Wednesday, March 23, 2011
Friday, March 4, 2011
JPMorgan Chase Made Nearly a Billion Dollars from Madoff-Chase is too Gangsta for TV!
 |
cnbc.com |
A new study of Bernie Madoff's Ponzi scheme concludes that JPMorgan Chase made over $900 million in pretax profits from the Madoff scam.
The academic paper by Dr. Linus Wilson, a finance professor at University of Louisiana at Lafayette, makes use of newly released data and different methods of calculation than previous studies.
Wilson's paper looks at total Madoff- linked account balances at JPMorgan Chase [JPM 45.25 
-0.83 (-1.8%) 
] from 1986 to 2008, a longer period than earlier studies, which may have underestimated JPMorgan's profits.
-0.83 (-1.8%) ] from 1986 to 2008, a longer period than earlier studies, which may have underestimated JPMorgan's profits.The total figure Wilson arrives at is $907 million.
That figure assumes JPMorgan's reinvestment of Madoff client money, and the generation of a similar rate to that of other funds invested by the bank during a similar time period.
But even without any reinvestment at all, Wilson finds that JPMorgan's pre-tax profits from Madoff money would have amounted to an estimated $398 million.
In addition to the magnitude of their alleged gains, Wilson reaches another conclusion that is likely to give JPMorgan agita.
Namely, he concludes based on prior academic research, that enough 'red flags' existed to make a reasonable observer suspicious—which presumably includes JPMorgan Chase.
Wilson lists two facts as being particularly problematic. First, that Madoff's custody over his client accounts resulted in no third party verification of trades (which, as it turns out, Madoff seems to have never made). And second, the very size and regularity of Madoff's returns should have raised suspicion in itself.
Wilson's complete journal article—provocatively titled 'Madoff’s Dirty Money'—can be found here.
Thursday, March 3, 2011
Obama hit the brakes on selling those old Government bldgs...WHY?
Obama Administration Scraps Sale of Government Buildings
The current administration has been forced to “scrap” plans announced last summer to sell off thousands of government buildings because plan was simply “unworkable”[1]. Now, a new commission has been tasked with finding replacement savings in the amount of $15 billion, the number that the administration believed it would save by selling off the buildings, 14,000 of which are currently vacant and 55,000 of which are “underused.” Thanks to poor conditions, bad locations and sluggish real estate markets, the sales of the buildings were not only difficult to accomplish, but less advantageous than the planning commission had originally hoped. Thus, the decision to abort the plan.
The administration is not giving up on its hopes to sell of buildings entirely, however. In fact, a new commission is now in the works – although no one yet has been asked to serve on the board – to identify ways to revamp the plan and shed the excess real estate – and upkeep costs – that the government no longer needs[2]. Local governments would, in many cases, be glad to see government-owned buildings back in private hands since they often sit vacant. However, there is a “cumbersome review process” before the buildings can be sold and “most of the excess properties are likely old, poorly located World War II-era sites,” reported the Washington Post.
Many people have criticized the government’s plan to sell off “excess” buildings that it could, theoretically, be using instead of spending billions in rental dollars on other facilities. Do you think that selling off these properties is a good idea? Tell me what you think...
Thursday, February 17, 2011
Mortgage servicing crackdown expected!!
Mortgage servicing crackdown expected
U.S. banking regulators are close to finalizing new national guidelines that will impact mortgage servicing shops after an interagency investigation revealed "significant weaknesses in mortgage servicing related to foreclosure oversight and operations," said John Walsh, the Acting Comptroller of the Currency, in prepared statements to be delivered before a Senate Banking panel today. "In general, the examinations found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party law firms and vendors," Walsh said.
"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.
Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.
Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.
U.S. banking regulators are close to finalizing new national guidelines that will impact mortgage servicing shops after an interagency investigation revealed "significant weaknesses in mortgage servicing related to foreclosure oversight and operations," said John Walsh, the Acting Comptroller of the Currency, in prepared statements to be delivered before a Senate Banking panel today. "In general, the examinations found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party law firms and vendors," Walsh said.
"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.
Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.
Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.
Monday, January 24, 2011
Bank of America Struggling...and other hot tips!
Bank of America not out of the woods yet!
Underlying Bank of America's (BOA) heap of one-time gains and charges in the last quarter was a sizable decrease in revenue and, in many consumer businesses, loan balances. Though BOA has made concrete progress in spinning off unwanted lines of business, cutting Fannie Mae and Freddie Mac liabilities, and reducing boom-time lending losses, its fourth-quarter results suggest that it is still in the thick of addressing legacy troubles. "It was not a great quarter," said analyst Michael Mayo of Credit Agricole Securities. "If you have two or three quarters like this in a row, then you raise some big issues. … The cleanup is not done, but it is progressing." Revenue dropped 11% year over year, with management citing limited short-term opportunities to make up for the fee income lost to new regulatory restrictions. Brian Moynihan, BOA's chief executive, conceded that the 13,000 extra employees it has working through the mortgage mess at its Countrywide unit aren't going anywhe
re soon, and Bank of America expects its net interest income, now at 2.7%, to fall in the first half.
Though the company made progress in the fourth quarter in tackling government mortgage put-back risks, it also appeared to be bracing for continued fights. Its litigation reserves — a "disproportionate" percentage of it tied to Countrywide — rose to $1.5 billion from $500 million. When asked to forecast this figure, Moynihan said, "it's hard to think about a run-rate for litigation expenses." Year over year, BOA's progress appears more concrete. Over the course of 2010 the company divested 20 business lines that sold for $19 billion. Its Tier 1 capital ratio rose 1.5%, to 8.6%. For the fourth quarter BOA reported $5.1 billion in credit-loss provisions — half what it set aside in the year-earlier quarter. And its net charge-off rate dropped nearly a full percentage point, to 2.87%. Quarter to quarter, however, the improvement was much less dramatic.
Though some of the difference is likely attributable to seasonal issues, B of A lowered its credit-loss provisions only slightly, from $5.4 billion to $5.1 billion. And total non-performing loans showed similarly modest quarter-over-quarter declines, from $34.6 billion to $32.7 billion. Loan growth was weaker than at some rivals. The company's overall average loan book grew 0.7%, to $940.6 billion, from the previous quarter. In commercial and industrial lending, average balances increased by 2% from the third quarter, a sign of "stability," BOA said.
Gas prices on the way up?
The American Petroleum Institute, an oil industry group, made no specific price forecast for 2011 but didn't seem to see a drop anytime soon. "Unless we see increases in supply, it's hard not to see a tighter market," John Felmy, the institute's chief economist, said in a conference call with reporters. Felmy said worldwide oil demand in 2010 hit a record of more than 87 million barrels a day, driven largely by strong growth in India, China and the Middle East. Supply, meanwhile, was constricted by the drilling moratorium in the Gulf of Mexico following the BP disaster, slow production growth in non-OPEC countries, and OPEC production controls.
The government's Energy Information Agency estimates that the drilling moratorium in the Gulf will curtail oil production by about 120,000 barrels a day in 2011. The moratorium has been lifted, but new permits have been slow in coming. OPEC holds just under 5 million barrels a day in production capacity that it is leaving in the ground. Gasoline price have risen 12 cents a gallon, or 4%, in just the last month, according to the motorist group AAA. The nationwide average stands around $3.12 a gallon, less than a dollar below the record high.
Lenders to destroy documents?
Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose. In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts." The former subprime lender shut down in February 2007.
In a Jan. 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain. In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island. AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007.
The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive. In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files. The issue of document destruction is sensitive because in recent months evidence has turned up that vast numbers of original loan documents by major lenders were never transferred as required when the mortgages were securitized and sold to investors. Lawyers for homeowners have strongly objected to AHM's document destruction, contending that vital evidence borrowers need to defend themselves in foreclosure cases will be lost.
NABE - hiring to improve
The National Association for Business Economics (NABE) said the hiring outlook for the next six months is at a 12-year high. "The number of firms expressing positive hiring plans is at a level not seen in over a decade -- a sign of improving labor-market dynamics," Shawn DuBravac of the Consumer Electronics Association said in a statement. Forty-two percent of companies surveyed said they expect to hire more workers in the next six months, a 13% increase over the same time last year. Meanwhile, 51% expect no change in hiring, while only 7% expect a decrease. GDP projections are also at moderate to high levels, with 62% of respondents planning for real GDP growth of 2% to 3% in 2011, and one in five expecting GDP growth in the 3% to 4% range. In total, 82% of respondents expect GDP growth in excess of 2%, a sharp increase over the 54% who expressed the same level of optimism last year. Respondents were also asked to assess the impact of the sweeping package of tax cuts pa
ssed by Congress late last year.
A slight majority of companies surveyed said they expect sales to improve as a result of the package, while 45% said they anticipate the law will have no effect. Companies are expecting less of a boost in the areas of employment and investment spending, with 68% of firms saying the tax deal will have no effect on hiring, while 37% said it would have a positive effect. Only 1% said hiring would be negatively effected.
CNBC's Olick - beware shadow office space
"Last summer I did some reporting on shadow office space, which is leased space, like individual offices, cubicles or entire floors, that was vacated during the recession. This shadow space was adding as much as 7 percent to office vacancy rates in Los Angeles and over 6 percent in Chicago, according to CoStar Group. Now that the office market appears to be taking a turn for the better, that shadow space will start to fill up, and in most places it will have to fill well before the company looks to take on additional space. Today Grubb & Ellis, a commercial real estate services and investment company, put some numbers to the scenario. "Grubb & Ellis expects that shadow space vacated during the recession will accommodate about one-third of all net new demand in 2011 and about one-fourth in 2012; this activity will not be reflected in the published statistics,' writes Bob Bach, chief economist, in his 'U.S. Office Market First Look: 2010-Q4.' Bach goes on to say that the 'st
ill-tepid rate of hiring,' combined with this shadow space, will keep the office market 'struggling to keep up with prior recovery cycles.' Office buildings gained 2.5 million square feet of occupied space in Q4 of 2010, the first increase since the end of 2007, according to Reis, Inc., a commercial real estate analysis firm, but the 17.6 percent vacancy rate still represents a 17-year high.
That doesn't seem overly concerning to investors in the office market. Pricewaterhouse Coopers surveyed 200 real estate executives, including investors, lenders and brokers, and found more than 70 percent believe the commercial real estate recovery is real. 32 percent say they are looking to invest in the office sector this year, second only to 45 percent who say they would opt for the apartment sector. Yes, 28 percent of office property mortgage loans will mature in 4Q '11, or about $6.8 billion, according to Fitch, in a still healing liquidity situation. But Fitch also reports that the pace of commercial loan modifications is quickening. 'Loan modifications continue to dominate as a resolution method,' writes Managing Director Stephanie Petosa. 'Servicers will resolve loans with increase velocity as liquidity returns to the CMBS market.' As more jobs are created and fewer are lost, the office sector is heading toward recovery. Investors should be careful, however, to tak
e shadow space into account when looking at specific properties and consider distressed properties, as office loan default rates remain high."
Now for our real estate education section...
Bird Dog Bidding Strategies
Congratulations! If you are reading this then chances are you seriously contemplating trying out a real estate auction. Auctions present a great way to find bargains but buying via auction also requires serious negotiation skills for novice investors. One of the more common questions presented by novice bird dogs is how to recognize and develop a competitive bidding strategy. It's actually a great question because learning how to recognize and capitalize upon different bidding strategies is the first step in increasing your awareness of the transactions and methods being used by others. Just remember, it's often possible to use different bidding methods for various situations so stay flexible and keep your eyes open for opportunity!
Unsold Selection - Unsure about where to start? Why not begin with a minimum of hassles by bidding on unsold selections. Normally a property will generates at least a few bidders but every once in awhile, there is literally no interest. The lack of interest may be due to very high prior mortgage or assumable lien but it could also be due to relatively minor problems like a small HOA fee or easily cleared title concern. The key is to do your homework well in advance and understand the true cost of correcting a defect. The ability to bid ultra-low without any competition is a clear incentive to pursue this option when the underlying problem (or perceived problem) has a cost-effective solution.
• Pros: Minimal bidding wars, ultra-low cost, often missed by novice investors or those unable to address small mishaps.
• Cons: Requires strong understanding of defects as well as knowledge of fees required to correct problems.
ROI - Another commonly used bidding strategy is based upon the anticipated return on investment. For example, the 1% rule was traditionally considered a very solid investment in terms of long term "buy and hold" strategy although it is not uncommon to realize 1.5 or even 2 percent on some auction properties.
• Pros: Solid correlation between profit and cost. Clear margins with sufficient room for growth. Tends to be conservative in nature making it a relatively lower risk investment. Heavily contingent upon cash flow.
• Cons: Fails to taken appreciation into account. Prone to under-estimate long term profit potential of marginal properties or those that require more "up front" work.
Square Footage - Many investors still prefer to purchase based upon average square foot cost. There is ample support for this bidding method; it is simple to quantify and compare the cost to the replacement and/or insurance basis as well as potential commercial or retail value. This works especially well for business based real estate needs but should not be ignored by the residential investor.
• Pros: Easily translates into insurance replacement cost, property tax appraisal and even secondary mortgage.
• Cons: Highly subjective especially for upper end properties.
Market Value - Of course, one of the most popular bidding techniques is to simply take the market value minus costs and profit to determine the bid amount.
• Pros: Highly flexible and able to acquire property in any condition at any location based exclusively on the prospective resale value.
• Cons: Market volatility can change rapidly leaving sparse margins for those that do not add sufficient padding to profit estimates.
Bottom Line - Before bidding...know your exit strategy or the proposed exit strategy of your investor. The exit strategy - and corresponding "safety measure" - will dictate the maximum bid amount. When in doubt, leave a little extra margin to make sure you and your investor are covered in case of an unanticipated expense or other cost; especially when first starting out. As you gain experience in estimating costs and correction fees, it will be possible to refine the bidding price to a much more specific level.
See you at the top!
Underlying Bank of America's (BOA) heap of one-time gains and charges in the last quarter was a sizable decrease in revenue and, in many consumer businesses, loan balances. Though BOA has made concrete progress in spinning off unwanted lines of business, cutting Fannie Mae and Freddie Mac liabilities, and reducing boom-time lending losses, its fourth-quarter results suggest that it is still in the thick of addressing legacy troubles. "It was not a great quarter," said analyst Michael Mayo of Credit Agricole Securities. "If you have two or three quarters like this in a row, then you raise some big issues. … The cleanup is not done, but it is progressing." Revenue dropped 11% year over year, with management citing limited short-term opportunities to make up for the fee income lost to new regulatory restrictions. Brian Moynihan, BOA's chief executive, conceded that the 13,000 extra employees it has working through the mortgage mess at its Countrywide unit aren't going anywhe
re soon, and Bank of America expects its net interest income, now at 2.7%, to fall in the first half.
Though the company made progress in the fourth quarter in tackling government mortgage put-back risks, it also appeared to be bracing for continued fights. Its litigation reserves — a "disproportionate" percentage of it tied to Countrywide — rose to $1.5 billion from $500 million. When asked to forecast this figure, Moynihan said, "it's hard to think about a run-rate for litigation expenses." Year over year, BOA's progress appears more concrete. Over the course of 2010 the company divested 20 business lines that sold for $19 billion. Its Tier 1 capital ratio rose 1.5%, to 8.6%. For the fourth quarter BOA reported $5.1 billion in credit-loss provisions — half what it set aside in the year-earlier quarter. And its net charge-off rate dropped nearly a full percentage point, to 2.87%. Quarter to quarter, however, the improvement was much less dramatic.
Though some of the difference is likely attributable to seasonal issues, B of A lowered its credit-loss provisions only slightly, from $5.4 billion to $5.1 billion. And total non-performing loans showed similarly modest quarter-over-quarter declines, from $34.6 billion to $32.7 billion. Loan growth was weaker than at some rivals. The company's overall average loan book grew 0.7%, to $940.6 billion, from the previous quarter. In commercial and industrial lending, average balances increased by 2% from the third quarter, a sign of "stability," BOA said.
Gas prices on the way up?
The American Petroleum Institute, an oil industry group, made no specific price forecast for 2011 but didn't seem to see a drop anytime soon. "Unless we see increases in supply, it's hard not to see a tighter market," John Felmy, the institute's chief economist, said in a conference call with reporters. Felmy said worldwide oil demand in 2010 hit a record of more than 87 million barrels a day, driven largely by strong growth in India, China and the Middle East. Supply, meanwhile, was constricted by the drilling moratorium in the Gulf of Mexico following the BP disaster, slow production growth in non-OPEC countries, and OPEC production controls.
The government's Energy Information Agency estimates that the drilling moratorium in the Gulf will curtail oil production by about 120,000 barrels a day in 2011. The moratorium has been lifted, but new permits have been slow in coming. OPEC holds just under 5 million barrels a day in production capacity that it is leaving in the ground. Gasoline price have risen 12 cents a gallon, or 4%, in just the last month, according to the motorist group AAA. The nationwide average stands around $3.12 a gallon, less than a dollar below the record high.
Lenders to destroy documents?
Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose. In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts." The former subprime lender shut down in February 2007.
In a Jan. 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain. In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island. AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007.
The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive. In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files. The issue of document destruction is sensitive because in recent months evidence has turned up that vast numbers of original loan documents by major lenders were never transferred as required when the mortgages were securitized and sold to investors. Lawyers for homeowners have strongly objected to AHM's document destruction, contending that vital evidence borrowers need to defend themselves in foreclosure cases will be lost.
NABE - hiring to improve
The National Association for Business Economics (NABE) said the hiring outlook for the next six months is at a 12-year high. "The number of firms expressing positive hiring plans is at a level not seen in over a decade -- a sign of improving labor-market dynamics," Shawn DuBravac of the Consumer Electronics Association said in a statement. Forty-two percent of companies surveyed said they expect to hire more workers in the next six months, a 13% increase over the same time last year. Meanwhile, 51% expect no change in hiring, while only 7% expect a decrease. GDP projections are also at moderate to high levels, with 62% of respondents planning for real GDP growth of 2% to 3% in 2011, and one in five expecting GDP growth in the 3% to 4% range. In total, 82% of respondents expect GDP growth in excess of 2%, a sharp increase over the 54% who expressed the same level of optimism last year. Respondents were also asked to assess the impact of the sweeping package of tax cuts pa
ssed by Congress late last year.
A slight majority of companies surveyed said they expect sales to improve as a result of the package, while 45% said they anticipate the law will have no effect. Companies are expecting less of a boost in the areas of employment and investment spending, with 68% of firms saying the tax deal will have no effect on hiring, while 37% said it would have a positive effect. Only 1% said hiring would be negatively effected.
CNBC's Olick - beware shadow office space
"Last summer I did some reporting on shadow office space, which is leased space, like individual offices, cubicles or entire floors, that was vacated during the recession. This shadow space was adding as much as 7 percent to office vacancy rates in Los Angeles and over 6 percent in Chicago, according to CoStar Group. Now that the office market appears to be taking a turn for the better, that shadow space will start to fill up, and in most places it will have to fill well before the company looks to take on additional space. Today Grubb & Ellis, a commercial real estate services and investment company, put some numbers to the scenario. "Grubb & Ellis expects that shadow space vacated during the recession will accommodate about one-third of all net new demand in 2011 and about one-fourth in 2012; this activity will not be reflected in the published statistics,' writes Bob Bach, chief economist, in his 'U.S. Office Market First Look: 2010-Q4.' Bach goes on to say that the 'st
ill-tepid rate of hiring,' combined with this shadow space, will keep the office market 'struggling to keep up with prior recovery cycles.' Office buildings gained 2.5 million square feet of occupied space in Q4 of 2010, the first increase since the end of 2007, according to Reis, Inc., a commercial real estate analysis firm, but the 17.6 percent vacancy rate still represents a 17-year high.
That doesn't seem overly concerning to investors in the office market. Pricewaterhouse Coopers surveyed 200 real estate executives, including investors, lenders and brokers, and found more than 70 percent believe the commercial real estate recovery is real. 32 percent say they are looking to invest in the office sector this year, second only to 45 percent who say they would opt for the apartment sector. Yes, 28 percent of office property mortgage loans will mature in 4Q '11, or about $6.8 billion, according to Fitch, in a still healing liquidity situation. But Fitch also reports that the pace of commercial loan modifications is quickening. 'Loan modifications continue to dominate as a resolution method,' writes Managing Director Stephanie Petosa. 'Servicers will resolve loans with increase velocity as liquidity returns to the CMBS market.' As more jobs are created and fewer are lost, the office sector is heading toward recovery. Investors should be careful, however, to tak
e shadow space into account when looking at specific properties and consider distressed properties, as office loan default rates remain high."
Now for our real estate education section...
Bird Dog Bidding Strategies
Congratulations! If you are reading this then chances are you seriously contemplating trying out a real estate auction. Auctions present a great way to find bargains but buying via auction also requires serious negotiation skills for novice investors. One of the more common questions presented by novice bird dogs is how to recognize and develop a competitive bidding strategy. It's actually a great question because learning how to recognize and capitalize upon different bidding strategies is the first step in increasing your awareness of the transactions and methods being used by others. Just remember, it's often possible to use different bidding methods for various situations so stay flexible and keep your eyes open for opportunity!
Unsold Selection - Unsure about where to start? Why not begin with a minimum of hassles by bidding on unsold selections. Normally a property will generates at least a few bidders but every once in awhile, there is literally no interest. The lack of interest may be due to very high prior mortgage or assumable lien but it could also be due to relatively minor problems like a small HOA fee or easily cleared title concern. The key is to do your homework well in advance and understand the true cost of correcting a defect. The ability to bid ultra-low without any competition is a clear incentive to pursue this option when the underlying problem (or perceived problem) has a cost-effective solution.
• Pros: Minimal bidding wars, ultra-low cost, often missed by novice investors or those unable to address small mishaps.
• Cons: Requires strong understanding of defects as well as knowledge of fees required to correct problems.
ROI - Another commonly used bidding strategy is based upon the anticipated return on investment. For example, the 1% rule was traditionally considered a very solid investment in terms of long term "buy and hold" strategy although it is not uncommon to realize 1.5 or even 2 percent on some auction properties.
• Pros: Solid correlation between profit and cost. Clear margins with sufficient room for growth. Tends to be conservative in nature making it a relatively lower risk investment. Heavily contingent upon cash flow.
• Cons: Fails to taken appreciation into account. Prone to under-estimate long term profit potential of marginal properties or those that require more "up front" work.
Square Footage - Many investors still prefer to purchase based upon average square foot cost. There is ample support for this bidding method; it is simple to quantify and compare the cost to the replacement and/or insurance basis as well as potential commercial or retail value. This works especially well for business based real estate needs but should not be ignored by the residential investor.
• Pros: Easily translates into insurance replacement cost, property tax appraisal and even secondary mortgage.
• Cons: Highly subjective especially for upper end properties.
Market Value - Of course, one of the most popular bidding techniques is to simply take the market value minus costs and profit to determine the bid amount.
• Pros: Highly flexible and able to acquire property in any condition at any location based exclusively on the prospective resale value.
• Cons: Market volatility can change rapidly leaving sparse margins for those that do not add sufficient padding to profit estimates.
Bottom Line - Before bidding...know your exit strategy or the proposed exit strategy of your investor. The exit strategy - and corresponding "safety measure" - will dictate the maximum bid amount. When in doubt, leave a little extra margin to make sure you and your investor are covered in case of an unanticipated expense or other cost; especially when first starting out. As you gain experience in estimating costs and correction fees, it will be possible to refine the bidding price to a much more specific level.
See you at the top!
Wednesday, September 8, 2010
Homebuyer Tax Credit Returning??
DSNews.com – Homebuyer’s tax credit coming back?
After a worse than expected falloff in home sales during the month of July, buzz about a possible revival of the federal homebuyer tax credit has begun to surface. The National Association of Realtors (NAR) reported last week that sales of previously owned homes plummeted 27 percent in July, hitting their lowest mark in 15 years. New home sales also took a dive, dropping nearly 13 percent from June to July. Both reports were clear indications of the frailty of the housing market post-stimulus. Although, the steep declines were actually considered a by-product of the tax credits themselves, which expired on April 30 – payback for the incentives that pulled sales forward into the spring months.HUD Secretary Shaun Donovan said on CNN’s “State of the Union” program this weekend, “The July numbers were worse than we expected, worse than the general market expected, and we are concerned. That’s why we are taking additional steps to move forward. Donovan said it was too early to say for sure, after only one month’s numbers, whether the administration would revive its popular homebuyer tax credits to give the housing markets another much-needed boost, but he didn’t wholly rule it out as an option. “All I can tell you is that we are watching very carefully,” Donovan told CNN. “We’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.” Two U.S. Senate candidates from Florida, one of the hardest hit states by the housing downturn, spoke out in favor of bringing back the federal tax credits for homebuyers on the CNN program.
If this was helpful, please leave a comment....thanks
Wednesday, September 1, 2010
How to find people - The top ten ways to find someone online
How to find people - The top ten ways to find someone online
Whats really good with my investor savvy member community and stray visitors? I have another basic but definitely important article for you to check out. I hope you been keepin up with me. I been on the move but thats what you have to do if you really wanna make it happen. You either Networkin or Notworkin. Which one are you? ...Enough Said....I posted this because when I find a vacant house I need to find that owner ASAP!! So here is a few tips. May not be the best but hey, it will get you started, you just mix and match and do what you do...Just never quit until you hit paydirt. Hope you Enjoy!
1.Google
By far the best way people finder on the internet, it's been around so long, it contains so much – how can it not be the very best people resource tool out there? Look at the facts, if you've had anything written about you online Google knows about it. The secret to finding people on Google is to use the quotation marks around the name of the person and then round the location i.e. "John Stevens" "London" by doing this you are greatly improving your chances of finding the person, remember to press the Cached button to get to the section of the webpage that is most relevant to your search. You can also search by their hobby i.e. "John Stevens" "Model Railways" this can get you to the correct person just as easily as their location. Finally remember the more popular the name the smaller the location area will have to be.
2.Facebook
It used to be Bebo and MySpace but those places must be like graveyards compared to what they used to be like, everyone is on Facebook now and it looks like it's here to stay. Finding people on Facebook is easy, you can try and search directly for them and if that doesn't work you can search for their friends to get to them, best of all its free to register and to contact people, an easy and fun way to find your old friends and see what they are doing now. People also upload their photos and usually where they work and who their other friends are so you can find out a lot of information regarding people from their Facebook accounts.
3. Friends Reunited
Not as popular as it used to be (see above) but still a fantastic way to find people and even better it is now free to do so, they will never capture the spirit of 10 years ago when it was one of the biggest websites in the world but still, you should be able to find your old school chums on Friends reunited and not only that you should be able to email them. Even if they don't check the site very often (many people don't) they should receive an email to say someone has tried to contact them so it is still in the top three people finders according to findermonkey.co.uk staff.
4. Twitter
Twitter is good for finding people and every so often they tell you a bit about what they are doing and similar to Facebook a lot of people have a photo of themselves on there. How long till Twitter is no.1 on this list is anyone's guess but had anyone even heard of this micro blogging site three years ago? This is still an excellent source for finding people for free.
5. 123People
We're slipping down the list a bit here as this is a good way to find people online but it does have some drawbacks, the primary one is although it has a US and UK option it does seem to merge the two together so you do get a lot of results that are not relevant. It does have some email addresses though so it is certainly worth using, you may just get lucky and that is a big part of finding people online.
6. The Electoral Roll
An electoral roll search is still a great way to find people but it's just not as good as it once was. Back in 2003 the electoral roll was unedited, now it has an opt out option and people are doing so in their millions. In 2003 there were 44 million records on the Electoral Roll in 2010 this had dropped to 14 million. Along with the above options it is still a great way to locate someone and if you use the correct company you can find one that not only searches the current electoral roll but also the last available unedited version too as well as the ones in between.
7. Ancestry.co.uk
Ok so generally this is used to work on the family tree stuff but you can access birth and marriage certificates through this site so if you are going down the Sherlock Holmes route of people finding and doing some serious digging then this might just be the site for you. It is rather expensive but they do have a large achieve of information and some of it could be what you need to break through your people finder case. A bit specialist? Maybe but a great people resource anyway.
8. The National Archives
Again this is a specialist tool but one that we use very often, it is easy to use and can bring up some really interesting stuff, this is more suited to finding out information relating to land and people rather than old friends and school chums but we thought we would add some more specialist people finder tools rather than the usual ones. This site is used on a regular basis by all findermonkey.co.uk staff.
9. BT Phone book
The old ones are the best ones! And this is no different, now available on-line for free. You can search through people's names and their location to see if it brings up their telephone number. If you are ringing round to see if one of the matches is your old friend, just make sure you use some common courtesy when doing so, it sounds obvious but some people will be rude to you, it's not worth getting involved with them. Just thank them for their time and move on, the next person you ring might be your long lost friend.
10. Other resources
There are plenty of resources available to help you locate people such as our people search blog findermonkey.co.uk/blog/ or people search-uk. Just keep your eyes peeled for the best ones and if you want to add to this list feel free to do so.
Good luck with your people finding.
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