How to Begin Investing in Real Estate

LandInvestmentsAn unusually long and harsh winter is delaying the start of the spring real estate and land market, but for the investment-minded, continued low interest rates and high demand for rentals appear to outline an opportunity especially when buying investment land.

Institutional investors and their buckets of cash have dominated many markets for the past several years, according to real estate data cruncher CoreLogic. But at the end of 2014, cash sales declined to a national average of 36.1 percent, down from 38.8 percent in November 2013. CoreLogic also reported that the foreclosure inventory declined 34 percent at the end of 2014. That means individual investors are starting to have a shot at lower-priced properties ripe for fixing up and renting and lower priced land investments for sale, real estate professionals say. If you are thinking of tiptoeing into investment real estate, you have two basic approaches.

Buying shares in a real estate investment trust. You can invest in a REIT, but doing so involves buying shares of a portfolio of properties. It’s really more like buying a stock or buying into a fund and a completely different animal from owning real estate directly.

There are three layers of value – the real estate itself, the management and cash flow that supports the trust, and the fund based on the trust. It’s a very different vehicle than buying real estate, but most of us can’t just go out and buy 1 percent of a skyscraper.

Adding a REIT to your portfolio can complement stock and bond funds, but you must be sure you understand how the real estate fund is designed and how its managers will likely extract value from the holdings. You can buy shares of REITs and real estate-based funds, but the performance of the funds is based on both cash flow and gains from occasionally selling properties – a very different scenario from the typical performance drivers of stock and bond funds.

Direct ownership. In a direct ownership you own your investment property. When you own real property as a direct ownership you can fall in line of thinking that your investment is easy money, that there’s not a lot of work, that tenants will pay on time and that pipes never leak. As we all know from real world experience, this is a dangerous way of thinking. Land is a bit of a different story and can end up being a wiser investment as it requires less general care, maintenance and overhead. Your land investment will never call at three in the morning to report an overflowing toilet and appreciates in value much faster than a real property investment.
To learn more about investing in land real estate contact an expert member of the Gratia Group at (239) 333-2221.

Why you Should Consider Land a Viable Investment Option

Blog Photo-Land InvestingToday’s world is filled with consumers with a fair amount of disposable income that aren’t aware of their investment options. They are guided by friends and family who are often misinformed too.  The US alone has seen a rise of over 29 percent in the disposable income generated in the country between 2007 and 2012.  What are the people doing with this income?  In the search for investment options, you usually encounter a number of risks. The popular maxim of investing is that the risk you take is directly proportional to the returns on your investment.

Perhaps the starting point for most investors is the low risk option of fixed deposits, mutual funds or commodities.  The more adventurous may gamble on the high risk-high return stock options.  However, if you’re an investor with a medium risk appetite looking to get high returns, you might want to consider buying land investments.  Historically, land has only gone up in terms of value.  Over the last five years, land has shown over 100 percent value appreciation in some areas.  Such growth is indicative of the great potential land holds for investors, yet many haven’t recognized this opportunity so far.

In terms of residential land on the outskirts of cities, you should take into account that already established residential areas may be hard to penetrate owing to few available spaces and high capital that is involved.  Nonetheless, if you do your research you could find spaces that are either in the process of developing or aren’t discovered yet but have the potential to grow.  These spaces provide the best opportunities in land investment.

There are some key indicators you should base your research on before buying real estate for investors including connectivity and access to basic amenities.  Some of the major deterrents to buying land in the past have been misconceptions associated with it.  People often go by the erroneous notion that land does not produce income or produces very little of it.  According to research, land was the investment that provided over 100 percent returns on investment between 2010 and 2013.

The difference with land as compared to other investments is that it is a tangible asset that allows you to adopt a few precautionary methods that reduce the investment risk from medium to low while still maintaining high returns over a long term.  The world is short of habitable land that needs to be able to develop, accommodate, expand, scale up, build, grow or upgrade.

Nonetheless, that’s only a part of the reason investing in land should be an element of your portfolio.  All of the three primary needs for life- food, clothing and shelter – are dependent on land, which provides the investor with a host of flexible options on getting the best out of your land investment.  You could dedicate it to organic farming, tap into a small business idea or build a home on it.  At the same time, it also gives you an option to leave it alone because in most cases it still continues to appreciate steadily and surely.

Despite its promise people are often discouraged from investing in land by their perception of the amount of capital required for it.  Firstly, it is more economical to buy vacant land than a developed property, a number of investors have invested in land using their savings and entirely avoiding dealing with loans and mortgages.  Moreover, if you can find the right places to invest and get in at the right time, the returns could be great.  The additional feature is that land can be a source of passive income over the long term, meaning it requires the customer to do little actively to gain returns.  In essence, land as an investment provides a wider range of business opportunities in a sector that rarely depreciates.

Mutual funds, equities, commodities, residential property and other options all make sense in certain scenarios and so does land.  It is a long-term option that will diversify and add volume to any investment portfolio.  It’s important not to jump the gun on land investment, only venture into it if you’re willing to consider it as a serious option and treat it as a business endeavor.

To learn more about land investments contact a member of the Gratia Group team at (239) 333-2221.
 

SWFL Land and Home Sales See Big Jump

Blog PhotoThe median price of an existing single-family home in Lee and Collier counties increased sharply in October compared to a year earlier along with Cape Coral land prices.  In Lee County, the median rose 17.3 percent from $157,000 to $184,175, according to statistics released by the Realtors Association of Greater Fort Myers and the Beach.

Collier County’s median increased 20.1 percent from $279,000 to $335,000, according to the Naples Area Board of Realtors.

Area real estate experts feel that even with such a robust surge in Florida land sales prices, there isn’t the danger of a bubble similar to the last boom’s over-heated market in 2005.  It would take annualized increases of 20 percent for five years to get us up into the territory where the region was (at the peak of the boom and currently the area isn’t even close to a danger bubble.

The rate of increase in prices is actually slowing but the market will stay strong this winter with omens such as six feet of snow in Buffalo, N.Y.   Experts feel the region is poised to have a very, very good season.  To learn more about the SWFL real estate market contact a member of the Gratia Group team at (239) 333-2221.

2014 was a Stellar Year for Real Estate Sales to Foreign Investors

Foreign Land Investors

In the year to June, non-resident foreign buyers purchased an estimated US$7.97 billion worth of Florida real estate, according to a report from the National Association of Realtors (NAR) and Florida Realtors.  This compares to just US $6.43 billion in the same period a year earlier.  This represents a rise of US $1.5 billion or nearly a quarter (approximately 23%).

According to the NAR’s Profile of International Home Buyers in Florida 2014 report, about a third (32%) of these purchases were made by Canadian buyers.  A further 24% of total spending came from buyers in the Western Europe, particularly the UK, Germany and France.  Latin American and Caribbean investors were collectively close behind their Western European counterparts when it came to buying home, lots and acreage for sale in Florida, providing a further 23% of all foreign funds.  Many of these investors are resident in Brazil or Venezuela.  Asian buyers made up 10%, with China alone accounting for 6%.  As China represented just 1% of Florida real estate purchases by foreign buyers a few short years ago, it seems the country’s investors are rapidly taking a greater interest in Florida and in US markets in general.  Central Europe, the Middle East and Africa represented fairly small percentages of the total pot, 5%, 4% and 2% respectively.

Overall, these figures suggest that a full 10% of the total residential market in Florida was made up of sales to foreign buyers, up from 9% last year.  Furthermore, it shows the significant popularity of Florida with foreign buyers, as roughly 17% of the US $46.7 billion spent by foreigners on US properties went towards purchases in Florida.  Of all foreigners buying and holding one or more US properties, roughly a quarter are believed to own at least one unit in Florida.

In terms of the number of units purchased by this near US $8 billion pot of spending, it is estimated that international buyers snapped up around 26,500 individual properties in Florida.  This compares to just 22,600 in the same period a year earlier, representing growth of just over 17%.

According to the report: “The increase in international home buying activity was driven by the continued recovery of the world economy and the affordability of US properties.  Both US and Florida residential prices remain affordable to most international homebuyers.”  It was noted that the strong position of many currencies against the US dollar was a factor in the decision to purchase, making US properties more affordable as foreign buyers can get more for their money.

The report also went on to note that “international clients continued to purchase properties, lots and land for sale that are on the average above the mean price paid by domestic buyers.”

Compared to a national average of just 28%, over half of Florida real estate agents (52%) have international buyers among their list of clients.  However, this figure is down from last year’s 63%. Of these, almost one in five (19%) has at least six foreign clients, and 20% say that more than a quarter of their business comes from international buyers.

To work with Florida’s premier land sales firm, Gratia Group, call us today at (239) 333-2221.

Foreclosures Decline in Southwest Florida

LeeCollierFlorida

Foreclosure rates have continued to trend downward in Southwest Florida, but they remain among the highest in the U.S., a new report indicates making it a great time for buying Florida land at low prices.  The rate of foreclosures among all outstanding mortgages in Lee fell to 4.31 percent in June, from 7.65 percent a year earlier, per data provider CoreLogic’s recent report.  The foreclosure rate in Charlotte County, dropped to 5.17 percent, from 7.95 percent.

Despite the declines, Lee posted the 16th-highest foreclosure rate in the U.S., while Charlotte came in at 25th among more than 400 metro areas measured.  Florida land sale and exisiting home foreclosure rates were 5 percent in June, but that was down from 8.52 percent a year earlier. The state has dominated foreclosure rolls for much of the past five years.  At the same time, the U.S. rate declined to 1.70 percent, from 2.50 percent over the year.

Foreclosure rates throughout the region have fallen for much of the past year, as the real estate market has recovered and more homeowners have held on to their properties.  The foreclosure rate in Charlotte peaked at 12.23 percent in June 2011, according to CoreLogic.  Lee hit a high of 11.93 percent in February 2010.

The region’s mortgage delinquency rate, which measures mortgage loans that are at least 90 days past due and that could be headed to foreclosure, also has continued to improve.  In Charlotte, 7.61 percent of all mortgage loans were at least 90 days late in June, down from 11.39 percent in the same period in 2013.  In Lee, the delinquency rate fell to 8.74 percent, from 12.28 percent.  Statewide, 9.35 percent of mortgages were at least 90 days delinquent, off from 13.13 percent at the same time last year.  The U.S. rate was just 4.38 percent, a decline from 5.57 percent over the year.

To learn more about the SWFL real estate scene contact a member of The Gratia Group at (239) 333-2221.

Determining Land Value

Land Values

The question of value is something that people selling and buying lots and acreage for sale struggle with.  What makes one piece of land more valuable than another?  You must consider this question: is the land a better value because it has more features, or is it a better value because it’s cheaper?  Some additional questions and considerations about property value should be: is this parcel more valuable because it’s closer to a city, or is this other property better because it has a beautiful view?  What if a piece of land has neither of these things, but it is close to land your family already owns?

 

The simplest explanation of the market value of a home site is that it is worth whatever people are willing to pay.  If someone is willing to pay $10,000 for a piece of property, that property is worth $10,000 and it is assumed that all properties around the first parcel are also worth around $10,000.  A few months later, a property several miles away may sell for $5,000.  The parcels between these properties are re-valued at $7,500, between the two prices.  This system of basing land values on nearby, comparable sales is something that real estate agents frequently use to place a value on a piece of land.  But this is really little more than an educated guess.

 

Local governments also involve themselves with property values.  They look at the market value of the property based on the last time it sold or on comparable sales in the area.  They then use that market value to come up with an assessed value.  The assessed value is often a percentage of the full market value.  This assessed value is what the county uses to determine how much they will charge in property taxes on that piece of property.  Sometimes the county looks at the market values every year and adjusts the assessed value accordingly, and sometimes they will only re-evaluate a property when it sells.  The assessed value might lag far behind rapidly changing market values an area.

 

When you are looking to buy a piece of property, it is good to look at all these types of value: market value, assessed value and comparable sales.  They can all be important tools for figuring out what a piece of land is worth. But it is even more important to look at what the land will be worth to you, personally.  Finding a piece of land that you will use and enjoy is much more important than looking at a particular price range.

 

To find the perfect piece of land contact a member of the Gratia Group Land Sales Team at (239) 333-2221.

 

 

 

 

 

Foreign Buyers Competing in U.S. Housing Market

As analysts, industry participants, and policymakers struggle to boost homeownership among Americans, foreign investors activity in the U.S. housing market remains strong.

According to a profile of international home buying activity released by the National Association of Realtors (NAR), total international home sales were estimated at $92.2 billion from April 2013 through March 2014, up from the previous period’s level of $68.2 billion.

Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability, and an incredible opportunity for investment in their future.

Approximately 65 percent of purchases by foreign investors over the year involved a single-family home, with 42 percent used as a primary residence.  Because non-residents are limited to six-month stays in the country, most buyers use their properties for vacation or rental purposes or as an investment, NAR says.

While interest in U.S. housing spans the globe, NAR reports the greatest amount of activity came from buyers in Canada, China, Mexico, India, and the United Kingdom, which together accounted for nearly 54 percent of all reported international transactions last year.  Canada held on to the largest share of purchases at 19 percent, while China took the lead in dollar volume, purchasing an estimated $22 billion.

Four states, Florida, California, Arizona, and Texas, comprised 55 percent of total reported purchases, with Florida staying on top at 23 percent.  California followed at 14 percent, followed by Texas and Arizona at 12 percent and 6 percent, respectively.

According to the group, among foreign investors and buyers, Europeans last year tended to flock toward the warmer climates of Florida and Arizona, while Asian buyers were drawn to the West Coast.  Buyers from all countries showed greater preference toward areas where there were already concentrations of people of their own nationality.

NAR also found that nearly 60 percent of reported international sales were all cash, nearly double that of domestic purchases. “Mortgage financing tends to be a major problem for international clients due to a lack of a U.S. based credit history, lack of a Social Security number, difficulties in documenting mortgage requirements and financial profiles that differ from those normally received by financial institutions from domestic residents,” the association explained.