Nobel Finance Sydney – Money Matters Newsfeed

By Kenneth Aikens

Do you know why only five percent of all currency traders are successful? Do they know something that we don’t? The truth is that successful forex traders use the same technical indicators that you and I use. The difference lies in accurately interpreting these indicators. A common indicator used by forex traders is support and resistance. Let us see how support and resistance are used in forex trading.

Support and Resistance is the foundation of most of the top trading systems. Support and resistance levels represent pauses in the trend when investors reconsider all information. The idea of support and resistance is vital to understanding and interpreting the forex market. Support and resistance are basically price bands where the price will probably stop falling or rising respectively. Support and resistance are created because price has memory. Support and resistance are by far the most important forex trading technical indicator you will ever find, and the best forex trading option if you want to be on the right side of the market.

Support and resistance are like a floor and ceiling, with prices contained between them. Support like resistance is rarely a precise price; it is more often a relatively contained price range, frequently in the vicinity of past technical patterns. Support and resistance levels on bar and candlestick charts are a major component in the study of technical analysis. Support and resistance come in all varieties and strengths. The length of time that a support or resistance level exists helps to determine the strength or weakness of that level. When a level of support or resistance is penetrated, price tends to thrust forward sharply as the crowd notices the breakout and jumps in to buy or sell. When a level is penetrated but does not attract a crowd of buyers or sellers, it often falls back below the previous support or resistance.

Support

Support is defined as a price level below which it is supposedly difficult for a currency pair or market to fall. Additionally it is a price level at which a currency pair or other security stops falling at least temporarily, hence the name. Support represents the level at which buying pressure is strong enough to absorb and overcome selling pressure. Support defines that level where buyers are strong enough to keep price from falling further. Support lines turn into resistance and resistance lines turn into support.

Resistance

Resistance is the opposite of support and represents a price level or area over the market where selling pressure overcomes buying pressure and a price advance is turned back. Resistance defines that level where sellers are too strong to allow prices to raise further. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

So we have learned that: Understanding the concept and significance of support and resistance is important for profitable forex trading. One aspect of its unique quality is that support and resistance is defined as an area or a zone not a single price level. One of the basic precepts of support and resistance is that once a support level is violated it becomes a likely new resistance level and when a resistance level is penetrated it becomes a new support level.

Start practice trading using support and resistance on a demo account right away. Go out there and continue to research this indicator as well as other technical indicators. Once you master interpreting forex technical indicators profits will surely follow.

Posted in Forex | | No Comments »

By Lane Bailey

Digging a little deeper into Flipping. In Real Estate Investing 101, Part I, we covered buying a house to resell for a short term profit. In this lesson, we’re going to delve a little deeper into flipping, run a scenario, and examine ways to maximize profit, while minimizing risk and making it happen fast.

Finding an appropriate property

Obviously the first ingredient in a profitable flip is the property. Despite what one may see on TV, it takes a little while to find good candidates. The various types of properties that may make good flip candidates are foreclosures or REO (bank owned properties), fixer-uppers, older homes that need updating, and ugly properties that are otherwise in good shape. Cost is obviously important, but condition is also very important. Remember, not only will there be an expense for the repair, but there is also a cost to carry the property while the repairs are being done. For example, if Property A needs $20k in rehab, can be completed in 8 weeks, and will cost $2k/mo. to carry, it may be more attractive at $176k than Property B, which needs $50k in rehab, will require 16 weeks at $1500/mo. and is priced at $150k. This assumes that they would both be able to fetch the same price at the end of their renovation.

Homes may be in almost any price range. Condos may be purchased for as little as $40k, but sometimes there are opportunities with homes prices at $1M or more. In fact, the pricier homes have some advantages in some markets. Let’s cover a few price levels:

Under $100k – Pro- Cheap, easier to carry if it doesn’t sell as fast, possibly a larger market to sell into after completion. Con- Lots of competition bidding up the prices, requires tight control of expenses to be profitable, lots of market competition.

$200k to $400k – Pro- Fewer competitors bidding up prices, often a little larger pool of properties to pick from, usually higher margins. Con- Requires more capital, appropriate level of fixtures and finishes more important.

Over $700k – Pro- Often more generous margins, little competition, fewer buyers that will do work themselves, more fun to make (home theaters, high-end kitchens, etc.). Con- Bring your checkbook, higher level of capital needed, wrong finishes and fixtures will kill chances of a sale, tastes may be fickle.

Over course, you may have noticed that I left generous gaps. These are guidelines, and in different markets, the actual prices will need to be adjusted.

Putting together the numbers

I have a Excel spreadsheet that I will use to examine the transaction. It is available here. While it isn’t fancy, it does cover the information that we need in order to calculate the cost of the flip, and figure out what needs to happen in order to make a profit. There is nothing worse than getting into the flip, and finding out that you forgot something important, and you aren’t going to make money. Unlike a TV show, it is not very often that you can just raise your price in order to get your money back out of the deal.

When filling out the spreadsheet, the light gray areas are for users to input information. The light green areas have calculated values. Remember, the more accurate the input information, the more accurate your profit analysis will be.

The toughest and most important part is getting the right cost estimates for the renovations. The natural inclination is for these to be under-estimated. Many first time flippers plan on doing all or most of the work themselves. This isn’t a great long-term strategy, but there are advantages. The primary advantage is that the flipper increases the profit margin. However, the big danger is that flippers often under-value their own labor. Using painting as an example, painting the interior of a large home may require 20 gallons of paint. A professional painter may bid this job at $4000. The cost of paint would be approximately $600. A job like this might take 60 person/hours. Entering $600 for the cost of repainting the house does not place any value on the time involved in labor. So, even if the person flipping the property is planning on doing the work, they need to break out the labor for these tasks. More than one person flipping a property has spent hundreds of hours only to find that they $/hr were terribly low.

Putting together a team

A good flipper needs a good team. This is even more important if one plans to have more than one or two properties active at any given time. But, these are the people one needs to have available:

Real Estate Agent- A good agent will know what is on the market, and should be able to quickly determine what a good ARV (After Repair Value) for a given property will be. This agent will also know how to price the property to maximize return. That doesn’t always mean maximum price, those closing costs can add up, and if one’s capital is tied up, one can’t move to the next project.

Inspector- Spending a few hundred dollars for a good inspection is money well spent. Missing a failing HVAC system or a roof issue could cost thousands. Knowing that a particular siding or electrical has shown itself to be unreliable can also be very valuable. If one can find an inspector that will give good cost estimates of repairs and upgrades that need to be performed, one may be able to cut down on the number of contractors that need to be consulted prior to buying a property.

Contractors- These contacts can make or break a flip. If the work is good, fast, and appropriately priced it is well worth paying to have it done. Saving a few hundred dollars and spending a few thousand in carrying costs while you wait for a contractor that is behind schedule is not a good trade. Saving a few thousand, and then having to spend money to fix what wasn’t done well is also not a good trade… especially when you have to carry the property that much longer to get everything done.

Project Coordinator- If more than a couple of projects are running, having a person to help keep everything on track is vital. Even the best contractors will have people that need someone to make sure they are there on time, and doing the right work. Even the best flipper needs a second opinion, and someone to run errands or get the right materials.

Mortgage or Commercial Loan Broker- Carrying costs are another make or break expense. Having the capital to complete the project is a requirement. Being able to continually finance projects is also required. Most mortgage lenders (not brokers) don’t want to loan money to flippers without front loading. They make money by either carrying the loan, or charging up front fees. Since the goal is to NOT carry the property, they need to front load the fees. A good loan source can DRAMATICALLY lower your costs.

Selling strategies

In order to lower carrying costs, as well recapture capital for the next project, selling the property quickly is important. However, giving it away reduces the profit margin. There are a few things that can be done to help accomplish these conflicting goals.

Hire a good agent. They are part of the team. A good agent will help get the right exposure for the property, as well as make recommendations that will make the house more marketable. They will also have access to people that are in their team that will make the sale go more smoothly.

Stage the property. A vacant house makes it harder for buyers to mentally move in. A few rooms that are well staged will really increase the value in the minds of buyers, so it is generally well worth the cost. This is especially true for higher end homes, but may be the thing that tips the balance for ANY property.

Price it appropriately. Many experienced flippers will price a property 3%-5% below market in order to make it sell faster. This reduces “opportunity costs” and also lowers risk. Opportunity costs are the deals that one can’t pursue because their capital is tied up elsewhere. There is no risk after the property is sold.

Research. Plan. Prepare. Remember the old adage that it takes money to make money. This holds true in flipping real estate as well. But, it is vital that the money be appropriately targeted, well managed, and strictly controlled. This doesn’t mean that it shouldn’t be spent, but that it should be spent on the right things, and taking shortcuts may not be the best idea.

Posted in Buying property, General, Real Estate | | No Comments »

By Lane Bailey

Many times buyers that are looking at new homes don’t feel the need to have their own agent. “The nice people at the community’s office are so helpful,” etc. And, yes, they are. However, they work for the builder or the community. They are hired to represent that builder… not the buyer. Unless the buyer brings their own agent, the buyer doesn’t have a representative in the process.

Much of the time, it will be fine. However, one may discover that the contract (other than perhaps a standard Realtor Association contract) may have a lot of one sided language in it. A few examples of this might be cancellation clauses, or worthless warranty provisions. One contract that I recently dealt with had a provision that allowed the builder to cancel the contract for any reason or without reason and refund the earnest money and a small amount for damages… right up to closing. Imagine that a buyer sold their current residence, and then the day before they are to close on both properties, the builder decides they can get a better price for the house this buyer has been waiting for over the last eight months. Now they don’t have a house to move in to, and the may not have a house to stay in. Another phrase that I dealt with allowed the builder to change the specs of the house being built with no notice. They could substitute materials and finishes for others that the builder deemed as “at least equal to” what was ordered by the buyer. Can you imagine a buyer ordering new furniture, and then finding out days before closing that some of the finishes in the house aren’t going to be what they ordered, and if they refuse to close they may lose their earnest money, or even more.

Most of the time, the writers of the special stipulations in the contracts are not envisioning these situations. They are trying to protect their clients, the builder, from other issues. But, if the language is there it may be exploited.

In other cases, having a buyers agent might clue one in to other aspects of the purchase. Perhaps there are other communities that might work as well or better for the buyer. One shouldn’t expect that the community agent will point out those other new homes. Or knowing what inducements are being offered in other areas. Also, a buyer’s agent will likely recommend an inspection, and possibly other services that the community agent won’t recommend. And don’t forget financing. Many times the community has special arrangements with particular finance companies. These might not offer the best deal for the buyer, so having an agent that is tuned in to some other sources may reveal other options.

The bottom line is that being unrepresented isn’t a great idea, and probably won’t save you any money.

Posted in Buying property, General, Real Estate | | No Comments »

By Lane Bailey

The NAR is getting ready to release their 2007 Profile of Buyer’s Home Feature Preferences in about a month. For the REALTORS that don’t subscribe to the NAR weekly newsletter, or those that are looking, here is the blurb:

Central air conditioning, walk-in closets, hardwood floors, high-end kitchen appliances, oversized garages and patios were among the features buyers said they would pay more for in a home, according to NAR’s soon-to-be-released 2007 Profile of Buyer’s Home Feature Preferences. Due out in early August, the report looks what buyers want, what they pay more for and what they end up with when the transaction is all said and done.

I just thought I would take a moment and toss out my thoughts on these things. That should be fun. Everyone wants MY opinion, right?Central Air – OK, here in Georgia, I think it is pretty rare to find a house without central air. I know there are some out there, but they aren’t very plentiful.

Walk-in Closets – I think we should be talking about walk-in closets in every bedroom. Most houses built in the last few years have at least a walk-in for the master bedroom. I’m starting to see more homes, even mid-priced with walk in closets for several bedrooms.

Hardwood Floors – Always a favorite of mine. There are a lot of older homes with great hardwoods, some even under carpet. Newer homes are also featuring more and more hardwood floors. As the homes move toward the higher end, I’m seeing more and more area covered with hardwood. Luckily, this is also something that a seller can do to their house to help it sell more easily in the current market.

High-end Kitchen Appliances – Another favorite of mine. I am seeing a movement away from stainless steel, and towards slightly softer finishes like pewter and graphite and stone gray. I am also starting to see a lot more built-in refrigerators at the high end of the market. Also at the high end are under counter wine cabinets, dual dishwashers, and warming drawers. Stainless steel, while still in the higher end homes, they are also showing up in more entry level homes. This is another thing that sellers can do if they are going to renovate their kitchen or if appliances need to be replaced.

Oversized Garages – My specialty. But seriously, most buyers are couples and have at least two cars, they also have lawn equipment and hobby stuff like bikes and so forth that need to be stored somewhere. The traditional two car garage is getting pretty cramped. Add in the number of minivans and SUVs out there, and the fact that most people would prefer to park inside, and it isn’t hard to see why bigger garages are moving into the mainstream. For auto enthusiasts, especially at the high end of the market, I’m seeing more 5+ car garages than ever.

Patio Space – This is another thing that I really like to see. Not only does the outside space need to be there, but it needs to be livable. Regardless of the price point, I am seeing the outdoor areas treated more like a living space. Most people like to grill out at least a couple times per year. If they have kids, they want to be able to enjoy family time outside, and many people like to entertain. Since the outdoor space is usually considerably larger than most of the spaces indoors, it only makes sense to have an entertainment and family space outside. At the entry level, a simple table and chairs on a patio may be enough to help a buyer “see themselves” outside. At the higher end, I’m seeing more outdoor kitchens and more structured designs including spas, pools, waterfalls and generous covered space.

What do you think? If you are a buyer, what are you looking to find?

Posted in Buying property, General, Real Estate | | No Comments »

By Lane Bailey

Many people make improvements or modifications to their homes. Some are made to increase the livability of the house, other are made to increase its value. Still others are made to put the house back into working order.

First, I think that improvement needs to be defined. There are a lot of things one can do that “improve” one’s home, however many of these items are not really improvements. A good example is replacing the HVAC system. Even when it is replaced with a newer, better, more efficient system, that isn’t really considered an improvement. The same would be said of a new roof, windows, or even appliances. I know that appliances are throwing a lot of folks. Those would be considered repairs, or possibly upgrades. However, they are required systems, and their functionality isn’t changing. The line between repair and upgrade may be a fine (and fuzzy) line, but generally upgrading would be putting something in that is a little “better” than the neighborhood average. An example would be putting on a “50 Year” roof shingle when most of the other homes in the area are using a 30 year material. The same would be true of a higher quality window or HVAC system. Generally, this type of work maintains the value of the property. It won’t really increase it, but if the systems aren’t up to at least area norms, the value will be negatively affected. The upgrades may give a little value bump, but their main value will be that they often speed the sale of the property.

The next fuzzy line would be updating. Taking an old kitchen or bath, and putting in new fixtures would be a great example of updating. Keep in mind that updating usually wouldn’t involve tearing out the cabinetry or dropping walls and reconfiguring the house. Updating is usually considered improvement, and will increase the value, and possibly decrease the time on the market.

Finally, the real meat of improvement is renovation. This should be reserved to properties that are getting extensive work. I see “renovated” properties all of the time that are minimally updated, but retain outmoded cabinets and other items. These really aren’t renovated, and the money that was spent to do something halfway may have been largely wasted. A great example would be throwing some entry level stainless steel appliances in to the kitchen, and then painting the 30 year old cabinets with wall paint, and maybe dropping a new laminate countertop in as well. That might be OK in a lower priced neighborhood where that is the norm, but doing that in an area where the other homes sport granite counters and high end cabinets around expensive appliances is a bad recipe. In this example, the seller might have spent $8,000 on the “mini-renovation,” but to bring it up to the neighborhood norms would cost a buyer $20,000. The buyer will be looking to buy the house at a price low enough to allow them to spend that $20k… that means that the seller may not even be able to recoup the $8k they spent.

The flip side of this would be spending $20,000 to redo the master bath in a $200,000 home. Unless the room was trashed, and it needed major infrastructure, the seller is not going to see that money again. Even if it was, the seller can kiss most of that money good-bye.

If one is doing a kitchen gutting remodel, they should expect to spend around 10% of the value of the house on the kitchen, or a little more. This would be the cabinetry, appliances and countertop, including labor. Bathrooms are tougher to gauge, but I would say that one should expect to spend a similar amount to a bit more for all of the bathrooms combined. However, seeing the master suites and the more extravagant bathrooms that many newer and higher end homes may have, that could be off.

Other rooms in the house are just up in the air. They are easier for the buyer to change to suit their needs, and usually only need to be painted or have the floor refinished or re carpeted at most, if the basic size is there. Small rooms are difficult to fix.

Don’t forget the landscaping. From the curb, the house needs to be inviting and neat. It also shouldn’t look like it needs a full-time gardener to keep up. Most buyers want the look of a finely designed yard… and to only have to spend 30 minutes a week keeping it up.

The bottom line is that to properly improve a home for resale, one needs to have an overall plan. Appropriate levels of trim need to be used, as pinching the wrong pennies can be very damaging to resale. Finally, I always tell people that they should not wait until sale time to repair/renovate/upgrade/update their home. That way, they will have the opportunity to enjoy the newer, more pleasant environment.

Posted in Buying property, General, Real Estate | | No Comments »