by Kevin Gleason

Residential single-family real estate is reeling. The sub-prime crisis has hit and it has hit hard. Homeowners struggle to keep the largest single source of wealth they possess, their home, from dropping into the abyss. The broad brush of public opinion that paints all investment vehicles black covers single family homes, stocks, bonds, hedge funds and to some extent commercial real estate in one fell swoop. Of course, each has its own unique characteristics, challenges and nuance.

For investment real estate there has not been the spectacular fallout that has impacted other investment types. By and large, retail properties are still retaining tenants while working harder to attract new ones. Rents are flat and will stay that way for the foreseeable future. The slowing economy puts pressure on American’s pocket books, they buy less, and retailers struggle, but most will tough it out. According to the Small Business Times, August 27, 2008, retail vacancies for Waukesha County are 7.7%, Northern Milwaukee/Ozaukee Counties 9% and Southern Milwaukee County 9.5%. This places these markets a bit on the high side for unrented space, but not too bad compared to more volatile national markets.

Office vacancies are high in most markets as well. The downtown Milwaukee office market has a 13% vacancy. Brookfield 18%. Western Waukesha County 14%. Northern suburbs 12.3%. Wauwatosa/West Allis 18%. These are big numbers for a market that should stabilize at 6-7%.

The real stellar performer in the midst of this mess are apartments. As more people lose their homes they become renters. Others who can no longer qualify for a mortgage will stay in the rental market. Demand for quality, professionally managed apartments has gotten better. Throughout the Milwaukee metropolitan market, vacancy rates for apartment properties ranges from 2.6% to a high of 6.4%, great numbers even in a flourishing economy. Owners of apartments may not be able to increase their rents for several years, and they may lose slightly more through rent defaults than normal, but they will pay their taxes, their mortgage and continue to build wealth even in the worst of times.

Historically real estate outperforms the Dow over time in real returns.

Apartments are the kings of real

estate wealth building!

Since most of us experience apartment life at some point in our lives, it’s easy to understand what it takes to make an apartment appealing to renters. Maybe more importantly, managing apartments is straightforward; not requiring special skills or education. They provide people with decent places to live, and over time, they can make their owners rich.

Call Kevin Gleason @ 414-870-5363 to answer any questions you may have about investing in real estate or to discuss our apartment listings.

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

Back in July we put up a post with this same title and at the time we noted the poor performance of Wall Street year-to-date. We were comparing investment opportunities between stocks and real estate to make a case for the latter. Events since then have provided all the more reason to consider shifting some investment dollars into real estate.

We know that overall real estate certainly hasn’t been looking real good either. But just like there are strategies that can make money in a bear market, there are parallel strategies to make money in today’s real estate market … and “right here, right now” we know that 20% to 25% annualized returns are reasonable … and with wholesale opportunities, ROI calcs could toast your calculator!

We continue to believe that the investment brokers of the world give us good advice when they tell us that the stock market is “where we need to be” (even in this market!).  We think a more global approach is more prudent these days. But regardless of your posture about investing in stocks and bonds, with the opportunities in today’s real estate market (some people we know say its a once in 50 year opportunity!) we think it also is another very important place “where we need to be” (we and you too!). Look around our website, give us a call or send us an email.

You’ve heard of a 50 year flood?

This is a 50 year real estate opportunity!

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

An important footnote: Many people have substantial funds in IRA accounts and are not aware that in some cases these funds can be put to use in real estate investments.  If you’d like to learn more about how IRA funds can often be invested in real estate, click here to learn about an exciting book offer that can teach you about this little know IRA investment option.

We previewed a wholesale property a while ago that we found very interesting. Its a 1950’s two story colonial. Overall in pretty fair condition, but another example of a rehab gone bad. The rehaber was trying to bring in today’s more popular open concept design to the first floor living area. First impression - unique and very interesting! But there were a few things that raised our eyebrows.

Opening up a load bearing wall was the key to creating a new open space. But, guess what? - not an ounce of understanding that if the 2nd floor would no longer be supported by the wall, it would have to be supported by something!

Here’s what’s cool! We found out that, at least in this case, if you take out the load bearing wall of a house, it does not necessarily mean eminent collapse! We always wondered about that! In fact, this place was looking pretty good - just a few small crack in the drywall!

We always thought that if you cut out a load bearing wall you’d better run for your life! So we did learn something here - sometimes the house comes down immediately - sometimes it needs a year or two!

Then we looked in the basement and realized that to create the open concept, the rehaber decided that the 1st floor half bath was in the way too! So that ended up in the dumpster along with the wall! We know that in this neighborhood a 1-1/2 bath home sell for $13K - $14K more than a one bath home. Oops!

This rehaber was pretty fortunate, all things considered. The second floor is still up there and the problem can be fixed. We’re pretty sure the 1/2 bath needs to go back in too, but - well, at least it will be new!

We love to work with rehabers.

We’d like to see you add value – not subtract it!

We can be your resource, your partner or both. We’re pretty sure the point of rehabing is to add value and profit from it. Call us if you agree!

Have a question about a wall - not sure if it’s load bearing or not?  We can help; just send us a comment and we’ll get back to you.

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

We visited a very sick house not too long ago. It’s a house that will literally die if its present stakeholder, a bank, does not get it the immediate medical attention that it needs! We think “medical attention” is the right phrase – this house IS SICK – having become a health hazard in just 5 or 6 weeks of complete neglect. If the present “disease” is left unchecked a day will come when the fix for this once loved home will be a bulldozer!

 This was a solid house when the bank became its reluctant owner. But with last year’s heavy rains and commensurate basement moisture issues, residual dampness in this basement is creating a mega problem. A $150 dehumidifier and some much needed ventilation is all that it would have taken to keep this cancer from getting a foothold.

 We list foreclosures and help buyers find them. We get inside an awful lot of these properties and sometimes “awful” is exactly the right word – today’s experience is testament to that. We’ll spare you more about the sites and smells when we got to the bottom of the basement stairs – let’s just say we turned tail and didn’t feel much like eating for awhile!

 We know that some of the institutions who are dealing with pre-foreclosures and REOs are struggling to keep up. But mold doesn’t wait for protocol or paperwork. Bad financial situations can become financial disasters in only a few short months without at least some minimal property management. We’ve seen too many vacant foreclosures that sell only after a long time and only after large price cuts. Its a shame.

Click Here for Related Article on Properties For Sale “As Is”

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

We can prevent problems like this, market and manage vacant properties, and keep values from melting away like ice cream on a hot summer day. If you are a bank, mortgage company or distressed property owner, give us a call.

My name is Kevin Gleason. I have been a commercial real estate broker since 1986. Over that time I have sold numerous commercial properties, encompassing apartments, shopping centers, office buildings and single-tenant net-leased properties. The clients and customers I have served have two things in common:

 They have all built wealth through investing in real estate and not one of them did it over night.

 Typically they started out with a small property, say a four family apartment. After a few years, as the property appreciated, they refinanced and pulled cash out and used it to buy another. Thus began a pattern of investing that over ten to twenty years built a portfolio of properties worth millions.

 Some were hands-on and on a part-time basis or with a spouse or partner managed the properties themselves. This for the most part consisted of renting apartments to qualified tenants, providing those tenants with a quality residence, and collecting rent checks every month. Simple bookkeeping, consisting of bill paying and record keeping took a couple hours a month. On occasion they might paint an apartment or cut the grass or plant flowers. They could enhance the attractiveness of their property in whatever way they chose, and the benefit was attracting better tenants, increasing the rent more often, and controlling to a large extent their wealth creation.

 Other investors hire a management company to perform those tasks for a fee based on the total collected rent. The more rental income the manager generates, the greater their fee. This arrangement provides an incentive for them to keep the property full.

 Either approach takes the investor to the same place - financial security, and over time, a valuable portfolio of real estate.

 This approach to becoming rich hasn’t changed since I started in this business. It goes on everyday, everywhere, and creates the same result. Slow and steady wins this race, and careful and responsible investing in real property will never let you down.

 Call me if you are thinking about embarking on the slow boat to wealth creation known as real estate investment. All you need is access to credit, a work ethic and the patience to see it through.

Kevin Gleason
Realty Dynamics
(414) 870-5363
kevin@realty-dynamics.com

Highlights from a July 14, 2008 article in Realty Times - “Washington Report: Foreclosure Facts of LIfe?” by Kenneth R. Harney

The article is an overview of a recent speech by Treasury Secretary Henry Paulson given to an FDIC housing conference. Labeled as, ” blunt, tough love comments about the home foreclosure crisis and the real estate market …” by the author, here are a few highlights …

In addition to saying that the federal government’s clean-up role can only be limited, the author goes onto say that, “Paulson also used his speech to punch holes in the widely-accepted perception — fostered by media coverage — that the housing market is in deep trouble nationwide.”

Paulson said, “We need to recognize that there is not a national housing market,” and further Paulson noted that just four states: California, Florida, Arizona and Nevada — accounted for one quarter of all mortgages nationwide, but 42% of foreclosure filings last quarter. Adding Michigan, Indiana and Ohio, these seven states — all by themselves — have accounted for over half of all foreclosure filings this year.” [Highlighting is ours].

We’re beginning to feel that more and more people here in Wisconsin are starting to get tired of the unending bad national real estate news. If you haven’t noticed, we’ve been tired of it for some time. That’s why we look to find news that debunks this “national real estate market”.

Look around our site … there’s all kinds of credible sources that are saying the same thing - real estate here is in pretty good shape. The fact is this market is producing some unusual opportunities and you’ll see plenty of that around here too.

Click here for a related article on our local real estate market

When you look around our website and blog, it doesn’t take long to find posts about very interesting properties, recent deals and talk about the opportunities that this market is offering. We know that there are real deals “right here, right now” as we like to say. We’ve seen them - been inside them; checked them with our 350 point inspection. We’ve done a few ‘deals’ ourselves and we’re anxious to do more!

But we find it a bit troubling that some websites create a sense that there are many deals that need nothing more than your wallet to turn them into dreams come true! We read an article yesterday on INAM.COM and we liked a few things they had to say -

“. . . The practice of mixing pre-foreclosure properties with listings of for-sale properties by major listings sites like Yahoo Real Estate and Trulia is misleading to consumers and damages the credibility of the sites that allow it, according to a company that’s in the business of supplying similar information itself.”

The article goes on to talk briefly about Foreclosures.com and RealtyTrac.com (two companies that supply foreclosure information) and later continues . . .

“Property searches conducted by Inman News show both sites provide information that could help consumers understand that the pre-foreclosure properties are not “listings,” and that the dollar figures displayed with each are not asking prices. But there does appear to be potential for confusion. . . .

. . . If home buyers don’t realize that none of the properties retrieved by this particular search [done on Yahoo] are actually for-sale listings, they might be further confused by the generic form used by Yahoo Real Estate to present details about each home, which states they are “offered by” RealtyTrac.”

The article also goes on to talk about Trulia.com for similar practices. Our thanks to Inam News for there viewpoint.

There are so many deals! When is “great” good enough?

Questions? Call us. We’re RealtyTrac reps.

In a press release earlier this year the Wisconsin Realtors Association (WRA) said that this real estate market is full of opportunities. We couldn’t agree more! Despite high inventories, record high foreclosures and sellers having difficulties finding buyers, this market is presenting amazing opportunities at the same time!

We get blasted with national bad news almost daily. We think it is nurturing a collective “bad attitude” which contributes to the problem. But our local circumstances have not been nearly as bad as out east, in Florida, Vegas or California, to name a few. Here’s part of the press release …

MADISON, WI – All real estate markets are not the same, and in Wisconsin, there’s more good news than bad. Explaining this reality to consumers is the goal of a new advertising campaign sponsored by the Wisconsin REALTORS® Association (WRA) and the National Association of REALTORS® (NAR).

“The fact is today’s real estate market, especially in Wisconsin, is full of great opportunities, if people take the time to look into it,” said Mike Spranger, Chairman of the Board of the WRA.

We look at a lot of pre-foreclosure and REO properties every week - maybe 5; maybe even 10 or 12! We walk through them so we can help our buyers and investors when they call us with their inquires. We do it because we want to advice our clients as best we can on the condition of each property.

We list foreclosure properties too like more and more realtors these days. We’ve never failed to be amazed at how most foreclosed (REO) property listings have a single photo, the standard “As Is” phrase, a word about proof of funds and maybe an “allow 2 business days for response” - beyond that, not a word! It’s being sold “As Is”.

Four basement walls caving in? Roof that has leaked enough water to sink the Titanic, frozen/broken pipes, building leans 3 inches to the south!! - not to worry, no need to mention it!! - the property is being sole “As Is” !!

When we list an REO, we publish as many photos as we do for our regular listed properties and, we also include the “As Is” clause in our MLS listings. But we make note of any significant readily observable items - whether attractive selling features or easily observable defects - Huh! - we thought we learned in Real Estate 101 that the State of Wisconsin requires us to do that!

We applaud the Greater Milwaukee Association of Realtors (GMAR) for their recent web posting of a friendly reminder to all realtors that the “As Is” clause, does not mean they do not have to disclose readily observable “blatant adverse facts”. We think some of our peers need to step it up and uphold their obligations under Wisconsin law. We also think that foreclosed properties deserve the same “best effort” as we give to all of our other listings.

Thanks, GMAR, for reminding us all of Wis. Admin. Code RL24.07!

Click here to learn more about our Specialty REO Services

Copyright © 2008 Gohlke & Associates, LLC - All rights reserved

We enjoy watching many of the programs that show people rehabbing houses and then selling them for mega-profits! We think its entertaining! It’s even cooler when they complete their projects in 5 days or less! Why are they always under such ridiculous deadlines anyways? Maybe the producers have a vested interest in companies that make blood pressure meds, do you think? Maybe its just good TV! What do we know!

With our experience in construction we know that a project that require 100 man-hours of work can easily be completed in an hour with 100 men!! Right? Oh, and we love the open houses with 37 people that bring 6 offers, the least of which is $24K over the asking price! It’s reality TV! (on steroids or something!)

It makes good TV; but not necessarily good sense … and we’re pretty sure its not ‘reality’! Sadly, we never fail to be amazed at the number of foreclosed properties we see every week that are half completed rehabs. We’d bet that some of these are born out of “Reality TV” - but who could prove it?

This kind of reality TV is not a lot like the real world from our point of view. We know there are a lot of great opportunities in the real estate market today, but we hate to see people who bought the easy profits that some TV shows would have us all believing.

We’ve thought about getting into television too - “Flip Flops” is kind of catchy, don’t you think? But we’re guessing the TV execs would say its too negative!

We’re thinking that maybe we should just stick with what we know - how to help investors and rehabbers to take advantage of “real” opportunities and walk away with real profits.