Busy buying houses last few months

Hello guys and gals, it has been three months sine I update build wealth tonight. As you've imagined, I've been busy build wealth every night. I 'm looking into couple hard hit foreclosure area and buy some bargain property. So far I did two deal in last few months. Both were bought below its replacment cost and postive cash flow. It's a real exicting time to become real estate investor. In fact, contrary to most people thinking, right now it's much "safer" to invest in real esate. Home price is very very low compared in 10 year period of time, most home become very affordable. As long as you can survive and hold on property for a few year of time, after all this subprime, foreclosure over, the chance of making money is just HUGE. Let's continue to look for more good deal to come in next few months.

Altosresearch.com

Reading Graph, understanding the trend, learning fundamental data are probably the best way to learn and understand the market. While there are many website provide these kinds of graph and data online, there are few for real estate investor. I recently heard a website provide data for market for professional real estate investor and wants to share it with you. It is www.altosresearch.com. It aim to provide data in graphical format for investor to learn and master the market. It support over 100 metropolitan area in U.S. The data include: median sale price, number of inventory, number of sold transaction, average days on market (DOM), etc. They charge a monthly subscription fees for more detailed graph. I call them this morning and ask for historical data to study more about the market. However, they only provide up to 1 year history data for customers. I was looking for more, like 3 , 5 or even 10 year history. Nevertheless, I still recommend this website as it provide meaningful data for real estate investor to track.

Real Estate 2008 is going to CRASH CRASH and CRASH!

Last month was an unbelievable month to me. I have seen prices in many the so called "prime area" near where I live have experience price dropped in an extraordinary fashion. Price sometimes could go down as much as 100,000 in a matter of days and weeks. With the record high foreclosure still coming to the market, tightened lending environment force out many buyer, losing confidences in real estate market, tons of bank owned property on the market, I really think year 2008 will probably the worst year for real estate price for decades in many many area. Today , the not so desirable get hit , tomorrow, even the better area will start to experience the FALL. Prices is going to toilet. It will be common to see all the equity built up last several year just evaporated over night. Even worst, many more people are thinking to just walk away from the house because they started to think foreclosure is a normal process that many people would just do. Especially with the new tax law "Forgiveness debt relief act 2007 " give people a break from not paying the income taxed owned from a shorted amount when a foreclosure sold, many more will take this "opportunity" to just walk away. There will be tons of foreclosure coming to the market at least until end of year 2008. I think the price would probably dropped back to the year 2000 level in many area. This means a property used to sold over 600K in the peak would probably go down half in value to 300K or even less. Whether you believe it or not, it's happening and can only get worst. If you're upside down already and has no equity in your house, be prepared to hold on your house for at least 5 more years. If you don't think you can Handel the payment for the next few years, call the lender now to work out a solution. Worst come to worst, be prepared and seek advice from CPA or attorney to plan for the foreclosure soon because price is going to drop even more down next few months. Whether you like it or not, be mentally and emotionally prepared to this greatest Market Fall in year 2008. See you at the bottom.

REO Auction After thought

Last week, I was busy going to the REO auction in the area I lived in. I went to the one hosted by REDC AND Hudson & Marshall. It was a great learning experience. The auction is very fast-paced and exciting, especially auctioneer speak so fast and make it more exciting. However, I didn't buy any property. The prices were a discount compared to the market price but it's not a discount that I hope for. I selected a few of the houses I'm interested to bid, and I went with my agent to see the property condition. After that, I make a note and determine the maxi um bid I'd like to bid for. Basically, I'm targeting to buy house that can generate positive cash flow for me with small down payment. The auction was very packed and price bid up quite dramatic compared to the starting bid price. I didn't end up getting the price I want so I didn't bid.
I talk with the official from the auction in the end and they said they're coming back in 6 months. I guess the market is continue to go down more with more bank owned properties popping up. I just need to continue to look for good deals and watch the market . This could be a very best opportunity to buy more houses in next few months or so.

Going to my 1st REO auction

In next couple day, there will be couple REO (bank owned property) auctions in the area I live in. It will be a new learning experience as I have never attended these kind of auciton before. I did some homework and check out some potential properties I 'm interested to bid. It will be quite exciting to see what the atmosphere and the final winning bid price compare to the market value. I will update all of you after this weekend to tell you how I did.

Scottrade Stop order service is Disappointing.

Few weeks ago, I started to get interested in HomeBuilder Stock (XHB). I place a stop order to buy the stock if it hit my preset price at 20 dollar. At that time, the stock was around 17 dollar. I put a order "good until cancel" Few days ago, the stock climb and finally it hit above my stop order. I was away from the computer in the whole day so I didn't check until late evening. Then, I found out my order is not executed! I was pretty upset because the closing price was already above 21 dollar, 1 dollar above my stop price. I was confused why my order is not executed. Next morning, I phone the branch and talk with the "broker" and ask for what happend. The guy give me some non-sense answer. I know the person I was talking to is new and don't even know very well what a stop order means. I then asked to talk to the branch manger. He put me on hold and he phone the market maker company and try to find out the reason why my order is not executed. After waiting, waiting and waiting, finally, he told me there was a "error" from the market maker yesterday and my order is not exeucted. To compenstate, they will buy the shares for me at $20.50. I then ask how you come up with $20.50, and he said that's the best they could do! Dudh! I was not very happy because I know if the stop order is executed right at the time when ASK above my stop price, it will become a market order And my price would be near 20 dollar. I have no way to track what price I could have got, so I couldn't do much but accept the price. I always thought Scottrade is a national brand with "exceptional customer servie", and they don't screw customers. Obviously, I was wrong and I have to consider switch to other reliable investment broker for future trades.

One of the single most important indicator for all Real Estate Investor

Real Estate prices in U.S has experienced a dramatic increase in price over the last five years. Many area see home price go up as much as double in mere five year time period. This is unprecedent. Whatever go up, must go down. I do believe there will be more price correction in the next year or two, especially states had the most gain, like California, Flordia & Navada. While in short run, these states will have more price drop. In long run, I'm all bullish in these "once hot spot." The reason is shown above. These are data I took from www.census.gov. Governement did a survey to project pouplation growth in U.S for the next 30 years (from 2000 to 2003). Real estate 's price in short run may go up or down, but in long run, it is ultimately deteremined by demand, or pouplation growth. The higher pouplation growth, the better chance price will appericate. (of course, these are just first glance, there are more factors come into play like property tax, living quality, restriction of building new house, etc) If you're looking to pick a state to invest in Real estate, study the data carefully and it will point you to the right state to focus your investment.

Time to own your primary residence.

With government being more and more aggressive in helping the economy from entering recession, fed rate has take a big cut again. I just check the interest rate for 30 yr fixed mortgage, the graph shows we're back to the 2005 level in terms of interest rate. This is lowest in the past 2 years. This is certainly a good news for home buyer NOW. If you have been waiting and thinking to own your primary residence, give it a serious thought NOW. With more inventory on the market, and interest rate being lower, it's definitely a great buyer market to own your primary residence.

Listen to the TREND, don't listen to your FRIEND

Do you remember when you first become interested in investing, who do you go to talk to to get advice? I bet most of us talk to the people around us, our friends. Friends will tell us a lot of opinion on the market. These are some common words we hear from our friend's mouth


"This is a great stock, look at it, 10% jump in price in few hours"


"This is a great time to buy, it just drop 20% over last few days"


"It can't go any lower"


"It can't continue to go up and up"


You know what I mean. Friend give a lot of judgement and it's dangerous if we listen to them. Especially when you first start out and you don't know any better. I remember, some of the terrible stock investment I ever have is because I listen to a friend who sounds a lot smarter than me. I follow my friend's "advice" and my money get burned out quickly. Instead, if we''re determined to become a serious investor and make a fortune, we should get our education in the right way. We have to study the market, it it moving up, down or side way, how it does in the past, what kind of pattern can you recognize, beside the price, what other data you should look at to increase your confidence level, etc? Listen to the trend you identity and follow it to capture your profit. If you make a wrong move, at least you learn something along the process and next time you know the mistake and you can learn to avoid it.

Advantage :partner with others to build wealth

After a day of hardworking 9 to 5, I know you must be getting tired to do anything else other than go home, relax and sleep. But as you probably should know by now, that 's not the way to build wealth. Sometimes, we're just tired, lazy, and lack of self-motivation. In fact, it's quite hard to do it alone. That's reason I suggest partnering with others. Find people who has similar desire as you to get ahead financially. Form a meeting with them on a regular basis, it can be every week or every other week. During the meeting, discuss what some thought you have about business, investing for long time but haven't done much activity. Your partner should share his or her thoughts with you. After every meeting, list out Action Items that need to be done by the next meeting. Then, consider the possibility partnering with them to do things you have thought about doing. There are many advantages of forming partner than working it out alone:
1) Action items are like your homework. You should get it done or your partner will be disappointed you don't do your assignment. In other words, you're accountable. You will be more motivated than if no one hold you accountable.
2) Two people will have more thought, ideas, creativity than one
3) If one of you is busy in some time because of job, the other partner should help so things are moving forward
4) Your idea, thinking, are checked and validated by your partners so your chance of getting it right should be higher than if you do it alone.
I 'm starting to partnering with few of my acquaintance this year to work on some investment together. It's exciting to meet and work with people who has similar desire like I do to build wealth. If you haven't done so, I suggest you look for people in your network and start meeting with them regularly to get things going and rolling. Good luck in year 2008.

Mr warren buffett's wisdom on investing

I've been reading a lot of book about how the greatest investor all time think and his philosophy on investing. It's really a great learning experience and I enjoy it so much. He has great vision and patient in stock game. One of the greatest lesson I learn from him and I think this will change my way of investing forever is followed " When everyone fears, you should be greedy. When everyone greedy, you should fear" This is powerful and straight to the point. Basically, Mr buffet always buy stock and invest when no one else does. People will laugh at him of buying stock which is out of favorite by most people. In other words, he wait for a crash of a paticular stock and he buys with both hands when price is selling at discount. He believes the stock's price is priced below its intrstic value and it's just a matter of time when others realize the value of the stock and start buying, and hence, price rise again. He is very patient, sometimes, he will hold on a stock for as long as five years to wait for the price become over value. Then he sells his holding to everyone who buy near or at the peak. He is a truly buy-and-hold master. I will combine his thinking into my stock selection system. The couple stock I've been watching are stock related to financial, real estate and home builder.

New year: time to think and plan BIG

2008 is few days from us. At the beginning of the year, I like to think and plan on the goals I want to accomplish in the new year. Chances are that you're just like me, surrounded by people who has small dream, small goal, and little to no desire to get ahead their financial life. People who are "used to" living day by day , year by year, with no exciting dream to talk about. It's good idea to be alone and think clearly what are some BIG things you want to accomplish in the new year. Or else, next year will be same as this year. Think and plan on it. Write it down and be specific on your goals. The more specific it is, the bigger chance it will get done. These are some of the major goal I set to reach in year 2008:
*Buy Apartment building with over 40 units with over 5 thousands dollar cash flow.
*Develop a winning stock trading system allow me over 50% of profit with loss no more than 10%
*Find equity partner to invest with me for my properties.
What about yours?

When Cap Rate > Interest Rate...

Cap Rate is defined as : Net operating income / property price. Net operating income measures how much rent is left after all the related expense, such as insurance, taxes, maintainance and operating cost. For example, if the property values is $100,000, annual gross rental income is $10,000, total operating expense is 3000. Then your cap rate will be 7%. Cap rate is very useful because you can tell if the property going to cashflow postive or not immediately. Say, you're doing 100% financing with 7% interest rate. Then you're breaking even in the above example. If the interest rate is 6%, then you will have net 1% cashflow as your profit every year. This mean you can net 100,000 X 1% = 1000 dollar every year.

Moving Average

Using moving average is an helpful way to determine the trend of the market. The popular technique is to using a fast moving average , say 10 days, and a slow moving average, say 30 days, and plot these curves on top of the price chart. Whenever the fast moving average cross the slow moving average, it indicates a trend is developing. If 10 days MA cross 30 days MA, this means prices is on the rise. I found that using 2 moving average is helpful to determine the trend of the market. But there could be a lot of WHIPSAW, (MA cross above and below frequently), it could be quite confusing. Therefore, I will use one more slower moving average to helps eliminate whipsaw. A 50 days MA is useful in combination 10 and 30 days. Thus, I'll wait MA 10 cross MA 30 AND MA50 as a true confirmation of the trend. It still not perfect, but at least it can eliminate some whipsaw compare using only just two moving average.

HOPE now!? Worry later....

On Friday, President Bush push out a government assisted program to freeze mortgage rate for the sub prime borrowers such that their initial teaser rate maintain for up to 5 years without worrying resetting to a higher interest rate. The purpose is to help these sub prime borrowers continue able to afford the mortgage payment. This should help reduce the number foreclosed proprieties due to miss-payment and bank take over ownerships. Overall, it should help stabilize the tanking real estate market all across the U.S. However, these are some of the concerns I have:
1)Governement interference is not supposed to happen in a total capitialist market. Price should be determined by supply and demand. Thus, this program destory the basic element of a free market
2)It encourage people with poor credit / income get into the market in future because they expect governement will bail them out again if they face problem with their payment
3)Hope now, worry later? It's true that sub prime borrowers can temporaily get a break without worry their payment increase now. How about in 3 or 5 years, when this program finish their freezing period, these very same people will have to face the mortgage payment problem in that time? Of course, we all hope prices of real estate will rise in next few years, so these people could refinance it again in few years. What if the market is still weak? What happen to them? Is governemnt going to bail them out one more time ?
It's still too early to see the effect of this HOPE program, we'll have to continue to keep track of real estate market in next few months to years to conclude its effectivness . What's your view?

Foreclosure.com

As you should probably know, the number of foreclosure in many area of the country has experienced a significant increase in the past 6 months. There are more people behind or can't afford the payment and walk away from the mortgage obligation. House prices continue to fall as a result. This is quite an exciting time for buyer. I've been looking for foreclosure listing last several months. I rely the resources from Internet. While there are many website program out there charge you a monthly fees for seeing the listing, I found a site that is pretty informative in providing the foreclosure listing info without a charge. Foreclosure.com. It covers all the 50 states in U.S. While the address is not complete , (it only show the street name, city, and state), it is useful enough as a first step. After I review the listing, I 'll call my agent in the area I'm interested invested in. I give them the street name and ask him/her to do more research for me. Check it out and let me know how you like the site?

TDAmeritrade Backtest strategy feature

Few weeks ago, I have a friend told me the online broker TDAmeritrade. It is discount broker like scottrade, etrade, that charge discount transaction fees compare to traditional broker. The interesting feature that attract me is the back test strategy they provide to the user. Basically, one can enter a set of trading rule (entry and exit condition) based on certain technical indicator and test it with the real historic data of the stock you're interested. It let you see how much money you make or lose based on your input trading rule. I open an account with them few days ago and now is busy testing the trade idea I've had in the past. It is quite an impressive tool so far. I'll update with you when I find a formula that I like and have consistent winning result.

Buy low , refinance high!

From the last post "25 cent for a dollar", I blog some of my friends were able to get a super bargain discount price from Bank owned property. It 's very lucrative business and I decide to do a similar deal in the area I'm interested on. I'm going to make numerous offers on the area I'm interested on R.E.O properties. I will start out with 75% discount as my initial offer price. I expect there will be many rejections before I can nail down one deal. But it will all worth my effort. After I acquire the property, I will refinancing it with the market value, so I can pull out equity loan from the house and roll it over to next deal. This is going to be very exciting. I'll update my progress to you from time to time.

25 cent for a dollar

Recently, I met a friend sharing with me a very inspiring story. I thought that was very interesting and I want to share this with you. Recently, one of the area he lives nearby has tremendous amount of R.E.O available in market. R.E.O stands for Real Estate Owned. These are the property that the bank bought back from the auction when the previous owner fails to pay back the mortgage obligation and bank foreclosure upon it. Because bank is not in real estate business, these properties holding bring no financial benefit from the bank point of view. The bank would like to GET RID of these R.E.O houses as soon as they can. First, they list the property at the market price. However, with recent slowdown in real estate market, houses become harder to sell. The Bank starts to accumulate more of these R.E.O as more foreclosure pop in the market. What my friend did is that he focus in these type of R.E.O. He use a creative criteria to narrow down the properties of interests and he is able to get a bargain deal with 25cent for a dollar. This is his technique
1)R.E.O
2)Has been on market for more than 100 days
3)Asking price 10% below fair market value
After he narrow down the houses into these criteria with the area he is interested, he make an all cash offer with 25% of the asking price. After many many rejections, he finally got one bank accept his deal. It's amazing how cheap he can purchase the property from R.E.O.

Stock is NOT for LONG Term

"This stock is for long run" We usually hear this comment from people when they bought a stock and saw the price drop, drop and drop. Seeing the money draining day, after day, after day. Instead of selling the stock and cut the loss early, people will say "That's ok, this stock is for long run, it will come up" This is a losing mentality. Why would a person want to hold the stock for long time? What's the reason you want to buy stock at first place? The simple answer is: You want the stock price go higher your purchase price so you can profit the difference. If a stock does not do that, why'd you still holding it and HOPE for the long run? Stock is not like real estate, when a particular stock go down in value, it's not necessarily come back up. There are zillions of reasons why stock price go down. And if you don't understand why price go down, you wouldn't understand why stock price will go up neither. So, the smarter things to do is : Cut your loss immediately, preferably less than 10%, so you can limit it from serious downfall of the stock price when you see the trend is turning against your expectation.