Tag Archives: housing

THERE’S NO INVESTMENT LIKE REAL ESTATE INVESTMENTS!

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The rules of real estate investing

Investing in real estate, either directly or through funds or real estate investment trusts – or all of the above – can add much-needed diversification to your investment portfolio. However, real estate is a unique investment, so you can’t apply the same rules as you do to investing in stocks or bonds. Here, U.S. News contributors and SMARTER INVESTOR bloggers share their best advice for becoming a successful real estate investor.
Have an exit strategy.
REAL ESTATE STRATEGIES include buying rental properties and becoming a landlord as well as flipping properties, then hopefully earning a substantial profit upon their sale, writes Joel Cone, a business and real estate writer. “Like any investment, real estate investing requires an action plan,” he writes. Some real estate investors have found success with three-year lease options, for example. Think carefully about the characteristics unique to each investment that will make your strategy successful.

Join a local investment club, but don’t attend ‘boot camps.’

Real estate investors often become successful with guidance from other investors. That’s one reason it can be smart for novices to get involved in investment clubs. But be careful not to waste money on unnecessary boot camps or training courses, Cone writes. Browse a local bookstore for information on real estate investing, and avoid getting sucked into expensive seminars and camps.

Figure out what type of real estate investing interests you.

If investing directly in real estate, investors should “choose a specific target market and study it intensely,” Cone writes. “Next, set a goal, form a business plan and establish systems to achieve the desired goal. Lastly, investors should take small, common-sense steps daily toward achieving that goal, such as talking with sellers, owners and local real estate professionals.”

Insulate your portfolio against potential losses.

Investors should set money aside to act as a buffer in case the unexpected occurs. Once an investor has scaled out to a large portfolio of properties, it’s important to have enough CASH ON HAND to rehabilitate 10 to 15 percent of those properties every year. “Be prepared. Plan for the best, but prepare for the worst,” Cone writes. “Insurance is true asset protection. Investors should insure themselves as if the world is coming to destroy them, and insurance is their only defense.”

Investing directly is very different from investing in a REIT.

If you are debating between investing in real estate directly or buying into a REIT or real estate fund, consider the tax consequences. “For many investors, tax deductions and capital gains taxes are integral to their expected return on real estate investments. Those factors are different from those you’d face investing in a real estate ETF,” writes Joanne Cleaver, a U.S. News contributor.

However, funds are a lower-maintenance approach.

Mutual funds and exchange-traded funds can offer a lower-cost way to invest in real estate, writes Barbara Friedberg, portfolio manager and consultant. She points to VANGUARD REIT INDEX ETF as an example of an inexpensive strategy for investing in real estate. “In one fund, the investor accesses a range of property types, including commercial malls, hotels and apartments … If you’re looking for income, REITs are required by law to pay out all earnings,” Friedberg writes.

Your house doesn’t really count.

It’s tempting to look at your own HOME AS AN INVESTMENT. However, property taxes, homeowners association fees, maintenance, insurance and other costs offset appreciation in property values, Cleaver writes. You won’t earn income from your home as you would from other investments. “A real estate investment produces income or appreciates in value after all costs are calculated. Not so with your house,” Cleaver writes.

Look at where millennials are moving.
Millennials are the future of the real estate market, so it may be smart to track where they’re moving and where they’re buying homes. Many members of this generation are renting now, but that doesn’t mean their habits won’t change as they get older. Real estate experts say investors can make money by renting to millennials and then selling to them as they decide to become homeowners, Cone writes. Austin, Texas, Nashville, New Orleans and Denver are just a few of the cities where GENERATION Y IS BUYING HOMES.
Source: CBRealtyCorp

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Single-Family Starts Save the Day

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Housing starts rose 0.9% in August pushed by a solid 7% increase in single-family starts and tempered by an 11% fall in multifamily starts. The single-family increase was broad; all four census regions showed increases ranging from 17.5% in the West to 2.3% in the South. Monthly multifamily starts have saw-toothed up and down for several months with four up months and four down months in 2013.

Housing permits demonstrated the same signal with single-family permits up 3% nationally and up or unchanged in every region. August single-family permits at 627,000 are the highest since May 2008. Similar to starts, multifamily permits were down 15.7% to an annual level of 291,000. The three month moving average, a more stable measure of multifamily, has remained above 300,000 since the middle of last year.

The solid single-family report provides additional evidence of the slow but steady improvement in single-family owner-occupied construction that begin in earnest in early 2012. The seasonally-adjusted construction rate increased 36% since January 2012. Even with the steady rise, single-family starts remain at less than half a normal rate of 1.4 to 1.5 million per year. The broad increase across four regions in permits and starts is a solid signal that builders do see continued improvement. NAHB is forecasting a 17% increase in single-family construction in 2013 over 2012 and a more robust 31% increase in 2014.

Source:  Eye On Housing

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Housing Starts Soar!

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses housing starts.

Housing starts reached an 894,000 annualized unit pace in October, which is the highest in over 4 years, and up 42 percent from one year ago.
Even with this huge gain, further increases are needed. The 50-year historical average is 1.5 million per year. Now that the household formation is bouncing back and reaching about a million, housing starts need to be at least 1.3 million just to keep the overall vacancy rates stable after accounting for 300,000 or so uninhabitable units that are demolished each year.
Multifamily starts made a larger gain of 57 percent compared to single-family starts, which increased 35 percent. Falling vacancy rates and solid rent gains have tipped developers to focus more heavily on new apartments.
The West region showed the biggest increase with a 73 percent gain. Inventory levels are very tight in California, Seattle, Phoenix, and Las Vegas. Naturally, homebuilders are responding to these market incentives and conditions. However, California lags well behind Texas in housing starts even though California has a larger population and is experiencing a more acute housing shortage because of tight land regulations and high fees associated with taking out housing permits. In Texas, just about anyone can dig earth by simply putting on a construction helmet. So expect a faster home price acceleration in California.
The northeast region experienced a slight downturn over the month and only an 11 percent gain from one year ago. Since Hurricane Sandy was at the very end of October, the lower starts are attributed to market forces in the region and not yet related to the storm. A large overhang of shadow inventory still looms in New Jersey, New York, and Connecticut. All three are judicial foreclosure states and hence it takes forever to turn it into an REO. Some delinquent homeowners are said to game the system by not paying mortgage but finding tenants to collect on rents.
Housing starts are likely to reach 1.1 million in 2013 and then rise to 1.4 million in 2014. That translates into a huge percentage gain of 50 percent in 2013 followed by another 25 percent gain in 2014. But such levels will still be insufficient to meet the rising housing demand. Housing shortage conditions will last for a while.

Source:
Lawrence Yun, Chief Economist
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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