Monthly Archives: November 2016

The Story Behind Real Estate Growth

There are times when the growth of the real estate industry has drawn the nervous energy of local or national media expecting a downfall after a period of prolonged growth. There are some serious flaws in the logic behind expecting a burst in the real estate bubble nationally and during any period of prolonged growth, you as a real estate investor should not panic in the expectation that a market fall will ruin your investment.

Of course, there are exceptions to every rule and there are times when a very localized market depression (such as the downturn of an area neighborhood) can profoundly affect a real estate investment. Extrapolating things like that into a national concern, however, ignores the fact that there really is no national real estate market.

The overall picture of the real estate market that the media uses to describe economic indicators is really made up of thousands of small real estate markets. Any time that a market is spread over that great of an expense, the chances of every tiny market failing at the same time are extremely slim. That is indeed what would be necessary for a national real estate market crash, making such an eventuality extremely unlikely.

To call something a “crash” takes an extreme drop off over a short period of time, something that would be difficult to accomplish in any real estate market. Pieces of information like population growth, new construction statistics and other economic measures can forecast a general trend for any real estate market well in advance.

Certainly, real estate markets will downturn from time to time, but no downturn happens in such a short period of time so as to trap investment money. Generally speaking, you can always get out if the writing is on the wall and that fact separates real estate markets from something like the stock market that can crash more easily.

The nature of real estate investment also provides some insulation behind any kind of dip in the real estate market. For those holding properties over a long period of time as investment opportunities, if a dip does happen in the local real estate market, the long term nature of your investment dictates that you will hold it long enough to see an upturn in the market. Real estate markets rarely stay down for over a decade and for a long term investment, that storm can certainly be weathered.

For short term flips, often the atmosphere of the local real estate market will not have time to change by the time you are looking to sell off your investment project. Fixer-upper properties and the like will often take a few months when the arrival of a market depression can take at least that long to show up.

Early economic indicators will tell you what the market may be like in a few months time and that is certainly something to look at when getting involved in a short-term investment. Simply put, by the time a market depression could affect your short-term investment, you’ll probably have sold it off.

Of course, getting involved in a bad investment will nullify a lot of these positive aspects of long-term and short-term investments, so do not take this advice to mean that any investment will withstand market fluctuations. If you buy an investment property with a less-than-stellar cash flow record, relying on an upturn in the market can leave you waiting for a long enough time so as to drain your funs and bust your investment.

When deciding on an investment, you need to understand the fundamental positives and negatives of an investment and when your property is a sound investment to begin with, it will generally withstand the fluctuations of the local market. At the very least, you now know that when national media talks about the real estate market, you can rest assured that the word “crash” is not going to follow.

Where To Put Your Money

 As in many aspects of life, the key to real estate investing can be location, location, location. While real estate is perhaps more complicated than hoping for foot traffic at a restaurant with a prime location, location does certainly play a part in the possible viability of a rental property. There are a few things you can look for in the area of your possible real estate investment that can tell you some important things about the possible long-term health of your potential investment.

Check For Growth
Is the area you’re looking at experiencing strong population and job growth? These are two important economic indicators that can help you decide whether a particular area is ripe for real estate investment opportunities. Local government web sites and federal reports are readily available with population and job growth information.

While the benefits of an increased local population are obvious, job growth that exceeds that population growth level can indicate a prospering community with money to spend. Areas that prosper are potential candidates for increased rent payments over time, one sure way to put you on the road to profitability with your real estate investment.

With job growth comes quality of life and as qualify of life improves in the area of your investment, so too grows the level of rent you can charge. It is a tried and true fact that people will pay more to live in an area they enjoy, so the prospect of an area growing more and more attractive will directly influence the financial state of your potential real estate investment.

The Real Estate Market
What is the construction atmosphere of the area like? Areas that are seeing a boom in new home construction often experience those booms because of favorable job growth, income growth and other factors. However, for an area where building permits are outpacing new population, that could be an early indicator of an over supply of real estate that could lead to depressed prices for rent payments.

The best case scenario is an area where few homes are for sale, pumping up demand, and where new home construction is strong but not out of control. That can be a fine line, but because any investment takes a great amount of homework and research, it is something that should be investigated over the course of your decision-making process on a new investment.

The Land Crunch
Just as a low supply of homes on the market can produce an upwards trend for housing prices and, subsequently, the level of rent you can charge, so too can a low level of land available to build on. In an area where population is growing and jobs are strong, all of these new people have to go somewhere.

Whenever more people want to move into an area than there are homes for those people to live in, you will see an upward slope for home prices and viable rent payments. If there is little land left to build on, those buildings that are already built will be able to charge more for their rent payments, putting your investment further towards profitability and the long-term benefit of owning property in an attractive part of town.

All of this initial information will not guarantee a profit on a rental property, but these are crucial steps to take when evaluating whether you want to put your hard-earned money into a real estate property that is sure to experience the ups and downs of the local economy. Especially for properties outside of your own home area, knowing the state of both the growth of the population and the home construction industry will help you more accurately predict the future viability of your investment.

Tips to Choose The Right Rental Property

 Deciding to get involved with investing in a rental property is an important decision and finding the right property for your efforts can make the difference between a profitable, successful career in rental properties and a discouraging experience that leaves you unwilling to continue on. No matter if you are looking at a rental property purchase for the first time or the 50th time, there are some key things to consider when searching out a good deal.

More Than Just The Rent
Money plays into your investment in a variety of ways, making an impact beyond simply what kind of rent payments you will be receiving. Knowing what kind of cash flow will be available through rent payments is important, but so is knowing what kind of cash you are going to put up for needed improvements or routine maintenance to the building. Whoever is selling the rental property is doing so for a reason, so make sure that high maintenance costs isn’t one of them.

The value of surrounding real estate, rental or not, can influence the kind of activity you receive at your rental property. In areas of expensive homes, rental properties will often pull in higher rental amounts even if the property isn’t up to those standards. Consumers that have their heart set on a particular area may turn to renting in the face of expensive home prices that would yield unaffordable mortgage payments.

Other rental properties in the area of course also play in to your cash flow situation and purchasing a rental property operating with rent payments below what the area is worth are great targets. Sometimes rental property owners get set in their ways with rent and avoid raising rent to scare off customers. Knowing that you can later raise a rent after purchasing a rental property is a great way to get an early jump on profitability.

Who Are You Buying From?
Understanding why someone is selling a rental property will go a long way towards understanding whether or not it is a good investment. Property owners that live far from their rental properties often get fed up with managing a property so far away and sell out of convenience. These types of sellers offer great opportunities as they are often more willing to deal in order to be rid of the obligation that they have grown tired of.

Additionally, the history of the property often reflects the history of the property owner. If you are dealing with a stable seller with a history of good rental ownership, it is probably that the property has been kept up to date with adequate repairs and improvements when necessary. Ask for all improvement records available on the property to look for a history of care taken with the property. Those that have been taken care of well will be less likely to cause headaches later.

What Does The Code Say?
Older buildings are more likely to have issues with building and fire codes. Do research not only into the age of a particular property but also into the history of updates done in regards to building and fire codes. Has anyone ever been out to inspect the property to ensure that is up to code with various local statutes? As soon as you sign on the dotted line, those obligations become yours so investigating just what issues may arise will save you from uncovering code surprises down the road.

Rental properties can be fulfilling, profitable investment opportunities, but selecting the right rental property for you is perhaps the most important step of the process. Protect yourself by asking some key questions about the property and its owner and you will avoid the pitfalls that beset many real estate investors out there.

How Can Motivated Is Your Seller?

 When purchase prices for homes escalate into the hundreds of thousands of dollars, sometimes a $10,000 difference in an offer price can seem like a small variation, but $10,000 is $10,000. As you go through the process of making mortgage payments, you will no doubt wish you could shave a few months off of your payment term, which is exactly what shaving $10,000 or more will net you.

One of the prime ways of doing so is to locate a seller that is truly motivated to sell a property, sometimes at a minor expense in return for a speedy, smooth transaction. Making low offers is something all realtors have probably done in the past, though it can sometimes seem like a slap in the face to send a below-list offer.

The prospect of saving $10,000 or more should take that embarrassment out of the equation and motivate you to explore all avenues for saving money. There are a few ways to spot motivated sellers that might be more apt to accept an offer below list price than they otherwise would.

Everyone Sells For A Reason
One of the best ways to investigate the motives of your seller is to simply ask. That might seem like a common sense approach, but people often go through entire real estate transactions without asking even the most simple questions about who they are purchasing a very expensive item from.

Your realtor or the seller’s realtor may have that kind of information at hand and while they might have reason to guard it, more often than not they will make polite conversation about what a seller’s plans are. At open houses especially, realtors may make the effort to chat with you, sometimes answering such questions, in hopes of getting you interested in the property. Let that eagerness work for you and get the information you need that might help you.

There are quite a few situations that might result in a motivated seller, but perhaps the most common are relocations, divorces and financial troubles. As you can imagine, if a seller is involved in any of these three situations, it is probable that speed is an issue and sometimes that speed is worth a bit of a discount on the list price of the real estate property.

Relocations especially can split a seller’s attention between two locations, greatly motivating the seller to quickly get rid of an old property to focus on a new one. That split focus can be your gain with a big of a discounted offer that nonetheless represents a quick chance to be done with the real estate.

Each Property Has Its Own Traits
More than just investigating a seller, you can investigate a particular property as well to perhaps indicate a seller that is tired of a particular piece of real estate. For example, properties that are not kept up as well, rental properties especially, could indicate that a seller is tired of dealing with a property and is more motivated to sell quickly, even if at a small discount.

If you want to go the extra mile and go through county tax records, it is entirely possible to find properties where sellers have home addresses far away from the property in question. In those cases, sellers that live far away are usually selling property that they can no longer maintain from a distance and have grown tired caring for. These are perhaps the best candidate to accept an offer below list price as they are tired of the hassle of maintaining a long-distance piece of real estate.

No matter your tactic, there are sellers out there that want desperately to sell you a piece of real estate. Do your homework and investigate just why a seller is doing so and why a particular property is on the market. Those two bits of information could produce the difference between a list-price offer for a piece of real estate and an accepted offer below list price.