Posted on : 21-04-2010 | By : admin | In : Real Estate
The primary motive for real estate investing, of course, is the money. Wealth is the essential reason why people invest in real estate, and typically the first thing people think of when they consider owning investment real estate.
One of the advantages of owning income-producing property is the considerable income generated from rent when a property is purchased and then subsequently managed correctly. If a real estate investor doesn’t overpay for a property, keeps expenses down, the apartments rented, and the building well maintained, a real estate investment can generally make the investor money, even while the investor sleeps!
Notwithstanding, there are there factors that can cause a real estate investment to lose value. Moreover, it can have a drastic effect upon a rental income property’s ability to generate profitability, despite the investor’s efforts.
Okay, let’s look at undoubtedly the 7 worst contributors to the deterioration of rental property value.
1. Neighborhood Decline
The community surrounding the income property can change in a variety of ways that adversely affect your real estate income property. Increasing vacancy, for instance, can lead to reduced rents, which in turn means reduced maintenance causing building deterioration, in turn causing the whole neighborhood to slip into decline and therein triggering a domino effect that simply compounds the problem. The nearby construction of facilities such as prisons, sewer treatment plants, and airports will also likely have an adverse effect on the area. Also, perhaps more subtle and slower in coming, is a decline due to increased crime, perhaps resulting from an adjoining neighborhood spill over.
2. Impact of Adverse Infrastructure
The impact of being directly under the flight path of aircraft, for example, can have a negative impact on a property’s ability to attract (or keep) tenants. Likewise, construction of a major highway or intersection can limit access to the property, and cause noise and dirt by the construction to drive tenants out. Perhaps the result may be an increase in your investment real estate value, but construction can take up to a year or more and during that time you can expect your real estate investment value to drop.
3. Controls and Regulations
Governmental controls and regulatory changes to zoning can adversely impact real estate investment property. Real estate investors that purchase raw land for development, for instance, can see their plans grind to a halt because of a building moratorium or anti-development sentiment. All of which, of course, results in a plummeting value.
4. Wear and Tear
Whether its air and heating equipment, driveway surface, electrical wiring, hot water heaters and boilers, roofing structure, plumbing or paint, sooner or later it will require maintenance and/or replacement. The value of investment real estate is reduced by the economic obsolescence (out-of-date) items if they are not properly maintained.
5. Supply and Demand
Two major factors of supply and demand causes real estate values to go down: overbuilt and tight money. Overbuilt is straightforward. With multifamily property, for instance, overbuilt would imply that there are many more apartment units available to rent than there are tenants to rent the units. In this case, the market can decrease quickly and stay down for a long time when new construction gluts the market causing an overbuilt situation. Tight money means less availability of long-term financing from lenders and therefore less qualified buyers for your rental property.
6. Lack of Proper Maintenance
A run-down property in the neighborhood, if left unchecked, could drive down the values of all adjoining properties. A deteriorating property, whatever the reason, will have an adverse affect on your real estate investment.
7. Pressure to Sell
Highly motivated sellers may reduce a property to a bargain basement prices and smart investors watch for property owners who must sell to take advantage of the owner’s strong motivation to unload the property. Always try to avoid ever reaching the moment when you are forced to sell.
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Help answer the question about real estate
How can I find a good real estate investment coach?I am a new real estate investor. I am looking for a good real estate investment coach in San Francisco Bay Area. I have a real estate saleperson license and have basic real estate investment knowledge. I am looking for a good real estate investor coach who have years of success investment experience in residential and commericial. I have private funds for good deals and would like to be partnership or learn from savy investors.
Hi Jeannie!
I suggest you first learn the difference between Real Estate Companies. Some charge desk fees, some do a split with commissions (find out what other monthly fees they have), some are flat fee brokers. Find out if they have retirement, residuals, if they offer profit sharing how long does it take to get that profit, training, what programs do they offer and do they cost? Do they have a training schedule? Do they have a mentor program? Do they have a new agent training course? Do they have health insurance?
Then go meet the Broker. If you can't relate with them, then it's not a good fit! If you have any questions, email me! Good luck and make us all proud!
Vicki Watzlawick
Broker Owner
Exit Platinum Realty
http://www.ExitPlatinumRealty.com
stay out of the mainstream area;
that is, listing houses for sale.
become an exclusive buyer's agent.
Rep middle income and upper income
black women as a niche.
Also poke into doing commercial
and industrial purchases.
and maybe business brokerage
plus, interview different agencies–
most are Realtor focused; which
means they take listings. YOU can
choose not to do that via being
an exclusive BUYER's agent.
[they don't sell RE--they help
buyers buy, and that is a different
approach].
plus u can find those offices that
have 100% approaches [where
the agent pays for desk space and
does not split the commission.]
available to help -though I am not
in TN.
In my area people tend to be more problematic when it comes to giving $10 for an earnest deposit. Most want $100 or even more. I have talked some sense into some but some are dead set on the $100 or more and I walked away cause I didn’t want to mess with finicky people.
So can I avoid the issue by writing in the agreement that the EM will be paid at closing? And would that make the contract still legally binding?
Normally that means they are not motivated enough…. One of my students has an interesting clause in the contract his uses. to cover EM.
I’ll see if he will send me a copy to offer
Russ Whitney has a great coaching program you may want to take a look at.
Good Luck
Sheldon Moylan of Dominion Lending Centres
You have a LEGAL AND BINDING CONTRACT. all disclosures within the contract should be what the seller knows about the property. Now the other agent cannot FORCE you to sign anything. Basically what the agent is trying to do is cover his clients ass- if the selling side has a problem with it you can always take it before arbitration (see how they like that). Either way the selling agent is not within his rights to present other docs. for disclosures, nor do you let them off the hook. You will have no recourse if you do. Hope this helps.
Yes, you simply explain it when you going over the contract with the seller. It’s “earnest money”
Depends on the licensing requirements in your state. Check with the Department of Real Estate for their requirements. Most states require some basic courses, but there may be exemptions or partial exemptions for experience in the field. The only exception in California is that licensed attorneys, regardless of their field of practice, can go straight to the Broker level exam. Afterwards, most states also require a certain amount of continuing education for license renewal at either the Agent or Broker level…so you might as well get used to taking classes…and who knows, despite all your experince, you may learn just the thing you needed to know…
One doesn't eliminate the other one. My broker is a Lawyer and his experience/practice is in Real Estate. After 10 years of practicing law, he decided to be a Broker.
Go ahead!
Wow! what a great question from a 14 year old. a LLC (Limited Liability Company) is incorporated with the Attorney Generals office in the state it is established in. The best way to do that is to go to an Attorney. A holding company and a Development company may be combined into one, have different division or groups to do the different objectives, or even the same people.
You can never have too much money to start a company, it's the too little that matters. Your best bet is to save as much as possible, write up a business plan, go to friends and family for investment in the company before you start out and hope to have a minimum of $50,000 to $500,000 to start your company. Then you can go to a bank and borrow, usually 2 to 3 times that much more to make your first purchases.
Yes there are Capital gains even for companies to pay with investment properties.
When you are ready, have your board of directors vote to take your company public by registering with the Securities and Exchange commission, with the assistance of a Stock Brokerage Company.
you should always be paid on the buyer’s side of the hud-1
you will always handle your own taxes
How do I present the $10 for consideration? During the agreement with the seller, do I just place it in his hands? And where is the $10 for consideration mentioned in the agreement?
I am a real estate agent and I think it's a wonderful career choice. If you have self determination, love working with people, think it's fun to show houses and don't want a regular 9-5 job, you will love it too.
I don't know what state you are in, but in California you are required to have three classes and then pass a test that is different from the three classes you take. So you have to study hard for the test, which is like taking an extra class.
One wonderful thing about real estate is that you can choose how many clients you want to work with. If you work a lot, you can make a good living. Or you can do it part time while you continue to go to school and your real estate income will help you get through college.
I don't think real estate is ever too risky to get into if you are self motivated. Even in a bad market, there are people who still want to buy and sell and they are looking for an agent who cares about their needs and will do whatever it takes to make their real estate sale go as smoothly as possible. If you like that idea, go for it.
where is your assignment fee listed on a hud-1 form, or IS it listed on there? do they request your tax payer id number at closing for tax purposes or do you have to handle that yourself?
it’s simply income that you have to report
I am a real estate agent in Australia with my own independent office.
I am not sure what courses are like through franchises, however, here, the courses with regular real estate schools are very good.
When you are looking to find an agency to work for, consider the following:
- do they regularly pay for training for their employees? what kind of training and how frequently?
- does management get regular training and upgrade their knowledge on changes in legislation etc (here we have special annual education to attend to stay in the know)
- what internal systems and procedures do they have that will assist people who are just starting out? for example, a good computer software and training resources in the office for when you get stuck on something.
- is there someone more experienced in the office that can mentor you?
I believe that a franchise is not necessarily the best, often all the training that they attend is in house, and they are not open to external training providers (which can be very beneficial).
You need to look at the individual operator of the office to decide if it will be a good environment to start your career or not.
is it listed as a assignment fee on the buyers side of the hud? ive HEARD that some lenders dont like that. as far as taxes, for clarification, are you ever given a 1099 or requested to show the tax number, or is it, strictly up to you, like you said? im not being redundant, just wanted a little more clarification.
that’s wats up