On House Flipping

Many investors have been buying up short sales and REO properties after the 2008 financial meltdown.  Some investors are holding on the real estate for long term investment.  However, we’ve also seen more and more houses that had been bought, fixed up or rebuilt and sold shortly for relatively high profits.  This is called house flipping (purchasing a revenue-generating asset and quickly reselling it for profit, according to Wikipedia).

Typically houses that require some work would attract less buyers.  But for those into house flipping, the worse the condition of the property, the better buy it is.  Many of them have made so much profit that even some of the movie stars are into house flipping in a glamorous style.  Just check out the photos and the following article from Los Angeles Times:

http://www.latimes.com/la-fi-0824-celebrity-house-flipping-pictures,0,5290510.photogallery

http://articles.latimes.com/2013/aug/24/business/la-fi-celebrity-house-flipping-20130824

Sometimes I wish I could have talked my clients into the understanding that you can only change the conditions of the house, but not the location.  If time and money allow, people can always remodel or even rebuild a house.  See, some famous movie stars are doing that.

Margin loans and Reverse Mortgages

Margin loans and Reverse mortgages are two topics I have found interesting and would like to share some information with you.

Margin loans

Margin loans are loans backed by buyer’s investments, typically not more than 50% of the portfolio’s value.  In this hot real estate market with high competition from cash buyers, many buyers have found margin loans a great tool.  The advantages using margin loans are no closing costs, no prepayment penalty, no appraisal, tax benefits and etc.  There is a downside: a maintenance margin.  Please go to the following link to read the details.

http://online.wsj.com/article/SB10001424127887323936404578581991623331764.html

Reverse mortgages

What I found remarkable about reverse mortgages is the statistics:” nearly 1 in 10 federally backed reverse mortgages is in default” according to this article,

latimes.com/business/realestate/la-fi-harney-20130721,0,111605.story

The horror of reverse mortgage is well illustrated in the case of Havemeyer of New York against OneWest (whose subsidiary Financial Freedom Acquisition owns the reverse mortgage note).  A mortgage with 9.95% interest, plus a 50% share of increased value by lender, plus a 2% “maturity fee”, plus a $33,000 mandatory purchase of an annuity by the homeowner is unconscionably an insult to homeownership.

A consolidated class-action suit in the late 1990s by a series of California lawsuits had settled $8 millions from the defendants – Transamerica Corp. Transamerica HomeFirst Inc., Metropolitan Life Insurance Co. and Financial Freedom Senior Funding Corp.  However, even today’s friendlier versions of reverse mortgages are made too complicated for the elderly borrowers and their heirs to understand the possible consequences.  Opinions from legal, financial and tax experts are strongly advised before anyone would take a reverse mortgage.

Wall Street investors are also buying houses...

June 12, 2013 I would like to share with readers of my blog an article on June 8th from Wall Street Journal titled “Corporate Buyers Boosting Prices in House-Sales Boom". It mentions that “the Wall Street investors are scooping up homes in bulk…” San Jose-Sunnyvale-Santa Clara area ranks #4 and San Francisco-San Mateo-Redwood City area #12 in the top 20 hottest real estate markets, according to Federal Housing Finance Agency. This is echoing what we realtors in Bay Area have witnessed: many times individual home buyers are competing with institutional investors for the same houses. These institutional buyers are not only purchasing distressed homes, but also non-distressed homes, typically probate/trust sales that they can fix up or build a new development. http://online.wsj.com/article/SB10001424127887324299104578531132265680630.html

A new development on the Estate and Gift Taxes

On New Year Eve and New Year day (2013), to avert the Fiscal Cliff temporarily, the Senate and the House had made this permanent: the estate and gift tax exemptions are set at the same $5 million level, indexed for inflation, and the estate tax rate above that exemption rose to 40 percent, up from 35 percent. With indexing, the exemption is already about $5.25 million per person — double for a couple. For more details, please check out the following links from New York Times and the Forbes: http://www.nytimes.com/2013/01/05/your-money/fiscal-deal-ends-decade-of-uncertainty-over-gift-and-estate-taxes.html?pagewanted=all http://www.forbes.com/sites/deborahljacobs/2013/01/02/after-the-fiscal-cliff-deal-estate-and-gift-tax-explained/ Please consult a Probate and Estate Planning Attorney if you like to discuss your concerns on this. You’re welcome to email me for a recommendation of attorney with such expertise and practice.

Energy saving ideas for the New Year

Happy New Year! I hope you all had a great holiday season. I would like to start the new year by offering the energy saving ideas from National Association of Realtors(NAR): In short, the 9 Unexpected Energy (and Money) Savers are Putting lamps in the corners; Switching to a laptop; Choosing an LCD TV;Giving your water heater a blanket;Turning off the burner before you're done cooking; Adding motion sensors; Spinning laundry faster; Using an ice tray; Using the dishwasher. May we have peace, joy and health in the year 2013 and beyond!