Real Estate as an Investment a Business or a Home…

• Residential Real Estate Sales and Service.
• Commercial/Multi-Family Investments.
• Property Development.

There is no doubt the Seattle real estate market has been in a downturn. Experienced real estate professionals know this happens as a normal course of business, as in other years, and other downturns, real estate as an investment will recover.

The right time to buy and sell real estate is not based on what is said in newspapers, TV, the DJI, interest rate charts, unsold homes inventory charts or any other measure; but it is based on what your individual circumstances dictate. What is good for you, has very little to do with what is good for your neighbor…when it comes to buying/selling a home or business or an investment.

I’m not a cheerleader for the real estate industry.  You might be surprised when you hear from me “don’t buy it or don’t sell it”, for I’m not a salesperson but more of a trusted adviser.  I’ll provide you with the guidance, knowledge, information you’ll need to make an informed buying or selling decision.

I’m always a bit perplexed when I take someone out into the market place and “we” find something that looks to be a great deal within the first few days of researching the market.  Because I’ll tell them “yes, that is a good deal” and “no, I don’t advise you to buy it”. Unfortunately we have not done enough looking.  I know it’s a good deal because I know the market, the problem is you’ve just begun to educate yourself about this market and I would suggest you make a more educated decision so you are fully confidant in your decision.  Utilmatly the decision is yours to make and this property will probably sell to someone else real soon because it is a good deal.  But we can always wait for the next good deal, it will come around…they always do.

~Lawrence P Nitkey

 

Real Estate as an Investment

There is no doubt the Seattle real estate market IS (perhaps “has been“) in a downturn. Experienced real estate professionals know this happens as a normal course of business, as in other years, and other downturns, real estate as an investment will recover.

The right time to buy and sell real estate is not based on what is said in newspapers, TV, the DJI, interest rate charts, unsold homes inventory charts or any other measure; but it is based on what your individual circumstances dictate. What is good for you, has very little to do with what is good for your neighbor…when it comes to buying/selling a home or business or an investment.

I know a person who developed some property in the early ’60′s and attempted to sell the development. The Seattle real estate market was experiencing a downturn then too. He tried to sell but to no avail, so he had to keep it. Knowing full well this whole thing was probably one big mistake, it created a real financial burden for some years, but he powered through. He ended up keeping the development for some 45 years. Needless to say several zeros were added to the left side of the decimal point from his original asking price to his sale price. I heard him describe this as “one of the best mistakes I ever made”.

Another person I know bought a house in the ’80′s for about $100,000. Shortly thereafter the house was worth 10%-15% less than the purchase price. Today she still owns this house, has lived in it for some 20 plus years, raised her children in this home, countless memories, greeted her future son-in-law…on and on from a 15% reversal to today’s value over $800,000.

 

What Does History Tell Us?

Of course history tells us a lot.  After all who wants to repeat the mistakes of the past?  The ones you have made or an even better lesson to capitalize on are the mistakes of others…and learn from those.

Real estate statistics are a very slow moving indicator…when you look at a snapshot of say the first quarter, or second quarter of the current year for instance.  An even more bizarre approach is to lump all closed sales together (for a particular short period of time), add them all up (sum), then divide by the total number of sales to arrive at an average sales price…and then proclaim that the real estate market is either going up or down.  Equally bizarre is the medium price…where you take the same group, line them up one on top of the other and then find the “middle”.

If the low end of the market is selling fast and furious (and that accounts for the majority of sales right now) why in the world would that drag down the market value of say a 5000 square foot bluff view home?  Why would that once 1 million dollar home now be worth 20% less because the majority of homes being sold are in the first time buyer price range?

I know what you “experienced” real estate people are thinking.  The fact is…”there are a lot (perhaps most) of “distressed” sales or REO (an acronym for Real Estate Owned by lenders) sales happening right now.”  If an “identical” home (or any property) sells in my neighborhood for a certain low price than the one I am going to sell should sell for the same price (but only if the market is in equilibrium).

An interesting fact is that lenders are “renegotiating” the loan terms with home owners at risk of default.  These same home owners then get behind on the “new” loans and eventually are foreclosed on.  What is interesting about this is…that in this “declining” market what 1 year ago would have sold for 20% more, now sells for 20% less further degrading an already degrading market.  My questing is, if the lender would have foreclosed and resold the home 1 year ago at the higher price would then the rest of the “identical” homes in that neighborhood be worth more today?

I could post a chart here that shows the average price of “sold” homes on a yearly basis back say…oh, 20 years.  But you already know what it would look like, but if you don’t just “Google” it.  Based on “history” real estate IS one of the many ways to create great wealth.  There are other ways too, but real estate is my favorite way…because I understand it.

 

The Accidental Landlord

Spokane, WA.

So it seems these two 80+ year old parents were trying to help out their son with some temporary housing needs.  They “allowed” him to live in the detached garage in the backyard of their home.  One day the son was arrested, and taken to jail.

Soon the parents began to see a strange woman (along with other unsavory characters) occupying their garage and property.  There is a simple solution, right?  Call the police, right?  She is a trespasser, right?  Well, not so fast.  The police did arrive, and the woman said she lived there.  The parents laughed, that’s ridicules they must have thought.    The police asked for proof of residency.  Silly me, I would have told her to provide a rental agreement, even though a rental agreement is not required to create a tenancy.  Well, she did provide proof good enough for the police… a letter with her name and address on it.  Good enough for the police, she has the right to occupancy and peaceful enjoyment!

So several months and several visits by police and a restraining order filed against the parents an eviction order was enforced upon the woman.  She was finally gone!  However, it was at great cost to the parents in monetary and mental distress.

Lesson learned if you have rental properties…get to know the Postal Carrier!

Couple Wants Back Yard Back

Couple Believes Tenants Have Moved Out

Judge Boots Couples Unwelcome Tenant

 

The Great Real Estate Comeback?

Just like a courageous 2nd half comeback (or a 9th inning rally or 3rd period if you prefer) featuring your favorite sports team. YOUR hearts in it…but does your team have the strength, stamina and desire?  Your team struggles, fights, makes strong smart plays, they’re in-sink now. You’ve seen it before.  You hope (pray) they don’t make another bone head play (turnover, error, foul, penalty).  They move along, ever getting closer to “knotting” things up. Your mind and will are in it.   But, you know YOUR mind and YOUR will can’t really move the ball (puck, birdie) forward or into the net, cup or receivers hand.  Somehow you feel as if you’re really participating, you’re really helping.  You feel your team just won’t be able to do it without YOU! But, deep down you know, you know that this is not under your control.  You’re not a participant. You don’t assist the coach (manager) determining plays, substitutions, wind speed/direction.  You don’t catch, hit, throw.  You don’t run, skate or block.  But you DO cheer, boo and participate in “The WAVE”.  You yell instructions to players, coaches and managers, all the while knowing that no one of significance will hear you.  You blog critiques, call talk shows, post remarks on social sites and text messages, hoping that someone with significance will hear and heed your advice.  Sometimes the advice is good, more often though, its fraught with errors, omissions and lack of in-depth, educated and experienced knowledge possessed by the pros.  Experience and knowledge gained ONLY through fighting it out in the tranches alongside your comrades…being a participant.

Experienced Real Estate Professionals know downturns happen as a normal course of business, as in other years, and other downturns, real estate as an investment will recover.

 

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