Categoría Puerto Vallarta Real Estate

What Type of Property Should You Buy?

Property

This is one of the most common questions that I get when working with new investors, and I guess that it is to be expected. Not only are there a lot of different types of properties out there, but there are also different strategies and pros/cons to each strategy. So in this post I will attempt to provide some criteria for how to answer this question for yourself.

What Are Your Goals?

I believe that everything comes back to your individual goals. There are many different types of properties and strategies out there, but unless you know your goals it is difficult to know which one to select. So start out by figuring out your goals.

Related: Tips for Achieving Your Goals in 2014

What is Your Strategy?

Once you have your goals established, the next thing is determining which of the hundreds of strategies you could utilize to achieve your goals. Some strategies are more active, such as wholesaling and flipping. Others are more passive (but still require work) such as buy-and-hold or tax lien investing. Narrow down the strategy or strategies that will contribute towards achieving your goal.

What is Your Location?

Sometimes this step can come before your strategy, sometimes it can come after. In my case, my goal was to generate monthly income to cover my expenses to allow me the freedom to make decisions without having to worry as much about the financial impact. My strategy to do this was to purchase buy and hold properties. So my next step was to find a location that would fit my strategy.

One of the first things that I did was to lay out my criteria for a location. These included things like:

  • Within 1 hour of driving
  • Steady/increasing population over the past 10 years
  • Multiple businesses locally available offering jobs
  • Purchase prices that allowed positive cashflow

After I had my basic criteria, I grabbed a map and created a circle of my target area. I then took towns (Zip Codes) within the circle and plugged them into City Data to get information and population trends for the zip code. Any that did not have steady/increasing populations got removed from the list.

I then created a spreadsheet for each Zip Code. I followed rental ads (either in the newspaper or online, whereever landlords advertised properties for rent). At the end of the month I analyzed the data and asked the following questions:

  • On average, how long were ads in the paper (how long did it take to get a place rented)?
  • What is the average rent for a 1 bedroom apartment? 2 bedroom? 3 bedroom?
  • Were apartments offered single family houses or multi-units?
  • What were the “norms”? Ex. Were pets allowed? Were utilities included?

Once I had this information, I then began looking at properties for sale. I used a spreadsheet to quickly evaluate these properties. At this point ...read more

Is There a Best Time of Year to Transact in Real Estate? (This Data Might Surprise You…)

Post image for Is There a Best Time of Year to Transact in Real Estate? (This Data Might Surprise You…)

Is it better to list in the summer? The winter? Will I have more competition if I list in the winter? Am I more likely to sell at a greater discount depending on the time of year?

*This post is being presented from the perspective of a seller but it is easy enough to extend the perspectives to those of a buyer*

As a managing broker I appreciate that even with the help of a real estate broker it is difficult to determine the optimal listing price or optimal time of year to list. Practically speaking if brokers and investors were pricing real estate perfectly price changes would not be as common as they currently are. The pricing market interests me so much that when wearing my “professor hat” I spend a fair amount of time examining the pricing of real estate in Chicago in an attempt to better understand movements.

Related: The Best (And Worst) Real Estate Markets (According to New Data…)

As I work through a much larger study I want to shed some light on a few things that investors may find interesting.

What The Data Says About The Best Time of Year to Transact Real Estate

This first post is summarizing the trends that were identified when segmenting properties into quarters. In an attempt to answer the questions above I looked at all residential multi-unit buildings from 2006-2012. This resulted in over 11,000 properties that were listed and sold during this period. In this post I am only discussing those properties that did NOT have to submit a price change in order to lead to a sell which reduced the properties sample to 6,410. The table below looks at this reduced sample and shows that over the 6 year period examined the differences in inventory are seemingly negligible. We can see that the first half of a year, Q1 and Q2, certainly have more listings but also more sales as a result.

If we are chasing the buyers we may want to list in the first half of the year but the fact that both Q3 and Q4 had more sales than listings may mean that sellers hold a stronger bargaining position in the second half of a year. The question is would you rather be operating in a market that is moving more inventory or one that has a tighter inventory?

Related: Why Winter is Great for Real Estate Investing

As a buyer you may reason that the fourth quarter is optimal since the fewest properties are being demanded and that prices will be lower as a result. It is worth noting that the average days it took to sell in this sample was 34.06 days which is relatively quick and speaks to finding the right time to list.

What about discounts?

While it is valuable to have a general sense of you competition what is the discount that these sellers are undertaking in order to sell over an average window of 34.06 days? The table below suggests that regardless of what quarter you list the average discount is approximately 5%. This would tend to imply that regardless of the quarter listed a parcel will sell for a discount of approximately 5%. On a technical note if you are a buyer you do seem to have a marginal benefit if negotiating a purchase in the second quarter of a year and if you are a seller you have a marginal benefit when listing in this same quarter.

Table 2 Discount

Summary

What conclusions can be drawn from this summary?

  • First and foremost is that when a home is priced “right” we should still expect an approximate discount of 5%.
  • Additionally, when we price “right” we should sell in approximately a month regardless of the quarter listed.

The next step is to examine what happens when we don't price “right” and have to change the listing price. Next time I will be looking at how price changes are received by the market and how they impact time and discounts.

The post Is There a Best Time of Year to Transact in Real Estate? (This Data Might Surprise You…) is property of The BiggerPockets Blog. and is Copyright

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