It’s not a high-glamour, high profile niche in real estate investing, but it could be one of the safer, cash-flow producers in tough economic times: We’re talking about self-storage facilities for small-scale investors.

Yes, there are lots of them out there — more than 52,000 nationwide. But the industry racks up $20 billion a year in sales, according to Self Storage Association, the major trade group in the field, and people always need a place to keep their extra “stuff.”

Better yet, many centers generate positive cash flows even with unit vacancy rates above 30 percent, so small-scale local investors who have a knack for management and marketing can often do well – even in a down economy.

Leigh (Lee) Robinson, a California investor and author is one of those entrepreneurs with a knack. He got into the storage facilities field several years ago, and now owns four centers, ranging from 400 to 500-plus units each. He also operates mobile home parks.

Robinson’s strategy with self-storage is to buy existing facilities in the $2 million and up range that have significant potential for growth in value by boosting rental revenues and occupancy rates through intensive management oversight and modest fix-ups.

In a discussion last week with Realty Times, Robinson laid out some of the key elements to his approach:

First, you’ve got to thoroughly research and understand the demand and current performance of self-storage facilities in your area. Generally the storage business “is very competitive,” he says, and draws customers from a relatively small geographical radius – about four miles. Locations with large numbers of multifamily dwellings — apartment buildings, condos and small houses — tend to do best.

Second, since competition comes with the territory — including against giant companies like Public Storage — you’ve got to be prepared to out-market them with creative sales strategies and even out-manage them with personalized services.

For example, in one of Robinson’s centers, all tenants get free use of a box truck to move their goods in or out. Robinson says he loves to compete head-to-head with big corporate-owned facilities “because we can pay closer attention to management” details — and quality of local management is crucial to higher returns. He knows all his facility managers well — and he hires only individuals with outstanding “people skills.”

Third, Robinson believes that well-chosen, modest-cost improvements go a long way: lighting, cleanliness, security, and even asphalt paving. One of his projects has 16 security cameras, causing some customers to joke that the office “looks like a NASA command center.”

But they’ve devoted tenants, and aren’t going away.

Kenneth R. Harney

The latest report from the National Association of Realtors (NAR) indicates that existing homes sales have risen, due to a jump in sales in the Western region of the United States.

Despite this jump, NAR chief economist Lawrence Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected. Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”

Regionally, all areas except the Northeast saw substantial gains. The Northeast dropped 1.4 percent from November; the median home price is still 7.8 percent lower than a year ago. While sales may not be recovering as quickly as other areas, this price shows is the smallest drop from last year when compared to each other region. The Midwest is down 11.4 percent, the South is down 8 percent, and the West is down a staggering 31.5 percent from last year.

DETROIT–(BUSINESS WIRE)– Ralph R. Roberts, consumer advocate and spokesperson for Federal Loan Modification Law Center, today released a list dispelling the top five myths about loan modification. Intended to better educate homeowners facing the prospect of losing their home in foreclosure, the following list demystifies the most common misconceptions surrounding the loan modification process.

MYTH #1: My bank wants me out of my house. My bank wants my home. Banks and other lending institutions do not want to foreclose. They earn more money if you can make your payments. When they foreclose, they not only lose your monthly payments, but they also have the expense of foreclosing (attorney fees), rehabbing the home, and then selling it (agent commissions). In today’s market, there’s a good chance they’ll have to sell the home at a loss. This is all good news for you – it means the bank is highly motivated to make a deal with you.

MYTH #2: My credit score is bad so I won’t qualify. Unlike the option of refinancing out of trouble, which requires you to apply for a new loan, loan modification simply adjusts the terms and perhaps reduces the balance of a loan you already have. Your credit score is much less of a factor in determining whether you qualify for a loan modification. In addition, a successful loan modification can actually improve your credit score over time, especially if it prevents you from ending up in foreclosure or bankruptcy.

MYTH #3 I am not late on my mortgage payments so I won’t qualify. I have to miss a payment to be eligible. Early on, this was true. In fact, some early eligibility requirements stated that you had to be 61 days delinquent in order to qualify. In other words, you would have had to have missed two full payments. The truth is that the eligibility requirements are constantly changing and differ among lenders. Many lenders are now working out loan modifications with borrowers who are up to date on their payments. It’s difficult to determine whether you qualify until you actually discuss your situation with the lender or with an attorney who is knowledgeable and experienced in loan modifications.

MYTH #4: I would be better off walking away or declaring bankruptcy than modifying my loan. Walking away from the home and filing for bankruptcy are certainly two options, but they are rarely the best options when you are facing foreclosure. If you simply walk away, the lender is unlikely to pursue legal action against you, but in some jurisdictions, the lender can pursue a deficiency judgment against you to collect the difference between what the lender receives for your home at auction and what you currently owe on the balance of the mortgage. Filing for bankruptcy may be better than just walking away, but it can leave a blemish on your credit history that makes it difficult to borrow money in the future. A successful loan modification is almost always a more prudent choice.

MYTH #5: It’s too late. I have already received a foreclosure notice. As long as you still reside in the home – that is, you didn’t voluntarily abandon it, and the home hasn’t been sold at a foreclosure auction – you may still have time to work out a loan modification with your lender. The sooner you take action, the more options you have available and the more time you have to pursue the best option, but you can still negotiate late into the process. By contacting the lender or, better yet, having your attorney contact the lender on your behalf, you demonstrate a good faith effort to work out a solution and can often buy yourself extra time to negotiate a loan modification.

WASHINGTON – Most congressional Democrats say the quickest way to save homeowners like Troy Butler of Saginaw, Mich., is to let them declare bankruptcy and allow judges to dictate new mortgage terms.

Easy, except the lenders that would absorb the pain — and lose control of any deals to ease the terms — do not want to get dragged into bankruptcy court by millions of overextended borrowers.

Butler, 40, is a laid-off General Motors worker who has filed for bankruptcy. But the bankruptcy court has no authority to change the terms of his $90,000-plus mortgage that is more than double the value of his home.
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A bill to give judges authority to alter loan terms for primary residences may be the quickest way to arrest the housing market’s collapse. Most Democrats in the House and Senate support that plan. President Barack Obama told Democratic leaders Friday he also backs it, according to a Senate aide who was not authorized to be quoted by name.

But 10 groups representing the lending industry and other businesses are fighting back fiercely. Several have engaged portions of their lobbying machines to stop the legislation. The groups spent $83 million in lobbying on multiple issues in 2008, a figure that shows the power of the banking and investing industry and their business supporters.

One Democratic backer of the bankruptcy proposal, Rep. Maxine Waters of California, said the banking industry “has owned this Congress far too long.”

Butler, the GM worker, and an industry lobbyist see things much differently.

“I’m living from day to day, hoping to make it through the day. I worry about my family, where we’re going to live, how we’ll survive,” said, Butler, who has a disabled wife and two children, ages 15 and 11.

‘Bad public policy’
The chief lobbyist for the Mortgage Bankers Association, Steve O’Connor, said new homebuyers would end up paying higher interest and bigger down payments if lenders are saddled with the risk that a judge could change mortgage terms.

“We’re going to defend the industry” against “bad public policy,” O’Connor said.

The association’s 23-member government affairs team is trying to persuade lawmakers to kill the bankruptcy legislation. The team includes six lobbyists and nine policy experts who double as lobbyists, said O’Connor, senior vice president of government affairs.

The bankruptcy solution would not cost taxpayers money, as would mortgage modification programs that could become part of the government’s huge economic bailout package. But it certainly would harm the bottom line for lenders and investors holding mortgages.

The lending industry has voluntary programs in place to change mortgage terms. But Butler’s lawyer, Peter Bagley, said it was a nightmare trying to contact his client’s lender.

First, he was told the application for a loan modification would take at least 30 days to process. Bagley then called someone with authority to stop any sale of the home, but only received voice messages that the mailbox was full. The application never arrived.

The key to passage of the bankruptcy bill is the Senate, where Democrats need 60 votes to stop a possible filibuster. Ten Democrats — all still in the Senate — would not back the plan in a vote a year ago.

Removed from stimulus bill
Sen. Dick Durbin, D-Ill., the chief Senate sponsor of the bill, said Obama persuaded him in a White House meeting Friday to remove the bankruptcy proposal from an economic recovery package — to ensure it doesn’t jeopardize the stimulus bill. But Obama pledged his support for the bankruptcy solution, Durbin said.

Obama said he would work with Durbin to attach the proposal to other “must pass” legislation — with the hope that supporters of the overall bill would not vote against it because of the bankruptcy provisions.

Of the 10 organizations that asked the House Judiciary Committee to oppose the bill, the largest is the U.S. Chamber of Commerce. It spent $57.9 million on lobbying in 2008, according to the Center For Responsive Politics, an organization that tracks lobbying expenditures and political donations.

The Mortgage Bankers Association, which represents 2,400 member companies in the real estate property industry, spent $3.8 million and the American Bankers Association totaled $6.8 million.

With President Obama fresh into the new administration, many are wondering what will be in store for housing.

In his inaugural address, Obama noted, “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered.” He gave also a motivating line that “starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.”

This reworking of our systems will most definitely include the real estate and mortgage sectors.

Lawrence Yun, NAR chief economist, has reported this week that restoring higher mortgage loan limits is critical to this part of the market. “Buyers in higher price ranges are at a severe disadvantage because they have to pay higher interest rates,” he said. “Lower loan limits are having a pronounced impact on trade-up activity at the upper end of the market, which depends more on large downpayments to keep mortgage amounts below the maximums for conventional financing.”

NAHB Chairman-elect Joe Robson reports, “The only way to stabilize the housing market and restore consumer confidence is to put a floor under declining home values. In conjunction with foreclosure mitigation efforts, Congress must pass temporary and targeted incentives to encourage Americans to buy homes again. This will help to stabilize home prices, prevent future foreclosures, restore consumer confidence and start creating jobs.”

Carla L. Davis