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Articles from the Category of Real Estate
Real Estate Investing
Posted by: Joseph E Poff, CPA CITP from Auburn Software, Inc. on Wednesday August 4, 2010 at 8:04 PM   (-07 GMT) | Comments (0)
Tags | Investing, | Mortgages, | Real Estate | Categories: | Debt, | Economy, | Real Estate

The Real Estate market has been and will continue to be a highly leveraged commodity. Sure, right now it's in the dumps - hardly anyone can get loans - those that can are too afraid. But there are signs it's already easing. For example, appraisals now must be made by those familiar in the area - there are issues about whether foreclosed properties should be in samples. Applications are becoming less restrictive too - ever so slightly but they seem to be easing. Credit score minimums have also been lowered.

The near or at 100% financing we had enabled a lot of people to buy property - residential and commercial alike who otherwise may not have been able to do so. Under some circumstances that 'can' and 'does' work - but you can't just blindly do it - you need to really look at the situation. Something that wasn't happening in the industry just prior to the collapse. But with or without the 100% financing 70-98% was common place and most of the time worked and still will work. It will be common place again.

In business you make money by leveraging yourself by your employees (or perhaps by machines). If you never had employees a business would have difficulty in growing or surviving.  It's the same in Real Estate - many clients of mine bought their own buildings to house their business in highly leveraged loans. It was rare when they didn't work out. Everyone won in those - my client was in better shape than renting - the bank did fine - things were great.

The concept of cheater intro interest loans, negative amortizations, the borrowers 'pretending' they didn't understand and the borrowers that really didn't understand - no wonder the Real Estate market had what the stock market calls a major correction. But we will go back to the heavily leveraged loans - it just has to happen. Along the way - Real Estate values will go up.

The market is still in a state of flux but smart - nerves of steel investors could make some money by buying some Real Estate. While prices might still drop - say another 10% if you buy now - the likelihood is that would be the extreme and we are probably at or near the bottom now. Signs of stabilization are showing up - not great - but stabilization. Also, pressure will be on our elected officials as the election season starts.

So, depending on your cash situation and investment strategy you might want to investigate the availability and pricing of some properties be that commercial, residential or land - all depending on your personal situation.

Be smart - don't over commit either physically, mentally as well as financially. Real estate transactions can be stressful but the more of them you do the easier it becomes. If you're planning on developing a property - well that's a lot of work - research it first - know what you are doing. If you want to be a landlord be prepared for it being vacant and the dead beats that leave your rental house in shambles. On the positive side - don't look for a quick return, but given time you will come out ok. Just think of the population increases - mathematically, they will have to increase in value.

As an alternative to investing directly into a project you could invest in a mutual fund or similar type investment that specializes in Real Estate projects.

Joseph E Poff, CPA

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