The Global Financial Crisis and Real Estate (part 3)
Residential property markets are much more complex that retail. In most of the emerging market countries, internal demand is keeping the markets moving if not robust. The buyers in these markets are used to paying cash or a very high percentage of the price in cash. The entrepreneurs in the countries are used to making something out of nothing. There local use markets should suffer very little disruption. The 2nd home market that has been helping the more exotic locations will probably suffer some. The bargain hunters will reap a harvest. The builders and developers will lose some profit and have higher sales costs. The good ones will survive.
To make predictions in the developed economies is harder. Dr. Lawrence Yun made a speech about the BRIC countries at the Brazil Summit last month. He said the 3 things that emerging (real estate) markets need to advance are 1) Access to financing, 2) Mobility of the populations 3) Reduction or measurement of risk. This last really means transparency, economic freedom and respect for property rights. Even though he was talking about emerging markets, I see the relevance in the developed markets. Right now no-one really wants to buy because of uncertainty (risk). People who are mobile are unable to sell the homes they already own; so they have to rent.
The rental home market is still good in Charlotte. I have a feeling that in markets where there are a lot of foreclosures, there may be a lot of houses available and many unqualified renters trying to rent them. How many landlords will make the same mistakes the banks did?
Next posting will be a continuation of residential.
David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com
Showing posts with label Rental properties. Show all posts
Showing posts with label Rental properties. Show all posts
Thursday, October 16, 2008
Monday, July 30, 2007
Owning Rental Properties Abroad
Rental Properties Abroad
Just how good an idea is it to own rental properties abroad? There are several advantages and disadvantages to doing so. An astute investor can take advantage of currency trends and situations where the perceived risk is higher than the actual risk. The most important caveat is that the investor must have a deep understanding of the legal and social niceties of the market.
The rule that capital flows to the highest yield with the lowest risk, implies that one will receive a higher yield in risky markets. Unfortunately, this is not always the case. The countries in Central Europe that are new or coming members of the EU have seen such an increase in the price of properties that the yield is no higher than Western Europe. The safety is not commensurate with the yield.
Commercial properties probably offer the greatest security. In many countries residential tenants receive so much protection and preference over the landlord that one loses control of the property by renting it. In fast growing cities there is considerable upside potential in the rental rates. Some countries have some rather unique ways of renting properties.
In the USA and Western Europe, most commercial leases are on a net basis. This means the tenant pays for everything. In South America commercial leases are a fairly new phenomenon in many places. The occupant would buy a floor or half of the floor in an office building. This is changing. Most of the leases are not on a net basis now; but change is coming.
In South Korea, the deposit is often as high as the value of the property. The rent is extremely low or non-existent. The landlord can invest the security deposit and keep the return on that deposit. This could be a possible risk for the tenant.
Market knowledge and understanding of the local culture is essential in any investment.
David Segrest is a REALTOR in Charlotte, NC
David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World
Just how good an idea is it to own rental properties abroad? There are several advantages and disadvantages to doing so. An astute investor can take advantage of currency trends and situations where the perceived risk is higher than the actual risk. The most important caveat is that the investor must have a deep understanding of the legal and social niceties of the market.
The rule that capital flows to the highest yield with the lowest risk, implies that one will receive a higher yield in risky markets. Unfortunately, this is not always the case. The countries in Central Europe that are new or coming members of the EU have seen such an increase in the price of properties that the yield is no higher than Western Europe. The safety is not commensurate with the yield.
Commercial properties probably offer the greatest security. In many countries residential tenants receive so much protection and preference over the landlord that one loses control of the property by renting it. In fast growing cities there is considerable upside potential in the rental rates. Some countries have some rather unique ways of renting properties.
In the USA and Western Europe, most commercial leases are on a net basis. This means the tenant pays for everything. In South America commercial leases are a fairly new phenomenon in many places. The occupant would buy a floor or half of the floor in an office building. This is changing. Most of the leases are not on a net basis now; but change is coming.
In South Korea, the deposit is often as high as the value of the property. The rent is extremely low or non-existent. The landlord can invest the security deposit and keep the return on that deposit. This could be a possible risk for the tenant.
Market knowledge and understanding of the local culture is essential in any investment.
David Segrest is a REALTOR in Charlotte, NC
David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World
Friday, July 27, 2007
Rental Properties in Cartagena, Colombia
Rental Properties in Cartagena, Colombia
Yesterday, I was able to spend the day with my friend Carlos Bustamante with Inmobiliaria Bustamante & Cia. in Cartagena Colombia. He has a general brokerage operation, with emphasis on property management. We discussed rental properties in Cartagena.
The rent on commercial properties there is normally 1% of the value of the property per month. The rent on residential properties is from .3% to .5% of the value of the property. Rent increases are usually annual and are based on the Colombian equivalent of the Consumer Price Index. Because it is generally believed that the government manipulates these figures, the increase is usually the index plus a premium.
As in many countries, once a residential tenant is established in a home, removal of the tenant is quite difficult. For this reason there is a “tenant insurance” system. The landlord pays 2% of the rent to the insurance company. The insurance company screens the tenant and either approves or denies them. If the tenant fails to pay the rent by the “late payment” date, the landlord calls the insurance company and the insurance company pays the rent. The landlord may not accept payments from the tenant after this. The tenant must pay directly to the insurance company. The insurance company will collect the rent or evict the tenant. They pay the rent to the landlord for up to 36 months while the eviction process is going on.
If the eviction process takes over 36 months the insurance company no longer pays the rent. They will finish the eviction process. Does it seem frightful that the eviction process could take over 36 months?
David Segrest is a REALTOR in Charlotte, NC
David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World
Yesterday, I was able to spend the day with my friend Carlos Bustamante with Inmobiliaria Bustamante & Cia. in Cartagena Colombia. He has a general brokerage operation, with emphasis on property management. We discussed rental properties in Cartagena.
The rent on commercial properties there is normally 1% of the value of the property per month. The rent on residential properties is from .3% to .5% of the value of the property. Rent increases are usually annual and are based on the Colombian equivalent of the Consumer Price Index. Because it is generally believed that the government manipulates these figures, the increase is usually the index plus a premium.
As in many countries, once a residential tenant is established in a home, removal of the tenant is quite difficult. For this reason there is a “tenant insurance” system. The landlord pays 2% of the rent to the insurance company. The insurance company screens the tenant and either approves or denies them. If the tenant fails to pay the rent by the “late payment” date, the landlord calls the insurance company and the insurance company pays the rent. The landlord may not accept payments from the tenant after this. The tenant must pay directly to the insurance company. The insurance company will collect the rent or evict the tenant. They pay the rent to the landlord for up to 36 months while the eviction process is going on.
If the eviction process takes over 36 months the insurance company no longer pays the rent. They will finish the eviction process. Does it seem frightful that the eviction process could take over 36 months?
David Segrest is a REALTOR in Charlotte, NC
David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World
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