Here are my observations of the most recent December transactions for Santa Clara County real estate and San Mateo County real estate. Your comments and questions are always welcome. If you see something in your neighborhood that you are curious about or have a question, please don't hesitate to share with us. If you have questions or a comment, please leave them here, or feel free to contact me through my website.
> General Market Observations and Comments -- The amount of homes (single family and condos and townhouses) available for sale continued their downwards trend in December. The most interesting thing about this trend toward fewer homes on the market is twofold: one, this occurs every year but this time the level is at its lowest since 2005; and two, the portion of lender-controlled homes (short sale and bank-owned) has diminished. Inventory, or the number of homes available for sale (supply) resembles what it was in December 2005. Many of will recall that the real estate market was super active then with almost no lender-controlled listings.
Still the case is a bifurcated market condition. Homes available for sale have a median days on market of about 70 days whereas those homes that closed escrow have a median days on market of less than 35 days. Homes priced well and in good condition, sell quickly and get the most activity (i.e., higher prices, quicker sale). Overpriced homes or those in poor locations or in poor condition (bank-owned or short sale homes are mainly in this category) stay on the market far longer.
Mortgage rates remain very favorable for buyers in the range in the high 3% to low 4% area. Since most buyers need a loan to purchase a home, mortgage rates are a major consideration in the decision and ability of the buyers to purchase. Even with lowered sales figures, escrow companies seem to be busy with loan refinance or refi activity. I've advised those buyers who purchased last year to refinance their "low" 4 3/4% loans and lock in a high-3% loan rate for the long haul.
For December, median price for single family residences, half above and half below or the middle transaction, stood at $530,000, a slight decrease from November and down about 1% from December 2010. Not too much you can make of this as the mix of homes is in constant change mode. Better to look at a smaller area or even neighborhood to get an idea of the price trends. When you do this analysis of various areas, we find prices actually increased a bit in a range of 4-8%!
Got that "love" note from your landlord or property manager yet? Rents have been impacted by demand from those who lost homes to foreclosure, new family formations and an improved employment picture in Silicon Valley. So much so that rents have increased about 12-15% from last year. Any end in sight? I don't think so as available homes to rent which has been steady in recent times will go up a bit as there are some developments of apartments going. The amount is insufficient to offset the increased demand that has and is taking place. Time for investors? That's what I've been saying for a while now.
Thanks for reading my blog. I'm Tom McEvoy, Realtor with RE/MAX Santa Clara Valley -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.
Showing posts with label investor. Show all posts
Showing posts with label investor. Show all posts
Tuesday, January 17, 2012
Wednesday, April 14, 2010
April Silicon Valley Real Estate Market Highlights
Here are the highlights of March's transactions and market comments for Santa Clara and San Mateo counties. Your comments and questions are welcome. If you have an update as to what you are witnessing in your neighborhood, please don't hesitate to share with us. You may leave comments here, or contact me through my website.
> Market Overview -- It's been a year since we saw the bottom of the real estate market in Santa Clara County. Since then we've seen pretty much a steady improvement in market conditions and this is more apparent in Santa Clara County than San Mateo County. Closings of single family residences (SFR) in Santa Clara County were 917 versus 633 last month and 721 in March 2009. San Mateo County also saw higher SFR closings at 322 compared to 250 in the same month a year ago. Higher activity levels and more buyers willing to make the decision to purchase is what we're finding. Buyers seeking low prices AND a chance to garner a tax credit or two are a little late to the scene. My analysis of the transactional information reveals:
* The supply of homes available for sale (inventory) has turned upwards after more than a year of continual decline. This is taking place in both counties. However, the levels are still substantially below the year ago levels. Santa Clara County inventory of available SFR's increased 8% from last month and San Mateo County's inventory increased 12%.
* Headline you don't see in the San Jose Mercury News -- "HALF OF HOME SELLERS GET MORE THAN LIST PRICE FOR THEIR HOMES!" The sale price to list price ratio continues above 100% and stands at 100.9% in Santa Clara County and increased a bit to 99.6% for San Mateo County. Big news continues in the percent of closings where sale price exceeded list price -- Santa Clara County was 49.7% and San Mateo County was 39.9%. This indicates the overall market is stronger in Santa Clara County.
* The Days of Unsold Inventory (DUI) continues to show improvement -- as readers will remember that a lowering of this number translates into a faster market. DUI is conceptually the inverse of inventory turns ratio, where a higher number means improvement. A lower figure for DUI means improvement. For March, Santa Clara County had a DUI of 44 for SFR, 41 for condos/townhouses and 68 for multi-unit properties. San Mateo County had a DUI reading of 45 for SFR's, 45 for condos/townhouses and 105 for multi-unit properties.
> HOT Markets? -- You bet and there are more of them, too! For Santa Clara County the hottest (seller) market areas are South San Jose, East Valley, Evergreen, North Valley, and Milpitas with Cupertino not far behind. For San Mateo County, the hottest markets are those bay-side cities of Belmont, San Carlos, Redwood City and San Mateo, followed by more expensive areas of Menlo Park, Woodside, and Portola Valley. The characteristics of a seller's market are shorter time on the market, fewer number of homes available for sale, higher demand by buyers which translates into a higher probability of multiple offers, sale prices generally exceeding list prices and a tendency towards price appreciation.
> Cool Markets? -- Yes, but there is fewer of them. For Santa Clara County, we see buyer's markets in Los Gatos Mountains and Los Gatos/Monte Sereno. Los Gatos is my current "Best Buy" area in the county. In San Mateo County, besides the more expensive areas, there are buyer's markets in the coastal communities. To refresh you, characteristics of a buyer's market are longer time on the market, higher number of homes available for sale, lower demand by buyers which translates into a lower probability of multiple offers and a tendency for price stabilization or even depreciation.
Where do I get "Seller's" and "Buyer's" market information? This is not an opinion thing but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI). Additionally, this is not based on price levels or my opinion but a supply-demand relationship.
> Median prices jump in Santa Clara and San Mateo Counties -- Santa Clara County median price for SFR's jumped to $600,000 versus $450,000 or 33% increase from March 2009. The median price for condos/townhouses was $375,000 or 57% higher than the same month a year ago. San Mateo County's median price for SFR's reached $800,000, 38% higher than the same month a year ago. Notice that with prices I don't use month to month changes but year over year. This eliminates seasonal fluctuations and is something that newspapers and most online pricing sources haven't figured out yet! Or, perhaps they use this intentionally to scare folks to sell newspapers! I advice my clients NOT to use an entire county's median price level to decide whether to buy or sell but use the trend information in a general manner. To formulate an effective strategy, I use analysis of the supply-demand characteristics of the neighborhood under consideration and advise my clients of the appropriate strategy to employ to maximize their dollars if they are selling and maximize their house if they are buying.
Need help with understanding the market in your area? Contact me at Tom.McEvoy@remax.net for a no-obligation consultation and research to help you make a better decision.
Thanks for reading my blog. I'm Tom McEvoy, Realtor -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.
> Market Overview -- It's been a year since we saw the bottom of the real estate market in Santa Clara County. Since then we've seen pretty much a steady improvement in market conditions and this is more apparent in Santa Clara County than San Mateo County. Closings of single family residences (SFR) in Santa Clara County were 917 versus 633 last month and 721 in March 2009. San Mateo County also saw higher SFR closings at 322 compared to 250 in the same month a year ago. Higher activity levels and more buyers willing to make the decision to purchase is what we're finding. Buyers seeking low prices AND a chance to garner a tax credit or two are a little late to the scene. My analysis of the transactional information reveals:
* The supply of homes available for sale (inventory) has turned upwards after more than a year of continual decline. This is taking place in both counties. However, the levels are still substantially below the year ago levels. Santa Clara County inventory of available SFR's increased 8% from last month and San Mateo County's inventory increased 12%.
* Headline you don't see in the San Jose Mercury News -- "HALF OF HOME SELLERS GET MORE THAN LIST PRICE FOR THEIR HOMES!" The sale price to list price ratio continues above 100% and stands at 100.9% in Santa Clara County and increased a bit to 99.6% for San Mateo County. Big news continues in the percent of closings where sale price exceeded list price -- Santa Clara County was 49.7% and San Mateo County was 39.9%. This indicates the overall market is stronger in Santa Clara County.
* The Days of Unsold Inventory (DUI) continues to show improvement -- as readers will remember that a lowering of this number translates into a faster market. DUI is conceptually the inverse of inventory turns ratio, where a higher number means improvement. A lower figure for DUI means improvement. For March, Santa Clara County had a DUI of 44 for SFR, 41 for condos/townhouses and 68 for multi-unit properties. San Mateo County had a DUI reading of 45 for SFR's, 45 for condos/townhouses and 105 for multi-unit properties.
> HOT Markets? -- You bet and there are more of them, too! For Santa Clara County the hottest (seller) market areas are South San Jose, East Valley, Evergreen, North Valley, and Milpitas with Cupertino not far behind. For San Mateo County, the hottest markets are those bay-side cities of Belmont, San Carlos, Redwood City and San Mateo, followed by more expensive areas of Menlo Park, Woodside, and Portola Valley. The characteristics of a seller's market are shorter time on the market, fewer number of homes available for sale, higher demand by buyers which translates into a higher probability of multiple offers, sale prices generally exceeding list prices and a tendency towards price appreciation.
> Cool Markets? -- Yes, but there is fewer of them. For Santa Clara County, we see buyer's markets in Los Gatos Mountains and Los Gatos/Monte Sereno. Los Gatos is my current "Best Buy" area in the county. In San Mateo County, besides the more expensive areas, there are buyer's markets in the coastal communities. To refresh you, characteristics of a buyer's market are longer time on the market, higher number of homes available for sale, lower demand by buyers which translates into a lower probability of multiple offers and a tendency for price stabilization or even depreciation.
Where do I get "Seller's" and "Buyer's" market information? This is not an opinion thing but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI). Additionally, this is not based on price levels or my opinion but a supply-demand relationship.
> Median prices jump in Santa Clara and San Mateo Counties -- Santa Clara County median price for SFR's jumped to $600,000 versus $450,000 or 33% increase from March 2009. The median price for condos/townhouses was $375,000 or 57% higher than the same month a year ago. San Mateo County's median price for SFR's reached $800,000, 38% higher than the same month a year ago. Notice that with prices I don't use month to month changes but year over year. This eliminates seasonal fluctuations and is something that newspapers and most online pricing sources haven't figured out yet! Or, perhaps they use this intentionally to scare folks to sell newspapers! I advice my clients NOT to use an entire county's median price level to decide whether to buy or sell but use the trend information in a general manner. To formulate an effective strategy, I use analysis of the supply-demand characteristics of the neighborhood under consideration and advise my clients of the appropriate strategy to employ to maximize their dollars if they are selling and maximize their house if they are buying.
Need help with understanding the market in your area? Contact me at Tom.McEvoy@remax.net for a no-obligation consultation and research to help you make a better decision.
Thanks for reading my blog. I'm Tom McEvoy, Realtor -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.
Wednesday, September 9, 2009
September Silicon Valley Real Estate Market Highlights
Here are my observations of August's transactions and market actions for Santa Clara, San Mateo, Santa Cruz, and Monterey counties. You are encouraged to leave your comments and questions or even update us on what you are witnessing in your neighborhood or area.
> Market continues showing improvment -- Market activity continues to display improvement, something that we've been saying for the past four months. For instance, in Santa Clara County, July saw a 38% increase in closings over the same month last year. My analysis of the transactional information reveals:
> Buyer's Markets? -- Far fewer than in the past, there are some buyer's markets located in Santa Clara County in Saratoga, Los Gatos and Los Gatos Mountains. To refresh you, characteristics of a buyer's market are longer time on the market, higher number of homes available for sale, lower probability of multiple offers or even an offer with most sale prices below list price. The tendency is to have price depreciation under this market condition.
Where do I get "Seller's" and "Buyer's" market information? This is not an opinion thing but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI).
> Median prices. Up sharply since March but declined from $590,000 last month, it stands at $560,000 for Santa Clara County, $685,000 for San Mateo County. These are down 14% from the same month a year ago in each county. An entire county's median price level should not be used to decide on whether to buy or sell. I recommend your real estate advisor complete an analysis on a much smaller area (as small as a neighborhood!) to form the basis of a strategy.
> Tale of Two Markets -- Sales of affordable homes in Santa Clara County less than $450,000 level have gotten even hotter than the past few months. There are just 20 days of unsold inventory for single family residences below $450,000 and 39 for homes with prices from $450,000 to $600,000. As the price ranges increase, the DUI increases. For Santa Clara County, high-priced homes in the $2,500,000 to $5,000,000 range ended with a DUI of 359 or almost one year of inventory whereas in San Mateo County ended with a DUI of 222!
However, sales of higher-priced homes (above $1,000,000) are sluggish at best. For instance, we continue to have no sales of $5+ million homes in the last five weeks in Santa Clara County and just six in San Mateo County.
> Sellers Be Sooner -- I continue to maintain my recommendation for sellers of higher-priced homes that they should consider selling sooner and having an initially more-aggressive list price as the market usually softens when we go deeper into the late summer and into fall. In any case, check with a Realtor knowledgeable about the technical aspects of the market conditions to guide you in positioning your home for maximum activity and price while minimizing time on market. .
For those considering a purchase of a home in an expensive area like Los Altos Hills, Los Gatos/Monte Sereno, Saratoga, your time is getting closer! Be ready but I think we'll see list prices reduced and sale prices dropping as we get closer to the holiday season this year.
> Investor's Corner -- Activity continues to trend upwards as more and more investors reenter the market. For Santa Clara County, there were 71 sales during the month with 40 of them in the less than $600,000 price range as that price range had a DUI of just 59 whereas the DUI for residential investment properties above $1,000,000 showed more than one and a half years supply at current sales demand.
Thanks for reading Tom McEvoy's Blog -- what are your thoughts, comments, questions, observations?
> Market continues showing improvment -- Market activity continues to display improvement, something that we've been saying for the past four months. For instance, in Santa Clara County, July saw a 38% increase in closings over the same month last year. My analysis of the transactional information reveals:
- Buyers continue to trip over each other to submit offers for homes in the more affordable areas of Santa Clara, San Mateo, Santa Cruz, and Monterey counties. Many offers submitted are for all cash or have substantial down payments. There are still only 20 days of unsold inventory on single family residences in Santa Clara County with a price of under $450,000.
- The supply of homes available for sale (inventory) continues to trend lower in each of the four counties without exception. The lower trend is more pronounced in Santa Clara and Monterey counties.
- The number of closings have turned are now lower in each county as the seasonality takes hold as we see less closings in the late summer after a peak around Memorial Day.
- The Days of Unsold Inventory (DUI) continues to improve generally in each county for single family residences and condos/townhouses, respectively. Santa Clara's DUI stands at 51 and 42, San Mateo's DUI is 74 and 70, Santa Cruz's DUI is 97 and 105 and Monterey's DUI is 65 and 80.
> Buyer's Markets? -- Far fewer than in the past, there are some buyer's markets located in Santa Clara County in Saratoga, Los Gatos and Los Gatos Mountains. To refresh you, characteristics of a buyer's market are longer time on the market, higher number of homes available for sale, lower probability of multiple offers or even an offer with most sale prices below list price. The tendency is to have price depreciation under this market condition.
Where do I get "Seller's" and "Buyer's" market information? This is not an opinion thing but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI).
> Median prices. Up sharply since March but declined from $590,000 last month, it stands at $560,000 for Santa Clara County, $685,000 for San Mateo County. These are down 14% from the same month a year ago in each county. An entire county's median price level should not be used to decide on whether to buy or sell. I recommend your real estate advisor complete an analysis on a much smaller area (as small as a neighborhood!) to form the basis of a strategy.
> Tale of Two Markets -- Sales of affordable homes in Santa Clara County less than $450,000 level have gotten even hotter than the past few months. There are just 20 days of unsold inventory for single family residences below $450,000 and 39 for homes with prices from $450,000 to $600,000. As the price ranges increase, the DUI increases. For Santa Clara County, high-priced homes in the $2,500,000 to $5,000,000 range ended with a DUI of 359 or almost one year of inventory whereas in San Mateo County ended with a DUI of 222!
However, sales of higher-priced homes (above $1,000,000) are sluggish at best. For instance, we continue to have no sales of $5+ million homes in the last five weeks in Santa Clara County and just six in San Mateo County.
> Sellers Be Sooner -- I continue to maintain my recommendation for sellers of higher-priced homes that they should consider selling sooner and having an initially more-aggressive list price as the market usually softens when we go deeper into the late summer and into fall. In any case, check with a Realtor knowledgeable about the technical aspects of the market conditions to guide you in positioning your home for maximum activity and price while minimizing time on market. .
For those considering a purchase of a home in an expensive area like Los Altos Hills, Los Gatos/Monte Sereno, Saratoga, your time is getting closer! Be ready but I think we'll see list prices reduced and sale prices dropping as we get closer to the holiday season this year.
> Investor's Corner -- Activity continues to trend upwards as more and more investors reenter the market. For Santa Clara County, there were 71 sales during the month with 40 of them in the less than $600,000 price range as that price range had a DUI of just 59 whereas the DUI for residential investment properties above $1,000,000 showed more than one and a half years supply at current sales demand.
Thanks for reading Tom McEvoy's Blog -- what are your thoughts, comments, questions, observations?
Monday, January 19, 2009
January Real Estate Market Tidbits
As a kind of executive summary of my observations of the recent market action in Santa Clara County, I've assembled a list of tidbits for you. I encourage you to make comments, ask questions or even update us on what you are witnessing in your neighborhood.
> The market activity is turning around. Closings in December was higher than November, something that hasn't happened since 2001. Could this be an early sign of a bottom in this market? We'll see.
> Sell thrice, close once! With all the bank-owned and short sale homes on the market, most of them are in the lower-price ranges. Many of these homes sell multiple times but only close once! This is due to issues with either the property or the buyer's financial readiness or loan situation.
> Condos and townhouses sales volume continues to take a beating due to the improved affordability (read -- lower prices) of single family residences.
> Inventory back up. The inventory of available single family residences started upwards on January 3, 2009. All-time high levels were reached last April and after a couple of blips upwards in September and October, the trend has been lower until now. Sellers take note -- 2009 likely will be another soft year. Sellers will need to sell sooner this year and be more aggressively-priced to avoid a home languishing on the market.
> Market mix plays with median prices. Market mix is bringing down median due to more low-priced homes selling as a percent of total sales volume. Remember, we had just the opposite situation a couple of years ago with high-priced homes selling and few lower-priced homes when the sub-prime loan issues hit in the Summer of 2007. You want proof? Try this: the median prices for the 10th percentile dropped 45% while the median (50th percentile) has dropped 36% and the 90th percentile has dropped only 27%. For additional information on this, please click on my recent post on this topic Beware the Median Price Deception.
> Can't sell your $5,000,000+ home? There have been no sales of any homes above $5,000,000 in over five weeks!
> Want to sell with multiple offers? The percent of completed sales with a sold price greater than list price stands at 35% which means that more than one out of three sellers receive more than their asking price. This is attributable to sellers aggressively pricing their home in a slowing market.
> Homes that closed in December had a median days on market (DOM) of 55. Those that stayed on the market had a median DOM of almost double -- 106! This is a bigger disparancy than before as homes priced aggressively sell.
> Investors, where are the investors? Multi-unit investor marketplace has had very few transactions with only 29 closings in December, far lower than the record monthly closings of 94 a couple of years ago. Tougher lender requirements have contributed to this situation and probably can't leave out the stock market, too!
> Go, Monterey, go! Monterey County has seen more closings than San Mateo County and are at record highs. Most of the transactions in Monterey County are bank-owned or REO's after a flurry of affordable home building in the county a few years ago caused a tremendous over-supply. This has not occurred in Santa Clara, Santa Cruz or San Mateo counties.
For a more detailed analysis of the market, please click on my January Silicon Valley Real Estate Market Update.
Thanks for reading -- what are your thoughts?
> The market activity is turning around. Closings in December was higher than November, something that hasn't happened since 2001. Could this be an early sign of a bottom in this market? We'll see.
> Sell thrice, close once! With all the bank-owned and short sale homes on the market, most of them are in the lower-price ranges. Many of these homes sell multiple times but only close once! This is due to issues with either the property or the buyer's financial readiness or loan situation.
> Condos and townhouses sales volume continues to take a beating due to the improved affordability (read -- lower prices) of single family residences.
> Inventory back up. The inventory of available single family residences started upwards on January 3, 2009. All-time high levels were reached last April and after a couple of blips upwards in September and October, the trend has been lower until now. Sellers take note -- 2009 likely will be another soft year. Sellers will need to sell sooner this year and be more aggressively-priced to avoid a home languishing on the market.
> Market mix plays with median prices. Market mix is bringing down median due to more low-priced homes selling as a percent of total sales volume. Remember, we had just the opposite situation a couple of years ago with high-priced homes selling and few lower-priced homes when the sub-prime loan issues hit in the Summer of 2007. You want proof? Try this: the median prices for the 10th percentile dropped 45% while the median (50th percentile) has dropped 36% and the 90th percentile has dropped only 27%. For additional information on this, please click on my recent post on this topic Beware the Median Price Deception.
> Can't sell your $5,000,000+ home? There have been no sales of any homes above $5,000,000 in over five weeks!
> Want to sell with multiple offers? The percent of completed sales with a sold price greater than list price stands at 35% which means that more than one out of three sellers receive more than their asking price. This is attributable to sellers aggressively pricing their home in a slowing market.
> Homes that closed in December had a median days on market (DOM) of 55. Those that stayed on the market had a median DOM of almost double -- 106! This is a bigger disparancy than before as homes priced aggressively sell.
> Investors, where are the investors? Multi-unit investor marketplace has had very few transactions with only 29 closings in December, far lower than the record monthly closings of 94 a couple of years ago. Tougher lender requirements have contributed to this situation and probably can't leave out the stock market, too!
> Go, Monterey, go! Monterey County has seen more closings than San Mateo County and are at record highs. Most of the transactions in Monterey County are bank-owned or REO's after a flurry of affordable home building in the county a few years ago caused a tremendous over-supply. This has not occurred in Santa Clara, Santa Cruz or San Mateo counties.
For a more detailed analysis of the market, please click on my January Silicon Valley Real Estate Market Update.
Thanks for reading -- what are your thoughts?
Sunday, December 23, 2007
Why you should consider me to help you buy your next investment property
Contemplating on making an investment in real estate? Would this be your first, second, fifth? Find out how an agent with financial, investment and business experience can advise you to purchase or ignore a real estate investment.
In order to make an informed decision, you must be able to decipher operating statements, cash flows, rent schedules, and the like. Or, work with an agent who has done this for companies as well as investors in real estate. I take an investment approach to helping my clients with real estate investments.
The old saying "garbage in, garbage out" is appropriate with investing in real estate. When you go about buying a home to live in you place an emphasis on "soft" things like quality of the neighborhood, schools, community benefits, the size of the house and lot, and features in addition to the price and loan rates to see if you're able to pay for it!
An investor looks at potential investment candidates in a different manner -- they look at how it will benefit them in a financial sense. You need an agent with analytical skills on your team to advise how one investment property will compare with another. And an agent who can and will compare a real estate investment with an altogether different investment!
In analyzing a real estate investment, one needs to project or forecast what different expenses will be in future years. Unfortunately, information provided by listing agents (remember garbage in!) mostly provide the expenses and perspective of the seller and their experience. That doesn't help you, the buyer, and can actually hurt you tremendously. Many investments were sold sight-unseen by merely showing an investor a page-full of numbers that the listing agent and/or seller made up! Many of these investments were located out of state and are not performing satisfactorily for their owners.
When I analyze a property on behalf of my client, I look at what will likely happen to the numbers in the future and how it will fit into the investor's current and future portfolio of investments. You need someone with experience in developing and populating what's called "proforma" operating statements before any decision can be made to complete the purchase.
After all operating expenses have been estimated, there needs to be careful analysis and consideration of the major ratios inherent in analyzing investment properties. Most notable would be an analysis of Gross Rent Multiplier (GRM) which is calculated by dividing gross annual rents by the list price. This can be compared to other similar investment candidates. Another such indicator is called the CAP rate which is short for capitalization rate. The CAP rate is calculated by dividing net operating income before taxes by the list price to arrive at a percentage or yield equivalent. I provide both these analyses and others as well as important scrutiny of the investment's "cost of capital" using real, current rates.
While searching for and analyzing investment candidates, you need an agent who will "get into the numbers" and provide advice that will eliminate emotions or "knee-jerk" decisions that so often occurs. It is part of helping the client make the best decision possible. This agent has told investors "no" many times and is not afraid of doing so again! My goal is to serve my client at the highest possible level.
You also need an agent who is adept at reading and following market trends to keep investors away from potential problems. I research market areas to determine to best time to enter or exit from them. For example, I have a client with investments in the Phoenix area who was thinking about selling. Luckily, when I queried them, they didn't have to sell. So I recommended they retain their real estate investments and keep them rented out. They want me to alert them when the market condition in that area is more favorable for them to sell.
In order to make an informed decision, you must be able to decipher operating statements, cash flows, rent schedules, and the like. Or, work with an agent who has done this for companies as well as investors in real estate. I take an investment approach to helping my clients with real estate investments.
The old saying "garbage in, garbage out" is appropriate with investing in real estate. When you go about buying a home to live in you place an emphasis on "soft" things like quality of the neighborhood, schools, community benefits, the size of the house and lot, and features in addition to the price and loan rates to see if you're able to pay for it!
An investor looks at potential investment candidates in a different manner -- they look at how it will benefit them in a financial sense. You need an agent with analytical skills on your team to advise how one investment property will compare with another. And an agent who can and will compare a real estate investment with an altogether different investment!
In analyzing a real estate investment, one needs to project or forecast what different expenses will be in future years. Unfortunately, information provided by listing agents (remember garbage in!) mostly provide the expenses and perspective of the seller and their experience. That doesn't help you, the buyer, and can actually hurt you tremendously. Many investments were sold sight-unseen by merely showing an investor a page-full of numbers that the listing agent and/or seller made up! Many of these investments were located out of state and are not performing satisfactorily for their owners.
When I analyze a property on behalf of my client, I look at what will likely happen to the numbers in the future and how it will fit into the investor's current and future portfolio of investments. You need someone with experience in developing and populating what's called "proforma" operating statements before any decision can be made to complete the purchase.
After all operating expenses have been estimated, there needs to be careful analysis and consideration of the major ratios inherent in analyzing investment properties. Most notable would be an analysis of Gross Rent Multiplier (GRM) which is calculated by dividing gross annual rents by the list price. This can be compared to other similar investment candidates. Another such indicator is called the CAP rate which is short for capitalization rate. The CAP rate is calculated by dividing net operating income before taxes by the list price to arrive at a percentage or yield equivalent. I provide both these analyses and others as well as important scrutiny of the investment's "cost of capital" using real, current rates.
While searching for and analyzing investment candidates, you need an agent who will "get into the numbers" and provide advice that will eliminate emotions or "knee-jerk" decisions that so often occurs. It is part of helping the client make the best decision possible. This agent has told investors "no" many times and is not afraid of doing so again! My goal is to serve my client at the highest possible level.
You also need an agent who is adept at reading and following market trends to keep investors away from potential problems. I research market areas to determine to best time to enter or exit from them. For example, I have a client with investments in the Phoenix area who was thinking about selling. Luckily, when I queried them, they didn't have to sell. So I recommended they retain their real estate investments and keep them rented out. They want me to alert them when the market condition in that area is more favorable for them to sell.
I tell my clients "cheaper is not always better and more expensive is not always more valuable". You can quote me on that!
To learn more about me, please click on the My Background link under my photo in the right column.
Let me know if you just want to talk. You can always feel free to contact me with any questions or comments.
Thanks for reading!
Subscribe to:
Posts (Atom)
