Whilst popular hope for green shoots in the housing market lies in President Obama’s stimulation policies, private enterprise has developed its own solution to the mortgage log-jam, that is the recent upsurge in owner finance and land contract programs. Briefly put these programs allow occupiers the chance to purchase properties at an agreed rate over the next 10 yrs. During this time they pay the mortgage in the normal fashion and are responsible for the taxes and day to day repair.

This type of arrangement has many fans within the traditional rental pool, the first time buyers, as well, as with those people in the unfortunate position of being recently foreclosed upon. The typical program allows for people with sub-prime credit a chance to secure a place on the property ladder at a given point in the near future, whilst allowing them the chance to work on getting their all important credit score to an acceptable level for conventional finance.

These programs give the property owner the chance to be the mortgage holder. The tenant/homeowner then re-finances the property with a conventional mortgage provider, and the landlord/investor realizes his, often very attractive, return.

The advantages for a real estate investor in entering into such a program are wide-ranging; firstly, they have a long-term occupier in situ who is committed to the idea of purchasing the property in the future. Secondly, the occupier is likely to maintain the property to a very high standard as they are intending to be the outright owner of the property within a short period of time. Thirdly, these contracts allow for a degree of certainty in both having a buyer and the price the buyer will pay. This last point gives the investor the opportunity to know the level of profit that they will realize from each property, which lets face it is an almost unheard of bonus in the real estate world.

The fact that capitalism has evolved to provide these land contract  programs out of the ashes of the conventional mortgage market, surely gives hope to all  real estate professionals, Investors and Brokers alike as it provides real ‘grass roots’ activity in the part of the market which needs it most. Is this the future of real estate investing? A growing number of  savvy real estate investor’s are saying it is, by putting their money where there mouth is. Spyglass  has several programs in different parts of the US, please get in touch if you want to find out more.

The woes of the single family housing market are well documented but one area of the housing market that is less analyzed is the multifamily market, here we discover how this area is standing up to recession.

Multi-family developments, as the name suggests, are those developments which house more than one family under one roof, these range in size from duplexes right through to large apartment buildings and communities. Typically multifamily developments are bought and sold off of cap rates calculated as a multiple of the net income, but during the housing boom the trend to convert multi-family houses into condo’s in many arts of the US, pushed multi-family developments to historic highs. These developers were buying the developments at a calculation based on potential resale costs of the individual units, which is traditionally greater than the sum of the whole. When the owner occupant and investor demand, for purchasing the units dried up, the rental demand remained strong.

There are several reasons for the strong rental demand; the erstwhile homeowner who has been evicted needs to live somewhere and as multi-family homes operate at the lower and cheaper end of the rental market then they are popular again. Also the shadow market (the area of the housing market which includes individual investor owned single family homes, condo units etc) has fallen out of favor with tenants as so many of the owners of the units are foreclosed upon which automatically evicts the tenant. These tenants are returning to the security of the traditional multi family rental option. The last main reason for the strong rental demand is the would-be buyer that cannot get conventional finance and so are forced to rent until such time as the market returns to see resemblance of normality. Condo converters also had the impact of removing many units from the rental pool.

As the artificial demand by condo converters receded then the prices of the multifamily units also fell, however as these prices are underpinned by the income of the properties and as the rental occupancy levels are high they haven’t suffered the drastic price falls which have affected many of the other elements of the housing market. In fact at the current time most multi family units are starting to look expensive when compared to those parts of the market which are affected by foreclosures, Bank REO’ s and distressed sellers off loading property at significant discounts to peak pricing.

Other reasons which contribute to the relative stability of the multi family sector include the lack of financing for new multifamily housing developments is contributing to firm up prices as lack of new stock coming online keeps demand high. A further significant reason is that many operators of multi-family units are experienced and professional landlords that are well equipped to survive the housing bust.

A combination of robust tenant demand, reduction in number of available units, stabilized cap rates and a constricted development pipeline suggests that those investors which already own multi family units will be well placed to survive the recession.

You are about to purchase another  real estate investment unit. You have the funds and everything else in place and are about to hit the road. It’s time to read our list of four factors.

Location: As we all know, location of the  real estate investment is of paramount importance with any real estate purchase, this is never more the case when you are searching for a rental property. The reason being is tenants are more transient by their very nature and so will want to be as close to the neighborhood activities as possible. It is also niche market specific for example if your going for college students then the nearer you buy to campus the more popular your rental will be.

Price: When considering a rental real estate investment always try and get the most income for your money. Sounds obvious I know but if you saw two similar sized houses and one was $10,000 more than the other, the chances are that these rentals would almost certainly rent for the same amount and so with the higher priced one you are trying to find extra income to service it.

Size: This may well be governed by your budget but in general terms you need to understand what the preferred size is for the area you are looking at, for example; in a Minnesota real estate investment downtown development it is reasonable to assume a studio or one bed room flat under 800 sq ft. will be a popular rental choice whereas out in the suburbs you may opt for a three bed house with 1800 sq.ft of living space.

Its not for you!: Always keep this in the back of your mind when your looking for the  real estate investment property. Unless you are buying it in advance so that you can downsize to it in the future then the property your buying doesn’t need to be the quality that you will live in as we have discussed each area has ceilings that people expect to pay for rent and if you look at property with your own occupation in mind then you may well be paying over this threshold for your rental.

Like any list of this nature it isn’t designed to be a comprehensive guide of how to find a rental investment property but rather a tool to help you think about your specific situation and adapt and apply some of these criteria to your needs. Please get in touch if we can help in anyway with your purchase.

According to an update from the National Association of Realtors (NAR), a slow but steady recovery is predicted for the U.S. real estate market, despite the ongoing challenges.

Lawrence Yun, Chief Economist of the NAR spoke to the 2010 Realtors conference, and said he expects a continuing improvement of underlying fundamentals of the current market in the following years. Mr. Yun pointed out that “a slow recovery is currently taking place, and that the pace of job growth will determine the strength of the housing market recovery going forward.”

One key factor, according to several experts, is to re-establish sensible underwriting standards for mortgages, as well as down payment requirements, as these will both help creating a more stable market with less booms and busts.

Margaret Kelly, CEO of RE/MAX said that overall, agents are now cautiously optimistic about the future state of the industry and added that “despite some challenges there are plenty of opportunities in the housing market with low mortgage interest rates, abundant inventory and stable prices attracting buyers to the market.

According to another expert, one of the key challenges to achieve a full recovery is to work thru the foreclosure issue, which is dragging down home sales and prices, consumer confidence and the health of the market and economy as a whole.