I've made a few comments about the popular press exaggerating the drawbacks of being a landlord .  Managing any business means dealing with customers - owning income producing properties is no exceptions.  Manage your customers (your tenants) well and they'll make your life easy. 

But you can't manage 'em well if you've picked the wrong ones, as this story from the Bay Area Mercury News shows.  A San Jose tenant is charged with killing his landlord and torching the property.  The article says that the tenant was not there when firefires responded to the blaze, but "showed up several hours later and did not appear curious about what had happened" according to police.  Hmmm.....

Well violence and arson are a worst case situation, but the first step to tenant management is screening candidates before they sign on the dotted line .  There were a lot of dodgy signals in this case that should have been heeded - the suspect had a history of scrapes with the law and an established track record of anti-social behavior.  Having a vacancy is bad, but filling a vacancy with a bad tenant is a thousand times worse.  You already knew this, but it's always good to hear again. 

Jerold & Terry Smith do a good job of covering this topic on their REALTOR® blog .  With various new competitors coming onto the market trying to forge their own holy grail of a unified system it will be interesting to see how NAR and the various MLS systems react. 

Real estate investors in some areas will greet this topic with a yawn...by the time a property hits MLS you're looking at a guaranteed negative cashflow investment.  In markets like this you need to find deals at significantly below market value to make the number work (short sales, foreclosure auctions, REO's, etc.)  But in undervalued areas where the rent-to-property value ratio is high you can still pluck some deals out of MLS if you keep your eyes on the ball. 

But competition can still be fierce.  I recently invested in a single family house that I'd bookmarked in the Houston Association of Realtors' excellent site www.HAR.com.  I got an update that the price of the property had been dropped by 10%.  This put the property within my investment threshhold.  I sent in an offer immediately; within the hour. 

Mine was the fifth one they got. 

I did end up getting the deal, though.  The guy who originally one didn't come though with financing and had to back out.  My offer wasn't the next best one, but it must have looked like the bird-in-the-hand to the seller.

Related posts:

• Another non-traditional player jumps into the MLS game
• Zillow.com :: How will the traditional real estate industry respond?

38th President of the United States of America.

My fellow Americans, our long national nightmare is over. Our Constitution works. Our great republic is a government of laws and not of men. Here, the people rule. ... As we bind up the internal wounds of Watergate, more painful and more poisonous than those of foreign wars, let us restore the Golden Rule to our political process and let brotherly love purge our hearts of suspicion and of hate.  August, 1974

Happy holidays from our family to yours.

You'll see the posts slow down for a few days as we enjoy the holiday season.  Looking forward to more good dialogue in 2007.

Regards,

Christopher Smith

EquityScout.com

I got a comment from a real estate agent the other day on the ActiveRain blog.  She said:

• “You can spot the problem investors right away. They have absolutely no criteria for what they are looking for. Their criteria is "anything that is a good deal." Good luck with that. If you don't know what you want to buy you don't know what you are doing.”

Hmm….that sounds like pretty good criteria to me – that's something I say to my agent all the time.  And that’s a fact that many real estate agents take a while to understand.  But that’s okay – we just have to get the point across that as investors we’re looking for something different than the average homebuyer.  An investor isn’t going to say “go find me a nice 3 bed 2 bath with room for my quilt collection on a corner lot.”  An investor is simply looking for a bargain that’s going to generate cashflow. 

And in some areas, bargains are easier to find these days than others.  In Global Insight’s 3rd Quarter Housing Price Study, released this week, New Orleans took over pole position as the most undervalued market in the United Sates, a spot that was held by College Station, TX (home of the Texas A&M Aggies) last quarter. 

Overall, economists take a bad rap, and I understand there are those out there who don't like valuation studies.  But generally I thikn they're useful, and I like Global Insight’s approach.  One thing that does pop out me, though, is that New Orleans is…different.  The Global Insight algorighm seems to do a good job of tracking trends when applied to historical data, but one has to wonder how well it fits the situation in New Orleans post Katrina/Rita.  So I’d look at that particular data point with a bit of suspicion. 

Texas still dominates the bottom five (Dallas, College Station, Houston and Fort Worth, in addition to New Orleans).  No news there.  Other notables: Tulsa, OK; Rochester, NY; Charleston, WV; Wichita, KS; Columbia, MD; Indianapolis, IN.  Investors in these markets should have an easier time of finding investments that produce positive cashflow.  The coasts are still challenged, but as prices have flattened/declined so have the levels of overvaluation.

Global Insight today released it’s analysis of data released by the Office of Federal Housing Enterprise Oversight (OFHEO), which covers both regional and national trends in residential real estate pricing. 

The main conclusion of the study is that the overall level of valuation is starting to ease nationwide.  Last quarter 66 metro areas were deemed “extremely overvalued”, whereas this quarter only 63 are.  This largely is due to price declines in some high value markets – 76 of the 317 metro areas surveyed experienced price declines during the quarter.  Nationwide, the average rate of appreciation for the quarter was 0.86% - significantly below the historical average. 

I thought the chart above was interesting – I took this from OFHEO data on the .gov website.  The cooling trend which accelerated last quarter continues.  National quarterly price appreciation topped 3% quite a few tiems over the past couple of years.  And note, these aren’t annualized numbers.  The peak was in Q3 2004 where the national index went up 4.44% in one quarter – that’s an annualized rate of 17.74%.  These, of course, are national averages – some metro regions were significantly higher. 

Real estate is local, but in a sense we’re all in the same economic boat so a soft landing will be good for the economy as a while.  But regardless of how it plays out, things will be tough for investors in a lot of markets for a while.  Look for shot sale opportunities as overextended homebuyers and speculative investors get squeezed out of homes with negative equity.

Regionally, most markets are within a few points of where they were when Global Insight last came out with their analysis last quarter, but interestingly four important bellweather markets (Las Vegas, San Francisco, Tampa and Washington DC) have inched their way back below the “extremely overvalued” threshold. 

I was meme tagged by Pat Kitano of Transparent RE.com. A meme [mem ] is described by the American Cultural Dictionary as “A unit of cultural information, such as a cultural practice or idea, that is transmitted verbally or by repeated action from one mind to another .”

Huh?  Well consider it sort of a virtual party game.  And this particular meme has instructions: tell five things about yourself that readers might not know, and pass the infection along by tagging five other Bloggers. 

So for your rea