Investing in San Diego Income Property

For all intents and purposes, investment property appreciates in value. If someone asked me the single best reason to own investment property in San Diego I would say APPRECIATION. What is appreciation? Appreciation is the increase of value of property over time due to inflation, supply and demand, capital improvements and other factors. Increase of value adds to your net worth.

The beauty of appreciation is that if you buy low and sell high, you can make money while you sleep.

What does this mean? It means that if you buy a property for below market value (poor condition, short sale, desperate owner) and you sell it at a future point in time for above market value (nicely upgraded, strong Seller's market, above average location) than you have just hit the jackpot!

The timing of a property purchase is everything, kind of like the stock market. Holiday time is easier to find a bargain than Spring time. If you find a property on the market in mid-December, you can be assured you have a very motivated owner. (and motivated owners tend to negotiate more).

If you buy low and sell high, you have nothing to gain but money.  

Yes, but you may be thinking that you will then have to pay taxes on all that money. Well, yes, you will but you could always do a 1031Tax-Deferred Exchange and roll over the gain tax free......as long as you follow some I.R.S. guidelines.

Regulations published in 1991 allow for construction/improvement exchanges and since then they have become a very valuable tool for the real estate investor.  A few simple facts about what they are and how they work:

What is a Construction/Improvement Exchange?

·         A construction/improvement exchange is an exchange in which the replacement property will have improvements made to it before it is acquired by the exchanger.

·         The construction/improvement exchange is often used to acquire a 'fixer' and do improvements on the existing structure. However it can also be used to construct a new building on bare land.

Why do a Construction/Improvement Exchange?
There are generally two reasons for this type of exchange:

·         The replacement property requires less funds than what is being held in the exchange account.  The ‘left over funds’ are then used to improve the building.

·         The ideal replacement property does not exist, so the exchanger decides to build it.
Important Issues with a Construction/Improvement Exchange

·         The entire project does not necessarily have to be completed by the 180 day exchange deadline; however the value needed to satisfy the 1031 Exchange requirements should be completed by the 180 day deadline.

·         Exchange funds can not be used to prepay for work or services to be preformed after the 180 deadline.

Identification of Replacement Property

·         In a construction/improvement exchange it is still necessary to abide by the 45 day identification requirement. When identifying, the description of the property should contain as much information as possible at the time of identification.

I was at my bank the other day--------San Diego County Credit Union------- and they have a new "App" where you can deposit your checks via your iPhone. Now I know this technology has been around for a year or so, but I didn't really think it made sense---I was  thinking it would be next to impossible to stuff a paper check into my iPhone!!   But then I learned that you just take a picture of the check and it is then treated as a paperless transaction.  :)

My office is in my home and my Brokerage is about 10 miles away, in downtown San Diego. My clients could be anywhere all over SD County and my meeting places are often Starbucks located just about everywhere. My mail goes to a PO Box yet most of my communications are by e-mail or text. My bank has a few branches scattered throughout metro SD, but now with a paperless iPhone deposit, I seldom have to go there. I could live on the moon and no one would know, as long there was WiFi!!

 When a Buyer is looking for a home, "location, location, location" are the first 3 things on their mind. Of course...who doesn't want to be close to services and with the price of gas, convenience is everything. Let's stop here and think about technology.

My trips to the office are seldom, and my trips to the bank now, are never. Clients (especially investors)  do alot of footwork, and you don't have to drive them from place to place. You can have a conference via Skype or "Facetime" on iPhone. I write up a list of items and order them from Drugstore.com, eliminating the need to drive all over the place.This opens up alot of possible locations for me to live---many more than it did even 5 years ago. Does it matter that my bank/pharmacy/supermarket are even  "bricks and mortar"? Heck, my office doesn't even have to be "bricks and mortar". So how does this affect not only me but our industry?

Locations that are further away from city services may start to take on a whole other dimension. If I don't have to worry about my commute or getting to the bank or drugstore, I just may opt to live further from metro city center and purchase a larger, less expensive house......or tap the better priced suburban condo market which is still floundering 15-20 miles outside of metro San Diego. 15 years ago, condos in East County were not considered as desirable as metro condos, but if you look at the vast price differential, they may be the next best buy. If I can save $500-$750/month by living in a "less convenient" area (and "convenience" is now a moot point), I can save that money and purchase another property, or investing it-----all the while, adding to my net worth.

Technology has not only changed our business model BUT the needs of our Buyers have changed as well. Don't lose Buyers because they can't afford the "chic urban areas"------------which may just see a decline in pricing due to our everchanging technology. Largely forgotten inventory in suburban/rural/fringe areas may just be on the upswing!

I just finished reading The Power of Charm by Brian Tracy.

This was an easy read, and although it did not hold any earth shattering revelations, I thought the chapter on eye contact was worth mentioning.

Did you know that eye contact projects to your speaker (client, partner, boss) that you are involved? it is a basic way that people will know if you are listening. Flicking is an act of shifting your gaze from one of the person's eyes to the other. It is a process of engaging with your speaker. I know a business colleague who never, ever gives me eye contact and is always looking around the room.  This is dismissive and I don't trust her. Now think of what your clients may feel.

Intense eye contact with no gaze shifting may signal sexual interest or threatening behaviour, so as to avoid this, shift your gaze to the sides of the speakers face for just a brief moment. Never gaze at their mouth or nose (they will think they have some food on their face or worse) or above or beside their heads (they will think you are showing disinterest).

Head tilts make you look very attentive and involved. it is a simple move, tilting your head slightly from side to side. (think of how endearing it is when your pet dog or cat does this).

Try using direct eye contact, flicking and the tilt and this will communicate: "I am totally focused on what you are saying".

What Is Lis Pendens?

A lis pendens literally means that litigation is pending. It tells the public that a lawsuit affecting the property is in progress and that any judgment awarded in that legal action will have priority as of the date of the lis pendens. Some lawyers file a lis pendens automatically when they file a suit affecting title to real estate. The lis pendens creates a cloud on the title and can prevent a potential sale of the property from taking place. A property owner’s first remedy, if a lis pendens is found, is to post a bond. If the court determines that the lis pendens was filed in bad faith, or that it does not affect title or possession to the property, then the court may expunge the lis pendens without the posting of a bond. You can take title subject to the lis pendens, but you would risk possible future judgments against the property. If a lis pendens exists it should be found in the preliminary report together with the liens and easements.

Read through the Preliminary Report (PR) carefully to determine which liens or items can stay on the property and which items must be paid or settled prior to closing. Once closed, the items not taken care of will remain on the property.

I like to save money---in fact, since the economy has taken a downturn, I have made it a goal of mine---to see how much money I can save (on things I thought I could NEVER do without--- like the latest suede boots) and deposit into a Roth IRA or other retirement account. Last year I fully contributed to my Roth IRA without making anymore money than the year before! Success! Always up for a challenge, I was stoked.

I wrote this blog post about how to cut corners and save money, and it has some great painless ways to do so----if it's not painless, then count me out.

I recently decided to move my money from a big bank to San Diego County Credit Union. No need to say which big bank, but it was a moral choice as well as a financial decision.

Internet Bill Pay: I have been paying my bills online for 14+ years. I love this feature and it saves me time and makes paying bills a snap. However, with the big banks, when you pay a bill and it is a "paper check"--- not an EFT (electronic funds transfer)  your funds are withdrawn on the day you pay. There is a 5 day lag time with paper checks to account for mailing. Thus if you used Bill Pay to pay a bill of $200 on 1/5  that was due on 1/10 and it was in the form of a paper check, the funds would be withdrawn on 1/5.  At SDCCU, funds are not withdrawn until the day you want the vendor to receive payment . So this $200 would stay in your account for another 5 days.

Why should I let the big banks float my money for 5 days, when indeed that extra 5 days will give me some breathing room and flexibility -sometimes the rents in my Property Management business are received a few days after the 1st.

This is not the only benefit. I have found SDCCU customer service to far outweigh the big banks, and check deposits are available immediately, instead of having to wait 2 business days for them to clear.

Look into moving your money to take advantage of other benefits San Diego Credit Union offers you!

If you're thinking about investing in a rental property, experts say low home 
prices combined with low interest rates make this the best time in years to become a real-estate investor.What's more, the real-estate market is starting to recover: U.S. houses lost $489 billion in value during the first 11 months of 2009, but that was significantly lower than the $3.6 trillion lost during 2008, according to real-estate website Zillow.com.

"We haven't seen home prices this low in so many years, coupled with the rates being so low," says Jill Sjolin, an agent with Windermere Real Estate in Woodinville, Wash., who specializes in investment properties. "When the money is cheap to borrow and the houses are cheap to buy, it's absolutely the best time to invest."

While the timing may be right, these five tips can help first-time investors take advantage of what might be the opportunity of a lifetime.

Know your options. Since not all investment properties are the same, it's important to determine what type of property fits your strategy, says Harrison Merrill, chief executive officer of Merrill Trust Group, a real-estate investment company based in Atlanta. Do you want to become a landlord, or would you rather restore and resell properties? Are you interested in apartment buildings and other commercial real estate, or in buying land that can be developed? First-time real-estate investors may want to start with residential housing, since commercial real estate and land development still face challenging market conditions, Merrill says.

Partner with experience. First-time investors should find a real-estate agent experienced in investment property deals who can help you locate promising properties. "Look for relational brokers who expect to do business with you again and therefore are going to be much more careful with what they recommend," Merrill says. A second option is to collaborate with a more experienced real-estate investor and close a deal together. In this economy, an experienced real-estate investor may be willing to work with you in exchange for the capital you can provide, giving you the opportunity to glean investment knowledge and experience firsthand, Merrill says.

Even if you don't collaborate with other real-estate investors, talk to them about pitfalls they've experienced. "Go down to the general district court in your area and listen to some landlord/tenant cases so you can get a sense of what kind of challenges landlords face," says Jeffrey Taylor, author of "The Landlord's Kit."

Look for the right location. If you buy a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal; stay away from rural areas where there are fewer people and a small pool of potential renters, Sjolin suggests. Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate. "Renters gravitate to a safe neighborhood, and if they have kids, they will want a good school district," Sjolin says. Also think about potential selling points for your property. If it's near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later. The more you have to offer, the more likely you are to please potential renters, Sjolin says.

Have capital lined up. Speak to potential lenders or even a financial planner about whether you have enough assets to handle the ups and downs that could come with investing. Even if you plan to rent out the property, count on paying the mortgage whenever there's a vacancy. "If you can have about six months of mortgage payments saved up, it's there if you need it, and you can use that money for repairs," Sjolin says. Even if you're planning to fix up a home and sell it, you may end up holding onto it for several months in the current market, Sjolin adds.

Build a supporting cast. Don't wait until a rental property needs repairs to find someone to handle them. "Line up maintenance individuals who can take care of the different challenges that occur so you can simply call the person when a particular issue comes up," Taylor says. Other sources you may want to have relationships with are an attorney to consult with on tenant issues, a property management firm to handle the day-to-day rental affairs and an accountant to help you understand the tax ramifications of investing. The more support you have, the better you will be able to handle the problems that come your way.

courtesy of Bankrate.com

Deborah's Cheesecake Recipe

5 8 oz. Pkg. Cream cheese

1 ½ cups sugar

3 tbsp. Flour

¼ tsp. Vanilla

5 eggs

2 egg yolks

¼ cup heavy cream

Graham cracker crust

Preheat oven to 500 degrees. Combine cheese, sugar, flour and vanilla. Beat to blend at high speed. Beat in eggs/yokes one at a time. Add cream, beating just until well combined. Pour into 10” spring form pan. (do not use any other type pan). Bake 10 minutes. Reduce temp. to 250 degrees and bake 1 more hour. Let cool in pan.

This month I had to perform one of the most dreaded parts of my job---looking for contractors and handymen. I typically have a small team, each of them skilled in their own specialty, some easy to work with, and some with personalities like wet cement. (pardon the pun).But when you need skilled trade, you got to take the few without charm and humor (if their rates are reasonable and they show up on time.)

 I have a “favorite” that I call on for ~move-outs~ and one for minor plumbing issues. Problem is, they only stay for awhile. When a big job comes through, they are too busy for small jobs, and then I am left in the dust...which is why I have several of them on call at one time.

Last month, they all disappeared on me-- some to big jobs and others into thin air.

This week I made about 15 phone calls and emails from Craigslist and 4 returned my calls. Requesting references and a short phone interview are the basics of my screening. One guy called me back, but I could hardly hear a word he said, with several screaming kids and dogs barking in the background. Another told me he had limited computer access and with an accent I could barely understand, figured I may have to pass.  One guy had prices so astronomical I knew he didn't really want my small jobs. Another contractor showed up to look at a bathroom on one of my properties. I knew what I wanted and told him----he was quite upset that I was a "woman who knew what she wanted" which left him unable to overcharge me (not his words but you get the picture).

I found a great landscape guy----he loves to text and I have been able to get several jobs done with a few minutes of texting back and forth. I also found a great handyman who texts, e-mails and doesn't charge a 2 hour minimum. If a handyman does an average job, I would be more inclined to use his services if he were: accessible, easy to reach and had good communication skills. 

In our day to day work, are you overlooking the little things that could get you more business? After all, you could be the best Realtor in the world, but if you answer the phone with screaming kids and barking dogs in the background, refusing to text, or not returning phone calls promptly, you may be missing out on some good business.