Helpful Real Estate Blog

It is not a secret to everyone that real estate can be regarded as one of the best and reliable way of investing money. While one considers buying realty as vital necessity another contrives to make, multiply or reserve their money through carrying out deals with immovable property. If you ask any good economist-analyst how to spend the free money you possess he will persuade you without any hesitation that real-estate industry is quite an attractive sphere for investment. And the main reason of such conclusion is the constant growth of prices.  So, as Florida Association of Realtors mentions average price for real estate in Florida increased 13% statewide from April 2005 to April 2006, and shot up 96% from five years ago.
But there are some important peculiarities that set you thinking before investing in realty. One of them is high prices and requirement of big sum of money. Another one is that you have a rather big chance to buy so called “bad product” and loose your money. So you should have good knowledge in this sphere and compile much data before making a decision. Perhaps it would be more advisable to receive consultation from a good specialist.

I’d like to distinguish
some basic modes of making money through transactions with immovable property:

1) Resale. This mode is acceptable chiefly for so called real-estate agents (realtors, brokers, etc.) and let them to earn quite big sums of money, but it is rather risky and requires special skills and knowledge.

2) Rent. This way is convenient for ordinary homeowners since it gives good and stable inflow of receipts and the guarantee to keep your means.

3) Resale after making some changes. For example you can buy a lot and resell it after building a house on it at higher price, or you can buy an old building or flat and resell it after reconstruction or repair. This mode requires additional investments and constant cooperation with construction firms and organizations. Some people who choose this way have there own construction gang.

As regards prices the main factors that influence the value of real estate in my opinion are:

1) Locality. There is no doubt that the situation of the realty in the ecologically clean districts in proximity to the peaces of nature (such as forests, parks, reservoirs), with absence of harmful enterprises and manufactures increases the price strongly.

2) State of the immovable property. Good condition and presence of luxurious finishes and amenities also augments the price.

3) Dimensions.

4) The way of buying or selling realty: without intermediaries or with the help of special agents (brokers, realtors, etc.). Last add to the main price of the realty the sum of commission that hovers at around 5-7 percent. 

Value of commissions depends much on actions of the agents operating on the real-estate market.
So action of the majority of the real estate industry members as a cartel leads to the mitigation of competition and as a result to the growth of prices and the deterioration of services.
Such tendencies are observed last years and this brings
huge commissions for the industry.
All this increase attractiveness of the real-estate industry for realtors and brokers but put homebuyers (especially those who buy estate for their personal needs and
use) in unfavorable conditions.  

Although in accordance with the National Association of Realtors “real-estate industry has one of the most competitive business environments in the world, characterized by low barriers to entry, intense personal client service and a results-based compensation structure. Real estate consumers can choose from nearly 80,000 real estate brokerages and more than 2 million real estate licensees, more than 1.3 million of whom are Realtors. Competition is fierce. In fact, discount brokerages and many innovative business models are doing very well today and the average real estate commission, as computed by Real Trends, has fallen from 5.5% in 1998 to 5.1% in 2003.”
And despite high prices and other hurdles I still assure that investment in real estate is the best way to  keep your money and get extra income.

This entry was posted on Thursday, June 29th, 2006 at 1:23 pm and is filed under Real estate market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.