How Real Estate Fits Into Your Retirement

You need to consider the benefits of buying real estate along with the risks.

 Homeownership used to be considered the American Dream. Most baby boomers grew up with a goal of owning their own home. Now, many members of the younger generation question whether it is a good idea to buy real estate.

No wonder -- having watched the housing market collapse five years ago, combined with a difficult job market, buying a house or condo may not be a wise move anymore. Homeownership has been steadily falling from its high of 69.2 percent in 2004 to a current rate of 65 percent, according to the U.S. Department of Housing and Urban Development.

So, is it a good idea to buy a house or condominium? To be clear, this is a question about purchasing real estate as a residence, not as an investment. When considering whether to buy, there are three major issues to consider: liquidity, return on investment and the personal use value.

Liquidity is the first issue to consider. Buying or selling real estate is timely and costly. It is generally not a good idea to make a purchase unless the property is expected to be owned for a long enough time period to recoup expenses and not result in a fire sale if circumstances require moving.

For example, it may not be a good decision to buy a one-bedroom condominium if you expect to have a child in the next few years or to commit to a house if a pending job change may require you to relocate to another city. Obviously, if there is the possibility of buying a new house without selling the first, the illiquidity of real estate is not a problem. However, most people don't have enough liquid cash reserves to invest in multiple houses and wait out the market for an opportune time to sell.

A second issue is the return on real estate. Real estate has not seen the same capital growth as the stock market over the past quarter century. Nonetheless, real estate provides diversification to a portfolio and returns can be amplified by leveraging the purchase with a mortgage. For example, an individual buying a house for $100,000 with a $20,000 down payment will realize appreciation on the full $100,000 from the date of purchase. Although the rate of return on housing does not change, the gain on the investment is significantly higher.

Finally, it is important to consider the personal-use aspect of housing when making a purchase. This concept can actually work in two directions. When purchased as a residence, houses are providing personal use as well as an investment return. This means a homeowner can live in the house and avoid paying rent while also experiencing gain on the house through appreciation. Yet that appreciation is locked in because the homeowner cannot tap into it without selling the house and losing the place to live.

The personal use of a house is very important. An initial comparison between renting and buying might compare rent to combined costs of mortgage, maintenance, insurance and taxes. However, this does not take into consideration particular attributes of mortgage payments, which is that they are fixed and finite. The principal and interest portion of a fixed mortgage will remain the same over time (although taxes and insurance might rise) whereas rental costs will increase. In addition, the mortgage should eventually be paid off, providing the homeowner with a rent-free place to live. This can be a great planning technique for retirement -- if the mortgage is paid off at the time of retirement, there will be a reduction in expenses at the same time income falls.

Although the personal-use aspect of a house brings benefits to the homeowner, this also means the investment return is difficult to access for other uses. If a family downsizes its house as children leave home and less space is needed, then cash can be pulled out. Other ways cash can be taken out come from using a home equity loan or a reverse mortgage. However, many people are reluctant to use reverse mortgages to tap into the investment value of their house. Reasons for this hesitation include high closing costs, reduced inheritance left to family, continued responsibility for maintenance, tax and insurance and the need to pay off the loan if the house is sold.

The bottom line is that owning your residence can be a good decision financially, provided it does not cause liquidity problems and provided there are separate sources of retirement income. However, each individual or family is unique and will have to evaluate their options based on their specific circumstances.

Ann G. Schnorrenberg, Ph.D., is a financial planning associate at Monument Wealth Management, a financial advisory firm located just outside Washington, D.C., in Alexandria, Va. Follow Ann and the rest of Monument Wealth Management on Facebook, Twitter, LinkedIn, YouTube, Google Plus and on their "Off the Wall" blog, which can be found on their company website.

Investment advice offered through Monument Advisory Group LLC, a registered investment adviser. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate, please consult your financial adviser prior to investing. All performance referenced is historical and is not a guarantee of future results. All indexes are unmanaged and may not be invested into directly.

Real estate values drop in New London revaluation

Last assessment done in 2008; decreases range to 35 percent

 

New London - New property assessments in the city have been completed and show up to 35 percent decreases in real estate values.
Mayor Daryl Justin Finizio told the City Council Tuesday night that the current tax rate would have to increase by 17 percent to adjust for the loss.
"But this is not a 17 percent tax increase," Finizio said, speaking to the newly elected City Council that was sworn in on Monday. "Most New London residents will make out OK."
The new assessments, which are preliminary, do not apply to the current tax rate. The tax rate based on the updated assessments will be determined as part of the 2014-15 budget process.
The last revaluation in the city was completed Oct. 1, 2008. State law requires municipalities to conduct revaluations every five years.
The types of properties seeing the largest reductions are multifamily houses.
According to a memo to the mayor from the assessor's office, single-family homes lost about 23 percent value. The median decrease for residential vacant land is 18 percent, 25 percent for condominiums and 36 percent for two- to four-family houses.
Buildings with five or more apartments decreased overall by 2 percent, and industrial property went down overall by 10 percent.
Commercial real estate went down by 34 percent.
The updated assessments were mailed out to residents Tuesday, and informal hearings will start Friday and continue through December. Those wishing to discuss changes can schedule an appointment with Vision Government Solutions, the company that conducted the 2013 revaluation.
During the hearing, property owners can ask about the process, request a review of property data and bring in recent appraisals or real estate listings for consideration. Copies of documentation should be provided to the staff for review.
All new valuation and assessment data will be available on the VGSI website with the links shown on the individual notices.
At the conclusion of the hearings, a second notice will be mailed to property owners who appealed, listing the results.
Individuals who still wish to contest their assessments may appeal to the Board of Assessment Appeals by Feb. 20.
The assessments will not be finalized until after the hearing process and after all changes have been reviewed and processed.
k.edgecomb@theday.com
TO SCHEDULE A HEARING
Appointments can be made by calling (888) 844-4300 between 9 a.m. and 4 p.m. Monday through Friday. All hearings, which must be scheduled by Dec. 16, will be held by appointment only in Council Chambers at City Hall. Appointment can also be made online at www.vgsi.com/schedules.

Online auctions for real estate opens in Dubai

The Land Department is releasing 17 real estate properties for online auction, a first for the department according to Gulf News.
Potential buyers can browse through the auctions using eMart, a new portal developed by the department, which can be accessed through the Land Department’s official website.
The portal provides many real estate services, including the auction, sale, purchase and rental of real estate through Ejari, an electronic registration service for tenancy contracts.
Traders will be able to complete purchases of properties easily and pay through Noqodi, an online wallet available to registered traders.
Both residential and commercial properties are listed for auction.
Each listing includes detailed list of the property, including a map.
Sultan Bin Mejren, director-general of the Dubai Land Department, told Gulf News that the new portal will increase the number of daily transactions for the department.
“The new portal is required to cope with the ongoing growth in the real estate sector and facilitate all procedures for real estate sector operators and stakeholders.”

EMC2 Data Offers Free Software to Mortgage, Real Estate Professionals; Appraisers

DENVER--(BUSINESS WIRE)--In effort to give all players in the residential mortgage process the best tools to serve consumers, EMC² Data, a developer of regression analysis-based valuation technology, is offering its Resilytics software to mortgage originators, real estate professionals and appraisers cost free. Access to the software will ensure every realtor is able to provide accurate valuations for any home residence in the country. 

“I have used this technology for a year and can honestly say it has helped me close more deals,” said Tom Witzel, a Realtor with Re/Max Alliance in Denver. “This tool will help the entire mortgage market because of the level of accuracy it provides on home values. I value this tool because it offers updated information and more importantly, it has the math to back up the values.”
Witzel, who has been in the real estate business since 1999, has used the technology in his listing presentations as well as to help returning clients better price their homes. It is a tool that is beneficial to home buyers and sellers alike, he explained.
Resilytics gives users an automated regression analysis with a 95 percent confidence level on adjustments. In addition to now being cost-free, the technology is backed by a $1-million guarantee on the mathematics behind the analysis.
“We know that having the right home values makes the difference in a deal closing for realtors and loans closing for mortgage originators,” said Jim Silva, founder of EMC² Data. “Unlike other regression technology, our application is automated and delivers users up to 250 comparables to substantiate the 95 percent confidence level in our analysis. Resilytics gives realtors the confidence they need to help their clients price and purchase homes, while giving originators the information they need for underwriting loans.
“We are giving this technology away because we are so confident in its ability to truly improve the way the industry approaches valuations,” Silva added. “Plus, with the proper technology, no one will be able to cite the valuation as the reason the process is not successful.”
About EMC² Data
Denver-based EMC² Data provides enhanced statistical mathematically-based automated regression analysis for property valuations; with its proven technology, the company has created a collaborative platform that brings together real estate professionals and lenders early in the process, in order to improve valuation methodologies and more efficiently increase the number of transactions. For more information, contact info@emc2data.com.

 

Rental Property As An Investment - Loan Love's New Article Provides Tips For Investing And More

SAN DIEGO, Nov. 25, 2013 /PRNewswire-iReach/ -- LoanLove.com is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. The loan advice website excels at providing readers and loan borrowers with essential advice when working with mortgage loans and refinancing through their many articles and guide videos. In one of their newer articles takes an in-depth look at rental property as an investment. Titled "Is Rental Property a Good Investment? (In TODAY'S Market)," Loan Love's article answers the question in the title while helping future investors unlock their investment potential with some helpful advice.

The article begins by saying: "The goal of investing in rental property is to earn a profit from the rent you charge to tenants. However, depending on the characteristics of the property, the market conditions at the time and the specifics of your situation, investing in rental property may or may not be a lucrative choice. That being said, is rental property a good investment in TODAY's market ? Here are some factors to consider…"

As the article points out, if there was ever a good time to invest in rental property or housing, now would be the time. Market conditions are shown to be more favorable to those looking to invest which Loan Love further explains: "According to housing market experts, now is one of the best times to invest in a rental property if you have the cash. Housing prices have dropped, making home and apartment purchases much more affordable for investors. In addition, mortgage interest rates are at an all-time low, so it's possible to make a handsome profit on a rental even if you need to finance it with a mortgage. The rental market is also ripe for investors. Rental rates continue to increase in virtually every major metropolitan area. Coupled with the affordable housing prices and the low cost of borrowing, investors who purchase rental units now are likely to have a healthy earning potential."

However, it also important to note that making an investment in rental property may not be for everyone, as the article points out. For example, properties in a low-income area may not draw in as much rent money as a similar property located in a higher income area. Loan Love adds that before investing, there are a few characteristics future investors should look for, such as the following:

• Price
• Renovation required
• Maintenance
• Location
• Vacancy issues

The article explains further on each individual characteristic and why they are important enough to consider before making an investment. In conclusion, the article advises: "Before you make a final decision, do plenty of research. Sit down and look over your options carefully. Estimate how much the investment will cost you and how much you are likely to earn. If you believe the investment will bring in enough money to make it worthwhile, go for it! On the other hand, if you think the purchase is too expensive or the profit isn't high enough, look for some other ways to invest your money."

To learn more on investing in rental property, please visit LoanLove.com.

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SOURCE LoanLove.com

RentalRoost rolls out ‘lifestyle-based’ real estate search engine nationwide (exclusive)

Finding a home isn’t just about what is in between its four walls — location also makes a huge difference.
Real estate startup Rental Roost launched nationwide today, with a new focus on helping renters figure out which neighborhoods suit their needs.
“Think of us as an eHarmony for rentals,” cofounder and CEO Nitin Shingate told VentureBeat. “Imagine how much more efficient your searches will be when you look beyond the usual criteria of bedrooms, bathrooms, and price. When you’re trying to find a place to live, isn’t that what actually matters?”
RentalRoost offers lifestyle-based search criteria. The engine combines your expressed preferences with social media data and “geo-location scoring algorithms” to figure out which lifestyle factors are most important to you and recommend homes and neighborhoods that suit those needs.
Today it unveiled its school-based search, where renters can select a school and see which properties fall within that district. Parents can also pick a property and see which district it falls in. RentalRoost partnered with GreatSchools to provide school ratings along with the listings.
RentalRoost also added an off campus housing search tool. College students can research properties by their proximity to over 9,000 public and private campuses, so they know how far that walk with a heavy backpack will be.
The site’s other lifestyle filters include kid-friendliness, transit options, dining, shopping, arts, and pet friendliness, as well as traditional criteria like price and number of bedrooms.
I tried searching for properties in San Francisco’s Mission. Some of the filters weren’t working, but the scores for walkability, schools, shopping, etc. were useful.
RentalRoost also provides detailed demographic information about neighborhoods, so people can look at charts with data about martial status, household income, occupations, gender breakdown, and even academic achievement.
Searching for an apartment sucks and there are a number of tech companies aiming to make it easier. In addition to RentalRoost, there are the big guys like Rent.com Zillow, Trulia, and Craigslist, as well as a slew of younger companies like ApartmentList, Urban Compass, RoomHunt, Padmapper, Zumper, and Cozy.
It is a crowded and competitive market, and the newcomers try to distinguish themselves with special features and specific focuses.
ApartmentList and RoomHunt have options for roommate hunting, and Cozy and Zumper help realtors and landlords streamline their listing process by enabling online applications and appointments. Urban Compass assigns an actual human to meet you at apartment viewings and offer helpful advice about neighborhoods.
RentalRoost aims to carve out a niche by helping with neighborhood search, as well as housing search.
The company launched its pilot in the Bay Area in September and is now available throughout the U.S., although it has the highest volume of listings in Las Vegas, Houston, Jacksonville, Austin, San Antonio, Dallas, Phoenix, Indianapolis, Chicago, Tucson, Orlando, Columbus, Atlanta, and Philadelphia.
RentalRoost’s “sister site” Houserie provides a tenant screening service for landlords.

Invel to Buy Pangaea in Largest Greek Real Estate Deal

Invel Real Estate Partners agreed to buy most of National Bank of Greece SA’s real estate unit for 653 million euros ($882 million), betting on a recovery in the country’s economy.
The sale of the 66 percent stake in Pangaea Real Estate Investment Co. is expected to be completed by the end of the year, according to a statement from London-based Invel today. Pangaea will probably have more than 1 billion euros of real estate assets at that time and it would be the largest ever Greek property transaction, Invel said.
The investment “demonstrates our confidence in the potential of this market and the recovery of the Greek economy,” Christophoros Papachristophorou, Invel’s founder and managing partner, said in the statement.
Greece is striving to attract foreign investment as the economy faces a sixth straight year of contraction. Pangaea, Greece’s largest real estate investment company, owns and manages nearly all of National Bank of Greece’s branches as well as the main offices used by the bank, the country’s oldest.
To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net
To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net