Sunday, February 17, 2008



Happy Sunday

Just had to share with everyone what happened this week. As I mentioned in a previous email, we are trying to provide a full night out for 50 kids at the Road Runner's game in April. We have the tickets and now we need to feed them and just make it a nice memory for all. We heard from Harry and Sharron Hummell at KM Coatings MFG ( you might know) and they are sponsoring 5 kids and Chuck Westerlund who works everyday of his life for these kids already, sponsored 3. Every single one counts, whether you do it as a group or individual. 20 dollars sponsors a child and we are happy to do one child at a time. Only need to it 42 more times and we are there. When we first started we had one child and after doing that 500 more times, guess what! We know the power of one at a time and we know how God works the math. Please let us know if you can help.

This was just a week of heartfelt blessings for us. Pat,a gal that works at Curves presented me with $5.00. Her church had asked their people to tithe for a charity that they wanted blessed and they felt was worthwhile. How humbling was that!

I'm not done yet. Ellen, a neighbor of mine had donated $100.00 for our kids at Christmas time. she then got our tax id number and paperwork, took it to her company that matches donations of their employees, if the charity qualifies. I received a check this week for $200.00. Thank you Ellen for taking the time to go the extra mile and present the paperwork to your company.

Thank you to Scott Miller, one of our Realtors at Cactus Country Property Professionals. Scott is also on our board. As most know our bracelet project really fell short, no it didn't fall short- it barely got off the ground. Scott works with special needs kids and he is trying to raise money for sports equipment for his football and track kids so he came by and picked up about 7000 bracelets and working with other coaches trying to get these bracelets out and make some money for his kids. We had bought these bracelets to sponsor our therapy program and it just wasn't suppose to be. Wouldn't it be so fitting if this is who they were suppose to help. If you have a fund raising need, we have the bracelets and we will split the profits with you. Call me at 602 971 3331, 602 980 0760 or email me;

Thank you everyone for being part of our network for kids. We can not do this without you and wouldn't want to try.

We are a 501 C charity. The math is easy-

100% of all money goes to the kids-

0% for saleries

Love House Kids Program, (602) 980 0760, Fax: (480) 275 3406

Saturday, February 16, 2008

Kath's Rate News

I thought you might find this of interest and remember “It is a great time to buy!”
Mortgage Bonds have traded wildly up and down over the past six days. So if you like volatility, this market is for you. Mortgage Bonds are now trading lower after this morning's Durable Goods release, which was reported well above expectations. It is known that, the Durable Goods Report is a volatile one, but the 5.2% reading was far above expectations of 1.2% and could signal that business capital investment is picking up or paint the picture that the economy is not as bad as previously thought. This translates to even more guessing about the Fed's decision tomorrow. Will it be a cut of a quarter or a half percent?
The consumer is still feeling pretty confident as Consumer Confidence for January was reported at 87.5, which was stronger than expectations of 87.0. Adding further strength to the report is an upward revision to December's reading from a previously reported 88.6 to 90.6. This morning's stronger than expected report has to raise some eyebrows at the Fed, which starts their two-day meeting today.
The Fed’s interest rate decision and Policy Statement is set for release tomorrow afternoon at 2:15pm ET. At least two former voting Fed members see a half point cut to keep the markets from going back into the sharp decline we had seen just last week. And the futures contract, which is not so good at predicting longer term Fed moves, but very good at the near term move, is pricing in an 86% chance of a 50bp or half percent cut...we see this scenario playing out as well.
If the Fed does cut by 50bp - the long term picture may not be so good for Mortgage Bonds. The Fed has already cut 175bp since September 18th, bringing the Fed Funds Rate down to 3.5% from 5.25%. And don't forget the 50bp cut in just the Discount Rate back in August. Add in the President's Stimulus Package and another 50bp cut tomorrow and you have a whole lot of ammunition to juice the economy. Remember that it takes 6 to 9 months for the effects of a Fed Move to be realized. And we are barely 4 months past the initial Fed cut. If inflation flames arise, bond prices will suffer later, as the fixed rate of return they generate must yield a number to compensate for higher inflation.
And in watching many so called experts parade in front of the news cameras this morning, it was funny to hear some of the comments. An economist from S&P said that most mortgages are priced off the 10-year Note...scary. Another said the Fed's recent cut (exactly one week ago) has had no effect on housing. Again, this shows how little understanding these individuals have about the way our business works. Do they really think that people see the Fed cut, get in their car, buy a home, get a mortgage, and close within a week?
Note the Floating Bias today - this does not mean to take your eye off the ball as we are already seeing a decline in MBS prices. Watch the windows; I will alert you if things get nasty. This is a good time to get the message out to your clients, who may be waiting on rates to drop further. As always, loan applications never peak at the lowest point for rates...they do so when rates start moving up and clients get off the fence before the train leaves the station. Warn your clients of this common error. It is wise to have your clients in queue, especially those above $417k, but below $625K. This way they can pounce on the lower rates once the conforming limit is raised.

Kathleen ReinertHome Mortgage ConsultantWells Fargo Home MortgageMAC S4153-02020369 N 59th AveGlendale, AZ 85308623.445.2297 Tel602.620.3105 Cell866.254.1668 Fax866.207.6731 ext2297 Toll

Friday, February 15, 2008

Weekly House Inventory Level in Phoenix AZ and area

Weekly Inventory Level comparison

As of Friday, 2/8/08

Total homes available for sale increased by 369, or about 1% over last week. Current rate of closings remains low due to the fact that it is reflecting activity from the end of the year. Closes in the previous month were 2405 which gives us a supply of 19 months, a slight improvement over last week
Current Pendings continue to increase. The good news is these are at the highest level that I have seen since last August PM (Pre-Meltdown). This should translate in to more closings in the next month.

Best market in the Valley continues to be the SE area at 16 months supply and next is Scottsdale under $1M at 16 3/4 months.

The comparison of current active listing change is based on the previous week’s inventory. Supply numbers are based on the number of closings in the previous month, divided in to the total number of active listings. This data is for Single Family Detached homes only and does not include patio homes, condos, or town homes.
Entire MLS (Maricopa and Northern Pinal county), listing inventories are up 1% from last week. Total of 45783 active listings. Based on current rate of closings, about a 19 month supply.
200’s area (Central Phoenix). Listing inventories are up 1% from last week. Total of 6446 active listings. About a 20 1/2 month supply.

300’s area (West Valley). Listing inventories are unchanged from last week. Total of 15156 active listings. About a 20 1/4 month supply.

400’s area (NE Valley), Listing inventories are up 2% from last week. Total of 7708 active listings. About a 20 3/4 month supply.

500’s area (SE Valley), Listing inventories are up 1% from last week. Total of 11447 active listings. About a 16 month supply.

Scottsdale over $1m. Listings inventories are up 1% from last week.
Total of 1622 active listings. About a 40 1/2 month supply.

Scottsdale under $1m. Listing inventories are up 2% from last week. Total of 2613 active listings. About a 16 3/4 month supply.

Paradise Valley. Listing inventories are up 1% from last week. Total of 426 active listings. About a 38 3/4 month supply.

I hope this information is useful to you.

Multi Family 101

Thinking of upgrading rental properties, perhaps moving from single-family homes to multi-family buildings? Have no fear. While managing these complexes, whether they have six apartments or 60, can sometimes feel more like running a business than managing a real estate investment, many of the tax, landlord and general real estate investing rules that apply to single-family housing also apply to multi-family investments.
Purchasing: Obviously, the overall cost of a multi-family building or apartment complex is much higher than a single unit. Small buildings with say, six units can range anywhere from several hundred thousand on up into the millions of dollars depending on the market, so you’ll probably need to have more cash available up front than if you’re buying a single-family home. The cost “per door” varies widely from market to market but is typically lower in larger properties, a result of various economies of scale.
An ideal building has a good mix of two-and three-bedroom apartments, the larger of which provides an opportunity to rent to families. Complexes with all one-bedroom or studio units tend to stay empty longer since they significantly narrow the pool of tenants they can attract. Of course, this all depends on the location of the property. A building near a college campus, for instance, might very well find plenty of tenants looking for one-bedroom apartments. In most scenarios, though, buildings with a good mix of unit sizes will outperform those packed with studios or one-bedrooms.
Location matters, so if you can, choose a property near the bus lines, local shopping centers, recreation facilities and other local attractions. Well located buildings command better sale prices and higher rents because they will be more desired and sought out by landlords and tenants alike.
Financing: Generally, a residential loan is all that is needed for buildings with one to four units, while a commercial loan is necessary for buildings with five or more units. Typical financing for one to four units will require 20 percent cash down, and loan fees vary, but usually average around 3.5 percent of the purchase price. In order to add larger properties to your portfolio you need to apply for a commercial loan, which has different underwriting and approval processes. For smaller residential loans, the banks generally look at the investment potential of the real estate and then fall back on the borrower’s personal financial and credit history. That’s not strictly the case with commercial loans where lenders are much more interested in profit and loss histories for the project itself. That can make convincing your bank to give you the money based on forward-looking projections more difficult. If possible, you should provide at least a three-year (five is optimum) historical report of income and expense data with your application package.
You may also run into trouble finding a bank that wants a commercial loan for less than $500,000. That means you’ll either have to think bigger and spend more upfront or shop around until you find a bank willing to finance smaller deals. Overall, lenders tend to look at all cash flow considerations including the amount of money you have in reserve to cover unforeseen expenses. They’ll also look at other costs you’ll incur besides the mortgage; these will include taxes, regular maintenance management fees and vacancy rates. Remember, banks need to see an ability to make repayments on a monthly basis in order to approve a loan. Many banks will have a set income to debt ratio, called debt service coverage ratio or DSCR that you will be required to maintain. A DSCR of 1.0 means for ever dollar of income there is a dollar of debt repayment. Expect most lending institutions to require a DSCR of at least 1.25 — one dollar and twenty five cents net income for each dollar of debt repayment — before they consider a loan viable.
Cash Flow: One big advantage of a multi-unit complex is that you will get payments from multiple tenants each month, making both vacancy rate hiccups and deadbeat tenants easier to absorb. If a single-family home is empty, vacancy is instantly 100 percent and cash flow plummets to zero. In a building with six units, if one or two of the apartments are empty there is still income flowing to help pay the bills. Compare that with a single-family house where just a few months without rent can quickly put a landlord in a cash flow crunch.
Because valuations of multi-family properties are tied more to cash flow and net income than single-family units, they tend to be less prone to wild speculative swings in value during both rising and falling markets. These values are often stated in the form of a “cap rate”, which is the ratio between the net income and capital cost. For example, a building purchased for $1 million that generates $100,000 in net operating income has a cap rate of 10 percent. When valuing properties, it is useful to think of the cap rate the same way you would look at a rate of return for any other investment. The higher the cap rate, the higher the rate of return on the investment, but also the higher the perceived risk. Cap rates vary depending on the location, size and history of the property. A fully tenanted apartment complex in a rapidly developing area will command a lower cap rate than an older building in a questionable part of town which is perceived to be a higher risk proposition.
Maintenance: This might be the first tangible difference many investors feel after the purchase process is completed. Even if purchasing and financing your first complex was easy, chances are you’ll soon feel pressure from the extra tenants you’ve taken on. Managing your first multi-unit project can feel like a full-time job. Real estate professionals will advise you to be prepared for the worst, and you should plan accordingly. Instead of that one perfect family you rented a house to with little fanfare, you’ll have several tenants with their leaky pipes, noisy neighbors and lost rent checks to deal with at any given time. Also, keep in mind that the same commonsense rental rules apply to apartments as homes. That means the more units you have, the more you will have to repaint, clean and inspect before a new tenant moves in.
However, if you currently manage several single-family units in different locations, buying a single larger complex could provide an advantage for you. Instead of six families living in six separate homes, your tenants will now share a single roof, lawn, and parking lot, leaving you only one area to maintain instead of six.
It may be advantageous to hire a property maintenance company to supervise, maintain and field calls for you. This will cut into your profit, but if you are a serious investor who wants to spend your time vetting new projects, it may well be to your advantage hiring someone else to take care of broken toilets and overgrown lawns on a day to day basis.
The Right Bet
Investing in apartment complexes should be considered a longer-term and possibly deeper commitment than owning and renting out single-family homes. It takes longer to sell a building or large complex than a home and it may take some time to get the hang of managing such a large property. However, if it’s done right, owning a multifamily complex can provide a constant source of income for years to come with considerable upside along the way. Any investment is a balance of risk, work and reward, but if you’re ready to take on a bigger challenge and move to the next level of investing, then a multifamily project might be the right bet.

Check out Maureen's multi family units at "