Tips In Investing In Real Estate

Real estate is a popular investment. There are many modifications in the monetary system having puffed-up risk or lesser returns, the investment marketplace go on with the plan imaginative and good-looking investment approaches. These developments make it important for real estate licenses to have an elementary and up-to-date knowledge of real estate investment. Of course, this does not mean that licenses should act as investment counselors. For all he time they should refer investors to knowledgeable tax accountants, attorneys, or investment professionals. These are the professionals who can give expert advice on an investor’s specific needs.

Consider All the Three Factors Before Investing in Real Estate

The three factors of investing in real estate are area, perception and economics. The key to making the best investment in real estate, and specifically in cooperatives, and townhouses, is to consider all the three factors. Investing in real estate correspond to a certain commitments on the part of the purchaser. Investment in real estate made solely upon the location of the property will not yield those results. Before making an investment, it is essential to include the three considerations

o Consider on the whole area.

o Consider awareness of the area.

o Consider the financial factors.

Merits of Real Estate Investment:

Real estate values have varied extensively in various areas of the country. Yet many real estate investments have shown above average rates of return, generally greater than the prevailing interest rates charged by mortgage lenders. In assumption, this means the investor can utilize the influence of rented money to invest a real estate purchase and feel comparatively sure that, if held long enough, the asset will yield more money than it cost to finance the purchase.

Real estate offers investors greater control over their investments than do other options such as stocks etc. Real estate investors also are given assured tax advantages.

Demerits of Real Estate Investment:

Liquidity refers to how quickly an asset may be converted into cash. For instance, an investor in listed stocks has only a call a stockbroker when funds are needed. The stockbroker sells the stock, and the investor receives the cash. In contract, a real estate investor may have to sell the property at a substantially lower price than desired to ensure a quick sale. Of course, a real estate investor may be able to raise a limited amount of cash by refinancing the property.

Huge amounts are generally necessary to invest in real estate. It is not easy to invest in real estate without professional guidance. Investment decisions must be based on careful studies of all the facts, reinforced by a thorough knowledge of real estate and the manner in which it is affected by the marketplace.

Real estate has need of dynamic administration. A real estate investor can rarely sit idle by and watch his or her money grow. Administration assessments must be made. The investor may want to manage the property personally. On the other hand, it may be preferable to hire a professional property manager. Physical improvements accomplished by the investor personally may be required to make the asset profitable. Many good investments fail because of poor management.

Finally, it involves a high degree of risk. The opportunity forever survives that an investor’s property will diminish in rate during the time it is held or that it will not make enough income to make it advantageous.

Marketing Luxury Real Estate: When Should Your Name Become Your Personal Brand?

There is a debate that still continues about using your name as your personal brand in luxury real estate marketing. Here is the best test to determine when it is advisable to do so: Ask yourself, “Are you ready to achieve celebrity status in your marketplace?” If you are prepared to have your name stand for a particular market niche that you can dominate, we say, “Go for it!”

Think of some of the most recognizable personal brands: Martha, Seal, Sting, Cher, Lance, [the] Donald, Kobe, and Coco. What category of celebrity comes to mind for each?

Channel is one of the most famous fashion design houses in the world. And, the company founder, Gabrielle Bonheur “Coco” Chanel, was one of the most highly recognized personal brands in her time. In fact, she was the only person to be named in the field of fashion on the Time [Magazine] Top 100: The Most Important People of the [20th] Century. Coco was a modernist who stood for the pursuit of expensive simplicity which is the most enduring core value of the Chanel company brand

Coco’s design standards were exacting. And, she was a task-master who insisted that her clothes reflect her personal, exacting impeccable standards. We know this first hand as Alexandra’s grandmother was a master finishing seamstress for Chanel in Paris as young woman. The attention to detail was relentless.

Clearly, Coco enjoyed top-of-mind status in the field of high fashion as a personal brand, a status that extends to the company brand as well, to this day. Top-of-mind is the goal of any luxury real estate marketing professional who is aiming for market leadership and celebrity status.

Are you ready for celebrity status in your luxury real estate marketplace? If not, you might want to consider a different tact when approaching your personal branding, other than using your name as your brand.

Real Estate Market Due for a Correction?

There is a lot of speculation and fear about the bubble in the marketplace. While bubble concerns are visible in some marketplaces in the US and perhaps Vancouver, is there a cause for concern for the rest of Canada?

The Normal Market

Similar to the stock market, real estate market also has a cycle. First, there is the annual cycle of certain months being slower months than others – winter is slow time, summer is usually more active time for buyers and sellers. Second, demand & supply, interest rates will cause occasional adjustments in the marketplace.

It is important to note that a “Bubble” is not part of the normal market cycle. It is an artificial rise in demand – which is unjustified by fundamentals usually fueled by speculation, misinformation and greed.

What is a Bubble?

In the dot com era, technology stocks were trading at extremely high price-earning ratios, which were not supported by market fundamentals – that is, the stock valuation had a weak correlation to the profitability of the company; rather it was based on expectation (speculation). People expected dot com companies to be the waive of the future and were willing to finance it, these companies had no real income or collateral to back up the equity loans they were taking out. While some dot com companies made it big, like Amazon and Google, the vast majority failed. The technology bubble burst due to one simple reason, all of these companies came out at the same time causing an excess of supply with no corresponding rise in demand for the products it offered. Buying and trading was being done almost solely on dreams of future cash. That is the basis of almost all, if not all, “bubbles”.

What about Real Estate Bubble?

In contrast, real estate is a basic need – everyone needs a place to stay. It has a finite supply – land is scarce since no one is making anymore of it. In addition, artificial barriers introduced by government (greenbelt, conservation land, farm land) cause land to be even more scarce and push the demand up for other available land for development purposes.

Population is on the rise largely due to immigration, demand is boosted for real estate around business hubs (like Toronto, Vancouver, Edmonton, Montreal). Since land is more expensive in these areas, developers will likely address the higher density issue by building up (high rise condos) in these areas. And since the vast majority of people prefer a single family home and builder’s are expected to build less of it in these areas, these types of homes will also see a rise in price.

To sum up so far, a bubble is fueled by artificial demand unjustified by fundamentals (normal supply and demand) – people begin to buy and sell based purely on speculation with no current market justifications for the higher demand. Real estate has a consistent rising demand and a limited supply which is unexpected to change anytime soon.

It’s all up for Real Estate?

Does this mean that the housing prices will not fall, absolutely not. As part of normal real estate cycle, prices will occasionally adjust to reflect the current supply and demand situation of the market.

Let’s first look at the crash of the 90’s to see if similar fundamentals are visible in today’s market place.

Crash of the 90’s

Over 30% of the people buying in the Toronto area in the 90’s were investors, with consistently rising interest rates, these investors could no longer afford the financing costs which caused them to either sell or be foreclosed on by the banks, which caused an excess supply of properties (especially condos) in the marketplace; the excess supply caused the prices to fall. The falling in prices caused investors who had crystallized their losses recently to stay away from the market place (further lowering demand). And end buyers noticed the falling trend and decided to wait a little longer hoping that the property values would drop further and properties could be picked up for a bargain. This waiting game lasted years.

Last year, only 19% of the condos in Toronto were rental units (according to CMHC’s Housing Market Outlook from the second half of 2005) and vacancy rates are dropping. This is because more people are buying for themselves and not on speculation. So even if the rental markets slowed and vacancy rates started to rise, the real estate market is not likely to be flooded like they were in the early 90’s.

Affordability

A major factor that caused the adjustment in the early 90’s was the interest rates. In May of 1990 the interest rates were a whopping 14.21% (according it CMHC), making mortgage payments $11.89 for every thousand dollars of your mortgage. This would make a $400,000 mortgage cost $4,755.97 per month. You can currently get a 5-year mortgage at a rate of about 5.25% or $5.96 per thousand dollars on your mortgage. This means that a $400,000 mortgage today will cost you $2,383.67 per month. That means that the effective cost of owning a house is half the amount that you would pay back in 1990 and yet the average price is only 5%-10% higher now than it was in 1989.

Conclusion

The adjustment in the early 1990s was a response to too many speculators and excessively high interest rates. In the late 90s and until now there has been another adjustment to account for the housing markets being under valued in the 90s and consumer attitudes changing to acknowledge that homes were affordable again. Now as prices are starting to reach a level where affordable houses are affordable, we are likely to see prices moderate with slower increases in price and the occasional peaks and valleys that represent a normal market.