Kevin Kiene
Supply & demand cut both ways, my fellow real estate junkies. Demand has plummeted, so what do we do? Swim against the tide and start buying, of course.
The Purchase Plan: Double Distress
Prices are down, but if you're a real estate investor worth your salt, you still want a killer bargain. So here's the game plan: where others see distress, you need to see dollars.
The purchase plan involves both distressed sellers and distressed properties. Let's consider the case of foreclosures for a moment; why does real estate sold through foreclosure auction sell for less? Because investors can't get inside to see what kind of shape it's in. But there is no question that buyers at foreclosure auctions, especially in today's market that's far oversaturated with them, will score a good deal, provided they know what kind of property they're buying.
So to take maximum advantage of a distressed seller sale by foreclosure, what safer method is there than to buy a property that you already know needs full renovation? There's a discount built into properties needing renovation, because of the hassle of renovating them. Those hassles, which you'll have to be adept at managing, include maintaining relationships with several of each of the following: hard money lenders (for quick settlements and renovation loans), small, local banks (they're far cheaper than hard money lenders and fill the same niche, but are pickier), licensed contractors, inexpensive handymen, and low-cost permanent lenders if your renovation loan is short-term. A distressed property in shambles, sold through a distressed sale, will effectively give you a double discount, which will in turn create maximum cash flow for the next stage: getting paid.
The Payout Plan: Deferred Gratification
We've already established that you have to go against the grain if you want to make money in a slow market like this one. With a depression in demand and an abundance of supply, you don't want to sell, so what do you do? You build your real estate empire, and watch money flow into your account every month as a landlord. When the market shifts in a few years, you'll be poised to sell all those distressed properties bought for a steal, and make a fortune.
There are some challenges involved in being a landlord, so be prepared. First, your money is not liquid; these investments, by their very nature, are long-term and you will have to wait for the market to turn before you can sell. Second, you'll need to be capitalized, both because your other money isn't available and because rental properties will always throw surprise expenses your way in the form of maintenance, repairs, vacancies, and lawsuits. As a final note, it is a wise and happy landlord who hires a property management firm to assume the headaches for them.
Remember the first thing you learned about money: buy low, sell high. The real estate market can and should be your ally, not your enemy; ride the highs and lows alike, and right now that means buying as cheaply as you can and holding the properties as a landlord. Good luck!
Article Source:
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
About the Author:
Read more articles for landlords and real estate investors at EZ Landlord Forms, along with free real estate forms and real estate investing tips and resources.
Read more....
Showing posts with label estate. Show all posts
Showing posts with label estate. Show all posts
7.8.09
Five Years in Review: The Minneapolis Real Estate Market
Kevin Curtis
Poised on top of the real estate mountain in 2003, it's hard to imagine so much change in the Minneapolis real estate market in the last five years. While the bubble has certainly burst and it's no longer a seller's market, key elements like long-term value of Minneapolis real estate as an investment and the quality of life available to residents has not changed. Even after five years of change, the world of Minneapolis real estate is still a great place to buy a home for you and your family.
2003 was a banner year for the housing market across the United States. In Minnesota, 39,440 people were gainfully employed in the real estate and rental industries with a combined annual payroll exceeding $1,237,000,000. Clearly, real estate was lucrative for sales professionals involved in the booming market. Sellers benefited from bidding wars over their homes. Houses could not be built fast enough to meet the exceptional demand for homes in the market.
Over the next two years, the strength of the economy and the housing market caused lenders to start granting adjustable rate mortgages and larger mortgages than people could actually afford. Lending practices got very loose as bankers were caught up in the housing market frenzy. Add the risky business of real estate speculation to the equation and it soon became clear that some of the growth in the housing market was built on shaky ground.
Builders and lenders wanted to continue the exponential growth of years past, and by 2006, it was clear that far too many new homes were sitting on the market unsold. New home building slowed to a stop by 2007, and because builders could not get new homes sold, the value of homes across the country started to drop. Analysts called it price adjustment for the over inflated selling prices of years past, but homeowners simply saw it as less value in their investments.
Once the dust settled in 2008, however, homeowners realized that although their homes had lost a bit of value, their homes were still solid investments. Compared with the performance of stocks and 401Ks, home equity was a solid place to put hard earned money for those willing to keep homes until the economy began to pick up speed.
While the past five years in Minneapolis real estate have been filled with drama, one thing a smart investor realizes: current prices in the housing market make this the ideal time to buy. Houses and condos that were once out of reach financially are now less expensive and ready to be purchased. In addition, the influx of one-time homeowners that now want to rent homes instead of paying over-inflated and financially dangerous mortgages makes this the ideal time to venture into rental property ownership. Rentals are a great way to invest and make money in the current economy.
The future is anyone's guess, but one thing is certain: Minneapolis real estate is one of the best ways to invest in your future. Over the long haul, it's sure to pay off; thanks to the strength and bright future of the city's schools, commerce and the entrepreneurial spirit of its residents.
Article Source:
http://www.bestmanagementarticles.com
http://real-estate-management.bestmanagementarticles.com
About the Author:
Kevin Curtis is a licensed agent with RE/MAX Advantage Plus. He is The Minnesota Real Estate Team's 2007 Agent of the Year. Kevin and his team provide great service and ongoing insights into the Minnesota Real Estate market at
Read more....
Poised on top of the real estate mountain in 2003, it's hard to imagine so much change in the Minneapolis real estate market in the last five years. While the bubble has certainly burst and it's no longer a seller's market, key elements like long-term value of Minneapolis real estate as an investment and the quality of life available to residents has not changed. Even after five years of change, the world of Minneapolis real estate is still a great place to buy a home for you and your family.
2003 was a banner year for the housing market across the United States. In Minnesota, 39,440 people were gainfully employed in the real estate and rental industries with a combined annual payroll exceeding $1,237,000,000. Clearly, real estate was lucrative for sales professionals involved in the booming market. Sellers benefited from bidding wars over their homes. Houses could not be built fast enough to meet the exceptional demand for homes in the market.
Over the next two years, the strength of the economy and the housing market caused lenders to start granting adjustable rate mortgages and larger mortgages than people could actually afford. Lending practices got very loose as bankers were caught up in the housing market frenzy. Add the risky business of real estate speculation to the equation and it soon became clear that some of the growth in the housing market was built on shaky ground.
Builders and lenders wanted to continue the exponential growth of years past, and by 2006, it was clear that far too many new homes were sitting on the market unsold. New home building slowed to a stop by 2007, and because builders could not get new homes sold, the value of homes across the country started to drop. Analysts called it price adjustment for the over inflated selling prices of years past, but homeowners simply saw it as less value in their investments.
Once the dust settled in 2008, however, homeowners realized that although their homes had lost a bit of value, their homes were still solid investments. Compared with the performance of stocks and 401Ks, home equity was a solid place to put hard earned money for those willing to keep homes until the economy began to pick up speed.
While the past five years in Minneapolis real estate have been filled with drama, one thing a smart investor realizes: current prices in the housing market make this the ideal time to buy. Houses and condos that were once out of reach financially are now less expensive and ready to be purchased. In addition, the influx of one-time homeowners that now want to rent homes instead of paying over-inflated and financially dangerous mortgages makes this the ideal time to venture into rental property ownership. Rentals are a great way to invest and make money in the current economy.
The future is anyone's guess, but one thing is certain: Minneapolis real estate is one of the best ways to invest in your future. Over the long haul, it's sure to pay off; thanks to the strength and bright future of the city's schools, commerce and the entrepreneurial spirit of its residents.
Article Source:
http://www.bestmanagementarticles.com
http://real-estate-management.bestmanagementarticles.com
About the Author:
Kevin Curtis is a licensed agent with RE/MAX Advantage Plus. He is The Minnesota Real Estate Team's 2007 Agent of the Year. Kevin and his team provide great service and ongoing insights into the Minnesota Real Estate market at
Read more....
30.6.09
Are safe investments possible?
by: David Humeniuk
That was the response I received from the first client I spoke with a few days after opening our doors for business. The husband and wife were questioning my sanity because I was suggesting that the time was right to be investing in a product that is secured by real estate. Yes, I have heard of investment companies being in trouble and note almost daily the number of published articles in newspapers, magazines and on the internet that are painting a picture of doom and gloom. As a matter of fact the Calgary Herald has just printed an article with the following headline in bold print: “Commercial Real Estate Suffers $1-Billion Drop.” Based on the headline anyone thinking of investing in commercial real estate would be putting their investment funds back under their mattress. The article was about how commercial real estate sales had decreased from 2008. What it failed to mention was that in 2008 and years preceding the number of sales were inflated because Calgary was the “ho!
ttest market for commercial real estate in North America.” That market is returning to normal which is a good thing. One should not always take media hype at face value. If you analyze and complete due diligence before you invest you will be making informed decisions based on fact and that will provide you with lucrative ways to increase your net worth even in these embattled times. So my answer to the, are you nuts, question is a definite NO!
“What Should We Look For?”
The investment promoter should be willing to give you their legal documents so that you can read and understand them yourselves, or with the assistance of legal and/or accounting advice. When an offer is made they should provide you with access to the due diligence that they complete. That should include current appraisals, engineer’s reports, environmental studies, a review of the leases and title searches to ensure that there are no undisclosed liens or problems. You will want to be assured that your funds are held in a trust account and that some form of audit is completed on the account. After you have invested you will want to know on at least a quarterly basis, if not more frequently, how the building you have invested in is performing.
Some investment companies still try to entice investors with projected returns that cannot be substantiated. The only return that is real is the cash flow. Therefore, you should note the following:
1) Who are the tenants and when do their leases expire?
2) Is there a good mix of tenants or does one tenant occupy the majority of the leasable space?
3) What is the basic rent they are paying and how does that compare to market rents?
4) What are the operating costs and is the amount collected from the tenants sufficient to cover all operating expenditures?
5) Who will actually own the property and how will your interests be protected?
6) Is there a mortgage on the property?
7) What is the amount being mortgaged? What is the rate? Are there prepayment penalties? What is the lenders receptivity to renewals and refinances?
If you have done your homework and you are satisfied that the company promoting the investment has done theirs real estate can be a safe short, medium or long term investment.
“Is There One Investment Product that I Should Consider?”
Syndications of commercial real estate have been around for a long time. The newest syndication product in the market is the private mutual fund trust secured by real estate. Some companies offer this product with debt while others provide a debt free property as security.
“Why Invest in Debt-Free Real Estate?”
1) Income is based on lease payments for a contracted period of time and amount from long term tenants with strong covenants.
2) Your capital is protected and will be there when it is needed.
3) Your return is steady and is not based on predictions or gimmicks.
4) Income and profit are maximized by not having to pay a mortgage.
a) Being mortgage free reduces risk of loss.
b) Real estate consistently stays ahead of inflation.
c) Real estate avoids stock market volatility.
5) It provides a dependable, secure income for retirement, a rainy day or a child’s education.
6) This type of investment is ideal for registered products like RRSPs, RESPs, Liras and RRIFs. It also is an excellent way to maximize the tax free returns in your tax free savings account.
7) Purchasing real estate with cash often allows for a better purchase price as a quick closing puts cash in the vendors pocket in much shorter period of time than if mortgage financing was required. From the vendor’s point of view this is a positive and often leads to a reduced purchase price. This, in turn, means that the potential for an increased capital gain at the time the investors sell the property is greater.
Summary
Investing in products secured by commercial real estate is still a safe and sound way to provide a positive source of growth in your investment portfolio. The key to investing in the right product is to ask the right questions and to make sure that you are comfortable with the company promoting the investment. Syndication is a popular way for everyone to invest in real estate as groups of investors provide the funds for a purchase that would normally only be available to wealthy individuals. The newest form of syndication is the private mutual fund trust. Debt free real estate provides the safest and best security for investors.
Read more....
That was the response I received from the first client I spoke with a few days after opening our doors for business. The husband and wife were questioning my sanity because I was suggesting that the time was right to be investing in a product that is secured by real estate. Yes, I have heard of investment companies being in trouble and note almost daily the number of published articles in newspapers, magazines and on the internet that are painting a picture of doom and gloom. As a matter of fact the Calgary Herald has just printed an article with the following headline in bold print: “Commercial Real Estate Suffers $1-Billion Drop.” Based on the headline anyone thinking of investing in commercial real estate would be putting their investment funds back under their mattress. The article was about how commercial real estate sales had decreased from 2008. What it failed to mention was that in 2008 and years preceding the number of sales were inflated because Calgary was the “ho!
ttest market for commercial real estate in North America.” That market is returning to normal which is a good thing. One should not always take media hype at face value. If you analyze and complete due diligence before you invest you will be making informed decisions based on fact and that will provide you with lucrative ways to increase your net worth even in these embattled times. So my answer to the, are you nuts, question is a definite NO!
“What Should We Look For?”
The investment promoter should be willing to give you their legal documents so that you can read and understand them yourselves, or with the assistance of legal and/or accounting advice. When an offer is made they should provide you with access to the due diligence that they complete. That should include current appraisals, engineer’s reports, environmental studies, a review of the leases and title searches to ensure that there are no undisclosed liens or problems. You will want to be assured that your funds are held in a trust account and that some form of audit is completed on the account. After you have invested you will want to know on at least a quarterly basis, if not more frequently, how the building you have invested in is performing.
Some investment companies still try to entice investors with projected returns that cannot be substantiated. The only return that is real is the cash flow. Therefore, you should note the following:
1) Who are the tenants and when do their leases expire?
2) Is there a good mix of tenants or does one tenant occupy the majority of the leasable space?
3) What is the basic rent they are paying and how does that compare to market rents?
4) What are the operating costs and is the amount collected from the tenants sufficient to cover all operating expenditures?
5) Who will actually own the property and how will your interests be protected?
6) Is there a mortgage on the property?
7) What is the amount being mortgaged? What is the rate? Are there prepayment penalties? What is the lenders receptivity to renewals and refinances?
If you have done your homework and you are satisfied that the company promoting the investment has done theirs real estate can be a safe short, medium or long term investment.
“Is There One Investment Product that I Should Consider?”
Syndications of commercial real estate have been around for a long time. The newest syndication product in the market is the private mutual fund trust secured by real estate. Some companies offer this product with debt while others provide a debt free property as security.
“Why Invest in Debt-Free Real Estate?”
1) Income is based on lease payments for a contracted period of time and amount from long term tenants with strong covenants.
2) Your capital is protected and will be there when it is needed.
3) Your return is steady and is not based on predictions or gimmicks.
4) Income and profit are maximized by not having to pay a mortgage.
a) Being mortgage free reduces risk of loss.
b) Real estate consistently stays ahead of inflation.
c) Real estate avoids stock market volatility.
5) It provides a dependable, secure income for retirement, a rainy day or a child’s education.
6) This type of investment is ideal for registered products like RRSPs, RESPs, Liras and RRIFs. It also is an excellent way to maximize the tax free returns in your tax free savings account.
7) Purchasing real estate with cash often allows for a better purchase price as a quick closing puts cash in the vendors pocket in much shorter period of time than if mortgage financing was required. From the vendor’s point of view this is a positive and often leads to a reduced purchase price. This, in turn, means that the potential for an increased capital gain at the time the investors sell the property is greater.
Summary
Investing in products secured by commercial real estate is still a safe and sound way to provide a positive source of growth in your investment portfolio. The key to investing in the right product is to ask the right questions and to make sure that you are comfortable with the company promoting the investment. Syndication is a popular way for everyone to invest in real estate as groups of investors provide the funds for a purchase that would normally only be available to wealthy individuals. The newest form of syndication is the private mutual fund trust. Debt free real estate provides the safest and best security for investors.
