Wednesday, August 30, 2006

What is Your Return on Equity?

I have heard the argument many a times, I don't want to sell because I own the property free and clear. That is a wonderful position to be in but not for the reasons you might think. One of the great benefits to owning investment property is the tax deductions. Mortgage interest is a large portion of it but many people over look the asset depreciation. You don't fully utilize all the depreciation you could get as properties increase in value.

The example below is the difference between a current property almost paid off and a new property bought through a tax-deferred exchange of the current property. Most investors will not hold a property for more than 5 or 10 years, here's why:

Tuesday, August 29, 2006

Inventories are Jumping through the Roof in Tacoma

I am a big believer in numbers, that is why I went into real estate in the first place.

In the Tacoma Housing Market, inventories have jumped from less than 250 Single Family Homes on the Market in May to over 1300 to date.

Not only that the number of Single Family Homes sold in August in Tacoma was a little over 260, compared to over 520 for the month of August in 2005.

Definitely swinging to a buyer's market. Don't let anyone pressure you into buying. There are plenty of properties available. And yes, while there are some still properties coming under contract in less than a week, that is the anomaly not the norm now.

I am firmly convinced that you should view every property as an investment unless you know for 100% certainty that you are going to live there until you die. Taking the emotional connection out of the picture, take a step back and get the best deal you can in the area you want. If your agent is not providing this kind of service and advice, find another.

I Love the Sixth Avenue District in Tacoma

Great Article about Sixth Avenue in the News Tribune

Sixth Avenue is a growing hotspot in Tacoma, with great restaurants and a strong nightlife. Zoning in the area is robust and there is talk on the city council of increasing the density of the zoning. The majority of my own investments are in this area.

I am a member of the Sixth Avenue Merchant's Association, and we are incredibly involved in Tacoma. Please support Sixth Avenue!

If you need any incentives go grab a pizza from Primo Grill, they have great food.

Saturday, August 26, 2006

Article in the Seattle PI Regarding How the Rental Market is Picking Up

Read the Article

While Seattle is a stronger rental market than Tacoma, the basic underlying factors are the same.

Friday, August 25, 2006

Interest Rates Lowest since April ....

Read the Article

Interest rates lower, making Tacoma Real Estate an attractive investment.

Is the Condo Market in Tacoma in Trouble?

Yes, I believe it is and here is why.

Inventories have tripled in the last six months. There were half as many condos sold in July then there were in both May and June. Why?

Developers are setting high prices (Seattle pricing) and are still building more units. Prium is working on three projects in a half mile radius. The median price for a 2 or 3 bed condo sold in the last six months Tacoma is $239k. The median price for a home is $234k. By the way, the median priced condo on the market right now in is $355k.

The reason why condos are attractive is because in most urban markets, Seattle for example, they are much more reasonably priced than single family homes. In Capital Hill in Seattle, the median priced house sold in the last six months is $669k compared to a 2 or 3 bed condo at $369k. That is a difference of over $300k. This is why the Seattle condo market is still hot. Since most people have a hard time entering a market at $670k, condos are much more viable an option.

This absolutely does not exist in Tacoma. Take my advice, do not buy a condo in Tacoma unless you desire that type of living and are willing to pay a premium for it. Condos in Tacoma are not a good investment.

The Tacoma Real Estate Market is Slowing Down this is True...

Don't let Real Estate Agents try to fool you, the market is slowing down. The market is swinging back towards a buyer's market. However, there are some key issues I would like to address. Properties of all kinds, are selling quickly if priced and marketed correctly.

For example a 3 bed / 1 bath, 2000 sq ft house right off 6th Avenue went for 5k more than asking price and was under contract in less than a week.

Now is a very good time to buy or exchange investment property. Why?

The investment property market is slowing but still healthy. The market is shifting from a strong seller’s market over the last four years to a buyer’s market. Increasing interest rates and home prices in the single family housing market, condo conversions, and a stable economy are contributing to lower rental unit supply and increasing rents. For the first time in years, renting is a much more viable and affordable option than buying, with owners getting greater cash flow as a result.

Why is it the perfect time to buy or exchange rental property?

  • The multi-family property market is still strong with correct pricing and intelligent marketing. Over a quarter of the properties sold in the last two months were on the market for less than three weeks.
  • Multiplex inventories have doubled in Pierce County over the past year.
    A 4% rent increase in the last 12 months with a projected rent increase of 14% of the next two years.
  • A projected net operating income increase of 21% over the next two years.
    In Pierce County, the market vacancy rate is 4.8%. That’s the lowest rate since early 2001 and down from its peak of 8.2% less than two years ago.
  • In 2006, 5,000 rental units in the tri-county region will be converted to condos significantly decreasing the supply of available units, and putting additional upward pressure on rents.
  • "Mortgage rates are down for the fourth straight week and are the lowest they've been since mid-April." Frank Nothaft, Freddie Mac chief economist, Aug. 17th.
  • There is now a difference of $550 between the mortgage payment of an averaged price home in Pierce County and the average rental of an updated 2 bed / 2 bath apartment, making renting an attractive cost-saving option for many people.