2017 Has Been a Good Year for Real Estate

Since the year is just about over, I thought it would be a good idea to tell you a little bit about how the market did over the course of the year.

As the year draws to a close, many of you have asked me how the real estate market did in 2017. I have good news to report to you about that. Stock values like the Dow Jones Index, NASDAQ, and S&P 500 have increased by about 25%, and the real estate market is doing well also.

In the market that I’m tracking for you, in 2016, we had an average price of $550,000 with an average square footage of about 1,780 square feet. Rounded off, it’s about $310 per square foot. In 2017, the average price is now $604,500 with an average square footage of 1,885 square feet, which amounts to about $327 per square foot. Between this year and last year, we saw about a 5.55% increase in the average price.

Based on this information, a person with an FHA loan who put 3.5% down (roughly $19,250) has seen their home value increase by another $30,000. This is about a 157% increase on the equity that they have on their home.

For a person who’s going for a more traditional approach, if you put 20% down (based on the average price, this would be about $110,000), that same $30,000 increase in equity gave them a 27% return on the equity, which is very good.

All in all, it’s been a very good year for our market.

The days on market has decreased from the 2016 average of 90 days to 66 days, which is in line with an observation I made in my August report. All in all, it’s been a very good year for our market, and I expect to have even better news come the new year.

If you have any questions about the market or real estate in general, please feel free to give me a call or send an email. Until next time, I wish all of you to have a Merry Christmas and a happy, healthy, prosperous 2018.

Seniors: Do You Know About Reverse Mortgages?

Hear two different true stories that demonstrate how reverse mortgages can help senior buyers purchase a home without adding monthly payments to their budget.

Today I’d like to talk about two scenarios, both of which are true case studies. In each scenario, a reverse mortgage helped the senior buyer to do away with their monthly mortgage payment.

The first refers to a home in Orange County for $950,000. The mortgage is still about $550,000. After the selling cost and the commission, the net amount is about $330,000. How would you buy a home for that amount in this current California market?

Since you’re planning to retire, you don’t want to worry about a higher mortgage. A solution to the problem is a reverse mortgage. This allows you to use the equity in your home to be converted into cash or a payment towards your mortgage, which means no monthly payment.

Since you’re planning to retire, you don’t want to worry about a higher mortgage.

The second scenario is about a single woman whose home is worth $550,000. She wants to move close to her children, and the home she’s interested in is $600,000. The solution here is similar: She can put $300,000 down and use the other $300,000 in a reverse mortgage so that she doesn’t have a monthly payment. She’s only obligated to pay the property tax and the annual homeowner insurance fee.


I have been able to put people into an investment vehicle like a Delaware Statutory Trust (DST) or in a TIC (tenant in common). For triple-net properties and A-Class, accredited types of investments, they can put it in and the return is between 5.25% - 6.25% depending on the offering from the sponsor.


Returning to the woman in the second scenario, with the $200,000 she has after the down payment of $300,000, she can get roughly an additional $11,000 to $12,000 a year in income that is fully sheltered.

Outside of this topic, I want to give a client named Quentin a shout-out. He told me about an area right here in Southern California with an affordable retirement community called Paumer Valley. You can find a 3-bedroom, 3-bath, 2,000 square foot home for $350,000. It’s a great community.

I’d love to hear from you. If you want to hear more about reverse mortgages for example, I’d be more than happy to bring in an expert to discuss your specific case. Just give me a call or send an email. Stay safe and stay happy!

What’s the Key to Identifying a Great Investment Property?

The key to identifying a great investment property is determining if the 1% rule applies to it.

How do you locate and identify a good investment property?

First, there are a few terms brokers use when it comes to real estate investment that you need to know about.

The first is cap rate (or capitalization rate). This is taking the net operating income the property is expected to generate over the property’s purchase price. Your net operating income is defined as your gross income minus the vacancy minus any type of fee you have to pay before the mortgage debt payment. The cap rate NOI is like a company’s EBITDA.

The second term is cash on cash. This is how much cash will be generated from your investment. This is the net of your income minus the debt payment (or principal interest that you pay the bank).

The last term is return on investment. Every year, you pay back 1.5% of your principal and add that onto your equity.

So, how do you identify a good investment property to purchase?

Let me give you an example. If a property is valued at $500,000 and is generating $5,000 in monthly income, then the 1% rule applies, and that makes that property a very good investment. With a 1% property, you’d have an 8% cap rate, a 12% cash flow, and 16% for your return on investment.

A $4,000 monthly income from that property would still be a great deal because you can still improve the property and raise the rent. At a 0.8% monthly rate, you’d still have a 6.2% cap rate, a 5% cash flow, and 8.9% for your return on investment.

Look for a property where the 1% rule applies.

Those numbers from each scenario are based on an interest rate of 5%, so they’re not unrealistic. The point is, you should look for a 1% property. Even if you find a 0.8% property, I can help you turn it into a 1% property.

If you want to know more about identifying a good investment property, don’t hesitate to reach out to me. I’d be happy to help you.

A Tip for Homeowners Over Age 62

We’ve got a great tip for senior homeowners today. Have you ever heard of a reverse mortgage?

As promised, I want to discuss a few tips for any senior homeowners in the market to buy or sell a property in the near future. They will help you compete in this crazy market.

Last time, we discussed the increased number of sales from 2016. A big portion of those sales is coming from seniors who are looking to downsize. There is a lot of demand for homes like this, especially from first-time homebuyers. First-time homebuyers are a great demographic to attract for home sellers because they often have no home to sell contingencies, hence a big source of competition for seniors looking to downsize.

Even if you have had a previous bankruptcy or bad credit, you can still qualify for a reverse mortgage.

If you’re a senior that’s looking to sell your home and move to something a little smaller, you should consider a reverse mortgage. You can use a reverse mortgage to buy a new home before your current home is sold, then use the proceeds from the eventual sale to pay back the lender.  Even if you have had a previous bankruptcy or bad credit, you can still qualify for a reverse mortgage, which will eliminate the need to make a monthly mortgage payment. However, you do have to be age 62 or older.

Remember that if you’re thinking about selling, you become a buyer just as soon as you become a seller. If you’re thinking of buying a home in the near future or have any other questions for me, don’t hesitate to give me a call or send me an email. I look forward to hearing from you.

A Look at Our Market From Last Year to Now

What is going on in our local Southern California real estate market? Let’s go over the numbers and how things compare to what we saw last year.

Today I’ve got a market update from the first half of 2017 regarding some of our local areas. 

To give you an idea of what’s been going on, I’ll be comparing what we’ve seen this year with what things looked like in 2016. The first piece of good news is that more homes have sold this year than last year and 2015 both. 

We’ve also seen a healthy increase in home values, as well as a decrease in the number of days homes are typically spending on the market. 

But, let’s take a look at some more specific numbers so that we can get a better idea of how things have changed. In 2015, the average sales price was roughly $413,000. That number increased in 2016 to $442,000, and this year, prices have risen again. As of June of 2017, the average sales price was $472,000. This is a roughly $30,000 increase each year.

Appreciation between 2015 and 2016 was approximately 7%, and from 2016 to 2017 it was 6.75%. So how does this affect your investment? Most people using a conventional loan will put down approximately 20%, and those going the route of an FHA loan will put down about 3.5%. In today’s market, that down payment can relate to a lot of leverage in relation to appreciation. If we consider a down payment of 3.5% in relation to a 7% increase in terms of appreciation, the result is a 210% increase on your investment. 

For an investor who usually puts 25% down payment, it is a 1 to 4 leverage. Because of inflation and appreciation rates, an ideal investment will see as much as a 33% return. 

So, what numbers are important to know for specific markets in our area? Starting to the east, the city of Rancho Cucamonga has experienced a hefty appreciation of 8.4% compared to last year. Another notable statistic is that the average number of days on market has decreased from 54 in 2016 to 29 this year. The number of homes sold, though, has increased. In 2016, 1,271 homes sold compared to the 1,331 this year. 

It’s a good time to purchase and a great time to sell.

In Chino Hills, home appreciation is at 6.4% average between this year and last. Days on market have dropped in that area, as well. This is a pattern we’re largely seeing across the board. Chino Hills homes have gone from spending an average of 58 days on market in 2016 to an average of 43 days in 2017. The number of homes sold has increased, as well. 671 homes sold between January and June of 2016, whereas 750 homes sold in 2017 between those same months. 

When we look at the more mature city of Alhambra, this pattern continues. Like other nearby areas, this city is seeing an increase in value. There, the appreciation between 2016 and 2017 has been 6.4%. As is the case elsewhere, the number of homes sold also increased in the last year—going from 316 to 331 homes. Also, again, days on market have gone down. Last year, the average was 48 days. This year, that number is 44 days. 

So, what do all of these numbers mean for you? If you are looking to sell, you have a great opportunity now to do so. If you price it correctly, your home should move fairly quickly off the market. Buyers, too, can take advantage of the market. However, buyers will need to act quickly and be ready to make decisions. Additionally, mortgage rates are still at all-time lows. 

It’s a good time to purchase and a great time to sell.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

Finding the Funds to Invest in Real Estate

You can find the funds to invest in real estate by using your retirement fund and putting it into a self-directed IRA.

In one of my previous videos, I discussed the seven reasons you should buy an investment property to forge a path of financial independence and perhaps even become a millionaire. 

Since then, I’ve received a lot of great feedback on this topic. One question I keep getting is from people who are interested in investing in real estate but don’t think they have the money to do so. 

Everybody’s circumstances are different, but there are ways you can invest in real estate even if you think you don’t have the means. 

Odds are you have a 401(k), a 403(b) if you’re a teacher, a deferred compensation plan, or an IRA. As I’ve mentioned before, our market has averaged a 6% appreciation every year for the past 30 years, and with a leverage of 20% to 25% and a 6% cash flow based on your rental, you should be able to produce a 30% return per year. 

If you have a child that’s about to attend college, I have a way for you to invest in real estate that I personally use. I recently purchased a home near where my son attends college at UC Riverside using my retirement fund. He shares the rooms with friends and classmates, which produces more than a 6% return annually. 

Using a self-directed IRA gives you total checkbook control.

Find the funds to invest in real estate by using your retirement fund and putting it into a self-directed IRA. This way, you have total checkbook control, you’re not dependent on a company you’re not familiar with, and you have total control over the property. You can also benefit from the tax write-offs that come with owning an investment property. 

If you want to know more about how to set up a self-directed IRA to invest in real estate or you have any other questions, please don’t hesitate to give me a call or send me an email. I’d be happy to speak with you.

How My Experience Stacks up Against the Zestimate

You may have heard that the Zillow Zestimate is inaccurate. Today I’m explaining why using an expert like myself to determine value is a much better option.

Many of you have likely heard the news that Zillow is being sued over their Zestimate feature by a dissatisfied homeowner. 

This homeowner is demanding that either Zillow remove or amend the Zestimate on her property’s webpage. 

As you are probably aware, a home’s value is determined by a number of things including its neighborhood, style, age, size, and amenities. These qualities can therefore be used as parameters for creating a fairly accurate estimate. However, according to the woman who filed the lawsuit, Zillow’s Zestimate for her property was inaccurate.

She believes this is in part a result of the Zestimate comparing her property to homes in neighborhoods and styles not relevant to her own. 

Experts have found that 25% of all Zestimates misjudge a home’s value by around 10%. Whether this is 10% more or less than a property’s true value, there is certainly an issue with accuracy. In fact, around 10% of all Zestimates are off by approximately 20%. 

For the past 13 years I’ve provided accurate property valuations to both individual and institutional clients.

This subject is very personal to me. For the past 13 years, I’ve provided accurate property valuations to both individual and institutional clients including banks, asset management companies, credit unions, financial companies, as well as a law group.

I have also been asked to use my expert opinion providing real estate estimates in circumstances where attorneys became involved with the potential foreclosure of a commercial property. 

So even before automated estimation tools like the Zestimate were introduced a few years ago I was responsible for giving my BPO (Broker Price Opinion) in order to determine a number of things such as a property’s value, whether to foreclose, or whether to put it on the market. 

Also, as of 2006 I am proud to say that I’ve been admitted by the county of Ventura Superior Court as a Superior Court receiver. Because of this I can provide my services in front of the Superior Court for many different types of cases. 

With all of this experience I can confidently say that my valuations are very accurate. While Zillow’s Zestimate is sometimes off by up to 20% my valuations are consistently within a 2.5% range of accuracy. 

Not only is using an expert like myself more accurate, but I personally can offer my services free of charge. 

So if you need to know your net worth, home value, or your FICO score, or if you have any other questions, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.

Locating a Great Investment Property

When looking for your next investment property, how do you know you’re going to turn a profit? The best way to determine that is by using the 1% Rule.

When looking for a great rental property that you can purchase as an investment, there’s a tried and true trick to ensuring that you’ll get great returns. Before I dive into that, I wanted to help you get familiar with a few terms that we used in the investment world:

Capitalization Rate: The rate of return on a real estate investment property based on the income that the property is expected to generate, and is determined by taking the Net Operating Income / Current Market Value.

Cash Flow: Also called cash-on-cash, your cash flow is usually the proceeds from rent payments after you’ve subtracted any monthly expenses. This cash flow is the return on the money you put in as down payment.

Return On Investment: Every year you pay back 1.5% of your principal balance and add onto your equity.

A good way to identify a great investment property is to look at the value of the property and use the 1% Rule.

A good way to identify a great investment property is to look at the value of the property and use the 1% Rule. For example, if a $500,000 property is generating $5,000 monthly in profit, or 1% of the total value price of the property, then it is considered a great investment property. 

If you find a “One Percenter,” you have an 8% capitalization rate, 12% cash flow, and 16% return on investment. These values go up if the original percentage is higher. However, in California, these types of properties are hard to find. In this current market, finding a property that is priced the same at $500,000 but is taking in $4,000 in monthly profit is still a great investment.

The reason for this is because many areas in California are not rent-controlled. This includes Los Angeles and parts of Southern California. When you invest in a property that doesn’t meet the original 1% Rule, all you need to do is improve the property and you’ll be able to raise the rent. Even so, without the improvements, a property like the one I described above is still seeing a 6.2% capitalization rate, 5% cash flow, and 8.9% return on investment. Those are great numbers.

So the only thing you need to do next is to start looking for those One Percenter investment properties. Even if you can’t find them and you land on a “Point-Eight Percenter,” I can help you restructure your investment to meet your 1% goal.

If you have any other questions about this or any other topic, please don’t hesitate to reach out to me. I look forward to speaking with you soon.

7 Reasons Why Buying an Investment Property Is a Smart Move

Today I’m going over the top seven reasons why now is the best time to take advantage of an investment property.

In my last couple videos, we went over the market conditions to see if we are headed for a crash in next couple years. The answer is no. We are going to see a healthy market with a steady 5% to 6% appreciation instead. With that in mind, I want to share with you how to increase your wealth by investing in real estate.

There are seven reasons why now is the best time to take advantage of an investment property. 

1. Leverage. By putting the 25% down for an investment property, you have one-to-four leverage, or 25% controlling 100%.

2. Tax shelter. You have 27.5 years to depreciate the value of the building. Let’s say it’s a $1 million purchase and the building value is 80%. That 80% value divided by the 27.5 years gives you a $29,000 write-off. Even though the building is breaking even, that $29,000 write off offsets your other income.

3. Cash flow. With most of the properties you can buy right now, you will see 5% to 6% on the first year’s return. The next year, with a rent increase, you’ll see more.

Now is a great time to purchase an investment property.

4. Appreciation. Historically we have an annual appreciation rate of 6%. That means your $1 million building will be worth $60,000 more next year.

5. Inflation protection. This goes hand in hand with appreciation. The average depreciation has been 6% in California, while the average inflation has been 3% nationwide, so that’s great protection of your earnings and assets.

6. Mortgage paydown. The mortgage paydown is roughly 1.5% every year, and that will give you back the principle. You’ll pay that 1.5% each year for the first 10 years and it will add to your equity.

7. Tax deferred exchange. In real estate, you can protect your gains and move it to another property without having to pay a tax. 

If you have any questions about investing in real estate or if you are looking to buy or sell a home, feel free to give me a call or send me an email. I look forward to hearing from you.

A Great Rent-to-Own Program in Southern California

There's a great rent-to-own program available in the Southern California market that's new, innovative, and a great option for many different types of buyers and renters.

As a result of the housing crisis, there was a program built to help homeowners who lost their homes to foreclosures, short sales, and bankruptcy. Currently, this program has a good application for upwardly mobile people, as well as anyone looking to rent in the Southern California market. This is mostly because we're seeing very few opportunities in the Southern California market where people can rent a property with the option to purchase it at a later time.

This program allows you to use the whole MLS and have all homes for sale at your disposal. It's a great option for people who are relocating, new to the area, people unsure of how long they'll be in the area, and millennials who like to be a lot more mobile. This option lets you try out the location and see if you want to stay longer.

It's a great option for anyone relocating to our area.

The program lets you rent with an option to buy and is backed by a big financial company. You can use the whole MLS to find a home or area you like, then engage a real estate agent to make an offer for you on behalf of the company. Then, the company buys the home of your choice in cash. After they buy it and go through the regular escrow period, you are then renting the property once it closes.

You'll sign an agreement in regards to the program, and once the property is purchased, you'll make a deposit for the rent when the down payment is made on the home. You then move in as a renter, but the good news is that you're not obligated to purchase the home after one year if you don't like it.

You can option up to five years as well. This makes the program especially appealing to upwardly mobile people because you can move after one year if you get a new job, for example.

It's a great program that I'd love to tell you more about. If you have any questions, don't hesitate to give me a call or send me an email. Until then, stay safe and stay happy!

Are We Really Headed for Another Market Crash?

Though many are worried about another potential market crash happening in 2017, the numbers say otherwise.

Is our market headed for another crash in 2017? There are six different factors we must look at along with the statistics they reveal to answer that question:

1. Number of months of unsold inventory
2. The number of trustee sales
3. The amount of new home construction
4. The sales of existing homes
5. The unemployment rate
6. Affordability of homes

What do the numbers tells us about these different factors? How do they compare with the last downturns our market experienced in 1989 and 2008 and the years that led up to them?

Let’s start with affordability. Affordability is based on the standard 20% down payment at the median home price, which is $435,000 here in California. At the time of the 1989 crash, our affordability index was at 17%. In 2006, it was at 11%. Right now, our affordability index sits at at 30%.

As far as the number of months of unsold inventory goes—or however many months it takes to sell a home—for the last two years we’ve been hovering around two months. In 2015, the average days on market was 61 days. In 2016, it was 58 days. At the beginning of this year, we had 1.5 months of unsold inventory. From 1989 to 1991, the number of months of unsold inventory jumped from 5 months to 13 months. From 2005 to 2008, it jumped from 2.5 months to nine months. As you can see, in contrast to these last two eras, our inventory is decreasing—not increasing. 

The number of trustee sales has to increase drastically to produce a downturn. From 1989 to 1992, there was a 400% increase in the number of trustee sales. From 2006 to 2008, there was a 1,600% increase. From 2015 to 2016, the number of trustee sales decreased 20%.

New home construction is always a good barometer for our market. We need new home construction—not excessively, but intuitively. This is because it creates more jobs and helps drive our economy. From 1989 to 1991, the number of new home construction units decreased from 161,000 to 77,000. From 2005 to 2008, the number of units decreased from 155,000 to 33,000. Right now, we have roughly 50,000 units being built in California. The number of permit pullouts for new build construction has remained steady at around 40,000 the last few years, which is the lowest it’s been the last 40 years. 

What about the sales of existing homes? Is that number declining or not? In 2015 and 2016, our sales of existing homes stayed flat. Prices have increased somewhat, but the number of sales has stayed flat. From 1989 to 1991, the number of homes sold in California decreased from 423,000 to 330,000. From 2005 to 2007, it decreased from 610,000 to 350,000. For the last five or six years, we’ve been hovering around 400,000 units being sold. 

Lastly, let’s examine the unemployment rate. From 1989 to 1991, the unemployment rate rose from 5% to 8.4%. In 2006, it jumped from 4.9% to 9.3%. Right now, our unemployment rate is 4.8%

"You will not see a market crash in 2017 or 2018."

Based on these factors and the statistics they reveal, you will not see a market crash in 2017 or 2018. You might see an adjustment, but nothing crazy. You can expect a 4% price appreciation, and we’re still in a good market for rentals because the homeownership rate will definitely not increase. Right now we’re at 63%, and we’re predicted to drop another few percentage points in the next 10 years. 

If you have any questions about our market, please don’t hesitate to call me. I’d love to have a conversation with you!

How Our Market Differs From Recession Markets

Many people are worried the changes in the market mean we are headed for another recession. I’ll go over why there’s no reason to worry about that today. 

Many people have asked me if the changing numbers in our market from 2015 to 2016 mean we’re headed for a market recession in 2017. I’ll go over why there’s no reason to worry about that today.

Back in 1989, the number of homes built was about 180,000, and in 1990, when we entered the recession, we still had about 100,000 new homes built.

In 2005, when the market was strong and healthy, there were 160,000 new homes built. In 2006 sliding into 2007, we still had 110,000 new homes built.

In 2015, there were only 55,000 new homes built, less than one-third of homes built in 2005 and less than half of the number we had when we slid into the recession.

As you can see, the current pattern is nothing like the one we saw with the last two recessions.

The lending environment is also incredibly different than it was when the last recession hit. Back in 2008, the percentage of home loans that were given to those with less than a 620 FICO score was 47%, which is almost half of all the homes loans that were granted.

In 2015, the number of loans that were granted to those with a FICO of less than 620 was 2.3%. There are no more liar loans, which means there are nowhere near as many foreclosures.

The market has come back up since the last recession, and the market is more on 2006 levels when it comes to price.

The market is stable and healthy and the interest rate is still great, so there is no reason to worry.

Overall, the market in 2017 will more than likely bring a 3 to 4% appreciation for home values and there shouldn’t be a downward trend. The market is stable and healthy and the interest rate is still great, so there is no reason to worry.

If you have any more questions, I would be happy to meet with you for a cup of coffee to discuss the market. Otherwise, please feel free to give me a call or send me an email. I’m always happy to help!

Did Our Market Improve in 2016?

From 2015 to 2016, our market improved greatly. Here are some numbers to supplement that. 

How did our southern California real estate market do in 2016? I pulled the year-end data and compared it to how the market did in 2015, and the news is good.

According to the U.S. Bureau of Labor Statistics, the 2016 inflation rate was around 1.8%. In our market, the median home price increased by 3.6% from $564,000 in 2015 to $585,000 in 2016. In other words, we doubled the inflation rate. The number of homes sold only increased by 0.5% from 2015 to 2016, but the average number of days needed to sell a home decreased by three days. In 2015, it took 61 days. In 2016, it took 58 days.

For a more in-depth look at our local market activity over the past year, I pulled the numbers from three separate regions and did the same comparison with the previous year.

Alhambra: The median home price increased by 2.25% from $550,000 in 2015 to $562,000 in 2016. The number of homes sold decreased by 6% from 405 in 2015 to 370 in 2016. The average days on market increased from 53 days in 2015 to 57 days in 2016. This increase in the number of days needed to sell a home can be partially explained by the fact that Alhambra is a more mature city, age-wise, with fewer new homes and less overall movement between them.

Chino Hills: The median home price increased by 3.6% from $606,000 in 2015 to $628,000 in 2016. The number of homes sold increased by 3% from 884 in 2015 to 908 in 2016. The average days on market decreased from 69 days in 2015 to 60 days in 2016.

Rancho Cucamonga: The median home price increased by 4% from $467,000 in 2015 to $486,000 in 2016. The number of homes sold increased by 9% from 1,791 in 2015 to 1,807 in 2016. The average days on market decreased from 64 days in 2015 to 58 days in 2016.

As you can see, our market improved in 2016, and a 3.6% overall appreciation rate is fantastic. Keep in mind that you have a one-to-five leverage ratio for your down payment on the average home that you purchase. Paying 20% down to control 100% of the value constitutes a one-to-five leverage ratio. A 3.6% appreciation rate multiplied by five equals 18%. Therefore, your down payment has increased by 18%

If you have any questions about our market, please feel free to give me a call. I look forward to talking with you!