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Top Ten Myths Preventing People from Investing In Real Estate

By Lloyd Segal,
President of LAC-REIA

Myth 1: No Cash

The Myth: “You need money to invest in real estate.”
The Truth: Find a good real estate deal, and the money will find you. Ask any experienced investor and they will tell you that a lack of funds is never an issue; lack of good deals is! If you can negotiate a good price on a house, you will find plenty of partners or lenders willing to put up the money.

Myth 2: No Time

The Myth: “I’ve got a job, a spouse, kids, and little spare time to invest.”
The Truth: Turn off your television and you’ll have all the time you need! People spend an average three hours per day in front of the tube. They spend even more time on weekends. Want to do something fun this Saturday? Load the kids in the mini-van and drive around looking for ugly houses. Make a game out of it giving a dollar to each of your kids that spots an ugly house. Tell them that each ugly house you buy means enough money to take them all to Disneyland.


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Myth 3: Everyone Says This Stuff Doesn’t Work

The Myth: “Those late night infomercials and reality shows don’t work”
The Truth: You can convince yourself that anything won’t work. Henry Ford once said, “Whether you think you can or think you can’t, you are always right.” If you listen to the critics, the naysayers, and other pessimists, you’ll convince yourself it doesn’t work. Most people that criticize money-making ideas need to do so for their own ego. After all, if it were true, what’s their excuse for not being successful? Make a point of not taking financial advice from anyone who makes less than you do.

Myth 4: Too Much Competition

The Myth: “There’s too many people trying to buy houses to find a deal.”
The Truth: There are more than enough deals to make everyone successful. At any given time there are hundreds of distressed properties for sale in your market for each investor looking for them. Besides, a majority of people who say they are investors are just sitting on the sidelines waiting for something to fall in their lap. Don’t be one of them – go out and make deals happen! You will be successful if you spend your time finding deals and not worrying about other people.

Myth 5: It Doesn’t Work in My Market

The Myth: “It doesn’t work in my city.”
The Truth: It works in EVERY market. True, it may work differently in some markets than others, but there are investors making money in every city, every day of the week. You have to learn your market – the rents, the trends, the local customs, the lenders, the title companies, etc. Then, learn the techniques and adapt them to your market. If you are in a hot market, you can buy and sell properties faster and ride inflation. If you are in a down market, you can find lots of bargains. Regardless, in every market, there are people with financial problems that are forced to sell their homes.

Myth 6: The Recession is Coming

The Myth: “Although the market is good right now, I hear that we are heading for another recession.”
The Truth: There are always naysayers predicting market crashes. You need to ignore these pundits. Besides, there are always deals regardless which way the market is heading. If the market changes, change your strategy. For example, if the market falls, sell cheaper or with attractive terms. When Dell wants to move more computers, they drop the price. When GM wants to move cars, they offer no-interest financing. Be creative and do things that make your houses sell or rent faster. If prices are falling, buy way below market and sell just below market. If rental vacancies go up, offer free cable or WiFi. After all, when everyone else is “dooming and glooming,” it only clears out the competition.

Myth 7: Realtors Won’t Cooperate With Me

The Myth: “Real estate agents don’t cooperate with investors.”
The Truth: The right agent can be your best friend and #1 source of business. I have one agent that brought me six deals in the past year. She knows exactly what I want and only calls me when there’s a deal. You need to educate a few agents and let them know exactly what you want. Few agents have repeat customers. In contrast, you have to make them understand that you will be giving them business over and over again.

Myth 8: I Have Bad Credit

The Myth: “I need good credit to buy houses.”
The Truth: Good credit helps, but you don’t need it to make money in real estate. Lease/options, owner-financing, flipping properties, assignments, and other creative techniques will allow you to buy real estate without credit. Besides, you can always use a partner who has good credit. You can also borrow “hard money” without having good credit. In the interim, you can work on fixing your bad credit so you can use it as an asset in the future.

Myth 9: I Might Lose Money

The Myth: “Real estate is risky. I could lose everything.”
The Truth: Real estate is one of the safest investments you can make! The stock market is beyond your control. Savings, CDs, money market funds won’t earn you enough money to make it worthwhile. You have to be willing to take a calculated risk to make money. The more you educate yourself, the less risky real estate becomes. However, don’t think you need to know everything before taking action.


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Myth 10: I Don’t Know What To Do First

The Myth: “I need to learn more before I start.”
The Truth: If you’re reading this, you probably know more than enough to get started in real estate. After all, you’ll never learn everything. Knowledge is an ongoing learning process, not a result. Read books, attend seminars, and take action. Then, learn some more and take a lot more action. If you are really impatient, enlist the help of others.

Henry Ford said, “Why should I clutter my mind with general information when I have men around me who can supply any knowledge I need?” Henry Ford was a smart man because he realized that he didn’t need to know it all if he could consult with others that did. And this was before Google!

Now go out there and start submitting offers. Remember, you won’t catch any fish if you don’t put your hook in the water.


Lloyd Segal

After practicing law for over 30 years (specializing in real estate litigation), Lloyd Segal assumed the leadership of the Los Angeles County Real Estate Investors Association in 2017 from the late Phyllis Rockower. Lloyd is an author, real estate investor, mentor, public speaker, and landlord. He is the also the author of four real estate reference books, including “Stop Foreclosure in California” (Nolo Press), “Stop Foreclosure Now” (American Management Association), “Foreclosure Investing” (Regency Books), and “Flipping Houses” (Regency Books). The Los Angeles County Real Estate Investors Association is the oldest (1996) and largest investor group in California. In his role as President, Lloyd is busy expanding LAC-REIA’s events and programs for members and real estate investors. For more information, visit www.LARealEstateInvestors.com

Compelling Reasons Why You Should Invest in Real Estate

Image from Pixabay

By Lloyd Segal, President,
Los Angeles County Real Estate Investors Association

If you’re considering investing in real estate, looked it up on the internet, read about it in books, attended some workshops, and perhaps ask a friend or two, you already know that you should no longer wait and get started today. But if you’re still struggling to figure out why you should invest, this article will highlight some of the most compelling reasons in the hopes of addressing your concerns and finalizing your thoughts about venturing into this brave new world.


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1. Appreciation

Over time, the value of real estate rises (sometimes fast, sometimes slow). This is due to “supply and demand,” a fundamental economic concept, which I’ll address separately. With respect to “demand,” our population is steadily increasing and does not appear to be slowing down any time soon. And until further notice, people prefer to live indoors. As a result, more and more people looking for a place to reside means more demand for housing. So the demand for real estate is gradually increasing. And, according to basic economics, as demand increases, prices rise in response. With respect to “supply,” they are simply not making any more land. So land increases in value with limited supply. Similarly, they’re not building enough houses on that land to meet demand. So the value of what already exists increases. Plus, improvements in the surrounding region also increases value. As a result, the value of real estate appreciates over time.

Image from Pixabay

2. Control

When it comes to real estate, once you’ve paid for the property and met all legal criteria, you own the asset outright and have practically unlimited control over it. You may immediately alter the asset’s value, improve the property, increase cash flow, reduce expenses, and increase the rents. So unlike stocks and bonds, you are not at the mercy of the market or corporate executives. You are in control and can increase the value of your asset.

3. Equity

The difference between the current market value of your properly and the balance of any mortgages encumbering your property is called “equity.” The more equity you have the better. When you invest in real estate, your property’s equity grows over time in two ways. First, as you pay down your mortgages every month, your equity increases. Second, as the value of your property appreciates over time in the marketplace, your equity increases.


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4. Diversification

Diversification is an important strategy to mitigate risk, particularly if you’re putting a lot of money into various investments. Most experts advise diversifying your portfolio so that you don’t lose everything in one fell swoop if the market in which you’ve invested suddenly goes downhill. Real estate is a great asset to put your money – and it’s a lot safer and more stable than a lot of other options, like stocks or bonds.

Image from Pixabay

5. Inflation Hedge

Today, we are dealing with inflation. Although all investments are affected by inflation, real estate is always a good hedge against inflation. Creating products and services is typically more expensive due to normal inflation. They must either increase pricing or accept lesser earnings. In contrast, real estate is a natural inflation hedge since it has no link with equities or corporate profits. Plus, any inflation costs are frequently passed on to tenants.

6. Conclusion.

If you’re still on the fence about real estate investing, hopefully I’ve given you a few compelling reasons why investing should be a wise decision for you. Keep in mind, as with any investment, there is always some risk involved. However, if you want to take advantage of all that real estate has to offer, you should be investing now. Remember, don’t wait to buy real estate – buy real estate and wait.


Lloyd Segal

After practicing law for over 30 years (specializing in real estate litigation), Lloyd Segal assumed the leadership of the Los Angeles County Real Estate Investors Association in 2017 from the late Phyllis Rockower. Lloyd is an author, real estate investor, mentor, public speaker, and landlord. He is the also the author of four real estate reference books, including “Stop Foreclosure in California” (Nolo Press), “Stop Foreclosure Now” (American Management Association), “Foreclosure Investing” (Regency Books), and “Flipping Houses” (Regency Books). The Los Angeles County Real Estate Investors Association is the oldest (1996) and largest investor group in California. In his role as President, Lloyd is busy expanding LAC-REIA’s events and programs for members and real estate investors. For more information, visit www.LARealEstateInvestors.com

Economic Update – June 2021

Photo from Pixabay

By Lloyd Segal

The one place that’s rip-roaring in our economy is the housing market. In fact, home prices are accelerating, as the Case-Shiller 20-City Index shows. Year-on-year gains rose to 13.3% in April, from 12% in March. Still, that’s a composite of 20 big cities. You might expect the broader FHFA national index to show more modest gains, but nope. That index showed prices up nearly 14% in April! Does that mean we’re back to the bad old days of the early ’00s housing bubble? No, I don’t think so…yet.

After all, this bump isn’t driven by psychology (hey, buy a house, make a ton of money! Home prices never go down!) so much as real, consumer demand. All you wild millennials (you know who you are) are buying houses all at once. And now that prices are surging, those who haven’t bought are freaking out that they better buy now or be elbowed out of the market for years. So if you’re an investors with properties to sell, you’re in the catbird seat right now.
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Image from Pixabay

Of course, it would be one thing if builders could quickly scramble to increase housing supply. But not only is that hard to do normally, it’s nearly impossible these days with shortages and huge price hikes on key building elements, including lumber and labor. The main homebuilder index is down 7.5% this month (although it’s still up 30% this year). Still, it doesn’t mean that all homebuyers in this market are losing out. In fact, selling your home and relocating to a better market–now that work-from-home has exploded–has been a hallmark of this “YOLO economy.” Even people who are paying over-asking price in Utah, for instance, may still be pocketing gains if they’re selling in California. So for those of you experiencing the Yolo Economy, let’s wash our hands, put on our facemasks, social distance, vaccinate, and get under the hood…
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Photo from Pixabay

New Home Sales Fell 5.9% in April. Newly-built single-family home sales fell 5.9% in April to a 0.863 million annual rate. But sales are up 48.3% from a year ago. The bigger story in the report by the National Association of Home Builders (“NAHB”) was the downward revisions to prior months. In the March report, sales stood at the highest level since 2006. However, now it looks like sales have generally been decelerating since January. That said, even after these revisions sales are still up 18.2% from February 2020 (before the pandemic erupted). This again illustrates how resilient the housing market has been throughout the turmoil of the past year. But one obvious reason for the recent slowdown in sales has been the relentless increase in prices. The median price of a new home is up 20.1% from a year ago (the most since the late 1980s). But it’s not just buyers who are pulling back from the market. PropstreamAd Due to higher inflation in costs, home builders are also becoming more cautious about listing new houses too early, waiting deeper along the construction process before making inventory available for sale. The problem is that with the recent runup in lumber prices and the ongoing labor shortage, builders don’t want to sell unfinished properties too early and be left holding the bag if costs balloon even more. Case in point, the NAHB reports that rising lumber costs alone have added $36,000 in cost to the average single-family home. So for the time being at least, look for builders to finish existing units before listing them for sale.
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Image from Pixabay

Nevertheless, the number of single-family homes currently under construction are at the highest levels since 2007, so there is a significant backlog that should keep construction activity running on all cylinders for the foreseeable future. As more finished homes become available, expect demand to remain strong and help maintain a rapid pace of sales in 2021.
Southern California Home Prices Jump 20% in April. The Southern California hot real estate market just got hotter! April home sales jumped 86.2% year-over-year with a total of 25,857 transactions, up from 13,889 in April 2020, according to data released by real estate firm DQNews. The six-county region’s median home price increased 20.2% year-over-year to a record $655,000, That’s $25,000 more than the previous median price record set in March. The 20.2% leap is the first year-over-year increase of more than 20% since December 2013. It’s both a reflection of the pandemic-fueled housing boom and a market that was chilled by the coronavirus last spring as sales died in escrow and would-be sellers decided not to move. More amazingly, it’s the ninth straight month of double-digit price increases! But why you may be asking? Economists credit a mix of factors including ultra-low mortgage rates, increasing demand for space, and an emerging home-buying demographic: millennials. Another contributor is the housing shortage.
As I’ve previously written, there’s a glut of potential buyers but a shortage of sellers, and it’s leading to bidding wars that drive offers far above the original price tag. Can you imagine, in April, more than half of homes in Los Angeles fetched more than the seller was asking, according to the Multiple Listing Service. Yes, you read that correctly. More than half of the homes sold for more than asking price!
Both sales and prices rose in all six counties in Southern California: * In Los Angeles County, the median price rose 19% to $750,000 in April, while sales climbed 101%; * In Ventura County, the median price rose 18.5% to $705,000, while sales climbed 82.4%. * In Orange County, the median price rose 15.6% that month to $872,500, while sales climbed 97.9%; * In Riverside County, the median price rose 19.7% to $489,750, while sales climbed 80.8%; * In San Bernardino County, the median price rose 23.7% to $436,500, while sales climbed 66.9%; * In San Diego County, the median price rose 17.8% to $700,000, while sales climbed 74.1%.
SoCal home price history
Key Inflation Gauge Rose 3.1% Year-over-Year. The “Core Personal Consumption Expenditures Index,” a key inflation indicator, rose a faster-than-expected 3.1% in April as price pressures built in the rapidly expanding U.S. economy, the Commerce Department reports. Federal Reserve officials consider this Index to be the best gauge for inflation, though they watch a number of metrics. As part of its price stability mandate, the Fed considers 2% to be healthy, though it is committed to letting the level average higher than usual in the interest of promoting full employment. The Index captures price movements across a variety of goods and services and is generally considered a wider-ranging measure for inflation as it captures changes in consumer behavior and has a broader scope than the Labor Department’s consumer price index. Including volatile food and energy prices, the PCE index jumped 3.6% year over year and 0.6% from March. That increase in inflation came with a sharp deceleration in personal income, which declined 13.1%. FOA Ad Personal income had surged 20.9% in March following the latest round of government stimulus checks you received. Despite the onslaught of inflation increases, most Fed officials remain reluctant to change policy. The central bank continues buying a whopping $120 billion of bonds each month (helping to keep mortgage rates down) and has kept benchmark short-term borrowing rates anchored near zero (even with the rising economy). But there have been some indications recently that the Fed is at least willing to start talking about reducing the pace of bond purchases. Of course, any real action is likely months away. Central bankers see the ongoing price pressures as “temporary,” due to supply chain bottlenecks and comparisons to last year when our economy was largely shut down. Let’s hope they’re right.
Core PCE
Inland Empire 4th Riskiest Housing Market. Investors watch out; the Inland Empire is now the nation’s fourth “frothiest” housing market, according to the “Bubble Watch Index.” What? You’ve never heard of the Bubble Watch Index. Where have you been? The Bubble Watch Index is the monthly homebuying data from Zillow and Realtor.com covering 47 big markets. The “bubble watch” scorecard is based on average rankings for overvaluation (listing prices vs. values); overheating (list-price gains vs. value increases); selling speed (days on market vs. a year ago); year’s inventory change; and year’s rent change. The Bubble Watch Index grades Atlanta, Georgia, as the nation’s frothiest market followed by Detroit and Jacksonville. Next comes a tie between our next door neighbors to the east, Riverside and San Bernardino counties. Folks seem very willing to dramatically pay more in these “affordable” markets in a feeding frenzy fueled by cheap mortgages and limited choices for house hunters. Just look at these numbers: No. 4 nationally: Riverside-San Bernardino counties … Pricing: $512,000 list vs. $460,833 value, or 11% overvaluation (41st) Appreciation: 22% list vs. 16.2% value, or 36% overheated (No. 10 largest) Sales speed: 28 days on market, down 50% in a year (No. 7 drop). Inventory: Down 64% in year (No. 11 decline). Remember, the Bubble Watch Index reflects “relative exuberance” in these 47 markets. But as I often say, these kind of rankings are part art and part science … so the beauty of any conclusion drawn from this analysis is definitely in the eye of the beholder. In other words, if you’re think today’s overall homebuying conditions are sustainable (I’ll bet you sell real estate), you’d argue the top of the rankings are simply the nation’s “hottest” markets. However, if you’re like me and are squeamish that homebuying has become irrational — plus, you’re here in California — here’s some solace: at least the Golden State isn’t leading the nation in this unnerving buying binge. Offshore Wind Farms Power California Housing. The federal government plans to open more than 250,000 acres of ocean off the California coast for wind development as part of a major effort to ramp-up the nation’s renewable energy and cut its climate-warming emissions. Under the plan, the administration would allow wind power projects to be built in federal waters off the coast of Morro Bay, as well as at a second location west of Humboldt Bay. This is important to all of us because the two areas combined could generate over 4,600 megawatts of electricity — enough to power 1.6 million California homes. Gov. Newsom praised the plans and estimated it would be built at least 20 miles offshore with enough space for roughly 380 wind turbines. The announcement comes amid a surge of interest in offshore wind power, which European countries have been using successfully for more than a decade, but which the United States has been slow to adopt. Despite wind energy’s appeal — it produces no greenhouse gas emissions and has a minimal environmental footprint — it hasn’t made progress in California. Although there has been no shortage of interest from wind farm developers in sites along California’s coast — particularly off the Central Coast and Humboldt Bay — efforts have been stymied. There has been regulatory obstacles, engineering challenges (created by the Pacific Ocean floor’s steep drop-off), and concerns about the impact the infra-structure could have on migratory birds, marine life and fisheries. As for the engineering challenges, the California coast presents an interesting problem.
windmill
Unlike federal waters off the East Coast, which are shallow enough to allow offshore wind infrastructure to be secured to the Atlantic seafloor, the Pacific Ocean is so deep that the only viable way to install offshore wind farms would be to build floating turbines that are tethered in place by cables. Floating offshore wind technology is still relatively new, but the industry has made significant progress in recent years. Nevertheless, it could be a decade before offshore wind farms start generating a significant amount of electricity. Any projects would need to undergo a thorough environmental review to study the potential consequences for fishing, shipping, marine life and views from the beach. They would also probably need the blessing of numerous state agencies. WRITTEN BY: For further information, comments, and questions: Lloyd Segal President Los Angeles Real Estate Investors Club, LLC www.LAREIC.com [email protected] 310-409-8310

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