Apartments Thrive In This Housing Climate

According to a recent Wall Street Journal article rents and occupancy in apartment buildings in the U.S. is continuing to rise steadily. WSJ cites a report done by Reis Inc, a company that collects data on real estate, which found that only 5.6% of the country’s apartments were vacant at the end of Q3 2011, down from 5.9% at the end of the first half of the year. That’s the lowest level since 2006. To top it off the only market in which rents declined in the entire country was Las Vegas, NV.

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Some Investment Tips

Foreclosure.com recently released the October 2011 issue of their monthly newsletter. It is, as usual, chock-full of some rather general  but still useful tips for home buyers, sellers and flippers. A lot of this issue is dedicated to the idea that information is power when it comes to investing in real estate. They offer tips and programs to help you stay up to date on homes in your area as well as ideas on how to schedule your time to make progress in your hunt.

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New Home Sales Trend Up 5.7% in September

Sales of new homes was up 5.7% in September of this year, which actually slightly outpaces the median analyst predictions according to this Bloomberg article. At the same time the median price of new homes has actually slumped 10% since September 2010. What does this all mean? If you’re contemplating an investment in real estate think about it from an investors perspective. Prices on new homes are going down, and sales are going up. Not a bad place to be.

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Looking to invest in Real Estate? Here's Some Free Advice

Every month foreclosure.com put’s out a newsletter  filled with a lot of great tips on navigating this often intimidating market. In September’s newsletter they covered issues such as…

  • Spotting the difference between a distressed property that has the potential to be a cash cow or a cash sinkhole.
  • An explanation of how tax lien sales and tax deed sales. The tax deed sale occurs when the homeowner doesn’t pay taxes. In that event the government auctions off the house with the minimum bid being the amount of back taxes owed plus interest. Tax lien sales are an opportunity to purchase tax liens against the property.
  • They also examine Florida’s Real Estate market, and the trend of foreclosures still rising slightly while delinquencies are dropping.

The newsletter isn’t a long read but if you’re interested in investing in Real Estate you’ll pick up some ideas.

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National Survey Suggests Strong Real Estate Investment Desire

Some really interesting statistics came out in Move Inc’s recent home buyer survey.

Of the 1,200 U.S. adults surveyed 200 were real estate investors. A third of those were planning on buying with the next two years, and about 8.6% of the typical home buyers were.

Some other interesting statistics include 56.5% of investors who said repair and maintenance of their properties hadn’t been a huge burden, 75% plan to combine cash and credit for their purchase, 59% of the investors said they were new to investing, less than 40% had previous property transaction experience. And 53% expect home prices to stay steady for the next six to 12 months.

Lots of interesting figures in the report, check out a good synopsis at No Radar Real Estate.

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Phoenix, Atlanta Best Markets For Newly Built Homes

If you’re in the market for buying, flipping or selling off an inventory of new homes you might want to take a look at Phoenix and Atlanta, at least according to a recent report from Barclays Capital. Bloomberg interviewed one of the reports authors.

“The reality is that housing is a region-by-region story,” said Vincent Foley. “And most of the big public homebuilders are reasonably positioned to benefit from an upturn because they’re in the right markets.”

Surprised? That’s the adjective Barclay’s analysts used as well. They also said that regions who pushed foreclosures through quicker are on track to recover sooner than others.

There’s a lot of great information in Bloomberg’s article about the Barclays report in Phoenix and Atlanta Will Be Best New-Home Markets in U.S., Barclays Says. It’s definitely worth a read, especially if you’re dying to read some positive news in the U.S. housing market.

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Big Mortgage Backed Security Deal Good Sign For REITs

UBS and Deutsche Bank recently approved a $1.4 billion deal to securitize a basket of commercial real estate. Securitization makes it safer for banks to lend to REITs and other real estate investors. For example, if they made a loan for $200 million, they would keep $100 on their books and securitize the other half. Good news for everybody in the deal, banks are more comfortable to loan, and it gives REITs and small real estate investors access to credit. For more info read CNBC’s Good Sign for REITs, Banks, Commercial Real Estate.

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A New Way To Play Real Estate

I love dividends.  There’s nothing I like more than receiving a fat dividend payout and seeing that cold hard cash get deposited into my bank account.

The problem is, not many penny stocks pay dividends.  So when you find a true penny stock paying dividends, you want to look at it quickly.  And that’s what today’s On The Radar Report is all about.

Here’s a stock for you to take a closer look at….

 

QUICK FACTS

Ticker                                      ARR

Industry                                  Residential REIT

Recent Price                         $7.49

Market Cap                            $362 m

Shares Outstanding            49.2 m

Average Volume                   856,907

Dividend Yield                      19.4%

Website                                  http://armourreit.com/

 

COMPANY DESCRIPTION

ARMOUR Residential (NYSE: ARR) is a Maryland based REIT investing in residential mortgage backed securities.  Their portfolios include adjustable-rate (5%), hybrid adjustable-rate (58.5%), and fixed rate mortgage-backed securities (36.5%).

All of their securities are issued or guaranteed by Fannie Mae, Freddie Mac, and others.  Their portfolio’s worth about $4.7 billion as of June.

This REIT takes investors money, leverages it up, then buys mortgage backed securities.  They capture the difference between their borrowing costs, and the yield on the debt.

Here’s another advantage… If you hate taxes then you’re going to love REITs.  Because they are designated a REIT, they can pass along earnings directly to you… without paying corporate taxes on the money.

The catch is they have to distribute 90% of their income to investors.

All that means is that your dividends get fatter!  Now, let’s look at the numbers…

 

FINANCIALS

Revenue in the first quarter jumped, reaching $13.7 million of interest income.  Now, it’s a great number, but quarter over quarter, comparisons aren’t significant because the company raised capital, and has been increasing their asset base.

ARMOUR management has been aggressively raising capital.  The most recent raise was for almost $118 million in cash.  These funds are being deployed into new assets paying out high yields.

Ultimately, it means big cash flow for the company, and big earnings.  Eventually those earnings make their way into the shareholder hands as dividends.

Speaking of dividends, the board of directors recently set their monthly dividend rate at $0.12 per share… through the third quarter.  That means, if you’re a holder of the stock by July 15, and keep holding for the next three months, you’ll be guaranteed a payout of at least $0.36 for the quarter.

 

KEY METRICS ANALYSIS

Trailing P/E                                        5.9

Price / Sales                                      20.8

Return on Assets                             1.1%

Insider ownership                            2.9%

Short Ratio                                        0.6x

Current Ratio                                    0.03x

Total Debt To Equity                         NA

 

RECENT EVENTS

As we mentioned above, on June 14, 2011 ARMOUR put out a press release announcing their dividends schedule.  Their Q3 2011 monthly rate is $.12 a share.  The holder of record date is the 15th of each month in Q3.  So there’s still ample time to get in on this while the getting’s good.

 

MANAGEMENT TEAM

Scott J. Ulm – Co-CEO, Vice Chairman, CIO

Jeffrey J. Zimmer – Co-CEO, Vice Chairman, CFO

 

STOCK ANALYSIS

Chart courtesy of stockcharts.com

 

After bottoming out in mid 2010, ARR has been a steady climber.  The stock recently retreated to the 50-day moving average, and is now bouncing higher.  And we continue to trade well above the 200-day moving average.

ARR’s 52-week low was $6.10 and the 52-week high was $8.33.  Right now the stock is trading at $7.49.  The 50-day moving average is near $7.43 a share and the 200-day moving average is at $6.94.  The company has a market cap of $362 million and 49.3 million shares outstanding.

 

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