I s su e 12 , Vo lu me 3 7 / Se p te m be r 16, 20 11Reallocating from Equities to Real Estate The Week Ahead -> The “Keys”Tim McLaughlin - Housing Data and the Fed Announcement highlight Equities and Fixed Income investments are delivering low(negative) returns, and home prices are at bargain levels. That has Date Economic Release Prediction Lastprompted a lot of would be investors to contemplate if the time isright consider buying investment properties for rental housing 9/19 NAHB Housing Index 15 15 As you would imagine, investing in real estate right now can besurprisingly profitable, if everything goes right. Rents are climbing 9/20 Housing Starts 590K 604Kin many areas, and more properties may be coming on the market.Last month, the Obama administration asked for proposals on how 9/20 Housing Starts (MoM) -2.3% -to convert some of Fannie Maes and Freddie Macs bulginginventories of foreclosed homes into affordable rentals. 9/20 Building Permits 585K 601K Investors used to aim for rents that were 1% of the purchase 9/20 Building Permits (MoM) -2.7% -3.2%price, or $1,000 a month for a $100,000 home, which equates toan annual gross return of 12%. Today in many areas, that has 9/21 MBA Mortgage Applications - -increased to 1.5% to 2%. However, average returns after taxesand expenses are more like 5% to 6% of the property value. But 9/21 Existing Home Sales 475M 4.67Mthat is still well above what many other investments yield. 9/21 Existing Home Sales (MoM) 1.7% -3.5% When investigating potential investment property purchases,avoid the following pitfalls: 9/21 FOMC Rate Decision - - Confusing a cheap deal for a good deal - It is true that you can 9/22 Initial Jobless Claims - -buy some homes for ridiculously low prices, but that doesnt meanyou can rent them out. Homes in deserted subdivisions arent 9/22 Continuing Claims - -appealing to renters or buyers in many cases. The same is true forless attractive properties or those in less desirable school districts. 9/22 BB Consumer Comfort - - Forgetting that time is money - In real estate, time is not always 9/22 Leading Indicators 0.2% 0.5%on your side. You lose money when your property is empty,whether you are painting it or between tenants. Many times, you 9/22 House Price Index (MoM) - 0.9%may be better off accepting a lower rent than waiting for a higherpaying tenant. Secondary Marketing Takeaways: A few weeks Assuming you will sit back and watch the rent roll in - When you back, we outlined some of the bullet points that werebecome a landlord, you also become a rent collector. Just like making the financial markets jittery. This week, thehomeowners who cant pay the mortgage, tenants lose their jobs focus appears to be Europe, and in particular, Greece.and stop paying the rent. Evicting them can sometimes take The projected odds are 95% that Greece will default onseveral weeks. There are extra steps such as upfront screening its debt and its restructuring packages.and pulling credit reports to see who is the “best credit risk” to rentyour property, much like in mortgage lending. Why is that a big deal in the US? If Greece Knowing the area you are investing in – Is the town ripe for defaults (and Germany just may let them do that), thenrenters? Is it a commuter town that is more apt to have a high all the European (and global) banks and institutionsrenter’s population? Does the town lend to a conducive renting who have lent money to Greece take major losses.environment. Don’t guess if it is or isn’t. Your knowledgeable That, in turns, restricts global profits, tightens lending inWeichert Realtor can help with those questions and provide Europe, and perhaps triggers a start of a downturnvaluable insight to find the right investment. (recession?) in Europe. And it feels like every time Financing your investment property… is often different then Europe sneezes, the US catches a cold. Thus the flightfinancing your own home. Weichert Financial can help you analyze to safety of Fixed Income, and the continued low rates.the differences and make an educated decision. Ask us how! Mortgage Access Corp. d/b/a Weichert Financial Services, Executive Offices, 225 Littleton Road, Morris Plains, NJ 07950. 1-800-829-CASH. NMLS Company ID: 2731. Licensed by the NJ Dept of Banking and Insurance. Licensed Mortgage Banker with the State Dept of Banking in NY and CT. Licensed by the Pennsylvania Department of Banking, Mortgage Lender 21042. Licensed Lender in AK, AR, DE, MD, D.C., GA, ME, MI, MN, WI, IA, IL, IN, LA, VT, FL, WV, RI, KY, NC, ID, MS, NE, WY, OK,TN, WA. Licensed by the Virginia State Corporation Commission, License #ML105. Licensed Mortgage Lender in the Commonwealth of Massachusetts. License #ML1713, Certificate #43155. Certificate of Authority to transact business in CO, SC. Registered Mortgage Lender in TX. Licensed with the Financial Institutions Division in New Mexico, License # 01297. Licensed by the Department of Corporations under the California Residential Mortgage Lending Act. Licensed Mortgage Broker and Lender Ohio. Licensed Loan Broker and Lender Rhode Island. Kansas Licensed Mortgage Company, License #MC.0001229. Licensed by the New Hampshire Banking Department, License # 8714-MB. Licensed Oregon Mortgage Lender License #ML2528. Weichert Financial Services arranges loans with third-party providers. Equal Housing Lender.