Welcome to our weekly edition of Real Estate Investing News This Week. Real estate news highlights include:

• Single family building permits increased 27 percent from a year ago

• More home price increases coming 2013 to 2017

• New home sales increase, distressed inventory declines

• Housing Index posts record April increase

We hope these real estate news items help you stay up-to-date with your real estate investing strategies and inspire some profitable real estate deals for you.

Single Family Building Permits Increased 27 Percent From a Year Ago

Single family building permits increased 27%

On Tuesday, RealtyTrac^® released its analysis of building permit data recently released by the U.S. Department of HUD for the first quarter.

High-level findings from the report:

• Nationwide single family building permits increased 27 percent from a year ago in the first quarter to the highest first-quarter total since 2008. Meanwhile U.S. foreclosure starts in the first quarter decreased 27 percent from a year ago to the lowest quarterly level since the second quarter of 2006.

• The majority of building permits in the first quarter were for single-family homes (64 percent of total permits), followed by 5+ unit multi-family properties (33 percent). Overall multi-family building permits increased 23 percent from a year ago.

CoreLogic Case-Shiller Home Price Indexes Affirm 2012 a Big Year for Home Price Increases, More to Come in 2013-2017

Key Findings:

• Home prices projected to increase 3.9 percent annually over next five years, following a 7.3 percent rise in 2012

• Cities at epicenter of housing bubble/crash clocking highest rate of appreciation, largely driven by investor demand

• New housing bubble unlikely as market dynamic shifts on both supply and demand sides

Download the Index here: CoreLogic Case-Shiller Indexes

New Home Sales Begin to Flourish as Distressed Inventory Declines

From Esther Cho:

“The available supply of foreclosures and short sales previously stunted the recovery for new home sales, according to CoreLogic’s May MarketPulse report.

Though, now that the supply of distressed homes and existing-homes for sale has fallen, there’s more room for the new home sales market to expand.”

Housing Index Posts Record April Jump

Expect continued increases in
prices and sales.

The Wall Street Journal‘s Nick Timiraos reports:

“It’s shaping up to be a hot summer for the U.S. housing market.

An index that measures prices received by real-estate agents and brokers posted its largest year-over-year jump in April in nearly eight years.

The data series released on Wednesday comes from the producer-price index, which measures how much manufacturers and wholesalers pay for finished goods….

The index showed a 9.1% gain in prices from a year ago.”

Cheap money and easier lender underwriting guidelines are two of the main reasons why property values have appreciated right along with our increasing rates of inflation.

Since the Credit Crisis began in the Summer of 2007, both commercial and residential property values have fallen significantly throughout the U.S. Accordingly, property owners are more likely to walk away from their “upside down” properties if their existing mortgage debt exceeds current market value.

Lenders Have More “Skin” in the Game

Real estate continues to be one of the best hedges for inflation.

In many regions, residential and commercial properties experienced price or appraised value declines of 50% or more since the last market peaks near 2006 – 2008.

Increasing vacancy rates in small to larger retail shopping centers, office buildings, or other commercial property types made it more challenging for owners to refinance or sell their properties at prices anywhere near the peak values.

When purchasing commercial real estate, typically the lender provides most of the capital for the purchase,  as opposed to the borrower. Whether the buyer makes a 5%, 10%, 20%, or a 35% down payment, it’s the lender who has more “skin in the game” or money invested in the deal.

As such, the lender is not as optimistic about the property as the prospective borrower, since they have more of their own money at risk.

Commercial Underwriting Guidelines: It’s All About the Numbers

When underwriting, analyzing, or investing in commercial real estate, it’s all about the numbers.

How is the gross income? How high are the expenses or expense ratios? What is the true NOI (Net Operating Income)? What is the typical cap rate (capitalization rate) used for the subject property’s building and location? How is the cash flow? What is the potential cash on cash return? What are the typical vacancy rates for the building type and region?

Commercial properties can be much more subjective deals for both potential buyers and lenders. Regardless of the building’s unique design style, prime oceanfront or downtown location, sales comparables, or the quality of the tenants, lenders tend to look first at the numbers.

Many commercial real estate loans are taken on by business entities such as LLC’s (Limited Liability Companies), Partnerships, or Corporations as opposed to individual borrowers. Some commercial loans are “nonrecourse” in that the lender or creditor may only seize the subject property in the event of a default and not pursue any of the individual members, stockholders, or partners for any additional remaining losses or deficiencies.

Cap Rates: How Lenders and Buyers Analyze Values

The capitalization rate is a measure of a commercial property’s potential performance without factoring in or considering the mortgage financing. It is effectively the NOI (Net Operating Income) divided by the sales price.

The cap rate is also used to convert the expected future Net Operating Income (NOI) over time into a present value number today. Many borrowers today are willing to pay higher prices for all types of real estate, partly since their borrowing costs are so low due to record-low interest rates.

The lower the cap rate used, the HIGHER the potential sale price. Between the fourth quarter of 2002 and the first quarter of 2008, average national cap rates plunged from 9.3% to 6.75%.

If investors and lenders can’t increase rental income numbers in the short term, why not ease lending underwriting analysis calculations, so property values stabilize or actually increase?

As a result of the declining cap rates considered by both lenders and investors, commercial real estate values increased for prime buildings, such as apartments, office, retail shopping centers, and industrial storage facilities.

As the Credit Crisis continued onward between 2008 and 2013, more lenders began to consider lower cap rates for properties partly due to the rapidly decreasing interest rates, as well.

Cap Rates = Interest Rates

Amazingly, some prime properties located in prime big cities like Los Angeles, Seattle, New York City, Baltimore, Washington D.C., San Diego, San Francisco, Atlanta, and Boston now may sell at cap rate prices as low as the 3% and 4% range for some multi-family apartment deals, which also parallels many of the best fixed-rate options for mortgage loans today.

These rapidly declining cap rates are helping to increase commercial property values significantly in many regions of the USA today, in spite of the ongoing sluggish economy, regardless of whether or not the subject property’s net operating income actually increased in recent times.

For example, as it relates to trying to partly determine a commercial property’s potential value or sales price using much lower cap rates today:

• Net Operating Income = $100,000 per year

• Cap Rate using 7% equals an approximate value of $1,429,000

• Cap Rate using 4% equals a $2,500,000 value

** Please note that lenders use a few other types of underwriting analysis formulas, as well, to better determine property values and loan amount limits.

Inflation Is the Key to Prosperity with Real Estate

When incomes are stagnant or declining, one of the best ways to improve property values is to drop interest rates as low as possible and ease up the underwriting guidelines, such as decreasing the allowable cap rates, considering higher vacancy rates, and being more flexible with the borrower’s credit and financial histories.

Once again, real estate continues to be one of the best asset hedges for inflation, so more flexible underwriting guidelines can help property values continue to increase right along with the higher rates of inflation.

48% of real estate experts surveyed say another housing bubble is a
moderate to high risk.

Home prices increased 10.5 percent on a year-over-year basis in March — the biggest year-over-year increase since March 2006.

Foreclosure filings decreased 5 percent from the previous month and were down 23 percent from April 2012.

But a majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve’s current policies could lead to another housing bubble.

We hope these real estate news items help you stay up-to-date with your real estate investing strategies and inspire some profitable real estate deals for you.

CoreLogic Home Price Index Rises by 10.5

On Tuesday, CoreLogic^® released its March CoreLogic HPI^® report. Home prices nationwide, including distressed sales, increased 10.5 percent on a year-over-year basis in March 2013. This is the biggest year-over-year increase since March 2006 and the 13^th consecutive monthly increase in home prices nationally.

Highlights include:

• Including distressed sales, the five states with the highest home price appreciation were: Nevada (+22.2 percent), California (+17.2 percent), Arizona (+16.8 percent), Idaho (+14.5 percent) and Oregon (+14.3 percent).

• Including distressed sales, this month only four states posted home price depreciation: Delaware (-3.7 percent), Alabama (-3.1 percent), Illinois (-1.8 percent) and West Virginia (-0.3 percent).

• Excluding distressed sales, the five states with the highest home price appreciation were: Nevada (+20.8 percent), California (+16.8 percent), Idaho (+16.3), Arizona (+15.1 percent) and Hawaii (+14.3 percent).

• Excluding distressed sales, no states posted home price depreciation in March.

Full-month March 2013 national data can be found at http://www.corelogic.com/HPIMarch2013.

See also:

March Home Prices Accelerate, Post Biggest Annual Gain in 7 Years

Foreclosure Auctions Hit 30-Month High, Overall Foreclosure Activity Drops to 6-Year Low

On Tuesday, RealtyTrac® released its U.S. Foreclosure Market Report™ for April, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 144,790 U.S. properties in April, a decrease of 5 percent from the previous month and down 23 percent from April 2012.

Total foreclosure activity in April was at the lowest level since February 2007, a 74-month low.

High-level findings from the report:

• Scheduled judicial foreclosure auctions increased 22 percent from March to April and were up 31 percent from a year ago to the highest level since October 2010 — a 30-month high.

• Scheduled foreclosure auctions increased from a year ago in 15 of the 26 judicial or quasi-judicial foreclosure states, including Maryland (199 percent increase), New Jersey (91 percent increase), Ohio (73 percent increase), Oklahoma (57 percent increase), and Florida (55 percent). Scheduled foreclosure auctions reached a 68-month high in Ohio, a 31-month high in Maryland, a 27-month high in New Jersey, and an 18-month high in Oklahoma.

• Scheduled non-judicial foreclosure auctions (NTS) in April were down 7 percent from March and down 43 percent from April 2012 to the lowest level since December 2005 — an 88-month low.

• A total of 70,133 U.S. properties started the foreclosure process in April, down 4 percent from the previous month and down 28 percent from a year ago.

Experts See Risk of a Housing Bubble Resulting from Fed Policies

From Krista Franks Brock:

“A majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve’s current policies could lead to another housing bubble.

Only 4 percent of respondents are not at all worried about a bubble resulting from the Fed’s monetary policy that is keeping mortgage rates down. However, 48 percent see the Fed’s policies as ‘a little risky,’ and the remaining 48 percent categorized the risk as ‘moderate to high risk.’”

More and more creative real estate investors are switching to the individual 401k and loving their new plan.

The Self-Directed IRA has been the standard vehicle for alternative investments in retirement accounts.

As many creative real estate investors know, mutual funds aren’t the only investing options for your nest egg. You can buy real estate, tax liens, notes, and even become your own private money lender.

Most people set up a Self-Directed IRA with an IRA custodian, then have learned to jump through the hoops that go along with it. But did you know that there is a better way?

You’re about to discover what most real estate investors will never know about investing in real estate in a retirement account. Introducing…

The Solo 401k

The Solo 401k, also known as an individual 401k or i401k, can be a great alternative to a Self-Directed IRA for creative real estate professionals. Here are some of the benefits:

• The Checkbook: With an individual 401k, you are creating a 401k plan for your own business. You can elect yourself as the administrator. The administrator (you) is the one that write the checks. Having the checkbook is much more efficient than going through the custodian intermediary. For example, if you find a fantastic deal and want to get it under contract with earnest money on the spot, you can do that with the solo 401k. With the self-directed IRA, you have to wait for your custodian to cut the check, which could cause you to lose the deal.

• No UBTI: With both the self-directed IRA and the solo 401k, you can use borrowed money to help with the purchase of real estate as long as the loan is non-recourse. However, with the solo401K, you will avoid the Unrelated Business Taxable Income (UBTI) issue that is triggered with a self-directed IRA.

• Higher Contributions: The total contributions to a solo 401k can be larger per year than a self-directed IRA. Plus, there are no income limits for Roth contributions.

• Mistake Forgiveness: If you do a prohibited transaction, you have a chance to adjust your mistake in an i401k. With a self-directed IRA, a prohibited transaction usually ends up in a liquidation of the plan. And a liquidation has significant penalties and tax consequences.

• Long-Term Cost Savings: The fees to set up an i401k may be more, but the costs to maintain it are much less than having to pay a custodian each year. IRA custodians charge as a percentage of the amount in your account, so the more successful and larger your self-directed IRA becomes, the more you have to pay. With the solo 401k, the nominal ongoing fees to maintain it typically just deal with keeping your plan up to date with the right paperwork.

• Be Your Own Bank: The feature that attracts a lot of people to the individual 401k is that the ability to borrow up to $50,000 from it. And you can spend that borrowed money on whatever you want. Just be sure to you pay yourself back.

You may be thinking, “How come I’ve never heard of this?” Four reasons.

First, it only come into existence in 2001, and a lot of people don’t know about the solo 401k. Second, financial planners and advisers typically stick with what they know and many aren’t educated on the i401k. Third, IRA custodians can earn more fees from self-directed IRA accounts since individual 401ks require less interaction. Finally, the solo 401k is only an option for people who have their own business. And that’s important to know–the requirements.

Individual 401K Requirements

Meeting the requirements for an individual 401k was tailor made for creative real estate investors:

• Operate a Business: You must operate a business, since this is a 401k plan for your company. You don’t need to incorporate or file documents with the Secretary of State to have a business. It can be as simple as a sole proprietorship or partnership, but you at least have to have a small business, and that’s exactly what most creative real estate investors have.

• Some Earned Income: Your income in this business must have at least some earned income (or the intent, if you just started it), even if the majority is passive income from rental property. Most creative investors can generate some earned income from a wholesale, an assignment, or a flip.

• No Full-Time Employees: Although you can have 1099 independent contractors as well as part-timers, you can’t have any full-time employees outside of a spouse. Most creative investors fit this bill, as well.

 i401K Drawbacks

Yes, there are a few drawbacks to be aware of, too.

• Competent Counsel: Very few advisers or IRA custodian companies really have experience and a deep understanding of how to correctly set up and educate creative investors on the nuances of real estate investing in a solo 401k.

• Opening a Bank Account: Your favorite bank where you hold all of your other accounts may not be able to open an i401k bank account. Some bankers will look at you with cross eyes when you try to open one. But if you are a creative investor, you are probably used to people being puzzled by your out-of-the-box thinking.

• Obtaining Title Insurance: Getting title insurance issued on solo 401K purchases can sometimes be a challenge. Title insurance underwriters don’t always know how to handle them.

• Self Discipline: Perhaps the biggest drawback to the i401k is also its biggest strength, giving you the purse strings and having no person in the middle to hold you accountable. Outside of borrowing from it, you can’t use your retirement money for personal use, even though you might have the checkbook in your possession. In fact, commingling personal with retirement funds on any investment is not allowed. So if you have no self discipline, perhaps you are better off letting a third party custodian protect you from yourself.

The best way to overcome these drawbacks is to work with someone who has significant experience in setting up and administering these plans for creative real estate investors. They should be able to set it up right with the proper paperwork, help you open the bank account, provide materials, so you can educate title insurance underwriters on solo 401ks and assist you along the way, so that you avoid any mistakes.

Much like any aspect of creative real estate investing, you have to work with the right people.

Solo 401K Investing

Investing in your real estate business using retirement money can be a great opportunity for you. The individual 401k might be a better option for creative real estate investors, but everyone’s situation is different.

For example, some self-directed IRA people don’t want to change and to acquire checkbook access, they set up an LLC in conjunction with their IRA. This technique works, but the costs of the set up and the annual fee for an LLC can be costly, and you still miss out on all the other great benefits of a solo 401k.

More and more creative real estate investors are switching to the individual 401k and loving their new plan. Thanks for reading, and if you have any questions, feel free to comment below.

Welcome to our weekly edition of Real Estate Investing News This Week. Real estate news highlights include:

• The Case-Shiller Indices showed a big gain in house prices

• Pending home sales rose in March

• Corelogic reports that foreclosures have decreased 16%

• Trulia’s Housing Barometer shows market is 56% back to normal

• The  FHFA House Price Index is up 7.1%

• Bad mortgages hit their lowest level since 2008

We hope these real estate news items help you stay up-to-date with your real estate investing strategies and inspire some profitable real estate deals for you.

Home Prices Rise in February – the S&P/Case-Shiller Home Price Indices

The Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, released Tuesday, showed average home prices increased 8.6% and 9.3% for the 10- and 20-City Composites in the 12 months ending in February 2013.

Get complete data here: S&P/Case-Shiller Home Price Indices ─ February 2013

See also:

Behind the Numbers in the S&P/Case-Shiller Release

“The February S&P/Case-Shiller Release….shows a strong performance by housing across all 20 metropolitan areas.  The composite of 20 cities rose 9.3% in the last year, the best gain since May 2006 and seasonally adjusted all 20 cities rose month to month for two consecutive months; the last time that happened was at the beginning of 2005.”

Case-Shiller Indices Post Sharp Gain in February

“Despite weakness in the Midwest, home prices posted their strongest year-over-year gain in almost seven years in February…

“Five Takeaways From the Latest Case-Shiller Report

“Tuesday’s report is the latest sign that the U.S. housing market has rebounded after home prices hit a bottom one year ago.”

Pending Home Sales Continue to Climb

From Housing Wire’s Megan Hopkins:

“After remaining flat in February, pending home sales increased in March, floating above year-ago levels,” according to the National Association of Realtors, which noted contract activity in recent months shows only modest movement.

See also:

Pending Home Sales Index Up For March

“The Pending Home Sales Index (PHSI) rose 1.5 percent to 105.7 in March, the highest level in almost three years, the National Association of Realtors (NAR) reported Monday.”

CoreLogic Reports 55,000 Completed Foreclosures in March

—Foreclosure Inventory Down 23 Percent Nationally Since March 2012—

On Tuesday, CoreLogic® released its March National Foreclosure Report. According to CoreLogic, there were 55,000 completed foreclosures in the U.S. in March 2013, down from 66,000 in March 2012, a year-over-year decrease of 16 percent. On a month-over-month basis, completed foreclosures rose from 52,000 in February 2013 to the March level of 55,000, an increase of 6 percent.

Download a copy of the Report here: CoreLogic Foreclosure Report March 2013

Housing Recovery Marches On

Trulia’s Housing Barometer shows market is 56% back to normal in March

Each month, Trulia’s Housing Barometer charts how quickly the housing market is moving back to “normal” based on three key housing market indicators: construction starts (Census), existing home sales (NAR), and the delinquency-plus-foreclosure rate (LPS First Look).

Trulia’s Chief Economist, Jed Kolko states:

“Averaging these three back-to-normal percentages together, the housing market is now 56% of the way back to normal, up from 54% in February and 43% six months ago in September.

One year ago, the market was only 33% back to normal – so the last year has been a significant recovery.

Furthermore, this month’s improvement is even better than it looks with the shift of sales from distressed to conventional and early signs that the inventory crunch may be easing, which will bring some relief to would-be homebuyers.

FHFA House Price Index Up 7.1 Percent

The Federal Housing Finance Agency (FHFA) uses the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index.

For the 12 months ending in February, U.S. house prices rose 7.1 percent. The U.S. index is 13.6 percent below its April 2007 peak and is roughly the same as the October 2004 index level. U.S. house prices have not declined on a monthly basis since January 2012.

Census Bureau: New Home Sales Turnaround

From Housing Wire’s Megan Hopkins:

“New home sales made a U-turn after falling 4.6% in February to 411,000 homes sold.

The sales of new single-family homes inched up 1.5% in March to 417,000.

March sales are up a more dramatic 18.5% from the year-ago estimate of 352,000, according to data from the Census Bureau and the Department of Housing and Urban Development.”

Bad Mortgages Hit Lowest Level Since 2008

By Nick Timiraos

“The number of U.S. mortgages that were behind on their payments or in foreclosure in March fell below the 5 million mark for the first time since 2008, according to a report released Tuesday.

The number of loans in the foreclosure process fell to just below 1.69 million in March, the lowest level in nearly four years, according to Lender Processing Services. That was down by almost 20% from one year ago. Overall, around 3.4% of all U.S. mortgages were in foreclosure at the end of March, down from 4.2% a year ago.”

Working for a living is only looking out for today. When do you expect to be financially secure?  Do you have a date?  Do you have a specific plan? Can you afford to sit on the sidelines and simply hope for a better tomorrow?

The good news is that today’s market is ripe to make big strides forward by investing in real estate. Here’s how you can overcome the roadblocks to your success.

1. Lack of Confidence

You can overcome the roadblocks
to your success.

The Number One trap is self-doubt and second-guessing yourself, which can have far-reaching consequences, affecting everything you’re trying to accomplish.

Lack of confidence is created from fear. Those around you are likely to tell you that you can’t do it, don’t have money to invest or the right skills to invest.

The good news is that fear is overcome by investing in yourself.

Do you know…

- What a great deal looks like?

- How to buy houses without cash or credit?

- How to calculate your maximum offer?

- How to buy the right house?

- How to find the right tenants?

If not, now is the time to learn, so you can capitalize on today’s opportunities.

2.  I Don’t Know How to Start

Have you ever driven a long road-trip? Maybe you plan to drive from Boston to Houston for your vacation or to visit family. If so, you would never just jump in your car without a clue about where you are heading. You would likely map out your route online or fire up your GPS, so you know where you’re going.

Real estate investing is the same way. Be sure you have a road map and know where you are going. If you can, invest long term, buy and hold real estate assets, and enjoy cash flow and wealth.  If you need to create some fast cash, consider wholesaling as the place to start and build your foundation.

3.  I Don’t Know Where to Get Help

Investing is a team sport and that is good news. Finding the best opportunities, negotiating and structuring the transactions, documenting and then managing the deal to fruition takes a team. So going it alone absolutely does not work.

You need someone to bounce ideas around with, a strong team to support you, and like-minded people to connect with. To give you feedback about what’s working and what’s not. And to solve problems before you run out of time.

Look. If you don’t have a partner and mentor, or someone to turn to… you are operating with a monumental disadvantage.

That’s why we’ve created our Affordable Coaching & Training Program.

Our members have the ability to interact with us online, to brainstorm deals and ask questions, to connect on our live coaching calls to ask questions, work on deals together, and support each other as confidence is gained and deals are made.

If you want to accelerate your learning, gain confidence, and establish your personal investing roadmap, I invite you to join our coaching community and begin to invest strategically.

You get immediate access to proven real estate investing systems. We’re talking detailed coaching and systems designed to help you…

• Become a strategic investor with clarity, direction, and confidence

• Play to your strengths, work around weaknesses, and WIN

• Find the perfect opportunities for you driven by your current assets, time, and goals

• Structure offers that can safely leverage your plan and accelerate your plan

• Eliminate the roadblocks holding you back from the success and lifestyle you want

• Know the “numbers” in any real estate deal, so you can improve every offer and every deal

• Systematize almost everything, so you’re not chained to your investments

• And put it all together as one efficient, highly-profitable investment machine!

 Take a few minutes now, and check out our Affordable Coaching & Training Program.

Title insurance is one of the most expensive closing costs in a real estate transaction. It’s usually required by a real estate buyer because it ensures that the buyer will not be responsible if another party has a future claim on the property. If somewhere down the road, someone argues that they have an interest in the property, your title insurer will deal with it.

As a real estate investor, you may pay for title insurance when you are buying a property. If you are selling a property, the new buyer may negotiate that you pay for their title policy, as well.  That makes title insurance a significant closing cost on almost every closing, and unfortunately, too many are paying too much for it.

Do you have money to burn?

I spend a substantial amount of time each week pouring over the closing statements of the deals of the people I mentor. In almost every case, I find places my student is being charged more in closing costs than necessary. Over the last decade, I’ve adjusted hundreds of closing statements, saving the folks I mentor a ton of money.

Why You’re Paying Too Much

The reason why the buyer, the seller, or both are usually paying too much in closing fees is because there is very little training and knowledge on the subject and the parties adding the fees to the closing statements (brokers, loan officers, title companies, and attorneys) have very little financial incentive to help educate buyers and sellers.

To make matters worse, what usually happens is that the buyer, the seller, or both grow weary of the transaction by the end and they take say, “I don’t care anymore, I just want to close this thing.”

Combine a lack of knowledge with just wanting to get something down, and it’s a recipe for over-paying. At the closing, the buyers and sellers sign the closing documents and accept whatever is written on the HUD1 Settlement Statement as etched in stone. And they pay hundreds, if not thousands, of dollars in extra fees.

All title companies should tell the party purchasing the title insurance what I’m about to reveal. Sadly though, far too many don’t. This simple tip can slash the cost of title insurance by hundreds of dollars.

How to Stop Paying Too Much

Here’s how you stop paying too much for title insurance…

Provide the title company with a copy of the existing title insurance policy on the property. By providing this policy, they will reduce the cost of the new title insurance policy they are going to issue. And since nearly every property has an existing title insurance policy, this means you should get this discount on just about every deal you do.

It’s that simple. Isn’t that the way it works with real estate? The truth is often hidden but, when you get to it, you make better decisions and more money with greater ease.

Where do you get the existing title insurance policy? The best place to find it is in the big, thick folder of closing paperwork the property owner got when they bought the property. If it isn’t in there, find the phone number of the title company from that closing paperwork and call them. Sure, this task may take some extra time to complete, but it’s worth hundreds in savings to you and any reduction in closing costs is usually pure profit in your pocket.

If you’re an experienced real estate investor, you may be mentally calculating all the deals you’ve closed where you didn’t employ this simple technique. Ouch! Better late than never. If you’re just getting started, the good news is you don’t have to learn this lesson the hard way. You’re learning from the experience of others. Well done.

Share your story. Where have you been hit with exorbitant closing fees? Have you been paying too much for title insurance?

Are banks hiding millions of foreclosures as “Shadow Inventory”?

If these numbers are true, then there were potentially upwards of ten (10) million homes nationally which went through some phase of the foreclosure process these past several years. As a comparative number, there are an estimated five (5) million mortgaged homes combined in California alone.

So why are inventories declining? As we all know, one of the best ways to try to increase the value of something is to suggest that there is a shortage of the product.

Home listing inventories have fallen in many regions by 30% to 70% year-over-year, despite our ongoing sluggish economy. At the same time, many homes have increased in value by 5% to 20%+ just over the past year.

Are there potentially several million “Shadow Inventory” foreclosure homes that may have been delayed? Are banks trying to artificially suppress listed home inventory levels, so that home prices slowly increase once again?

The MERS and LIBOR Scandals

The LIBOR and MERS Scandals are two key reasons why home supply is declining and the MLS inventory levels are much lower today.

The #1 reason why there was a foreclosure moratorium is linked to the questionable and legal right of MERS to actually foreclose on many homeowners. Since MERS acts as the nominee on behalf of many of the biggest banks and mortgage servicing companies, they affected the legal ownership of real estate and “Chains of Title” more than anything else.

LIBOR allegedly involved the rigging and manipulation of interest rates. Many homeowners were charged higher rates on their mortgages and credit lines which used the benchmark LIBOR rate as their core index.

If a homeowner may currently be in foreclosure, then will this same homeowner be able to stop the foreclosure process if he was overcharged thousands of dollars in fees and rates due to the rigging of LIBOR rates?

Numerous banks have sold entire packaged pools of their “Shadow Inventory” homes to domestic or foreign investment groups to avoid potential legal issues with future MLS buyers.

Supply and Demand

In life as well as in real estate, perception typically becomes one’s reality. If someone believes there aren’t enough homes for sale, then this will cause that same buyer to jump back into the real estate arena before the existing prices and interest rates rise too rapidly in the near term. As demand increases, then so do home prices.

Many big banks and mortgage servicing companies are trying to clear up their foreclosure supplies by either selling them off in bulk to large investment banks or even by bulldozing them,  like in Detroit. Instead of a true “popping” real estate bubble, we have experienced more of a slow leak by gradually releasing more foreclosed “Shadow Inventory” homes to the General Public.

The brightest real estate investors out there are picking up some great deals with very cheap money, and are “fixing and flipping” these same homes for quick profits, while the home listing inventories remain very low.

The supply of capital drives the future direction of the housing market more than any other economic factor. Let’s hope that banks decide to lend more of their money to U.S. consumers instead of  hoarding their cash to save themselves. Your comments are welcome.

Welcome to our weekly edition of Real Estate Investing News This Week. Real estate news highlights include:

• Home prices are still increasing while the number of MLS listings keep falling

• The boost in March housing starts is being bolstered by a surge in multifamily building

• Both first mortgage and second mortgage default rates are falling

• 3 reasons the housing recovery may not last

We hope these real estate news items help you stay up-to-date with your real estate investing strategies and inspire some profitable real estate deals for you.

Home Sales See Seasonal Surge, Listings Fall

Home sales rose 25 percent in March.

By Tory Barringer:

“The seasonal surge in home sales combined with another drop in listings to further drive up prices in March, Redfin observed in its latest Real-Time Price Tracker.

According to the brokerage, home sales rose 25 percent month-over-month in March, reflecting the normal spring spike that occurs every year. On a year-over-year basis, however, sales were up just 0.9 percent—the smallest gain in 14 months….

The number of homes for sale fell 31 percent from March 2012 to March 2013….”

Multifamily Boosts Housing Starts in March

Mark Lieberman reports:

“Led by a surge in multifamily building, housing starts jumped 7.0 percent in March to a seasonally adjusted annual rate of 1,036,000, the highest level since June 2008, while housing permits dropped 3.9 percent to 902,000, the lowest level since November, the Census Bureau and HUD reported jointly Tuesday.”

First Quarter of 2013 Shows Healthy Consumer Credit Quality

On Tuesday, S&P Dow Jones Indices released the latest results for the S&P/Experian Consumer Credit Default Indices. Data is through March 2013.

Get Complete details here.

See also:

National Mortgage Default Rates Fall in March

From Ester Cho:

“Mortgage default rates moved lower along with the overall national default rate in March, according to the Consumer Credit Default Indices released by S&P Dow Jones Indices and Experian.

The first mortgage default rate fell to 1.41 percent last month from 1.48 percent in February and 1.88 percent from March 2012. The second mortgage default rate was down to 0.69 percent, a monthly and yearly decrease from 0.71 percent and 1.03 percent, respectively.”

OPINION PIECE:

3 Reasons the Housing Recovery May Not Last

This interesting article by CNNMoney’s Les Christie sheds some unique insights on today’s buying frenzy. Read the entire article. Here are some highlights:

“The housing market has made a big comeback over the past year; home prices have surged some 8% and homebuyers can’t seem to buy up properties fast enough….

Here are three reasons the housing market recovery may not last:”

1. The housing recovery is being led by investors.

2. The economic recovery is just not strong enough yet.

3. Government cuts will hurt homeowners.       READ MORE >>>

• Taxes will be the biggest expense you will pay in your business and personal life.

• Taxes will prevent you from taking more money home and putting it into your bank account.

• Taxes will eat away at your wealth.

One of the best ways to reduce your taxes is to be in business.

Taxes are eating away at your wealth.

Investing in real estate is not the same as “being in business.”

When you invest in real estate, you can take certain deductions, like depreciation, and there are certain other tax benefits, but if you want to take the most deductions allowed by law — almost 150 of them — you need a small business corporation.

And there are many more deductions available with a C-Corporation than with an S-Corporation or LLC.

So if you’re a real estate investor, you need a “business.” It could be:

• A property management corporation, or
• A property finding corporation, or
• A property marketing corporation, or
• A (fix and flip) contractor corporation

So start thinking about how you can reduce your taxes by “being in business” so you can take the maximum deductions and put more money in your pocket.