International Buyers Snapping Up U.S. Real Estate

Remember how I kept saying that if you are in any kind of strong financial position, now is the time to snap up investment real estate?

International investors -- from pretty much all over the globe -- are visiting the U.S. and using the impotence of our weakened dollar to pick up solid investments. The Irish have been buying up apartments and townhomes all over Manhattan for more than a year now. This week, USA Today reports that foreign buyers are now coming in and buying single family homes to hold for investment.

I have received calls and emails from at least a half-dozen investors looking for property in Central Ohio and the Midwest, areas generally considered more economically stable than much of the rest of the United States. Unfortunately, my language skills include only a smattering of Spanish. As a native English speaker, my inquiries have come from buyers in Australia, Britain, and from English speakers from France and Spain.

The bottom line is that this is the time to buy. And hold. NO FLIPPING!

Here is an excerpt from the USA Today story:

"With these prices, you can't say no," says Monique Burger of Belgium, who's buying a Miami Beach vacation condo for $270,000. "With the low dollar against the euro, it helps. And the low housing prices made us want to buy."

I'm not surprised. Rents are strong in many areas of the nation, though there has been some softening as many more homes that people cannot sell are being listed for lease, or into rent-to-buy scenarios.

Once things turnaround, investors will have both rents, depreciation and expence deductions and appreciation all putting cash in their pockets -- courtesy of their renters.

Fed Sees Higher Inflation Looming

The Federal Reserve sees worse economic problems ahead, according to new forecasts from the central bank released Wednesday.

But even so, the Fed may be reluctant to cut interest rates any further than it already has, the minutes from its last meeting show. (The minutes were also released Wednesday.) The Fed lowered its economic growth forecast for the year. At the same time, it raised its projections for inflation and unemployment. The combination of slowing growth and rising prices created a difficult situation that made the Fed's latest decision to cut rates on April 30 a "close call."

So with that said, remember what I have mentioned in earlier posts about inflation being a real estate investor's friend. Inflation raises everything, including rents. Keep that in mind.

Large Florida Deal Indicative of Investment Opportunities Large And Small

Who says the market is down and no one wants commercial properties?

People who don't know what they're talking about, that's who!

In southwest Florida (a place I love), where homebuilders have pulled up stakes or are navigating some pretty rough financial seas, there is trouble. But one person's -- or business' -- misfortune is another organization's opportunity.

WCI Communities Inc., based in Bonita Springs, Fla., has agreed to sell its high-end, Italian-inspired Tuscany Reserve community in a multimillion-dollar deal. After several other deals fell through, says the Naples Daily News, WCI closed on a sale Thursday to a group of European and Middle Eastern investors.

The sale price was not disclosed. Observers pegged it at about $65 million.

The market will come back and the investor group will be poised to make a killing in a decade. So I'm sure you're saying, "oh right, we're talking a giant project, what does that have to do with me?" The reality is, if you have any kind of strength financially, NOW is the time to pounce and pick up property. And not just the first project you run into. Investors have a wide variety of choices. If one doesn't pan out, or the numbers don't work, move on to the next one. Something WILL work.

Unlike residential real estate, where people are emotionally attached to the home or structure they purchase, commercial/investment real estate is all about the numbers. The math either works, or it doesn't. There are residential opportunities for investors, as well. To hold, not to flip. I have already covered that issue far more than I should, so I'll stop there. But good homes can be purchased at good values (not just fair values, but with good deals). Hold them for investment, rent them out for income, take advantage of the many tax opportunities, and you have a winning combination.

So while the WCI transaction is larger than a lot of people could ever dream of dealing with, it is indicative that transactions are happening, and for investors -- large and small -- there is a ton of opportunity.

More Experts Come Out Against Flipping (In This Market Anyway)

Anyone who reads this journal even sem-regularly knows how I feel about flipping. Not a good idea generally, and definitely an insane idea in this market.

Well, I'm not the only one. Dian Hymer, a columnist for Inman News, says the same thing. That is, she's saying don't buy to flip in the current market. Here is an excerpt:

"Short-term investing paid off for many investors a few years ago. In most cases, this strategy should be avoided today. Although the home-sale market is localized, generally the current housing market is soft and is expected to take a year or more to recover. You don't want to be caught having to sell in a year or two when the value of your house might be less than or equal to what you paid for it. After taking into account the costs of sale, you could find yourself selling at a loss."

True, short-term buys and sells did generate some cash. And it was enough to spawn a raft of questionable television shows showing the "benefits" of flipping. But I would hardly call flips "investing." It is speculating -- pure and simple. Commodity traders don't invest; they hedge and they speculate. Buying houses to flip is no different.

Still, there is money to be made -- serious money -- buy buying houses and holding them for investment. Rent them out, take advantage of a wealth of tax writeoffs (expenses and depreciation), plus have income. Work the numbers with someone who understands investment real estate, look at the pros and cons and pick your investment carefully. It's not like there aren't a few possibilities out there. Work it right and the income will cover the note. The expense write-offs and depreciation is gravy. And as the market recovers, appreciation is the icing on the cake. It is truly a buyers' -- an investors' -- market.

Savvy investors do not flip. They buy to hold. And they let their residents (tenants) pay what is owed to the bank.

Remember, people are perfectly willing to help you pay your bills -- if you let them.

Inflation Is The Toughest Thief To Battle

I heard a great one today. "Inflation is the toughest thief to battle." It is virtually unstoppable. It creeps up on you and takes from you.

So what can you do? Well, of course you know my answer. Invest in investment grade real estate. Not houses to flip. But houses to hold and rent. Or apartments. Or offices. Let others pay your bills for you. Let others pay your mortgage for you.

Owning real estate is a hedge against inflation. It won't stop it. But in fact, you'll be carried along by it. Values for property over time go up. Rents go up. We are seeing it now in multifamily and distressed single family homes. Both of which are being snapped up by experienced investors. Because people can't afford to buy, or keep their home, they are being forced to rent. Which puts pressure on rental residential properties -- whether a single house, or a twin-single, or four-family, or large apartment complex.

Something to think about.