Personal Finance

Flipping Real estate? Here’s how to do it right

Posted by Ozzie Jurock's Real Estate Insider

on Friday, 20 September 2013 18:33

Ozzie Jurock Photo 09-webInvestors often turn to real estate, looking to flip as a way to earn big money fast. Real-estate experts agree, however, that people need to do their research so their flips don’t flop.

To start, potential investors need to be clear on exactly what kind of flip they’re prepared to pursue. There’s the “quick flip”; buying a place, fixing it up, and selling it within a year; and buying a property, renting it out for a longer period, then getting rid of it.

“All three are totally different animals,” says Vancouver-based Ozzie Jurock, president of the Jurock Real Estate Insider. “People want simple answers. It’s not so straightforward as hoping some other greater fool will pay more the next day than what you paid today.”

The basics                                                                                                       Ozzie Jurock

“The number one requirement to flip has nothing to do with the market but has to do with you: it’s guts,” says Jurock, who’s currently keen on Phoenix and Las Vegas for real-estate investing. “You have to step up to the plate. In our club every month we have people talk about how they saw a deal. They’ll say ‘I saw it, I knew it was great, I did my research, but I didn’t move and someone else got it.’ They’re human beings; they act on emotions. It’s not all clear numbers.”

There are many success stories, though. He points to a senior couple he’s worked with who wanted to flip as a means to increase their annual income. They decided on flipping four properties a year, one every three months. Their first year they made $32,000; the second, $68,000.

“And this year they’re well on their way to doing it again,” Jurock notes. “To them it’s ideal because they’re clear [about their goals]. Often what we don’t have in real-estate investment is clarity. When people aren’t clear, they’re running around all over the place, ‘Joe says I should do this. Have you heard about this?’ As a flipper, know thyself. Have guts to act.

“What is the reason why this or that property is going to be worth more after you buy it?” Jurock adds. “Is it because you’re going to add value to it by painting? Or is there something happening in that town–a new sawmill opening up or a new power station–some kind of economic reason?”

Making money by flipping also involves “elbow grease”, Jurock says, who points to Edmonton, Calgary, and Surrey as other strong markets for investors. “Say you buy a place that’s a bit rundown. You paint it, clean it, cut the grass, put on new front door, put big brass numbers out front; only spend money on the main floor. Don’t spend a lot of money on stupid stuff. Don’t ever put a bidet in a washroom.”

He says the “classic” flip everybody wants is a foreclosure. He suggests people go to the courthouse and see how the process works. Money can be made on these properties, but again, people need guts. “Understand yourself,” he says.

Finally, remember there’s risk involved.

“You might go somewhere and buy the wrong thing,” Jurock says. “Or you might buy the right condo at the wrong time. Markets are cyclical.”

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Click on image or HERE for more info

The markets reacted swiftly to the news of the Federal Reserve’s FOMC’s decision to not taper their asset purchases at their September meeting. The press conference following the policy announcement expanded on this to give the impression that the US Fed lacks confidence in the economic recovery to be able to pare back their extraordinary stimulus. While some question the Fed’s credibility at this point and see Bernanke as a repeat offender for shocking financial markets, there could be other shifts going on at the Fed that have caused them to make this decision.

Earlier this year, it created a huge turn in financial markets when the Fed announced that they begin the withdrawal of their asset purchases later in the year. Immediately there was a huge selloff in all markets spanning from equities to bonds to commodities. The only asset for some stability was the US dollar. That helps explain the reaction Wednesday, when the markets took the complete opposite reaction to the Fed’s decision to delay the much anticipated taper. And if Chairman Bernanke tried his best to make clear one single point, it was that the Fed’s decision to taper was and always has been dependent on the economic data. Despite analysts and financial media over-interrupting his press conferences and meeting minutes, data indicating an improvement in the underlying US economy will allow the Fed to taper. Wednesday signalled that day is not yet here.

The job market had provided the best indication for market analysts for the direction of Fed policy. That is why, in an economic recovery, when those numbers are released each month so much weight goes to what they reveal. In this newsletter a few weeks back, discussing August’s weak payroll report, I suggested this could give voting members uncertainty about the upcoming decision to taper, and create the potential for a few months delay, and that is exactly what we saw. Where the Fed used the unemployment rate as yardstick for the quantity of asset purchases to be made on a monthly basis, they realized that their yard stick was no longer the right measuring tool for the State’s economic performance.

Bernanke cited problems with US job creation. Particularly as we enter a period of decreasing labour force participation, and a retiring boomer population that is not being replaced by a workforce with the same skill set. Thus an unemployment rate of 7 percent to allow for tapering asset purchases looks more like some arbitrary goal than one of actual substance. Better signs for the US employment front can be found in the 4 week moving average of weekly jobless claims as that number indicates almost 40 thousand fewer Americans file for unemployment benefits on a weekly basis as did 4 months ago; however, job creation is the foremost issue, and there are still 7 million Americans either under or unemployed since the peak before this crisis began.

Going forward, it’s truly important that investors make themselves cognisant of two issues. These encompass the realm of possibilities in decisions that could come from the US Fed. Tapering can occur at any instance between now and the Fed’s next meeting. It may not, but eventually the taper is inevitable. This could throw a bit of a curveball at the markets. Despite the Fed’s asset purchases as of late being more impactful on sentiment, any announcement regarding change (or lack thereof) can act as a shock to the financial system.

The second is that investors may want to position themselves for an even more dovish Federal Reserve. While some argue Bernanke went back on his word or misled investors, I would suggest (with full credit to Pimco’s Bill Gross) that the shift is beginning to see Fed Vice-Chair Janet Yellen’s influence increase even more. Thus, this is why the market priced in her leadership overseeing the Fed Funds rate unchanged for a longer time horizon.

Although there are many uncertainties, one thing is clear; despite the Fed’s increased transparency and despite their efforts to provide forward guidance—against all efforts to the contrary they still have the ability to send financial markets for a tailspin.        

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Jack Crooks: Rates Heading Lower

Posted by Jack Crooks - Black Swan Capital

on Friday, 20 September 2013 16:59

 10-yr Treasury Benchmark Yield: Pointing lower……and some great comments from Dr. Doom – Mark Faber

 US Treasury 10-yr Benchmark Yield [last 2.75%]: At a 38.2% retracement, 10-yr yield at 2.38; at 50% retracement, yield at 2.19%…

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 Mark Faber’s reaction to the Fed decision on Wednesday—this is priceless! “QE infinity”… 

Regards, 

Jack & JR

 

MEMBER SERVICES

 

The annual Canadian inflation came in at 1.1% this morning edging down from a 1.3% July posting. Core CPI,the number watched closely by the Bank of Canada, rose 0.2% in August in line with expectations.

 

Drew Zimmerman

Investment & Commodities/Futures Advisor

 604-664-2842 – Direct

604 664 2900 – Main

604 664 2666 – Fax

800 810 7022 – Toll Free

dzimmerman@pifinancial.com

The Key Variable

Posted by Michael Campbell - Money Talks

on Friday, 20 September 2013 15:47

Michael Mike Campbell image Whether its mortgage rates, the solvency of your pension or what it costs you to travel, Michael zeroes in on the main force in society affecting your finances. 

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