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.

Commercial Investment Property – Keys for Real Estate Agents to List and Sell More

In commercial real estate, getting to a closed deal and final commission is a number of critical steps. You cannot take shortcuts. Most particularly you have to understand the start of the deal and the reason for it. This is the key to long term listing and selling in the industry. So let’s put some of these steps together.

First and foremost, you should be a specialist in a part of the industry that has the opportunity for reasonable growth and reward. This could be retail leasing, retail selling, industrial leasing, industrial selling, or office leasing, and office selling. It doesn’t really matter what part of the industry you are concentrating in, but it does matter that a future exists with the type of property you have selected and that you can relate to the type of property.

The second step in the process of building your business involves understanding your market. You cannot be a specialist without completely understanding the deals that have been done and the deals that need to be done. This knowledge will involve benchmarks of property performance including income, rental type, expenditure, methods of sale, and methods of lease, construction costs, and property usage. When you pick up any information from the marketplace it is best to collate the information for future reference. It is this information that will allow you to negotiate with skill; it is this information that will give you a higher value in the marketplace as a real estate agent.

As part of this process, there is a group of property professionals that you need to know. They are an abundance source of new clients and new business. They are solicitors, accountants, architects, engineers, and property valuers.

The third step in the process of building your business involves understanding the prospects and what they need. This means getting in front of the people who need to do the deals one day in the future. In simple terms this is called relationship building and quite frankly not enough is done by most real estate people. When you establish a face to face contact with the right people you set the foundation of building opportunity. Essentially people need to build trust and respect with you. There are far too many agents are out there who are all fighting for the same prospects. The agent that wins the contact and the commission is the one that has started the relationship and continues it over a lengthy period of time.

Once you have a relationship with well qualified groups of prospects, you can start to drill down on the types of property deals they need. You can actually look for the properties that they require and put the deals together before they even reach the marketplace. In commercial real estate, it is very common to do off market deals.

This property market is currently frustrated by restrictive financing. The banks and the lenders are slow to approve or accept financing proposals on the larger property deals. The property valuers are also very conservative and reluctant to put on any higher values on property for financing purposes. This will change, however and for the moment, we must target the people who have higher equity in another property or business activities, therefore they are less reliant on higher loan value ratios.

There are many property investors and businesses out there that are quietly waiting to seize the opportunity of a new property purchase if the right properties become available. These successful businesses and investors are the ones that you need to know in this market. The more people you know, the more opportunity you will generate.

So how many prospects should you be working in a market like this? Your database should include at least 300 high end prospects, and at least another 300 other prospects that can be converted to higher value. Before you start saying that it is a high number, I will let you into a little secret. This database formula is built on the basis of five new contacts every working day. Within a period of six months, you will have built the database of this size. As you proceed down the path you will also have achieved extra sales and leasing deals that you didn’t have before. Success in the industry belongs to those that can get highly organised in the prospecting process. Persistence pays rewards in ‘bucket loads’. Good luck.

Urbanization Vs Real Estate Sustainability in India

Though India has a massive population, its rate of urbanisation has been relatively low. This is a matter of some concern, considering that India has three of the 20 biggest cities in the world, that is, Mumbai, Calcutta and Delhi. It also has 23 cities that house populations of above one million each.

Going by established and ongoing patterns, it can be safely said that true urbanisation has been limited to India’s western and southern parts. However, the process of urbanisation in these parts is limited to certain cities. This is a situation of considerable gravity all by itself; however, the larger issue lies in the gross imbalance between rural and urban development.

It is becoming increasingly evident that agricultural growth is no longer the answer for our rural economy, since India’s average yield per hectare is much lower than that of countries like China.

Not surprisingly, there has been a steady exodus from India’s rural parts to its urban areas, putting a huge strain on the infrastructure of the latter. This is most apparent in a city like Mumbai. Other metros across India are also buckling under the pressure of steady inward migration from rural areas.

RAPID URBANISATION

Rapid urbanisation is fast compromising the urban real estate marketplace. There are real concerns now about what the scenario will be a few years down the line. Gradually it is being realised that urbanisation must go hand in hand with environmental sustainability measures.

To illustrate, in India, as in many other countries, the growth in municipal waste is proportionate to its economic growth rate. Further, by 2020, India’s demand for commercial energy will very probably increase by a factor of 2.5. India is a chronically energy-deficient country, and already faces significant challenges with meeting its energy needs.

Rapid urbanisation is definitely not helping in this respect. We see the consequences everywhere in the form of power shortages and supply interruptions. This growing gap between energy demand and supply sends a clear SOS regarding the need to increase dependence on stable, more environment-friendly energy alternatives such as solar power.

A SECTOR DIVIDED

Currently, the Indian real-estate sector is divided into players who take the importance of sustainability seriously, and those who do not. The second group, which is in the majority, has issues with overall profitability, since rendering land and buildings sustainable costs money.

However, the overarching issue has more to do with ‘change resistance’. The laws of change resistance underline the difficulty in persuading people, corporations and nations to adopt proper sustainability practices.

A sustainability focus in the process of urbanisation calls for a change in individual values at the personal, corporate and collective levels. The problem is not that of ignorance – most are aware about the need for environmental sustainability, and even agree with it. The problem lies in the adoption and implementation of these values.

SUSTAINABLE BUILDINGS

At its very root, sustainability is a process or state that can be maintained at a given level for prolonged periods. In the real-estate context, it means developing land and buildings in such a manner that the environment can sustain future growth.

While talking of a sustained and sustainable real estate boom in India, one should remember that there is no market without a marketplace.

Therefore, for companies that deal in real estate in any capacity, environmental sustainability is not too distant from business sustainability. In other words, there is no difference between sustaining the environment and maintaining the marketplace for indefinite business activity.

Sustainable buildings are defined as buildings that are designed, built and operated with low environmental, social and economic impact while enhancing the health, welfare and quality of life of the people that live and work in them.

With international awareness of corporate responsibility having grown, sustainability has become a crucial factor in the assessment of the impact of real estate. Organisations, especially MNCs, are taking an increasing interest in the environmental credentials of the real estate that they occupy.

Although the demand for higher levels of compliance may initially appear like a threat to owners of large assets, sustainable buildings do not represent a loss in building utility or level of profit. Rather, modern sustainable technologies possess proven ability to raise environmental efficiencies while simultaneously bringing real economic gains. However, to reap these benefits, sustainable development requires a change in mindset.

IMPLEMENTATION

The process of making commercial buildings more sustainable is akin therefore to embarking on a journey. There are no quick fix solutions to be applied. Rather, owners and occupiers of buildings must work together to establish goals, undertake audits, and establish where savings and improvements can be made.

However, the foundation of achieving sustainable outcomes is the adoption of sound design and management principles. Performance enhancements can be achieved by focusing first on high-impact, low-cost solutions that can be implemented within a realistic time frame.

Once the appropriate solutions are identified and a business case is established for various improvements, the process of physical works, education and internal communication can begin.

The effectiveness of these measures then needs to be tracked, and the results of improvement fed back to the owners and occupiers of the building, and to any other parties involved, including contractors and design teams. From there, further improvement can be made with outcome goals being redefined as information and analysis of the improvement measures build up over time.

What is clear is that you not only need time to implement it, but also that it is not a process with a start and a finish. Rather, it is an ongoing process of improvement, feedback and further enhancement.

In developed nations, there has been a steady increase in the development of sustainable buildings. It is our belief that it is only a matter of time before this market preference towards sustainable buildings in developed markets begins to manifest itself more convincingly in India, as well.

MAJOR NATIONAL RATING SYSTEMS IN INDIA

LEED India by IGBC – Indian Green Building Council and USGBC (US green building council). There are currently 604 buildings registered under LEED India, while another 97 are LEED India certified.

GRIHA – Green Rating for Integrated Habitat Assessment, developed jointly with TERI (The Energy Research Institute) and the Ministry of New and Renewable Energy, Government of India. GRIHA has now got a national rating. Government buildings and PSUs would be the first to adopt this new ranking system.