As a Realtor in Acadiana, I take great pride in telling people that real estate, as an investment, is still a smart move. The current average sales price, compared to last year, is only down about 2.5 percent, and those reductions have primarily hit the higher-end price points.
Whether it’s your own home, or you’ve made the transition into the role of an investor — an owner of income-producing properties — your risk is low.
A 40-something petroleum engineer is one such client of mine. When he contacts me, our conversation goes something like this: “Teresa, I’ve just spotted a listing in area G1. (He’s learned the geographic codes for Acadiana like the back of his hand.) What do you know about values in that neighborhood? Are they holding?”
“They’re solid,” I reply. “If you noticed, there’s only one other listing in that area.”
“The virtual tour looks good,” he says, “but I want to get in there today. Please set it up. Thanks. Later!”
He is well on his way to acquiring another income property, and our entire conversation happened via text messages.
Such is the high-speed world of real estate investment. These are not necessarily “flippers” hoping to make some quick cash. These are business people with an eye to the future and long-term investments. Being in the right place at the right time was once the name of the game. Today it is not so much that kind of luck as it is making use of technology.
Search engines in real estate Web sites are complemented by RSS (Really Simple Syndication) feeds that keep the serious investor constantly in the know when new properties are posted. A window can appear on your computer desktop all day long, giving you access to the latest listings in the Realtor Association of Acadiana’s Multiple Listing Service. Van Eaton & Romero, for example, has an iGoogle gadget that accomplishes this, and other local community sites have been developed for constant, top of mind market awareness and information flow.
This instant access combined with virtual tours, mortgage calculators, insurance rates and property taxes — all now available online — means the busy professional can manage a separate investment career at night and on the weekend. Personal accounting software has also made the management of income properties less complicated and less cumbersome, though a relationship with a handyman is still critical.
When Lafayette Parish Tax Assessor Conrad Comeaux succeeded in placing all our property tax rolls online, Acadiana truly took a leap forward. Access to information is what makes the process work. Just be aware, this so-called part-time job is not for the faint of heart.
Here are a few tips:
• Single family, residential property investing? Deal with a full-time residential agent experienced with single-family investment properties. This is especially important when a market is shifting. It takes time for sales to go through the closing process and get reported. A real estate agent can make you aware of these sometime subtle pricing shifts in our market; ask them to share current market statistics.
• Multi-family, residential property investing? Deal with a full-time commercial agent. Only he knows the intricacies of commercial codes and regulations at a level that will be of true value to you.
• Build a network of specialists, including insurance agent, mortgage lender, appraiser, inspector, pest controller, contractor, painter, handyman
• Study the going rates for rent/leases in an area before making a purchase
• Visit these properties to size up your competition
• Determine profitability, net operating income, price-earnings ratio. (house P/E ratio = house price divided by rent, minus expenses)
• Make conservative cash flow projections
• Determine capitalization rate (net operating income divided by purchase price)
• Determine true property value (total operating income divided by capitalization rate)
• Schedule and conduct regular return on investment check-ups to determine if you should sell or maintain the property. The return (your rental income) divided by investment X 100 is a general ROI formula.
If you pull out the Katrina and Rita factor of 2005/2006, property values have steadily risen in Acadiana since 1991, so essentially we’re still plotting upward.
As my engineer client says, or better yet texts, “Some people may disagree with me, but my real estate investments help me sleep at night. I can’t always say that about the stock market.”
You may never invest in real estate beyond your own dwelling, but for those who do, our local market is a tangible, practical and sound investment. And with today’s technology, it’s a much easier process.
Teresa Hamilton of Van Eaton & Romero has been one of Lafayette’s top agents for more than two decades. This representation is based in whole or in part on data supplied by the Realtor Association of Acadiana Multiple Listing Service. Neither the board nor its MLS guarantees or is in any way responsible for its accuracy.
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