Is Flipping Time Here Again?

What a crazy thought!

How could anyone think of flipping in this horrible real estate market?

Well, in the past few weeks, two investors I work with have asked me to be on the lookout for possible houses to flip in the coming months. They are noticing something that I am noticing: There are some super-cheap houses being dumped on the market by lenders in neighborhoods where prices will never fall that low.

For example, in one neighborhood I watch closely -- where no home has sold in the last year for less than $925,000 -- one lender dumped a home on the market for around $650,000. It was promptly snatched up. The home was a cosmetic fixer.

There are others. If you buy one of these cheap homes and actually live in it for several years, buyers can walk into some serious equity even if the market continues to decline dramatically. Or you could try a flip. But in this market, flipping is a dangerous game.

In the flipping heydays, many people could overpay for a property, overpay for renovations and sell the property for less than it should sell for – and still make money. Nowdays, you can do everything right – and still lose money.

This is definitely not a flipper’s market. Just see what’s happened to the No. 1 celebrity flipper, Bravo TV’s Jeff Lewis.

But it can be done.

The greatest Mega-Mansion play

There was a great story in the L.A. Times this week about the contunied heavy pace of mega-masions being built in Bel-Air Beverly Hills and Homby Hills. The continued strength of the ultra-luxury market in Los Angeles is something that I've talked about repeatedly in this space in the last year as it's been noticed by myself and others that work with luxury homes.

If you missed it, here's my previous posts about this topic:

• The Real Story on Luxury Housing in L.A. -- Part 1
• The Real Story on Luxury Housing in L.A. -- Part 2
• Off-Market Mansions in L.A.
• L.A. Market for $10 million+ homes

Those of you who know me well know I've been working with an experienced mega-mansion builder to put together a mega-mansion development. We have targeted the land and planned out the development. It's an incredibly conceived project. But given the current economic environment, it's been difficult finding an additional equity partner even for an experienced developer.

That said, there are many ways for a possible JV partner to come into this project. It could be simply as an equity partner. Or it could be someone who simply wants to build one of these homes, but instead of building a home just for themselves, they can leverage the dollars they'd be putting into their own house into several others and make a substantial profit. Either way, it's an opportunity to be a part of the most incredible luxury housing projects in the city's history and invest in one of the only still-strong segments of the housing market.

European buyers in L.A.

One of the trends we’ve seen lately – particularly with high-end properties – is increasing interest from foreigners in buying California real estate. In the last month alone, my office has been working with serious high-end buyers from Switzerland, England, Germany, Croatia and Greece. With the weak dollar, falling prices and many American buyers and investors keeping their money away from real estate, Europeans have sensed a buying opportunity. While many Americans are still waiting to see if the real estate market will still fall further in 2008 (and it might), buying now may be a smarter play for Europeans. Chances are that even if housing prices decline slightly more, they might not decline enough to compensate for the tremendous advantage the Euro has over the U.S. dollar right now. That means the Euro may buy you more now than it will 6 months or a year from now, even if prices decline. There’s no guarantee. But there’s also no denying that prime real estate in Los Angeles and elsewhere in California is at a deep discount for Europeans.

Land Trusts: Privacy and Protection of Your Property

A land trust is a little-known but highly effective way to shield your property from lawsuits and provide the utmost privacy.

One of my good friends and business associates, Ramon M. Gonzalez, Esq., is an expert on this subject.

So few people know about the possibility of holding property in land trusts that I wanted to help get the word out about -- especially in a town like this where there's such a need for private and protected ownership of property.

Here's a link to a PDF file that's an article Ramon has written that thoroughly explains the ins and out of land trusts: CLICK HERE

Or, if you'd like, you can simply contact Ramon at 310-592-0245 or ramonmgonzalez@yahoo.com.

Off-market Mansions in L.A.

With a busy week I haven't had much time to write. However, I wanted to follow up on my series on the best homes for sale in Beverly Hills and Bel Air on the market with a discussion about those available off the market.

I definitely can't give a specific list on this one!

Properties available off-the-market are kept from the market for very good reasons. Confidentiality for buyers and/or sellers is one of them. Real estate agents have their own reasons.

But another reason is that many of the best homes simply don't need to be put on the market to be sold. For the very best properties in the very best areas like Bel-Air, Beverly Hills, Brentwood, Hancock Park, Sunset Strip, etc., there's often more than enough buyers. Just read this little blurb from last week from BusinessWeek.com:

• "Stephen Shapiro, chairman of Westside Estate Agency, which has the $165 million listing, said there's a shortage of homes in Beverly Hills for $30 million and more. There's little room to build more sprawling mansions without knocking down smaller ones, he said."

So yes, many of the best homes will never be on the MLS. Currently, I'm aware of great off-market homes in areas like Beverly Hills, Bel-Air or Sunset Strip available for prices ranging from $8 million to $45 million.

And no, you won't read about them here.

But I will tell you that one of the best off-the-market possibilities I like right now is the opportunity to have a custom, brand new 15,000-square-foot home in Bel Air for $27 million. To find out more, you would definitely have to talk to me in person.

UPDATED W/ LINKS! - Top 10 Beverly Hills homes for sale

OK, I've updated my Top 10 list of Beverly Hills homes for sale with links to the properties.

I'll try it for now and see how it works.

Go to original post: Top 10 Beverly Hills homes for sale

Duplex Mania!!!

The big news in local real estate today is that the federal Office of Federal Housing Enterprise Oversight (OFHEO) announced it has temporarily increased limits on conforming loans offered by government-sponsored enterprises, Fannie Mae and Freddie Mac. Conforming loans are those that the government will buy from lenders, so the interest rates are lower sometimes as much as a full percent lower.

Much has been made about how this can help a lot of homeowners and homebuyers in L.A. The old limit for a single family residence was $417,000 and now it’s been raised to $729,500 for L.A. County.

But I think this could be even bigger news in the best parts of town for duplexes, triplexes and fourplexes.

The old limits:

One-family	Two-family	Three-family	Four-family
$417,000.00	$533,850.00	$645,300.00	$801,950.00

The new limits:

One-family	Two-family	Three-family	Four-family
$729,750.00	$934,200.00	$1,129,250.00	$1,403,400.00

To understand futher why I think this is such a big deal for 2-4 units, you just have to do the math and look at the MLS.

If you’re the standard putting 20% down on a single family home, these loan limits allow you to buy a single-family home up to $912,187. But you still won’t be able to get a great home in a great part of town for that price.

However, if you get a duplex and put 20% down, you can afford $1,167,750. Can you get a great duplex in a great part of town for that. Absolutely! I can show you plenty of them right this minute.

And the same goes for triplexes at $1,411,562 and fourplexes at $1.754,250.

For now, these limits only apply to loans originated between July 1, 2007 and Dec. 31, 2008. It may or may not be extended beyond this year. But I can tell you for sure, if I was going to buy a duplex, triplex or fourplex and put at least 20% down, this sure would make me happy. And in fact, I sent this exact information out this afternoon before posting it here to two of my own clients who are looking to buy this type of property.

Handling Unpredictability

The market is very unpredictable right now. But here’s what I think.

The short answer is it depends on where you’re buying and how you’re financing your purchase.

Prices came down considerably in 2007. In some parts of L.A., we will probably see further price declines in 2008. The more desirable areas won't suffer as badly.

2008 will definitely be a good year to buy. The reason is that even if the home isn’t quite at the bottom, it’s close and sellers are still willing to deal. That means you can offer less on a lot of houses and get your house at rock bottom price. I just did this with a client in Woodland Hills. Even in this declining market, the house is worth much more than they paid.

Most experts are predicting a recovery in 2010. Some are predicting prices will start to go up again in 2009 and some are predicting it will still be a slow market.

The biggest question is the mortgage market. Right now, it’s still very tough to get a loan (although it's better than August). 100% financing is nearly impossible. Even 90% financing is tough to get for most buyers. Until the mortgage problems are solved, prices won’t start going up again. But once they are, people will start jumping back into the market because in many areas of L.A. prices have become very reasonable.

In 2008, the best times to buy will likely be the spring and fall. However, if you hear news that the loan situation is improving, you’ll want to buy because that will signal the beginning of the end of the declining market.

Of course, I can’t guarantee any of this. But this is what I think.

And here's what some others think:

• RealEstateJournal.com suggests the worst of the housing slump may be over.

• CNNMoney.com suggests things may get worse.

4 FACTORS IN DECIDING TO BUY A HOME OR WAIT

The No. 1 question on the minds of most buyers I talk to these days is: Should I buy a house now or should I wait to see if prices drop further?

Amid this changing real estate market, this is an important question for any buyer to answer to their own satisfaction. It’s a difficult question. I think it depends on 4 factors:

1. Where you’re buying

Here in Los Angeles some neighborhoods have already seen significant drops. Some will see more slipping of prices. For outlying areas, it's probably best to wait. However, if you're interested in high-demand areas (anything close to the ocean, desirable communities like Santa Monica, Westside L.A., West Hollywood, Beverly Hills, etc.) the question of whether or not to wait is more difficult. There are deals to be had in those areas right now, but prices are not trending down in these desirable areas and they probably won't drop as dramatically as in the outlying areas.

2. What you’re buying

The near-term outlook for condos is not nearly as good as for single-family homes. Condo prices are more likely to continue to fall in price than single-family homes.

3. How you’re paying for it

With the federal reserve lowering interest rates and lenders loosening up their standards again, loans have become more easy to come by than just a few months ago. Whether or not you can get the loan you want right now should play an important factor in your decision.

4. How long you plan to live there

No matter where you’re buying quick flipping is definitely not a good idea. You need to keep your home at least three years, otherwise rent.

7 REALTORS YOU SHOULD AVOID

1. Avoid Kitchen Sink Realtors
You don’t want a Realtor who will send you everything but the kitchen sink to look at.

2. Avoid Lazy Realtors
You don’t want a Realtor who’s never available or takes his time to respond to your requests.

3. Avoid Stupid Realtors
You don’t want a Realtor who you can’t have an intellectual conversation with.

4. Avoid Frenetic Realtors
You don’t want a Realtor who will panic and blow up a deal.

5. Avoid Part-Time Realtors
You don’t want a Realtor who’s not up on the latest twists and turns in the market or who doesn’t study the MLS.

6. Avoid Slug Realtors
You don’t want a Realtor who can’t pick up the nuances of negotiation and get you the best deal.

7. Avoid Liar Realtors
You don’t want a Realtor who will tell you what you want to hear just to make a sale happen.

Art of the Lowball

No question about it. This is a buyer's market (except in Malibu). And in this buyer's market, one of the things buyers are requesting more than ever is the lowball. By lowball, I mean an offer that's not just under asking, but significantly under asking. These are not fun for most people. For obvious reasons. Some agents still won't write lowballs for clients. But with so many houses sitting on the market, some lowballs will be accepted. And that means you can help your clients in the best way possible -- getting them a great deal! But often, it comes down to tact. And while there's a few important things I like to do in preparing and submitting a lowball offer, I found a good article that covers some of them. There's a few additional things I would do, but this is a start. CLICK HERE

Who predicted the credit crunch? ME

OK, I realize that I'm shamelessly tooting my own horn here, but I can't resist. (Sorry, Mom.)

Back in March, I wrote a blog on this site that I also sent out as a newsletter to my friends and clients. In this article, I discussed my review of the current market conditions and wrote specifically about "Access to Money," wherein I predicted that later in 2007 money would be less available for home loans. Boy was I right! Read the original article by CLICKING HERE