There are real estate bargains everywhere. Post 192

AMERICAN PUBLIC MEDIA Marketplace

6/25/12

Condo buyers square off against foreign investors

The condo market is on the rise in hot cities like Miami. But that means competition from international buyers who bring cash.

Kai Ryssdal: I remember being in Miami about three, four years ago and seeing high-rise after high-rise after high-rise of apartment buildings — condos that had been abandonded mid-construction. Just sitting there half-done after one of most most brutal real estate busts in the country. Today Miami condos are actually selling quite nicely. Prices are rising. Inventories are falling. But why?

Karen Burkett: Some locals are buying property. Ashley Arends hopes to become one of them.

Arends: It’s cheaper in the long run for me to buy a condo at this point in time.

Arends’ year-and-a-half hunt for a condo has tested her patience.

Arends: I’ve put bids in on almost 10 properties. And nothing.

This 29-year-old attorney has repeatedly been beaten on offers by cash buyers who’ve just pounced on the deals.

These buyers are investors from countries like Argentina, Brazil, Mexico, Spain, even Russia. Plenty of local realtors will tell you international investors saved the market. Phoenix is the only market hotter than Miami right now. Now, 90 percent [condos] are owned or rented.

RJ de Varona: All our sales are to foreign capital sources or high net worth foreign individuals who are looking for U.S. income-producing assets.

the Solution Group…buy properties, fix them up, rent them out and then sell. A very different business model from the years when flippers were buying on spec. De Varona says foreign investors consider the United States low risk because it has a stable political system and economy.

Unstable is how Michael Alen described his financial situation.

Michael Alen: I had a one bedroom, one-and-a-half bath, 768 square feet…It had a balcony, 15th floor. You see the water.

the 35-year-old video editor…was burdened with condo fees. He was paying extra to make up for owners who defaulted on their mortgages.

Alen: In 2010, I tried to sell it and I had nobody come and look at it. Same realtor, this year. The night we put it on the MLS, I had my first bid.

Burkett: Cash buyer?

Alen: Cash buyer. European. I think it’s great. I needed it and they came in and they saved me.

Alen ended up moving to a quieter, more affordable city called Pompano Beach.

Alen: I got double the square footage for less money and I have quite a bit of money to play around and make it exactly how I like.

For this seller, a foreign investor brought relief. But for buyers, higher prices and outside competition — it just adds to the stress of condo hunting in Miami’s suddenly hot market.

See the entire article at:  Condo buyers square off against foreign buyers

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Coach Mitch’s REFLECTIONS™

 

This is a good article because it shows several important realities about humans.

1 People buy with emotion.

Those who purchased Miami beachfront condos did so mostly because they bought into the hype about “the view.” On the real estate reality TV shows, the buyers gush about “the view,” as if seeing the sea is the only way to relax.

My view is that the main reason to consider a real estate purchase is that the price is well below the market. If you insist on having a view, then hunt for a really good deal – with a view. BTW, realtors think that a good deal is buying at 90% of asking price. I have never paid more than 50% of market value.

2 People ignore the warning signs and hope for the best.

While we never will sell at the high, we also don’t buy at the lows. The most profits are made when prices are low and going lower. The signs of the real estate bursting bubble were well announced, most were in denial or waited too long to act.

As a featured speaker a year prior to the bubble burst, we all knew that prices were soft and getting softer. I advised all my clients to sell, especially the ones in Florida, in Arizona and in California. Each one waited and each one regretted waiting. They all wanted to squeeze “just a little bit more” out of the situation.

3 When people smell blood they act like sharks.

As a market gets soft, potential buyers become very careful. Correctly ascertaining its direction, buyers are worried when the market is going down, The wariness starts when an upward trend slows. Since buyers don’t know if it is just a blip or if the market is going into a tumble, buyers either pull themselves out of the market or they offer low ball prices, in an effort to protect themselves. This is smart buying, but it acts to stifle the marketplace, further reducing prices.

4 If you dig deep enough, you will find gold.

Universally, peoples first reaction to a new idea is, “No, that can’t be done.” and then they wonder how you did it, in this case, how did you get such a good deal? If you look for sellers in trouble, then you will eventually find someone who will sell really cheap.

I have dealt with tax delinquent properties for a long time. Florida, including Miami, is riddled with properties where the owner cannot pay their property taxes and these desperate owners are hoping that someone will come along and save them. They are happy to give-a-way their equity just to be able to move on. Not everyone will sell cheap, but you are only looking for one; and some properties even have a great view.

5 Almost all will ignore great ideas or good advice and will continue with what is comfortable.

That is why people keep money in CD’s at .25%-2%. I don’t even look at a potential investment property unless I believe I can make 200% ROR. A 200% ROR margin provides dramatic safety.

Coach Mitch’s High Rate Of Return formula:

A desperate owner with the NEED to sell
+ lots of equity to give-a-way
+ a knowledgeable real estate investor
= High ROR potential.

The knowledge needed is more than the ability to find a desperate seller. This seller knows that he is in trouble. However, why should he choose to give his equity to you instead of his brother-in-law or that other real estate investor? You must be able to help that seller choose to give the equity to you.

6 Realtor Rule.

Realtors say the most important real estate rule is, “Location, Location, Location.” I suggest that the most important real estate rule is, “Price, Price, Price.” Now is the very best time to become involved as a real estate investor, but only if you buy at FIRE SALE prices.

    Coach Mitch’s FIRE SALE rule:

   1 Find a desperate owner with lots of equity and offer to buy at a FIRE SALE price (10%-25% of FMV)
2 See Rule #1        – that’s it.

Every market is always good – all the time. There are real estate bargains everywhere – all the time. You just have to know where to look. Someone, somewhere is going to have what you want, at the price you want to pay – all the time.

When you do find a situation, with the market being so soft, with cash being so tight, with banks not lending, why would you ever consider paying anything close to the current fair market value? That is a recipe for financial suicide. Why make the sellers problem into your problem?

Remember:

Price, Price, Price – say it again –

             Price, Price, Price – say it again –

                           Price, Price, Price…save your money

See Coach Mitch’s “Ridiculously Simple System…” ™ for details.

Best regards,