James Yoakum

After a recent tragedy in which two people fell from a Center City fire-escape the city's Department of Licenses and Inspections (L&I) is feeling pressure to prevent the same thing from happening again. They announced today that they will be conducting spot-checks on multifamily buildings to look for major code violations and safety hazards. This should be a great incentive for multifamily property owners to take better care of their properties and hopefully will make Philadelphia's tenants safer and happier.

Given the huge number of dilapidated properties in Philadelphia, I think the ideal solution would be for L&I to conduct regular, thorough property inspections of all multifamily properties in the city and strictly enforce safety codes. While this would obviously be a very expensive endeavor for both L&I and property owners, it could pay for itself if L&I sold 'property condition reports' to potential tenants or charged landlords for an 'L&I Seal of Approval' that would allow them to charge a rent premium.

This article from RealtyTrac profiles five investors in different parts of the country who are still having success at short-term investing or flipping. Flipping was hugely popular during the real estate boom of 2002-2007, and many people who got the timing right made gobs of money by buying properties cheap, fixing them up a little, and then reselling them in a matter of months (or sometimes just a few weeks).

For the most part the bursting of the real estate bubble has forced flippers to switch to a more conservative buy-and-hold strategy of real estate investing. Not because there aren't great deals out there, but because the resale market is unpredictable to the point of making flipping an extremely risky strategy if the long-term hold numbers don't give you a "Plan B" on every deal. The five investors profiled in this article have found ways to make flipping work even in the current market though, and a few of the common threads running through their stories are:

1. In depth, up-to-the-minute knowledge of their local real estate market. They know exactly what they can sell a property for post-rehab, and therefore what they can afford to pay.

2. An established network of professional partners (attorneys, real estate agents, contractors, bankers) to keep their transactions on track and prevent major losses due to snags in the process.

3. Creativity to constantly discover new ways to profit as the market dynamics evolve.

4. The readily available capital to make cash offers on properties, close quickly, complete high-quality renovations, and structure creative financing deals for buyers.

5. All of these investors are targeting their sales to the largest part of the market - right now first-time home-buyers looking for quality, affordable housing in convenient locations. Selling to this broad market segment removes much of the risk associated with trying to flip higher-end properties that are not actively trading in most markets right now.

Even following these rules, flipping is a very risky strategy, but as with any investment strategy, the surest way to reduce risk is to increase your knowledge-level.

If you need to sell your home, but have been waiting for the market to recover now may be a good time to take a shot at selling - especially if your home is one that would appeal to first-time buyers rushing to close deals before the November 30th expiration of the first-time buyer tax credit. You're still going to have to price your home very competitively to sell it in today's market, but if you anticipate selling in the next 12-18 months, the time between now and November may represent a brief window where you can earn a premium thanks to the tax credit. The message is also clear for investors who may be working on rehab projects that will appeal to first-time buyers: finish that rehab ASAP and get it on the market now so that buyers can share their tax credit with you in the form of a higher sales price!

Potential home sellers shouldn't think that only buyers can benefit from the tax credit - use it to get the best possible price for your home and take advantage of the great deals still out there for 'move-up' properties.

According to Senate Majority Leader Harry Reid of Nevada an extension of the $8,000 first-time-buyer tax credit is something that, politically anyway, can (and will?) be done. Additionally, by 'extension' he refers to extending the program beyond its current expiration date of November 30th, and extending the tax credit to all hombuyers, not just first timers.

While an extension of the tax-credit would be great news for buyers who are just now entering the market and could use more time to shop around, an extension also prolongs the unnatural state present in the current housing market. Currently, sales are being artificially propped-up by the tax-credit, especially in the neighborhoods and price-ranges favored by first-time buyers. If the credit is expanded to all buyers, this artificial inflation of sales volumes and prices will quickly spread to other areas and price ranges, and will persist as long as the program lasts. The problem with this is that anyone with the slightest medium or long-term perspective will know that as soon as the tax-credit ends, the pool of buyers will shrink and prices and sales volumes will drop. Maybe by then the rest of the economy will have recovered enough to pick up housing's slack, but why not just take the pain as soon as possible and build everything back up in sync?

The program was a needed shot-in-the-arm for a housing market that was dominated by fear and over-caution a year ago, but it has served it's purpose of getting buyers back in the market, and, unless Congress wants to make it permanent, it should be allowed to expired on schedule so that sales levels can quickly reach a true market equilibrium and start to build from a firm foundation based on pure supply and demand for housing. Until the government proves that it is acting decisively, predictably and consistently in regards to the housing crisis, long-term thinkers will continue to avoid the housing market - waiting for a true, non-government-influenced bottom.

According to the National Association of Realtors home existing sales shot up substantially in July - by 7.2% over June. This was the largest month-over-month gain since the index began in 1999. This also sets a record by being the first time since November 2005 that home sales volume is up year-over-year, establishing a solid trend and indicating that this could be more than just a random increase month-over-month.

While home sales volumes are up, median prices continue to fall nationally, down 15.1% year-over-year and 2% from June to July. This indicates that most of the increase in sales volume continues to be at the lower end - comprised of first-time-buyers, bargain hunters, and investors.

In Philadelphia, sales volume rose 3% from June to July but is down slightly year over year, while the average sales price is down by 10-11% on a month-over-month and year-over-year basis. With a smaller sample size though these local figures are much more volatile, and vary greatly from neighborhood to neighborhood.

While a bottom in real estate may be close-at-hand, it's important to realize that there are still many risks in today's market, and you can still make mistakes and lose money even when buying at the bottom. We haven't reached a point (and probably won't) where every property on the market is a bargain - you still have to make you're own deals by negotiation and careful planning. It's more important than ever to do your homework and work with an experienced agent so that you can catch the wave at the bottom and ride it up instead of watching others pass you by.