Real Estate Investing

I grew up a military brat moving from place to place in what was mostly middle America.  Like the hobbits of middle Earth who were amazed at the new sites they saw as they returned the ring to the fires of Mount Doom, I am constantly astonished when I hear what people pay for real estate in other parts of the country.  A 900 square foot cottage in California for how many hundreds of thousands - and it needs some work!?   Ay yi yi.

Today, the news is out that values of apartments in Manhatten continue to climb though there are many job losses, causing concern that the prices will soon begin to erode. 

After the stock market crash of 1987, it took two years for Manhattan real estate prices to drop… When they did drop, the market became more troubled because the slowdown coincided with developers taking advantage of tax incentives to build thousands of new apartments. At the same time, thousands of rentals were being converted into co-ops. Many builders had concentrated on building only smaller apartments that were attractive to investors looking to rent them out. All of this inventory meant that it took until the mid-1990s for prices to recover from overbuilding.

Meanwhile, the average price of an apartment in Manhattan rose to $1.5 MILLION in the third quarter of this year.  I wonder what the price per square foot is there.

If you’re interested in finding an expensive place to live, Miami rates at #10.  Other cities include Seattle, Sacramento, Boston, Washington, DC, San Diego, Los Angeles, New York, San Francisco, and #1 is SAN JOSE. 

Of course, there are countless great reasons to live in these cities ranging from cultural to educational opportunities, recreation, entertainment, jobs.

And now that the massive bailout plan for the financial markets has passed and been signed into law today, perhaps people can again afford to buy homes.  According to Forbes, it’s unclear when credit-crunched banks can begin selling their troubled loans to the Fed.   Some of the fodder of the bill include,

–Provides the government with warrants to obtain an equity stake in companies. This helps ensure that taxpayers share in future gains of companies that are bailed out.

–Limits excessive executive compensation for some companies. Any firm that sells more than $300 million in troubled assets to the government is also subject to more taxes.

–Establishes an oversight board and special inspector general to act as a watchdog.

–Requires the Treasury secretary to regularly report to Congress the details of all financial transactions under the bailout.

–Allows federal agencies to modify troubled mortgage loans.

We’ll see the results of the bill flesh out in the coming months.  But for this next week, I’m going to try to forget about it all as I take a vacation to the white sandy beaches of Destin, Florida, sipping cold drinks and reading a good book.  See you October 13th unless I can find a wireless connection!

Craigslist, a legitimate online classifieds site, can be a great place to find landlords, tenants, pre-foreclosure deals, investment property, roommates, vacation rentals or simply a really great home. This blog has recommended the site many a time. However, there are vultures lurking, ready to pounce on the innocent and trusting, and vigilance is required.

In 2005, Craigslist CEO Jim Buckmaster told MSNBC that fraudulent postings made up only one-tenth of one percent of the site’s overall listings. The site has a very well-established method for users to “flag” posts for removal if they are posted in the wrong area or posted too often, etc. (signs of fraudulent activity). Furthermore, Buckmaster said the company was considering charging landlords to post property rental ads on the New York message boards, in the hopes of discouraging fraudulent real estate postings in the area where such activity apparently posed the biggest problem in 2005.

Not sure if they actually implemented such a policy, but it sounds like a reasonable one to implement nationwide because three years later, the problem persists. KGET 17, a Bakersfield, California news station, reported yesterday that a local woman was prey for an online real estate scam artist. As it turns out, the property photos and description that were so appealing to Tiffany Llamas were actually ripped verbatim from a listing handled by a legitimate realtor — the same one who happened to be working to help find Llamas a home. According to the KGET web site:

“The return email read: ‘I and my wife came over to the U.K. for missionary work, so I hope you will promise us that you will take care of our house.’ Llamas said, ‘That’s great but I still want to see the house first, and when he told me send $2,400 via Western Union and then he would, you know, send the keys to me.’”

Llamas didn’t fall for it, but such predators persist on a variety of Internet networking sites hoping that someone will fall for it. Apparently, tenants aren’t the only ones being preyed upon either. This is undoubtedly occurring in the property resale market as well. The Real Real Estate in Connecticut blog points out what can happen to landlords and (in the comments section) what can happen to those seeking roommates on Craigslist.

The blog points out some red flags to beware of with Internet dealings. It may sound biased, but the following qualities are true in the vast majority of cases:
-Poor English, i.e. broken sentences, misspellings and bad grammar.
-Asking questions about details you already gave in the advertisement.
-No direct contact information.
-The writer is overseas. Many of the scams are from people claiming to be in other countries.
-Very often, these people represent themselves as high-income individuals, like doctors, lawyers or professors.

Again, Craigslist itself is not bad, but the way it works has the potential to introduce a lot of people to a lot of scam artists. Never, ever give anybody cash, check, bank account information, etc. without having first met with them and thoroughly checking out the situation. Follow your gut instinct, and above all else, the old rule applies — if it sounds too good to be true, it probably is!

As if there wasn’t already enough temptation to move to Hawaii with all the sand and surf and pineapple, there is now yet another reason. This state is the strongest in America in terms of the real estate sales forecast for 2008, according to HousingPredictor.com. Honolulu, Maui and Kauai are expected to appreciate at 6.8, 5.6 and 4.9 percent, respectively. The cities are currently ranked second, fourth and ninth, respectively, among the top 25 appreciating U.S. markets.

Housing Predictor takes its data from independent research and analysis of individual communities across America. The site says its forecast estimates in 2007 proved to be about 86% correct — no easy feat in the tumultuous real estate year that was. Interestingly, the site’s list of the top 25 appreciating markets for this year are scattered evenly across the United States. Other than Hawaii, five other states had three cities make the list: Texas; Mississippi; Idaho; Washington and North Dakota. The even scattering from the west coast to the east coast and all points in between shows that the real estate market is indeed not as hopeless as national media would have us believe.

Of course, it was little surprise to see Austin, Texas at number 10 on the list, because this city, with its large white collar high-tech demographic, has consistently defied the trend of low Texas prices. The other Texas cities on the list, McAllen and San Antonio, probably made it on because their real estate prices have little place else to go but up. Plus, Texas is the new Florida in terms of retirees and vacationers. Hawaii has notoriously higher cost of living, so little surprise there. And Manhattan, NY, at number six on the list, may appreciate the projected 5.2%, but it will probably be primarily due to the unbelievable demand for housing there.

With towns big and small across America making the list, Housing Predictor offers hope that the housing market may just pick up sooner than we thought.