Puerto Vallarta Real Estate
Cruising the Water in Puerto Vallarta
This is one of the most common questions that I get when working with new investors, and I guess that it is to be expected. Not only are there a lot of different types of properties out there, but there are also different strategies and pros/cons to each strategy. So in this post I will attempt to provide some criteria for how to answer this question for yourself.
What Are Your Goals?
I believe that everything comes back to your individual goals. There are many different types of properties and strategies out there, but unless you know your goals it is difficult to know which one to select. So start out by figuring out your goals.
Related: Tips for Achieving Your Goals in 2014
What is Your Strategy?
Once you have your goals established, the next thing is determining which of the hundreds of strategies you could utilize to achieve your goals. Some strategies are more active, such as wholesaling and flipping. Others are more passive (but still require work) such as buy-and-hold or tax lien investing. Narrow down the strategy or strategies that will contribute towards achieving your goal.
What is Your Location?
Sometimes this step can come before your strategy, sometimes it can come after. In my case, my goal was to generate monthly income to cover my expenses to allow me the freedom to make decisions without having to worry as much about the financial impact. My strategy to do this was to purchase buy and hold properties. So my next step was to find a location that would fit my strategy.
One of the first things that I did was to lay out my criteria for a location. These included things like:
- Within 1 hour of driving
- Steady/increasing population over the past 10 years
- Multiple businesses locally available offering jobs
- Purchase prices that allowed positive cashflow
After I had my basic criteria, I grabbed a map and created a circle of my target area. I then took towns (Zip Codes) within the circle and plugged them into City Data to get information and population trends for the zip code. Any that did not have steady/increasing populations got removed from the list.
I then created a spreadsheet for each Zip Code. I followed rental ads (either in the newspaper or online, whereever landlords advertised properties for rent). At the end of the month I analyzed the data and asked the following questions:
- On average, how long were ads in the paper (how long did it take to get a place rented)?
- What is the average rent for a 1 bedroom apartment? 2 bedroom? 3 bedroom?
- Were apartments offered single family houses or multi-units?
- What were the “norms”? Ex. Were pets allowed? Were utilities included?
Once I had this information, I then began looking at properties for sale. I used a spreadsheet to quickly evaluate these properties. At this point …read more
Starting back in July of 2013, Freddie Mac initiated a risk-sharing plan to transfer some amount of their residential mortgages credit-risk exposure from taxpayers. The offering was to attract other sources of capital from the private market, like banks, mutual funds, and insurance companies.
The Structured Agency Credit Worthiness (STACR) debt notes offering has received investment grade ratings from Fitch and Moody’s, and attracted over 50 different investors. Effectively, any investor that bought more than $1 billion in bonds now shares the risk of a portion of losses that could happen if some mortgage borrowers don’t end up repaying their loans.
Freddie Mac is back with another installment (third) of its risk-sharing deals under mortgage credit securitization platform. So far, these credit-risk deals have received an excellent response from the investors and the government enterprise is ready to come up with similar deals in future.
The past few months have witnessed an increase in the investor pool planning to invest in these government bonds. We can expect a regular issuance of similar deals throughout this year and the government plans to increase the credit risk on private investors in small installments.
Key Points of Third Risk-Sharing Deals
- More than 65 investors are now participating in this offering.
- Single-A Rated Class Pricing: one-month LIBOR with 100 basis points
- Triple-B Rated Class Pricing: one-month LIBOR with 220 basis points
- Unrated Class Pricing: one-month LIBOR with 450 basis points
The most interesting fact is the introduction of three different bonds in the STACR 2014 series with the target to offer additional protection to Freddie Mac and offer healthy combination of products. Freddie Mac anticipates that these product mixtures are among the primary reasons for better response from investors (20+ investors). The earlier offering in 2013 had two different types of product investment options.
The STACR 2014 series has offered better investing flexibility to the investors with an option to exchange between these three classes. It is possible to combine pro-rata components of each of the individual cash flows. At the same time, investors can divest interest from any of these classes and create more bonds with individual margins.
The third installment of risk-sharing deals, STACR 2014, constitutes of 140,000 residential loans with $32.4 Billion in principal balance (unpaid). The 30-year fixed-rate single-family mortgages purchased by Freddie Mac during the second quarter of 2013 are among the subset of this STACR pool.
Transferring Risk good for Taxpayers?
This isn’t the first time Freddie Mac has tried it’s hand at raising capital in the private sector. Over the past 5 years they have been successful at bringing in more than $64 billion dollars through a multi-family K-Deal program. This makes them one of the largest issuers of multifamily structured debt in the US capital markets, putting the overwhelming majority of risk onto the private capital investors that purchase their bonds.
Related: Freddie Mac Housing Report: What’s In-Between the Lines?
What do you think? Is this innovate and forward-thinking of Freddie Mac to transfer the risk off the government and into the private sector? Or is it spelling trouble to not have government more government oversight involved?
The post Buyers Ready to Invest in Credit Risk Bonds with Freddie Mac is property of The BiggerPockets Blog. and is Copyright