previously planned to build a new Mental Science Institute on the site next to the UT/Harris County Psychiatric Center.

"The Modigliani" will be a multilevel townhouses will start at $650,000. Some units will be larger than 4,000 square feet. The project will be marketed to Medical Center doctors, administrators and executives from downtown. The higher end of the real estate market is less prone to mortgage finance issues that have plagued the housing market. So far, three of his units have sold. Once one more sells, the he'll begin work on another phase of eight units.

The first units will be completed around December.

Residential developments ranging from high end stucco-constructed homes in gated enclaves to townhouses clad in metal have been popping up in the area. A twin-tower luxury residential project called Mosaic is being developed on nearly five acres on Almeda near Hermann.

Part 2: Landlord 101 For Investors Considering Rental Investment Property

2008-06-22T12:36:41Z

Find Good Tenants

Not everyone is cut out to be a landlord.

One story is a couple bought a duplex. Strapped for cash, they rented the upper unit to the first couple who showed up on their doorstep because they needed rent money to pay the mortgage. They did not complete a credit or background check on thier tenants.

The couple turned out to be the tenants from hell. When the husband wasn't punching the wife, he was punching holes in the walls with his fist or an ax. The couple sold drugs, stole the landlord's tools and had screaming arguments in the middle of the night -- right over the heads of the landlord's two children. They also stopped paying rent. The tenants were eventually evicted, but so was the landlord and his family. They had fallen so far behind in their mortgage payments that the lender foreclosed.

These and other disasters can be prevented by putting in more work up front. The key is screen, screen, screen. Verify references, and ask questions.

In addition to running credit checks, call previous landlords to ask whether the tenants paid their rents on time and kept their places clean. This is the diligence of a responsible landlord. The difference between profits and losses can be your advanced screening.

Credit checks can be done for about $25 - $30. A more complete report, which includes a public records search for lawsuits, previous evictions and criminal convictions, can be had from tenant-screening companies for about $49. Take an extra step of making sure the phone numbers applicants list for their employers and previous landlords actually match the publicly listed numbers. That can help ensure the applicant isn't simply directing him to a friend who's been instructed to provide a phony reference.

You can hire a local Realtor to do all this for you, or a property manager. The manager can also handle the repairs, tenant disputes, midnight move-outs and neighbor complaints for a flat fee or a portion of each month's rent. Some landlords have had good experiences with property managers, while others feel that no one cares as much about their investment as they do. A property manager can take 10% or more of your rental income, which could consume much of your profit, depending on the property.

Don't be afraid to get your hands dirty

The more tasks you hire other people to do for you, the less you'll earn from your investment.

Returns would probably be higher if landlords didn't need to pay professionals to do most of the work around his rental, other than cutting the lawn. But some landlords are just not handy.

I would advise people considering buying rentals to try this to learn what really goes into building a house. So when you have a repair job, you can make an educated decision if you can do the repair yourself.

Get educated

Learning the landlord-tenant laws in your area. Potential landlords should educate themselves thoroughly on their rights and responsibilities. Know local city requirements. Sugar Land requires landlords to get a permit for each property.

Exercise particular caution when it comes to rental agreements. A poorly worded or outdated form, for example, can make getting rid of a problem tenant expensive, if not impossible. Professional bad tenants know the law . . . and landlords can be so fooled. They won't spend 50 cents for a new form but they'll spend $2,000 for an eviction.

Part 1: Landlord 101 For Investors Considering Rental Investment Property

2008-06-22T12:07:03Z

Part 1: Landlord 101 For Investors Considering Rental Investment Property

My blog topics for June are dedicated to my residential and commercial investment clients. Part 1 of a series for investors interested in investment rental property and becomming a landlord.

Owning rental property can be a constant nightmare -- or a good way to build wealth and net worth in real estate. Both of these cases have been proven by my clients.

The difference between a profitable investment and a disaster, is the amount of work an investor is willing to put in. Not everyone is cut out to screen tenants, persue overdue rent and answer those middle-of-the-night repair calls.

I can discuss finding good rental properties in a future blog. For now, let's talk about what is necessary to be a successful landlord.

Change Your Perception of the Job

Ignore those late-night infomercials that promise huge returns with no money down. Experienced landlords all agree the upfront costs are usually higher, and the returns lower. The infomercials would have you believing otherwise. The infomercials make it sound so simple and easy, but need to send you multiple books, hundreds of pages each, CDs to listen to, DVDs to watch. All that just to explain thier general idea, then they disclaim laws and regulations vary from state to state and the principles explained in thier material may not apply or be legal in your area!

Financing Your Next Investment Property

Lenders typically expect down payments of 20% to 25% for rental property, and some lenders want as much as 40% down. Your loan will be more expensive than a typical residential mortgage, as well, because lenders believe investors are more likely to walk away from a rental than they are from their own home. Lenders may charge interest rates that are anywhere from 1 - 2% points more on a rental-property loan than they would on an owner-occupied home.

Some alternatives:

Specialty lenders. Some lenders are willing to accept smaller down payments in return for a higher interest rate.
Seller financing. Sometimes current owners are willing to be your bank. In other words, you'd make your loan payments to the person from whom you buy the property. Your interest rate and down payment may be less than if you had used a traditional lender.
Owner-occupied loans. You can usually get a less expensive loan if you're willing to live in one of your units, a technique that often helps first-time buyers qualify for bigger homes in better neighborhoods than they might otherwise be able to afford.
How big a loan can you get? Lenders usually will take into account 75% of the rent you could charge for units in determining how much they're willing to lend you.

For Example if you bought a duplex and rented each side for $1,000 the lender would consider 75% of that total -- $1,500 -- in determining how much you could borrow. If you rented one side and lived in the other, $750 would be added to your monthly income to come up with the size of your loan.

Potential Tax Advantages

Remember you may also benefit from special tax breaks. What you spend on upkeep and repairs for a rental is typically tax-deductible. You also get a tax break for depreciation, which is an allowance for the wear and tear over time on your property. You may even be able write off up to $25,000 in losses each year if your modified adjusted gross income is under $100,000.

However you shouldn't count on those tax breaks to help you make a profit, as experienced landlords know. One of the golden rules of looking for investment properties: look for properties that will rent for more than the monthly mortgage, insurance and tax payments, to ensure they have enough cash to cover needed maintenance and repairs.

You may also need to adjust your profit expectations. A good return from rental real estate is anything over 10% annually. In commercial real estate this is referred to as the cap rate. Many small landlords will find they earn less than 10%, even after the property's rising value is taken into account. Maintenance, repairs, and any vacancy will eat into your profits. A major repair, falling rents or a costly eviction can be a disaster for your bottom line.

Many people only keep very simple records, and think they're getting a great return because they only look at appreciation or cash flow. You must consider all costs -- mortgage payments, taxes, insurance, maintenance and repairs among them.

Market Report: Englewood Place First Colony Sugar Land, TX June 2008

2008-06-20T21:45:49Z

June 20, 2008

Mike's Neighorhood Report for Englewood Place (June 2008)

Englewood Place is located in First Colony of the acclaimed City of Sugar Land. Located off the highly accessible Williams Trace near Lexington, Englewood Place is convenient to Highway 6 and Highway 59. This subdivision is surrounded by retail and restuarants, and features a walking trail along Oyster Creek. This is a cozy little neighborhood convenient to everything feauturing the most recent constuction in the area of its immediate surrounding neighborhoods. Englewood Place is nieghbored by The Highlands, Sugar Wood, Sugar Creek, and Sugar Lakes.

Currently there are only 3 homes on the market for June.
   3 available
   0 option pending
   0 pending sales
   1 rental available

15310 Truslow Point FOR SALE Call Mike for Info

15515 Truslow Point FOR SALE Call Mike for Info

15522 Amesbury FOR SALE Call Mike for Info

1 homes in the neighborhood is available for rent. Average monthly rate is $1,550 for the neighborhood.

15338 Amesbury FOR RENT Call Mike for Info

Listed price ranges from $244,900 up to $269,000 for current homes on the market.

Since Jan 1, 2008:
There have been 6 homes sold in Lakefield.
Average square footage of sold properties is about 2800 sf.
Actual sold price ranges were from $225,000 up to $262,000
Average home sales price was $245,000

June 2008 Market Report: Lakefield in First Colony Sugar Land, TX

2008-06-20T21:23:29Z

June 20, 2008

Mike's Neighorhood Report for Lakefield (June 2008)

Currently there are 7 homes on the market for June.
   7 available
   0 option pending
   1 pending sales
   5 rentals available

4403 Alamo Ave FOR SALE

4403 Treasure Trail FOR SALE

4514 Treasure Trail FOR SALE

4527 Treasure Trail FOR SALE

2438 Lakefield Way FOR SALE

5 homes in the neighborhood are available for rent. Average monthly rate is $1,300 for the neighborhood. For more information to list your home for lease or visit a home for lease contact Mike.

Listed price ranges from $126,699 up to $249,000 for current homes on the market.

Since Jan 1, 2008:
There have been 3 homes sold in Lakefield.
Average square footage of sold properties is about 1400 sf.
Actual sold price ranges were from $120,000 up to $155,000
Average home sales price was $136,000

If you have any questions, would like to visit any of the homes above, or would like a free consultation and market analysis of your home to place it on the market, contact Mike the neighborhood Realtor at 713.935.5800

June 2008 Local Real Estate News

2008-06-18T11:16:39Z

Foreclosures in Harris County Rise This Year

As we know, Houston is not immune to national trends and news because we are an important part of the national economy.. Foreclosures were up 16% for the first six months of the year in Harris County. That is a stable number considering the national reported average was as increase of 48% as I mentioned in my blog: Forclosure filings increase. For 2007, foreclosures jumped 24% percent from 2006 in Harris County, still only half of the national average. Foreclosures slipped in June to 1,034, from 1,119 during the same month last year, indicating the rate of foreclosures may be moderating in Harris County.

Houston is not immume but we are very resilient to the national crisis. Remember real estate is a local market. Our prices are dfferent than other cities, our property appreciation is moderate and our property values dont surge 100-500% like in some cities. Our cost of living is lower, and it was recently reported in the Houston Chronicle we are still experiencing job growth here in Houston the energy capital of the world during a national energy boom right now. That gives our real estate market additional stability.

Foreclosure sales, which take place the first Tuesday of the month at the courthouse, totaled 6,683 for the first six months of 2008, up from, 5,739 during the same period last year. Fallout from the subprime mortgage crisis, fraud and overextended borrowers continue to trouble the Houston area, experts said. Lenders are now working more with strapped borrowers to stave off foreclosures.

Many investors are taking advantage of the foreclosure inventory and jumping in, without having a plan. Please check my recent blogs: Rookie Investor Mistakes Part 1 and Part 2. Work with a local Realtor with experience in the market when investing, contact Mike Wong 713.935.5800 for a personal consultation.

Home Market Inventory in Houston Increases

Area sales of single-family homes fell 15 percent in May compared with a year ago according to the latest reports by HAR (Houston Association of Realtors). At the end of May, listings expected to close within the next 30 days were down almost 16 percent. Realtors still sold 5,996 single-family homes in May, which was the highest number of closed sales since last August. That was still 193 homes sold per day! That does not sound like a huge housing meltdown to me like the news media is portraying. Remember real estate is a local market.

The largest segment of the housing market - properties priced between $80,000 and $150,000 - saw sales decline 22 percent. Despite the slump in sales, the median price for a single-family home was unchanged from last year at $155,000 in Houston. That compares with an 8.5 percent decline in the national median price, which fell to $200,700 in April, according to the latest figures from the National Association of Realtors. The median is the point at which half the homes sold for more and half for less.

And as with any large city, the housing market is mixed. Some pockets still have a low inventory of houses for sale and properties are getting multiple offers. Neighborhoods between the West Loop and Beltway 8 south of Memorial Drive saw both prices and sales increase in May, according to an analysis by the local Realtors association.

Overall prices are holding up here because the local housing market never experienced a price bubble like Miami, Las Vegas and other places did, experts said.

In fact, Houston is one of the markets expected to lead the overall housing recovery, buoyed by oil prices, affordability and a supply that's not become a major concern, according to a recent analysis by UBS Investment Research.

There were 53,305 properties on the market at the end of May, a 3.2 percent increase over 2007. Housing inventory usually increases over the summer month as people relocate while school is out. Right now is a great time to purchase a home or investment property and take advantage of some of the lowest rates and great selection of inventory. My investor clients now are more active than ever.

Oil Costs Affecting Houston Home Builders

For Houston-area builders, the blessing of the local big oil driven economy is revealing its alter ego as well. Those high energy prices that created thousands of local jobs in Houston and fueling home sales in the midst of a national housing slump, are now causing building materials and the cost of delivering them to construction sites to sky rocket. The rising construction costs are coming at a time when builders have already been scaling back production as demand for new homes has weakened, particularly for first-time home buyers who are experiencing a national transition in loan requirements.

High prices on such building materials as copper, concrete, steel, and fuel for deliveries, now builders are also paying more for plastic pipe, shingles and other petroleum-related products. The cost of materials in May was 4.7 percent higher nationwide according to the U.S. Labor Department.

One of the main reasons for the price hikes is transportation costs. The national average for regular unleaded gasoline was $4.08 a gallon Tuesday, up 29 cents from last month and $1.07 from a year ago, according to AAA and the Oil Price Information Service. Diesel was $4.80 a gallon Tuesday, up from $2.89 a year ago.

Metropolitan Design Group a Houston builder recently had to rebid the cost to build a custom home slated for the Museum District. In a matter of months, the cost jumped another $15,000. The reason was more expensive steel, plumbing fixtures and concrete, which is delivered to a job site in multiple fuel-guzzling trucks.

Some builders have been eating the extra costs on houses it builds to sell or working with custom clients on redesigns or trimming back some of the fancy fixtures. Eventually, though, the consumer will have to bear more of the financial burden, builders said. It has to be passed on to the consumer just like every other product.

The increase might not be obvious in the bottom line price. It might mean a smaller builder discount or fewer standard features like granite counters or security systems. There are ways to put a price increase into effect without raising the price on the price sheet.

To combat the higher costs, Houston-based Trendmaker Homes is evaluating how it can make some of its construction processes more efficient. That could be recycling materials so there's not so much trash to haul off a job site. With prices escalating so rapidly, Trendmaker would like to see construction start on a house no longer than a month after the buyer signs a purchase contract. Typically, the process takes about six weeks as customers pick out finishes and fixtures. Construction workers also may start working longer days in order to make fewer trips to the work site.

The price of fuel prices isn't the only thing driving up construction costs. Natural disasters have affected the availability of certain building materials, as well. According to a builder the cost of lumber has recently gone up more than $1,000 per house. They are looking at it as a fundamental change, not just a problem to deal with.

We are just beginning the hurricane season and any natural disaster or disturbance can drastically affect not only building material costs but our unstable fuel costs as well like we saw during Hurricane Rita.

Single-family building permits in the Houston area were down 32 percent for the 12 months that ended in April, according to the Real Estate Center at Texas A&M University.

One positive result from the higher prices could be more sales of existing homes.

Meanwhile, the price pinch is being felt throughout the home building industry. Plumbers, painters, carpenters and other ancillary businesses are upping their fees because their costs are up, too.

ATTENTION: The Importance of a 1031 Exchange Would have saved my clients how much?!?!

2008-06-17T21:48:16Z

What Can a 1031 Exchange Do For You Mr. Client? How about save you $550,000?

I dont know about you, or any investors out there, but an extra $550,000 in net worth would make life nicer. Giving away $550,000 to the IRS instead of keeping it, just doesnt make any sense to me.

I have been well aware of the 1031 exchange for my personal investments and for my clients as well. I usually refer my clients to three different qualified 1031 exchange intermediaries per Respa requirements.

Last year an investor sold his property for $2 million. He acquired it nearly 10 years ago for less than $250,000 including property taxes paid over the time he owned it. That was a marvelous 800% return on investment (ROI) in 10 years! I would guess that beats almost all stock market funds out there, but it can happen any time in real estate. His capital gain was $1,750,000! He was so happy with his other Realtor at that time.

Prior to the sale I kept showing him potential exchange properties, advising him to get things in order. He decided to instead take the total proceeds and put them into his bank account (a 3% money market account) not a CD and he collected about $60,000 on that.

When the time came to pay the IRS and he met with his accountant he expected a 15% capital gain tax on his $1,750,000 to amount to $262,500. He was content with this, but I reminded him this could buy 2 or 3 income producing rental homes. What a shock when his accountant told him about the "alternative tax" when income exceeds $250,000. Calculating a 15% capital gain tax + alternative tax + moving up the tax brackets until his IRS tax bill came to $550,000!!! That was almost 28% of his sale price OUCH! Even worse it wiped out 31% of his gain!

I didnt want to remind him now that $550,000 could purchase 5 to 7 income producing homes. But I couldnt help myself, I had to tell him and educate him of what he was missing out on. Not to rub it in, but he missed such a huge opportunity.

$2,000,000 in a money market account = $5,000 monthly / $60,000 annually
vs.
$550,000 (5 - 7 rental homes) = $5,000+ monthly / $60,000+ annually
(I also explained vacancy, taxes, maintainance, but also home appreciation)

Less of his money could have worked more efficiently for him. He could have deferred the taxes. He could have had more income and gained appreciation in real estate. In banking it would have been compounding interest working in his favor. However in this case the local market appreciation history would have been greater than the compound interest rates.

Not only did that investor see the light that day I talked with him, he became a lifetime client and sends me other investors he knows. He is so fustrated by his previous Realtor not explaining any of this to him, and now blames that agent for costing him $550,000 instead of making him $2,000,000. Funny how his perception changes after he was educated about his options.

I now remind him, my commission may come to a big amount on any other large multi-million dollar deal he does in the future, but "my job is to make you the most amount of money in the shortest time". "Then help you preserve your money and assets not give them away and miss opportunities" this knowlege and services more than justifies my commission. He already said any commission I may make from him in the future is already justified by what I've showed him.

Investing In Commercial Real Estate to Build Wealth Part 1

2008-06-16T23:46:05Z

Investing In Commercial Real Estate to Build Wealth Part 1

There are 2 common ways to make money in real estate: appreciation and rental income. This applies to residential investment properties and commercial properties. When a proper strategy is implemented correctly, the investor can pay little or no taxes until the property is sold.

Assume a dentist purchases a small strip center for $1,000,000 to open his dental practice. He then also leases out the extra spaces in the building to other medical businesses for a total of $10,000 a month in rental income or $120,000 per year. This would include the mortgage payment, repairs and maintenance, management fees, etc.

This rental income would presumably generate a nice positive cash flow, yet it could still result in a tax loss. The dentist will have to file the rental income for the building on his annual tax return. Scheduled depreciation write offs will allow the dentist to recoup the purchase price of his investment over time thru annual tax deductions on the building and its components.

Depreciation is considered a "non cash expense". Depreciation combined with other property ownership expenses, could make the total expenses exceed the amount of income received on the property. In some situations this tax loss can offset other W-2 income.