Now is the time! Hemet prices move towards stability...

Like a perfect storm the late 2008 price decline accelerated into 2009 with a force few predicted. But as quickly as prices fell, investors have flown into Hemet in droves and have picked up cheap properties at well below the ask. Within the past month, the average REO property entering the market attracts multiple bids above the ask, thus, stabilizing the prices somewhat. They are still cheap, but not dirt cheap anymore. Also, with the federal government's new program introduced last week, banks are finally going to have to work it out with borrowers. This has reduced the amount of REO inventory in the market. Foreclosure is no longer an option. Short sales and loan modifications are going to increase as federal funding begin to enable banks to stay up with the mountain of paperwork. More jobs for pencil pushers and more stability in the housing market.

So what's an investor to do? Be glad that sanity is coming back. Cash is still king and capital is scarce. If you have cash you can still buy low and cash flow! Plus we can maximize cash flow and minimize risk of holding rental properties by using Lease Purchase instead of just renting to dead beat tenants. Target the homeowners in Hemet, get them to short sale, and offer them a second chance through a lease purchase. Face it, loan modifications are for folks who have income and are not significantly under water. For folks in Hemet, short selling, saving their cash for 6 months and then locking into a lease purchase on a similar property is the best solution. For investors, we can sleep at night knowing our lease purchase buyers have skin in the game and were once hardworking homeowners who now have a chance to gain true equity in the home. Plus you are doing the people of Hemet a lot of good by giving them hope for the future by not renting your properties to questionable types who may give you more headaches than cash! If you want more information, go to my website: www.HemetPropertyVentures.com

Why Hemet and not Temecula/Murrieta/Menifee?

So why wouldn't I recommend investing in newer, nicer areas like Temecula, Murrieta, and Manifee? It's simply a numbers game. The homes are twice as expensive and the rents only 33% higher. In addition, there are fewer older homes that can be purchased dirt cheap. These other cities have mostly newer, larger homes that rarely price below $175K for a single family 3 bedroom, 2 bath house. However, Hemet, has far more older and smaller homes built in the 1980's and late 1970's that are pricing for $50-$90K. That's right! Insanely cheap prices due to the fact that so many foreclosures have hit Hemet and many of these homes are in need of rehab work! Some of the homes a in really bad shape and some are just cosmetic fixers.

For example when searching on the MLS for homes with 3 bedrooms+ and 2 baths+ priced between $50K-$90K and comparing rental prices for 3 bed/2bath SFR, results are:

*From MLS actives, 3 bedrooms+, 2 baths+, SFR detached homes between $50K-$90K

**craigslist rentals based on asking prices for the 7 days (3/18-3/23). Condos, townhomes and apartments excluded in average.

The rental price comparison among these neighboring cities demonstrate that there is more potential cash flow properties in Hemet. Perris is a close second but it is a much smaller town and the rental inventory (and demand) is less than half that of Hemet’s. In addition, Perris homes tend to be more expensive because there are more newer homes there compared to older homes. More detailed research in Hemet also indicates that a newer 3 bedroom home given the same square footage does not price much differently than an older home. Renters are very price sensitive will not pay more to live in a newer home. I know one investor in Hemet that purchased a newer investment home on the West side paying over $130K for the house. Then he tried to price higher ($1,400) than the older East side homes and was unsuccessful in getting stable tenants. He had to eventually lower to $1,195 to get it rented. I also know another investor who purchased an East side REO with 3 bedrooms for $65K, rehabbed it for another $5K, and was able to find good tenants within 4 weeks at $1,250. After taxes, insurance, and considering repairs and vacancy of 25%, he still has a cap rate of over 11%.

The second scenario is what I would recommend to a cash flow investor. Sure, you have an older house in need of TLC, but you will get a huge return on your money!

2009 Housing Prices Plummet in Hemet!

I'm starting this blog to educate and inform real estate investors nationwide who are interested in Southern California cash flow rental properties. That's right! Cash flow in California is now not only a reality in 2009 but the returns (cap rates) are incredible in Hemet, CA. I'm seeing REO properties going for a fraction of their 2005-2007 highs (homes purchased for $300K in 2006 are being dumped for $60K these days). Meanwhile, the home-owner population of Hemet which was once well above the national average in home ownership are now being (and sadly so) converted a city of renters creating a ready market for investor-owned rentals. Foreclosures are rampant here and finally the banks are dumping their REOs in Hemet at fire sale prices.

Hemet is has flaws (high unemployment, lower income population, higher than average crime rates), but the current environment provides a unique opportunity for real estate investors who are cautious and want to secure cash flow in excess of 10-12% for their capital.

If you are a real estate investor who has a modest amount of capital to invest and want to use your capital to create a stream of passive income TODAY and not wait until the market turns around. If you think the market can not be accurately “timed” and any significant rebound in housing prices in Southern California may take years of not decades, then you should give Hemet, CA a closer look!