I have been interacting with Colombia for the last three years. Many of my colleges think that I am crazy to be doing business in Colombia. However, I believe that we as investors need to be looking at the markets that are positioning themselves for growth and not the ones that are already hot and potentially over inflated. While in many parts of the world the real estate market is stagnant and the tourism is down, in Colombia is the opposite. Colombia has not suffered the devaluation of many other countries and its tourism is increasing. Colombia is a shooting star. It is a cash based economy, massive natural resources, US military contracts, booming tourism, solid banking system, low debt, strategic location, reducing the risks for investment.
From the perspective of the entry level investor and looking long term, I suggest Santa Marta. Yep, you heard me right. Many people are familiar with Cartagena and would have expected me to suggest this region. Cartagena is an awesome city with great potential. The main reason I did not pick Cartagena as my top choice, is because the entry level for real estate and land is high and the appreciation rate eventhough is expected to increase, I think Santa Marta's appreciation will be higher. Furthermore, Santa Marta has the foundations in place for becoming a far superior tourist destination than it already is. Here are couple of other reasons why I believe that Santa Marta is the place to be:
1) Ruta del Sol - this will connect Bogota to Cartagena in 12 hours compared to 18-20 hours right now. This will make the drive to Santa Marta approximately 13-14 hours.
2) New international airport between Barranquilla and Santa Marta. No need to fly to Bogota and then drive or take another national flight to the coast.
3) Plan Centro Santa Marta.
4) International Marina. http://marinasantamarta.com.co/ - This is only one of many future developments for the Santa Marta region.
One strategy could be to buy a colonial property in Santa Marta Centro and renew it. Remember both materials and labor cost a lot less here than in the US. With the right architect and workers, you can do wonders with a reasonable budget. Before you start I suggest that you do your due diligence, visit the area, get in touch with a local attorney that knows about real estate and taxation, avoid the multi-layer of middle-men that tends to increase the value of a property, etc. Investing in another country is complicated regardless of the country. For example, how is the taxation system in the country?, how friendly is the country to foreign investment? how is the legal system? Will you be an absentee owner? These are questions that must be addressed before you venture to another country to invest.
Monday, January 11, 2010
Saturday, January 9, 2010
Business Plan Solutions for Real Estate Investors
Real Estate professionals know that every successful real estate project begins with a clear, concise and compelling business plan that details the business, market, and financial reasons for completing a transaction
We support our client’s real estate funding goals through the development of customized business plans, project investment summaries, and assumption-driven cash flow or financial models appropriate for individual and institutional investors and lenders. Each client engagement results in a well documented and supported business plan and financial package that will:
* Describe the project in detail
* Explain why the project fits the developer’s or investor’s investment strategy
* Forecast realistic cash flow and capital appreciation targets
* Analyze investment and operational risk
* Communicate a winning marketing strategy
* Provide detailed financial projections or cash flow models
* Suggest the most appropriate capital structure
* Detail financing assumptions, including senior and mezzanine debt, preferred equity and other complex transactions
* Demonstrate potential investor and joint venture returns
* Propose a well conceived exit strategy
When appropriate, we work actively with our client’s team of real estate, financial, legal, marketing, technology, and investment banking providers to maximize the effectiveness of the business planning process and deliverables. The result is a powerful due diligence package to catalyze the funding of a single real estate project, or the growth of a portfolio.
To start the year 2010 the right way, we are introducing our services at a low price of $200 USD per business plan in the month of January. You pay $100 upon the completion of required documents and $100 when the business plan is completed and delivered to you. Questions? please email us to businessplans@paradiserealty.biz.
We support our client’s real estate funding goals through the development of customized business plans, project investment summaries, and assumption-driven cash flow or financial models appropriate for individual and institutional investors and lenders. Each client engagement results in a well documented and supported business plan and financial package that will:
* Describe the project in detail
* Explain why the project fits the developer’s or investor’s investment strategy
* Forecast realistic cash flow and capital appreciation targets
* Analyze investment and operational risk
* Communicate a winning marketing strategy
* Provide detailed financial projections or cash flow models
* Suggest the most appropriate capital structure
* Detail financing assumptions, including senior and mezzanine debt, preferred equity and other complex transactions
* Demonstrate potential investor and joint venture returns
* Propose a well conceived exit strategy
When appropriate, we work actively with our client’s team of real estate, financial, legal, marketing, technology, and investment banking providers to maximize the effectiveness of the business planning process and deliverables. The result is a powerful due diligence package to catalyze the funding of a single real estate project, or the growth of a portfolio.
To start the year 2010 the right way, we are introducing our services at a low price of $200 USD per business plan in the month of January. You pay $100 upon the completion of required documents and $100 when the business plan is completed and delivered to you. Questions? please email us to businessplans@paradiserealty.biz.
A Potential China Tsunami?
Lately there has been concerns about the real estate market in China and its impact to the United States and the rest of the world. We just experienced the results of the housing bubble and credit meltdown and its ripple effect to the rest of the world. Now there is talks about the bubble in the real estate market in China. Could this be a China Tsunami causing damage to the prospect of recovery we are foreseeing in 2010 and beyond? Here is a couple of economic data I found out about China's current situation:
1. China has been experiencing real estate and food price increases, causing concerns of inflation in this country. For example in Beijing, the housing price per square meter is equivalent to seven months' salary on average. Statistics from Goldman Sachs showed that over the past six years, the housing price hikes had outpaced income rises by 30 percentage points in Shanghai and 80 percentage points in Beijing. To those who think there is no housing bubble in China, average home price in Chinese cities rose more than 50% from Jan. 2009 to Nov. 2009.
2. The concerns about inflation, has driven the China’s central bank to issue a fiscal stimulus over fears that asset bubbles and inflation could destabilize the economy. Sounds familiar?. The People’s Bank of China began selling the 3-month Bills at a slightly higher interest rate Thursday for the first time since August, a move aimed to controlling the excess liquidity brought on by over $1 trillion in new loans issued between January and November 2009. This action is expected to avoid the the lending binge of 2009 as policymakers attempt to prevent the nation’s economy from over-heating. Potential mortgage meltdown?
3. The New York Times reports that super-star short seller James Chanos (who bet right on the collapse of Enron)has now set his sites on China's real estate market. Chanos views China as "Dubai times 1,000 - or worse" and suspects that Beijing is faking its reports of 8% GDP growth, according to the New York Times.
4. China has relied on massive stimulus and loose credit to register 8.9% year-on-year growth in the third quarter, by the far the most impressive growth of any major economy. This has created a spike in the housing starts in China of 194% in 2009, and 90% of the new supply is targeted towards the luxury market. This situation resembles some of the scenarios we lived during the real estate boom in the United States. For example, the average apartment of 1,000 sqft in Beijing sells for 80 times the average income of that city's residents. If you recall we went through that situation right before the meltdown, we had an excess of homes for sale with "lots of equity" due to price increases in real estates. This motivated the banking industry to relax the lending requirements to keep the party going. The problem is that this can lead to excess inventory being held as investment property speculation generating no cash flow. Real estate bubble bursting?
Now, you may be wondering about why am I writing about China's real estate market, economy and potential real estate bubble in that country. First, as we learned from our recent real estate bubble and mortgage meltdown, the impact had a worldwide ripple effect. Many of these countries are all tied up and the fall down of one of them has negative impact on another country. China and the United States are locked in a sort of economic partnership, in which we need them to lend us money and they need us to buy their low-priced products. China is becoming one of our sources of financing in this crisis by buying real estate, investing in our banking system and becoming a lending source to our country. So if China's economy gets into trouble, the U.S. will feel the effects. That's why we as real estate investors in the United States should care about a potential real estate bubble in China. The concerning part I see is that the information about a China bubble is compelling. The question now is when will the bubble pop and how China will react?
On a final note about this subject, China's real estate industry and potential bubble differs from the United States in at least one crucial respect, the U.S. financial crisis was a result of the securitization of mortgages, but China does not follow this practice. Therefore, the impact of a bursting Chinese real estate bubble would likely be lesser in degree. However, if people who borrowed money could not pay it back, China might need to scramble to raise cash to keep its banks above water. Banking system meltdown? Since the banking system in China is owned by the government, there is no option of a banking bailout program like the one of the United States. In that case, they might sell part of its $2.2 trillion in U.S. debt, which would likely drive up interest rates in the United States. Yes you heard me right. How can that be? The selling of that debt would increase the supply of U.S. debt on the market at the same time that China's demand will be reduced or eliminated (China wont be lending to the United States to be able to address its internal economic situation). This will force the United States to seek financing from other sources potentially at higher interest rates, such higher interest rates could lead the U.S. into another round of economic contraction as a greater portion of our GDP goes to paying higher interest payments on the debt.
This purpose of this article is not to act on fear, it is to be informed and make sound and prudent business decisions in our profession.
1. China has been experiencing real estate and food price increases, causing concerns of inflation in this country. For example in Beijing, the housing price per square meter is equivalent to seven months' salary on average. Statistics from Goldman Sachs showed that over the past six years, the housing price hikes had outpaced income rises by 30 percentage points in Shanghai and 80 percentage points in Beijing. To those who think there is no housing bubble in China, average home price in Chinese cities rose more than 50% from Jan. 2009 to Nov. 2009.
2. The concerns about inflation, has driven the China’s central bank to issue a fiscal stimulus over fears that asset bubbles and inflation could destabilize the economy. Sounds familiar?. The People’s Bank of China began selling the 3-month Bills at a slightly higher interest rate Thursday for the first time since August, a move aimed to controlling the excess liquidity brought on by over $1 trillion in new loans issued between January and November 2009. This action is expected to avoid the the lending binge of 2009 as policymakers attempt to prevent the nation’s economy from over-heating. Potential mortgage meltdown?
3. The New York Times reports that super-star short seller James Chanos (who bet right on the collapse of Enron)has now set his sites on China's real estate market. Chanos views China as "Dubai times 1,000 - or worse" and suspects that Beijing is faking its reports of 8% GDP growth, according to the New York Times.
4. China has relied on massive stimulus and loose credit to register 8.9% year-on-year growth in the third quarter, by the far the most impressive growth of any major economy. This has created a spike in the housing starts in China of 194% in 2009, and 90% of the new supply is targeted towards the luxury market. This situation resembles some of the scenarios we lived during the real estate boom in the United States. For example, the average apartment of 1,000 sqft in Beijing sells for 80 times the average income of that city's residents. If you recall we went through that situation right before the meltdown, we had an excess of homes for sale with "lots of equity" due to price increases in real estates. This motivated the banking industry to relax the lending requirements to keep the party going. The problem is that this can lead to excess inventory being held as investment property speculation generating no cash flow. Real estate bubble bursting?
Now, you may be wondering about why am I writing about China's real estate market, economy and potential real estate bubble in that country. First, as we learned from our recent real estate bubble and mortgage meltdown, the impact had a worldwide ripple effect. Many of these countries are all tied up and the fall down of one of them has negative impact on another country. China and the United States are locked in a sort of economic partnership, in which we need them to lend us money and they need us to buy their low-priced products. China is becoming one of our sources of financing in this crisis by buying real estate, investing in our banking system and becoming a lending source to our country. So if China's economy gets into trouble, the U.S. will feel the effects. That's why we as real estate investors in the United States should care about a potential real estate bubble in China. The concerning part I see is that the information about a China bubble is compelling. The question now is when will the bubble pop and how China will react?
On a final note about this subject, China's real estate industry and potential bubble differs from the United States in at least one crucial respect, the U.S. financial crisis was a result of the securitization of mortgages, but China does not follow this practice. Therefore, the impact of a bursting Chinese real estate bubble would likely be lesser in degree. However, if people who borrowed money could not pay it back, China might need to scramble to raise cash to keep its banks above water. Banking system meltdown? Since the banking system in China is owned by the government, there is no option of a banking bailout program like the one of the United States. In that case, they might sell part of its $2.2 trillion in U.S. debt, which would likely drive up interest rates in the United States. Yes you heard me right. How can that be? The selling of that debt would increase the supply of U.S. debt on the market at the same time that China's demand will be reduced or eliminated (China wont be lending to the United States to be able to address its internal economic situation). This will force the United States to seek financing from other sources potentially at higher interest rates, such higher interest rates could lead the U.S. into another round of economic contraction as a greater portion of our GDP goes to paying higher interest payments on the debt.
This purpose of this article is not to act on fear, it is to be informed and make sound and prudent business decisions in our profession.
Thursday, January 7, 2010
Monday, January 4, 2010
Lower home appraisals appear to be up. Deals get killed as foreclosures, short sales make valuing property difficult http://ow.ly/Srpa
Friday, January 1, 2010
Vision a Key Element in Your Real Estate Investing Succes
Anyone who is thinking to venture into the world of real estate investing should understand that it is not a game. You have probably seen all of the informercials and links to blogs and landing pages with promises of riches in real estate investing. These gurus will tell you that it is easy, no risk, no money down, no nothing, you make money while you sleep, blah, blah, blah. Obviously, many individuals who dream of riches fall for these luring ads and purchase these programs that promise them wealth beyond their dreams in 30 days.
So why we have so many people fail in the business?
I have concluded that the main reason someone fails in real estate investing, and in businesses in general for that matter, is due to their view or lack of vision of their real estate enterprise. Is real estate investing a business or a hobby for you? I think that depending on how you answer this question, it will determine the probabilities of your success. There are many other factors that will contribute to your success, but the answer to this question is key and will influence in other aspects of your real estate investing future.
Real estate investing, as I have mentioned before, is not easy. However it is simple. Do some marketing, find some buyers, then wholesale some houses and watch the cash roll in. However, most of the people that venture into this profession don’t make money and end up quitting within the first 12 months. The reason is the lack of vision. Most of them treat their new venture as a hobby and after the excitement wears off from their last real estate seminar they loose interest and frustration sinks in.
Persistence, faith, and vision must be with you at all times, specially when things get tough. Believe me they will. It’s easy to give up when after couple of deals do not seem to close, the sellers have rejected your offers, I know because I’ve been there. When I started right out of college I was looking for the “magic pill”, the easy fix that many real estate courses sell. Not everything went well at the beginning. Then I realized that real estate investing is no hobby, it is a real business. To be successful you must treat it as such. It has legal and tax consequences, just like any other businesses.
After 20 years in this business, as a real estate investor and consultant, I have concluded that there are no "secret magic pill" to success in real estate investing. What I suggest to those of you that are getting started in real estate investing is the following:
1. Before you start, determine if you are going to treat this venture as a business or hobby. The answer to this question, will determine the amount of resources (time and money) you must invest in it.
2. Find out why you want to become a real estate investor. Make sure that your reasons are not based on unrealistic expectations.
3. Like any business, you must create a plan. Yes a business plan. It does not have to be complicated. It will help you set goals and vision. In this section you will identify you strenghts and weaknesses (prepare a SWOT analysis), some of us are better working on wholesaling transactions than fix-n-flip.
4. Determine your method of real estate investing (wholesaling, fix-n-flip, etc). This will be determine as part of developing your plan and it will help you determine the resources you need.
5. Invest in your education. Yes, invest in real estate courses that will help you better understand your industry and niche.
6. Professional advice. This is a must. You must have as a minimum in your professional team a real estate attorney and tax advisor. Many times you will see a real estate investor bragging about how much they made in their last closing, you know the ones I am talking about with their checks posted in their websites, the questions is how much of that they get to keep. How much money they had to invest to generate that closing. As far as I know, financial wealth is measured by what you keep and not by what you make.
In 2010, I invite you to review your vision and goals regarding your real estate business.
So why we have so many people fail in the business?
I have concluded that the main reason someone fails in real estate investing, and in businesses in general for that matter, is due to their view or lack of vision of their real estate enterprise. Is real estate investing a business or a hobby for you? I think that depending on how you answer this question, it will determine the probabilities of your success. There are many other factors that will contribute to your success, but the answer to this question is key and will influence in other aspects of your real estate investing future.
Real estate investing, as I have mentioned before, is not easy. However it is simple. Do some marketing, find some buyers, then wholesale some houses and watch the cash roll in. However, most of the people that venture into this profession don’t make money and end up quitting within the first 12 months. The reason is the lack of vision. Most of them treat their new venture as a hobby and after the excitement wears off from their last real estate seminar they loose interest and frustration sinks in.
Persistence, faith, and vision must be with you at all times, specially when things get tough. Believe me they will. It’s easy to give up when after couple of deals do not seem to close, the sellers have rejected your offers, I know because I’ve been there. When I started right out of college I was looking for the “magic pill”, the easy fix that many real estate courses sell. Not everything went well at the beginning. Then I realized that real estate investing is no hobby, it is a real business. To be successful you must treat it as such. It has legal and tax consequences, just like any other businesses.
After 20 years in this business, as a real estate investor and consultant, I have concluded that there are no "secret magic pill" to success in real estate investing. What I suggest to those of you that are getting started in real estate investing is the following:
1. Before you start, determine if you are going to treat this venture as a business or hobby. The answer to this question, will determine the amount of resources (time and money) you must invest in it.
2. Find out why you want to become a real estate investor. Make sure that your reasons are not based on unrealistic expectations.
3. Like any business, you must create a plan. Yes a business plan. It does not have to be complicated. It will help you set goals and vision. In this section you will identify you strenghts and weaknesses (prepare a SWOT analysis), some of us are better working on wholesaling transactions than fix-n-flip.
4. Determine your method of real estate investing (wholesaling, fix-n-flip, etc). This will be determine as part of developing your plan and it will help you determine the resources you need.
5. Invest in your education. Yes, invest in real estate courses that will help you better understand your industry and niche.
6. Professional advice. This is a must. You must have as a minimum in your professional team a real estate attorney and tax advisor. Many times you will see a real estate investor bragging about how much they made in their last closing, you know the ones I am talking about with their checks posted in their websites, the questions is how much of that they get to keep. How much money they had to invest to generate that closing. As far as I know, financial wealth is measured by what you keep and not by what you make.
In 2010, I invite you to review your vision and goals regarding your real estate business.
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