Real Estate Investing

“And the rich keep getting richer,” so the old saying goes. It seems now is one of those times when the saying is true. About 77% of the wealthiest people in America think the current state of the real estate market presents a “real opportunity,” and 40% plan to capitalize by purchasing real estate within the year. The group surveyed in American Express Publishing Corp.’s Annual Survey of Affluence in America is defined as households with discretionary income in excess of $500,000 per year.

Other groups included in the survey ranged from “upper middle class,” with incomes between $100,000 and $149,000, and “super affluent,” with incomes between $250,000 and $499,000. The vast majority of all income brackets agreed that now is the time to seize the day in the real estate world. Still, only 17% to 26% were committed to buying real estate within the year in those income brackets, nowhere close to the 40% in the wealthiest category.

This should come as good news to the 14% of homeowners who expressed concern they might miss payments in the next six months, according to the AP-AOL poll released Monday. As for average citizens, 60% stated they would definitely not buy a home in the next two years and only 11% expressed certainty that they would do so. Maybe we average citizens could delve into the real estate market if we go rob a bank play the stock market buy lottery tickets.

Real estate investing is a hot topic right now. Interest rates are low, prices are low — what’s not to love, right? If you’re looking to seize the day, keep one thing in mind. Go west, young man … or east, depending on where you sit as you read this. The Lonestar State is the place to be and other western states like Utah, Colorado and New Mexico are also getting some nods. It’s a veritable gold rush for the 21st Century.

Of course, the list of where to invest in real estate varies depending on which you look at. We looked at the Top 10 list compiled by real estate valuation company Fiserv Lending Solutions, the Top 10 list compiled by investment company HomeVestors, and the Top 7 compiled by HousingPredictor.com. One thing all three of these lists have in common is that Texas cities appear in the top three listings. Some say El Paso and McAllen, while others say Dallas, Houston or Austin. Regardless, it’s clear that Texas is the place to be. San Antonio and Ft. Worth are even mentioned in lower spots on some of the lists.

Actually, plenty of developers, second home buyers, snowbirds and vacationers truly are turning their sights from Florida to Texas. This has been a known fact for a while, but home prices are rising fast so capitalize before it’s too late.

Interestingly, Syracuse and Rochester in New York state made one list, with an expected 3.60% and 4.20% price appreciation this year. Asheville, North Carolina made another list because it has seen steadily increasing prices with no signs of slowing down and pro golfer Tiger Woods recently announced his plans to build a golf course megalopolis there. I am an avid golfer, but given the choice, I’d still have to head southwest, where the prices are lower and appreciation forecasts are greater. Grab your gun, boots and spurs — Lonestar State, here we come.

So what is in your five-year plan? Does it involve international real estate investing? If so, you may want to take a look at a recent Forbes article projecting the “up-and-coming” real estate markets around the world. The article analyzes housing conditions in capital cities and business centers of several countries, based on “economic expansion, inflation rates, strength of individual property rights and access to lending in emerging markets.”

So a second home or, say, a vacation rental purchased in one of the following locales could yield big rewards down the road.

Tel Aviv, Israel’s strongest real estate market, is on the rebound from an extended period of deflation. In 2007, things started turning around with a 2% increase in housing prices. Gross domestic product increased simultaneously just over 5%, and is expected to see a 3.8% growth this year. All things that bode well for economic development and the real estate market.

Kuala Lumpur, the capital of Malaysia, has seen economic growth rivaling that of nearby Southeastern Asian countries but some of the area’s lowest inflation and consumer prices, according to Forbes. The housing demand in Kuala Lumpur is so great that builders are running to keep up and prices are as much as 70% higher than initial asking price in some cases.

Santiago, Chile and Aman, Jordan have seen economic inflation and development grow proportionately. This means, as Forbes put it, “economic expansion represents a greater value in the real estate market because it speaks to what people can afford in the loan market.”

Forbes’ article took an extensive look at the overall economic health of these developing countries, because that is extremely important in determining the likely returns on real estate investments. For instance, the article points out that Latvia and Estonia excited investors in 2006 when home prices grew 66% and 24%. But considering the economic instability of those countries, it is little surprise that prices depreciated 7% and 14% in 2007, taking the wind out of investors’ sails. No one can predict world events, which is practically what you’d have to do to feel comfortable investing in smaller international markets. It is by no means a stable investment, but could be an interesting and possibly a profitable one if you have some serious cash to gamble.