Author Archives: Krista Magidson

Economic News this Week: None! The Fed announcement gets a big yawn

The Fed announcement gets a big yawn, and the “weather” takes the blame for other poor numbers.

On Tuesday we got housing starts that were down 0.8% and building permits were up 5.7%, which in the mix is mortgage interest rate neutral. That means not good news, not bad news, so no influence on rates.

Then on Wednesday, the data on the existing home sales for August fell just by 1.7%, which is actually mortgage interest rate positive, meaning if there are fewer home sales and home sales support so much of the economy, then there is less movement in the money flow. That means low inflation, which means long-term interest rates are not going to go up.

Later on Wednesday, the Fed announced, as expected, that they would leave the Fed Funds rate as is. So no hike in the prime rate. And that was it. Some mortgage program rates were up slightly (like the 30 year fixed), but most remained the same.

Update on Florida: It’s the calm after the storm

It’s the calm after the storm – the hurricane to be exact. I was relieved that the 6 duplexes in Florida and 10 units in Pompano Beach are fine. My other clients’ properties (some wood construction) are fine as well.

This is a lot like the three little pigs story where the wolf could blow down just about any house in his way. I’m glad that I decided to stick to CBS construction, have the right insurance, have a diligent, systematic, communicative property manager who has been through hurricanes several times. These factors gave me the best outcome possible – and while I was prepared to replace many roofs, fences, have no rent for 2 months, etc. – none of that was necessary.

I warned last week to have reserves and have all the protection allowed when you are in a high-risk zone. And while I will have to pay the payments on 10/1 with no rents deposited, in the scope of things, that’s ok. I want my property manager to get back on track in a clean linear unrushed way. He has enough to think about to get everything on track. Today was the first day of full power and he had crews at work at the crack of dawn to get the empty units rented.

Now that I know what I know, I am looking into getting a backup generator for both properties. Our tenants stayed in the property, and they are all used to it. As a concerned landlord, but also a value-add investor, I see the potential for a win-win in getting a back-up generator.

Success Story of the Week: How His Credit Went from 550 to 730

Lucky number 7? Let me tell you just how lucky that is and why it matters.

A client was referred to me by his brother 7 years ago. He was ready to buy a home but his credit scores were 550 – hardly high enough to get a good rate.

We spent some time to devise a plan and I helped him bump that score above 600 to get the loan.

More importantly, he called me just this week and told me, “Athena, I’ve been following your 5 guidelines for pumping up my credit, and I’m up to 730 now.” He said because of his great credit, he also got a low-interest car payment so that his family could have a safer newer car.

That’s a success story worth applauding and applying. Knowing the right money management strategies can not only change your home buying experience but your life experiences.

I truly love it when people take my advice and their financial life gets stronger and debt much cheaper. I was thrilled when he told me they are now are moving to a bigger home which is closer to family, and because they have a big down payment from the sale of the original home, they landed a low monthly payment too!

This week, all eyes were on the storms hitting the South East.

This week, all eyes were on the storms hitting the South East. Very little weight was given to the economic data as some of the lower production numbers were blamed on Hurricanes Harvey and Irma.

On Wednesday the August Producer Price Index was up less than expected at 0.2% the core rate was up 0.2%. August consumer price Index was up 0.4% the core rate 0.2%. August retail sales were down 0.2% excluding autos it was up 0.2%, which is very weak for summer. The Industrial production was down 0.9% while Capacity Utilization slid down to 76.1%.

As you can see, the US had a weather-related economic slump in production, in buying/sales and in many different areas. As you probably read or heard on TC, factories were closed for several days, stores were closed, banks were closed, no electricity for days… hard to produce and/or spend in those conditions. Investors will not and did not react to this since it is basically a false reading or skewed reading of our economic health.

This also means next month’s numbers will be watched more closely. Because of this wait and see attitude, rates remain the same.

I Have 6 Duplexes in Florida. Here’s What Happened.

“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.”–Dave Ramsey

Success at anything – especially investing – comes in many forms. I’d like to share my most recent success, that, at first glance, may not be the success you’re looking for – but oh – it was a blessing in disguise!

I have 6 duplexes in Hollywood Florida, on a property in Pompano Beach. On August 25th, I closed after 3 months of due diligence appraisals, loan approvals, negotiations over inspection items etc.

They are all insured, but the news of a Level 5 hurricane passing through those neighborhoods might have scared even the most confident of investors. But not me!

The good news for my tenants is that in the end, the storm went west, away from the Miami area, (still sending love to those who have been hardest by the hurricanes). But the real good news for any investor is the test of your team and their ability to act in emergency.

When we found out that Irma was getting closer, my property manager was under forced evacuation from her home in Miami Beach.

She went to her parents’ house to secure their property for the storm and took care of my properties. Calmly texting back and forth even as she was at risk, she went to all the properties 3 days before and posted notices that the tenants should get to safety, reminding them also that the landlord insurance does not cover their belongings.

She secured the storm windows on all units, and I received reports through the weekend on how she is and if there were any calls. She had no electricity at that point.

After the storm passed she went to the units and talked to the tenants who had stayed about any damage. She saw lots of debris but no damage to the properties’ roofs, windows.

Only pieces of an old fence ripped out at the Pompano Beach units which we were going to replace. Her partner drove 80 miles to get an internet connection to send out an email about what was going on and when people would be able to reach them.

In addition I got similar messages from the insurance company saying that they are fine and to call immediately if we think we have a claim.

Thank goodness my property manager had been through several hurricanes and wasn’t phased by this tremendous storm. She was confident that they were doing everything that needed to be done, and placed the rest in God’s hands.

As a side note, that the rents were paid by 5 out of 12 tenants in Hollywood and banks are not open so I needed to pay the mortgages out of reserves unit I can get the rest of the rents collected and deposited on the 22nd. Though emergencies such as this latest hurricane don’t come up often, they do come up. Investors do need to have reserves for emergencies.

The lesson learned from this destructive storm was that while we can’t control Mother Nature, we can make sure that we are prepared.

As I always say: Successful investing is all about having an excellent team with excellent communication to take care of an asset. Better an excellent team and mediocre asset than a mediocre team and a prized asset. The former is success the latter is disaster.

The next big week for rates

Last Friday I did not send a newsletter out because I was in Paso Robles in 110 F heat. And it looks like I wasn’t the only one drying up on my trip.

This week had one data point to move the markets and that was the Institute of Supply Management’s service sector Index for August. This number crept up from 53.9% to 55.3%: indicating a stronger economy.

Unfortunately, this was not good for mortgage rates because it is only one indicator of a possibly stronger economy.

The non-farm payrolls were UP 154,000 and the jobless rate was also UP to 4.4% – also the June and July payroll numbers were revised LOWER by 41,000. All these should have helped mortgage interest rates but it was a short trading day and like me, many bond traders were already “checked out of office” – so no movement to lower rates occurred.

The next big week for rates and for the year will be the end of September. If the economy looks weak (and it usually does because of seasonality), we will get lower rates with disappointing numbers.

But hang in there. What goes up must come down. We’ll get through this slow cycle soon!

Why cash is not always King

In the buying and selling process, it’s common to think that cash is king. But just because it’s been done doesn’t mean it’s always done that way.

Sometimes being faster gets you the deal. We had a client 2 weeks ago that was bidding on a house against 2 other cash buyers. He was putting 50% down but didn’t have 100% down 😉

Where there is a will there is a way, so to get the deal done, he paid a little more than the other 2 offers and we guaranteed a late payment fee if we didn’t close in the same 20 days that the other 2 cash offers had committed to.

Yes, we were that confident that we would provide a guarantee to the seller.

And so with a big down payment, we are able to get the deal AND get it done in just 15 days. Our mortgage team attacked the transactional process like the best Indy pit crew you have ever seen (or if you haven’t seen then think of the blur of the cartoon Tasmanian devil 🙂 .

So remember that cash is not always king if you can sweeten the deal for the seller.

An eclipse and flat rates? Here’s what happened

It was a slow economic newsweek this week. And despite the excitement over the eclipse, it didn’t give us lower rates. Even the news of July new homes sales numbers announced Wednesday had fallen 9.4%, still didn’t help the rates decrease at a noticeable level.

Thursday existing home sales slumped 2.8% which also should have helped interest rates and it did, but ever so slightly. And just to prepare you for the week ahead, it is unlikely to change much as much of the country is in last hurrah of summer mode.

So hold tight for another week of flat rates. Enjoy the summer and know that everything changes with time. 🙂

Can an income property cost you money?

You have an investment property you naturally think that you’re making money. But the truth is, many people actually lose money by accident.

As an investment advisor, I see many people mistakenly falling into the California (CA) bank trap.

What’s a CA bank? It’s the rental property that you have in California that has now tons of equity but barely breaks even or has negative cash flow.

This happened to one of my clients recently who came in for a refi. He showed me that he owned a property which was his previous home – a condo in San Pedro.

He bought it for $225,000 and the payments with the Homeowner’s Association were $1800. He had rented it out and was getting $1695 in rent. And it wasn’t until the tenant was moving out that we discovered this “piggy bank” of his with $200,000 more in equity was actually COSTING him money every month – and that was on a good day (on a bad day if repairs came up it was an even bigger hit).

So I showed him some examples of properties in other states where the same equity of $200,000 would be giving him MAILBOX MONEY (income that just shows up in the mailbox) of $1200-$1500 per month. He was excited!

He now owns a triplex and gets paid $1254 every month, and every time the rent goes up, he makes more money. Even better, when the mortgage is completely paid off the income will increase by $521 per month. Success!

Do you know someone who has equity but no cash flow that you can share this nugget with? Have them call me and be the reason someone smiles today!

Economic News this Week: This week we had a couple of market-moving numbers

This week we had a couple of market-moving numbers, but ended flat. When you watch the bond market like we do, it gets exciting and can foreshadow things to come, such as higher rates.

Tuesday we had the July retail sales number coming in much stronger than expected at 0.6% – yeah summer spenders – helping the economy, but putting an inflationary scare into the bond market.

Wednesday, July housing starts were down 4.8% and building permits were down 4.1%, which was mortgage interest rate neutral.

Thursday was a number that I don’t usually share with you but it was so unusual I had to. The WEEKLY jobless claims were down 12,000 which is a pretty big number for 1 week bringing the jobless down to 232,000. Good for the people who got the jobs (or did they just give up?). But bad news for the mortgage interest rates. Is this foretelling of what we will see the First Friday of the month monthly jobs reports? If so we may be seeing the next rise in mortgage rates.

More people working means more sales, higher prices, and away we go.