The vast majority of foreclosure auction investors pick up one to a handful of units a year at most, then either rent them out or fix them up for eventual resale. Typically they also troll for distress situations, pre-foreclosures and “ugly” houses.

But John Helmick, CEO of fast-growing Gorilla Capital in Eugene, Oregon, takes a very different, high-volume approach that can be summarized in five points:

1. Buy big — 150 or more foreclosures a year – but only by cherry-picking houses that have maximum potential for immediate turnaround and sale to retail home buyers or investors within about 60 days.
2. Have dedicated crews of contractors ready to go at all times to paint, lay new flooring, and repair whatever’s broken. Fix up costs should not exceed $5,000 to $15,000.
3. Provide seller financing to retail or investor buyers if that enables them to close on units within the target turnaround time.
4. Be the proverbial “800 pound gorilla” in select target marketplaces – dominating foreclosure auctions, tracking new filings, and understanding local demand dynamics and price trends in depth. Dense urban markets can be tough environments in which to be the dominant player — so look for outlying, lower-populatin counties where you can buy most of the foreclosed units that fit your investment criteria.
5. Specialize in foreclosures only. Never stray and go after pre-foreclosures or short-sale situations. They’re too much hassle…and you don’t get the rock-bottom prices that you can obtain at auctions.

Helmick started Gorilla Capital in 2005 following the multi-million dollar sale of an earlier business venture. Since then, the firm has positioned itself as Oregon’s foreclosure mega-player – buying up houses at low costs and reselling them at price points approximately 10 percent below actual retail, to move them out quickly.

Gorilla Capital focuses primarily on 15 counties in Oregon, but has recently begun to expand into other high-potential areas, such as Arizona. The company is not after massive, quick profits, Helmick told Realty Times in an interview last week, but instead seeks to churn out consistent, steady gross profits of around 9 percent after paying real estate commissions and other expenses.

Most of Gorilla’s houses sell fast — anywhere from 72 hours to 10 days. Median holding time from acquisition to re-marketing: just 58 days, according to Helmick.

Bottom line here: Carve out your own specialized investment niche. Target only markets you truly understand. Then stick with the program to achieve a highly-disciplined path to profits.

K. Harney

A certain inconvenient truth about the trend toward green building — that it will neither fade like a bad dream nor match the utopian visions of its most ardent advocates — is good news for both the state of New Jersey and the United States, according to veteran environmental attorney James A. Kosch, a shareholder in LeClairRyan’s Newark-based Tort Defense Group.

“Neither Rush Limbaugh nor Al Gore will be happy about it when the ultimate contours of today’s green-building trend have emerged,” Kosch commented. “And that is because the same macroeconomic factors that have been so visible this year — as reflected in the extreme volatility in gas prices and the capital markets — also tend to have a moderating impact over time.” Not so long ago, many observers still wondered whether the green movement that emerged in recent years, in part because of rising concern about global warming, would follow historical precedent and quickly fade.

“Memories of the early 1990s are still strong,” noted Kosch, a director of the New Jersey State Bar Association’s Environmental Law Section. “The idea back then was that everyone would have hand-pushed lawn mowers, recycle everything and drive tiny cars. By 1993, however, Americans all drove SUVs, rarely recycled and wanted the biggest power mowers they could buy.” This shift boiled down to simple macroeconomics: As gas prices plummeted, so did the level of interest in both the green lifestyle and in eco-friendly construction projects. Echoes of this were evident last year as average U.S. gas prices, which had soared to a record $4.10 in July, collapsed along with consumer demand in the wake of the global economic crisis.

“The pace of the green movement moderated,” Kosch noted. “Companies that were looking at going green a year ago — either because of shareholder pressure, marketing considerations or demands from the European Union — backed off a bit.” Interestingly, today’s green movement appears to be more deeply rooted than those of previous eras like the early 1990s or 1970s, said Kosch. Polls show U.S. shoppers still put a high priority on sustainability despite the recession, and marketers have responded by stepping up their green-themed promotional campaigns. Meanwhile, even today’s cash-strapped state and local governments continue to push for alternative energy and eco-friendly construction, and the Obama administration has committed to spending some $80 billion by 2010 on nearly all things green.

“There is a cultural shift underway,” Kosch observed. “Part of it has to do with improvements in technology. We can now ‘do green’ much more effectively than in the past.” Still, major uncertainties remain. Legal professionals tracking this trend are navigating uncharted territory on issues related to water reuse, energy generation and sales, tax credits, insurance, economic incentives, easements for light, air and conservation, and much more, Kosch explained. They must pay particularly close attention to the status of legislation and regulation that affects, or may affect, future projects, he added.

So far this year, for example, New Jersey lawmakers have introduced 20 or 30 green-building related bills. “Fortunately, much of this legislation shows a moderating sensitivity to the economic challenges now faced by New Jersey businesses. We’ve seen bills pass that provide flexibility,” Kosch said. “That is a positive development. After all, the Soviet Union tried command-and-control, and it didn’t exactly work.”

P. Mosca

Congress is pumping out reform legislation, with support from both sides of the aisle, that’s aimed at correcting some of the problems that contributed to the financial crisis.

Last week alone President Obama signed two major bills into law. The first is intended to combat widespread mortgage fraud.

It authorizes nearly half a billion dollars for the federal government to hire new prosecutors targeting mortgage fraud, and to beef up Secret Service, U.S. Postal Service and HUD fraud investigation capabilities.

The Fraud Enforcement and Recovery Act extends the federal government’s legal reach to pursue companies and individuals who currently avoid federal oversight and pursuit.

Under the legislation, people committing mortgage fraud would now be subject to federal investigation and prosecution, federal civil penalties and federal prison time — all of which are generally tougher than their state counterparts.

Since the FBI estimates that fraud schemes bilk home owners, lenders, builders and realty agents out of billions of dollars a year, the new law should send a message: Virtually all mortgage fraud is now in the federal arena. Don’t do it!

The second major bipartisan bill signed by President Obama last week was the Helping Families Save Their Homes Act, which makes the federal Hope for Homeowners foreclosure-financing and loan modification program easier for lenders and financially stressed borrowers to use.

The law also provides new protections for renters living in houses whose landlords are foreclosed upon. They will no longer be subject to immediate eviction following foreclosure, which is the case in many jurisdictions today, but instead will have rights to remain as tenants in the property for additional periods of time.

The law also significantly expands federal assistance to homeless relief and service programs around the country, giving local organizations and governments greater flexibility in the use of federal housing funds.

Finally last week, Obama administration officials confirmed that they are working on a plan — due out within weeks – that will create a new, unitary federal mortgage market regulators with the power to oversee all players — from small loan brokers to big banks — unlike the current, fractured system where multiple agencies have partial oversight.

Critics lay part of the blame for the severity of the mortgage crisis on the fact that no single agency had the power to take action to deal with the widespread lax underwriting, risky subprime loan products and abusive lending schemes that characterized the years 2002 through 2006.

K. Harney

Loan modifications and principal reductions are big news for homeowners, but what about real estate investors who own apartment buildings, strip shopping centers, and small office buildings?

Are loan “mods” possible for them?

Absolutely, says Jonathan Hornik, executive vice president and general counsel for Kennedy Funding, Inc., a New Jersey-based lender who not only helps investment property owners negotiate debt restructurings with their creditors, but provides the take-out financing to make the deals happen.

In fact, according to Hornik, far more loan modifications involving writeoffs of portions of existing mortgage debts are needed in commercial real estate right now.

Many income properties carry loans that must be rolled over — refinanced — in 2009, 2010 and 2011. But with declining property values, owners may not be able to come up with the financing needed to pay off what they owe.

The solution, said Hornik in an interview with Realty Times, is to negotiate a reduction in the principal balance owed to the lender, and pay that off with new replacement financing.

But you might ask: Are banks really willing to do that when borrowers are current on their payments? Hornik says large numbers of them “are more than willing to negotiate to less than the existing balance on a current mortgage. It all depends on the situation the bank is in.”

Many lenders are themselves under stress because of the economic downturn. They need to bolster their own capital bases, and may be willing to write off some of the debt an income property owner owes them in exchange for a single lump sum payoff.

How much might a bank reduce an investment property loan balance that’s current? Hornik says the reductions his firm helps negotiate can range from 20 to 40 percent.

Kennedy Funding’s role, said Hornik, is “to be the catalyst. We call your lender and negotiate the terms” of the writedown, if it’s at all possible. If there’s flexibility on the bank’s end, Kennedy then offers to either buy the existing note at a discount, providing cash to the bank. Or it provides the refinancing takeout cash to retire the debt at a lowered principal amount.

None of this comes cheaply, however. Kennedy Funding is a “hard money” lender, so interest rates on the new, smaller loan amount for the investment property owner can range from 9 percent and up, with at least three points. Loan to value ratios tend to be low, generally 65 percent or less.

At the end of the process, however, said Hornik, property owners generally owe less on the real estate and pay less per month, even with higher rates.

K. Harney

Being a salesperson is one of the greatest professions on earth. As real estate salespeople, we are helping people achieve the great “American Dream”. We get into trouble when we don’t understand the process of the sale. Most real estate salespeople have never studied sales. They have learned a few scripts and dialogues, but they don’t clearly understand the buying process. They have never become students of selling.

To be a Champion salesperson you have to understand and study sales. The first step is to understand the sales process. The truth in sales is that people make decisions based on emotion. How they feel emotionally about something governs their decision-making process. We don’t do things based on logic, reason, and intelligence. We will use those tools to justify our decision. Reality is we all act emotionally, and our behavior is shaped by our emotions. Because we are human, we are in a constant state of trying to satisfy our emotional needs and emotional wants.

How do we talk to our clients’ or prospects’ emotions? We need to first put ourselves in their situation. We need to clearly understand their needs, wants, and desires. We need to have true empathy for the prospect or client. To really be effective, we need to imagine what the prospects feel like. By clearly knowing their feelings, we can gently and patiently help them see our point of view.

For example, you are working with sellers who want to overprice their home. They believe they need to get above fair market value. The most effective way to turn them to reality is to empathize with their problem, to acknowledge that you understand their feelings. Once you do that, then you can gently show them why their desires will not happen. You have to meet those overpriced sellers where they are and work them towards your position.

If you draw a line in the sand and you are worlds apart, all you are doing is yelling at them across a canyon. You have to cross the canyon to their side. You need to lead them back across the canyon. People can often be like cows. You can push, poke, and prod them, and they won’t budge.

Your reason for your way has to be a benefit to them. Once they see how they can benefit, they will follow your thinking. The key is to talk to people in terms of needs and emotional benefits to them. Once you have established the benefits, you can persuade people to do anything.

D. Zeller

A home is not an island.

The surrounding neighborhood is just as important because it can have a big impact on your lifestyle — safety, available amenities, and convenience all play their part, according to the National Association of Realtors (NAR).

NAR also says you can keep your home value buoyed if you find the right neighborhood.

And you can find the right neighborhood by getting information direct from the best sources — rather than from second hand and often incomplete data bases professing to offer you one stop shopping for all your neighborhood checking needs.

• Make a list of the activities — movies, health clubs, churches — you engage in regularly and stores you visit frequently. See how far you would have to travel from each neighborhood you’re considering to engage in your most common activities.

• Check out the school district. The education department in your town can provide information on test scores, class size, percentage of students who attend college, and special enrichment programs. Even if you don’t have children, a house in a good school district will be easier to sell in the future.

• Check crime. Ask the police department for neighborhood crime statistics — not only the level of crime, but also the type — burglaries, armed robberies — any trends of increasing or decreasing crime and the location of crime.

• Look for economic stability. Your local city or county economic development office can tell you if income and property values in a neighborhood are stable, rising or falling, the percentage of homes to apartments. Apartments don’t necessarily diminish value, but they can indicate transient populations. Check for vacant or blighted businesses or homes.

• Consider resale value. A local real estate agent or trade association can give you information about price trends, inventories, selling times and other information that can indicate how well your home’s value will hold up.

• Hit the streets. Narrow your focus to several neighborhoods and do a “walk-through” of each. Pick a warm day when people are out and available for chatting. Look for tidy, well maintained homes, quiet streets and other indicators of neighborhood stability.

B. Perkins

The National Association of Realtors is reporting that the national media existing single-family home price was $169,000 in the first quarter 2009 — down 13.8 percent from the first quarter of 2008.

Dr. Lawrence Yun, chief economist for the NAR, said some areas showed dramatic drops in home prices. “In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” Yun said. “We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other. In many cases homes are selling below replacement construction costs, which speaks to great value in the current market.”

The bright spots in the market were found in Nevada, California, Arizona, and Florida. All of these areas saw increases by 25 percent or more. Nevada led that pack at 116.8 percent.

Golf great Greg Norman was keynote speaker at the unveiling of 52 private villas that will act as the cornerstone of a $1 billion development in the island country of Dominican Republic in April. Known as “The Great White Shark,” Norman greeted an international press corps to show off his latest golf course development at Costa Blanca’s two-day kickoff.

Costa Blanca’s plans are enormous; spread over 300 acres in the town of Juan Dolio and incorporating 10 towers with 52 private villas. The condominium project is the latest of condo developer Group Metro. The Caribbean development will play host to a mega-yacht marina, as well as the usual accoutrements of a luxury condo development – “a tennis village, clubhouses for both tennis and golf, a secured, private beach, and the first signature Greg Norman PGA golf course in the country,” according to www.NewCondosOnline.com.

“The highly-anticipated development will set new standards of luxury in the area, and will bring forth a modern spin on private, high-end communities…Residents will find villas with open-air spacing to showcase their wrap-around pools, condos where every owner is afforded unobstructed water-front views, and an assurance that every aspect and step of the project is environmentally sound and positively affects the region,” according to a press release on the web site.

The Dominican Republic tourist industry has continued its growth trend even through the latest world-wide economic downturn with a 4.5 percent increase in 2008. Meanwhile, capital investment growth was up more than 20 percent according to www.GoPuntacanaRealEstate.com, a site that tracks local real estate trends in the DR.

M. Anthony Carr

Home builders and Realtors cheered in Washington last week when HUD Secretary Shaun Donovan announced that FHA will allow lenders and government agencies to “monetize” the $8,000 federal homebuyer tax credit, providing purchasers with downpayment cash upfront, available at closing, rather than waiting for the IRS to mail them a tax credit check.

Speaking at the mid-year conference of the National Association of Realtors, Donovan said HUD supports “bridge loan” programs designed to help first-time buyers come up with needed cash.

Under the bridge loan concept, an FHA-approved private lender, a state or local housing agency, or an FHA-approved nonprofit organization could advance as much as $8,000 for downpayment and closing costs — in anticipation of receipt of the $8,000 credit months or weeks down the road.

Sanctioning bridge loans could improve the effectiveness of the federal credit program significantly, said Joe Robson, president of the National Association of Home Builders.

Bill Riley, incoming president of the Washington State Realtors Association, estimates that half of all would-be first-time buyers lack the downpayment resources needed to complete a purchase, and therefore aren’t making use of the credit.

Donovan said technical instructions to lenders for the bridge loan program would be provided by FHA shortly.

In the meantime, 10 state housing finance agencies already run credit monetization programs on their own. They include the states of Missouri, Colorado, Delaware, New Jersey, Tennessee, Idaho, Ohio, Pennsylvania, New Mexico and Washington.

Most of the programs provide second liens with no interest charges for a period of months, with the expectation they’ll be paid off immediately after the homebuyers receive their IRS credit checks.

In some cases the liens turn into second mortgages with 10 year terms and floating interest rates if the buyers choose not to repay the advance with the tax credit check.

In the wake of Donovan’s announcement, major mortgage lenders are likely to gear up their own programs, bringing bridge loans for first time buyers to all 50 states, not just the ten that pioneered the idea.

However, anyone who wants to take advantage of all this needs to move fast. Under the federal tax credit rules set by Congress, purchasers must close no later than November 30 to be eligible. They must not have owned a principal residence at any time during the three years preceding their purchase. Buyers can claim the 2009 credit against their 2008 federal tax returns – they just need to file an amendment – or can wait and file next April.

K. Harney

When the sunshine starts to warm the air (and melt the snow, depending on where you live), many of us homeowners start to think about making some outdoor improvements. That can be a very good decision especially if selling is in the near future.

According to Angie’s List, a Web site where thousands of consumers share their ratings and reviews on local service providers in more than 425 different categories, well-designed landscaping can increase the value of your home by 7 percent to 14 percent.

I’ve written a lot about the importance of curb appeal and, well, let’s face it, curb appeal is similar to meeting someone for the first time — a good first impression is likely to increase the chances of a second meeting — so, too, for a home on the market.

With still so much inventory for sale, buyers simply can’t be bothered with homes that don’t dazzle them from the get-go. Buyers will look at many homes online; only the ones that entice, invite, and attract with curb appeal are likely to get a second look — this time in person.

Ken Andersen, VP of Walter Andersen Nursery says improving landscape makes the home not only more aesthetically appealing but it also can help save you money. “One of the things that you can do to help save money on your landscaping is making sure that you’re watering efficiently. One of the ways that you can save water in a landscape is by mulching the landscape.”

He says placing a two-inch layer of mulch in your yard helps keep the soil from drying out and therefore it needs less water. “It also adds organic material to the soil as the mulch breaks down and gets incorporated into the soil. So that’s always a benefit to the plants,” says Andersen.

Andersen says mulch has improved over the years. “There are a lot of decorative [mulches] that will turn what would have been a bare patch of dirt into a nice manicured area of your landscape—just a little bit of mulch or bark down in an area like that can really make a dramatic difference in the look of the landscape and it’s very cost effective,” says Andersen.

Rubber mulch is another alternative that some homeowners like to use in playground areas. You can learn more about mulch and other landscaping tips by reading my article .

If you’re going to add mulch to your landscape, Angie’s List suggests this money-saving tip: get a couple of neighbors on the block to purchase it with you so that you can buy it in bulk to save money. Here are a few more things Angie’s List says to consider:

• Think about how much work you actually want to do. You may want to hire someone only to deliver the mulch, or you may want to hire someone to spread the mulch.
• Does the company deliver the mulch or are you responsible for pick-up? How is the delivery charge calculated? Is it by material, weight, or location distance? Request a delivery quote in writing.
• If you want it delivered, it’s a good idea to be present during delivery of the materials. If you can’t be there, be clear and detailed on the place in your yard where you would like the mulch dumped.
• Compare prices. Call around to three other mulch companies to compare rates.

Of course, landscaping involves more than just laying down mulch and that means the cost of sprucing up your yard can vary greatly. Andersen recommends having 10 percent of the cost of the home reserved for spending on landscape—that doesn’t include any hardscape such as a patio floor, walkways, or a pool. But for existing homes, depending on the current condition of the landscape, improving it can be done very cost effectively.

Whether it’s new or existing landscape, Andersen recommends seeking professional help. While do-it-yourself homeowners may be eager to pick out the plants they like and then promptly put them in soil, Andersen says check with the pros first or you could end up with plants not surviving due to outgrowing the space or being placed in poor locations such as next to the wrong plants with different sun and water needs.

“Don’t be afraid to ask for help. Go into a local nursery or garden center and ask for local advice as to what you can put into your yard so that you’ll be successful. If you put something in and it dies and you have to take it out and go get another one — even if it’s under a warranty — it’s not an efficient use of your time,” says Andersen.

He adds, “You really want to make sure that what you put in your yard is going to give you the most value for your investment because landscaping really is an investment in your home.”

P. Chongchua