Saturday, July 26, 2014
Where Should I Invest $1,000,000?
That's the question I'm going to work on this weekend. I hope to be able to provide several viable options for several clients who are ready to invest in real estate.
The answer is easy if the prospective buyer is a first time home buyer, as owning your own home provides several benefits in addition to providing shelter. Once the primary residence is in place, and perhaps even the move-up residence, it becomes a matter of personal choice as to what real estate vehicle best fits your real estate portfolio model. Vacation home or income property are always options.
Although throughout history a great many people made their fortune in real estate, it is not without its risks. Ask anyone who was trapped "underwater" during the Great Recession and you will hear one horror housing story after another. With mortgages larger than the value of their property, many walked away, did a short sale or were foreclosed upon. Many learned the hard and costly lesson that real estate prices do not always go up. It was a difficult time in the world of real estate as well as the overall economy.
Real estate is a market, and like the stock market, today's prices do not reflect tomorrow's value. The secret sauce is location, and there is nothing new about that. However, it is wise to investigate why one location is superior to another even though they may be within the same general geographic neighborhood. The sub-categories of location are view ( buy one if you have the option), proximity to amenities such as shopping and dining, schools, freeways, public transportation (close enough to keep commutes easy, but far enough away to avoid noise and pollution), and perhaps the most difficult to project--future growth and value potential.
Every savvy investor would like to get in on the ground floor of the next trendy neighborhood, the deal of the decade and so on. The key to identifying real estate opportunities is to first know what's happening in the communities of interest and watch local trends. One of the driving forces of today's rental market is more young people are delaying the purchase of their first home. This translates to a higher demand for rental units in urban and beach locations as this is where young professionals want to live.
On the other hand, suburban areas with top-rated schools will attract renters who do not purchase due to affordability or other personal factors, but still want their children to enjoy the benefits of the best education they can provide. I've leased many Palos Verdes homes for this exact reason.
Income producing property in a highly sought-after neighborhood may not be offered at a bargain price, especially if in a coastal location, but chances are there will be a growing demand for such properties. This translates to increase in value (equity building) and a low vacancy rate--both positive factors from an investor's point of view.
If you're in the market to purchase income property, or a second home, we would happy to discuss your investment goals and help you meet them.
- Norma Toering - Broker/Owner of Charlemagne Intl Properties
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