Real Estate Articles

Of late the media has featured disheartening stories of people who have bought properties abroad and suffered financially as a result. These media reports are fair and factual, but they do not present a balanced picture - of those who buy homes abroad every year, the vast majority do so happily and successfully. They get what they pay for and get what they expect, they do not suffer at the hands of unscrupulous agents and bad builders, they do not buy in emerging markets that fail to emerge further, and what’s more, they find that in the best cases they have not only successfully bought a home overseas, they have bought themselves an attractive and lucrative investment asset as well.

So, what sets the success stories apart from the rest, and how can you buy property abroad with confidence?

A very well researched report in the Telegraph recently went to great lengths to cover the ground that would-be buyers of a home abroad need to think about and investigate. The report flagged a number of critical issues that do indeed set the successful buyers apart from those who very unfortunately suffer financial losses when purchasing overseas real estate.

The very first thing to get right is location. Your location selection will of course be determined largely by personal choice; however, if you are looking for the most secure form of purchase, the majority of successful buyers will always choose a tried and tested location where there is already a strong property market, an active resale market and rental interest, and ideally where there is also a level of tourism demand. This gives a buyer the ultimate choice - they can rent the property long-term or short-term when they are not using it, they can resell probably for profit, and they can exit the market when the time comes more easily as there is waiting demand for their property. A location such as Marbella in Southern Spain is an excellent choice for such buyers because of its long-term, well established appeal, it is a popular holiday hotspot year round, and it is one of the main relocation destinations in Spain for expatriates, thus ensuring a buyer has a market to rent to or sell to if they choose to view their purchase as an investment.

The second thing to get right is choosing the right developer to construct your home. The most successful British buyers often choose British companies building abroad because they are familiar with their track record, the company financial data is visible in the UK, reputations that have been built up will want to be maintained, and also because they can be assured of the level of service and delivery of end product that they will receive. It is due to these factors that the brand new Champneys resort in Marbella in Spain is receiving such strong levels of interest, as a well established and reputable name.

Champneys is an example of an internationally acclaimed British company with an excellent reputation for the delivery of exquisite quality. One only has to look up the name online to find it is associated with five star excellence, therefore it is of little surprise that the company’s venture into the creation of a luxurious spa resort in Marbella, complete with residential properties, is proving so popular with those who want to buy abroad with confidence. According to Tony Roberts, Sales Director at Champneys Marbella: “our clients know our brand and our reputation, they know that Champneys champions the way when it comes to providing superior quality, and they are assured that the company ethic translates into our first of its kind and exciting venture in Spain.”

Therefore, for British buyers wanting to buy a property abroad with absolute confidence, it makes sense to examine your chosen destination, then search for the most reputable, well established name building in that location and look more closely at what they have to offer.

The headlines read that housing has bounced back and that sales have bottomed. Recently the Commerce Department reported that sales of new, single-family homes rose 3.4 percent in November. The government even revised the previous three months, showing stronger activity. The national and local news reporters are all claiming housing is on the rebound. But has it?

The Devil is in the Details

The Census Bureau surveys home builders and specific housing starts. If a home is built and at some point goes under contract for sale, then it is considered sold. They do not go back and check if the sale actually went through.

So what happens when Lennar, the # 3 homebuilder, says the cancellation rates for home sales was running about 30% last quarter and KB Homes says their cancellation rate was 43%. Due to the way the Census Bureau performs their survey, they do not double count if the house sells at some point later to another person. In the long run, this method does not over or under count the estimate of the number of houses sold.

However, in the short run, as their web site explains “As a result of our methodology, if conditions worsen in the marketplace and cancellations are high, sales would be temporarily overestimated.” So when the existing home sales data seems to be showing that the market is bottoming, we need to recognize that there are significant cancellations that are missing from the data. You can access the actual Census Bureau policy at the following link: http://www.census.gov/const/www/salescancellations.html

The headlines are missing the underlying trend. The cancellations in sales of new houses imply that sales are lower than being reported. It doesn’t seem likely we have hit the bottom in new home sales.

What does History Tell Us?

We keep hearing that the bottom in housing is either here or very near. But is it? If the reported sales are skewed, then how can we tell? Maybe a look at some history will give us some insight. Guerite Advisors provides some excellent analysis that is useful. In the previous seven cycles since 1959, housing starts have dropped an average of 50.7% from peak to trough. Each time housing starts have fallen more than 25% from their most peak, a recession has followed. The only exception was the “credit crunch” of 1966-67 that ended in an economic contraction but not an official recession.

According to Guerite Advisors, shows housing starts have dropped 34% so far from their peak in January 2006. To get to the average we need to have another 20% drop in starts. This is another bad sign that contradicts the headlines.

Professor Robert Shiller of Yale, author of Irrational Exuberance: Second Edition, tracks housing prices, adjusted for inflation, since 1890. This index is for existing houses and not new construction. It presents housing values in constant terms over 156 years, factoring out the effects of inflation. The benchmark was set to 100 in 1890. This means that a house that sold for $100,000 in 1890, inflation adjusted to today’s dollars, receives a value of 100. The equivalent house that sold in 2006 for $199,999 would receive an index score of 199, or 99% above the price in 1890. Here is the link to Shiller’s site: http://www.econ.yale.edu/~shiller/

Since 1997 the price index has risen 83%. Professor Shiller believes that the index is mean regressing, meaning that over time it tends to return to the mean from the extremes. It is easy to understand that the spike in home prices is substantially above the mean, no matter how you would calculate it.

What concerns me the most is the wide disparity between the price of houses and building costs. I would think this has to narrow over time. Either the price of houses comes down, or the cost of building a home goes up or some combination of the two. In any case, it implies that housing will face more difficult times.

The Case for Soft Landing in Housing

So what will mitigate the problems in housing and help it find a soft landing and then move up. In the past declines in housing were accompanied by high unemployment, high interest rates and a general slow down in the economy. So far we have low unemployment and low interest rates long term interest rates. Even if unemployment were to rise in 2007, keep in mind that approximately 80% of the US economy is in the service sector, which tends to experience fewer layoffs than the manufacturing sector during an economic slow down or recession.

The 10 year treasury rate, the primary index for mortgage rates, is still in a relatively low 4.6% area. As long as mortgage rates stay relatively low, housing should be able to hold its own.

Conclusion

The headlines on housing sales are misleading in that they are based on data that is in accurate over the short term. Calling a bottom in housing on these misleading numbers gives a false sense that the industry is doing better than it is. Be careful making investment decisions on this data. There are factors that continue to push housing down further and there are factors that are helping to moderate the fall in housing. It will take time for this to work itself out.

Borovets is a fabulous Bulgarian ski resort and mountain tourism location situated approximately 70 km south of Sofia on the Northern Slopes of the Rila Mountains. It has long been established as a major European ski resort with excellent facilities. It is only in recent years that other ski resorts in Bulgaria such as Bansko and Pamporovo have started to challenge its status as the premier Bulgarian ski facility.

Borovets is at 1350 m above sea level with the peak of Moussala at 2925 m. The resort benefits from this high altitude and can provide consistent good quality skiing when other resorts fail to provide adequate skiing, such as in the mild winter of 2007.

The resort provides skiing for all abilities and there are more than 200 ski instructors. The ski instructors are often professional skiers and are of a high standard. They can offer instruction in a number of languages and for a wide range of skiing abilities.

The existing facilities and hotels are also of a high standard and the resort is popular with the major tour operators who provide package holidays and flights from most regional European airports into Plovdiv and Sofia in the winter period.

Significantly, the airline easy jet started to fly from Luton to Sofia in November 2007. Borovets is approximately 40 minutes from Sofia which is another reason why it has become of key interest for property investors in this area.

Prices of ski property for sale near the Borovets resort compare favourably with other ski resorts in Bulgaria and are significantly lower than those in the established European Alpine regions.

The Bansko ski resort in Bulgaria has become another area of investment interest but recent overdevelopment in this resort will suppress prices for another 2 to 3 years at least.

The pretty resort of Pamporovo is also of interest, new infrastructure is currently being implemented to enable it to compete with Bansko and Borovets. It is also an existing significant tourist attraction with many holiday operators offering skiing holidays in the resort. Prices are attractive here too, ski properties for sale in Pamporovo are generally lower than those in Borovets.

It’s an exciting time - you’ve found the home of your dreams, you’ve been approved for a home loan, and there’s only a few formalities left before it’s yours. Then a huge wad of papers you need to sign arrives, and all of a sudden it seems a lot harder. Reading mortgage documents isn’t like reading a good novel - it’s boring, tedious and often full of legal jargon.

Chances are that you’ll sign the documents, get the loan, buy the house - and everything will be okay. But what if it’s not? What if something goes wrong further down the track, and all of a sudden you discover some very nasty clauses in the fine print? Maybe if you’d found them upfront, you might have been able to change them, or at least been aware of what could happen, and saved yourself a lot of heartache.

I’ve bought a lot of houses in my time, and in some ways that’s worse than just buying one - I sometimes get a bit lazy, and think that all mortgage documents are the same. Well, I’ve learnt now that they’re not. I had one loan that I was considering refinancing, because the rate was high. I’d been having some trouble getting finance at the time I first took out the loan, and had gone with a new lender. I wasn’t happy with the fact that I was paying $25 a quarter “loan management fee” and $250 annually as a “package review fee”. Talk about giving the lender money for nothing - they’ve never reviewed my loan except to put the interest rate up!

Imagine my surprise when I finally took the time to read the loan documents more carefully, and discovered that if I refinanced the loan or sold the house within 5 years, I was up for some really steep penalty fees. The loan at the time was for just under $130,000 - and it was going to cost me almost $10,000 to break the contract. Ouch! This was an investment property, which means I’m more likely to sell or refinance than someone buying his or her own home, so fine print in my home loan that makes it so expensive to break the contract is not a good thing for me. Needless to say, I’m still with the same lender and still grumbling every time I pay the $250 package review fee. Only a couple more years to go though!

The bottom line is this - make sure you know what you’re signing. If reading the fine print just leaves you confused or unable to understand what’s being said, then take it to your legal adviser. Never, ever sign home loan documents “on the spot” - you should always take them away and read them thoroughly. If you have questions, ask them. Yes, buying a home is expensive enough already - but believe me, the small cost involved in having a legal professional explain the contract is worthwhile, if you can’t work it out for yourself. You should never sign anything you don’t understand.

We are in a slow real estate market.  Many houses are on the market, but few houses are selling.  Now is not the time to buy and flip.  The house might lose value before you can sell it.  The solution is to buy, & hold investment properties.

Don’t flip unless you are Olympic gymnast Shawn Johnson

Conventional wisdom says that flipping houses works when house values are going up.  You buy a fixer-upper house for a low price, repair it and sell it for a higher price.  However, in this market, home values are dropping like like they are on a slippery slope and diminishing any chance to turn a profit.

All is not lost

So you are used to turning a big profit flipping houses?  Don’t give up hope! Just change your investing strategy to fit the economy.

The buy, hold & rent technique is in

Let’s take a close look at today’s housing market.  Housing construction is grinding to a halt & house prices are outside the reach of most home buyers.  That reduces the demand for home ownership. Yet, people, unable to break old habits, still want a place to live, so they wisely turn to rental properties. That drives the demand for rental properties up. And, as we all know from our Economics 101 class, when the demand for a product goes up, the price also goes up. 

“What?”, you say to your tenants, “you want to pay me MORE money to rent my house?”  “Well, if you insist.”  That’s just how easy it’s becoming.  I have found that I can raise the amount of rent that I charge every time a tenant leaves and a new one moves in.

What about the future?

Granted, housing prices are not increasing, so the equity in rental properties, likewise, is not showing much life. But, who cares? We are raking in cash on rentals. When the next cycle comes, we will start making more equity again. But, in this imperfect world that we live in, when house equity starts to goes up again, our rental profits will probably level out.

It is a great time to own rental property. Go with the flow! And, with house prices falling, and sellers in a negotiable mood, now is a good time to pick some up.

If you are an investor who is looking for a solid investment opportunity, you might want to consider looking into a farmland investment in lands in Canada and Saskatchewan. With the current state of the economy, we are in the early stages of a bull market in terms of investing in farmland and the politically stable environment of Canada and Saskatchewan makes this area the ideal location for an investor to sink his or her money.

Making a Long Term Commitment to Earnings

When it comes to making investments, every investor knows that long term investments provide the best chance for an excellent return. Making a farmland investment is an excellent long term investment plan with a solid history of success. In fact, over the past 15 years, farmland returns have exceeded the returns offered by stocks and bonds. At the same time, investing in farmland is up to 60% less risky than an investment in stocks and bonds.

Reasons to Invest Now

While making a farmland investment has long been an excellent way to make money, there is no better time than today. This is because our world is entering into a period when the demand for crops is at an all time high. This is because we have hit a time when crops are used for food, feed and fuel. As the world population continuous to grow, so does the demand for food and farmland to grow the food. Similarly, countries such as China and India are consuming larger amounts of meat, which means they have a growing demand for feed for their livestock. Of course, the increasing attention being placed on biofuels has also resulted in a greater demand for crops.

With such a high demand for crops, it only stands to reason that the demand for farmland will increase as well. This is where wisely investing in farmland can help an investor enjoy a rather nice return on his or her initial investment.

Investing in Farmland in Canada and Saskatchewan

Although there are many places where an investor may invest in farmland, Canada and Saskatchewan are excellent locations for investing in farmland. This is because Canadian farmland offers all of the following qualities for an investor:

• High quality land

• Good infrastructure

• Some of the lowest per acre prices in the world

By combining high quality with low cost, an investor can get in early with his or her investment and potentially enjoy significant rewards later.

If you think you are ready to invest in farmland in Canada or Saskatchewan, be certain to work with a reputable firm that will help you make the best farmland investment possible. By working closely with a company that specializes in investing in farmland, you will be certain to enjoy fantastic results.

This topic can go way beyond Real Estate but I am going to apply it to Real Estate. Did you know that there are brokers that charge all their fees up front? Have you used any of these types of services? I have seen brokers charge their clients a discounted 1% fee regardless if they sell your home or not. (Now this is were I recommend you read about what I think of Discount Brokers.)

Now in my mind I would never give anyone all of his or her money up front. Even if it was at a discounted price. Why? Because that agent or broker could care less about you or your house now that he’s got his money. He can now move on to the next sucker! What he will do for you is make sure that he collects all the buyers that call off of your For Sale sign to make even more money from you.

All the while you are wondering what happened and why is my agent so hard to get a hold of? I really think that these agents are not very honest people and I wish that they would stop and never take advantage of another person again. I know that will never happen which is why I have posted this to uncover the truth about these kinds of agents.

Now do not get confused with the brokers that charge an upfront fee for a product or additional service. Also, I myself sell extra products and services that will benefit the buyers beyond what my normal services are.

Final Note: Never give an agent all of their fees up front without any work done. If that is what the agent requires, move on to a different agent. This will save you a big headache in the long run.

Of the 10,000 plus different type of mortgages that were available last year, many have fallen by the roadside and not been replaced. There is far less choice on the market and those that are out there are becoming more and more difficult to get hold of.

At the same time, many banks are struggling to borrow the cash they need for themselves to be able to lend mortgages. Finding a mortgage is becoming increasingly more frustrating. And if you are one of the many thousands in the unlucky situation whereby you have a current mortgage deal that is about to end and you are needing to compare remortgage rates in order to save yourself from a huge rise in costs, you may have your work cut out.

Many of the best mortgages out there on the market now come with many strings attached. The days have gone when there was a choice of banks who were willing to lend you far more than the value of the house you are buying, at least for now, anyway. Instead, some of the best offers are only made to those homeowners who are lucky enough to be able to put down a good sized deposit - 25% in some cases. This means that if you are after the best mortgage, which are usually the ones shown in comparison charts, you can only be borrowing three quarters of the value of the property you are buying.

Hopefully, for many people who are looking at remortgages that isn’t too much of a problem as their home’s value has probably increased in value a lot since they first bought it. But first time buyers and those who’s property hasn’t increased in value since purchase, might find themselves struggling for a mortgage offer.

Tie into this the woes that many banks and building societies are now not lending to people whom they previously would have happily leant to, and the thousands of products you are viewing in a mortgage table is vastly reduced.

But cutting through all of this red tape doesn’t need to be a hassle for you. There are still plenty of mortgage brokers out there looking to make a living and they do that by offering their services for free and finding you the best deal possible. Although it maybe seems a good idea to trawl through mortgage tables, these days that can give you a lot of wrong answers. So get the experts to do the leg work for you!

The new-construction boom has crated thousands of new condominiums. Some are well built and some utilize questionable building techniques. Before you sign a real estate purchase contract, be aware of some beyond the surface construction flaws that should make you run not walk from the development.

-Before falling in love with a builder, ask for the addresses of other projects theyÂ’ve completed. Talk to condo association board members on the track record of the builder. Warranty issues should have been corrected in a timely manner. And, donÂ’t be afraid to ask if they had to file lawsuits against the builder.

-Concrete or cinder block construction, requires ongoing waterproofing maintenance. If moisture seeps through, mold in addition to structural damage will result.

-Ask for 2 coats of finish paint over 2 coats of primer. Less, and youÂ’ll be painting sooner than you expected. Tops and bottoms of doors should be sealed and painted, to eliminate expansion in humid weather. Run your hand over painted walls, if itÂ’s bumpy, the wall wasnÂ’t prepped properly.

-Exposed kitchen and bath cabinets should have finished, matching end panels, not particleboard with wood-look laminate. All drawer and door pulls should be in the same place. Look for dovetailed drawer construction and drawers that roll all the way out, both quality signals. Doors should hang square and hinges should be adjustable.

-All plumbing and electrical pipes should have finish plates that screen holes through walls or cabinets. Irregular and large holes are signs of a sloppy contractor and a mediocre builder.

-Phone and cable jacks in every room. If one room wired is standard, itÂ’s a sign that the builder will nickel and dime buyers. Ditto single clothes bars and shelves in closets. If 100 amp electric service is a minimum code requirement, but the builder has installed 200 amp service, itÂ’s a sign that they do things right.

-Do your homework on appliances, furnaces, air-conditioners and hot water heaters. There are wide ranges of price points, and some builders know that consumers donÂ’t know the difference between a low-end and a top-of-the-line furnace.

-All ceramic or glass tile should feature on all outside edges a rounded corner “bull-nose”. And, grout should be sealed. A quick test to check the seal is to sprinkle water on grout, if it beads up, it’s sealed, if it’s absorbed, it’s not.

-Windows are not all created equal. This feature is one commonly discounted in building budgets. Ask the brand name of the windows and do a search on the Internet to determine quality. Metal-framed windows conduct cold. Wood framed windows are considered best.

-Finish moldings and trim. Inexpensive, out-of-scale, or non-existent baseboards, window and door trim work all say the builder cut corners. Baseboards should have quarter-round where the baseboard meets the floor.