It has been said that more fortunes have been made in real estate than any other endevor. Real estate has several factors that make it an excellent choice to increase one's wealth:

• Scarcity - The most valuable lands lie along the coastal regions of the United States in and around populated areas. In areas like Florida and a few others, most of the most desireable land has been developed. In Broward County Florida (Fort Lauderdale) and Palm Beach County (Boca Raton, Delray Beach and Palm Beach) there is very little undeveloped land available for construction. We are already experiencing the demolition of older homes in order to build new ones in thier place in the most desireable locations. With global, US, and Florida population increasing, the price of these desireable properties will likely continue to increase in spite of the current downturn.
• Leverage - If you put $10,000 in the stock market and it returns 10% in one year you have increased your equity to $11,000. If, however, you put $10,000 down on a $100,000 property and the property value increases 5% over the same year, you have increased your equity to $15,000 or by 50%.
• Mortgage rates are at very low levels now. On residential and investment property the interest charges are usually deductible (consult your tax accountant).
• Price - Today, there is an excellent opportunity to aquire residential and commercial property at a price far below the fair market value. The Short Sale is the method of choice for lenders and banks who do not want to damage thier credit rating by taking ownership of the property. The process used for establishing the price does not use a conventional appraisal but, instead, uses a Broker Price Opinion (BPO), The difference? Appraisals only consider Arms-Length transactions in arriving at a price while the BPO considers all sales and foreclosures. Normally, in this market, the BPO is quite a bit lower. Then, the lender usually accepts a percentage of the BPO without regard to the amount owed on the property

It has also been said that the money is made in real estate when you buy, not when you sell. This is generally taken to mean that it is very important to buy in the correct area - with an eye to appreciation and cash flow (for investment property) and to pay the right price. As the seller pays the expense, it makes great sense to enlist the help of an experienced and knowledgeable realtor that specializes in the area and type of property that you are interested in.

An often asked question about rental real estate is: Can I make money with this particular propery? Real estate investment gains (or losses) can be divided into two major areas that can be calcualted: capital appreciation and after-tax cash flow.

Appreciation can be calculated by subtracting the value of the home at a past point in time, say one year, from the appraised value today. Most mortgage companies require 20% downpayment on rental property, althought one can do better with excellent credit. If you put $20,000 down on a $100,000 property and it experiences only a 5% appreciation over the next year, your $20,000 equity will have grown to $25,000 or 25% improvement. There is, of course, no guarantee that propety values will increase over the next year. Real Estate is usually a long-term venture and over the long term real estate has been an excellent investment. You might think that prices are not going up at all, but remember that the price of a rental property is based on the rental prices. I certain areas of South Florida, rents have been going up for over a year now.

After-tax Cashflow is calculated for each property on the basis of factors such as prospective rental income, vacancy allowance, expenses, insurance, debt service (interest on the mortgage loan), and your personal marginal tax bracket. Once these factors are known, a basic calculation will determing the net monthy income (or loss) for the property in question. The higher your marginal tax bracket the more you can pay for a property and still be after-tax cash flow positive.  

If you would like to know more about the investment opportunities in Florida or which areas and property types are likely to appreciate the most quickly, contact me and I will be happy to answer any questions you may have.