Now more than ever, real estate investing is gaining its popularity because of all the advertisements and promotions of magazines, newspapers and television shows. These are huge exposure for real estate investing.If you are one of those who are fascinated with real estate investing and you have decided to try Sarasota real estate investing, you should know that there are factors and things that you should consider and know before you start with this kind of business.Real estate investing is not as simple as buying a property, it requires lots of work, time, effort, skills and knowledge. But if you are really determined to go on into Sarasota real estate investing, you have to equip yourself with the necessary knowledge and information about real estate investing and the market.If you are wondering on how you’ll gain knowledge and information about real estate investing, there are lots of ways to do so. You can use the internet in finding information; there are heaps of websites that offers tips and guidelines about real estate investing. You can use your yellow pages and contact some investors and ask about their experiences, you can learn from these investors’ experiences.Read books about real estate investing, this can also give you the proper knowledge about real estate investing. Attending seminars and forums can also help you gain knowledge and information about real estate investing. These are few of the ways to learn.Hiring a real estate agent can help you in your quest at Sarasota real estate. Actually, real estate investing requires lots of work, so you really need persons to assist you with your quest and real estate agent is one of them. But you need to make sure that you will be having a real estate agent that is very familiar with the Sarasota real estate market in order to assure that the agent can assist you in having the best deal.Allocating time in searching for the right real estate agent is important. You have to contact several real estate agents and schedule each for an interview. Ask the necessary questions in order to find out who’s the best among the few real estate agents.You have to learn about the market as well. In order for you to know what the right things to do when the market changes, since it is a fact that the market changes every now and then.Allocating budget for your investments is very important factor as well. You must have save money in the bank before you enter real estate investing, since you need money for repairs, and so on.If you really want to enter Sarasota real estate investing, these are few of the factors you need to know and consider. But do not rush things out. You can’t be successful overnight. Sarasota real estate investing is not a hobby; it is a business, so you need to treat it as one. You have to wait till 6 months to see if you are really into Sarasota real estate investing. If you like what you are doing, you have to know that it takes a year to be successful in this kind of business.Eliza Maledevic Aysonhttp://www.srqmls.com
Real estate agents? Hasn’t the internet gotten rid of them yet?I hear this question all the time. Most people assume that property portals in India are working towards eliminating agents and facilitating direct interaction between seller and buyer. Though this is partially correct, real estate agents are the biggest customers of these portals and the portals are doing their bit to facilitate their growth. We interact with agents every day and we see most of them are doing good business. I want to take some time and explain the dynamics behind Indian real estate, the role agents’ play and how the role of agents’ is going to change in the future.Note – Throughout this article, I’ve focused only on the rental and resale market and not gone into sale of new property by builders as the dynamics of that market are radically different. Also, the scope of this article is limited to Indian Real Estate.”MakeMyTrip has eliminated travel agents. So why hasn’t the same happened to real estate agents?”One needs to understand that ticketing is now a point-and-click industry – travel agents have been replaced by computers. The process of getting information about the journey AND purchasing the tickets can be done on the internet. Real estate is fundamentally an offline process. Though information aggregation is an important part of it, site visits, negotiations and paperwork all need to be done offline. Even from an owner/sellers perspective, renting out/selling a home isn’t as simple as listing it online – the process can stretch for months. This is where real estate agents step in – in guiding customers through the offline part of the transaction, bringing both parties to agree to the terms and finishing off the paper work.Why aren’t property portals trying to eliminate agents and become virtual middlemen? A property portal provides a platform for a seller and a buyer to interact (A seller can be an owner, builder or an agent). If we eliminate agents from this equation, portals are left with a C2C platform with property owners being the only source of inventory. Though many prefer a scenario like this, we need to figure out how the platform provider is going to monetize from this setup. They have the following options -Listing fees – They can collect a fee from the owner/seller to list their property. There are few owners who’re willing to pay for premium listings (last time I checked, about 5% of owners listing online were willing to pay) but this is simply not enough to sustain the business. Indian consumers are ready to use a service which is free (free listings) OR pay for a service once it’s rendered (brokerage) but are not OK with anything in between. Charge property seekers to get owner information – Another option would be to charge property seekers a fee to give them information about the owner who’s listed. This also isn’t a sustainable option because owners who list online tend to list on multiple portals and you can always finds a portal which gives you the owners information for free.Brokerage fee when the deal is closed – This would be a great monetization scheme that everyone would be willing to pay for, but is very hard to implement. To do this, portals need to keep track of every deal that closes offline and that would be next to impossible.There might be more options, but I don’t really see them becoming huge ‘revenue making machines’. Running a real estate portal is a VERY expensive affair and portals would need a solid revenue stream to offset that cost. This is where Real Estate Agents step in: Agents are willing to spend good money to market their properties on a platform which would give them good leads. Property portals see this as a steady, sustainable revenue stream. This, seemingly, is a match made in heaven.So, you’re saying property portals have made no dent in the brokerage industry? Undoubtedly, they have. In a BIG way! With many owners listing their properties online, agents are starting to feel the heat. Coupled with the fact that the number of real estate agents has almost tripled in the last few years, you’ll see that the average real estate agent earned a LOT less in 2014 that he did in 2011. Agents are beginning to realize that there’s a paradigm shift and it’s time to mend their ways, before the game gets taken out of their hands. There needs to be a shift in their mentality and it needs to happen NOW.Role of the 21st century real estate agent 10 years back, agents pretty much charged money for information arbitrage – “I have the contact information of the owner/tenant and you need to pay me money to get this contact” was the mantra and it has worked. A disproportionate amount of money was charged for this seemingly simple service and the world went on without a qualm primarily because there was no alternative. But now there is. Increased owner listings on portals, multifold increase in number of real estate agents, internal portals in corporate companies which help employees find accommodation, Facebook groups, etc. have all impacted the brokerage industry and there needs to be an overhaul.”What’s dangerous is to not evolve, not invent and not continuously improve customer experience” – Every Realtor in the country needs to latch these words said by Jeff Bezos, CEO Amazon. Information arbitrage can no longer be the game real estate agents play – We’re moving towards a world where access to information is getting easier and this cannot remain the USP of why a property seeker goes to a real estate agent. I believe agents need to adopt the following practices -Save time for your customers – In today’s world, nobody has time to do things (even if they do have time, people don’t want to spend their time house hunting). Saving time for your customers is probably the best value-add an agent can provide. Be up-to-date on the latest inventory that is available in the locality. If you’re not confident if the customer will like your property, just tell them so! Don’t drag them to a dingy apartment they’ll never never be interested in – they’ll lose trust in your sense of judgment and never come back to you again. Learn to truly understand what your customer wants, be equipped to find the most relevant inventory, accompany them during site visits and close the deal. A really good agent should be able to close a rental requirement in 7 days and a resale requirement in 1 month, tops.Give as much information as possible – Instead of hoarding information, agents need to freely part with it. Tell your customers exactly which apartment society the property is in, tell them exactly how far from the bus-stop it is and tell them if the owner/tenant is not comfortable with someone from their demographic. In the longer run, this helps build a better rapport with customers. Sure, other agents (or your customers themselves) might get to the owner/seller without you, but in the longer run, this is what will work.Adopt technology, don’t fight it – Apart from Whatsapp, agents don’t use their smart phones for any business related activities. Why is this so? For starters, there’re many CRM applications on the app store which they can use. This alone will improve their productivity 100 times over! Other applications for maintaining inventory, marketing, etc. are available but are not being consumed by agents.Develop skills a computer/technology can’t do – A computer can never negotiate a good deal for the client – that’s a job that requires a human touch. A computer can never get a feel of what the customer truly wants – Agents can do that given you’re always with the customer. This is a relationship driven industry, make sure you always remember that.Use social media as a marketing platform – When owners are using Facebook as a platform for marketing, why shouldn’t agents? Creating a Facebook group to marketing their listings is a great way to reach new customers. There are some agents who do this already and are getting good response from the same.Be professional – Cliche as it may sound, going back to the basics is something every agent needs to do. Being punctual, dressing in formals and talking politely to customers are some key skills that agents need to practice. Again, there are agents who’re well mannered, but the number seems to be shrinking.The list can keep extending, but I can summarize it this way – If you’re a real estate agent, think of what you were doing for your business 5 years back and compare that to what you’re doing today. If nothing much has changed, understand that you’ll become redundant within the next few years. The world is changing and only those who change with it will live to fight another day. Portals have evolved, house hunting has changed for end customers and it’s about time the role of the real estate agent changes as well.How are we positioned in this complicated market? Our vision has always been to build A Technology Powered Real Estate agency that works towards helping our customers find a home they truly love. We do that by mixing cutting edge technology and expertise brokerage. We’re adding great real estate agents to our team, giving them next-gen mobile applications/desktop products to better run their business, helping them understand the market as it is today, providing training sessions and learning material and eventually, helping them serve customers better. Given the amazing response we’ve received from customers and agents so far, we’re confident of the road ahead.
A Bit of Valuable Theory First: Vince Lombardi Would Approve!!Cause and Effect RelationshipsWe are familiar with “cause and effect” relationships. A particular “cause” or action will result in a predictable “effect”, reaction or response.”Laws of Physics” tell us that if you throw a tennis ball at a wall, you can accurately predict the direction that it will bounce off the wall.That is an example of a “cause and effect” relationship within earth’s gravitational fields.Further, if you change the “angle of incidence” (the angle at which a thrown ball hits the wall) then, you can accurately predict the direction that the ball will take as it bounces off of the wall.The angle of incidence equals the angle of reflection, and predictability exists.”Laws of Human Response” tell us that if I use hurtful words or actions toward you, then I can anticipate that I will probably receive a predictable response in retribution from you.If I don’t wish to receive that type of negative response, then I should be careful not to use hurtful words and actions toward you. We call that human nature.While Laws of Human Response may be less predictable than the Laws of Physics (people can develop good acting skills), a good real estate negotiator learns to control his or her emotions in order to guide the negotiations to a desired result.”Laws of Financial Markets” tell us about the “cause and effect relationships” between “Supply and Demand”.If demand for a scare commodity increases, but the supply or availability of that commodity decreases, you can anticipate an increase in it market price.Qualifying Demand Factors:1.Demand is influenced by purchasing capacity. When dealing with “demand”, only those with purchasing capacity should be considered. Point: If I would love to own one, but can not afford to buy one, my vote does not count as part of “effective demand”.2.Demand is influenced by availability of financing. If I could afford to buy one with a loan with an interest rate at 5%, but interest rates just increased to 6%, then my “desire to own” remains strong, but only at a lower price that would allow me to finance its purchase within my capacity to service debt. Restated: My “demand” no longer counts at the previous price.3.Demand for real estate is influenced by the attractiveness of the stock and bond markets. A large part of demand for real estate that caused the “Real Estate Boom of 2004 through 2007” was due to the wholesale rejection of the stock market and the bond market.Point: Many people lost 40% or more of their retirement account that was invested in the stock market. Many flocked to real estate for fear of continued losses in those other markets. A “feeding frenzy” pushed prices up rapidly. Too many dollars were blindly chasing too few attractive properties.Qualifying Supply Factors:1. Supply Responds Slowly. It takes a while for supply for real estate to respond to an increase in demand. You can’t just leave the printing press going over the weekend at the US Mint to create more money. That is an option that is only available to the federal government.Point One: Observation: To create a new apartment complex, it takes a year or so to acquire the right property, get plans approved as a building permit, build the complex, then rent it out until it’s full. It does not happen over night. This can cause a substantial increase in market price for an existing good looking apartment complex.Point Two: My prediction: When the market finally stabilizes for apartment complexes, we will see a horrendous increase in “cost” of generating that new complex. Systems development charges, cost of building materials, and financing costs will boost the “finished price” of that property.Suggestion: Consider buying existing “pre-owned” apartment complexes right now. You will look like a hero later!2.Political Considerations Influence Financing. The federal government has the capacity to regulate interest rates. The easier it is to finance the acquisition of an income property, the more appeal it will have.Question: Why isn’t this a “supply-side” factor?Answer: It is. The easier it becomes to buy a property, the more available property becomes to buy.However, it is also a demand-side issue in that it is now possible to obtain a new mortgage with ten year fixed interest rate.Observation: Ten year fixed rate financing allows the investor to neutralize the “cost of capital” issue during a recession.Suggestion: Take advantage of available new financing.3.Tax Law Changes Influence Appeal. Recently the federal government provided real estate investors with the opportunity to increase their tax shelter from real estate. Cost Segregation depreciation allows such an opportunity.Understanding Changes in the Real Estate Financial MarketsThese “Laws” or financial cause and effect relationships have recently become substantially altered, and thus have become far less predictable.Change One: Artificial Supply-Side Pricing. Real estate prices are being adversely impacted by a large number of “forced sales” caused by defaulting borrowers being forced to sell under pressure to sell, and foreclosure sales by lenders in need of a quick sale.
Situation: A borrower is unable to make the mortgage payment, and has attempted to sell the property.
He discovers that it will not sell for enough to pay off the existing loan. He then notifies the lender of the situation.
The lender must then decide which course of action to take.
If the borrower has not been declared to be in default, the lender frequently ignores the borrower’s plea for relief.
If the borrower has been declared to be in default, then the lender will either:1. agree to accept less than the full loan balance in satisfying the loan (a “short sale”); or,2. take steps to foreclose on the property, then resell it quickly to recoup the amount of the loan.
Result: Discounted sale prices resulting from “short sales” and “foreclosure sales” impact all property values and force prices down. You will have difficulty attracting a buyer who would pay more for yours than they could pay to acquire a very similar property offered through a short sale or foreclosure priced property.
Even if you are successful in seemingly avoiding the impact of “forced sale” discounts, the appraiser who the buyer’s lender will use to value the property for loan purposes will include those low priced forced sale. The buyer will not be allowed to borrow as much, and your sale may be in jeopardy of closing.
Observation: Until the lenders sell off all of their REO and the number of short sales is substantially reduced, the value of real estate will continue to be adversely impacted. “Real Estate Foreclosures 101″What is a “Short Sale”? A “short sale” occurs when the lender agrees to accept less than the full loan balance as repayment of the existing debt.Why Would The Lender Agree To Accept Less? Once a borrower defaults on a loan, the lender must form a course of action that would result in the least loss to the lender.Would the short sale be less costly than a foreclosure resale of the property on the open market? If so, agree to the short sale and be done with it.Observation Concerning Short Sales: As a buyer offering on what will be a “short sale”, there is never a quick decision to allow the deal by the lender.The lender’s decision making process causes the potential transaction to travel through several departments of the lending entity before a decision to accept the short sale is reached.It has been known to take months for the lender to finally agree to a short sale. By that time, the buyer lost interest in the property, and has walked away by the time that the lender approves the short sale.Lenders are slow to agree to lose money, even if money is being lost with each passing day.What Happens to the Lender When the Lender Forecloses? The lender’s financial statement will be immediately and substantially altered. The previously performing loan (an asset held as a “Loan Receivable”) is converted to a less liquid asset known as “Real Estate Owned” or “REO”.Lender’s Financial Consequence of the Foreclosure: The lender will experience several negative consequences as a result of the foreclosure.The lender is often the only bidder to show up at the foreclosure sale.
At the foreclosure sale, the lender makes a bid equal to the balance of the debt. If no other bidders bid higher, then the lender receives title to the property.
If the lender receives title to the property, then the dollar amount of the previously performing loan is subtracted from “Loans Receivable” and the value of the property acquired through foreclosure is added to a category known as “Real Estate Owned” or “REO”.
The lender is well equipped to make loans, but much less equipped to hold real estate in lieu of a Loan Receivable.
In order for the lender to get out of real estate ownership and back into the lending business, the lender must resell the foreclosed property on the open market.
Probable Result: If the prior borrower could not escape foreclosure by selling the property, then the lender probably can’t do any better. This is where the lender’s bigger problems begin.1. “Mark to Market” While the previous “Loan Receivable” and the “Real Estate Owned” are both “assets” owned by the lender, the bank auditors will soon require the lender to periodically mark down or reduce the reported value of the REO to reflect what it would sell for in a quick cash sale. Any action that reduces the value of the bank’s assets will directly reduce the lender’s “Shareholder’s Equity” (the bank’s net worth).2. “REO Reserves”. In addition, the auditor will require the bank to create a “Reserve for REO” or a cash fund set aside to cover the performance of the REO asset.This reduces the amount of available funds that could be used to create new loans and generate more revenue for the bank.Summary: Both of the above actions will reduce the bank’s ability to generate more revenue and increase Shareholders Equity.Lender’s Decision Point: Consequently, the lender may conclude that it is less expensive to avoid a foreclosure and to accept less than the full repayment of the loan balance by taking a short sale, and being done with it.Foreclosure Sales: What HappensNature of Sale: An All Cash Auction: The trust deed foreclosure sale is an all cash auction conducted by the trustee at a published date and time at a specified public place. Typically, the only all cash buyer to show up at the foreclosure sale is the lender who brought about the foreclosure. The lender bids in the amount of the loan, and receives title to the property.As the lender starts to convert more of its performing asset base (performing “mortgages receivable” on the asset side of the balance sheet) to “REO” or real estate owned, the bank auditors will force the bank to set aside available cash (that could have been used to make another loan), and hold it as a reserve to cover the REO portion of the bank portfolio.
A double hit has just occurred:
1. The bank’s Operating Statement no longer has a performing mortgage loan, and now has instead a piece of real estate “REO”(Hint: banks are good at making loans and collecting monthly payments, but are not very good at holding real estate that must be managed and tenanted to prevent damage and further loss of value to the property); and,
2. The bank has to use a portion of their available cash to set up a cash reserve to cover the REO.
Too much of that action, and bank auditors will write down the value of the REO property and increase the size of the REO reserve…both actions will reduce the “Stockholder’s Equity” (net worth of the bank). If it gets too thin, the Federal Reserve could close the bank. Example Two: The bank-owned foreclosed properties are soon sold at substantially reduced prices compared to other “non-foreclosure” properties in the same neighborhood.
The reduced sale price creates lower neighborhood values. Those most recent low sale prices form the “comparable sales” data base that the appraiser will use when appraising your “for sale” property for a buyer’s lender.
Your appraised value is reduced, and the entire process will continue to spiral so long as there is a bank-owned REO that is there to compete for the limited number of buyers for your property.
SOLUTION: Only when the last REO is finally sold will the artificial reduced prices cease to exist. Buyers may love this environment, but everyone else is perplexed by artificially lowered prices. FINALLY… Part ThreeTHE QUESTION: WHAT SHOULD I DO NOW?THE ANSWER: If you can complete the following steps, then I may be able to help you sort out a course of action that you should take.Part One: Where Am I Now?Define your current position in terms of money1.Complete a detailed “Financial Statement” of your current position.a.The Asset Side:i.What assets do you own?ii.What is the current value of each of those assets? (ignore debts owed on each asset, since they will appear on the Liability Side of the financial statement)Note: Organize the Asset Side of the financial statement in the sequence of “most liquid or cash-like assets” at the top of the list, and “lease liquid or hard to liquidate assets” at the bottom of the list.Now total the value of assets listed on the Asset Side.b.The Liability Side:i.To whom do you owe money?ii.How much do you owe each creditor?Note: Organize the Liability Side of the financial statement is sequence of “shortest term debt” like short credit lines at the top and “longest term debts” like mortgages at the bottom.c.Your Net Worth – The difference between what you own and what you owe is your Net Worth.2.Complete a current “Income Statement”a.List all incomes that you receiveNote: Separate various incomes by category: Vocational Incomes, Investment Incomes, other incomesb.List all expenses that you incurNote: Separate various expenses by category: Vocational expenses, Investment Expenses, and Living Expensesc.The difference between Total Incomes per Year and Total Expenses per Year is the Surplus Available For InvestmentPart Two: Where Do I Need to Be? (a retirement goal)Project your living expenses to your desired date of Financial Independence1.What will be your Survival Number?This is the minimum monthly income required to cover all living expenses. ALWAYS KNOW YOUR SURVIVAL NUMBER!!!2.How much of that Survival Number will be covered with “other Retirement Funds”? (e.g.: Social Security, pension fund distributions, etc.)3.How much of a Short Fall appears to exist?a.This is the amount that your real estate portfolio much cover on a dependable monthly basis.Part Three: How Long Will I Be Willing to Work to Get There?1.How long am I willing to work to amass my retirement portfolio?2.Does it appear that my vocational employment will continue that long?3.What happens if it doesn’t?Part Four: What is My Surest Course to the Goal Line?THIS WILL BECOME YOUR REAL ESTATE INVESTMENT STRATEGY