Real Estate – One Investor’s View
Primary Residence – If you love life and your family, then the "Investment profile" (potential profit at sale) on this property has only marginal importance. The primary issue with this property is how it affects your life – Do you feel good waking up there? Does it provide a good space for your family & allow for flexibility in lifestyles as kids grow up, you age and your interests change? If the answer to any of those questions is "no" then regardless of the "profit potential" you have not located a "home" – it’s just a house. You will end up selling it and moving (again) and in the end this has a substantial subjective cost in lost time, resettlement etc. When you buy a home – buy a HOME.
"Love is great but it goes better with bread"
After you have a home, you need "investment properties" in your portfolio ...
Duplex / Triplex / Fourplex Income Properties – Buy for income potential. Most are presented at a particular factor times gross. I find this a flawed point for analysis, as there are many factors that will affect the eventual net. The "bottom line" – net income – is what I find the most interesting. Factors to consider when looking at such properties:
- Liquidity – these small-unit buildings have relatively high liquidity, as they qualify for attractive mortgage rates and are considered "owner user" properties. This increases your buyer audience substantially.
- Rental credit programs – many communities have programs for subsidizing income of elderly or disabled. If you have a property that fits the agency profiles, you are almost guaranteed a 100% occupancy rate and will very likely have tenants who make the rent payments without fail.
- Tax credits – some areas are targets for urban gentrification programs due to historical architecture, etc. – these will have development tax credits that can substantially lower your long term costs of ownership.
- Location affects Income Tax, Property Tax and Estate Planning. Check these factors before buying.
- Rent Control - If possible, buy in an area where this concept is "unthinkable" (for example Texas or Belize). The good news is that even in rent control communities, smaller buildings (2-4 units) may be exempt from such regulations.
Vacation Homes – Buy for enjoyment and profit.
- Fall in love with it. A wonderful place is easier to rent and to sell. A sensational, fun, relaxing luxury home will always be in demand.
- Savings – calculate the savings in nightly rates for your own vacations. Remember that not only do you save when you stay in your own home, but you have the opportunity to exchange your home with owners of other vacation homes, again saving a sizeable sum on superior lodgings.
- Income stream while you are not in residence – This varies by location, management and amenities. Generally speaking a home managed by a "hotel service" establishment will get the highest bookings rates, the highest nightly rates and the best overall income stream for you.
- Location – buy where the local taxes on property and rental income are somewhere between low and nil.
- "The Market and Liquidity" – when Wall Street slumps or levels off, the smart money heads to "warm weather luxury properties" and/or ski slopes.
- Enjoyment – a good on-site management service package is essential.
Raw Land – Although there is no cash-flow to this investment, it is generally an opportunity for hassle-free appreciation. Either buy, hold and re-sell in bulk OR subdivide and sell parcels. If you buy and re-sell, consider "being the bank" – providing seller financing via land-contract, giving you a low-risk fixed-rate of return that is secured by the title to the land itself.
Buy the largest possible parcel in the best location.
"A+ Property" has the highest long-term appreciation & the most liquidity.
Basics: Buy in a location where titles are secure and tax laws are favorable.
Don’t spend more than you can afford. Don’t buy an ugly house.
Maintain your property.
Location, location, location – "Hot Properties" for the new Milennium:
Beaches - Warm Weather - Economic Stability - Low Crime Rates - Eco-Touris
"Tax Havens" (even if you don’t use the benefits, others are attracted to them!)
Properties that serve multiple purposes – living, retirement, income, estate planning.
Today’s Hot Locations – Belize, Mexico, Cyprus, Honduras, Virgin Islands, Ireland.
Getting "Real" – September 11 / Wall Street and Real Estate:
Wall Street – When stocks fall, investors seek high quality real estate investments.
September 11 – Greater focus on Family Time; Quality of Life; Travel to Locations "closer to home" that are not magnets for political events.
Population Demographics – Who’s Doing What:
Baby Boomers - There are legions early retires - affluent folks looking for "active retirement" in a healthy and interesting location. Their focus is on outdoor sports, good basic health services, and communities they can enjoy and into which they can integrate.
The single most common dream is a beach house, warm seas, palm trees and an endless summer". Other dreams include golf courses, yachts and castles.
Thinking Globally is finally more than a buzz-word. Today’s high-speed communications make it possible to live just about anywhere and manage one’s life.
Thanks for reading ..... Diane Campbell
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