Right now, today, if you were asked how you want to invest your retirement account and you only had two choices–gold or real estate, which would you choose?  Here’s a gold chart for 2011 up to December 20th.  We have been bombarded for months now with “buy gold” commercials.  The “buy gold” mantra has reached a feverish pitch in T.V. and print advertising, not to mention Internet ads.  Gold dealers have been preaching the safety of gold and what a great investment it is.  Even today, after gold has crashed as seen on this chart, many gold dealers want you to invest your money on the gold they are selling.  Obviously, they earn a commission for gold sales, and obviously that is their primary motivation.

Gold or Real Estate

Gold or Real Estate – That is the Question

A number of financial advisers and other talking heads boasted today that gold is a great buy now that it has crashed.  Their claim is that you can buy it now at a discount because it is going back up.  Fascinating, because they were saying the same thing before it crashed at about $200 to $400 more per ounce.  If you look at the two trend lines I drew on this gold chart, it is quite clear that the trend since September is downward.  One fundamental rule one learns about investing is not to trade against the trend.  One other thing investors learn is that by the time a stock or commodity is on the front page of all the financial magazines, it is too late to buy.  By then it is at a market top.  On November 9th I wrote an article suggesting that gold was headed downward.  I wouldn’t hold my breath waiting for the price of gold to go back up anytime soon.  It could, especially if Europe slides into the economic abyss, but why gamble?  If you ask me where I would put my money, in gold or real estate, it would be real estate now.

Gold or Real Estate – Chose Real Estate

I’m selling homes to retirees and investors in Sequim at prices that are incredibly low and not speculative.  Many of these homes are selling at far less than the actual cost to replace the home today.  In other words, many homes are selling for less than the cost of cheap property plus the cost of excavation, the installation of utilities, the cost of permits and building the home itself.  The price of homes has no where to go but up.  Unlike gold that has a lot of room to drop . . . and drop . . . and drop.  I hope it doesn’t, but the point is real estate is a much safer investment today in my humble opinion.

What would you do?  Invest in gold or real estate?

Possibly Related Posts:

• Real Estate Without Offices
• Sequim Real Estate Broker – Attorney Still Giving It All Away for Buyers
• Top 20 Sequim Real Estate Posts of 2011
• Real Estate News for Buyers
• What About a Low Ball Offer?

Question:   Chuck, I’ve been looking at a few areas to invest in a single family home, not to live in for myself but as a rental.   I might want to use it part of the year as a getaway for myself and my family, too.   Port Angeles has some great prices and water views.   How would you compare Port Angeles to other areas in the state or the country for investing like this in real estate?

Answer:   Excellent question Adam.   Here’s what I think generally about investing here and owning a home as you describe it.

You could buy a property that would be a great getaway for you and your family, and that could make a sweet vacation rental the remainder of the year.   It is amazing how much short term rentals get here.   But there are several options here, short term and long term rentals.

Right now the Sequim and Port Angeles areas are definitely good places to buy for future appreciation.   I could tell you stories of properties I’m helping clients buy at incredible prices right now, and some are as much as $100,000 below 2006 prices.

As a buyer, you are in a very strong position to negotiate here with sellers.   Sellers just don’t have many buyers, especially, by the way, west of Port Angeles.   There are almost no buyers for properties west of Port Angeles to Salt Creek.   Of course, that also is a factor when investing, because that means it will probably be harder to sell a property out there in a timely fashion.

This area on the Olympic Peninsula is much more stable in the long run than real estate prices in King County or Pierce County (Seattle and Tacoma) areas.   It is very unpredictable as to what is going to happen in the larger metropolitan areas for single family homes, not only because of the uncertain economic future, but because of the larger number of foreclosures that will continue to be added to the inventory of homes for sale.

We don’t have that situation in Sequim and Port Angeles.   We are a much more stable long term real estate market for investing in single family homes.   We also have a small but steady stream of retirees with money who come here and pay cash for properties.   For many of these buyers, the state of the economy is almost irrelevant.   I think that will be true many years from now.

I hope that is helpful Adam.   Ask anything, and if I can help or send more information, I certainly will.

Chuck E. Marunde, J.D.
Broker/Realtor
Sequim & Port Angeles Real Estate, LLC
618 South Peabody St., Suite I
Port Angeles, WA   98362
360-775-5424

Possibly Related Posts:

• Gold or Real Estate?
• Should I Invest in Real Estate Notes?
• Real Estate Investors Struggle to Find a Good Deal
• Paper Transactions in Real Estate
• Sequim Real Estate Sales Slow Down

Question:   Hi Chuck,   I am considering entering the world of real estate commercial note buying, and I want to make sure I have all the information I can find prior to making the move.   I heard of the field from Russ Dalbey, of Colorado.   What is your opinion of the field today?   What in your opinion are the risks of an individual entering the field?     You mention that you used to work for the largest note buyer in WA state, who might that be?     Thank you for your time.

Answer:   Yes, I worked for Metropolitan Mortgage & Securities in Spokane.   When I worked there many years ago, we had purchased over 7,000 private notes (deeds of trust and real estate contracts).

At that time, interest rates were high, so based on a required investment return of 18%, we were getting an average discount off the principle balance of about 30%.   Not bad.   Of course, with interest much much lower today, discounts of that kind are not possible.

It is a great business, or was a great business.   It has gotten to be a very competitive business, so much so that note buyers are offering as much as 97% of the balance.   Wow.   A 3% discount hardly makes it worth considering.   Of course one’s rate of return is based in part on the interest rate on the existing note, so a small discount might still work out to a decent ROI, provided the underlying interest rate is high.   Problem is, most people refied and all those private high interest notes pretty much are history.   Note buying is still a great opportunity, but it is hard to find secured notes on good real estate that is not overvalued right now and that can give you a good ROI.

There are some serious risks for the inexperienced note buyer.   Of course, you want to be in first place, so you have to be able to analyze title information like an expert, to recognize potential problems, and to know when to hold ‘em and when to fold ‘em.   There are unrecorded dangers, too, like a labor or a mechanic’s lien.   There is the danger of unrecorded encumbrances, like adverse possession or an easement by prescription.   There are other legal risks, like an IRS tax lien, private judgments, and spousal claims.   You could loose money real fast in this business if you are not an expert from the start, or if you don’t get an expert partner from the beginning.

If I had to compare the best opportunities right now in the real estate market, I would say that single family homes can be purchased at massive discounts, and many of these in the right areas will double in value in 5 years.   There’s a lot more to what I’m saying in this paragraph, and it would take a lot more space to type a full explanation, but I just wanted to share this info for your consideration.   Here’s a bonus for you.   I really think that a small group of 3 to 6 partners with a total of 5 or 6 million could make a fortune in a real estate partnership over the next 5 to 7 years.   Of course, it definitely would take some serious knowledge and experience in the areas of partnerships (avoiding the common pitfalls), real estate buying, investing, selling, and so on.

If you consider doing this, I would strongly recommend some serious professional help, and not just anyone.   It takes a special expertise to be able to do this without losing your funds.   That’s kind of important.   I would suggest someone with both a real estate law and a real estate brokerage background, like my background.   This is not a solicitation.

Best Regards,
Chuck Marunde, J.D.
Broker/Owner/Realtor
Sequim & Port Angeles Real Estate, LLC
618 South Peabody St., Suite I
Port Angeles, WA  98362
(360) 775-5424
(866) 733-7135 fax
chuckmarunde@gmail.com
http://SequimPortAngeles.com

Possibly Related Posts:

• Gold or Real Estate?
• Is investing in real estate in Port Angeles wise now?
• Real Estate Investors Struggle to Find a Good Deal
• Paper Transactions in Real Estate
• Sequim Real Estate Sales Slow Down

Real estate investors are scooping up the deals and making millions.   Right?   Wrong!   I met with an investor the day before the Thanksgiving holiday, and he   was ready, willing, and able.   Like the vast majority of real estate investors     around the country right now, he is having trouble pulling the trigger on a buying decision.   Why?

People think the general state of the real estate market creates grand opportunities for investors, and it does, but only in a general sense.   The fact that the real estate market is in a major slump undoubtedly creates an environment of opportunity.   But an investor must find that diamond in the rough, and that is not easy.

We’ve all been talking about how many foreclosures there are, and it seems every day there is another news headline about the large numbers of homes in foreclosure.   But try to find a single home in a good area that has the parameters of a good investment, such as three bedrooms, two baths, a double car garage, including one that will crunch the numbers you need, well . . . that’s a horse of a different color.

Intelligent investors are not interested in junk, and there is a lot of junk out there.   There are homes in unattractive areas that are not going to rent or sell well.   Forget those.   There’s a home in a nice area, but the retired couple that owned it built only two bedrooms and an odd kitchen.   Forget that.   There is a nice three bedroom, but it only has one bath, and the home is built on a potential mud slide.   There’s a cute cottage on a busy street.   No.   There’s a perfect home in foreclosure, but the current owners are obstinate, and so that one won’t be available until the Trustee’s sale when there are 227 other people competing to buy it.   Don’t want to go there.

When you do find one (have you got 40 hours a week to do research and drive around?), the numbers have to crunch for you.   If it’s going to be a good investment, you have to be able to pick up some equity, and it’s hardly worth investing if you can’t pick up $20,000 to $80,000.   After all, you’re going to have to put some money into it to fix it up or make it sellable, and you’ll have carrying costs and selling costs.   If you want to flip houses, you’ll have to sell well below current fair market value, which means you definitely need a good chunk of equity built in to your investment from the beginning.

One has to be very careful buying homes in distress.   A successful investor I know purchased a foreclosure home at a Trustee’s Sale at a seemingly good price, but later discovered the timbers in the crawl space have to be replaced because of dry rot.   All his profit just went poof!

This is why it is not so easy to be a real estate investor, even in times of plenty.   There are plenty of houses for sale, but finding the perfect investment project is definitely a struggle.   They’re out there, but good luck finding them.

Possibly Related Posts:

• Gold or Real Estate?
• Is investing in real estate in Port Angeles wise now?
• Should I Invest in Real Estate Notes?
• Paper Transactions in Real Estate
• Sequim Real Estate Sales Slow Down

You can invest in real estate without owning any real estate.  For example,

1. You can buy notes (secured by a deed of trust) at a discount, or
   
2. You can buy a Real Estate Contract, aka Land Contract, at a discount.
   
3. You can buy an Option to Purchase property and either exercise it or assign it for a profit.
   
4. You can assign for profit a Purchase & Sale Agreement.
   
5. You can assign a lease for a profit.
   
6. You can buy out a party being foreclosed on and deal with the secured party, and sell the property before it ever gets in your name.
   
7. You can buy out a troubled party and obtain a Quit Claim Deed, and then sell that paper.
   
8. You can wait until property has been foreclosed, and go to the secured party and buy the rights to own or re-sell the property.
   
9. And there are many more combinations.
   

Red Flag:  These transactions are not for the faint of heart.  These are advanced techniques, because there are so many traps for the unwary.   A thorough understanding is critical to avoiding disaster.   I’ve handled all of these, either as a real estate attorney or Realtor.

Possibly Related Posts:

• Gold or Real Estate?
• Is investing in real estate in Port Angeles wise now?
• Should I Invest in Real Estate Notes?
• Real Estate Investors Struggle to Find a Good Deal
• Sequim Real Estate Sales Slow Down

In a free enterprise system, markets go up and markets go down. This is the cycle. Out here in Washington state, especially in King and Pierce Counties, and even here in Clallam County on the Olympic Peninsula, in 2005 homes and land sold quickly at greatly appreciated prices. In rapid appreciation, builders over build, and the mortgage market gets creative, coming up with new ways to get otherwise unqualified people qualified for loans. The party had to end. Now we wait to see how long the hangover will last. But, and this is the good news, those with money now or who can get the funds, stand to make a lot of money investing in real estate NOW, because the market eventually will return to steady and slow appreciation. Houses are still selling, because there are qualified buyers moving into the area. In the long run, real estate has been a strong and reliable investment in western Washington. For a great resource on investing in real estate in Sequim and Port Angeles, read more at:

http://freerealestatelaw.com/Investors.html

Possibly Related Posts:

• Gold or Real Estate?
• Is investing in real estate in Port Angeles wise now?
• Should I Invest in Real Estate Notes?
• Real Estate Investors Struggle to Find a Good Deal
• Paper Transactions in Real Estate