Property Management Training, Real Estate Investing, Economic Drivers and Las Vegas

So to switch things up a little, in this property management training story I wanted to step back and take a look at some of the factors that can affect the cash flow and the possible appreciation, or heaven forbid deprecation, of your real estate investment.

Before I talk about that, though, let me share a story about one of my favorite questionable rental housing markets.

Las Vegas, Nevada.

Property Management Training In Vegas

I’m picking on Vegas because lately I’ve been hearing a lot of otherwise intelligent people suggest that now is a good time to invest there. Maybe yes, maybe no.

Here’s my story.

Years ago, before the house rental market really took off I had the opportunity to travel to Las Vegas once every month or so, for the better part of a year.

What eventually struck be about the place was how absolutely artificial it was, and what a huge – and I mean huge – impact the casino industry had on the city.

Bigger Than Some Small Towns

Most if the casinos have infrastructures larger than some small towns. And the number of people they employ is huge.

There are schools devoted strictly on training people how to work in various jobs in the casinos.

And I don’t mean casino or hospitality management. I mean blackjack dealers, waiters, car hops, jobs of that nature.

There are actually schools devoted strictly to this. One morning on the way to an appointment I drove by one, and the parking lot was jam packed.

Now you may be reading this and thinking to yourself, “No kidding Jeffrey, Vegas is all about gambling.”

And you would be right. Except I would say, it’s ALL about gambling.

How Economic Drivers Influence Real Estate Investing and Property Management

Which means if you’re investing in a rental property in Las Vegas you’re really investing in the casino industry, and how well the casino industry is doing will have a 100% impact on the success of your investment and property management efforts.

The casino industry in Vegas is what we’d call the economic driver.

If they’re driving the economy forward, if they’re employing people, paying a decent wage, and managing to keep them happy, your how to rent my house efforts will be positively impacted because there will be plenty of people who can afford to rent your house.

On the other hand, if the casino isn’t doing well, then you’d better make sure you’re applying all of the methods from the property management training you’ve received if you want your rental property to be a success.

For sure Vegas is an extreme example, but it illustrates my point well.

I’m always surprised that 9 out of 10 of the real estate investors I see focus only on price and spend little if no time thinking about the economic drivers for the area they’re investing in.

It’s Not All About Price

Naturally, if you’ve invested in some basic property management training you’re in the top 10% and understand economic drivers and the big picture.

Here are some of the top items I consider when thinking about economic drivers, real estate investments, and managing real estate:

Is the market ever going to come back?

This is true of certain neighborhoods within a city as well as certain cities or even parts of the country. If your market is dependent on politics, its probably already booming. On the other hand, if you’re hoping that the auto industry in Detroit will come back, that I’m not so sure about.

How stable are the rents?

Consider whether more rental homes will come onto the market at prices lower than what you paid. If so, your competition will have more flexibility in adjusting rental rates that you will.

Will the demand for your rental property soften?

Right now there’s a lot of activity in the apartment and multi-family market.

Common sense property management training should cover the pros and cons of different property types.

If you’re investing in multi-family property, spend some time thinking about how your rents and tenant quality might be affected if more and more single family homes come on the market at rents close to what your apartment rents are.

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The California Real Estate Rollercoaster

The year 2010 brings to a close one of the most volatile decades in the history of the California real estate industry. Median home prices increased at an unprecedented rate to all-time highs five years ago, while the second half of the decade witnessed the sharpest decline in home prices ever recorded. It’s hard to imagine that the same ten years that saw homes being purchased sight-unseen at twenty percent above asking price also experienced widespread foreclosures and lofty inventories of properties for sale. Home builders that were once purchasing as much land as they could find were soon abandoning partially completed developments. Homebuyers that once struggled to find a home they could afford were suddenly availed to a wide array of reasonably priced houses. So now that the California real estate rollercoaster has rapidly taken us up and down, what does the future hold?

Excitement aside, it seems safe to say that market stability would be much more favorable when compared against the extreme fluctuations experienced over the previous decade. Thankfully most real estate economic indicators over the past several months do point towards a leveling out of housing values. However, the primary concern in the back of every real estate professional’s mind is whether a second wave of foreclosures will negatively impact housing values in the near future. Should we be ready to pull back the safety bar and lift our arms in the air to prepare for the next plunge on the rollercoaster?

This determination should begin with an analysis of two of the most prominent real estate market statistics: housing sales and median prices. A look at California homes sales shows that between 500,000 to 600,000 single family residences have been sold each month in the state for the last year-and-a-half consistently. These stable statistics are well above the trough of 254,650 home sales that occurred in October of 2007. So given the currently high levels of affordability compared to the peak years of the housing boom, a dramatic drop in the number of homes sold seems very unlikely.

A quick examination of California median home prices during the first quarter of 2010 may initially raise fears of a potential double dip as housing values decreased from $306,820 to $279,840. However, it is important to note that the median price of $279,840 was actually 14.1% above the median from a year ago. Affordability is also more than double than the levels of a few years ago when the median home price in California exceeded $550,000. The fact that more buyers can afford to buy homes should continue to drive demand and prevent a significant decline in home prices.

When applying the law of supply and demand to housing values, one must assess the number of homes for sale in order to ensure that this supply, or housing inventory, does not exceed the current level of demand. The first quarter of 2010 revealed a housing inventory of 6.3 months – the time it would take for all of the homes currently on the market to sell at the current rate of sales activity. Although this figure may seem large, California’s long-run average is 7 months of inventory. Accordingly, inventory levels below 7 months have always fueled year-to-year price gains in the past. So if inventory levels can continue to be contained, housing values should begin appreciating again in the near future.

Housing inventory is what leads us to the primary quandary as to whether record breaking loan default notices over the past year will lead to yet another wave of foreclosures that will ultimately be re-sold by lenders in bulk. In theory, this could dramatically increase housing inventories beyond demand and cause another drop in home prices. Fortunately this event seems unlikely now that both banks and the Federal Government are increasingly working hard on various levels to promote foreclosure avoidance through loan modifications and short sales. These efforts in combination with recently instituted housing tax benefits, increased affordability, low inventories and increased demand should all help to counter the effects of future foreclosures.

So even though most patrons don’t enjoy a relatively slow and stable rollercoaster, it is safe to say that most Californians welcome the idea of this ride becoming a little safer and predictable.

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Why Now Is A Great Time To Invest In Resort Real Estate

When Headlines Don’t Match The Real Data

Real estate, like life, follows a series of cycles. Whether you consider it locally, nationally, or globally – it’s an eternal exercise in ebb and flow, but one that over time tracks continually upwards. While the mainstream media is currently focused on eye-catching headlines reporting supposedly dire real estate economic conditions, it fails to recognize – and certainly fails to report – the differences between national, regional and local data, as well as the vast chasm between the primary vs. the vacation/secondary home market.

Current news trends amplify the real estate woes of only a handful of areas in the U.S., where speculating by ‘flippers’ and sub-prime loans to primary homebuyers have, admittedly, caused significant real estate downturns. However, while these issues affect perhaps 10% of the States in this country, markets in a large portion of the other 45 states are experiencing everything from a modest gain to a near-record high real estate environment.

One of the strongest segments of those rising market areas is the resort or vacation/second home market. Because of the nature of this market – where buyers are generally well-funded and financially capable of pursuing vacation or possibly future retirement area options – this real estate segment is typically less volatile than primary or investor-driven markets. Highly-leveraged buyers, those that help create volatility, represent only a small fraction of the resort/vacation/second home markets.

As a result, the economic forecast for this portion of the market continues on an upward swing. In 2006, vacation home sales accounted for 14% of all the nation’s home sales – according to the National Association of Realtors (a 2% increase over 2005). And even in the current economic climate, it is anticipated that 2007 statistics will continue to hold strong.

In fact, according to real estate market analysts such as renowned economist Harry Dent, the success of the resort/vacation/second home arena is truly nothing more than a simple ‘numbers’ game — driven by the sheer volume of Baby Boomers venturing ever closer to the retirement horizon.

“Rising Baby Boom birth trends…show a rising wave of peak vacation-home buyers from 2000 into 2024,” according to The Next Great Bubble Boom (H. S. Dent, 2006).

Indeed, the combination of the financial resources of the post-WWII generation, coupled with the continual rise of technological advances indicate a profound reinforcement of this prediction. No longer tied to the physical constraints of living in the city to remain commercially productive – Boomers are now recognizing their ability to live where they can play…….and rely on technology to maintain their career connection. As indicated by the chart below, the next great migration wave is off to the small towns and resort communities………and that’s precisely where the resort/vacation lifestyle is to be found.

All of these statistics and forecasts for the future of resort real estate, however, seem to fly in the face of what can only be considered by the news media: a “Great Bad News” reporting event. So it’s not surprising that the data of the past, current and future trends that investing in resort/vacation properties is well-supported – specifically those resorts located in the Rocky Mountains – is rarely seen.

In the more well-known and long-established ski resort areas – such as Jackson Hole, Wyoming and Aspen, Vail, Breckenridge, and Telluride Colorado – during the past 10 years, the value of resort properties purchased in these markets has risen from 23-28% annually. 2006 saw record results, with 2007 on track to break even those records. Condominiums typically lead this market with homes in a close second position — and as the Rocky Mountain lifestyle lends itself to year-round enjoyment of these second-home and resort properties – these statistics should really come as no surprise.

But the truth is – you won’t see them making headlines anytime soon.

Perhaps for the savvy real estate buyer, though — that’s good news. Few things are more satisfying than having done your own research, which leads you to making an advantageous and unique real estate investment. The Rocky Mountains cut a wide swath through the western U.S., and offers some of the most spectacular recreation, landscape, and lifestyles imaginable.

Look for resort areas that are earlier in the growth curve, and have a large, financially secure entity that supports massive infrastructure and community amenity improvements. These may include government supported improvements (roads, utilities, airport upgrades, etc.) or amenities (new ski lifts, golf courses, conference facilities and waterparks) that are developed by well-funded companies with a proven track record for quality. Whistler, British Columbia is one example of a location that had both strong government and corporate support twenty years ago, and real estate values have more than tripled there over the last decade.

While resorts like Aspen, Vail, Sun Valley and Jackson Hole are in their “maturing” stage, look towards those areas that have just recently “hit the radar screen”, like Central Oregon (Bend), Couer d’Alene, ID, Whitefish, MT and Kellogg, ID.

By purchasing in one of these “up and coming” resort areas, a smart buyer can still stumble into a ground-floor opportunity – similar to those seen in Vail and Aspen twenty years ago.

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An Overview on Calgary Real Estate Economic Conditions

The correction in the housing market, fall in interest rates and growth in house hold income has brought the affordability of Calgary homes better than ever before. However, the degree of housing affordability has improved far better than the 1980′s cycle. The present growth is found to be similar with that of early 1990′s real estate cycle. Record lows are spotted as another important reason for the increase in affordability and still further lowering is expected. Calgary agents instruct people to budget for higher interest rates to stay away from excessive risks. Speaking about the market, there are three individual yet connected types of real estate markets are available. They are Rental Market, Resale Market and the Construction Market.

One of the intelligent ways to evaluate your assets is just by comparing them with safe investments. However, Government bonds are considered to be the safest investments but at the same time real estate investments also have got some significant advantages over the bonds. One of the best features of real estate investments is the growth of dividend and appreciation of the asset value with time. The new house price index for Calgary is showing a steady rise since 2008 whereas the resale market conditions were not so smooth but however, showed peak positive results in 2007. Looking on to the current trends of market conditions, the Calgary realtors say that they are experiencing a decline every year which is about 1.6% from the year of 2008. Also the single family home prices dropped up to 44%. But there was a considerable rise in the sales of high end houses for sale in Calgary.

Generally low employment and high inflation rates are two factors that support real estate growth. Looking back the history the market, during the period of 1973-1983 there was a steep rise in home prices only because of the two factors mentioned above which Unemployment and Inflation were. However, things changed after 1983 when the unemployment rate cooled off significantly to lower rates which lead to the fall in home prices. If we take the period of 2005-2006 into consideration, a ratio of 50% sales to new listings ratio kept prices in balance. The current Calgary market conditions reports, an approximate value of 3.6% unemployment rate and an inflation rate of about 4.3% and undoubtedly, these two are spotted as the main reasons for the conservative optimism prevailing in the current Calgary real estate market.

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Costa Rica Real Estate – Economic, Political, and Social Stability

Amidst the political and social turbulence that plagues many of the Latin America countries, Costa Rica has been able to sidestep that. The economic, political and social stability of Costa Rica is one characteristic that has distinguished it through its entire contemporary history and as one of its most important strengths, has enabled it to reach great success in luring foreign investors.

Costa Rica’s government has been a stable democracy since 1949. The country’s success was recognized in 1987 when President Arias Sanchez was awarded the Nobel Peace Prize. The award was granted for the president’s high ethical standards and the image that he portrayed as a representative of the Costa Rican people. The people share in his high ethics and morals. They are recognized to be among the top educated and socially aware people in the world.

Political Stability

Costa Rica was the first country in the world to constitutionally abolish its army. Following civil war in the 1940′s, Costa Rica ended rule by armed forces and established a democratic republic. Since 1949, the Costa Rican government has been a stable democracy that is governed by a strong, democratic constitution. Even before the current democracy was established, the Costa Rican government stemmed from a political tradition of rule by the majority. Its government has also been able to work towards pacification and successfully avoid the widespread violence that occurs throughout most of Latin America. Costa Rica is one of the most stable governments in the region.

Economic Stability

For the past twenty years, Costa Rica has not experienced any economic crisis. For a developing country, that is a great accomplishment. Poverty has been reduced from 40 percent of the population to below 20 percent of the population, which is over a 50 percent reduction. The average economic growth rate of the country is approximately 2.5 percent each year. Costa Rica has increased their participation in world trade as well. Exports rose from 30 percent of the GDP in 1980 to 50 percent in 2000. The increase in trade has led to an expansion of the economy and greatly reduced the economy’s vulnerability to financial crisis. As the Central American Free Trade Agreement (CAFTA) was implemented, Costa Rica was further integrated into the world economy and economic stability was further established.

With a $1.9-billion-a-year tourism industry, Costa Rica stands as the most visited nation in the Central American region. Most of the tourists come from the U.S. (54%) which translates into a relatively high expenditure per tourist of $1000 per trip. In 2005, tourism contributed with 8.1% of the country┬┤s GNP and represented 13.3% of direct and indirect employment. Ecotourism is extremely popular with the many tourists visiting the extensive national parks and protected areas around the country. Costa Rica was a pioneer in this type of tourism and the country is recognized as one of the few with real ecotourism. The protection of the environment has also become a top priority to Costa Ricans and their government.

Social Stability

As Costa Rica has succeeded in implementing political and economic stability, many of the country’s policies focus on social stability. Economic and political policies have helped to ensure that the basic needs of the people are being met and the standard of living is continually improving. The Costa Rican people are well-educated and nearly the whole population is literate. The literacy rate in Costa Rica is of 96% (CIA World Factbook, February 2007). Elementary and high schools are found throughout the country in practically every community. Universal public education is guaranteed in the Constitution. Primary education is obligatory, and both preschool and high school are free. There are both state and private universities.

According to the United Nations Study conducted in 1980s, Costa Rica’s medical system was first in Latin America and ranked near the United States and Canada among the 20 best in the world. There is access to clean water and health services and the life expectancy rate is high. The World Health Report (1995) placed Costa Rica third in life expectancy in the world. All of Costa Rica’s social indicators are among the best in Latin America.

All of the achievements that the Costa Rican government has made in the past 50 years have led to political, economic, and social stability. It is no reason why Costa Rica Real Estate Investments are increasing at an alarming rate each year. According to the U.S. Embassy’s website, over 20,000 private American citizens reside in the country. While property prices still remain extremely reasonable, the great attraction to Costa Rica, on all levels, is raising property prices and many investors are enjoying double-digit appreciation annually.

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