ADVICE/FINANCIAL PLANNING/REAL ESTATE

REAL ESTATE DYSFUNCTION

Are there still deals to be made in the real estate market?

Apparently yes according to a client who builds mixed commercial/residential real estate developments up north.

According to him, not all real estate is in the dumper. He shares that as long as you have time on your side (i.e. can hold onto the properties for 3-5 years), adequate capital, access to credit and the “right” real estate inventory, you will survive this major market correction.

I checked with another client, a successful commercial real estate broker, who shared the same sentiment.

MARKET CORRECTION?
Your interpretation of the market depends on how you are personally positioned.

You probably feel that the economy is moving towards a recession if you are over-leveraged and can’t wait out the real estate market pull-back. Many real estate investors used the “no-money” down strategy or did not take the time to calculate the estimated amount of funds needed to make repairs or maintain the properties in case of vacancies. Unfortunately, some have also lost jobs and not planned for this contingency to cover negative monthly cash flow properties.

On the other hand, you might not be feeling as much pressure and interpret that the economy is experiencing some pull-back or a major market correction if you are holding onto properties that have positive cash flows and manageable debts. Your lifestyle has probably not been altered significantly.

WHAT IF YOUR 9-5 IS SUBSIDIZING YOUR SIDE-LINE REAL ESTATE BUSINESS
Don’t panic. If you are not in foreclosure but starting to feel the stress of your real estate investments, you must take action. immediately.

At a minimum, do the following:

  • Assess where you are (i.e. determine the estimated fair values of all of your real estate, loan positions, cash flows, vacancy rates).
  • Establish a realistic plan of what you feel you should do, based upon your current and most likely future personal situation (i.e. you want an exit strategy if you can’t afford to continue to operating in this manner).
  • Communicate with your lenders if you are behind on your mortgages or think that you will be become delinquent soon to renegotiate.
  • Contact your real estate broker if you are not an experienced or savvy real estate investor.
    If you want to check out a few sources for real estate investors, visit your library and pickup the following books: “The Peebles Principles: Tales and Tactics from an Entrepreneur’s Life of Winning Deals, Succeeding in Business and Creating a Fortune From Scratch,” by Don Peebles; “The Weekend Millionaire’s Secrets to Investing in Real Estate: How to Become Wealthy in Your Spare Time,” by Mike Summey and Roger Dawson; and “Beyond the Bubble: How to Keep the Real Estate Market in Perspective and Profit no Matter What Happens,” by Michael Thomsett and Joshua Kahr.

Real estate investing can be a great investment vehicle to include as part of your portfolio as long as you plan, track and make realistic decisions.

Genevia Gee Fulbright, CPA is President & COO of Fulbright & Fulbright, CPA, PA, a business strategist, tax advisor and author of Make the Leap: Shift from Corporate Worker to Entrepreneur and most recent book Make the Leap: From Mom & Pop to Good Enough to Sell (Infinity Publishing). Her sound financial planning advice tips can be read regularly on www.urbanthoughtcollective.com. Visit Fulbright at www.makeleap.com or call (919)544-0398.


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Comments

September 22nd, 2008 at 12:43 am kamalp says:

But is now a good time to buy firsttime? I see places on the cheap nowdayz that are hecka tempting but Im scured I admit.

September 22nd, 2008 at 1:15 am RENEP says:

i have a question: should we keep our $$$ in the bank in light of the current bailout and what not?

September 22nd, 2008 at 1:45 am property says:

What you Suggest Should one invest in real estate market now?

Daniel Marshel
http://www.bhomes.com

September 22nd, 2008 at 5:40 am lilmamma86 says:

Dang girl zi bet you ballin OKAaY LOL!

September 22nd, 2008 at 7:22 am nicq says:

Im looking into going into the real estate field so thanks…this info was very informative!

September 22nd, 2008 at 7:35 am heatmizer says:

I admit I need to be schooled more on what’s going on in the economy Its a mystery to me all I know is its bad!

September 22nd, 2008 at 8:06 am Nicole Malave says:

every bit of info we can get to help arm ourselves for the coming storm is critical!

September 22nd, 2008 at 9:07 am Mr.Fantastic says:

whoa buying a house is a lot of work lol!

September 22nd, 2008 at 9:24 am Tina says:

I have property I think I’m just going to sit on it and pray for the best

September 22nd, 2008 at 9:39 am Ashley says:

Great information the market is going a little nuts right now so we need all the financial information we can get.

September 22nd, 2008 at 9:43 am Jessica Hubbard says:

the market is still good for a lot of things yes some can profit from others losses but hey that is capitalism at its best

September 22nd, 2008 at 10:19 am Tina says:

Great info. Do you have any predictions on how long the real estate market is going to stay down Ms. Filbright?

September 22nd, 2008 at 10:20 am culturepop says:

Great book suggestions and you guys even if you don’t have much money make it work for you

September 22nd, 2008 at 10:43 am Krista Wills says:

thank you!!!

September 22nd, 2008 at 11:32 am MR TIBBS says:

I’m stepping into the real estate areana its a great time

September 22nd, 2008 at 2:33 pm choppy says:

get yours ya’ll

September 22nd, 2008 at 4:54 pm Phillip Giddings says:

what a stressful time

September 22nd, 2008 at 5:08 pm SUPPOSED NEGRO says:

Finally some sane advice on this site. Ever heard of being objective you simpletons.

September 22nd, 2008 at 6:00 pm Jane Kennedy says:

@Supposed Negro. We don’t play this. This is a respectful environment where all opinions are welcome, but name calling is just not cool. What’s up with that?

September 22nd, 2008 at 6:27 pm belly says:

great advice as always

September 23rd, 2008 at 9:04 am thelma says:

I may get a hold of my financial situation yet!

September 23rd, 2008 at 11:05 am Genevia Fulbright says:

Thanks for the feedback!

Real estate professionals have always shared with me that location, location, location is very critical.

Find a deal, run the numbers, check out the competition and understand the market that you’re investing.

Other tips include checking with your city planners and building permits division to determine if there have been commercial and/or residential permits issued for your target location (i.e. are they anticipating growth in the area, are people repairing the houses in the neighborhood regularly). Is there excessive crime in the area compared to other locations in the city (i.e. burglary reports, home invasions, etc…)?

Do your homework!

Don’t rush into a deal unless you understand it and as needed have solicited solid advice from “qualified” professionals.

Great thing about it is that much of this research is readily available on-line at no charge.

Having reviewed many deals for clients both before and after closings those that take the time to thoroughly review the cash flows, visit the neighborhoods and work with qualified real estate professionals if they are not a trained real estate investor are much more successful.

You should treat purchasing real estate like any other business deal:

- review the product
- compare it to the market (i.e. other inventories available, competitors, etc…)
- understand how you’re going to finance and maintain the business (do you have enough capital)
- understand how much cash flow and “profits” you anticipate (i.e. prepare projections)
- screen partners carefully (i.e. check out your partner’s backgrounds, cash flow requirements/needs, credit situation, talents and relevant experience he/she is bringing to the table)

Good luck!

September 23rd, 2008 at 6:30 pm Tony Price says:

Genevia
great and informative article, I would also caution people to be careful of Real Estate scams that will surface in HUGE #’s during the current market, do your homework, cross those T’s and Dot those I’s , just ask the many people who are losing their homes what spending that extra time doing the due dilligence means

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