Segments of the Market Are Waking Up

The past few weeks have seen a resurgence of activity in the Portland multi market. We are seeing serious investors (many of whom have been dormant for years) start to think about buying again. Lagging behind: Owner occupants. Many first-time buyers are still hesitant to pull the trigger. It's a shame... rates are low and inventory is high. Perfect conditions for getting into your first multi!

Another Sullivan Multi Holiday Party Is In The Books!

Thanks to everyone who joined us at Eggspectation last week for the annual Sullivan Multi Holiday Party. As always, everyone behaved themselves (for the most part... John!) and a great time was had by all. Didn't get the invite?? Call us at the office and make sure you get on the list for next year... It is the premier event of the season!

What does the Fed rate cut mean?

Everyone's talking about the Feds latest move. Here's a great article about possible implications...

http://bankrate.com/brm/news/fed/winners-losers.asp?s=1&caret=3

Sullivan Multi Open House

Thanks to everyone who made it out to our "office warming party". It was great to see everyone. With days getting shorter and hectic schedules, it meant a lot to have folks take time out of their day and come check out our new digs. For those who didn't attend, you missed out on some great conversation and more importantly, free beer!

Lessons for Buyers

Everywhere you turn you hear the talk about foreclosures and the failing mortgage market. We have certainly seen the effects here is this office, but not neccesarily in the ways you would expect. Prices have definitely made an adjustment downward, which can be good or bad, depending on which side of the table you are sitting. But business hasn't ground to a halt as some outlets would lead you to believe. Instead we are seeing more "creative financing" if you will, and more people being able to jump on opportunites that just weren't there before. Last month Chris talked about a property that sold as a bond for deed, and since that post we have completed another. Our current contracts include three short sales, and our closings in the last few months have included several seller financed properties. So the story right now seems to be the following:

1) Now is a good time to buy but you will probably need some cash in your pocket to do it. Gone are the days when anyone with a pulse could buy property, but there are loans out there and people are starting to come down on their prices.

2) There are financing options out there if you don't have much cash. Seller financing can be a really good option for both buyer and seller. Short sales can be long projects without guarantee, but can be a good investment if you have the patience and time. Bond for deed gets you instant equity if you find the right property and can get the seller to bite, though it is a riskier option to both parties.

3) If you are handy, this is a great time to buy. There are fixer-uppers coming onto the market regularly and with prices moving south you can make the sweat equity work if you aren't afraid to dive into the project yourself.

4) Make a low offer if you have the comps to justify the price. In some cases properties are going for significantly less than they are listed for simply because that is where the value is shifting and the evidence is there to prove it. You won't always make it work, but you have a much better shot than you did a year or two ago.

Market Activity Picking Up

After a tediously slow July and August, the multi-unit market in the Greater Portland area finally seems to be picking up. In the last two weeks alone, 18 units have gone under contract. The Sullivan Multi Team put four units under last week alone and are activly negotiating several more contracts. We'll keep you posted as these deals continue to come together.

I received an email recently from the owner of a three unit in Westbrook wondering if now would be a good time to sell. In the email, the owner stated that she and her husband had purchased the building in February of 2006 and made about $35,000 in capitol improvements. They now live forty-five minutes away and are tired of traveling to mange the building. She wondered if she could sell now and make her money back, or wait a year and try then. Below is my response to her inquiry:

“ In my mind, the most notable factor in Westbrook real estate values for the coming months will be the reassessment which is going to drastically increase property tax, including investment and owner occupied multi family property. Historically, Westbrook has been a nice alternative to Portland for investors looking to capitalize on the proximity to Portland, yet earn more of a return on their investment due to lower prices, lower taxes and comparable rents. This increased expense coupled with rising interest rates will put pressure on values and stagnate prices. I don’t see your building going up in value over the next year.”

I hate to give someone bad news, but there are some valuable lessons here:

1. Never buy a property that is out of the way for you to manage. No matter how good the numbers look on paper, over time, your time is worth something and you should be cognizant of this when looking for investments.

2. Unless the climate is ripe for a flip, plan on holding on to your investment for five years or more. Longer is better. Logistics should (with few exceptions) never be a deciding factor in deciding when to liquidate an asset.

Sullivan Multi Happy Hour

Sullivan Multi hosted a happy hour on Wednesday night for our clients, friends and family. It was a great night of talking, laughing and yes, a little drinking. We even found time to discuss the market conditions and catch up with our newest multi owners as well as some folks who have been at it a while. Everyone seemed to enjoy themselves and it was awesome to be able to get everyone together. Hope to do it again soon!!

Outside the box...

Sullivan Multi closed a “bond for deed” deal last week. If you are not familiar with a bond for deed, as explained by John Graham, it is a mechanism whereby the title is held in escrow by the seller's attorney until payment in full is received from the buyer. The seller’s current mortgage(s) stay in place and the buyer pays the seller an agreed upon monthly payment and the seller then uses this money to pay the mortgage holder. The buyer is responsible for all management, upkeep, expenses, taxes and insurance, ect. The buyer owns the building but uses the seller’s current mortgage.

If the buyer does not pay, the seller can take the building back over in as little as forty five days. The risk for the seller is that the building could potentially be managed poorly or allowed to be run down.

The risk to the buyer is, while doing capitol improvements and paying the seller on time, the seller could potentially stop paying the mortgage. In that scenario, the bank could foreclose, leaving the buyer with no recourse.

As bad as everyone feels about the sluggish pace of the market lately, this climate seems to bring out the serious investor who knows an opportunity when they see one. As lenders pull their purse strings tighter and tighter, buyers and sellers will continue to find creative ways to transact property.

We've Moved!

Effective July 2nd, 2007, the Sullivan Multi office will be located at:

306 Congress St
Portland, ME 04101

Our phone number will still be 207-771-5556.

Feel free to stop by and check out our new space!

Happy Holidays

We are still collecting toys for Toys for Tots. You can drop off a new, unwrapped toy at our office any time between now and Christmas. We are located at 1 India Street, Portland

Happy Holidays from the Sullivan Multi Team!

Bill, Brit, John, Dave and Michelle

Toys for Tots Event

Please Join Sullivan Multi and Local Area Marines

Friday, December 1, 2006
1 India Street, Portland, ME
2 to 7pm

▪ Visit w/ Santa
▪ Military equipment display
▪ Check out military vehicles
▪ Donate a toy to “Fill the Humvee”
▪ Enjoy refreshments – coffee and donuts provided by Dunkin Donuts

Please bring a new, unwrapped toy
*Cash donations also accepted

Post Election Market

On the Monday following the election, the Sullivan Multi phone started ringing with calls from buyers. By 10:00 AM Monday morning, we had scheduled 5 showings for 5 different properties - a record for Sullivan Multi in any market and simply amazing in this down market. It would not have occurred to us that the election was a factor except that we had noticed a similar pattern two years ago.

Back in 2004, our first year in business, we had a nice two unit listed near Woodford's corner. The property had a steady run of showings up until a few weeks prior to the Presidential election. The showings dried up and we were forced to question the price. Remember, two years ago, we were in the middle of a very hot market. The election never occurred to us as a factor to consider.

After much debate, we recommended to the seller to hold to his price. Sure enough, the week following the election, the showings picked-up and within two weeks the nice two unit was under contract.

The beginning of September was busy for about two weeks but then buyer activity slowed significantly. Post-election Monday came and the phone started ringing off the hook. The buyers are back! While I don’t have scientific proof of cause and effect relative to the election, the pattern seems pretty clear. It is a good reminder to keep global events in mind in the midst of local issues, seasons, weather, and the holiday season.

Everyone is trying to figure out this new real estate market. Is the bubble bursting? Many believe that the spring will tell the truth. For the last couple weeks, the truth is that there are buyers still willing to pay a fair price for decent properties for a long term investment while locking at a good interest rate - a good formula in any market.

Multi Unit Real Estate Tips - Raise Your Rents

The Sullivan Multi Minute Tip: Raise Your Rents!

Are your rents at market value? How do you know?

As we go through many apartments in the Greater Portland area, we often surprised at the great disparity in rents. One day we see an average 3 bedroom for $1000/mo in a marginal area of Portland. The next day we see a 3 bedroom with parking and water views for $950/mo with heat included! What gives?

There are two explanations. First, most experienced landlords rent units just below market value. This enables them to find good tenants and makes it hard for those good tenants to leave. Avoiding turn-over is the gospel of successful landlords!

The second reason for low rents is simply the landlord’s lack of awareness. You do not know what other similar units are renting for if you are not out looking. So get out there. Read the paper, search on craigslist.com, and see what other similar apartments are renting for.

In the short term, low rents result in a significant loss of potential income (obviously). For example, $100 per month under market in three separate units is $3,600 per year of lost pre-tax income. What if you invested that money?

There may be an opportunity to raise your rents even higher! We see all kinds of creative ways that some landlords get higher-than-market rents. How about furnishing your apartment? If your property is in a nice part of town, tenants may pay up to $200 more per month for a furnished apartment. How about finding a business that needs corporate rentals. You are the investor! Find the angle! There is always a way to do a little better than the average landlord and see a significant return over time.

Finally, in today’s buyer’s market, higher rents equal higher prices. Think of it this way – every rental increase is instant equity in your property!

Sullivan Multi Monthly Minutes are sent to you from Bill Sullivan, Brit Vitalius, and John Graham, the ‘Multis in Greater Portland, That’s All We Do’ people. Bill and Brit are principals of Sullivan Multi Family Real Estate, LLC, One India Street in Portland. FMI Call 207-771-5556 or go to http://www.sullivanmulti.com/