A "Strong Dollar" Affects Real Estate

The global economy has changed some basic ideas of weak and strong; now all countries want a weak currency, so that other countries buy its products and employ their workers. A strong currency makes products expensive, and buys a lot of foreign products. Weak is good, strong is bad. 

That's a big deal for U.S. apartment properties. 

First, foreign buyers won't buy American property, so there's less demand. Already, prices in New York are being affected:

manhattans-new-real-estate-problem-the-strong-dollar-is-pricing-rich-euros-out-of-the-market-2010-4

Second, job growth is less, so renter demand is less.

Finally, and this may be the biggest impact, is that interest rates will go up. Money will shift from the bond market (where it's been for a long time), to the stock market. More demand for loans, less money to loan, means higher rates. Higher carrying costs for investment property really affects the market value.

The Real Estate Recession is Over, But What Happens Now?

Reading the popular literature and talking to fellow agents, I hear that the wave of foreclosures has not yet hit its crest, and that real estate values are not out of the woods, yet.

I just can't match the talk with the reality, at least around Coachella Valley multifamily. Properties in good areas (high household net worth, low crime statistics, and good schools) are on the market for five percent cap rates, which is exactly where they were in 2006, just before the Global Financial Crisis. How can that be?

Expectations drive sellers and buyers more than actual facts, and sellers believe that they'll get their price. With multifamily, prices have rebounded, already, based on current economics.

So, what could change? Well, the better question is, what won't change? The global economy has tolerated the U.S. federal deficit for many years, but that could change, particularly with the ham-handed Republican/Democrat bungling leading to government shutdowns. China is a teetering economy, with a weak banking system. Europe and Japan have aging populations with little future growth.  The possibility of another economic crisis is, in my view, greater than the likelihood of business as usual. I don't see how interest rates can stay so low, considering the rate of inflation and risk inherent in investment. In other words, interest rates should probably be seven percent.

Multifamily properties rely on simple arithmetic for their values. Rents, less vacancy and expenses, produce a "net operating income". The market provides a "cap rate", or a measure of what investors are paying for future cash flow.  The cost of financing the purchase comes out of the NOI, leaving net cash. Change these numbers, even a little, and the values of multifamily investment property change a lot.

Did Banking Create the Real Estate Crisis?

In my last post, I mentioned that Al Gore cited individual home loan foreclosures as the cause of the 2007 Real Estate Crisis.  That piqued my interest: what really happened, now that the dust has settled?

There were more foreclosures in 2006 than in 2005, and more in 2007 than in 2006. However, the general real estate market at that time was reasonably solid; there were buyers for homes and the economy was still growing.

I noticed that articles of that time seem to suggest that the lenders were the first symptom of the crisis. In particular, Countrywide Finance had made a lot of loans that created a problem for them. They were later taken over by Bank of America, and issues such as "robo-signing" of documents emerged.

The government then sued the both of them for fraud.

http://www.reuters.com/article/2013/10/15/us-bankofamerica-hustle-idUSBRE99E12C20131015
http://realestate.aol.com/blog/2012/10/25/bank-of-america-lawsuit-countrywides-unethical-lending-was-br/#!slide=865671
http://www.huffingtonpost.com/2012/10/24/bank-of-america-mortgage-fraud_n_2009791.html

So, I've completely changed my own understanding of the real estate crisis: private lenders made stupid loans, committed fraud and broke the laws, and stuck the U.S. economy with the bill. So much for the business cycle excuse.

Al Gore on the Real Estate Crisis

People occasionally say, 'hindsight is twenty-twenty', meaning that once something's happened, it's clear to be seen. That's not my observation; we rarely understand what happened to us. We certainly don't agree on what's happened.

I stumbled across Al Gore speaking about the "next" economic bubble (carbon asset valuations). In doing so, he casually mentioned that the Real Estate Bubble happened because so many people defaulted on their no-down-payment loans.
 http://finance.yahoo.com/blogs/daily-ticker/al-gore-carbon-bubble-going-burst-avoid-oil-121707563.html

That's not what I remembered; so I looked it up. It turns out that there was not a spike in non-performing home loans before August 2007; so the "bad" homeowner doesn't actually look like the culprit. There were dozens of opinion pieces in financial and economic journals, blaming either government or the private sector for stupidity, greed, and blindness. However, opinions were much more prevalent than facts.

So, why did the U.S. go into a real estate recession in August 2007? To be continued...

Will Obamacare help apartment owners?

It seems like a stretch to me, but the following article seems to suggest that Obamacare will help commercial real estate in general.

federal-reserve-sees-clearer-skies-ahead-commercial-real-estate

The writer's logic is this: job growth has been okay so far (we're almost back to where we were in 2007) and offering a general solution to health care in the U.S. will help business. The dispute over Obamacare has retarded job growth, but getting past the arguing will help business, and employment.

By the way, in the spirit of full disclosure, and I like to talk, I was originally against universal health care in the U.S., because if we take such bad care of ourselves when we have to pay for it, how badly will people treat themselves when someone else has to pay?

Now, though, I have changed my mind. The medical system has become distorted through so many patients who rely on the chaos and don't pay, anyway. I'm willing to give Obamacare a chance. Congress voted for it already; what's the argument now?

Does legalizing marijuana make neighborhoods less safe?

Recently, my little home town of Cathedral City, California (next to Palm Springs) discussed an application from a marijuana dispensary to open a location in the city.

The City waited for a decision from the California Supreme Court regarding the legality of a local prohibition on marijuana dispensaries. Later, the Court decided that cities may turn down applications if they've passed an ordinance. So, Cathedral City will not permit dispensaries, although surrounding cities have them.

I participated in the discussion of the planning committee regarding a recommendation. Since I keep up with real estate issues, I realized that I had not read a single article discussing the benefits, or the disadvantages, of the impact on communities of marijuana dispensaries. Later, I Google'd the issue, and found that there was a small study (for sale for $35) and a large study just started by UCLA to run for a few years.

In an apartment building I owned in San Diego, one tenant had a prescription (he said) and smoked marijuana openly. It bugged the other tenants, a lot. It wasn't illegal, but it caused problems. And his friends who came over to smoke with him, weren't the people I wanted to hang around my property.

Not everyone agrees the Apartment Sector is healthy....

This article comes to a conclusion that apartment tenants cannot pay more rent, so rents will not increase (much). Rents are already pushing limits of affordability.

Forbes Magazine: are-investors-paying-too-much-for-apartments

The writer also suggests that capitalization rates for apartment properties will increase from their current, historically low levels. (By the cap rate going up, with a steady "NOI", the value of the property goes down).

The article says that "apartment loans are not completely self-amortizing", which is not my experience. A twenty year loan on an apartment property is paid off in twenty years, period. Most apartment buildings are sold, financed with a "debt coverage" cushion, and produce net cash flow. I haven't seen any with a balloon payment.

While he acknowledges that capital is cheap, and rents have gone up, he appears to really believe that apartment owners will be forced to refinance in a future of higher cap rates (and lower property values).  He sees "maturity defaults" for owners of apartment buildings.

If anyone believes that, raise your hand. (I don't see anyone).

Why Investing in Apartments is Better than Investing in Office

Commercial real estate is a diverse field, and one sector can be very successful while others are floundering.

Please see this article in Commercial Investment Real Estate magazine regarding office space in the U.S.

http://www.ccim.com/cire-magazine/articles/323224/2013/09/stuck-neutral

Briefly, the demographics of the U.S. are creating families and adults much faster than the economy is creating new businesses needing office space.

Interest rates, cap rates, and apartment investments

It looks like cap rates for commercial properties have remained steady even though interest rates are firming up. 

Interest Rates Aren't Affecting Cap Rates (National Real Estate Investor Magazine)

For an investor, this is a crucial relationship to watch and understand.

There are (at least) two different interest rates to consider. The first is that of Treasury bills, which has a profound effect on investments, economic growth, and the federal budget. The second is the interest rate a buyer of an apartment building pays to borrow.

Business growth of the general economy may be the most important factor for an owner of commercial real estate. The ten year Treasury bill competes for the attention of investors; commercial real estate, with its work, risk, and tax results must offer a premium to an investor over the no-risk T-bill. That "spread" has been historically high recently. A researcher at CoStar Inc. estimates that, if the T-bill goes up 1%, cap rates will increase a half-percent. The market value of a property goes down (cap rates are the "net operating income" divided by the "price" of the property. If the cap rate goes up, and the NOI remains the same, the "price" must be less).

Higher interest rates harm the financial return of an individual investor buying an apartment property, since their interest carrying costs reduce their net cash flow. Less buyer net cash flow means a lower property value (to that investor).

So, what to do? See the next article....

20 units

I drove a listing that I think is a pretty good investment. It's 20 units in the "Cove" area of Cathedral City, near Palm Springs.

The Cove is the area on the south side of Highway 111, which is nice because it has a neighborhood feel, a gently rising topography, and some consider it to be the "downtown" of Cathedral City. The City Hall is just across the Highway, with a cinema, a water feature, and dining. It's nice.

First of all, we consider the numbers put out by the listing broker. He claims 6.72% cap rate,  and a 7.9% "cash on cash". 

Just to refresh your memory, the cap rate is the "net operating income" divided by the asking price (before the mortgage payment). 

The "cash on cash" is the net cash after the mortgage payment, divided by your down payment.

In my experience, the broker's numbers are usually a little optimistic (that's his job, by the way).  

If you agree with me about demographics going up faster than construction, multifamily properties will appreciate a little faster than single family homes over the next few years. So, if you add the market appreciation to the cash-on-cash return, your "internal rate of return" would be very good, better than any other investment I'm aware of.

If you're thinking about an investment, you might start off with an offer at about $90 per square foot, which is ten percent less than the asking price. Call me for more information, or to present an offer!

When to buy, when to sell...

As an economist, I'm comfortable with numbers, facts, and clear questions. So here's one: when should you sell your investment property?

When you have a better investment.

How do you know? Here's where the work and the judgment come in.

It's my personal opinion that most investment property owners hold too long. It's understandable; it's a lot of work to market your property, sell it, and find another one. However, the market is always changing, and your excellent decision of 2010 is probably not the best decision in 2013.  Interest rates change, business changes, and population moves. Hanging on to a property may not be a bad plan, but it's rarely the best strategy to make the most in real estate.

This strategy implies a constant monitoring of other investments. Right now, I personally believe that commercial real estate, particularly multi-family, is the best sector for investment and appreciation. However, real estate related stocks might be good, too. The smart investors are always looking at things they turned down in the past; maybe they changed and are better now.

As a commercial real estate professional, I notice that I deal with a lot of mature people with assets. That kind of person probably has learned to be careful with risk, and fairly opinionated (since they're successful, they have every right to trust their own opinions).

However, it's easy to make judgements too quickly. It takes some effort to keep your mind open when you think you already know the answers (I'm really talking about myself here, not you), but I've been surprised in the past when I found the facts were very different from my beliefs.

The U.S. real estate market has changed much more than anyone would have guessed, before the Global Financial Crisis. The rate of change is not slowing down--it's actually speeding up. Stay open minded, and see the opportunities before the crowd.

Chorus of positive articles about investing in apartments

The act of investing includes two approaches: first, to independently look at the facts, and second, to watch what other people are doing. 

We are definitely a "crowd", and crowd behavior is a powerful influence on investment results. A 'buzz" of good news, or bad news, drives a lot of individuals to make decisions, and that affects the market. 

Commercial real estate has been a mixed bag for the last seven years. Industrial, office, development, and specialized uses were knocked down by the Global Financial Crisis, and slow to get back up.

But now, I see a lot of articles about multi-family. Ride the wave early.

Article "six-facts-why-apartment-investors-should-be-optimistic"

Getting the right advice

Choose the right people to ask for advice in your apartment investment. In my experience, talking to an attorney or an accountant is likely to get inexperienced, personal opinions, not good business advice.

First of all, operating a commercial real estate investment is a specific skill. Judging tenants, calculating risk, and negotiation are really important-- and most people don't have the necessary experience.

Accountants are good for judging your personal financial situation, and tax obligations. But the macro-economic judgment that leads to good returns and high rates of internal rates of return, would not be their area. They're excellent at arranging the books and records, but don't know how to manage property (my apologies to anyone that does).

Attorneys are temperamentally risk-averse. They look for problems and threats. Believe me, owning commercial real estate will have problems and threats. LLC's and entities are worth looking into to shield your personal net worth from the risks of ownership. But most lawyers don't know how to manage property investments (my apologies again to anyone that does).

Being an entrepreneur is very different from being an accountant or an attorney. Use experts where you should, but don't invite opinions from those who aren't used to taking on risk.

Reasons to buy an apartment building as an investment

Recent stories suggest that the bond market is over as an investment, as interest rates rise. Stocks have appreciated, but few analysts suggest that there's a lot of future growth in prices.

Real estate, in California, is still a great deal. Multi-family, in particular, has not gone up much in price, and there are many good deals on the market. A good broker can find you deals that aren't on the market, which is where the opportunities are.

8-reasons-to-invest-in-multifamily-apartments

Buying an apartment building in Palm Springs

Palm Springs doesn't have the most apartment units in Coachella Valley (Palm Desert has more), but it's got prestige and name recognition. If you're considering buying an apartment property, you could do worse.

The cap rates for Palm Springs range from 5% up. I recently walked through a 1955 property, well-located, and in good condition, for sale for a seven cap. As an investor, I'd look at buying an older property in a good area as a two-step strategy: first, run it as is, and look into rebuilding on its foundation in the future.

Here's the issue with Palm Springs for investing: it's a little unfocussed in its long-term future view. There are two large shopping centers which are vacant. One's being remodeled for a hotel now, and met some local resistance (for good reason). The other's just vacant. 

Since I live here, I think it's a great place. For apartment investing, it's got a good location on a major interstate highway, it's near Los Angeles, and has a reasonably healthy local economy. Detroit, it's not.

Los Angeles Times article

Rehabilitating American cities

I had the great opportunity to live in Asia for the last six years, and my opinions about America will never be the same, again.

I love being an American, so this isn't a political change. However, I don't love American cities, and I do love Asian cities. American cities could learn to become better places.

Density is not a bad thing. Traffic jams, crime, and noise are bad, but the benefits of living and working closely are great.

I can't help but notice that shopping centers are under-utilized. Too much parking, too much vacancy, too little going on to attract me to go. In Coachella Valley, there are many vacant ghost towns of old retail.

Cities might take the lead and redevelop the sites into mixed use with public transportation access. 

Pudong area of Shanghai, China. This project, at the time in 2007, was the most expensive housing in China.

Buying an apartment building in Indio

The Coachella Valley has a number of sub-markets.

One is the City of Indio. This is located at the eastern end of Coachella Valley, with a largely agricultural, lower economic population.

Indio is engaged in a long-term plan of redevelopment. The long-empty shopping center in the middle of town will be redeveloped as

For an investor, Indio is a good area to investigate. The cap rates are far better than the Western region of Coachella Valley. Many properties are newer, and the streets are clean and safe.

 "the Next Big Thing" report about Indio

Americans are driving less...

According to a study, the year 2004 marked the high point in automobile usage in the U.S. Since then, people are driving less, owning fewer cars, and spending less on them.

This has a lot to do with real estate, particularly apartment real estate. Location represents a premium, or a discount, for any apartment property you're considering. 

http://www.uspirg.org/reports/usp/new-direction

The Current Market for Real Estate in Coachella Valley

Some recent data shows real estate in Coachella Valley as having recovered from the Crisis, and getting some legs under its pricing and velocity.

Prices for homes have been flat for the last few months after growing in the 12 months before. Speculators are becoming a smaller segment, and owner-occupants are becoming a bigger proportion.

In the Coachella Valley, people associate the summer with a slow down in activity. However, the statistics show that the inventory declines, demand continues, and transactions increase. A couple of years ago, there were years of supply on the market, using the current rates. Now, it's less than three months.

Investing in apartments

Investing in apartments....

Buying real estate is not a spectator sport. It takes emotions, and it takes brains. Most of the people I know who are successful were lucky, too, since you can't control the world around you.

Emotions: you have to like the property you buy, and the people who rent from you. Really. Otherwise, it's unpleasant to manage and make decisions.

Brains: you should use more judgment and care in buying an apartment property than you usually use in the rest of your life, because the numbers are bigger.

Investing can be made simple: you pay out money to buy something, you get money in cash flow from the operations, and at some point, you sell it, and get a lot of money (your initial investment) returned to you.  I taught real estate investing at the graduate level, and used the following diagram:

Every investment costs money in the beginning (Year 0), brings in some cash flow in the years you hold it, and returns the cash flow plus your equity in the last year. You can compare every investment if you break it down into these steps, and calculate the internal rate of return. From baseball cards to the stock market, you can end up with a figure.

This is why I love apartment buildings: if you buy it right, run it well, and sell it for a little more than you paid for it, your "internal rate of return" can be excellent.

The other aspect of investment involves your assessment of "risk". I would argue that the market dynamics of apartment ownership are better than other investments. The population of the U.S., or your particular area, is probably growing. Most of the growth comes from young people, or people moving around, and they're more likely to need an apartment than a single family house. In other words, people need apartments and you'll always have demand.

An interesting LinkedIn forum for investments:

http://crepig.ning.com/profile/BruceHaulley

"Crowd-funding" and real estate financing

A recent change in the regulations of the Security & Exchange Commission may mean changes in small-scale real estate development. Combined with the reach of the Internet, it may mean more investors for more developers and ownership.

Briefly, prior to the July 10 2013 change, the SEC required those seeking investors to surpass very high standards of reporting in order to advertise for investors. Investors had to be close associates. Now, however, a real estate developer or a syndicate can make a plain-English appeal for funds to the general public.

The Internet brings a second element: crowd-funding. A Web presence, for instance "Fundrise", can reach numerous candidates easily and cheaply. A person in New York can invest in an apartment complex in Palm Springs.

It might go like this: an apartment building is found, but the experienced purchaser lacks all the down payment. He/she advertises on a crowd-funding site, producing a prospectus, a management team, financing, and supporting oversight experts (accountant, attorney, inspector). Moneys collected go into escrow, the deal closes, and reporting is done at agreeable intervals. At some time in the future, the property is sold and moneys distributed to investors.

I've had a little experience with real estate development partnerships. Investors should be careful to know the people they invest with, and exercise good oversight over management of the developments. It will be interesting to watch how the changes affect real estate in the future.

Here is the SEC announcement:

SEC removes prohibition on advertising for investors

A discussion is here:

http://astudentoftherealestategame.com/

Apartment properties-- the best investment in commercial real estate

There's a lot of talk about "real estate" in the U.S. rebounding.

The discussion usually centers around owner-occupied single family homes. Commercial real estate is a mixed bag, with more complex dynamics.Commercial real estate includes shopping centers, raw land for development, industrial, medical, office, and many more specific, individual groups with their own business cycles.

However, one sector, multifamily, may be solidly positioned to grow for the foreseeable future.
Prices for multifamily properties are reasonable, judged by their yield to the investor, their potential appreciation, and demand.

Institutions see a sustained growth for apartment investment properties:

http://www.realestateeconomywatch.com/2013/04/apartment-markets-still-look-good/

In my area, the Coachella Valley area of California, there are hundreds of low-density, functionally-obsolescent properties built in the 1950's. My secret personal plan (don't tell anyone) is to buy older properties, rebuild them from the foundation up, going up two to three stories, improving their building standards and security, and making them relevant for today's demographics (more single parents, seniors, and women). Since they were built in the past when the urban areas were much smaller, their locations are often highly desirable.

As an investment, older multifamily properties offer cash flow as investments, and the potential of redevelopment at a timing of my own choosing in the future.  If you're interested in partnering, please contact me!

Vacant Restaurant for sale or lease

My broker-partner and I have a listing on a vacant restaurant in Yucca Valley, California.

It's a diamond in the rough. The current owner bought it from the bank, and is willing to fix it up to the standards of a first class restaurant chain. There are two kitchens, a bar, dining rooms, and two patios. On 1.2 acres, there is plenty of secure parking.

The Rib Co. sits on Highway 62, with 28,000 cars per day passing in front. The town of Yucca Valley, according to the U.S. Census Bureau, has an average household income of $55,000. The town reminds me of Santa Fe, New Mexico, with a beautiful topography and cooler weather than the rest of Coachella Valley (22 miles south).

Yucca Valley is redeveloping its core, and the Property sits right in the "Old Town Highway Commercial Specific Plan". With good planning, the area will be friendly, beautiful, and busy.

Call me or email me with your interest. Bruce Haulley 760 969 1033, bhaulley@gmail.com

For flyer:
https://docs.google.com/file/d/0B5UxaxpDt6d2SnlvVmdqS3Q1NUE/edit?usp=sharing

https://docs.google.com/file/d/0B5UxaxpDt6d2Z3pBbUtZZFBUTjg/edit?usp=sharing

Published in The Desert Sun

The Coming Crisis in Apartments in Coachella Valley

When people talk about housing, they usually mean single family houses, owned by their occupants. But one third of Americans live in apartments, paying monthly rent. Housing policy hasn’t properly considered their legitimate concerns, and a crisis is shaping up.

America, and Coachella Valley, aren’t building enough apartments for our growing population. Even at the height of the boom in 2006, we built less housing than the growth in families as children became adults, started careers, got married and had children.

After the Crash in 2007, new building collapsed, but kids kept growing up. Goldman Sachs estimates that there are 2.7 million shadow households, adult kids living with their parents and room-mate situations. These people need apartments.

Coachella Valley is even more in need of apartments for its population than the rest of the U.S. in general. The Valley is an island, at great distance from other urban areas. Jobs in general here pay less than the rest of Riverside County. It doesn’t pay to commute to work here. Cities in Coachella Valley aren’t building apartments; building permits were declining even before 2007.

The living situation for the working class in Coachella Valley will become desperate in the coming years. New families, the working poor, and single parents will not be able to find decent, affordable housing within a reasonable distance of their jobs. Local cities must take a pro-active approach to finding creative solutions for this important segment of our society.

http://www.mydesert.com/ 

The Next Economic Earthquake

(Printed in The Desert Sun)

Why China Might Become Greece, and Why That Might be Good for California

The Chinese economic miracle has been growing for decades, since the government made private enterprise legal. No other economy has grown as much, and China is now the second largest economy in the world.

The banking system is a major component of the government’s ability to manage the economy. However, its lack of openness, and inflexibility, are major weaknesses. No one knows for sure how many loans in China are non-performing, and they could suddenly fail, one after another. Their banking system is living on borrowed time.

China may become another Greece, in that its loans, its currency, and its trade may suddenly shift unexpectedly. However, that may be good for the U.S., and good for California.

First of all, jobs would grow here, instead of China. Real estate here will be a better investment than property in China, much of which is sitting empty and too expensive for the average citizen. Finally, it might be “tough love” for the U.S. to get its own financial house and federal budget in order, without depending on the readiness of China to buy our debt.

This is a recent article from CNN regarding Chinese buyers of California homes:

http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/index.html

This is a recent article about a change in policy to encourage foreign buyers of American real estate

http://www.realestateeconomywatch.com/2013/03/foreign-investors-could-be-freed-to-invest-in-us-real-estate/

This is a recent article regarding commercial real estate and Chinese buyers

http://www.nytimes.com/2013/06/26/business/global/chinese-investors-pursue-us-real-estate-deals.html?pagewanted=all&_r=0 

Are real estate agents worth the money?

Not always.

The best agents bring their "A-game" to each deal. No one outside the business has the day-to-day exposure to transactions, negotiations, and strategy, to match someone with experience and judgment, and a few screw-ups (yeah, I learned from those, too).

In the book Freakonomics, the author reported on a study of real estate agents selling their own homes, and selling the homes of clients. They consistently got more money for their own property, and the reason is simple. When they're working for someone else, they want the most reliable income, at any price, and when they're working for themselves, they want the most money.  They're likely to urge their client to take the first, solid offer, but wait for more offers for themselves. It's human nature.

My father never liked using brokers, and he was a successful investor and businessman. Some people like having the control.

I can see both sides, but I have found that the best investors use brokers. Success looks for experts.

http://www.freakonomics.com/2005/06/17/professors-dubner-and-levitt-made-erroneous-statements-on-today-show/ 

The Economist Magazine discusses U.S. real estate sales commissions:

http://www.economist.com/node/21554204

18 units in Desert Hot Springs

I wish I could have bought this property myself.

My fellow broker-extraordinaire, Dick DeCarlo, listed this vacant motel/spa in Desert Hot Springs for $530,000. It's in surprisingly good shape, on the bus line in a good neighborhood, and built with individual electric meters.

This property appears to be a great deal to me.

• On a "per-unit" basis, it's less than $30,000 a unit. (You couldn't build the building for that). 
• On a "per square foot" basis, same outcome. 
• On a gross rent multiplier measure, the projected rents would make this a great value. 
• On a "cap rate" basis, using reasonable estimates for income and expense, it would be a terrific purchase.

Here's the up-side. Buy it either with cash or get the seller to carry, fill it up with paying tenants, get a loan, fix it up, and sell it again in twenty four months at a seven cap.

Dick's got a couple of offers on the property already, so it's probably gone. But the California market has a lot of opportunity for people to make money with some work, some smart risk, and access to capital.

Foreclosures didn't necessarily hurt middle class families...

According to a recent study published in the American Real Estate Economics journal, the wave of foreclosures of single family homes in the U.S. did not reduce the living circumstances of those affected.

First of all, many foreclosures took place at the speed of a glacier. Fully half of the foreclosures were still in process two years after starting, meaning the families continued to live in the homes.

Second, when the families moved to a new location, few moved "down" into apartments or more modest accommodations. Most found a new, similar residence, at a lower price than their previous one.

Finally, the major damage of foreclosures was personal, not financial. The study mentioned divorces as a significant by-product of the stress on families making tough decisions.

http://www.areuea.org/publications/ree/

If you're thinking about buying commercial real estate....