When You Decide to Invest, Let Us Help You Avoid the Pitfalls
September 12, 2011
HARRY’S WEEKLY UPDATE
A CURRENT LOOK AT THE COLORADO SPRINGS RESIDENTAIL real estate MARKET
WHEN YOU DECIDE TO INVEST, LET US HELP YOU AVOID THE PITFALLS
As we have been emphasizing in recent issues of our Enewsletters, there are great opportunities for investors in our Colorado Springs real estate market. Low prices, low mortgage interest rates, large inventories of available homes, low vacancy rates, etc. all combine to offer a window of opportunity for investment that may never open again.
In fact, according to Realtor Magazine, more homes are turning into rentals. Nearly 35% of occupied homes were rented in 2010, which is a 33.8% increase from 2000.
Furthermore, Hotpads.com, a real estate research firm, states that the vacancy rate for rentals is at its lowest level since 2003 and the average nationwide rent increased to $1,320 in 2010, for a jump of 11.6%.
However, smart investors in real estate should be aware of some of the potential problems they might run into, when they jump into the investment market. As the Wall Street Journal points out (Sept. 10-11, 2011), first-time investors frequently make one or more of the following mistakes:
- Confusing a cheap deal with a good deal. Location is still the most important factor for an investor. Are renters likely to want to live in the property? That’s where we can help you analyze the specific local neighborhood history.
- Overlooking key costs. Closing costs, maintenance, etc. will all impact your eventual profit. We are very aware of all of these ‘add-ons’ and can help you evaluate the true cost of your prospective property.
- Forgetting that time is money.You lose money when your property is empty, whether you are painting it, or between tenants. Knowing how to adjust your rents accordingly is something we can help you with.
- Assuming you will sit back and watch the money roll in. Unless you are willing to devote yourself exclusively to maintaining your rental property, you will probably need the assistance of a good property management firm to screen tenants, handle maintenance, etc. We can help you contact a reputable individual or company to handle the day-to-day management issues that are a necessary part of your investment.
- Underestimating repair costs. Unless you have experience with home repairs and intend to do your own maintenance, you will probably be surprised by the routine costs involved in the maintenance of rental properties. (Many experts recommend setting aside a reserve fund to handle such maintenance). Again, we will be happy to work with you in determining how much ‘set-aside’ you should plan for.
- Assuming that owning a rental is the same as owning a home. You are willing to put up with many small inconveniences and defects in your own home that renters will not accept. Here again, a good property manager can take over that aspect of investment property. Give us a call to discuss this aspect of investment.
Investors used to aim for rents that amounted to 1% of the purchase price of their investment. (That’s $1000 a month in rent for a $100,000 home). That equals an annual gross return of 12%
Today, however, because of the factors discussed above, many investors are getting rents that equal 2% of the purchase price. That’s quite an inducement to acquire an investment property before the window closes on this opportunity.
Call us at 598-3200, or (800) 677-MOVE(6683) and we will be happy to chat with you about the investment opportunities available in our local market.
TWO MORE REASONS FOR BUYING NOW !!!!
On October 1, 2011, the FHA maximum loan amount available from FHA will drop in most cities, including Colorado Springs, from $325,000 to $272,200. Experts warn that this change in policy will prevent Fannie Mae and Freddie Mac from financing a significant segment of the real estate market and will put a lot of Buyers out of the market.
This drop in the conforming loan limit is expected to affect 2% of all homes nationwide.
Another reason for buying now is that many lenders are getting reluctant to lend to anyone except those who have ‘pristine credit’. Even the Wall Street Journal (Tuesday, Sept. 6, 2011) noted that many prospective Buyers with excellent credit have been turned away by some lenders.
Fortunately, we have good, working relationships with our local lenders and we have not had any trouble getting our clients financed. If you have had any problems in this area, give us a call. (598-3200, or (800) 677-MOVE(6683).
Bottom line: Better Buy Now.!!
THE BROOKINGS INSTITUTE SAYS COLORADO SPRINGS IS POISED FOR RECOVERY
According to a recent study by the Brookings Institute, Colorado Springs is ninth among the nation’s 100 largest metropolitan areas in a ranking looking at the resiliency of an area’s industries and the gap between the education of its workforce and the needs of its employers.
Jonathan Rothwell, a Brookings senior research analyst and the author of the report, stated, “There is no reason Colorado Springs shouldn’t bounce back once the nation’s economy begins improving. Colorado Springs has one of the best balanced economies between workers’ education related to the needs of their jobs”.
LATEST STATISTICS FOR COLORADO SPRINGS
The most recent Sales and Listing report of statistics for the Pikes Peak area, published by the Pikes Peak Association of Realtors, shows that home sales in August jumped from a year ago by the biggest percentage in nearly 1 ½ years.
Sales of new and existing homes totaled 832 in August, up 20.9% from a year earlier. This was the largest increase since March of 2010, when sales benefited from the federal tax credit for first-time homebuyers (A program which expired in June of 2010).
The August increase followed an 11.9% gain in July, the first indication of improvement after sales fell in 10 of the previous 12 months.
Most experts agree that the current rise in sales is due to the low interest mortgage rates which are currently available.
Click here for the latest Sales and Listing statistics for the Pikes Peak area
And, please remember, I would be honored to serve as your Broker for all of your residential real estate needs. I want to help you, my reader, make the most prudent and accurate Real Estate business decision.
Also if you know of anyone who desires to buy or sell local real estate, or, who is moving in or out of the Pikes Peak region, remember that, with over 39 years of providing relocation and Real Estate services to clients throughout the country, I am uniquely qualified to assist them with the relocation process, including buying and/or selling their homes on both ends of their move. Please allow me to implement my negotiating skills on your behalf.
Just click on the icon at the top of this email to listen to my latest podcast. ….
And, if you would like to learn more about our Job Loss Protection Program, please contact us.
JOKE OF THE WEEK
We thought you might be interested in the Winner of the Top Ten Dumbest Criminals of 2010
THE WINNER!
A Charlotte, NC, a man purchased a case of very rare, very expensive cigars. He proceeded to insure them against, among other things, fire.
Within a month, having smoked his entire stockpile of cigars and without having made even his first premium payment on the policy, the man filed a claim against the insurance company. In his claim, the man stated the cigars were lost "in a series of small fires."
The insurance company refused to pay, citing the obvious reason that the man had consumed the cigars in the normal fashion. The man sued....and won.
In delivering the ruling the judge agreeing that the claim was frivolous, stated nevertheless that the man held a policy from the company in which it had warranted that the cigars were insurable and also guaranteed that it would insure against fire, without defining what it considered to be "unacceptable fire," and was obligated to pay the claim.
Rather than endure a lengthy and costly appeal process the insurance company accepted the ruling and paid the man $15,000 for the rare cigars he lost in "the fires." After the man cashed the check, however, the company had him arrested on 24 counts of arson. With his own insurance claim and testimony from the previous case being used against him, the man was convicted of intentionally burning his insured property and sentenced to 24 months in jail and a $24,000 fine.
The moral of the story?
Darned if we can tell.
