Don’t Overpay for Real Estate

Isn’t real estate fun? While the commercial and investment marketplace continues to trudge along without much hype and hoopla, the residential marketplace continues to make headlines. Today for example you’ll see the headlines “Stocks tumble on concerns over lenders.” and “U.S. Foreclosures soar.” I find it amusing that generally intelligent people seem to be surprised by these turn of events. They wouldn’t if they would just give it a little thought.

For months we heard about outrageous appreciation in prices, we learned of appraisers who inflate their values to justify the demands of real estate licensees and lenders. We see wild speculation in virtually every market in the nation. However, … we don’t see the population base increasing fast enough to absorb all the building going on and we don’t see incomes increasing fast enough to meet the demands of the higher mortgage amounts. Most people are like race horses, running with blinders on, keeping all that is going on around them out of sight and therefore out of mind.

Too often the real estate business is based on the “One greater Fool” theory. It is common for one person to pay too much with the intent of making a profit when the at least “One greater Fool” comes along and pays even more. Unfortunately, this works more often than it should. The residential single-family market has always been an emotional and irrational market, and it will continue to be. That is why it is difficult to use this market as a long term profit-oriented basis for portfolio development. Yes, intelligent investors will continue to benefit from this market segment. But they must be wise when calculating their entry and exit.

On the other hand, proper and prudent purchasing in the investment marketplace is still generally based on the ability of a property to produce income. The property that produces the most income is inherently the most valuable. It will serve any investor well to be familiar with the economic factors of both the market and the properties in which they invest. If they approach the business wisely, doing their legwork and running the numbers, they should consistently buy real estate that will produce long term revenue and substantial secure profits. Intelligence, education and hard work will pay off. If you have and use those things, everything else will fall into place. You can and should just sit back and smile when the headlines scream doom and gloom while your properties are chugging along exactly as they should because you bought as a professional and not as the one greater fool. The best way to make sure you don’t loose money on real estate is to not pay too much in the first place.

The Fundamentals of the Three Kinds of Real Estate Markets

If you’re a first-time home buyer and you want to purchase a property from the available Boca Raton homes for sale, you must be aware of the three types of real estate markets. This is very important as the process of home ownership is quite complex and you need a plan to succeed in it; different markets require different strategies, which makes it essential for you to be aware of the differences of these marketplaces to know what you have to do to get that home you want.

Buyer’s Market

A buyer’s real estate market, also referred to as a cold market, is where there are a lot of buyers and only a few properties put up for sale. If you’re buying in this kind of marketplace, then you’re in an advantage since you will have a lot of choices and many sellers often take any offers into consideration. You may even buy a house lower than the list price and some sellers may possibly finance your closing costs.

To make sure that you’re in a buyer’s real estate market, you need to look for these signs:

– The houses in the inventory have stayed in the market for over six months.
– The number of homes of sale is higher than the preceding months or years.
– A smaller number of buyers are present, so the closed sale numbers are also lower.
– The comparable sale prices are much higher compared to the prices indicated in the active listing.
– The ads for real estate are growing bigger.
– There is a drop in the median sales price.
– The “For Sale” signs put up in properties stay longer, so the days on market or DOM is also longer.

Seller’s Market

In a seller’s market, also known as a hot market, there is a large number of buyers while there are only some houses available for sale. Sellers are generally at an advantage in this kind of market since they receive multiple offers. You will have a lot of competition if you’re planning on buying here, so you must be prepared to make your best purchase offer.

It is hard to enter in this competition where you may have a lot of competitors for the house you want; sellers don’t just consider any offer and bad ones are quickly rejected. They may even ask for some of your rights as a buyer to be waived. Because of this, you should seriously make a strategy that would make you win. However, if you are not that serious about purchasing that home, then it’s not wise to compete with others.

The following are the signs you need to look out for to determine if you are in a seller’s real estate market:

– The homes in the inventory have stayed in the marketplace for less than six months.
– The number of properties available is a lot smaller than the preceding months or years.
– Many buyers are present, so the number of closed sales is higher.
– The comparable sales price are much lower compared to the prices in the active listing.
– The ads for real estate are becoming smaller.
– There is a rise in the median sales price.
– The “For Sale” signs set up in houses stay only for a while and then immediately get a “Sold” or “Pending” sign attached to it.

Neutral Market

This type of real estate market is stable and normal, meaning it does not experience unpredictable swings. Here, the sellers and buyers are practically equal and the rates of interest are reasonably priced in general.

Purchasing a property in Boca Raton real estate is not very easy. You must first do some research and plan on what you should do. Understanding these three types of marketplaces is very important to help you succeed in buying the perfect home for you.

Real Estate Property Investment Series – Focus Canada 2007

Canada has something of an evergreen appeal which means that not only does it welcome many new and affluent citizens to its shores annually as part of its active immigration policy, these new Canadian citizens provide fresh inward flow of demand and affordability to the Canadian real estate marketplace.

If you add to this the fact that more Europeans and Americans are seeking to either move to live in Canada for part of the year or holiday there for extended periods of time throughout the year and you have quite a new and active market seeking long term rental accommodation and even resale property units as well.

On top of this active flow of demand you have local demand which is strong particularly away from some of the eastern provinces where property prices have risen a little too high a little too fast of late, and overall there is a great deal of local affordability and demand underpinning a solid and positive property market.

Having said all that, not all in the Canadian real estate garden is rosy as we look forward to 2007…while an investor who does their due diligence carefully and astutely can reap dividends from commercial and residential real estate in Canada in 2007, there are certain economic facts that could negatively impact the real estate marketplace in Canada in 2007… this report covers both angles.

On the one (negative) hand – while Canada’s property market has not been shaken quite so significantly as other established nation’s markets it has suffered a general slowdown of both market and construction activity. This is because the question of ‘affordability’ has suddenly had to enter the marketplace…questions have been raised relating to whether average property prices have hit a ceiling beyond which home buyers cannot afford to enter the market.

On the other (negative) hand – the Organisation for Economic Cooperation and Development has reported that in 2007 Canada’s GDP growth rate will under perform previous expectations of it. GDP growth was around 2.8% in 2006 and this is predicted to drop to 2.7% in 2007 before bouncing back firmly in 2008 – in addition to this, unfortunately consumer price inflation is set to follow a similar pattern and core inflationary levels could rise from 1.9% to 2.1% in 2007. These statistics suggest that the property buying public’s activity could be depressed a little in 2007.

But it’s not all bad news! Far from it in fact…

The Canadian Real Estate Association is working with the government to change the way smaller property investors in Canada are taxed on their capital gains. A small investor is one with fewer than five employees and this type of investor is called a passive investor in Canadian taxation terms. Currently such an investor has to pay capital gains tax and suffer capital cost allowance recovery if they sell an investment property even if the proceeds from the sale are then reinvested in another investment property within one year. If CREA get their way investors will be able to defer capital gains tax and capital cost allowance recovery when they sell investment properties and then reinvest the proceeds of the sales back in to other investment properties within one year.

So – the question presents itself – where should an investor invest in real estate in Canada in 2007 if they are to reap strong returns?

To tap into strong real estate profitability in Canada in 2007 investors basically need to apply commonsense when it comes to doing their due diligence on whether a market has room for expansion and whether it is enjoying, and will continue to enjoy, strong consumer demand for either rental or resale accommodation.

Simple!

A good example for a potential investor to examine is the city of Edmonton in Alberta where demand for properties for sale is outstripping supply and where the local economy is being supported greatly by the current oil sands driven boom. This is the sort of market an investor needs to preempt to derive as much profit potential from their investment decisions as possible.

Investors should also examine which Canadian towns and cities are going to be benefiting from upgrades to infrastructure such as communications and transport links because where an area is improving so desirability will increase and house prices will always follow. Also worth examining in Canada is the expansion of the local and international tourism market where residential letting opportunities could arise as well as commercial investment interests.

Commercial property investment opportunities also exist in the likes of Ottawa as well where vacancy rates are attractively low and construction is underway to supply some 800,000 square feet of prime, grade A office, retail and industrial space to a market hungry for such space. Basically investors who tap into this new supply could find themselves generating attractive yields in a relatively short period of time and opportunities like this exist all across Canada…in fact it is a nation ripe with investment opportunity!