Investing in Real Estate: 2018 and Beyond

Investing in Real Estate: 2018 and Beyond

Real Estate is currently, and has always been, the most stable investment one can make for the future. Sure, many will read that first line and immediately think that this is a hack-job piece created by a salesperson, however, that could not be further from the truth. Let’s take a look at a few variables and see exactly why investing within your means in real estate is the safest choice for not just your money, but your future.

Real estate values are not subject to the massive price fluctuations like the stock market and commodities. These assets can swing multiple percentage points in a day. First and foremost, 2008 did not happen due to property simply losing value. The “crash” happened because Americans invested well beyond their means, leveraging bad debt to purchase multiple properties and when the economy had a financial downturn, it left people up the proverbial creek without a paddle. This economic crisis was created and manufactured not just by wall street greed, but due to the greed of the middle class as well. Real Estate did not lose value, American’s lost money and were unable to afford the mortgages they signed for with outlandish interest rates. American real estate had a surplus of supply as people could no longer afford the property due to being bankrupted by poor decisions and greedy lenders, assigning no doc loans to those who were all too eager to sign for them. Do you know what happened to American real estate as a direct result of the 2008 economic crisis? Foreign money moved in and bought what we could no longer afford. There was a downturn prior to this happening, but that was merely a supply-demand cause-effect situation playing out due to banks not lending (under the same circumstances) and real estate becoming too expensive to afford for the American middle class.

From 2008 onward, foreign money has been a massive piece of the stabilization of the American economy. If I turn this article political, we can truly go into why American economic infrastructure was destroyed, but that’s a thought for another day. Foreign money (and smart American money) has propelled our real estate market during times when our middle class could no longer afford real estate, due to spreading themselves too thin and becoming crippled with debt. We had a period I like to call “THE GREAT SALE”- real estate values weren’t much lower, however, SHORT SALES being approved and subsidized by the government moved our market forward. Deficiency judgements weren’t being assigned to the homeowner due to the government covering the tab. Sales volume was wild during this time period for a country going through an economic crisis, which falls between 2008 to 2012. From 2010 through 2012, residential sales grew roughly 10% each year until booming in 2013 past what they were even in 2007*.Short sales fueled this boom, and smart money in America, coupled with a massive influx of foreign capital assisted in this growth. This was our first real recovery period. People were able to drop their debt, and smart, qualified investors were able to capitalize.

Step into present day, and we see property values (and sales) have fully rebounded. 2017 and 2018 sales are eclipsing those of 2007, and are well on their way to retracing the buying frenzy of 2004/2005. The difference between now and then is quite simple. American real estate is now hitting these numbers without crippling homeowners, and without spreading capital too thin through refinancing and property acquisitions beyond the average American’s financial means. We are seeing a resurgence of QUALIFIED first time home buyers. Americans are receiving tax cuts and bonuses. Big business is reinvesting in our country. An incredible amount of manufacturing has returned to America. The life-blood of a truly dominant American economy is coming home.

We as south Floridians are in a truly unique position. We live in East California, and what I mean by that is simple: we are a part of one of the most dominant real estate markets in the world, not just America. Hollywood is slated for the most growth year over year in south Florida in my personal opinion. Here you have a city nestled in the shadows of Miami and Ft. Lauderdale, undergoing a massive infrastructure and branding overhaul. It is no longer solely a retirement destination. Downtown is bustling with new business, the beaches are bringing in huge names in Margaritaville and boutique hotels from around the world, and more importantly, maintaining their business. These places aren’t coming in, setting up shop, and calling it a day. They are investing long term in Hollywood. We have some of the most unique and high end restaurants in South Florida with names like Gigi’s Waterfront and Sardelli’s, along with being a host to a variety of culinary destinations in the heart of Downtown Hollywood. Even with this growth, there are still many areas within our city where a smart real estate investor can invest and walk into a great cap rate. Duplexes and triplexes throughout the city are available with 7-12% cap rates on the market TODAY. These properties were pulling numbers like this in 2004, 2008, 2012, and will always continue to churn out a solid investment for people intelligent enough to invest in the locomotives of the real estate industry. These are investments that pay you back in eight to twelve years, and everything after that is maintenance and profit. As long as you as the investor do not overextend beyond your means, you can always make slow and steady gains in the real estate industry. These aren’t investments solely for you, they are for your children and your children’s children.

Hollywood is not only a great city for investment, it is also an excellent city to raise a family, citing overall crime reductions of 11% in 2017, with a 26% reduction in violent crimes in 2016. These are numbers directly from the office of the City Manager, however with the police presence in Hollywood it is quite easy to see why we are able to reduce our crime rate. Hollywood invests in its future, and that investment is paying dividends for it as a city. Since installing CCTV and LPR technology, we have also seen a 77% decrease in vehicle burglaries on north beach alone, an almost complete eradication of something that plagued an area of the beach I personally used to live and have experienced first hand. Couple the crime rate reductions with the money pouring into this city from all angles, quite literally, and you have the recipe for an area slated for large economic growth over the next twenty years. You won’t become rich, or poor, as fast as messing around in the cryptocoin markets, but your money and your future will be safe. At the end of the day, safety, longevity, and happiness are all that matter in life. Invest in avenues that reflect those values.

Developers are building within their means, buyers are purchasing within their means, and lenders will only lend with extensive applications, not willing to lend to those attempting to extend beyond their means. Honesty is everything in today’s real estate market, and sales volume and valuation are currently reflecting that. You need an honest real estate agent assisting and guiding you through the purchasing process. Whether investing or purchasing for the first time, Costa Bella Realty Group will be your guiding light.

 

*(source: https://www.statista.com/statistics/226144/us-existing-home-sales/#0)

Michael Spitaleri

Costa Bella Realty Group

Real Estate Salesperson