John Huber

The Senate voted 85-2 in favor of extending the tax credit for first time homebuyers. The overwhelming support probably indicates that the president will likely sign the extension very soon, giving hope to all of those first time homebuyers who couldn't quite make the 11/30/09 deadline. Here's the need to know info on the new bill:

First time homebuyers will receive $8,000 as a pure credit (it does not need to be paid back) if they contract on a house by 4/30/09. As of right now (I will update you on any changes), the bill allows you to get under contract by 4/30/09 and close by 6/30/09. So, if you are a first time homebuyer, I would recommend aiming for an April closing date (at the latest) so you don't have to rush at the last minute.

There is one other interesting aspect of the new bill. There is a $6500 credit for "move up" buyers. The bill stipulates that anyone who has lived in their home for 5 years will be eligible to take advantage of this $6500 if they buy a new primary residence.

I'll have more details as they develop... Call me or email me with questions.

The Raleigh real estate market will see some benefit to this bill as there continues to be an excess inventory of foreclosure properties available. About half of the properties that are selling right now are either short sale or REO (bank owned foreclosures). This tax credit will allow the market to absorb some of this inventory, as many first time homebuyers choose to buy foreclosures. Most of the national market continues to see signs of improvement as well. I am excited about the prospect of real estate in 2010, as it remains a buyers market and people who take advantage of buying property now, will reap huge rewards when the cycle shifts back toward a seller's market. I anticipate the Raleigh real estate market to lead the way in many categories during the next few years, especially certain locations such as downtown Raleigh real estate, and North Raleigh real estate.

Real estate has been all over the news for the past two years. First it was the real estate bubble in 2006 and early 2007, then the word "subprime" became almost a household term (and it definitely became a household term for Realtors and mortgage brokers), then real estate began slipping nationwide, and then the market crashed last September, credit dried up, foreclosures doubled and even tripled in some cities, and the financial world markets went into a tailspin. What a fun ride it has been!!

Luckily, for those of us who live in Raleigh and make a living working with Raleigh real estate, our lives have been much less affected than some of our fellow professionals in Florida, Nevada, California, and the Northeast. Downtown Raleigh real estate and North Raleigh real estate remain two market places that have remained very stable and numerous neighborhoods have actually appreciated. Cameron Village, for instance, has seen it's median home price appreciate 8.1%! Most people don't believe that... either trust me, or look it up, it's true! Of course, there are certain neighborhoods in our downtown Raleigh real estate market that have gone down in value as well, like certain condo projects or certain new construction neighborhoods where supply vastly outweighs demand.... but me being the optimist that I am makes me want to focus on the positive. Also, by understanding these statistics and trends, I'm better able to educate my clients on the Raleigh real estate markets so that they can make an informed decision on the home purchase or investment.

But amidst all of the recent foreclosure chaos, there has been an interesting phenonenom occuring. Banks are so backed up with foreclosures that they are too busy to grant requests for loan modifications to borrowers who are currently paying their mortgages on time (those select few)... Many borrowers need to refinance, or modify, their loan into a fixed rate that they can afford so they don't go into foreclosure. So these "loan mods" (mortgage lingo) are in many cases granted first to the borrowers who are in default. So here is the interesting trend that is beginning to occur: Many borrowers around the country are "under water" meaning their mortgage balance is more than the house is worth. These borrowers can afford their payments, but they desire to complete this loan modification. But the only way they can do this is to quit paying their mortgage for a few months. This way, they have the attention of their bank, and the bank is forced to either modify the loan, or take back yet another property into foreclosure. Given the two choices, the bank will likely modify the loan because they know that the foreclosure process is expensive, and if it forecloses they will take back an asset (the house) that will be worth less than the new balance on the new loan. So they modify the borrowers loan and the borrower gets to lower his payment and/or balance in some cases.

The question that was brought up by CNBC on this video is this: Is intentionally quitting on your mortgage, even when you can still afford it, immoral? In other words, many borrowers truly can't pay... they've lost their jobs, etc... and they have to foreclose. But there are certain people, like the investor in this video that stop paying their mortgage in order to get some negotiating power with his bank so he can lower his payment. Take a look....

http://www.cnbc.com/id/15840232?video=1182586806&play=1 (I couldn't figure out how to embed the CNBC video so this link will take you to CNBC's site)

Again, many of these people are in locations where home prices have dropped 10%, 20%, or even more. Luckily, we live in an area where demand for Raleigh real estate has been stable and the supply has not grown completely out of control. Nevertheless, it's still a buyers market out there and will be for a while to come. Rates are low, there's still time to collect the $8000 if you are a first time buyer, and prices are very affordable.... what a great combination!

John Huber works with downtown Raleigh real estate, North Raleigh real estate, Raleigh investment real estate and other surrounding areas of Wake and Johnston County. He studies statistics, knows the neighborhood trends, and helps his buyers and investors make good decisions and helps sellers maximize their profits. He also works with other real estate professionals to help increase their residual income.

One of the things I love about the real estate business is the ability to watch and help people create passive income. Passive income, or residual income, is a form of income that comes from sources such as investments or assets that you own. Passive income, by definition, is income that is unearned. The great thing about passive real estate income is that your assets that produce that income can appreciate in value.

So if you choose an asset class such as real estate for an investment, you have the opportunity to create passive income, collect tax benefits, and also reap the benefits of future appreciation.

There are many different opportunities to break into the real estate field... one of them being becoming a Realtor. Getting involved with selling real estate can give you an opportunity to work with other investors and "learn the ropes" while making money selling to save for investments.

In addition to selling real estate, there are some companies that allow you to create a second income stream. Exit Realty, my company, allows you to create a passive income stream from introducing new individuals into the company. This is not MLM, but this is a single level residual that allows you to collect bonuses paid from Exit Realty Internation. For more info, please visit my Exit Realty Blog.

This is an opportunity to create a passive income by adding leverage to your sales business... and in the meantime you can begin to invest your profits back into investment real estate to create even more passive income. This is one of the topics that I will expand on in future posts.

Thanks to a large marketing effort by the National Association of Realtors, most everyone is aware that if you are a first time home buyer (or have not owned in the last three years), there is an $8000 pay day waiting for you in the form of a tax credit if you buy a house this year. This is a complete gift from the federal government... it does not need to be paid back. The government giving you back some of the money you've paid in taxes?? How often does this happen?? Not often.

In fact, this might be the only time we see this type of credit. With the national deficit rapidly expanding and with the out of control spending that we are witnessing, the US will have plenty of obligations to meet (namely repaying China), and those obligations won't go away anytime soon (our kids and grand kids will not be thanking us). We have gone from the world's biggest lender to the world's biggest borrower and we (as a nation) do not have enough money coming in to repay our debts. One way you can personally hedge yourself against rampant inflation (a likely outcome given our current policies) is to buy and hold real estate. Real estate is a hard asset that has real, intrinsic value. This means that as the value of the dollar declines, assets that are measured in dollars like gold, oil, and real estate tend to appreciate. If you hold real estate over the long term, you will be better off than keeping your money in a bank or CD (or worse, paying someone else's mortgage in the form of rent!)... Savings accounts will likely fall short of inflation which means that the more you put in the bank, the more your buying power will deteriorate over time.

I could continue talking about my opinion on government spending, but I'll save the rest of my thoughts for a later post... the point I want to make is that this $8000 tax credit may not be extended and this could be the only time that you will be able to take advantage of it. The credit runs out on 12/1/09 (unless legislation passes to extend it). This means that if you are thinking of taking advantage of this credit, you have less than three months to find a home, get it under contract and close. Here in the Raleigh real estate market, you will need to write a contract on a home by mid October if you would like to close by the end of November. Please take advantage of this credit! If you have any questions on the Raleigh real estate market, or Raleigh real estate investing, please feel free to contact me.

John Huber works in the Raleigh real estate market, and he specializes in downtown Raleigh real estate, North Raleigh real estate, and Raleigh Investment Property.

We've seen 5 consecutive months of increasing home sales and we are approaching the point where the year over year decline has been the smallest in three years. Many other indicators suggest that the economy is finally emerging from one of the deepest recessions in decades. So what does that mean for the real estate market?

Well, it depends on where you are located. If you live in certain areas that have been hit the hardest, you still have to deal with excess inventory and foreclosures that seem never ending. This will keep the supply of homes on the market high which will continue to challenge the prices. However, if you can find property that provides good cash flow and you have a longer time horizon, you will be able to capitalize on many of these opportunites.

I have a friend who just purchases two single family homes in Florida for $55,000. These properties sold for nearly $200,000 in 2005! They are only a few years old and he rents them both for $850 per month. If he put down 20% on both ($11,000 each), his mortgage would be around $400 per month including taxes and insurance. That means he is making around $400 per month on each property (give or take depending on expenses). That is around $4800 per year, and $9600 total per year from both properties from a $22,000 investment. This represents a $43% cash on cash return (the return on his initial $22,000 investment). By the way, this is just the cash on cash return he receives. His properties could stay valued at $55,000 and he still receives that huge cash return every year!

Now, his properties will likely appreciate modestly over time. So let's say that the market will average a modest 3% return (pretty safe bet considering inflation and the fact that his area has gone down dramatically in the last two years). Adding the leverage he gets from using the banks money for 80% of the purchase, the 3% apprecation of the property means that his 20% investment appreciates by 15%. Add that to the 43% and you get a return of 58%! Incredible returns from a modest pair of single family homes. This does not include the tax benefits my friend will receive. (And they are quite large because he has a very high income from being a Realtor). I will go into those benefits on a different post.

Suffice it to say, even in the worst areas, it looks like it is shaping up to be an outstanding time to invest in real estate. Where I live in North Carolina, it looks like a great time as well because here the market fundamentals are even stronger and while the prices may not look as cheap compared to other locations, the economy and the job growth is very strong and growing, which provides for a great opportunity to invest in real estate.

So go out there and start making some money!