Parts is Parts

Sometimes the upgrades on a house make it worthwhile. This is especially true when the housing market is down.
When the price per square foot is down, you're going to get more bang for your buck on a repo. I just saw a house with a $60K upgraded kitchen and a $5K in flooring, and another couple thousand in crown molding, sell for $50K more than a similar house down the street that had been a rental. I'm a handy guy, but kitchen remodels are notoriously laborious. They take a lot of time and usually a lot of money.  The house was basically on sale with a $17,000 discount. The other house also had rental grade lighting and bathroom fixtures. The difference in the houses had everything to do with how much the house was cared for and loved by the owners.
The difference in price, works out to about $300/month with today's interest rates. Sure, not everyone can afford the difference, and some people don't want the extra debt. When the market recovers, the house will be worth that much more, and be that much more attractive to a buyer.
There is money to be made when the parts are worth more than the whole. This is similar in concept to the corporate pirates of the 1980's did, and what salvage yards do on a regular basis. Find something where the pieces are worth more than the whole. Obviously, you're not going to split up the house. But, if you have similar house, with dissimilar prices, it might be worthwhile to estimate how much the upgrades would cost if you plan to make them in the future.

Credit Crisis brings opportunities for Seniors

Three important events have occurred that bring rise to opportunities for seniors to increase their retirement income. The drying up of much of the conventional credit market, the limitation of conventional loans for individuals, and the collapse of housing prices. Why does this bring new opportunities for seniors?

At this point everyone knows how hard it is to get a loan after the Fannie Mae and Freddie Mac failures that culminated in disaster last month. It's hard for even people with good credit to get loans at the moment, and underwriters and looking very closely at all aspects of loans they are approving. New laws to prevent real estate speculation have limited the number of mortgages and individual can have to four conventional loans. Because of these conditions, combined, with housing prices that have dropped and opportunities in the REO market, seniors have the opportunity to hold mortgage notes to increase their retirement income.

A senior I know just told me she's making three percent (3%) on her CD and she's looking for ways to increase her retirement income, as SS only pays $700 per month. She owns her home free and clear, but has repairs to do to the house, especially in the kitchen, where the sink leaks, but she doesn't want to deplete her meager savings to fix problems that are a health hazard and are damaging her house.

Seniors have the opportunity (especially in California) to take reverse mortgages out on their homes and reinvest the money or loan it out at hard money rates. By buying investment properties or mortgage notes, seniors can increase their passive income and avoid endangering Social Security income. The senior above could take a reverse mortgage line of credit to do the repairs she needs, paying 7.5% or less in most cases, then draw from her LOC to loan out at hard money rates (15-24%) secured by 1st mortgages or rehab loans, or buy rental property for cash
and rent the out.

I have 6 conventional mortgages out, on 10 properties, and 2 hard money loans, and 2 properties are paid off--I own them free and clear. I bought smartly and all of these properties have positive cash flow when rented at 80% occupancy rates. Due to the new limitations on the allowable number of conventional loans, I can not get a conventional loan on the 2 properties that are paid off. I had to go to a hard money lender to get funding. I am getting a loan for less that 50% loan to value (ltv) at 11.5% but I am paying 8 points, so my apr is basically over 17%. I am happy to get the loan because it is going to allow me to earn a return higher than what I am paying. I've even seen websites out there that say they'll loan 40%LTV at 19%.

So, the above mentioned senior could conceivably borrow $100,000 at 7.5%, fix her house for $20,000, then lend the remaining $80,000 out (I recommend smaller loans to spread out the risk) at 15% with 7 points, and she would bring in an additional $1000.00/month and as the loans mature or are paid off early she would bring in the $5600 in points, which may increase her net return, because the investors don't want to pay the 15% rate for a long time. Or, a senior could invest the $80,000 remainder in a rental or several rentals and collect rents of $750 to $1600 depending on how they did it, but that would entail more management time, and I think the return on investment in the hard money market would be better and entail less risk now that housing prices are down.

I happen to know that there are several investors out there looking for the money to make their deals happen, and wouldn't mind paying the high percentage rates to get it done.