sacramento cash flow homes march 2010: your guide to the sacramento real estate market

www.InvestinSacramentoRealEstate.com Schedule your FREE Investment Strategy Session (916) 687-6868

We are excited to announce the launch our magazine… Sacramento Cash Flow Homes! We love to talk about real estate and this offered us a platform to specifically target cash flow homes! If you have been watching the Sacramento Real Estate Market in 2009, you know that we have had another crazy year! Lenders have tightened their guidelines more than ever, but that did not stop investors and first time home buyers from fighting over the small amount of inventory available this last year. Banks still have not released their inventory of foreclosed homes and as of right now we don’t expect a huge flood to our market. Their release has been gradual as it appears they are waiting for buyers to absorb what is available before they release their next batch. Sacramento’s blend of inventory has changed from predominantly bank owned properties to now 45% of all homes on the market are short sales. The banks are being offered Government incentives help homeowners avoid foreclosure…. Which is better for everyone! Are you looking to invest in new rental properties

this year? Want a team on the ground to help you locate the best deal? Give us a call to schedule a FREE no-obligation strategy session so we can see if we can help! To Your Success!

Sacramento

Cash Flow Homes

Magazine

Created by…

Todd and Erin Newington

Mortgage Planners

First Priority Financial

9381 E. Stockton Blvd. #200

Elk Grove, CA 95624

(916) 687-6868

[email protected]

Over the years we have come to understand the

many fears and frustrations people have when

shopping for a mortgage. Many of which, we

experienced first-hand as consumers before our

career as mortgage advisors.

We guarantee that we will always put your needs

and goals ahead of any commission or paycheck

to help you maximize your goals and dreams.

We guarantee that we will treat you with the

respect, honesty, and dignity that you deserve

and communicate with you openly, throughout

the entire process, to allow you to make in-

formed decisions based on expert mortgage ad-

vice from an investor's point of view.

CONNECT WITH US ONLINE

www.facebook.com/teamnewington

www.linkedin.com/teamnewington

www.twitter.com/teamnewington

www.SacramentoMortgageUpdate.com

www.SacramentoCashFlowHomes.com

www.ElkGroveREIA.com

First Priority Financial, Inc. is licensed by the CA Dept. of RE, license #00654852" Todd Newington #01700520 Erin

Newington #01700374

© 2010 All Rights Reserved. This magazine can’t be reproduced in any way with out written consent.

P.S. Make sure to register for our Investment Alert Emails

so you can start receiving emails with the newest rental property deals!


Our Sacramento Investor Boot Camp will give you the tools you need to purchase investment property in today’s Sacramento and Elk Grove real estate market. We will take you to some of our favorite cash flow areas and show you how to get a deal on your next investment purchase.

Register for our next Investor Boot Camp!

You will learn:

• What you should expect when buying from a bank!

• Learn how an asset manager thinks and get insider informa-

tion from a local REO (bank owned) agent in Elk Grove!

• How offers are received and processed by the bank!

• How to write a solid offer that will get noticed!

• About loan programs that allow you to put less money down

that most mortgage professionals don't know exist for Investors!

• Get tips on what investment models are currently working in

our area!

• Find out how to get the bank to pay for your closing costs!

• Which local neighborhoods you should target and what rents you should expect!

• And more!

Register online at www.SacramentoInvestorBootCamp.com Or call Erin at (916) 226-9617!

EVENT SPONSORED BY:

Todd and Erin Newington First Priority Financial Inc.

AND

Mode and Durham

Keller Williams Realty

What can you expect from this all day exclusive event? The group will meet in Elk Grove around 9am on a Saturday morning. We will provide you breakfast as we have a discussion in the classroom for the first hour. Then we will take you into the streets to show you a blend of homes available in some of our favorite cash flow areas. Finally we will provide you lunch so that we can discuss your next steps!

It’s important to note that if you are currently working with a real estate agent, it would be more appropriate that they show you homes in our area. This Boot Camp is FREE of charge and we hope to earn your business in the process!.


WHY BUY NOW?

Here are my top 5 reasons why you should consider investing this year in our current

Sacramento Real Estate Market:

1. Homes are now under-valued! Right now prices have dropped to the point where it’s

cheaper to buy a foreclosed home than build it. Our clients are having to insure their homes based on the

replacement cost which is much more than what they paid for the home. Many insurance companies price re-

placement cost at $150 square foot. As you can see by the graph to the left, most zip codes in Sacramento are

trending under $110 a square foot!

2. Interest rates remain low which is expected to

change soon! Right now you can get a new mortgage for an

investment property with an interest rate in the range of the low-mid 5’s. Locking in at these historic

rates will improve your cash flow numbers.

3. Wholesale Flippers have entered the

market big time! We have seen more and more investors who are

buying homes to immediately resell to retail buyers. Homes are being purchased at a

discount, and with a little elbow grease, can be

resold to a retail first time home buyer.

If investors who flip properties are able to turn a quick profit in our current market, it just shows

you can get a discount, but choose to keep the home long term.

Many folks have sit on the sidelines waiting for our

market to hit the bottom. What these folks don’t realize is those Investors currently buying in our

area are making a fortune! If you can get a deal with discount prices that are under-valued and

cash flow… Why not invest now?


4. The rental market has remained fairly steady! Although many rental owners I talk to have had to slightly

reduce their rent to get a renter secured… the impact is nothing like what we have seen in the ownership side of

the fence.

5. The Room for Error Factor?... Right now all new mortgages (FHA and conventional)

have to go through a new process in order obtain an appraisal for a property. This new process requires a

third party Appraisal Management Company (AMC) to manage the entire appraisal process. The AQMC’s job

is to randomly assign appraisers and act as a middle

man between the lender, mortgage broker, and the appraiser. The thought process behind this new rule is the appraiser can no longer be

pressured by the parties involved to get the value that is needed to get the deal done.

Well, this new rule backfired and has contributed to further decline of our market. The problems have been the AMC’s are hiring appraisers who are unfamiliar with our area.

Some are coming as far as the Bay Area to give their opinion of value of our Sacramento market. This has led to many appraisals coming in below the actual value.

This forces the sellers to lower their price so the buyer can get financing. We have seen our clients get as much as $25,000 off their accepted price because the appraiser

used comparable properties that were not accurate.

Under valued real estate + Cash Flow + Low Interest

Rates +"Room for Error Factor" = A REAL DEAL TODAY

The fact is more millionaires were made during the Great Depression than any other time

in history! We have the same opportunity in front of us today. Make sure you work with a real estate agent who understands our market and your goals, so you are looking at op-

portunities that will make you money!

We work with many investor friendly Realtors if you would like a referral, just give us a

call at (916) 687-6868!


What's going on with the Sacramento Real Estate Market?

Get an update for the last 90 days!

If you have been watching the Sacramento Real

Estate Market, you know we have been through the

ringer for the past 4 years or so! So where are we

now?

After many years of really rough waters... it feels like

the storm might be over. We don't believe that to be the

case.

The Sacramento Real Estate Market, in our opinion,

still has several years before we cycle through our

bank owned homes and short sales. By the time that

happens... If you have not made a purchase... We

believe you may have missed the bottom of the market.

This chart provided by Altos Research who uses data directly from the MLS system. These number were run as of March 22nd and only reflect single family homes.

Here are some stats that I pulled for some popular areas in Sacramento. As you can see not

all areas have reacted the same to our current real estate market!


It is important that you work with a real estate agent

who understands our market! Make sure to call us for a referral!

Want to track what is going on in the Sacramento Real Estate Market?

Visit our website at www.investinsacramentorealestate.com to order your FREE customized

reports. You choose the zip codes you want to track and we will send you weekly or monthly

reports like the ones above for FREE via email!

Our reports track sales, inventory levels, price per square foot, listing absorption, days on the

market, and more for each zip code you choose !

YOU CAN ALSO COME BY OUR BOOTH TO REGISTER TODAY!


DO YOU HAVE A PLAN?

Why do I need an Investment plan? You wouldn’t take a long road trip without a map. In the same way, you need a

road map for your financial future. A financial plan looks at where you are

today and where you want to go. Then it leads you through all the steps you

need to take to bridge the gap between the two places.

Having an Investment Plan allows you to pinpoint what types of homes your

should be looking for in the Sacramento Real Estate Market!

You could be pushing yourself away from your goal if you

do not have a plan!

1. Don’t just buy real estate haphazardly because it’s cheap right now!

Buying up real estate just because it is on sale is not a plan. Know what you want and what you will need to get

there ...then choose the right property and amount of properties to meet that goal.

2. Run your numbers and then run them again!

If your deal does not provide you with your needed cash flow and/or return, you probably don’t need to buy it. In this

market you need to sharpen your pencil so you don’t get burned.

3. Who will your team of advisors be?

Being a “Jack of all Trades” is a tough job and may, actually, end up costing you money. You will never be able to master

every aspect of investing and do it well. Hire a team of professionals you can leverage from to meet your goals.

4. How long will it take?

Do you know, specifically, how many and at what pace you will need to acquire investments in order to acquire your goals?

Make sure you are future pacing your investing activities to meet your financial objectives?

Remember: No plan = Indefinite progress (or at best, stifled progress)

What information do I need to build a Investment Plan?

An Investment Plan will help you make the most of your money. Before you can build one, you need to know where you stand.

Start by taking a look at your finances today. Remember, the more honest you’re with yourself, the more effective you will be.

Write down:

• What you own (big items like your home, car, boat, savings and investments)

• What you owe (student loans, mortgages, car loan, boat loan, credit cards, and other bills)

• What you make (your pay and other income)

• What you spend (include basics like food, clothing, utilities, and car costs, as well as extra expenses like eating out,

insurance, health or dental bills, and money you donate)

• What you hope to achieve (your goals) and in what time frame

• Then back into your money rules and actions steps that need to take place to accomplish your goals. If the numbers

aren’t penciling out, you may need to make/save/invest more money, spend less money, push your timeframe out, and/

or find investments that meet your tolerance for risk with higher rates of return.


Whether you are buying a new home or refinancing your existing home, you’re about to make some critical decisions about mortgage interest rates. This guide will give you an expert’s insight to the most commonly asked questions. Gaining even a basic understanding of the role of interest rate movements, lock options, and strategies can save you tens of thousands of dollars in interest over the life of your new loan and help guarantee that your mortgage application process is easy and pleasurable. The subject of mortgage interest rates and points has traditionally been a source of considerable stress for uneducated borrowers. But it need not be stressful at all if you understand a few simple basics:

• Rates Change Daily And in many cases hourly. Yesterday's quote is very likely to be different than today's or tomorrow's.

• Don't Play the Guessing Game Interest rate movement is not an exact science. A qualified mortgage professional can give you an educated guess based on the trading volume of mortgage bonds and anticipated economic reports. However, just like the stock market, nothing is guaranteed and doesn’t always go as expected. However, you can use this question as a good screening point to see if the individual you are working with is a professional. If they can’t give you at least an estimate, you may think about working with someone else. Also, if you can’t afford a rate increase, you may want to lock your loan to sleep better at night.

• Getting the Right Rate and Point Combination Determining which combination of rates and points is best for you is generally a function of how long you in-tend to keep the mortgage. In general, the longer you plan to keep the mortgage, the more advantageous it is for you to get a lower rate by paying more origination points up front.

What Makes Mortgage Interest Rates Rise and Fall? These questions are simple enough: What’s going on with mortgage rates? What makes them rise, or fall? Is it the Fed-eral Reserve (“the Fed”)? The economy? Inflation? The President? Fannie Mae or Freddie Mac? The answer is that rates are moved by a number of related factors, and believe it or not, you are one of those factors. Mortgage money can come from many sources, including deposits at banks and brokerages, but in most cases comes from investors through what is collectively know as the “capital markets.” This is where investors interested in purchasing certain kinds of debt instruments—bonds, in this case—come to buy these items. The primary purchaser of these bonds right now is the Federal Government, but that is set to expire the end of March. In order to attract investors, sellers of bonds must compete with one another to get their money. They do this by offering a variety of “instruments” (also referred to as “product”) with differing structures of risk and return over given periods of time. These offerings compete with other investments that are reasonably similar in performance, such as US Treasuries, corporate bonds, foreign bonds, and others.

UNDERSTANDING INTEREST

RATES


The volume of bond trading basically comes down to the theory of supply and demand. These are investors are just like you. They want to get the greatest return on their money with the least amount of risk. Mortgage bond trading and inter-est rate movement are typically counter cyclical. As trading volume goes up, rates go down and visa versa. As the return on mortgage bonds goes down in comparison to the unlimited amount of other investment choices investors have to place their money, mortgage bond issuers need to raise the yield to appeal to the investor. That in turn, causes the rate to you to go up. The opposite is true as trading volume declines. This is a continual dance between the supply of money to purchase or sell the mortgage bonds in addition to the rates being attractive enough to appeal to borrowers. Also, the economic climate affects mortgage rates just as much as Treasuries. After all, the US government isn’t likely to lose its job and suddenly stop making payments, but it’s a safe bet that a percentage of homeowners will, even in good economic times. There’s much more to the structure of bond, mortgage, and capital markets, including government influences (especially now) and overseas relationships to our capital markets that can also have an effect, but the information provided above should be enough to provide you with a modest working knowledge of the market. You will notice, up to this point, we really haven’t mentioned the Federal Reserve Board (the Fed) at all. Fed policy and rate movements have no direct ef-fect on fixed rated mortgage pricing, but their action or inaction (and expectations thereof) can have a substantial indirect effect.

The Fed’s Role Contrary to popular belief, the Federal Reserve Board doesn’t control long term mortgage rates (except for the recent bond purchasing by the US Treasury). In fact, their most well known policy tool—the Federal Funds Rate—is the over-night interest rate that banks can charge each other when a bank needs to borrow money to meet its end-of-day reserve requirements. Simply, those rules require that a bank must have a certain amount of cash on hand at the end of each day, and those funds can be borrowed from another bank at this interest rate. You should know that the Fed merely “suggests” what this rate should be, which is why it’s called a “target” rate; the actual rate is negotiated between the borrower bank and the lender bank. A good way to keep a handle on the Fed is to remember that the Fed Funds Rate is the shortest of short-term rates—literally, for an overnight loan—and a fixed rate mortgage loan is all the way at the other end of the scale, a loan that lasts as long as 30, 40, or 50 years. From Fed Funds Rate adjustments, begins a complicated discussion of monetary policy about how Fed movements affect certain deposits, loan markets, and inflationary expectations. The end result is that the Fed raises or lowers the Fed Funds Rate to help manage increases or decreases in economic activity. Lower rates can help banks make certain kinds of loans more cheaply, especially for businesses and certain kinds of consumer lending, and that can help generate greater economic growth. Higher rates, by contrast, can reduce demand, and thereby reduce inflationary pressure. You’ve probably heard a lot of talk in the news about this lately. In some ways, the mere expectation of what the Fed might do can be more important than what it actually does, as their actions or inactions can help to confirm or deny what investors be-lieve about the current state of the economy and capital markets. You may have noticed that sometimes the Fed reduces the Fed Funds Rate and fixed mortgage rates actually increase as a result. Why? If the Fed is taking steps to address economic weakness by lowering the Fed Funds Rate, it likely means that a return to faster growth—and possible higher inflation, as well-is coming sooner rather than later. So, what moves mortgage rates? Supply. Demand. Competition for money. Inflation. The Economy. Expectations. And, of course, you, the perspective borrower.


Are you a member of the Rental Housing Association?

We highly recommend you join the association if you own rental property?

“If it were not for RHA in the beginning of our journey as rental owners, we are not sure what we would have done. Being new to the rental scene, we were able to leverage their many resources available in order to become successful landlords.

Sometimes, as an Investor, you get caught up in the thrill of the deal and forget that you are now responsible for providing a safe and clean environment for local families. We spent hours developing our own plan for managing our rentals by taking classes at RHA and calling in issues as they came up. Their free legal Q&A paid for the membership fee alone!

We highly encourage you to make the small investment and join the Rental Housing Association. It was worth every penny and is a great resource for us.” Todd and Erin Newington

www.RHA.org

Come by our booth to register to receive email alerts as new Cash Flow Homes come on the market!

It’s FREE and you can start receiving emails Monday!


HUD announced a temporary policy that will lift the 90 day

seasoning rule! Now we are talking!

In an effort to stabilize home values and improve conditions in communi-

ties where foreclosure activity is high, HUD Secretary Shaun Donovan

last Friday announced a temporary policy that will expand access to FHA

mortgage insurance and allow a quicker resale of foreclosed properties.

FHA previously required the seller to own (must be on the title) a prop-

erty for a minimum of 90 days before they could sell it to a buyer using

FHA financing.

HUD has lifted this restriction as of February 1, 2010!

This lift of the 90 day seasoning rule will permit buyers to use FHA-

insured financing to purchase homes they previously could not qualify

for.

You see... there are a ton of investors picking up homes and renovating

them, so they can quickly resell the home for a profit. In the past, if an Investor wanted to sell their home to a FHA

borrower, the investor would have to hold the house for 90 days before they could write a contract with the bor-

rower. This made investors seek out conventional and VA buyers, leaving the FHA buyer out of luck.

To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated

prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length With no identity of interest between the buyer and seller or

other parties participating in the sales transaction.

• In cases in which the sales price of the property is 20 percent or more above the seller's acquisi-

tion cost, the waiver will only apply if the lender meets specific conditions.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mort-

gage (HECM) for purchase program.

This is a good compromise in my opinion! Let's make sure the FHA buyer is protected and... Lets get these

homes rehabbed and back on the market!

If you purchase a home for cash… You have to wait 6 months before you an pull some of

your money out!

In our Sacramento Real Estate Market many investors are taking down (investor talk for

purchasing) homes with cash. This way they are able to close quickly and often times get a

discount on the home because they can close in a few weeks.

In the past, all Investors had to do was close escrow, then turn around and pull most of their

money out by obtaining a new mortgage after the fact.

If you are going with a conventional program (Freddie or Fannie), you will need to own the

property (and be on title) for 6 months before you will be able to pull any money out.

If you do not plan for this upfront, it might throw off your investment project numbers so be aware!


OTHER RESOURCES www.ElkGroveREIA.com

Elk Grove REIA is a local Real Estate Investment Club we run! It was created so

local investors could meet at least-monthly for mutual support, encouragement,

stimulation and information to further their investment goals.

Whether you are looking to bounce ideas off someone, learn about local

techniques that are working now in Sacramento, find an investor or accountabil-

ity partner, locate a service provider, or just want to get your feet wet…. Elk

Grove REIA is here for you!

We meet the third Tuesday of the month in Elk Grove! We would love for you to

join us. Check the website for details about our next meeting!

www.SacramentoMortgageUpdate.com

Keep up with what’s going on in the mortgage world! This blog is updated frequently with

guideline changes and challenges we see in the financial markets.

www.InvestInSacramentoRealEstate.com

Find out how differently each area is reacting to this market. Get insight into the

Sacramento Real Estate Market!

Connect With Team Newington Online!

Facebook.com/teamnewington Twitter.com/teamnewington Youtube.com/sacramentomortgage Linkedin.comteamnewington

sacramento cash flow homes march 2010: your guide to the sacramento real estate market

Documents

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