Monthly Archives: November 2016

Real Estate Investment In A Recession

Have you ever noticed how buyers flock to purchase property in droves when real estate prices are at their peak, yet buyers are relatively scarce when prices are most affordable? Notwithstanding the fact that this occurrence defies the generally accepted investment strategy to buy low and sell high, one cant help but wonder why attending social gatherings during the real estate boom years of 2005 and 2006 would inevitably lead to engaging in a conversation about someones real estate investment and the promise of future profits to be derived from the venture. Its not all that surprising that many of those recently boasting about their real estate exploits have softened their tone while seasoned investors, dormant for the past six or seven years, have begun to once again start purchasing lucrative investment property. Despite news about the recent real estate and financial industry tribulations that the public is seemingly bombarded with every day, the last few months of 2008 provided a relatively quiet, yet dramatic, surge in real estate sales.

The National Association of REALTORS (NAR) has reported that residential home sales have increased by an astonishing 115% when the last quarter of 2007 is compared against the same period for 2008. Have the experienced investors purchasing all of this property been ignorant to the steady stream of media reports warning of declines in real estate values? The answer is no, they have simply been waiting for the right time to emerge like a small swarm of locusts to steadily reap houses for sale like crop. In fact, their buying presence has been so prominent that national housing inventories of homes for sale have significantly decreased during 2008s final quarter, a reliable sign that demand is beginning to once again catch up with supply.

But how do these brave souls know precisely when they are buying at the bottom of the market? Do they throw caution to the wind and simply force themselves to muster the courage to purchase property despite the fact that values may continue to decline in the future? The simple answer is that savvy real estate investors do not purchase property with the expectation of immediate appreciation in value. Rather, investment real estate should be purchased based on the propertys potential for positive cash-flow. Positive cash-flow occurs when a propertys rental income exceeds the owners costs to maintain the property. Consequently, when a property provides a positive cash-flow, a decline in real estate prices is of little concern since the owner can simply enjoy the income his property generates until the market revives and the property can be sold for further profit.

During the real estate boom years our nation became blindly infatuated with the appreciation of real estate prices, which represents the amount of value that a property will gain over time. So called house flippers brazenly leveraged money to buy numerous properties with the expectation that their values would increase, thus enabling them to sell the properties for handsome profits in a short period of time. These novice real estate quasi-moguls, often addicted to HGTV and other television shows created to promote the industry like Flipping Out and Flip This House, regularly failed to consider property cash-flows prior to making their purchases. Why bother when real estate values will always continue to appreciate, thereby alleviating the need to hold properties for long? After the housing bubble burst, many of these speculators realized that they shouldn’t have built their investment houses out of sticks, and social gatherings became pleasant once again.

Seasoned investors build their investments out of bricks by carefully and conservatively analyzing a propertys cash flow potential prior to purchasing. The primary reason that these investors have been sitting on the sidelines for many years is that most real estate prices have been far too high to generate positive cash-flows and a reasonable return on investment. It hasn’t been until recently that both residential and multi-family housing prices have retreated to levels where rental income will cover monthly mortgage payments and other operating costs. Further, with the construction of new housing and apartments decreasing to a virtual halt, a still rapidly growing local population, and many families displaced from foreclosed properties, an investment propertys owner is free to choose from a tenant base that is now stronger than ever. One can clearly see why a decline in real estate sales prices typically accompanies an increase in monthly rental prices.

No matter what the year 2009 holds in store for real estate investing, it is essential to remember that investing in real estate should always be considered over a long term. Although the opportunity for a quick flip may present itself, the distinguishing benefit to sound real estate investments is their ability to provide income no matter what the economy throws your way.

Importance of Property Valuers in Organization of the Real Estate Industry

BUYING AND SELLING PROPERTY IN AN ORGANIZED MANNER

More than 95% real estate leads are generated online in the US and developing countries like India will soon follow suit. So it is very important to have a listing portal that helps agents and brokers to promote their listings. It is very important to be a part of this vibrant and ever-growing business field of real estate brokerage. However, it is even more important to be part of a successful global network. Real estate industry professionals need to work on a business model that has successfully been employed in major countries across the world. To overcome the inefficiencies of the real estate industry, it is important to have the use of training, technology and be ahead of its time. The RE/MAX policies of cooperative growth and shared office expenditure, ensuring that a person can focus more of his time on earning and doing transactions, is a collaborative way of doing business and making sure that everybody wins.

PROBLEMS IN THE CURRENT REAL ESTATE BROKERAGE SYSTEM

1.Less inventory: The number of sellers one represents in the market
2.Less leads: The number of buyers one represents in the market
3.Budget to advertise: Agents and brokers have little money to spend on advertising.
4.No training on real estate broking : Lack of knowledge of the real estate industry
5.Staff retention: Employees do not stay for long in the system.
6.Staff monitoring: Employees need to be given more time in terms of monitoring.
7.Staff motivation: Motivation levels fluctuate as per the market dynamics.
8.Recognition: A small office cannot recognize the efforts of a good employee.
9.Restricted network : Network of a real estate broker is restricted to his local friends at the most
10.No trust: Customers do not trust the average real estate broker, as agents are normally seen as dishonest.
11.Unorganized market: The property market is unorganized with no entry barriers and no regulatory body.
12.No international presence: Lack of reach to international locations plagues property agents.
13.Builders have to spend a lot of advertisement: Since selling agents are not coordinated, builders are spending a lot of money to promote their projects.

WHY A REAL ESTATE PORTAL IS NOT THE SOLUTION TO YOUR PROPERTY NEEDS

There are many real estate portals competing online in India right now, such as MagicBricks, 99Acres, Makaan and IndiaProperties. These property websites constantly vie for the attention of real estate buyers, sellers and tenants.

Online property portals on the Internet were established with an agenda to remove or bypass real estate brokers and agents from transactions taking place in the industry. They allow customers to list properties directly with the idea of eliminating the broker from the chain. However, nobody knows better than a broker that only a well-established property agent can give local market knowledge, help with paper work and find the best deal for the client at the lowest possible cost. It is difficult as well as unreasonable to try and eliminate agents and brokers out of the network.

HOW REAL ESTATE VALUERS CAN BE PART OF AN ORGANIZED REAL ESTATE BROKERAGE SYSTEM

The primary job of the broker is to sell the property he lists. The value at which a property is listed is of prime importance. If the property is undervalued it will sell fast but the seller will lose substantially. If the property is overvalued then it will take a long time to sell and the seller will lose on interest with increased opportunity costs and the may miss an ideal investment prospect.

A valuer can not only list the property in the market at the right price, he can also convince the customer that the price is perfect as he has the precise knowledge as to why the property is valued at that price.

KEY ADVANTAGES A REAL ESTATE VALUER HAS COMPARED TO A REAL ESTATE BROKER

Trust: A real estate valuer gets the trust of the seller as he is considered to be an independent third party doing the valuation of property.
Knowledge: The valuation of a property requires in-depth knowledge of various aspects to valuation and knowledge of the field. This creates an entry barrier to anyone who wants to enter the field of real estate.
Mandate: Generally, a seller will not get multiple valuations done for the property. So, the awareness that the property might be up for sale is available only to the real estate valuer.
Early Involvement: A real estate valuer gets involved in the transaction much before a real estate broker. This gives a bigger advantage to him in both customer interaction as well as the whole property deal process.
Expectation Handling: A real estate valuer can set correct expectations in the mind of the seller, helping in the negotiation process which ultimately helps in faster transaction.
Allied Services: Real estate brokerage can be reflected as an allied service or value added service to the main earning business vertical of real estate valuation. Customers increasingly prefer a one-stop-shop that provides a centralized solution to their end-to-end real estate requirements.