Pressures That Dominate Real Estate Value

When people usually think of real estate value they think of two forces; supply and demand. Yes, this is correct; however supply and demand only fall under the one of the four main categories that drive/depress real estate value. Supply and demand fall under the economic category of influences in real estate value. The other three include; social impact, government subjection and environmental forces.

When looking at social impact, there are a few things one would want to consider determining the effect it will have on real estate value. Most of all the value would fluctuate accordingly with population characteristics. This tie into the potential for demand in the economic section of value; the more demand, the more value a property can derive. Population however should be looked at in more depth by breaking down the sample by age and gender, rate of household formation and partition, as well as analysis of the social values such as education, law and order, and lifestyle preferences. Careful consideration of these factors will help establish trends in what would be reflected in real estate values.

Next is the government subjection, accounting for a large aspect of real estate value. This includes political and legal activities on several levels of government. These government influences have the power to overwhelm natural market forces such that you would find in the economic category. Government has their hand in providing facilities and services that affect values as well as a one of the main contributors to patterns of land use (zoning, by-laws, etc). The following are some things to look out for when assessing the government subjection of a market; fire and police services, garbage collection, transportation arrangement, utilities, zoning, building codes, health codes, and fiscal policies. Also the legislation that is set forth by the governmental factor must be accounted for, this would include; rent control laws, rights to farm, rights for managing forest, rights to agricultural land, restriction on ownership, new development laws, control of hazardous and toxic materials, and laws affecting investment power, loan terms, and mortgage lending institutions. All in all this is quite the category and its understanding will provide for a great idea of where values are currently and where they are headed.

In addition to the social impact, as well as government subjection, the environmental forces also play a part in real estate values. These can be natural or man-made and are analyzed by observing several aspects. Climatic conditions (snowfall, rainfall, temperature, humidity) would be an obvious one that would affect the values of building somewhere as well as maintenance and carrying costs, as well as the quality and type of build. Topography, soil and consideration of any toxic contaminants would also be of great importance as well as natural barriers, such as rivers, mountains, lakes, etc.

Just to get out of the 4 factors of real estate value; it is important to mention that there are some overlying factors that would be part of 2 or more of the categories. Once such factor is location, this is the link of a property in time/distance to any given origin or destination of a resident/user of the property. Location could fall under for environmental and economic, if not all categories. Due to the area and property type, properties access to public transport, schools, hospitals, stores, employment, suppliers, recreational and cultural facilities, parks, and places of worship would of importance.

This would also lead us back to the economic factor of influence on real estate value. The fundamental aspects to look for here include: employment, price levels, wage levels, industrial and commercial expansion, mortgage credit availability and cost, stock of vacant property, stock of improved property, occupancy rates, construction costs and rental/price trajectories of existing properties.

And there you have it, the 4 major pillars of real estate value; social, governmental, environmental, and economic. Taking a deep look at each of these sections one would assemble the entire spectrum of current real estate values and more importantly future real estate values.

Be Careful How You Evaluate Real Estate Data/Statistics: 4 Examples

In today's world, we are often over – loaded with statistics, data, etc. Some of these might be relevant and significant, while at other times, they may be over – reaching, misleading, or unnecessary! We often hear or read discussions regarding mortgage interest rates, so – called – housing starts, number of mortgage applications, and the number of houses on the market, etc. Often, discussions focus on seeming to need to label the real estate market, either as a buyers or seller market! While there may be times these are valuable indicators and information, like most data, the skill is in how well one can interpret these, understand them, know what the numbers really mean, and how to use them. Let's review 4 examples of how statistics are related to real estate, etc.

1. Average or median price: The first thing to understand is the difference between an average and a median price. Average means one adds up all houses sold in the specific target region, and dividing by the number of sales. Median, on the other hand, is listing all the sales prices, and the one in the 50 percentile, is the median price. Simply stated assume 10 houses sold are reviewed, and 2 are sold at $500,000; 2 at $600,000; 1 at $750,000; 2 at $900,000; 2 at $1 million; and one at $1.5 million. In this sampling, the average price is $757,000 and the median price is $750,000. However, why is this information important, since if the sampling is not large enough, wouldn't it depend on which specific houses sold, whether there was more strength at the higher or lower end of the market, etc. When pricing is discussed, it's important to put it into perspective, and see the number of units compared in both periods of time.

2. Housing starts: This refers to number of new builds in an area, but doesn't it make sense, to also consider how much empty or available land/ property, might be available to build on. Always put all statistics into some sort of perspective!

3. Mortgage applications: Are these predominantly for new mortgages or refinances? Are they conventional mortgages? Might it also be important to look at the term of the mortgages? Shouldn't we also look at the criteria being used, and how many/ what percentage, are approved?

4. Houses on market: It is generally considered a buyer's market when there are significantly more houses on market, than buyers, and a seller's market, when circumstances are reversed? Look at the inventory of houses being offered, and the locales. How long do they seem to be staying on the market?

Like in most things statistics – related, it is important to know and evaluate what things mean, rather than making false assumptions, and/ or speculating. Beware of statistics, because they might turn out to either be your friend, or enemy!

Your Big Why and Planning the Future

A while back at an event I got the opportunity to sit across from a couple of brand new investors. As I usually do, I asked them what they were investing in; they admitted that they were newbies and weren't really sure where to begin. We discussed their level of knowledge and expertise, and I found the conversation drifting away from real estate and more into the lifestyle design arenas. I started asking them about their “Big Why” – why were they wanting to leave their corporate jobs, what they wanted to do with their time, and what would make them happy.

We started putting a dollar value to that lifestyle and level of comfort. I saw their eyes get a bit wide as the reality of what they were up against hit them. I quickly reassured them that real estate was a great choice to attain the lifestyle they envisioned if they were willing to work hard and put in the hours, but how? We didn't get into too much detail on the spot, but we talked about breaking those big goals down into time frames and smaller milestones. We discussed assigning how many and what type of deals could get them to those milestones, as well as what were they comfortable doing and how their personalities would help them to achieve their goal. They made notes on what types of marketing and how many offers they would have to make each month, week, and day in order to acquire the number of properties to hit their goals.

We then went back to their “Big Why” and discussed if it was really big enough. By that, I meant to talk to them about whether their choice to pursue real estate would be big enough to get them up and out of bed every day? Big enough to push them to tackle that daily task list? Big enough to hit those smaller goals knowing that as each milestone is hit that they are that much closer to the lifestyle and freedom they want? They made some more notes, and I think they had some talking points to consider as they pursue their real estate vision.

So what is your “Big Why”? Why are you a real estate investor? Is it big enough to get you out of bed each morning with a smile on your face, ready to face the day? Is it big enough to motivate you after 3 months of busting your butt without finding the right deal? This isn't something you can come up with overnight if you haven't spent any time on it already, so let your mind wander. Dream big! Dream really big and write it down. Look at it every day and see yourself living that lifestyle. Then break down how you will get there. Get really specific, all the way down to daily tasks. Now you've put goals and milestones on paper and you have created a map showing you how to get to that big dream and lifestyle you desire.

To be honest, this isn't easy. The dreaming part of this puzzle may be easier than identifying the “Why”, especially when you analyze and determine if your “Why” is a solid vision to which you can remain dedicated. Nevertheless, I promise, if you work hard to identify the “Why”, develop your vision, and stay focused, you will be set up to achieve the vision you set for yourself.

Should Long Term Real Estate Investors Focus On Cash Flow or Growth?

There are really two sides or two strategies to this debate. I lean one way for sure and will explain why but, I am also open about this and understand that other people have goals and strategies that differ from my own. In this article I want to briefly talk about both strategies and then give you some ideas to expand what you are trying to accomplish.

I want to define a long term investor as someone who is purchasing real estate with the strategy to hold onto it for at least 5 years but in most cases much longer. This is a great way to grow wealth and although it can be slow, it will guarantee financial freedom if the strategy is done correctly.

When we discuss lending the staple in the industry is the 30 year fixed rate loan. The advantage to this loan is that your principal and interest payment will remain constant for 30 years even though rents should increase. This loan also comes with the lowest payment in the market helping you to maximize cash flow. I put 30 year loans on my properties whenever possible. (This becomes more difficult as you get more properties which might be a topic for a different article). I like the cash flow because it gives me control and I can choose where to invest it.

The disadvantage to a 30 year loan is that it takes 30 years to pay off the house, assuming you make the minimum payment. If you are a believer in paying off your rentals then a shorter term loan might be a better strategy and will give you the discipline to actually do it. Because interest rates are important to a lot of investors it is important to know you will get a much better rate with a shorter term loan.

My personal belief is that if you are leveraged on your properties you can buy more properties and more properties create more cash flow and more growth. It is the best of both worlds. This is true only IF you are buying quality deals and have reserves and plans in place for the unexpected. As many of you know when I started investing with my wife we would leverage as much as we could and we purchased as many houses as we could. Needless to say that back fired and we lost almost everything. I share this because I want you to know that I understand that leverage creates additional risk. However, if you are purchasing properties that cash flow AFTER vacancies and maintenance there really is not much of a down side.

As you can see I am not a fan of paying off your real estate when you are in your growth strategy period. I believe this strongly for several reasons and have been quoted in major publications sharing my view. I do, however, think you should start paying them off as you get closer to retirement or when you are in a position that income becomes more important than growth. I also understand that many people have a different risk tolerance than me.

There is one thing I want to caution you about. I would not recommend purchasing property on speculation. Again, we learned this the hard way. If you purchase for cash flow, whether you choose to pay off the property or not, you won't get hurt. If you cash flow and the house decreases in value, you keep it and enjoy the cash flow. If it goes up in value… well, you either keep it to enjoy the cash flow or you can sell it and take the cash. Don't get caught up on any of the hype. In Denver the big thing right now is the light rail expanding North, West, and Northwest. Several new lines going in could of course increase the value of real estate, but that is speculation and if the market turns or the lines get delayed you could suffer.

In my opinion, if you are trying to grow your money quickly and are less concerned with the income, you should purchase as many properties as you can, especially those of you in Minnesota. Inventory is not as tight as other parts of the county and it is still easy to buy rentals with no down payment. To purchase as many properties as you can you need to leverage as much as you can.

I want to close by sharing one last opinion. Although I am a strong believer in leverage and being smart about it, I understand that it is not always the best way to go. In Colorado specifically, there are not many deals. Travis, Justin and I talk about this frequently. We all want more deals in Denver but cannot find them. If there are limited deals in the areas you want to buy, you need other investment vehicles to put your money. For some that is investing outside your area, which is what I am doing and for some it is paying off your loans, which I am also doing. If you want to buy more but cannot find the deals, by all means focus on paying off the loans. That is much better than leaving your money in the bank doing nothing.

If you have any stories on the relating topic please feel free to share.

Utter a Fortune With Real Estate

Property consisting of land and the buildings, as well as with its national resources such as minerals or water, pastures, immovable assets of this mood and constructs or accommodate in general. The business of Real Estate is the profession of buying, selling, structures or dwelling and hiring moor. Before is moving forward, some important factors about manor should be kept in memory to do your job well.

Types of Real Estate

* Residential 😛 TAGEND

Containing either a single kinfolk or joint household, that is available for non-business roles. There may be different types of housing tenancy also, and the size of an apartment or house can be described in meters or square hoofs. But the field of “living space, ” eliminating the garage and other non-living spaces may differ in some countries.

* Real Estate Investment

This Investment is the thing that generates income or is otherwise be available for investment purposes. Investors own numerous patches of real estate, which provides as a primary residence.

* Commercial 😛 TAGEND

It is a owned that is used the design for business exclusively. For instance, commercial-grade possession includes restaurants, powers, ballparks, plazas, gas station and convenience stores

* Industrial 😛 TAGEND

The property that is used for industrial work. But it covers a prodigious stray of business kinds and comes in all shapes and sizes.

Industrial Real Estate includes single or double-storey buildings. Small industries have adaptable interior room. Large-scale manufactures include medium to large-scale warehouses and factories that are designed to storage goods or manufacture.

To become.

Fortunate Real estate agents, need to be familiar with their place, rationales to increase or lessen property rates. For instance, if a brand-new airport or superhighway is to be built this can increase the price of nearby mansions. Equally, improvement of an neighbourhood can enhance premiums. The worker must be aware of recent sale prices or rental for equivalent properties of the area.

To become estate agents or professionals, dealing with all suburban, agricultural and commercial-grade dimension. They should adhere to a code of conduct, which would incorporate regulations about looking after their clients' money.

If the slew ended, then owned negotiator may blame anything from 1% to 2 %, and this is calculated on the sale price of the property.

Making an online rich as Real estate agents or business manipulating most notably online , ordinarily render a option of rewards, the majority of members of which are paid in advance. The straddle of expenditures is from $300 to $800, which is payable in advance. Countless online estate agents render their service up front but they shelved the path of fee, it wants there is nothing to pay in advance, but after a stage a cost is increasingly becoming payable.