January 1, 2010
Dear CCIA Members and Friends,
As we look back on 2009, it has been an interesting year. At the beginning of the year it looked like things were dead in the water for investors that wanted to buy, rehab, and resell property. Sure, there were ways to make it work if you were creative enough, but there really were very few buyers out there. You needed to be prepared to rent and hold. And, we were still seeing prices falling in many areas.
Then, as is the way in this business – a few strokes of a pen and the game changes. This time it was government incentives for first time buyers. A spurt of activity in the starter home market helped get some things moving. Fortunately, through some lobbying efforts by the NAR, the short -lived incentives got an extension, and an expansion, so some of this activity in the residential markets could continue.
Foreclosures continue at a feverish pace. While the government keeps pressing the lenders to do more mitigation work and help people keep their homes, these deals seem few and far between. I would expect more pressure on this front in 2010, but still don’t see it being very effective without big changes.
Lack of available lending sources for investors is one of the bigger problems I am hearing about. Many banks are worried about making any loans that might be considered the slightest bit risky. Many others really don’t have available funds to lend because of the REO’s they are holding in house. I am going to suggest that you check with the small lenders in the neighborhood where the property sits. Small banks have not been hit as badly by the problems in the credit markets, and they have incentives to make loans locally. Community Investment Corporation is another resource you should check out if you are working on small to mid sized apartment buildings, particularly on the west and south sides of the city of Chicago.
Members have been telling me all year about banks cutting their Home Equity Lines and other credit lines. Particularly painful when you are mid-project. My advice on this – borrow the money you are going to need and put it in a bank account. You will pay a little more interest doing it this way, but at least you won’t be caught short.
All year, members who operate rental property have been having a challenge finding good tenants. This is probably the result of a combination of the first time buyer incentives and the high unemployment rates. Good tenants with jobs are buying homes, and good tenants who have lost their jobs are leaving the area, or moving in with relatives. It is more important than ever that you learn how to attract the best tenants, while at the same time honing your screening skills.
As we move on into 2010, I expect that we will continue to deal with a tough and ever changing market. I appreciate your confidence and continued involvement in the CCIA. I have seen many long-term members returning to meetings this year. It is great to see you back, and I appreciate hearing about your investments and experiences, and even the challenges you have been facing. You’ll find that you are not alone. In the CCIA network there is almost always someone who has “been there, done that, fixed that, etc.”
I also appreciate all of the new members who have come into the group sensing opportunity in the current markets. After all, with huge price drops that we have seen, there just have to be some bargains out there. Your enthusiasm recharges all of us, and makes the folks that are mourning the loss of “effortless appreciation” wake up to the opportunity.
The day of the creative investor is back. The deals are there, and yes there are obstacles. But there are also solutions - formulas to make the deals come together. We are planning on offering more “brown bag workshops” this year. These are targeted educational programs to help you past the obstacles. Stay tuned for more details on these as they make it into the schedule.
Jane Garvey
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