SECRETS OF MAKING MONEY IN REAL STATE


The value of any piece of property is determined by the income that can
be generated by that property when it is developed to its highest and best
use from this moment in time, and onward into the future.
There are million of acres of land that will never have any real value, that
cannot be developed to produce income, to satisfy specific human needs or to
earn any money.

If you sincerely desire to enter the real state field, to purchase property
as an owner or investor, there are several things that you will need to learn
to make money in real state. Each factors is essential, and your knowledge of
these factors will give you an edge that will enable you to make wiser real
state investment decision.

4 FACTORS FOR INTELLIGENT INVESTING

FACTOR 1:
You must study the economics of the city and the neighborhood where
you are thinking of investing. Look at the neighborhood as though it
were a company, and look at a house in that neighborhood as though it
were a share of stocks in that company.
Some cities and some neighborhood are in a state of decline. These are
risky choices for real state speculations.These are the primarily the
places where you can get homes with no down. What you are looking for
is cities and neighborhoods that are growing and that are therefore
good choices for investment.
FACTOR 2:
You need to learn to learn the various factors that make a property
valuable in a specific area.
FACTOR 3:
You need to learn how to evaluate and appraise real state in order
to determine what kind of a piece you can afford to pay.
FACTOR 4:
You must learn how to negotiate and how to sell people on the idea
of dealing with you,and or selling you terms when they are selling you
their property.

TEN FACTORS TO CONSIDER IN CHOOSING A CITY

1. LEVEL OF BUSINESS ACTIVITY

Start with a big picture. What is the general level of business
activity in the country as a whole? Nationwide recessions and
depressions hurt all real state values everywhere, but nationwide
booms or prosperous economic times, do not necessarily help all
real state values in the same way.

2. LOCAL BUSINESS ACTIVITY

Study the level of local business activity. The most important
indicator to look at is the number of new business start-ups,
and the growth of employment in the area. You need 3% to 4% of
new businesses starting up every year just to maintain the same
level of employment because of the rate of job and company
attrition.

3. IDENTIFY THE TRENDS IN EMPLOYMENT

Examine changes in the employment and income sources for the
community. Is industry or business moving in or out? Are the
Government offices moving in or out? Where are the jobs coming
from,and where are the jobs going? The level of employment will
have an enormous impact on rental rates.

4. STUDY LOCAL INTEREST RATES AND FINANCING

Before investing in a city,you must determine the general financing
terms and interest rates of real state in that area.Are they going
up or down? Are interest rates higher or lower than the national
averages? How much of a down payment will you have to make to buy
a home in that particular area? What kind of terms can you get?
What kind of interest rates will you have to pay on mortgage
financing?

5. STUDY POPULATION TRENDS

You must understand the trends in population growth or decline. Here
is an important formula.Real state prices increases at twice the
rate of population growth and/or three times the rate of inflation.
This means that,if there was no inflation, and the population was
growing 3%per year,real state prices would grow at two times 3% or
6% per year.If the population remained stable, but inflation was
growing at 3%per year,home prices would increase at three times that,
or 9% per year.
But let say that you have 3% population growth and 3%inflation rate.
That would be a total of 6% plus 9% would be 15% increase or upward
preasure on real state prices,specially home prices,in any given
12 months period.
It is therefore important that you look at population growth or
decline.If population is declining, real state values will decline
at twice that rate.If an area is losing 2%population per annum,
real state values will decline at 4% in that area. This would not
a good area in which to invest.NEVER TRY TO BUCK THE TREND.

6. IDENTIFY THE TASTE AND PREFERENCE

Study the changes in the taste and preference of home buyers.What
kind of home do people want now? What kind of homes will they want
in the future? How does that compare with the homes that are for
sale at the present time?
Many home are built in a style that is outdated. People don't want
to live in that type of house. It is very important that you don't
invest in those houses,no matter what kind of a price you can get.
Think a long term.

7. DETERMINE THE LEVEL OF BUILDING ACTIVITY

Find out the volume of building activity and construction cost
levels and trends. How many new homes are build each year relative
to the rate of absorption? In other words,if an area requires 1000
new houses new year for the growing population,and developers are
building 1000 new houses per year, you will have very little upward
preasure on housing prices.
8. CHECK THE VACANCY RATE


You must consider the vacancy rate in the area in which you are
thinking of investing. This perhaps the most important single factor
affecting real state market trends and values. The basic rule is
that a vacancy rate below 5% in apartment or other rental accomodation
is good. This vacancy rate causes upward preasure on home prices.
A vacancy rate above 10% is poor and causes downward preasure on
home prices. A vacancy rate between 5% to 10% is a factor that you
must use your judgement to evaluate.

9. ANALYSE THE RELATIONSHIP BETWEEN NUMBERS

Study the relationship between prices, rents,and construction costs.
These are important market conditions. For example,wide differences
between listing and final sales prices are specially significant.
In most markets,85% to 90% is a common difference between the
listing price and what the purchaser actually pays. If the ratio
is above or below that, it can have a positive or negative effect
on home prices.
For example,in one area,a typical house is listed for P100,000.
Home listing for P100,000 however are selling for P75,000 to P80,000.
These means that there will be downward preasure on home prices.
In another area,if homes are listed for P100,000 are selling at
P95,000, P98,000 or at full price, this means that there will be
upward preasure on home prices.Before you invest in that area, it
is essential that you know the disparity between listing prices and
final sales price.

10. STUDY THE LEVEL OF REAL STATE SALES VOLUME

When investing in a city, you must determine the volume of marketing
activity taking place in real state in that area. This is reflected
in the number of deeds and mortgage recorded, and the volume of
foreclosures.You can get this information down to city hall,ask them
for the statistics on activity within the community. Get sufficient
information so that you can compare present levels of home building,
rental rates, and sales activity with past levels to see if the
market is getting better or worse for home investing.

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