How To Filter The Best Real Estate Investment Opportunities Of 2010

“Falling markets over the past 18-plus months have created crisis buy opportunities,” writes resident global real estate investing expert Lief Simon, “for personal use and for investment. New Year 2010 is a year for action. I’ll present specific opportunities starting next week.

“Meantime…invest in a piece of real estate in another country? How do you get started?

“First, you ask yourself why you’re buying–for investment or for personal use. The answer may not be clear-cut. And the best case is when you find a piece of real estate that holds out the potential for an investment return (in the form of capital appreciation and/or a yield from rental) and that also happens to lie in a place where you want to spend time.

“State your objectives and exit strategy expectations clearly for yourself and for anyone else buying with you. Every decision you make related to the eventual purchase is affected by the property’s intended use. If you’re buying straight up for profit, things are simplified, as every decision is based on the numbers. If you’re buying for personal use, on the other hand, even part-time, you’ll make your choices based on many things, including some that can’t be quantified in a spreadsheet.

“Now that you understand why you’re buying, you need to decide where you want to buy what. I’m personally excited about the opportunities I see on offer as we enter 2010 and, again, will introduce you to them in coming days. How will I determine where I’ll put my own money this New Year? I make all my buy decisions after passing every opportunity through the following filters:
Path of Progress. This is a key factor when buying for investment but important if you’re buying a retirement or second home overseas, as well. What infrastructure improvements are planned? A new airport, new train station, new highway, new hospital, etc., can mean a new universe of potential buyers…which is good news if you’re buying as an investor looking to develop or to flip. These things, though, also translate to better living.
Inventory Supply and Demand. In Panama City, right now, for example, a glut of high-rise condos is coming online. These units were launched and sold pre-construction over the past two-plus years. Now they’re being delivered…and their volume is one reason Panama’s capital market continues to soften.
Costs of Acquisition. Remember that they go beyond agent commissions. Depending on the market, they can also include: legal fees, notary fees, registration fees, title insurance (we strongly recommend it), and transfer taxes (sometimes called “stamp duty”). In Ireland, for example, stamp duty can be as much as 9% of the purchase price.
Carrying Costs. Including: maintenance (a house on the beach requires a lot of it, for example); a caretaker (if you won’t be in residence full-time yourself); property taxes (not every country charges them, and, in some countries, they’re negligible); income taxes (if you’ll be earning rental income); capital gains taxes (when you eventually resell…again, not every country charges them); other local taxes; property management expense (you’ll need a property manager if you intend to rent); rental management expense (separate from property management and, again, necessary unless you’re going to manage all the details of your rental investment yourself…something I don’t advise); and homeowner’s association/building/condo fees.
Economic Outlook. Critical if you’re buying for investment, but you don’t want to ignore the market climate even if you’re buying purely for personal use. Markets move up and down…and then up again. At what point in this cycle is the market where you’re thinking about buying right now? In which direction is it moving?
Opportunity for Diversification. In terms of market, type of investment, type of property, and currency.
Budget and Cash Flow. Everything follows from this. Be clear on not only how much capital you have but also how much you want to put into any particular investment. Make this determination before you start shopping, and don’t forget to include the total costs of acquisition in your calculations.”
Kathleen Peddicord

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