Archives for March 2012

Should I Buy Overseas Investment Property?

Look to diversify

With the current instability in the U.S. real estate market, you may want to consider enlarging your horizons. You could expand your overall portfolio by buying overseas investment property. It’s always a good idea to diversify your real estate portfolio of investment properties if possible. And one solid way is to investigate looking at acquiring overseas investment property.

Buying on your own

Areas with emerging and burgeoning economies are good places to start looking. Pacific rim countries like China, Japan and the Phillipines are all doing well right now. In Europe, countries like Turkey, Latvia and Romania are in fine shape, with low debt and rapidly increasing economies.

Meanwhile, the usually reliable spots for investors, like Italy, France and Spain, are all currently struggling. However, if you stay in major cities like London or Paris, there is much more stability in real estate valuations. Of course, if you’re unfamiliar with specific areas, you’ll need to do a good amount of research first before investing. You’ll need to make sure the market has been relatively stable over the past 5 to 10 years.

On-site trips

Another main concern you would have when looking to purchase residential overseas investment property, is whether you’re going to be able to make on-site trips at regular intervals to check on your properties and inspect them. If you don’t normally go to these areas that you’re considering purchasing, it may be a bad idea to be looking to purchase overseas investment property individually. If you want to own the property outright, you may consider having an on-site manager who lives in the same town or the same building, to deal with any problems, especially emergencies on your rental property.

However I don’t recommend purchasing individual overseas property unless you plan on making at least one or two visits there per year. While there, you’re going to want to make a detailed physical inspection of the property, check on your tenants, and make sure the property doesn’t need any major repairs.

Some investors create overseas investment properties out of former vacation homes that they own. If you do the same, you’ll have a leg up since you’ll be very familiar with the area, and already know it’s vagaries. You’ll also be able to have the option of screening tenants yourself when you’re there.

Using specialty REITs

Of course if you haven’t been to a particular overseas country that you’re considering investing in, it may not be a good idea to be looking for an individual piece of overseas investment property. Familiarity is very important. As an alternative however, especially if you’re searching for higher yields than U.S. real estate is throwing off, it’s a good idea to try to look for Real Estate Investment Trusts (REITs) that specialize in overseas properties, both residential and commercial.

Many top REITs in the U.S. have enlarged their scope of properties to include overseas divisions. REITs such as Prologis and AMB Property (soon to merge), Simon Property Group and Kimco Realty are good places to start your search. Compared to REITs that invest solely in U.S. property, most overseas REITs tend to have higher cost structures, and may have relatively higher share buy-ins compared to strictly stateside-invested REITs. However, compare their 1,3,5 and 10 year yields to get a better idea of how they are outperforming the U.S. market.

Investing in REITs that specialize in overseas property investment can be a very lucrative way of going. Be sure to do your homework, and then choose the correct REIT that meshes well for you. You’ll find expanding your real estate portfolio to include some form of overseas investment property is the smart way to go for long term growth.

photos courtesy of prestigeproperty.co.uk, moneyplansos.com, lincolntrustco.com,

caribreezes.com, members.virtualtourist.com, sg.lifestyleasia.com

Has The Housing Market Reached Bottom?

A big week ahead

As you look down the road at your investment property finance decisions, this week ahead may prove to be the one where you look back and declare “the housing market has finally, and definitively, reached bottom.” There will be a number of economic indicators coming out this week that will help in ultimately making this call.

While housing has continued to be one of the largest drags on the U.S economy since the bubble burst back in 2008, all property investors have been wondering if the bottom has been reached yet. The constant flow of foreclosures, ever-increasing inventories and average time on the market for properties in general, as well as poor new-build numbers in the past few years, have all slowed the housing arena to a crawl. Of course, this has made for an ever-increasing and robust rental market, as homebuyers stayed on the sidelines in droves.

Nearing bottom

However, recent rebounds in stock valuations of some of the nation’s largest home builders in the past few months, as well as their forecasts for greater home buying during the remainder of this year, lead to the conclusion that the bottom is near. In addition, apartment construction has been rebounding of late as well, as more buyers look towards renting for the short term, until they see a bottom has been reached.

In some local markets around the country, house inventories have been shrinking. Also, property investors, as we know, have been out in force over the last couple of years, picking up foreclosures and other bargain-basement properties that they can either rent out, or look to re-sell as the market slowly rebounds.

Apartment construction as indicator

In general, apartment construction traditionally precedes new home construction by one to two years. And of course, once the bottom is reached after any housing bubble, prices usually will continue to drop off a little more, even as the bottom is ultimately being hit. This is simply due to the time lag of consumers psychologically assimilating the concept of a bottom being reached, then turning their thoughts into action by actually searching for, then closing on their next home.

Key reports coming out

Some of the key reports and numbers to be watched this week to check on as indicators of a bottom being close at hand include the National Association of Home Builders Market Index, which is due out on Monday. It’s a measure of builder confidence. (It rose in February to 29, up from 25 in January.)

Next, look for housing starts and building permits figures, to be released by the Commerce Department on Tuesday. A number over 700,000 for building permits will represent a very positive sign for the housing rebound. On Wednesday the existing home sales report will come out from the National Association of Realtors. Later in the week new home sales will be reported by the Commerce Department. If sales are at or above 325,000 units on an annualized basis, while very low, it would be another indicator that inventories are going down.

Watch for the trends

So look for the trends in all these reports this week. They may all point to the beginning of the end for the housing downturn. Of course, once the bottom is reached, you’ll want to start thinking about shifting your investment property finance decisions. It may soon be time to start looking at fixing up properties to turn over and sell again, rather than simply holding onto rental units.

photos courtesy of petetheplanner.com, thenakedtruthinaconfusedworld.blogspot.com, apartmenttherapy.com,

newsone.com, candysdirt.com, politico.com

Falling In Love With A Victorian – A Fatal Flaw For Property Investors

A trap for new investors

If you’re new to the investment property search process, beware of getting sucked into the notion of rehabbing a gracious Victorian…or Colonial, Carriage House, Farmhouse or any period property exuding tremendous charm. The property may have fallen on hard times, and you may feel you’re just the person to bring it back to its former splendor. And then turn a profit on it when you rent it out and /or sell it.

Unfortunately, older, period houses usually come equipped with renovation costs that can skyrocket out of control very easily. Costs that the average property does not share, and that you may not properly account for when you crunch your numbers, and come up with your overall rehab budget. It would be sad indeed to purchase an older house at a great price, only to discover you’re sinking in red ink as your fix-up costs spiral out of control, and way beyond what you originally planned on.

Remain emotionally detached

Remember, this is not your home you’re considering purchasing. Always keep in mind as you go about your investment property search, that this is an investment property that requires you to be emotionally detached from it in order to become, and remain, profitable. Otherwise, you might as well consider investing in some other emotionally-laden investments…like a Broadway show for example.

Consider what an older house brings to the table: sash windows that are paper-thin by today’s standards, and also are quite leaky – producing many drafts, thereby increasing your heating costs. Also think about the costs of rewiring hundred-year-old electrical wires and circuits throughout the house. And how about replacing antiquated plumbing lines and fixtures as well. On the whole, your repair costs could run 25% to 50% higher on an older property than on a newer one.

According to a 20/20 Research report, 38% of Victorian property owners felt that their property had not been a good investment. And these were actual homeowners – not simply property investors. Clearly there is a disconnect between “falling in love” with a property, and actually fixing it up and maintaining it.

Look for newer properties first

The best investment property search results, and therefore yields, can usually be found through investing in newer houses that need less repair work to begin with, and which will cost less to maintain in the long run. So as you begin your investment property search, always be wary of your own emotional tugs to older homes. And be sure to check them at the door.

photos courtesy of davidtripp.wordpress.com, yourdailyrealestatefix.com, workaway.info, users.rcn.com, danzafamily.com

Investment Property Information Series – Do You Need a Property Manager?

How to determine if using a property manager makes sense for you

Property management companies traditionally charge 10% of your monthly rent roll as their fee for their services. However, it’s not a rule, so by all means shop around. With traditionally tight margin levels in investment properties, their fee could be the difference between running a positive cash flow or a negative one on your property. So you should first crunch your numbers for each of your rental buildings, to ensure you can afford their services.

Are you tempermentally suited to property managing?

Once you’ve considered the economic effect of hiring a property manager to manage your real estate investment portfolio, and as you develop your property investment strategy, you’ll need to determine if your personality type works well interacting with people, because you’ll be dealing with loads of people if you choose to act as your own property manager.

You’ll need to be showing your units for rent, screening tenants, choosing them, and then make monthly rent collections. In addition, you’ll be dealing with a list of trades people when it comes to basic maintenance on your property (landscaping, lawn cutting, snow plowing), as well as repairs (mostly plumbing and electrical). Sometimes, hiring a handyman you’re comfortable with can suffice, as he can perform many of these tasks as a general all-in-one repair/maintenance service person who‘s “on call” for you.

Also, you’ll need to ask yourself if you’re okay with emergency calls from tenants – whether in the daytime, or in the middle of the night and on weekends. If you’re a calm person who’s good at “putting out fires” without it taking an emotional toll on you, then by all means you’ll be a good property manager for your own real estate holdings. If not, look towards hiring a professional property management company.

The basic responsibilities of a property manager

Deciding on choosing a property manager, the supervisor of all your property investments, is no simple task. Here are the most basic responsibilities of property managers:

1) Maintaining your rental property – Managers will be responsible for regular on-site checks on your building(s) to ensure proper safety and regular upkeep/maintenance. They’ll also be responsible for all emergencies (ie. – emergency calls from tenants), and making sure the right tradesperson is called to fix the problem, as well as follow-up to ensure the problem was fixed properly, quickly, and resolved to the satisfaction of your tenant – all at the most affordable cost to you.

2) Advertise, locate, screen and approve all tenants (usually with owner’s approval). Show your rental units that are vacant. Prepare all leases, and have them signed.

3) Collect rent from all tenants. Make all collection calls on delinquent tenants.

4) Represent you in any tenant eviction process, if necessary. Work with your attorney to aid in a smooth eviction.

5) Keep all accounting for each property – including the holding of bank accounts for security deposits, rent, and debiting the rent account for all expenses incurred on the building.

How to choose the best property manager for your situation

Make sure you use a very local management company – an agency very close to your property (or properties). You’ll really want to choose a managing agent that knows your area very well, and the vagaries of each neighborhood too. This will be invaluable when they need to show your vacancies, as well as help choose the best tenants for your units.

In addition, be sure to do your homework on each potential managing firm. Make sure to get references from them, and speak directly with those clients to get a good idea just how responsive (and responsible) each managing agency has been with their clients.

View other buildings they manage

It’s also a good idea to drive by several properties your prospective property manager actually manages, to get a sense of how physically well kept up each property has been. Are they attractive ? Do they have curb appeal? Or, are they run down, and in need of repair. If the latter, ask the property manager why they remain so run down.

Once you have gathered all this information, you’ll be able to make a proper decision as to the clear-cut choice for your property manager. And it’s a major decision, like most of the decisions outlined in this investment property information series, since they will act as the main overseer of your entire rental real estate portfolio.

photos courtesy of propertymanagersandiego.com, denalipm.com, homeguides.sfgate.com, dcmud.blogspot.com, carterrealtyagency.com, sanpedrosquareproperties.com