Real Estate Investing

The owner of the company where I work in Middle Tennessee came to our meeting this morning and confirmed what we’re all thinking through some real evidence: the market is coming back.

Although he believes it’ll take until the second quarter of 2009, the biggest indicator is in new construction.  In my county, there were 75 more closings in new construction than “starts.”  This means that the building industry may be slowing down enough to get rid of the excessive inventory of new homes.  As demand comes back, then existing homes alongside more manageable new construction will stabilize the market.

Corbet Property Real Estate News agrees with this assessment, using for data the information that was reported in the Wall Street Journal,

Inventory levels are starting to slow with a prediction that when we reach a 5-month of inventory level sometime in 2009, which historically signals a tightness in the housing market, this will eventually turn around the housing market all together.

However, when we talk about a recovery we also should see what’s happened in the last two years.  The big guy from my company said that although our market is off, we’re off the least.  Our sales are only down 20 to 25% from the glory days of two years ago while the east and west coasts have suffered a reduction in home sales of up to 60%.  Those companies are going through some painful cuts, including cutting staff, closing offices, and renegotiating the salaries of managers just to keep the doors open.

In the long view, the agents who provide solid service and are committed to a career in real estate will survive.  Just as the mortgage companies who have smart lending practices in place will survive. 

On the commercial side, we heard today that commercial real estate is finally beginning to slow somewhat.  For example, one well-known pharmacy-type store used to allow franchises for almost zero down.  Today this company requires about 20 percent downpayment.

In my opinion and from reading and hearing what others are saying, we aren’t quite out of it yet, but the big improvement is coming soon.  I feel it in my bones!

Magnificent photo from here.

Everyone knows you should have an independent home inspector and/or property appraiser check out a home before you buy. Everyone knows you should shop around for the best value on property and home loans. But there are some things that are not quite stressed as often, yet are equally important to the home search.

Property taxes — What will you be paying annually? Is it outrageous in comparison to surrounding areas? Why is it so high, and is it worth it? You may have heard of cities with low or no property taxes. This may sound like a dream come true, but closely examine what you might be trading for that. For instance, one fairly good-sized town in my area has no property taxes, but also has no fire service. By relying on the distant county fire service to arrive in a timely fashion, homeowners and their properties are at much greater risk.

Homeowner’s association dues — Again, are these outrageously high or are they reasonable? What do the homeowner’s association dues cover and is it worth the price? This is something to consider whether buying rental property, bare acreage or a home.

Surrounding income level and building restrictions — What will your neighborhood look like in 20 years? A good predictor of that is the income and education levels of the surrounding area. There are plenty of online resources to help you determine these facts. Furthermore, ask about building restrictions in the area. Are mobile homes allowed, or are houses restricted to a minimum square footage? These can all change the landscape, and the likelihood of rental property creeping in.

Zoning issues — Nobody wants a zoning mess on their hands. It’s just a disaster, so research this very carefully. Don’t take the seller’s word on it, but do your own independent research. You’ll be glad you did!

You may have heard a lot about LEED certification without understanding what it really means. LEED, or Leadership in Energy and Environmental Development, is essentially a rating system set up by the U.S. Green Building Council to gauge the “green”-ness of buildings. The LEED rating system has tiered levels, based on points accumulated for different building features. It offers basic certification, then the gradually higher silver, gold and platinum levels. Consumer Reports offers a more in-depth explanation on its web site:

“These levels correspond to the number of points earned in eight categories: Innovation and design, location and linkages to the larger community, sustainable sites, water conservation, energy efficiency, materials and resources, indoor air quality, and consumer education.”

LEED certification is highly sought after by commercial, government and industrial buildings. Basic LEED techniques, like low-emitting paint and Low E (energy-efficient) windows, are actually being implemented on a regular basis by many new homebuilders nowadays. This trend is part of a growing awareness that a few simple steps, sometimes at no extra construction cost, can go a long way toward helping the environment.