Ludovic Kohler

This is not a secrete in the world of making money, you want to buy low and sell high. Stocks, bonds, commodities or even real estate, it is all the same. The difference is with real estate, cycles can take time. Often the cycles run in years and are evaluated and studied by the decade. That is where we are now. We are in a property downturn cycle of a gigantic proportion.

This downturn is so large and has such a wide scale impact that major cities are even feeling the pain. Some locations are hit so hard that they will never recover, or if they do they will have a totally different look than what they had 10 years ago. Flint, Michigan is just an example. Nothing against the city at all and Flint is really a nice place to live, but Flint is gone and I don’t think there is any chance of it ever returning.

The jobs are gone, housing has collapsed, the infrastructure is deteriorating and there is no foreseeable solution in the near or far future. No business will be returning there any time soon unless the local government gets proactive and starts some program to attract new, non-automotive based manufacturing or businesses.

This is definitely not the place to invest in real estate unless you get a super great deal or you have some inside information about some company that will be moving into town. This is just one of those places that has “dried up”.

Southern California on the other hand is the exact opposite. The economy in California is so diverse there is no way to stifle it. Everything from shipping, transportation, IT, all types of manufacturing and even produce, farming and agriculture can be found in almost every single county and city in the State of California in every location from the Oregon to the Mexican border.

Even the California wine industry is a world leading market that rivals the best regions of France. There are very few products available that are not produced, designed, manufactured or available in some part of California.

This is what makes the housing market in all parts of the state so resilient and why even though dips in prices are often extreme the recoveries are even more extreme. Housing prices are not always up in California, and there is not one person that will say they are, but when the cycles turn the prices will exceed previous highs in 95% of the areas in the state.

The same goes for most of the major cities in the “sun belt” region of America. From California to Florida and everywhere in between (especially the costal areas with major ports and shipping).

If the location has a robust economy then it does not matter how bad the housing market gets hit, it will recover to a level higher that it was at before the initial downturn. It is just a matter of time.

If you are entering the housing market after other people have taken the hit on a downturn then you are buying at the right time, even if the market drops down another 5% or even 10%. As long as you plan on holding the property for a length of time to weather the storm you will be making money.

The types of people that benefit from this the most are first time home buyers that will hold their home for 5 to 7 years or investors that are buying residential properties to rent with the intention to hold the properties for 5 to 7 years. This will give the buyer / investor the time required for the property to recover its equity while also appreciating in value. In the case of the rental investor they also enjoy the added benefit of the income to offset the cost of the property.

Many people that have the financial ability to buy rental properties during a major downturn like we have experienced over the last few years have put themselves in a position to make earnings that are so significant they change the status of families for generations. A single property has the ability to not only recover hundreds of thousands of dollars in equity over a few short years, this same property demands rents in the thousands of dollars per month which will significantly eliminate the mortgage and further increase the investors equity.

If you have the ability and skill to acquire 5 to 10 properties during a devastating downturn they could easily and realistically materialize into millions of dollars of hard cash within a few years.

On the other hand, people that have the financial ability to purchase their dream home during a major downturn in prices will also create a financial environment where they could easily realize hundreds of thousands of dollars over a few (up to 10) years. It is always better to buy at the bottom and reap the benefit from the appreciation in prices.

Of course, when it comes to real estate, all the best deals are in the existing home market. In a down market you will still find some really good deals on new construction, but you will be buying at top dollar from very sophisticated sellers. The best deals are found in the existing home market and foreclosures.

Look around for a home that meets or exceeds your needs and imagine what that home will be like (or what it will be worth) in 7 years. Also evaluate what that home was worth in 2006 (if it was built then) to get a feel fro what you should expect as a minimum recovery price. When you put all the factors together then you will get a pretty good idea of what you should be able to expect from your investment.

One of the worst financially impacted areas of America to feel the effects of the real estate crisis is California and southern California specifically. Why would there be any reason to buy in this specific market if it has been so devastated over the last four years.

That is it, you have basically answered you own question with the question. The whole south of the United States has been devastated by the housing crisis, but the areas where overbuilding and jobs losses were more prevalent got hit the worst (California, Nevada, Arizona, Texas and Florida). The northern manufacturing states like Michigan and Pennsylvania got hit hard too, but they will not recover very soon and are not the best locations for investing in real estate yet, although that can change at any time. If you are interested in the northern areas, keep a close eye on the news and job recovery statistics.

Because the housing market has taken such a big hit over the last four to five years that means that prices are at decade lows for existing homes and the full retail price of new construction is also at decade lows (although square foot on square foot you will pay more for a new construction home).

If you have any handyman type of skills you can even get better prices on existing homes that are slightly and lightly neglected while they have been sitting in a lenders foreclosure inventory or while the owner has been challenged with trying to sell the property.

#1 The first reason why property in Los Angeles County is a good deal now, is because it is financially a good deal now. On average the homes in Los Angeles county have lost 26% of their value over the last 5 years. This is across the board with the more upscale properties to the north and in the hills losing even more. These losses equate to profits for the next person that will be the owner of any of these properties. Just because a property has lost 25% to even as much as 50% of its equity does not mean the real and true value of the property has evaporated, in California the prices normally recover eventually. This is not the same for all parts of America, but it is true for California.

#2 Population trends is one of the strongest factors that effect home prices. This is a factor that is directly associated with housing availability. It is just simple math, more people, more housing needed. More housing needed the higher the demand and the higher the price per unit. California and specifically Los Angeles county is a location with a net increase of population. Even though the housing market is not seeing a turn around this very minute, it is only a matter of time until demand outpaces the supply.

#3 Employment trends also have a major impact on housing demand and also prices. Los Angeles county is one of the few regions in America that have already started to show signs of economic recovery in all sector of the economy from manufacturing to construction. The population is increasing at a very steady rate and unemployment is dropping at also a steady rate. People are going to California for a reason and that reason is pretty obvious if you take the time to look at the big picture.

When you take the time to consider all that the State has to offer and you also take the time to imagine and consider why so many people are moving to, returning to or relocating to California then you can see that this is a location that many tens of thousands of people see as a location that holds promise for their futures and the futures of their families.

They are willing to sell the farm and move to Burbank or Hollywood. They see that the future is bright in sunny California. The new governor has pledged to balance the State budget to the tune of $25 Billion dollars within only 18 months. That is a huge undertaking in its own right. Things look really good for people in and people considering relocating or repatriating to California.

I cannot blame any one of them for making the move and I could not with any conscience offer an alternative that is better.

This is a great example of how popular California is, 99% of Americans only know two zip codes, the zip code where they currently live and a little pocket of people that live in Beverly Hills…. 90210.

When you consider how severely the residential retail housing prices have dropped, the mass exodus of people from California over the last 5 years, the influx of people returning to California because of the recovery in employment and the overall economic “big picture” and you throw them all in a blender and hit puree, the thin red paste you pour out will spell financial success over the next few years if you have the ability to buy a residential property within the first half of this year.

The key to your success is to either have an intimate understanding of the market you are interested in (Burbank is not the same as Hollywood or Encino) or to find a Realtor that is extremely and intimately familiar with your area of choice.

The downturn in the housing market has not only produced some of the best real estate values in years, it has also produced some of the best Realtors of our life time and you would be foolish to not take advantage of their skills, experience and expertise.

As many buyers in the Silver Lake area are well aware, the process for finalizing a real estate purchase is a lot more complicated than it was a few years ago. Before the California real estate bubble burst and America entered a severe housing and credit crisis lenders were handing out money without even scrutinizing people’s credit or income. That was good for some borrowers who got money fast and easy. But it also meant that many home buyers in Silver Lake wound up with toxic mortgages, unmanageable monthly payments and sky high adjustable rate loans that would sometimes double in size without warning.

 

So although it is a little harder to qualify for a mortgage now than it used to be, it is also a great deal harder for mortgage lenders to take advantage of you and rip you off with inappropriate predatory lending practices. In fact it is now relatively easy to get fantastic rates on steady, predictable, no-nonsense fixed rate mortgage amortized over either 15 or 30 years and to enjoy some of the lowest interest rates in history.

 

The trick to snagging these great loans and user-friendly terms is to plan ahead and prepare your financial documents before applying for a loan. Here are five easy things you can do to prepare for a successful loan application:

 

1.

 

Create a file in a safe place, and begin to add documents to   it such as copies of your last two year’s worth of IRS tax returns. Continue adding to the file as you gather and organize your paperwork.

 

2.

 

Get a copy of credit report. You can access it for free once per year or pay a small fee of about $25 to order the report if you have already used your annual freebie.

 

3.

 

Study the report for errors and start getting any that you discover corrected now so that by the time you apply for your loan they will be cleared up and resolved.

 

4.

 

Pay off outstanding credit card balances, but don’t cancel those cards. Just put them away and try not to use them.

 

5.

 

Get copies of recent pay stubs and bank statements and any loans you are paying – like student loans, auto loans, or home equity loans. Save these in your file.

 

Having all these documents in one convenient place and working ahead of time to improve your credit score will do wonders to smooth out the mortgage application process.

 

That not only makes it easier for your Silver Lake lender to process the application but it can ensure that you get the best loan at the best price, and in the shortest amount of time.

 

To learn more about ways to shop around for Silver Lake loans consult a local real estate agent. Experienced agents can guide you through the Silver Lake home buying and loan application process so that your chances of getting the mortgage you want are greatly enhanced and the process is less stressful and more personally and financially rewarding.

If you are buying a home in Glendale in 2011 then you will most likely need to also secure an affordably priced mortgage loan. Here are three tips to help you get mortgage financing at discounted rates this year.

#1

Do you qualify for a VA loan?

First of all, if you are a military veteran or are an active member of the armed services you should look into the possibility of taking out a VA loan. These loans are not made by the Veterans Administration, they are made by ordinary banks and mortgage lenders. But the VA insures the loans against potential default so that lenders can provide them to you at more attractive prices with more user-friendly terms. If you qualify for a VA loan you can get a great mortgage at an exceptionally good price that is not available to non-military consumers.

#2

Consider Using an FHA Loan

Even if you are not a vet, you can benefit from similar programs offered by the Federal Housing Administration (FHA). These FHA-guaranteed loans are also made by traditional banks and mortgage companies, but they offer exceptional terms and interest rates. You can get a great FHA loan for a smaller down payment, for example, or one that includes much lower closing costs. Ask your Realtor or lender for more details, or contact your local Glendale HUD or FHA office for more information.

#3

Shop for Your Loan through a Mortgage Broker

No matter what kind of loan you need or what kind of property you plan to buy, you should check out local Glendale mortgage brokers. These lenders don’t just represent one mortgage company but instead they offer loans through an entire network of competing lenders. That means they can help get you a more competitively priced mortgage and show you comparisons of various terms and rates. You will probably pay a fee to the mortgage broker for his or her services, but this should be offset by the savings they can generate on your behalf.

To learn more about how to select the best loan or broker and what kinds of questions to ask to ensure they are right for you, discuss the issue with your Realtor. Or look online for articles about selecting mortgage brokers and weighing the pros and cons of various loan products in today’s market.

If you are investing in real estate as a profession or if you realize that the primary residence you purchase is an investment, you should consider Burbank. This city has everything to offer to everyone, but the potential for growth is the most appealing to someone in the market for investing in residential real estate.

Burbank has a very strong and growing economy and population is steadily increasing with that demand. With the entertainment industry jobs being created and the need for writers and animators this will be one of the most solid moving property markets in Los Angeles county.

Single family residents in the 3 and 4 bedroom range are already starting to show solid increases in sales volume and the reason is because of the general sentiment that the economy is turning around. Whether or not is, that is a question many people are asking, but people in Burbank feel it is.

With the announcement last week by the VP of Freddie Mac that the national real estate market is expected to “bottom out by spring” and the sales volume increases in the 3 and 4 bedroom homes this city appears to be the one that will be leading the Los Angeles area back to recovery.

The entertainment industry is normally the last industry to fall during an economic downturn and it is the first one to bounce back at the first sign of recovery and everyone knows Burbank is the media capital of the world. Everything, well everything important is located there (from NBC to the Cartoon Network).

Many of the cities both north and west of Los Angeles are starting to either show the signs of recovery or the tension is building in everyone in anticipation of it and the Freddie Mac statement may be just what they are looking for. The potential for growth in all these cities is very strong because these were some of the harder hit areas for residential real estate and therefore a return to pre downturn values will mathematically produce a larger potential profit.

When you feel that the economy has taken a turn for the better or the signs of the recovery of cities and suburbs north and west of Los Angeles is inevitable then it is time to start finding a Realtor to help you out. Every one of the cities are unique and West Hollywood is not the same as Encino. If you are considering Burbank then get a specialist in Burbank and the surrounding area, the same would go for Glendale, Pasadena or Beverly Hills. You don’t need a generic Los Angeles based Realtor, you need someone that is a specialist in your area of choice.

When I am talking about a specialist I don’t mean someone that knows all the shortcuts and detours around the area, I am talking about someone solid that has been able to work in the specific market you are interested in during the downturn. The Realtor who has not only survived it, but has also thrived in it. This is the proof that they know the town and the town knows them.

If your primary purpose for investing in one of these areas for rental income then Burbank shows some of the best statistics for that market as the none homeowner population is steadily increasing (primarily due to the entertainment industry jobs) and the population is expected to increase by almost 10,000 people within the next 4 years.

There is not very many bad things you can find when you are considering living in and investing in Burbank. You will need to take the time to find the right property whether you are relocating or just investing but many of the indicators are already showing signs of economic life coming back into the city that brings us all the shows that we love to watch.