Real Estate Articles

Everybody wants to understand the real estate trends to assure their investments. However, the trend with huge ups and few downs is not helping much to analyse the situation and nobody is yet sure, what future holds.

In such situation, a new and reliable real estate investment alternative becomes quite convenient to adopt. Only an alternative of the existing residential real estate in Panama can secure high rate of return.

Over the last few years, economy of Panama has seen a drastic upward trend. To supplement the high economic pace; population and cultural aspects have changed a lot. These factors altogether played a huge role in securing more investment from the foreigners. Statistics show and predicts that in the coming years, flow of foreign direct investment in the real estate sector will grow even further. The question is where to invest?

It is no secret that commercial office space in Panama is now passing its premium time. The future actually holds an even better situation with hoards of incoming foreigners and relocating companies looking to open up additional shops across Panama. As consequences, price of real estate will go up; as the basic economic theory illustrates: low supply, high demand = higher rate of return.

Most investors coming to Panama are familiar with the residential real estate option. They feel, they will purchase five or ten condos or pieces of land and will lead a life with enough cash when they retire. — In today’s circumstances, this might not be a right option.

The fact is, people who make the most money in Panama do not own units. They own buildings instead. They can afford a great lifestyle with their passive income. This allows them to relax on their yacht and smoke outrageously long cigars! They can do it because they made an alternative choice in the beginning, unlike most of the investors.

According to Cushman & Wakefield, throughout the world including Panama, commercial real estate is increasing at extraordinary rates. It has become a high-roller game of poker where it requires a high investment to get in, but the rewards are significantly more thrilling.

That leaves us with the questions - where to invest and where not to. Is it wise to search for retail locations, floors of office buildings and small office structures?

First of all, one should pre-determine the types of client; she / he would rent the space to. For instance, Glitzy storefront offices should turn ones attention on the Banking District and satellite neighborhoods including El Cangrejo, Marbella and Obarrio. Business executives wearing thousand dollar suits probably will rent the place to be in the central location. Prices in these areas for ‘already-built’ commercial space can be anywhere from around $1300/m2 to $3,000/m2. Pre-construction sites might cost around $1800/m2. If one charges 1% to 2% rental rates, there will have no problem in finding potential tenants.

For various reasons, residential development in the neighborhoods near Tocumen Airport is now semi-stunted. However, neighborhoods surrounding the area are the homes of majority of Panama City’s bread and butter workforce who will be hired to fill up the above mentioned offices.

Now……..

Here is the catch:- would not it be nice to have an office that is close to home? The answer is, off course it would. What can we do than?

We can simply re-locate the office premises in the neighborhoods. We are talking about warehouse-type buildings, where a call center or a small size enterprise can be set up with hundreds of people working. There will be no problems with parking or traffic. Additionally, real estate is extremely cheap there and renovation costs are lower compared to the central zone. In the coming years, more people will prefer working in this area and demand will rise which will ensure a higher rate of return compared to residential real estates.

Investing in commercial real estate today in Panama City will prove to be of great long-term value. This alternative investment opportunity has been overlooked so far. Now it is the time to make use of it before it is too late.

About Knightsbrige Investment group:
Knightsbridge Investment Group offers investment properties for discerning individuals around the world. Providing the foreign investor with a large selection of properties, Knightsbridge is a comprehensive knowledge source for real estate including all legal and financial aspects involved in purchase.
http://www.knightsbridgeinvest-panama.com
1800 583 2779 USA Toll free
00507 228 07 Panama office
0800 032 5039 UK free phone

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2008 marks the first year when 78 million baby-boomers born between 1946 to 1964 start retiring. This is the first time in the US history that there is so many people who will be eligible for AARP membership. So how will this affect you when it’s your turn to retire? And what should you do now? Since it has never happened before, you don’t have the benefits of learning from history. Let’s look at the big picture from 30,000 feet:

1. Uncle Sam is currently spending about $1.30 for every tax dollar he collects. As of March 2008, the US national debt has skyrocketed to over $9.38 trillion dollars or about $30,894 per citizen. The majority or about 44% of total debt is owned by foreign or international investors. The borrowing pace has also accelerated as he added $2.38 trillion dollars more debt just less than 4 years! The Government Accountability Office (GAO) warned this kind of fiscal policy is simply unsustainable!
2. Per Michael Astrue, Commissioner of Social Security Administration, Uncle Sam will begin paying more benefits to retirees than he collects from active workers starting in 2017! The situation for the Medicare Trust fund which pays for hospital benefits is even worse. To many retirees, Medicare is even more important than Social Security checks. Per David Walker, the former US Comptroller Director, the Medicare Trust Fund will pay out more than it collect starting in 2008. This is because Americans are living longer while having fewer children. The baby boom generation just compounds the problem. So there are fewer young workers paying taxes to support the retirees. Government spending on health care alone could double by 2017 to more than 2 trillion dollars a year as a result of baby boom generation retiring and rising costs of drugs & medical expenses. As a consequence, the reserves for the Medicare trust fund will be depleted by 2019!
3. On top of that, the US has a huge appetite for imports. The trade deficit reached $708 Billion dollars in 2007. It has been rapidly increasing since 1997 when the figure was only $108 Billion. So more and more of our capital is sent to the Middle East and China to pay for our addiction to oil and imports. Per the Wall Street Journal (WSJ), the US has spent $10B since 2000 to expand railroad tracks, freight yards and locomotives; and planned to invest another $12B. It’s not an accident the US is expanding its railroads the first time in nearly a century. One of the primary reasons is to haul more cheap Asian imports to heartland cities.

So the government will have to spend more and more money that it does not have. To put it simply, the problems are so big and a financial train wreck is inevitable. The question is not if but rather when the tipping point triggering an unprecedented financial crisis will happen. So to make sure you will be least impacted by what is about to come, you will need plenty of cash when you are retired.

If you work for Corporate America, you probably participate in the 401K plan which invests mostly in stocks/mutual funds and bonds. While 401k is a convenient retirement plan for many as it allows people to make a small monthly tax-deferred contribution, it may not be the solution for everyone. Some people prefer to own more tangible real estates with limited supplies that they have total control and most likely will not reinstate financial results years later! Most if not all financial experts agree that as you get older, you should reduce your investment in the stock market due to its volatility. In addition, the stock market is often promoted & considered as a best investment in the long term. However, the WSJ summarizes it all on its March 26, 2008 issue “By one broad measure, the stock market has made no progress over the past nine years.” So where should you move your investment to? This article discusses about an alternative plan to 401K and for a lack of better name the “equity-of-my-home-is-my-retirement-investment-plan”. It is intended to introduce a new paradigm in retirement investment that is not promoted by Fidelity, Smith Barney, eTrade or Charles Schwab.

There are several reasons why commercial real estate investment is a strong candidate:

1. It is a fairly stable investment. This is an important factor as investors want to make sure their equity is also preserved throughout their retirement years. Unlike stocks, real estate investment is not sensitive to market fluctuation. Commercial real estate investment will shield people from going through the emotional roller coaster as the stock value widely fluctuates sometimes within a very short time. The stock of the Bear Stearns, the fifth biggest investment bank in the US is an example. J.P. Morgan Chase & Co. initially offered $2 a share for what was traded at $150/share in March 2007 with a book value of $84/share and Lehman Brothers reiterated its $110 price target just 3 days earlier! It sparked soul searching questions about the true, not book, not market, value of stocks & mutual funds. You don’t see this kind of dramatic volatility in commercial real estate.
2. It generates strong cash flow after paying all expenses and mortgage. To those who invest for retirement purposes, this is another important criteria. In order to retire with dignity you need cold hard cash. Your social security check which was never intended to be your only source of retirement income will most likely not sufficient. The maximum benefit for a 65 years old person in 2008 is only $2185/month provided you have maximized your contribution every year after you turned 21 (you can estimate your social security benefit check on www.ssa.gov/OACT/quickcalc). For those who are still working for Corporate America, this cash flow gives you a second source of income just in case. The simple truth is you are the company’s most important asset until you get the pink slip. Besides, your gray hair is often a liability! To achieve strong cash flow, investors often look for properties where “cap rate” is higher than the interest of the loan. This means you also make a profit on the money you borrow! Texas is an area where many commercial properties offer 8-9% cap rate and it is a good place to invest for strong income. Commercial properties are like a golden goose that keeps laying eggs. You can just eat the eggs, i.e. cash flow, without slaughtering the goose, i.e. your equity, for meat.
3. It is an excellent hedge against inflation. As gas approaches 4 dollars per gallon, you will have to pay more on almost everything. In addition, the US dollar is falling against most foreign currencies so imports will cost more (is there anything made in the US any more?) All these things cause inflation to go up at least in the foreseeable future. Commercial properties tend to hold values very well for two reasons: strong cash flow and limited supplies. Besides, the leases often have an annual rent increase so you should have a raise every year. As the rent increases, the property value is more likely to remain the same or to go up.
4. It gives you a wide range of landlord responsibilities options from purely passive to active. Some single-tenant properties, e.g. restaurants or pharmacies offer 20 years absolute triple-net lease with no landlord responsibilities whatsoever. This means you don’t have to worry about looking for a new tenant for a long time. The tenants maintain your property in first-class condition & pay for all property taxes while all you have to do is cash the rent check and pay the mortgage. This kind of property is ideal when you don’t want to do anything.
5. It also offers potential for appreciation while allows you to depreciate for income tax purposes. This may increase dramatically the overall return of the investment. It is a more prudent investment than residential real estate investment. Due to strong cash flow, you don’t have to gamble on appreciation to make money and thus are less likely to invest on pure speculation. If the property appreciates in value then your investment return is much better. However, if it does not appreciate rapidly and thus you don’t get rich quick, your rental income is more than enough to cover the loan payment & expenses. As a result, your property is less likely to be foreclosed. So it’s not an accident that the default rate for commercial properties is only 4/10 of 1%, at least five to ten times lower than that of residential rental properties. Of course real estate properties are more difficult to sell compared to 401k shares. This actually encourages you to hold the properties for long term investment and discourages you to sell prematurely.

Below is a case to illustrate these principles:

The Smiths (name changed to protect privacy) had their own business and lived in a very expensive neighborhood in the San Francisco Bay Area. They planned to sell their business and retired in the next 2-3 years. They still wanted to maintain current life style. Over the years, they had invested in real estate and had quite a bit of equities in several residential properties. However, they figured out these residential properties would not generate enough cash flow for them to retire comfortably. They decided to exchange these properties for ones with more income. They sold one of the properties and netted about $1M. While the Smiths were looking for properties with high rental income, they wanted to make sure the investment also preserved their equity. This meant they would need to invest in a stable and growing area. They chose to do a 1031 tax-deferred exchange for a $2.825M Italian restaurant located in front of a mall in the fast growing Atlanta metro. The financial information showed the tenant was doing very well and expected to do well in the future due to its highly-visible and irreplaceable location. They applied for $1.8M 5-year fixed-rate 30-year amortization loan at 6.95% interest rate. The property generated $19,000 of net rental income a month after expenses (8% cap) while the mortgage payment was $11,915. So each month, the Smiths net over $7000 of cash flow –several times more than the expected amount of their social security check. The tenant signs a 20 years absolute triple-net lease in which there are no landlord responsibilities. Since the lease had a 2% annual rent increase, the Smiths could expect to get even more cash flow in the future.

Conclusion: The turbulent stock market in 2008 and the subprime crisis are a belated wake up call to reevaluate the emphasis on investment for growth & appreciation to investment for income. Investing in commercial real estate is a good alternative solution to generate a strong & stable stream of retirement income for baby boomers while preserving your equity. However, it is not a plan for everyone as it requires a large sum of down payment. 2008 marks the first year of baby boomer generation retiring which means the time to take action is now before everyone jumps into the bandwagon.

Information in this article is reliable but not guaranteed to be correct.

David V. Tran is the President and Chief Investment Advisor of eFunding Inc., a commercial real estate & loan brokerage, property management & leasing, and TIC company in San Jose, CA. His website is http://www.efundingcom.com. He may be contacted at (408) 288-5500. eFunding does business in all 50 states. He is selected as Pensco Trust’s (a major self-directed IRA custodian) Preferred Professional and is the #1 US commercial real estate expert author. David currently offers 3 FREE real estate investment seminars:

1. How to invest in commercial real estate for retirement income NOW.
2. How to maximize cash flow with 1031 tax-deferred exchange.
3. TIC: Fractional ownership in high-value commercial properties.

You are welcome to share this article, unedited and in its entirety, with anyone you like. You may not remove this text. © 2007-2008 eFunding, Inc

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Have you ever heard these infomercials advertising that you can buy properties worth tens of thousands of dollars for as little as $100?

The difference between you and me is that you probably did not believe these claims and I did.

So back in 1999 I bought one of these manuals on how to buy Tax Delinquent Properties for as little as $100.00 and guess what, it did not really work but it also did kind of work. So I stuck to it and changed it, improved it and made it better year after year until finally in 2002 I figured out all the missing pieces and had a system that works like a charm and allows anyone to buy properties for as little as $100.00.

Since 2002 I have now personally done over 5000 Real Estate Transactions. I have literally bought and sold, not as an agent for other people, but as a principal in each transaction over 5,000 properties and made money consistently in good markets, great markets and in bad markets.

So how does it work. Well back then I was told to send people who own properties a letter just asking them if they would give the property to me for a token payment of let’s say $50.00. You can imagine how well that worked. Of course it did not or almost not work.

However, as I said above, I also kind of worked. I realized that most people who did respond to my letter had one thing in common. They owed property taxes and had decided to let their property go for taxes.

Hmmmm, I thought, so what if I could find these people in masses, and target my letters to them and offer them a little more than $50.00 but not much more? And that is what I set out to do.

Now I have a simple step by step system which allows you to massively increase the odds that one of the people you identify as a target for a mailing campaign is in deed one of the Fed-up Long time property owners who have decided to let their property go for taxes.

Now it is not a crap shoot anymore, but instead a targeted business where I know that if I send X letters I will get Y responses and chances are I will buy Z number of properties. It’s a simple numbers game. And the best is that my system does not require cold calls, or any kind of “sales” technique. No, the property owner actually calls you and you then make an offer in writing without even talking to the seller again. So if he likes the offer, great he will accept, if not he will toss it out but you don’t have to face the uncomfortable situation of having to negotiate with sellers.

So I am here to tell you that buying properties for as little as $100.00 is very possible, you just need to have the right system in place and need to have a targeted approach and not just some vague idea of how to do this.

Jack Bosch began investing in real estate in 1999. Along the way he discovered a secret system of buying land for literally pennies on the dollar and reselling the property for thousands more. Since his first transaction he has personally bought and sold over 5000 properties using his fine tuned system. Jack to this day still invests and profits from real estate, however now he also offers his secret strategy of buying and selling real estate for huge profits to You! You can find his complete wealth building system at http://www.LandForPennies.com and at http://www.SecretLandProfits.com

Article Source: http://EzineArticles.com/?expert=Jack_Bosch