*Metro Albuquerque NM Real Estate: Investor Information*
Patrick F. Montrose - REALTOR®, BA, MAT
Associate Broker
Certified Relocation Specialist
Coldwell Banker Legacy Realtors
6767 Academy Road NE
Albuquerque, New Mexico 87109
Pat@PatMontrose.com
(505) 857-2344 Office Direct Line
(505) 239-4253 Mobile
(505) 212-9357 Fax
Good Investment?
Experts disagree on how safe an investment flipping is. Economist Tucker Hart Adams claims that this practice
has created a housing price bubble by artificially inflating property values. She says that the bubble must pop.
Other experts claim that even if the market in places like San Jose, CA and Miami, FL have been grossly inflated
and may be at risk, the Albuquerque market will be relatively unaffected because the market inflation here has been small.
The saying goes, "By the time your hairdresser is flipping properties and the grocery clerk is giving real estate advice,
it's too late to get in the market." Others say that you can make money if you adjust for the present market.
Some experts believe that opportunities are still plentiful in the thriving high-end home market.
They say low-end market presents more opportunities as it becomes harder to buy homes due to rising interest
rates and declining middle class income and jobs.
What is Flipping?
There are two basic ways to flip property. One is to buy with the intent to resell at a profit without ever occupying it.
The more common method in the Albuquerque area is the fix and flip. The principle is simple, acquire a property,
remodel/renovate and sell at a profit.
The fix and flip works in most markets. There are always distressed properties on the market.
The profit comes from improvement of property and/or from market appreciation.
Not everyone makes money. Some people do take big loses. Check out this article by, George W. Mantor,
known as the "Real Estate Professor." Mantor says a common way to make money flipping is to buy houses
in foreclosure. He says, "Let's be very clear, when you target homeowners in distress, your intention is to
defraud them of the equity that is rightfully theirs. It isn't illegal, but it does require manipulation and deceit.
The only reason a seller in distress would decline to receive full market value for their property is if they
didn't know what the true market value was." There are many other ways to acquire property.
The fix and flip is attractive to small investors with little or no experience. One hundred percent
plus financing makes it an easy investment for many people to get into. Stories about quick
wealth flipping are everywhere. An abundance of workshops, seminars and books claim, "You can’t fail if you follow our method."
Good Planning is Essential
The profit is there to be made by even the novice, but planning is essential.
Investors who go into projects blindly are probably going to lose. Cost must be accurately projected
at the beginning of the project. The number one rule of remodeling and renovation is that there will
always be surprises. Actual costs are so hard to estimate that you will still comes in over budget almost every time.
Common mistakes, besides not expecting the unexpected, are underestimating cost to hold the property
until sold and cost to sell the property. Timelines are difficult to keep in a constantly changing market
when dealing with properties that can hold costly surprises. It usually takes longer to fix and resell than anticipated.
Be realistic and work with a good real estate agent who can help you understand the present market
conditions in the neighborhood where your property is. He/she can help you decide the level of
renovation that the neighborhood and market merits. He/she is also a great resource for deciding
how to configure the property for maximum profit. A knowledgeable agent can help determine the
proper price for the neighborhood. Consult with him/her before making plans for renovation and marketing.
Each property is unique and will have unique problems. You never know what you’ll encounter when
you open a wall or pull up a floor. One of the biggest mistakes investors make is not knowing
what they are getting into. It is suggested that flippers need to plan on doing as much of the work on the
property themselves. Contractors eat profit, but trying to do work beyond your skills and knowledge
can consume all profits as well as your enthusiasm. Accept your limits.
The surprise expense of removing asbestos, lead or mold can destroy hopes of making a profit.
Polybutylene, galvanized or lead plumbing, defective furnaces, roofs or foundations are defects
the average investor may be unaware of. Minimize the surprises by getting a good inspection before buying.
A good inspector will find most defects and be able to identify potential problems.
Hidden defects can be impossible to identify, but most hidden defects reveal themselves in visible clues.
Many flippers buy without an inspection. This small expense can make the difference between profit and loss.
Acquiring property
There are many ways to acquire property. Foreclosures and buying off the open market are common.
Loans are readily available to help investors flip and fix with a minimum of up front cash.
Good, lasting relations with lenders depend on things going according to plan. Remodels seldom
go according to plan. Regardless of how you finance, your plan needs to be complete, budgeting
for every contention including the unexpected.
It is suggested to have at least 6 months in carrying cost in reserve. Other experts suggest up to 8 months.
It is suggested to use as much lender money as possible keeping cash reserves back to cover the unexpected.
Try for 100% + financing to cover acquisition and fix and flip costs. Lenders are lending on the finished
value of the property, not the present value. They loan money based on your track record and their
belief in your ability to successfully complete the project. Once you develop a good track record,
borrowing full costs becomes easier. Use a lender that specializes in fix and flip.
Remember that ARM is Adjustable Rate Mortgage and the payments go up if interest rates rise.
Plan for increasing payments if you opt for these plans. Watch out for prepay penalties.
An increasingly popular approach to fix and flip is to find a homeowner who is the position
of losing his/her home. By creating a partnership with the homeowner, investment is minimized.
The investor puts up money to bring loans current and to remodel/renovate the property.
The profit is split between owner and investor. The homeowner gets another chance and possibly provides
some labor. The investor gets a deal that doesn’t eat money as quickly and requires less capital.
Investors doing this claim they never lose money.
The present market in the neighborhood of the property you are considering determines
what is and is not a good investment. It's easy to buy property in an area where jobs are disappearing.
This hard part is selling the property in this market. In a hot market, you may buy a property and sell it
within a few days for a profit. This occurs in an area where jobs are growing quickly or in luxury markets.
Water front condos in Miami have been hot investments that yield huge profits without ever taking
possession of the property. Perhaps an extreme hurricane season will slow this market.
Value is always the perceived value of the buyer. If fear rules the market will slide.
In a hot market, it may be hard to make a buying mistake. In most markets, profits are harder to make.
Real value must be added to the property to reap a profit. In these markets, buying decisions
must be made more carefully. Conventional wisdom is to buy the worst property in the best neighborhood possible.
The biggest mistake investors make is not having enough equity potential in the deal.
It is suggested that a minimum of $30,000 must be possible to cover the expenses and allow a profit.
After making initial estimates on all cost to buy, fix and sell a property you can project a tentative sales price.
It is recommended the selling price be in the middle of the neighborhood range and slightly under market value.
It should also be in the middle of the MLS price bracket it appears in online.
Time consumes money in these deals. The property must sell quickly, or be taken off the market and rented.
This is sometimes desirable to allow equity to build. If you don’t have enough equity to make selling
profitable this may be your best plan. You will have to prepare the property for market again. Anticipate this cost.
In a luxury market, the best properties may be the better deal. The most expensive homes sell quickly and provide
the greatest leverage. All value is perceived value.
Renovation Plan
Determine the level of upgrading the property warrants. If you are in a million dollar neighborhood,
home theatres and wine cellars may be assets. In a $150,000 home they are wasted investment.
Most people are proud of their work and try to do the best job possible. Flippers may envision
their dream homes and try to create this in their renovations. Flipping is a business and must
be approached as such if it is to be profitable. The level of improvement should be the minimum
it takes to bring the property to the condition of those in the neighborhood.
How much is too much?
Some improvements don't increase value.
This doesn't mean taking shortcuts that ignore issues that will return to plague new owners.
Covering up problems may be tempting. It is done. Mold, water damage, insect infestation,
lead paint and asbestos may be simply ignored or improperly covered. Covering lead paint and
asbestos may be the acceptable remediation in some cases, but covering mold, water damage
or insect infestation is never acceptable.
Systems problems like cracked heat exchangers, gas leaks, galvanized, lead or PB plumbing or
aluminum wiring may be overlooked. In most cases, a buyer’s inspection is going to reveal these things.
You are likely to have to adjust the selling price to cover these repairs and lose some of the value of remodel.
All value is perceived and doubts about the quality of workmanship decrease value.
In a hot market, you may get away with selling to an anxious buyer without an inspection,
but it's dishonest and will not serve you in the long run.
If you don't have the expertise to recognize and correct defects, get a professional.
In all cases, if you are unskilled, use professionals for HVAC, electrical and plumbing upgrades and repairs.
Consult an engineer when changing structural components. If a potential for danger,
or recurrence of the problem, exists, get professional help.
In flipping, time is money. Not only should you anticipate going over budget, you can also count on
finishing late. It's part of the game. Your schedule may be at the mercy of contractors, code
inspectors, lenders or government agencies. Most of us are overconfident and believe we can
do things quicker than we actually can. Figure generous extra time for your own tasks.
Get bids on work to be contracted, along with time estimates. Work must progress in the proper sequence.
Ask contractors where they need to fit into the schedule if you're not sure. Some work can be done simultaneously.
Demolition must be completed before reconstruction. Demolition time and cost can't be overlooked or underestimated.
Plumbers and electricians may work well at the same time, but flooring contractors and painters don't mix.
Itemize all permits, materials, systems and appliances you'll need.
You can often save money looking for bargains. You can also lose more time than it’s worth.
Double the amount of time you plan to take to finish the project and sell the property.
Be certain you have the money to carry the project for this long.
Start thinking about marketing before you acquire the property. Never show the property until it's done,
but begin planning. The renovation plan should be steered toward what it takes to make the property
the most marketable. All remodel and repair should be tailored to the tastes and means of the people who will live there.
There are many books, television programs, videos and web resources for staging a house for sale.
From curb appeal to the feeling in each room, every aspect needs to be considered before starting.
The better the house shows, the quicker it sells. Tend to all details.
Selling Your Property
It can be tempting to sell your property yourself. A very hot market might make this a good plan.
If buyers are actively combing the streets looking for any house for sale, acting as your own agent may make sense.
In most markets, a professional real estate agent is best. You need current knowledge of the neighborhood sales and
general market you're working with. The advice you receive for acquisition, remodel and preparation for sale are invaluable.
When you sell, it's important to price your property right the first time. If it doesn't sell quickly, it can be pushed into
a buyers already rejected file. The property becomes market weary. Even if the price or terms are sweetened,
it probably won't get a second look. Professional agents know what actions to take and when so buyers will give you a new look.
The Metro Albuquerque Real Estate Market is contained within approximately 1,200+ square miles:
The East Mountains contains approximately 540 square miles; Albuquerque contains approximately 162 square miles; Rio Rancho/Corrales
contains approximately 45 square miles; Bernalillo/Placitas contains approximately 30 square miles; and
Valencia County contains approximately 265 square miles.
$150,023 in 2000.
$152,399 in 2001.
$158,717 in 2002.
$166,703 in 2003.
$182,490 in 2004.
$205,402 in 2005
$228,633 in 2006.
$243,089 in 2007
$232,626 in 2008
$215,295 in 2009
$209,283 in 2010 First Quarter
In the second quarter of 2005, (in April, May, and June) 3,613 existing homes (resales) were sold. That's an increase of 52%
over the first quarter of 2005! This is the most resales ever sold in a quarter since records have been kept. In Rio Rancho existing
home sales increased by 45% over the first quarter, with the average sale price increasing by $11,000 in the same time period. The
average price was $157,911 for the first quarter and $169,066, a 7% gain, in the second quarter.
If you like statistics and more detailed information concerning the Albuquerque Housing Market please
click here to go to that page of my website.
Home Price Analysis for Albuquerque
With home prices rising strongly, in most parts of the country, there has been widespread media coverage
on the possiblity of a housing market bust. A thorough analysis of the Albuquerque metro market reveals
there is very little danger of this. In fact, the local housing market is in excellant shape, with a potential
for significant housing equity gains, particularly for homebuyers who plan to remain in their home for
the long run. This is part of the report prepared by the National Association of Realtors (NAR) on the housing
bubble and how it effects Albuquerque. For the complete report, please
Click here to E-mail me for the complete report.
Fortune Magazine has rated the Albuquerque Metro Area as the 14th best real estate market in the Unitied
States. According to the magazine, Albuquerque came in first for metro areas in the west. In its evaluation of the
top 100 housing markets, Fortune is predicted that home prices in the Albuquerque Metro Area are likely
to increase by 6.5 % in 2005 and another 6.1 % in 2007, withj 2008, 2009, 2010 and 2011 being stable years.
National Home Sales Likely To Remain Stable
The housing market is stabilizing with little change in overall sales volume expected over the balance of the year, NAR says.
"We've seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending
sales based on contracts," says David A. Lereah, NAR chief economist. "On one hand is the rise in mortgage interest rates that
has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years.
These indicators mean many potential home buyers could enter the market in the foreseeable future, especially in moderately
priced areas where affordability conditions remain favorable. In fact, this is already occurring."
Are new home prices really rising? Statistics can play tricks on you. A famous comedian once defined statistics as, "The science
of producing unreliable facts from reliable figures." This quip is all too true when it comes to trying to get a handle on the prices
of new homes in the greater Albuquerque metro, and understanding what the numbers really mean.
On paper, Albuquerque's average new home base prices over the last twelve months produce a graph curve that looks
reminiscent of a roller coaster having ups and downs. Having said that, I can tell you first hand that new home prices generally aren't going up.
Yes, you read that correctly. The majority of pricing hasn't changed at all in recent months, and some base prices
have even been coming down. What's messing with that average price curve so much? In short, it's the product and the product location.
The product itself is currently bigger than ever before. In Albuquerque, the average new home square footage is 2,094
and the median is 2,022. Compared to just three years ago, this represents a 9% increase on average and an 8.1% for
the median size of a new home. The product also looks very different today. The last few years have seen increasing trends
in such features as flagstone accents, entry turrets, and Mission style architecture. In part then, new homes are now more
expensive due to these aesthetic reasons. In terms of location, there continues to be a strong presence of new home builders
on the west side, which historically has built more affordable new homes than east of the Rio Grande river. Now, however, the
product change on the west side has shifted substantially to more high-end product than entry level product. And as the product
itself changes, the average price curve adjusts accordingly and gives us these "ups and downs".
The answer to the question "Are new home prices still rising?", is currently both yes and no”. Yes, in terms of looking at just
the statistics, but no in terms of weighing in all other factors at hand. What will the future of local new home pricing look like?
Given the dramatic increase in local land costs, and also using history as a guide . . . I'd say there's nowhere for new home prices to go but up.
Rental Information
|
Zip Code
|
Vacancy Rate
|
Days On Market
|
|
87114
|
28%
|
63
|
|
87120
|
19%
|
54
|
|
87121
|
7%
|
164
|
|
87105
|
10%
|
38
|
|
87106
|
0%
|
0
|
|
87108
|
12%
|
51
|
|
87109
|
8%
|
63
|
|
87110
|
5%
|
17
|
|
87111
|
8%
|
42
|
|
87112
|
12%
|
30
|
|
87122
|
0%
|
0
|
|
87123
|
7%
|
43
|
Courtesy of Brunikarr
Albuquerque Named to Top 10 Large Metro Areas for Relocating Families
Louisville, Kentucky was ranked as the top area for relocating families among U.S. metro areas with population of 500,000 or more,
according to a list developed by Worldwide ERC, an association for global employee relocation, and Primacy Relocation,
a relocation provider, working with Bert Sperling of Sperling's BestPlaces. According to the report, the top-10 large metro areas for
relocating families are: Louisville, Ky.; Austin-San Marcos, Texas; Denver, Colo.; Nashville, Tenn.; San Jose, Calif.; Washington, D.C.;
Baltimore, Md.;
Albuquerque, N.M.
; Knoxville, Tenn.; and Harrisburg, Pa. Evansville, Indiana topped the list among mid-sized
metro areas with a population of 250,000 to 500,000; and Athens, Georgia topped the list of small metro areas with a population of
50,000 to 250,000.
The above information is just meant as an general information piece, and should not be considered an endorsement of any of
the methods or ideas presented above. Information obtained from sources deemed reliable and not guaranteed
by this website.
click here to e-mail me!
The information on this page is presented as a service by Patrick Montrose -
Realtor.
Click here to go back to:
Albuquerque NM Real Estate and Homes: Patrick Montrose: Coldwell Banker
All about the
Real Estate Market in the Metropolitan Albuquerque NM Area.
Copyright 1996-2011 Patrick Montrose all rights reserved.