Date : January 29, 2009
To: Our clients and friends in real estate,
Just a quick update on the market and checking in with you how you and your family are doing.
In this first letter of the year we wanted to touch on a number of timely subjects affecting many people and their real estate plans for the next number of years.
· Market updates resources now online...
· Your 2008 Property Tax Assessment notices.
· We will touch on a number of questions we hear from various people at different stages in their live in trying to figure out what is the right thing to do regarding their real estate plans.
· In addition we wanted to introduce you to our new VIP service and invite you to become a member in this preferred services club.
For current market conditions and statistics we would encourage you to visit our website and check out our newsletter their which is updated with current real estate news almost daily. In addition you will find market statistics of various Lower Island communities in greater detail, with current averages, median prices and number of sales over the past month. Our web site is at www.pfanntastic.com . if you do not have access to the internet, and would like to receive a printed copy, please call us and we will gladly make a copy available.
TAX ASSESSMENT NOTICES; This month you will or have already received your annual property assessment notice, which this year has an extraordinary approach to estimate the assessment, by using the lower of 2 years in determining this year’s assessed property value. As you know your annual property taxes are based on a multiplier factor used with your assessment value, so the higher the assessed value the higher your property taxes (notwithstanding that the municipalities can and will adjust the multiplier every year if needed). With this unprecedented move the assessor is all but eliminate the flood of appeals that they would otherwise have incurred, however if you feel that your property assessment is still to high, you do have the right to file a formal appeal (the online system as identified in your notice is very simple and works very well).
In order to submit your appeal you do need to have some estimate of value as of the assessment date, so talk to us if you need any assistance with establishing this value as at July 08 and July 07.
We mentioned to review the market statistics on our website well as you will see the market statistics show some dramatic shifts and changes, as the sample gets smaller however it is clear that with the current market conditions and lack of confidence that there will be some amazing opportunities that will show up over time. Let us give you some examples.
For those considering upgrading to a larger and or more expensive home. To give you an example, and assuming that prices slide at the same rate across the market (which is not true) but let’s say that the market prices dropped 10%, from $ 660,000 to 595,000 but your next home priced at $ 800,000 dropped the same 10% the spread between the 2 actually reduced by $ 15,000 in your favor.
As mentioned we actually think that the higher priced/ larger properties are dropping at a slightly higher rate than the prices of properties closer to the median of the local markets, which would further benefit you. On top of this, you will see over the next little while that a few builder/developers are getting squeezed by their banks and will be very motivated to sell sooner rather than later.......
Conversely, if you were planning to downsize over the next few years (2 – 5 years), it may be a good time to consider your options as well. As most of the experts are anticipating a prolonged slide in market activity and values, if your property is valued moderately to substantially higher than you local market area medians, your property value is likely to reduce more and faster than those at or below the median values in your area. Which could cause the net proceeds difference between the sale of your current property and the lower purchase price of your future property to be smaller than you would have hoped for.
For example, say you sell today at $ 600,000 and buy today at $ 400,000 (ignoring fees and expenses) you would net $ 200,000, however say you sold in 2 years with a net value reduction of 10% per year for both your sale and purchase in 2 years your current property would sell at $ 486,000 and the property you would buy would be at $ 324,000. Again ignoring all the expenses and fees, you would net a whopping $ 38,000 less, but it gets worse, if you then consider if you had invested the net proceeds from your sale now at say 5% return per year, the difference would turn out to be a total of just over $ 60,000 in net advantage to you just by timing your move correctly.
So if a move during the next 5 years seems inevitable for you, making the big move now in either case may be better than over the next 2 to 5 years, that much seems to be clear.
TO SELL OR NOT TO SELL THAT IS THE QUESTION…….? As we keep discussing with most people, if you do not need to sell now or in the future, that would be the way to go, keep the current property and use it for future “investment purposes”. That investment may be your downsized home, or the new dream home, use the current property for revenue purposes and have your mortgage paid for by tenants. However we understand, that is not always possible or an appropriate solution for you. (ask us for our free report on this issue).
There are many very good tenants still screaming for appropriate housing at affordable rates. We have also recently spend some time investigating how to optimize revenue from rental accommodation and would be delighted to share this information with you if needed.
We can not predict what the future has in store for you, however, we do know that those that embrace information, knowledge and opportunity tend to be able to better weather the storms of change when they show up, real estate holdings have always been a save heaven for most not just as a home but as a secure and long-term investment……
Now this off course has nothing to do with anything until and unless you are interested or need to be moving at all. If that is the case the chicken and egg issue of real estate becomes relevant again, as most people need to sell their property in order to be able to move forward with their purchase.....We have a little report about timing your move correctly, which we will gladly forward to you if needed.
FOR FIRST TIME BUYERS, this current market situation is like opening a cookie jar, and finding new favorite cookies every day.
With increasing supply and lowering prices and combined with amazingly low interest rates it becomes almost to good to be true. properties that were not even on the radar scale a year ago, are now being by passed, as even better options become affordable. Be sure to stay in touch with us as well as your Mortgage Broker, as financing situations are changing and your local mortgage expert, can save you money time and frustration as long as they know what your plans are.
The question we currently hear often from first time buyers is “when is it the right time to buy?” the answer is often dependent on your own situation, but simply stated, when your current cost of housing exceeds the cost of your mortgage for your future home, I would say it’s time to take a hard look at your options. Even if the prices may still drop a bit, with the monthly payment savings, the equity your are building as well as the ability to start adding value to the property, I would likely suggest again that sooner is likely better than later, provided we shop smart, find the right property, at the right location and at the right price and terms.
INVESTING IN REAL ESTATE, is it time to start investing in real estate…….?
Yes, no and maybe, is the short answer, again it really depends on what your objectives are over the next 3 to 5 years. But like any other investment, if the investment fits your specific investment criteria, why would you not buy it….?
Today is likely not the time to buy and try to do a short term flip with a property for obvious reasons. However there are certainly properties around that by doing the right things to them (buy, fix, sell) that could give a decent return, although even that would be a higher than average risk at this time.
The best situations at this time are likely in properties that are under used, in some way or another, and that could benefit from a creative investment approach to its improvements with an eye of generating cashflow that would far exceed the normal forms of cashflow available.
We have discussed this opportunity area with a good number of people over the past few months and years, and it is very clear that there is an ever increasing demand for specialty housing with added services for which in the past various levels of government was responsible, however this segment is more and more becoming an amazing business opportunity for those with a bit of vision.
Even if you want to be in the traditional revenue type real estate, there are already a number of opportunities around where the potential cashflow would easily pay for the property, which again would likely make sense to consider for long term holding certainly more secure than the stock-market………., need we say more.
Options, Choices, more options, more choices, what to do, it is a real good time to consider your options and talk to us.
