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There is only so much beach front property available… March 9, 2010

Posted by mkuhbock in Arizona Vacation Property, AZ Real Estate News.
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It has been while since I have ranted but I am having the same inane conversation with too many people lately and it has now allowed me to now see backwards due to all of the eye rolling I have done.

Yes the US resort property market (California, Nevada, Arizona, Florida & Hawaii) is still depressed.

Yes there are still great deals available and yes there will be a bounce along the bottom for another period of time (12 to 36 months) but the house that your friend/associate/partner/or friend of a friend bought out in the deep suburbs (middle of Podunk nowhere) 12 months ago from some smooth talking know it all Realtor has NOT increased in value due to brilliant property purchasing prowess…. The deal was probably OK as it is hard not to buy at the bottom 25% of the market over the last 24 months, but when a property does not come up on your GPS or on Google maps then you know it will not rebound in value quickly and will dramatically under perform centrally located real estate.

As I published in a previous Blog, there are 3 main variables that effect the value of property; 1. Location, 2. Features and 3. Local Amenities. A $200,000 home in the deep suburbs will cost you over 1 million+ in the center of a high profile area. Those numbers can now be adjusted to $75,000 and $450,000+. If it takes you 15 minutes to find a store that is still in business to buy a paper or carton of milk then guess what, you have purchased in the middle of nowhere…..

Real estate has been and always be about location, location, location and beware of anyone that tells you differently as they will be trying to sell you a time share in a central Florida swamp or prime piece of desert property 2 hours from Sky Harbor airport.

The market still has some amazing deals but make sure you conduct in-depth due diligence, hire or utilize educated and well seasoned professionals and educate yourself as much as possible, as any purchase, be it a primary residence or a vacation property will be a decision that requires a substantial investment of time and capital.

One final word of caution, the trustee sales are becoming crowded auctions and prices in some areas of the nation are being pushed up to just below retail by overzealous buyers and agents. Paying overinflated prices for properties which are, due to the nature of trustee auctions, completely Caveat Emptor is a fools folly. Make sure you either become a local real estate expert or use a service which is the best in the local market, otherwise you could… no make that WILL be over paying for property which could be a black hole where you will be shoveling all of your money into…

Best of luck in your real estate endeavors,

Michael

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Phoenix Trustee Auctions – make sure you are ready to play with the big boys December 11, 2009

Posted by mkuhbock in Arizona Vacation Property, AZ Real Estate News.
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I did a post some time ago about auctions with a link to a great article that explained the process titled Buyer Beware,  but there is a new article out that goes into the details of how these auctions work. The only problem with the article is that the average non professional investor will read only one thing, how much one professional made in a quick one week flip.

This article can be found here and is titled House Flipping Makes a Comeback. Great article and make sure to look at the slide show but and it is a big but… these people that work the trustee sales are professionals with years of experience and teams in place. They have the cash or the access to cash to close in the required 24 hour period, they have done their research on the properties they bid and purchase via drive bys and walk arounds and even may have had access to the property to assess the repairs it will need. Another issue in the property/ investment flip game is that everyone is now getting into it and the competition for great deals is much greater than it use to be 2 or 3 years ago.

On a  $75,000 to $150,000 flip you will need at least $20,000 net profit on the purchase to turn around a $10,000 net profit on the sale. That is if you have a good Realtor and the all of the market factors of the home are aligned. Properties can drop in value by 25% overnight, (if comparable sale properties in a couple of block radius drop their prices due to being banked owned or going into foreclosure this will affect your ability to sell at your planned price) I have experienced it first hand thus you need to be well healed and have all the necessary resources at hand.

Properties of great value might produce greater margins but will also have greater costs associated in the transactions and are tougher to resell, more first time buyers than those looking for a $250,000 family home. Then when you get into the luxury market you can steal properties but good luck trying to sell it unless you have it on the market substantially below current market prices like the example in the last article.

On a positive investor note it is anticipated that there will be a new wave of properties entering the Phoenix market in the spring, not good if you purchased a home and will be trying to slog it off in the next couple of months but good if you are waiting to enter the market in the early spring.

In any case if you decide to venture down the path of playing the trustee auctions then best of luck in swimming with the sharks. 🙂

Have a great weekend wherever you are!

Michael