A Secret To Real Estate Profits – Follow The Builder

A Secret To Real Estate Profits – Follow The Builder


Submitted by Staff on April 15, 2007 - 3:31pm. Home and Leisure | Real Estate





As the real estate market cools, the profit potential of home ownership has cooled as well. Here’s a strategy called “follow the builder.”

It is relatively easy to make a profit when you sell your home if the market is rising sharply like it has been in most of the country for the last three years. It becomes more difficult when a hot market slows down. It’s very difficult to make a profit on the sale of your home when prices are falling.

Is there a way to be relatively sure you’ll make a profit when you sell your home? There is under all but the most negative market conditions. In fact, I’ve seen young, energetic couples use this maneuver multiple times when they don’t even need to move.



Follow That Builder

In many areas of the country, there are builders who build hundreds of houses each year within a fifty mile radius of each other. They build entire communities or are one of three to five builders who build entire communities around big employment centers. This present you with an important opportunity.



New Community

Builders will typically sell first phases of communities for significantly less than later phases. On one hand, they need to get the cash flow moving. On the other, it is harder to sell at high prices because the community typically consists of dirt lots and construction equipment. Put the hands together and you have a great profit opportunity.

The idea is to get in on the first phase of the build out. You will purchase the home at a discount, which gives you built in equity. As the community is built up, you sell the home for a profit at a higher price. While you’re doing this, you keep tabs on the builders projects and find another location where you can do the same thing.

You’ll end up living in each house for a year or more and picking up nice profits along the way. The only real downside is you have to move repeatedly.




Tax Consequences

I’ve seen this work well for a number of people who have done it more than once. However, you need to be aware that generating profit this way can have tax consequences. You need to discuss your plans (including projected timing and profit potential) with your tax professional so that you are prepared to deal with any tax consequences.

World’s Largest Real Estate Tradeshow

World’s Largest Real Estate Tradeshow Identifies Florida Real Estate Professionals as Ideal for International Expansion

Madrid Real Estate Exhibition To Take Place May 29-June 2, 2007

MIAMI--(BUSINESS WIRE)--SIMA07 will hold its ninth annual international real estate exhibition - expected to be the largest ever - from May 29th to June 2nd, 2007 in Madrid, Spain. As the leader in world real estate exhibitions, Madrid Real Estate Exhibition will provide an incomparable venue of opportunities to its international audience of over 150,000 participants, comprised of realtors, brokers, developers, landowners, consultants, construction companies, and other industry professionals.

Having chosen the State of Florida to launch the tradeshow’s international expansion, SIMA07 is receiving strong support from NAR, FAR and the Spain-US Chamber of Commerce in Miami.

Organized by Madrid-based Group Planner, a leader in the organization and promotion of retail exhibitions in Spain, the five-pavilion structure will host 800 participating organizations, a growing group from the international product sector outside of Spain – among these - The Realtor Association of Greater Miami and the Beaches (RAMB) with about 24 exhibitors, the Colombian Asociación de Inmobiliarios, the Argentine Cámara Empresarial de Desarrolladores Urbanos, among other representation from the U.S., Panama, Argentina, Colombia, Brazil, Uruguay, Chile, Italy, Mexico, Dominican Republic, Panama, Estonia, Bulgaria, Poland, Egypt, Greece, Slovakia, Portugal and Turkey. This global arena will be comprised of several meeting areas, and a dynamic agenda of seminars, panels and sessions covering the key aspects of the rapidly globalizing international real estate industry.

“For the professional interested in reaching beyond geographic boundaries, the international program offers access to a unique global inventory that can serve not only the local but the worldwide needs of clients and customers. We chose South Florida to communicate our expo’s fast-growing international area because we feel representatives from this particular market are knowledgeable not only about their local product offering but about the international marketplace, given that South Florida is now widely recognized as the commercial bridge between Europe and Latin America. Florida professionals may visit SIMA07 to target international investors, second home buyers and to exchange their experiences with other professionals, thereby accessing a wave of new business opportunities,” said Santiago Herreros de Tejada, Director of the International Area.

Additionally, as Florida becomes a pronounced international second-home and investment market, the event has established a reputation as a rewarding destination for Floridian professionals and organizations. SIMA07 offers an especially attractive tangible business factor: Its audience is largely comprised of end-consumers searching for the ideal properties, an approach still foreign in the North American real estate market.

This year’s fair will include the third editions of “The Latin American Real Estate Congress” and “The International Professional Program”. The latter, focusing specifically on the international globalization of the second-home and investment market, offers participants from more than fifty different countries a platform for sharing information regarding international real estate operations and conducting on-site global business transactions.

For individual registration, please consult www.sima2007.org. To contract booth space in the Florida Pavilion, interested organizations may contact Lynda Fernandez at RAMB (Real Estate Association of Greater Miami & the Beaches) via email at lynda@miamire.com, or via telephone at 305-468-7040. SIMA07 is also receiving strong support from FAR, NAR and the Spain-US Chamber of Commerce in Miami.

About Grupo Planner

Launched in 1989, Grupo Planner is one of Spain’s top companies specialized in the promotion and organization of business tradeshows oriented toward industry professionals and the general consumer market. Its leadership team is continuously dedicated to client satisfaction, the highest standards, permanent concern for the continuing education of the company’s employees, and constant innovation with respect to the design and implementation of its tradeshows.

Currently, Grupo Planner organizes tradeshows in Madrid (SIMA07 and Expo Retail), Barcelona (Expo Retail) and the United Status (SIMA USA Showcase), 2006 New Orleans edition.

The futures of real estate

The futures of real estate
Wed Apr 4, 2007 10:24AM EDT
By Jonathan Keehner - Analysis



NEW YORK (Reuters) - U.S. brokers and exchanges are close to breaching an impasse that has prevented property derivatives from being widely available here, a step likely to be welcomed by increasingly jittery real estate investors.

While investors in nearly all other major asset classes enjoy the utility of a derivatives market, often to hedge their risk, those in fragmented and opaque U.S. real estate markets largely have not.

But access to real estate indexes is adding U.S. commercial and residential property ownership to the list of items, from companies' debtworthiness to the weather, that investors can speculate on through listed and over-the-counter markets.

Property derivatives are already widespread overseas, where the market for products linked to London-based Investment Property Databank indexes totaled 4.7 billion pounds ($9.2 bln) at year end. IPD's database has over 12,000 properties, or about half of the total property assets of U.K. institutions and listed property companies.

U.S. real estate, with over $270 billion in 2006 transactions according to Jones Lang LaSalle, has lagged behind for reasons including a lack of liquidity and reliable metrics.

"Each piece of property is unique so it's been hard to come up with measures that allow markets to be looked at on a macro basis," said Stephen Berkman of law firm Winston & Strawn LLP. "I think we're finally getting to where the information is being gathered and people trust the results."

In one move aimed at boosting liquidity, Credit Suisse Group (CSGN.VX: Quote, Profile, Research) recently relinquished its exclusive license to structure derivatives based on a property index compiled for nearly 30 years by the National Council of Real Estate Investment Fiduciaries.

The NCREIF Property Index (NPI) is an appraisal-based index measured quarterly, with nearly 5,500 institutional properties and a market value of about $250 billion at year end.

"Two years ago we knew very little about derivatives," said NCREIF Chief Executive Blake Eagle. "We have been on quite a learning curve ever since."

As a result of Credit Suisse's move, Merrill Lynch (MER.N: Quote, Profile, Research) and Goldman Sachs Group (GS.N: Quote, Profile, Research) are now also licensed, along with five other brokers, to structure NPI derivatives allowing investors to bet on whether the index will rise or fall.

"A lot of us are trying to make a bridge between derivatives and the real estate market," said Fritz Siebel of inter-dealer broker Tradition Financial Services. "But the market certainly knows NCREIF."

BROADER SEGMENT

New exchange-listed derivatives, which are standardized and centrally cleared, could also open real estate to investor segments like professional traders and smaller developers.

The Chicago Mercantile Exchange (CME.N: Quote, Profile, Research) last year launched housing derivatives based on the S&P/Case-Shiller Home Price Indexes and announced similar plans for commercial real estate with Global Real Analytics, a firm acquired by discount brokerage Charles Schwab Corp. (SCHW.O: Quote, Profile, Research) in January.

The Chicago Board of Trade (BOT.N: Quote, Profile, Research) has launched futures contracts on the Dow Jones U.S. Real Estate Index (.DJUSRE: Quote, Profile, Research), which consists mostly of real estate investment trusts.

"This goes to a broader segment that may be interested in real estate but lacks access to over-the-counter products, like professional trading shops, pension funds and small or mid-level hedge funds," said CBOT senior vice president Robert Ray.

Developers may look to real estate derivatives that are listed on financial exchanges to hedge projects, said Eric Loth of MA-based Northpoint Realty Development, which focuses on residential properties.

"A listed product with more liquidity, where you could jump in and out of the market, might be better for us as far as pricing models," he said.

Institutions seeking to hedge exposure to real estate stocks could also buy such derivatives, said John Capobianco of Susquehanna International Group, adding that portfolios exposed to homebuilders and REITs have been volatile.

SUBPRIME OPTIONS

An active derivatives market may help lenders reduce their risk to less creditworthy, or subprime, borrowers.

Winston & Strawn's Berkman notes that in commercial lending transactions, borrowers taking out variable rate loans are routinely required to buy derivatives called interest rate caps. These products become more valuable as interest rates rise, limiting a borrower's exposure.

"What if a lender made a loan accompanied by a product that made money if the property value went down, allowing the borrower to repay," Berkman said. "If subprime lenders could have done that they would be in much better shape today."

Tax tricks of the real estate rich

Tax tricks of the real estate rich

Some straightforward strategies can reap big rewards at filing time
By Matt Woolsey
Forbes
Updated: 11:58 a.m. MT March 27, 2007
Using real estate to lower taxes doesn't require an army of CPAs or numbered bank accounts — just the craft to cut through the tax code.

"There's a reason why the rich are rich," says Sandy Botkin, chief executive of the Washington, D.C.-based Tax Reduction Institute. "In real estate, people are missing things they shouldn't be missing, and it's costing them a fortune."

Some of the more sophisticated tricks require a keen eye for predicting future home and neighborhood values and the willingness to buy significant fixer-uppers.

But for the most part, real estate tax planning is straightforward. And the payoffs are huge, especially if you do like the wealthy.

In a real estate transaction, you can end up paying thousands of dollars in title insurance, attorney fees, appraisal fees, pest inspections and bank fees, none of which are deductible.

Points paid, however, are. A point is equal to 1 percent of the loan amount and is paid to a lender to lower the interest rate. For tax deduction purposes, points are amortized over the life of a loan.

At purchase, negotiating with a bank to absorb fees — in exchange for paying an extra point or two — means the same cash flow for the bank and makes more of your cash outflow deductible because you're paying points, not fees. A few years down the line, homeowners are confronted with the problem that refinancing isn't immediately deductible. But, since most people sell before the full length of their loan, unamortized points at sale or refinance become deductible.

Aggressively challenging valuations, which determine property taxes, is another tactic.


"Many communities have been revaluing properties upwards during the housing price run-up since 2001," says Anthony Sanders, real estate chair of finance at The Ohio State University. "Tax assessors have often raised the value of the house to a higher amount than the actual current value of the property."

That discrepancy can cost serious tax dollars, especially during the current slowdown in home sales price growth. To combat this issue, experts advise hiring independent appraisers and aggressively challenging city estimates of property value. While success rates vary by area, if you can effectively demonstrate property worth against like-kind home sales, it is possible to lower your tax basis.


The state of the housing market has a lot to do with the success of appeals. Just ask Warren Buffett, who in 2003 lost the fight to keep his Omaha home value at $500,000 after a state appraisal boosted it to $700,000. Four years later, in a tapering market, Buffett's case is much stronger.

A 1031 exchange may be the most glamorous use of real estate for tax protection. Also called a "like-kind" exchange, it allows a multiple-property owner to reinvest the gains made on the sale of one home into improvements on another. This simple transfer means no capital gains are recognized. Instead of paying taxes on the gains, the homeowner can build a new guest house at their vacation residence.

A 1031 exchange may be the most glamorous use of real estate for tax protection. Also called a "like-kind" exchange, it allows a multiple-property owner to reinvest the gains made on the sale of one home into improvements on another. This simple transfer means no capital gains are recognized. Instead of paying taxes on the gains, the homeowner can build a new guest house at their vacation residence.

Thinking big in terms of renovations and repairs carries tax advantages even when you don't own multiple properties. Instead of making patchwork repairs to a driveway, roof or yard, consider upgrading entirely. Building an entirely new roof for example, and improving the value of your home, makes the expense deductible, whereas simply fixing it carries no tax benefits.

Present tax benefits are not limited to home ownership. Even for those who can afford to buy big, there are advantages to short-term renting.
Instead of taking on a long-term mortgage, or even a shorter five- or three-year adjustable-rate mortgage, it often makes sense for both lower-income buyers and the super-rich to forgo the tax benefits of owning a home and reinvest the money saved by renting.

At the top end, if you're an exec relocating to Dallas, say, or an athlete or celebrity with an uncertain time frame, the wisest thing to do from a tax perspective might entail renting. Instead of tying up money in a home investment that may only be appreciating at a modest clip, putting the saved money in a high-yield fund instead can pay off better in a volatile housing market.


The same may go for small fries.

Median home prices, on average, fell across the country in 2006. Some markets resisted the trend, but very few appreciated at a better rate than many stock funds. The one-year return on a Vanguard Selected Value fund in 2006 was 19.1 percent; the return was 15.1 percent on a Fidelity Value Fund.

So while the interest deduction available to buyers makes owning a home a tempting plan, for those in the lower tax brackets, whose deduction may pale in comparison to those buying luxury homes, "it may," says Sanders, "be in the best interest from a tax viewpoint to sell their dwelling and rent."

© 2007 Forbes.com
URL: http://www.msnbc.msn.com/id/17816184/

First-time Home Buyers Now Have Access to Real Estate and Mortgage Partners

First-time Home Buyers Now Have Access to Real Estate and Mortgage Partners Via HomeTeam’s Online Beta Portal

Home buyers connect with service providers; move closer to home ownership

TAMPA, Fla.--(BUSINESS WIRE)--HomeTeam, creator of the nationally syndicated “Cause” television program of the same name, has added real estate and mortgage partners to its first-time home buyer online portal beta, www.hometeam.com. The news was announced today at the Mortgage Bankers Association’s 2007 National Technology in Mortgage Banking Conference and Expo in Tampa.

Home buyers can search HomeTeam’s database of real estate and mortgage partners by zip code. Additionally, home buyers will have access to extensive mortgage information and education, networking capabilities, as well as real estate agent and loan officer searches.

“We’re excited about starting our partnership with HomeTeam as they focus on helping people get into homes who normally would not have the resources to assist them in the process,” said Karen Mayfield, president of The Home Loan Group, Prudential California Real Estate’s mortgage affiliate.

HomeTeam’s real estate and mortgage partners will now receive leads when a home buyer makes a service request. HomeTeam currently has 100 percent national mortgage coverage and significant real estate coverage with partners including Keller Williams–The Alaska Group, Century 21 United, Real Estate One, Prudential Fox and Roach, and Prudential California, among others. New partners are being added regularly to facilitate HomeTeam’s aggressive 2007 growth plans.

“First-time home buyers are positioned well to enter the current market and capitalize on the low interest rates being offered,” said Eric Gorrell, president and CEO of HomeTeam. “Through our online beta portal, first-time home buyers can now search for and locate real estate and mortgage professionals in their preferred region. Additionally, we now have the ability to offer our partners leads, helping them actively engage this underserved market and capture more business. In adding these partners to our portal, HomeTeam is continuing to make the home buying process easier, faster and more successful for first-time home buyers everywhere.”

About HomeTeam

Founded in 2003 and based in Seattle, Wash., HomeTeam is managed by a seasoned executive team with experience creating quality TV programming, real estate-related affinity partnerships and web-based technologies. The HomeTeam Web site portal is a trusted online community that guides first-time home buyers through a clear and concise home buying process. Supporting the online community is HomeTeam University, which empowers the consumer with knowledge through courses, content, educational seminars and home-ownership counseling.

The HomeTeam one-hour “Cause” television show has reached 94 percent U.S. coverage weekly on ABC, CBS, NBC, FOX, CW and Superstation WGN cable. For each show, unsuspecting individuals or families are surprised with a down payment and the first year’s mortgage payments for their first home. Friends and family are enlisted over a three-day period to add the final touches that will make the house a home. Recipients are chosen each week from nominations submitted to www.hometeam.com. Host Troy McClain tells the story of each family’s dreams despite challenging life struggles, through home videos, photographs and interviews from family and friends. Then finally, at the end of each episode, the American Dream is revealed, their very own home.