Special thank you to Wyatt Martin, our Realtor, and Mike Whyte, our banker at 5/3.

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While you were enjoying turkey and football, Zillow.com was negotiating a $16 million all-cash deal for HotPads, a map-based rental and real estate site, announced November 26, 2012.

The move makes sense for Zillow ― HotPads generates 2.8 million uniques each month, mostly from renters.  That’s another 2.8 million potential leads for landlords participating in the Zillow Rental Network.  Zillow launched its rental marketplace in October, four months after acquiring RentJuice for $40 million.  Once HotPads is intergrated, the Zillow Rental Network, which already includes Zillow.com and Yahoo! Homes, will receive nearly 9 million unique visitors each month.

No word on whether Zillow (which went public back in July) will continue to offer free-listing options for landlords, given the website’s recent push into―and focus on―the rental market.  Premier memberships in the Zillow Rental Network currently start at $59/month.

In May, we purchased our first duplex — 740/742 Neland Ave.    Each side has 2 bedrooms / 1 bath.  The previous owners had completely renovated one side, but stopped work before finishing the other.

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We leased side 1 while under contract.  Side 2 is, well, a work in progress.  We’ll complete renovations by September 1.  Given the demand right now for quality housing, we’ll have tenants in it as soon as it’s ready.

Then in July, we closed on 614 Neland Ave, a 3 bedroom, 1 bath single family home.  This one will require a full renovation, but will be well worth the effort.  It’s located on a quiet section of Neland, surrounded by well-kept homes.  This house will be perfect for a family of 3 or 4.

“And if I—literally, if I was an investor that was a handy type, which I’m not, and I could buy a couple of them at distressed prices and find renters, I think that’s—and again take a 30-year mortgage, it’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make now.”

“[I]f I had a way of buying a couple hundred thousand single-family homes and had a way of managing—the management is enormous—is really the problem because they’re one by one.  They’re not like apartment houses.   So—but I would load up on them and I would—I would take mortgages out at very, very low rates.”

To Buffett’s point, big-money investors are getting into the landlord business.  Indeed, the Wall Street Journal reported this week that hedge funds, private-equity firms, pension funds and university endowments are dipping into the single-family foreclosure market.

For our part, we’ve been steadily buying foreclosures and other distressed properties in Grand Rapids since 2008, and are in contract to buy 3 more houses—1 duplex and 2 single-family homes—in the next few months.

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This video shows PadMapper in action:

Click here to view the video on YouTube.

So how can property managers get their apartments and houses listed on PadMapper?

Because PadMapper is an aggregator, meaning it pulls and compiles listings from other rental websites, there’s a good chance your places are already on it.  If you advertise on Apartments.com, Move.com, Postlets.com, or Craigslist.org, for example, your listings are automatically displayed on PadMapper.  (Propertyware.com users:  Recall, Propertyware automatically syndicates listings to Hotpads.com, Trulia.com, and RHPros.com, but not to any website that PadMapper pulls from so you’ve got some work to do).

But there is also a direct way to get listed:  PadLister.com, a free tool from the creator of PadMapper. PadLister is the only direct way to get listed on PadMapper.  And PadLister updates PadMapper in real time, while the syndicated sites have some lag.  Also, and perhaps most importantly, PadLister postings stay active longer on PadMapper. Syndicated listings are displayed on PadMapper for 7 to 21 days, depending on the source and location; PadLister listings, however, stay active for 30 days before asking to renew.

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In a report published by RealtyTrac, an online marketplace for foreclosures, the average foreclosure in Michigan sold for $70,765, a hefty 40% discount off the State average. Bank-owned buyers did even better, getting close to a 46% discount. And pre-foreclosure sales—sales that occur while the property is actively in default, scheduled for foreclosure auction, or short sales—were discounted nearly 14%.

Closer to home, distressed buyers in Kent County paid $66,416, a 41% discount off the County’s average sales price.

Oddly enough, we’re in contract to buy our first non-distressed property in nearly five years.  More on that buy in future posts.

By definition, the lender loses money at a short sale, wherein the lender approves a sale by the borrower for less than the loan amount, with the lender—not the borrower—losing the difference between the sale price and the loan. Thus, in the past, it was generally considered more lucrative for lenders to pursue foreclosures which, at the very least, have an upside potential. Foreclosures today, however, are taking longer, growing more expensive, and fetching less. Thus, “lenders [now] consider short sales as the lesser of two evils when compared to foreclosures,” real estate analytics firm CoreLogic explains.

This presents a unique opportunity for real estate buyers with the skill to negotiate with two parties, the homeowner and the lender. Remember, the bank, not the borrower, is eating the loss. So when negotiating the price of a short sale, the lender most likely has the ultimate say. The homeowner’s only goal, of course, is to secure a minimum price that will not require him or her to bring cash to closing. In a short sale negotiation, therefore, your best offer is the most the lender is willing to lose that, at the same time, doesn’t require the borrower to put in any cash toward the deficiency.

At its peak, Zillow.com was valued at $1.6 billion—not bad for a company barely turning a profit.

Zillow’s $70 million float follows HomeAway.com’s, which raised $216 million in June.

Adding to their troubles, underwater homeowners seeking a short sale—selling a property for less than the value of the outstanding mortgages—have a much harder time doing so when they have a second mortgage, because all the lenders involved must agree to take losses on the sale, and second-in-priority holders take the first losses in such a situation.  For these reasons, and with home prices nationwide continuing to tumble, new home-equity loans are almost nonexistent.
Source:  The Wall Street Journal