Dear Everyone,

Good news! In the aftermath of the subprime lending woes, Fannie Mae has initiated a program to assist subprime borrowers. Home Stay is designed to refinance high-interest subprime loans. With lower monthly mortgage payments, borrowers are less likely to default and go into foreclosure.

It will be interesting to learn more about the requirements for the Home Stay program and how Fannie Mae is going to market it. Stay tuned.

Elaine

Dear Everyone,

At the risk of sounding as if I am whining, I really don't feel well today. I spent last week being the only daughter of aging parents. That is a fulltime job with no vacations or holidays. I also traveled through tornadoes last weekend. They delayed and canceled flights made me think I had entered the airport version of Gillian's Island (the original sitcom, not the "reality" show). So this Baby Boomer is quite tired and slightly ill. The last thing I want to be today is a thinking human being, much less a real estate investor.

I'm sure everyone, self-employed or not, has these days. The important thing to remember is that it is just a day. There are many, many more days left in which to work. And if today is the last day, for some tragic reason like those at Virginia Tech have experienced, then I am still happy. I spent the day resting, talking to friends and getting ready to be a real estate investor again. Tomorrow.

Elaine

Dear Everyone,

I'm still traveling and posting from the airport in Oklahoma City. It's going to be a long day of travel, so I'll have plenty of time to reflect on being the only daughter of aging parents. For those of you who have aging parents who do not live nearby, you might consider integrating them and their needs into your business plans.

With that said, the real estate portion of my brain had the opportunity to wander from time to time while in Oklahoma. While I drove through towns in the southwestern part of the state, I did a quick market analysis and looked for telltale signs of economic health or decline.

What I saw was a part of the country that is struggling to reassert itself. It's a part of the country that once relied heavily on agribusiness, but is now seeking out other industries for economic survival. I saw expanding medical complexes, several new gambling casinos and several new upscale housing developments--all signs, to me, of an economy in transition.

Market opportunities I observed rested with building or rehabbing mid-range homes. New upscale developments have been constructed only blocks away from aging, neglected neighborhoods. Those aging neighborhoods are a mix of rentals and owner-occupied homes, leaving plenty of room at the table for would-be rehabbers and landlords.

Elaine

Dear Everyone,

I am posting from Oklahoma City. I am here being the only daughter of aging parents. The only mother of the only daughter is talking to me as I type.

Downtown Oklahoma City is an interesting real estate case study. If you had been with me in downtown OKC before I had gray hairs and aging parents, you would have seen a sea of urban parking lots. There wasn't much else. Now there's new development everywhere, from the huge Cox Convention Center to Bricktown, a downtown entertainment area. For you Toby Keith fans, his I Love This Bar and Grill is located in Bricktown.

With all the commercial development, there's also several condo developments in progress. A newspaper reporter queried today why all the new condos were priced at $250,000 and above. The reporter acknowledged that the higher prices brought greater profits, but most modest prices would bring faster sales.

I've heard newbie investors make similar kinds of statements. While I applaud the reporter's concern for those who want to live downtown at an affordable price, his statement shows a lack of understanding. Higher prices in real estate do not always yield greater profit. Since there are several development projects going on at the same time, the competition is on. Buyers will be looking at the location as well as features and amenities. Developers may be forced to grant concessions to buyers to make sure their condos sell. The more concessions, the longer the condos stay on the market, the less profit.

But the reporter offered a gift to potential developers by pointing out a market need for affordable downtown condos. Any takers?

Elaine

Dear Everyone,

I looked at a house over the weekend. Here are some of the things that went through my head while I was looking:

Exit Strategy

I begin with the end in mind, forming the strategy before I ever step inside the property. That way, I can think about ways to execute that strategy while looking at the property. I can also see if the property condition is a match with the exit strategy. The strategy for this property was wholesaling--sign a contract with the seller, then find another investor to purchase the contract.

Property Condition

The property is an older home owned by an elderly gentleman who wants to downsize. I looked first at the items that can be costly and scare off buyers--the age of the roof and windows; potential water problems in the basement; telltale cracks in walls that hint at foundation problems; and general condition of electrical wiring and plumbing. Then I attend to features that help sell the home. That's why knowing the exit strategy is so important. If I'm going to be selling to another investor, I have to think like an investor while looking at the property. If I'm going to sell to a homeowner, then I have to think differently.

Neighborhood Condition

It doesn't matter if I find the perfect property if it's located in a neighborhood where no one wants to live. I drove around the neighborhood both before and after looking at the property. There were both positive and negative findings. It was an old neighborhood with some boarded-up properties. I noted some individuals several blocks over who were engaged in questionable activities. On the other hand, the property is located across the street from a school; there is new condo construction nearby; and a neighborhood of expensive homes within a few blocks.

Conclusion

The seller passed on my offer. Property values in the neighborhood are low, so I had to make my offer accordingly. Sellers sometimes get excited when a real estate investor shows interest in their home. They start seeing infinite dollar signs and thinking, "I could do that. I could sell my own home." And they are correct. They could sell their own home. Oftentimes, they do not. "No" is frequently "no for now." I will stay in touch with the seller. We could do business in a month or so.

Elaine

Dear Everyone,

If you've been affected by all the doom and gloom reports about the flagging subprime industry, take heart. According to a report issued by the Association of Realtors, existing (as opposed to new construction) home sales rose 3.9 percent in February, the largest amount since 2004.

The report also showed that our beloved northeastern U.S. fueled this increase in sales. That makes me smile. Think back a few weeks to February. If you can't remember, I'll jog your memories. The weather in the northeast was horrid. It was brutally cold and quite snowy. Stalwart buyers braved the weather and bought homes anyway. Imagine that. Armageddon averted yet another day.

With that tidbit of good news, I hope you have a pleasant weekend. I will spend the weekend trying to increase existing home sales in April.

Elaine

Dear Everyone,

Now that Starbucks has added 'record label' to their menu, it's not such a stretch to think of going to Wal-Mart for a midnight shop and loan application. But Wally World's attempted foray into the world of banking was recently cut short. The retailer withdrew in reaction to an FDIC moratorium on applications for industrial loan corporations, the kind of banking structure sought by Wal-Mart.

Wal-Mart sparked (yet another) uproar when the retailer applied to become an industrial loan corporation. Critics, including Alan Greenspan and members of Congress, feared that the big box retailer would ransack the banking industry in much the same way that it ran amok in the food industry upon offering groceries in Wal-Mart stores.

In announcing that it was throwing in the towel on the ILC application, Wal-Mart Financial Services President Jane Thompson labeled the brouhaha "manufactured controversy."

"At no stage did we intend to use the ILC to establish branch banking operations, as critics have suggested--we simply sought to reduce credit and debit card transaction costs," Thompson said in a statement.

This is how my brain functions. I thought of Paul McCartney, the "cute" Beatle and first artist signed to Hear Music, the Starbucks label. Then I thought of listening to a post-Heather, Starbucks-produced McCartney album while sipping a mocha frappaccino (this is not a paid mention, just a caffeine craving). Then I thought of going to Wal-Mart to get some Ben and Jerry's New York Super Fudge Chunk (craving again) and apply for a mortgage. Scary and intriguing. This stream of consciousness makes me think that one day, in the near future, we may see real estate brokerages proposing wedlock with retailers.

Watch and see...

Elaine

Dear Everyone,

I am a great fan of Mellody Hobson. She is the president of Ariel Capital Management, a Chicago-based mutual fund that manages nearly $20 billion for both individual and institutional investors. I admire the fact that she has found success in a "boys' club" industry. I also admire that under her leadership, Ariel has increased its visibility by boldly venturing into new areas, such as providing financial backing for Oprah's Broadway production of The Color Purple. Bravo, Ms. Hobson.

In the April issue of Black Enterprise magazine, Mellody Hobson writes that African American communities will be hard hit in the coming year due to the high numbers of interest-only mortgages granted to African Americans and the oncoming adjustment this year of $1.5 trillion in ARMs (adjustable rate mortgages). She also mentions the annual Ariel/Schwab Black Investor Surveys. These studies consistently show that most African Americans prefer investing in real estate over investing in the stock market.

While Ms. Hobson was writing to encourage African American to invest in the stock market, her two points present opportunities to the observant. Real estate investors are in a position to lessen her predicted financial blow in African American communities by including these communities in their marketing plans. Whether your strategy is obtaining pre-foreclosures or rehabs or rentals, Ms. Hobson's observations suggest that there will be many opportunities to purchase in African American communities.

Offering seller financing to your potential buyers is another opportunity. If it is becoming more difficult for the credit challenged to obtain financing, then you have the option of filling that need. There are a host of seller financing strategies, from holding part of the note (a seller carryback) to allowing your buyer to lease the property before obtaining a mortgage (lease option) to carrying the entire note (contract for deed or land contract, depending on your state). My caveat, particularly aimed at newbie investors, is that this is not a strategy for the faint of heart nor the short of cash. This is not a strategy for you if a missed lease payment would lead to your financial ruin. This is also not a strategy for you if, even with the financial resources to offer seller financing, you would spend sleepless nights wondering if your monthly payments will arrive.

Finally, it is my humble opinion that African Americans are an overlooked source of investing capital. You're leaving money on the table if your investing strategy includes recruiting sources of private money yet you're not doing anything to connect with African Americans. In the 2006 Black Investor survey conducted by Ms. Hobson's firm, 52% of blacks stated they preferred real estate to stocks.

A word to the wise...

Elaine