It’s one of the most asked questions in the overseas property market at present, and one which seems to evoke the greatest range of answers. From talks of a new and sustainable growth already being underway, through to stagnation until early 2012, it seems little consensus is emerging about what is in store for Spain’s economy and property market in 2011.
In order to try and ascertain what is likely to happen over the next twelve months, it’s important to understand the various factors which contributed to one of the most spectacular property crashes of recent times. Without doubt we are in relatively uncharted territory, and whilst it cannot be disputed that challenges do remain, there are likely to opportunities emerging as the Spanish property market seeks to redefine itself with the next generation of overseas investors.
The much heralded Spanish ‘economic miracle’ of the past twenty years was seen by many as becoming a blueprint for many emerging economies seeking sustained growth through direct overseas investment. However with economic growth so intrinsically linked to a real estate sector built on unsure foundations, it was understandable that the Spanish economic falls of 2008 coincided with one of the world’s largest property market crashes.
The real estate bubble in Spain predominantly focused around two key factors, which contributed to its considerable growth over past twenty years. Firstly, with tourist driven demand for property in Spain being at an all time high in the early 1990′s, property developers began to react by undertaking one of the largest construction booms of recent times. Large numbers of new properties were being built in Spain at an unprecedented rate, and with developers understandably keen to shift stock, prices became very attractive to overseas purchasers.
The second ingredient to this toxic financial cocktail was the tidal wave of cheap credit which suddenly became available to purchasers of property in Spain. This cheap credit saw demand increase to unprecedented levels, as people saw an opportunity to purchase their very own slice of the Mediterranean dream.
When the correction came in 2008, it manifested itself in the most spectacular fashion, and the impacts of the Spanish property bubble bursting where felt throughout the economy as a whole. A recent Bank of Spain report showed that the correction resulted in around 2 million jobs being lost in Spain, which had become highly dependent on the property market for employment and growth. Indeed the bank estimated that by the end of the crash, the reduction will have reduced the Spanish economy by 5.4% in comparison with 2007 figures.
By Summer 2010, the Spanish property market seemed characterised by oversupply and lack of available credit, and understandably, many people are now asking what’s next, and when will the recovery begin to emerge?
2010 has been seen by many as a period of consolidation, as many people chose to take stock of the new situation. Arguably this period of transactional calm is likely to prove beneficial in the long term as investors and holiday home owners move away from the negative sentiment which was all consuming just a few months ago.
Talk is now of the oversupply gradually being squeezed out of the market, with many major developers having held off on the majority of new construction in recent times. Indeed, there are already suggestions that some more tourist orientated destinations such as Mallorca are now seeing increased demand once again. Without doubt, oversupply is still a factor, but this does now seem to be focused in commuter belt pockets surrounding major commercial centres such as Madrid, Valencia and Seville.
Away from the more tourist focused areas, the correction has resulted in a more realistic pricing structure being applied, which is gradually bringing overseas purchasers out of the woodwork. Indeed many of these more recent purchases do seem to reflect exceptional value for money in comparison to the prices of three years ago.
Of all the factors to be considered when evaluating the future direction of the Spanish property market, without doubt the most important factor is demand. Over the course of the past twenty years, Spain has been the most popular overseas property purchase destination for people from the UK and Germany. Today, Spain shares this accolade with France, however demand for property in Spain is still substantial and is likely to remain so for the foreseeable future. What is more positive for the Spanish property market, is the rapidly increasing demand from the newer overseas markets such as Italy and Scandinavia reducing the dependence on the economies of just a couple of its European neighbours.
Overall, there does seem to be a consensus that the worst period is now over for the Spanish property market, and whilst the market will not return to the artificially inflated highs seen previously, a sense of direction and momentum will be harnessed during 2011.
Without doubt, the problems of the Spanish property market epitomised the global credit crunch, and on the back of this overall demand for property in Spain fell back as people became increasingly wary. These factors however are gradually easing their way out, and it is highly likely that once again Spain will become the heart of the European overseas property market.
There is a popular misconception that real estate investing is as easy as pie. Nothing could be further from the truth. Real estate investing is not for the faint hearted. It is not as straight forward as most people believe it to be. If you intend to make money from real estate investments either on a full time or part time basis, you should consider participating in some sort of real estate investing training.
There are various forms of real estate investing training. The most common is investment seminars. Investment seminars offer the latest information on the best industry’s investments available in the market. Investment seminars also offer you the opportunity to get advice directly from speakers who are successful industry investors too. They can offer you the services of their expertise and experience.
Investment seminars are one of the best forms of industry’s investing training because of the networks formed as a result of attending them. Experienced and novice industry investors meet in these forums and are able to exchange ideas and experiences. However, it is important to avoid striking any deals or entering into agreements during these interactions. These should be put off for further discussion at a later period.
Although investment seminars are a great way of learning, they are also opportunities for scams. Be sure to check the credentials of the organizers of any investment seminar you intend to attend. If you do attend a seminar, listen with an open mind. Do not believe everything you are told. Investigate the information you are given after the seminar before implementing any of it.
Other forms of real estate investing training include actual lectures organized by real estate investing networks, organizations and institutions. These are offered as formal classes. These lectures offer you insight into the financial aspects of investment. They are especially helpful for those who do not have a background in economy or finance. Although industry’s investing does not require a formal education, it is always an advantage to gather as much information as you can on any particular area. This improves your chances of success.
Entities that invest in different types of real estate or real estate related assets such as commercial complexes; shopping centers, offices, hotels etc. are referred to, as real estate investment trusts or REITS were first created in the 1960′s to give a chance for investing in large-scale commercial properties.
The internal revenue code has a list of conditions, which a company has to fulfill in order to qualify as a REIT.
1. It has to be structured as a corporation or a business trust.
2. Has to be under the control of a board of directors and officers.
3. Have a minimum of 100 shareholders at least.
4. Shares should be fully transferable without any problems.
5. The company has to invest 75% of its total assets in real estate.
6. It should generate 75% or more of its gross income from investments in real estate or mortgages in real estate.
7. Another condition is that it should pay 90% or more of its taxable income to its shareholders in the form of dividends.
REITs may be held publicly or privately. If they are publicly held they have to be listed with the SEC.
Types of REITs:
REITs are of three kinds, equity, mortgage and hybrid REITs.
Equity REITs: This is the most common kind of REIT. This kind of entity owns or invests in real estate and makes money from the rent it collects.
Mortgage REITs: Typically lends money to owners or developers as well as invests in financial instruments that are secured through mortgages. Their main revenue is interest earned from mortgage loans.
Hybrid REITs: Is a combination of the other two kinds.
Advantages of REITs:
1. Investing in REITs has the advantage of buying a physical asset as well as the prospect of increased returns due to appreciation in the rent as well as the market value of the properties.
2. The income generated by the property is shared among the shareholders as well as reassuring them of their rights to the property.
3. Even an average income person can own real estate without large down payments or any hassles.
4. Only one level of taxation is applicable to income earned from REITs as the entity can avoid corporate taxes.
People can invest in REITs by purchasing shares or by investing in mutual funds specializing in real estate. People investing in REITs have more liquid investment. Most REITs yield 7% to 10% dividend yield making it profitable.
While investing in REITs make sure you buy stock from a reputed and established entity. Invest in REITs after carefully analyzing all aspects and understanding all risk factors involved.
Various firms offer help to new entrepreneurs by offering their services as well as products to help run their businesses efficiently.
Today’s real estate investing market is saturated in many regions of the country, a situation which is determined by the years of consecutive bubble inflation and the consequent burst. One of the best strategies for an up and coming real estate investor is to explore the target market in search for a particular niche.
One of the explanations for the great number of successful deals that can be made in a real estate investing niche market is the so called “long tail” effect. When a real estate investor tries to enter the game in a crowded market the competition from similar investors and other entities poised to get a profit can be strong, if not crushing. This means that a real investor needs to be very resourceful and have a strong back in order to profit from these markets.
The “long tail” side of the market, on the other side, is far less crowded. This means that there are fewer players interested in making a transaction, but this scarcity doesn’t mean that profit cannot be made in these real estate investing niches.
Real estate investing in niche markets allows the investor to gradually accumulate more knowledge about that specific niche, which is much more difficult to do when dealing with larger segments of market. It is therefore possible for anyone to become a guru in his or her own niche, a status which natural leads to better transactions with higher returns.
Finding the right niche is what every person interested in real estate investing should consider as early as possible. Theoretically speaking there is an infinity of niches out there, waiting to be explored. Here are a few examples:
· Seniors
· REOs
· New Constructions
· First Time Buyers
· Property which needs fixing
· Land
· Short sales
As you can see the possibilities are endless and the criteria which determine the niche can apply to both people and properties. You need to find a niche for yourself, either splitting the general categories of properties in smaller part, or splitting the buyers and sellers into similar smaller categories which allow you to identify a niche.
The most important thing to do when niche hunting is a thorough analysis. Read every piece of information you can lay your hands, network with the right people, check statistics and read real estate investing newspapers. This will allow you to get a good picture of the market and gradually you will see some patterns emerging. Once you are at this stage try to narrow down your selection and identify the niche that are the most accessible or are the most profitable. An example would be: General Public>Young People>Single Young People>Single Young People with no Property>Single Young People Looking to Acquire a Home.
Once you have your niche is time to work it. Try to think about the places where you can find your target criteria. Think about the specifics of each target group. Complete a deal, even a small one for starters and use the experience in you next deal.
You will gradually become more knowledgeable about your niche to the level of becoming an expert. You will then be able to fully make use of your real estate investing niche and turn the highest margin of profit from your deals.
Over specialization can sometimes backfire and you can find yourself not being to cope to a different real estate investing market than your specialty. Also, from time to time you will need to move on to another niche. It is therefore important to hedge your bets and never use the entirety of your resources in a single niche.
Wake up! The clock is ticking and time is running out. Now is the best time to buy commercial real estate and pave your own road to wealth and financial freedom.
Here’s seven reasons why you should be investing in apartment buildings and not rental houses:
1 – Super cash flow – Get bigger, fatter monthly paychecks flowing into your bank account from cash flow rich apartment buildings, instead of cash poor rental properties.
2 – Principal reduction – Over a period of time, your tenants pay down your mortgage each and every month building your equity stake in the property. still make money even if your property doesn’t go up in value.
3 – Forced appreciation – Single family home values are geared to the whims of the marketplace. With apartment buildings, simply raise the rents and the property value zooms.
4 – Risk reduction – In a single family rental if one tenant fails to pay rent you’re in the a financial hole, but not with apartment buildings. You got multiple tenants paying the bills.
5 – Management free (almost) – You can hire your own manager or use a management company to handle daily activities, freeing up your time.
6 – Less competition – Competition is fierce in the rental housing business, but is practically nonexistent in the commercial apartment business.
7 – Gigantic payday – When you finally sell your apartment property, it is not unusual to receive a six or seven figure paycheck. Try to get that from a rental house.
Stop wasting your valuable time chasing pennies from rental properties. Get smart and go for the big bucks from investing in apartment buildings. You’ll get richer faster!