Up and Coming Neighborhoods, Beware!
Beware of the seller who will try to convince you to buy their property at a premium price based on an up and coming so called improvement.
If you haven't heard it yet, you will.Some sellers make out that their property has premium value based on a local paper running an article about a revitalization plan near the seller's property. Or a new a new school has been announced to go up across the street, in the year 2011!
Let's think about this for a moment. It's a wellknown fact these days that real estate as a whole has cooled off quite considerably. Some markets in the country have gone stone cold sober over the past year and a half.
Despite all the blatant evidence of slow sales, such as, houses sitting on the market for six months or more, price reduction signs all around, fewer renovation projects, residential developments grinding to a halt, half completed, resembling a ghost town?
Can you believe there are sellers out there who still believe we're in 2004 when sales were on steroids? I've been running across my share of pipe dreamers and so have many of my students around the country which we discuss during our group talks. Matter of fact here's a prime example of what I’m taking about.
I've been dealing with a pair of sisters who are interested in selling their house which has been in their family for years. This house is a real junker.As we rehabbers say, "It needs everything!"
The house is located in a decent neighborhood in Washington DC, called "Columbia Heights" for you locals reading this.
The sister, who is the family spokesperson, said to my assistant Valerie last week "well, we know this is an "Up and Coming area, just look at all the development over on 14th street."
Well my friend, this lady couldn't have been more wrong about anything else as she was about that statement. I assure you, she is not alone as a seller. In her case I can see how she based her thinking.
Hey, new development, must be hot! Right? Not always, it depends.......
.........on what kind of development. In this case the development on 14th Street the seller was referring to are mostly commercial projects. Some large condo buildings and mixed use projects are going up as well. Here's the deal with real estate price trends.
As an investor your objective is to spot trends and market movements. Is the market emerging, stagnant or declining? A general rule of markets is this:
First come jobs, then the people, creating a demand for housing.Next comes the new residential developments to serve the new population growth. Once the population swells in the new residential areas, the commercial guys start planning their move.
Scoping out the demographics and population growth the big box stores i.e. Wal-Mart and Home Depot move in to serve the masses. Small retailers follow suit along with entertainment (movie theaters, restaurants etc). This is economics 101, supply feeds demand.
Once the influx of commercial development begins to take place usually the residential markets have peaked as is the case with the Columbia Heights neighborhood in Washington DC. The residents naively believe their property will continue to increase because of the commercial and retail activity nearby.
Now there are exceptions to every rule. One such exception is what I call the "Big Dog" factor. Yup when the Big Dog breaks ground in an area, their very presence can influence the market appreciation seemingly overnight. Does the name Trump mean anything to you? Mr. Trump can and has influenced market appreciation with just the announcement of a proposed project.
You should know the local Big Dogs in my area. Here in DC it's guys like Douglas Jemal, Steve Abdo, and PN Hoffman. These fabulous developers can go into uncharted territory and create a sizzling market. This is the exception, remember, not the rule.
So when you're out problem solving for your deals don't fall for the “okee dokee” some sellers try to feed you. You'll see it with apartment and office building managers who fax you the pro forma (future best case numbers) instead of actual dismal numbers.
You my friend, will make offers based on the current condition and/or circumstance. NOT, what's coming in the future. Not based on future increases in rents. In the case of buzzing commercial and retail projects remember, those folks have done expensive studies to locate population growth before they send in the first bulldozer.
In the case of commercial projects going up before population and residential swelling, that's pure speculation on the part of the “Big Dog” with deep pockets that can wait it out, it doesn't always impact housing sales. For instance, the MCI Center, home of the Washington Wizards comes to mind. Owner Abe Pollin started, albeit slowly, the revitalization of downtown DC neighborhoods. We're talking four or five years before any real action revved up.
Forget the new school that's coming, or new subway stop, and the harbor plans, yadda yadda yadda on and on. Make your offers on what you can verify TODAY!
In the case of two sisters and their Columbia Heights property, Valerie just printed out a new MRIS report showing their zip code's housing prices dropped 15% during the 4th Quarter of 2006. Our current research also endorses those stats.
Valerie will meet with the pair in an attempt to shed some light using the mighty black and white 3rd party report. The sisters should get it, don't cha think? Not always. In my 12 1/2 years of experience in the trenches some sellers (people period) only see what they want to see. In that case......
NEXT! Someone else is waiting for you!
Take Action,
Ken Williams
Much success to you.
Go to http://www.thewholesalewizard.com/ for more information.
Beware of the seller who will try to convince you to buy their property at a premium price based on an up and coming so called improvement.
If you haven't heard it yet, you will.Some sellers make out that their property has premium value based on a local paper running an article about a revitalization plan near the seller's property. Or a new a new school has been announced to go up across the street, in the year 2011!
Let's think about this for a moment. It's a wellknown fact these days that real estate as a whole has cooled off quite considerably. Some markets in the country have gone stone cold sober over the past year and a half.
Despite all the blatant evidence of slow sales, such as, houses sitting on the market for six months or more, price reduction signs all around, fewer renovation projects, residential developments grinding to a halt, half completed, resembling a ghost town?
Can you believe there are sellers out there who still believe we're in 2004 when sales were on steroids? I've been running across my share of pipe dreamers and so have many of my students around the country which we discuss during our group talks. Matter of fact here's a prime example of what I’m taking about.
I've been dealing with a pair of sisters who are interested in selling their house which has been in their family for years. This house is a real junker.As we rehabbers say, "It needs everything!"
The house is located in a decent neighborhood in Washington DC, called "Columbia Heights" for you locals reading this.
The sister, who is the family spokesperson, said to my assistant Valerie last week "well, we know this is an "Up and Coming area, just look at all the development over on 14th street."
Well my friend, this lady couldn't have been more wrong about anything else as she was about that statement. I assure you, she is not alone as a seller. In her case I can see how she based her thinking.
Hey, new development, must be hot! Right? Not always, it depends.......
.........on what kind of development. In this case the development on 14th Street the seller was referring to are mostly commercial projects. Some large condo buildings and mixed use projects are going up as well. Here's the deal with real estate price trends.
As an investor your objective is to spot trends and market movements. Is the market emerging, stagnant or declining? A general rule of markets is this:
First come jobs, then the people, creating a demand for housing.Next comes the new residential developments to serve the new population growth. Once the population swells in the new residential areas, the commercial guys start planning their move.
Scoping out the demographics and population growth the big box stores i.e. Wal-Mart and Home Depot move in to serve the masses. Small retailers follow suit along with entertainment (movie theaters, restaurants etc). This is economics 101, supply feeds demand.
Once the influx of commercial development begins to take place usually the residential markets have peaked as is the case with the Columbia Heights neighborhood in Washington DC. The residents naively believe their property will continue to increase because of the commercial and retail activity nearby.
Now there are exceptions to every rule. One such exception is what I call the "Big Dog" factor. Yup when the Big Dog breaks ground in an area, their very presence can influence the market appreciation seemingly overnight. Does the name Trump mean anything to you? Mr. Trump can and has influenced market appreciation with just the announcement of a proposed project.
You should know the local Big Dogs in my area. Here in DC it's guys like Douglas Jemal, Steve Abdo, and PN Hoffman. These fabulous developers can go into uncharted territory and create a sizzling market. This is the exception, remember, not the rule.
So when you're out problem solving for your deals don't fall for the “okee dokee” some sellers try to feed you. You'll see it with apartment and office building managers who fax you the pro forma (future best case numbers) instead of actual dismal numbers.
You my friend, will make offers based on the current condition and/or circumstance. NOT, what's coming in the future. Not based on future increases in rents. In the case of buzzing commercial and retail projects remember, those folks have done expensive studies to locate population growth before they send in the first bulldozer.
In the case of commercial projects going up before population and residential swelling, that's pure speculation on the part of the “Big Dog” with deep pockets that can wait it out, it doesn't always impact housing sales. For instance, the MCI Center, home of the Washington Wizards comes to mind. Owner Abe Pollin started, albeit slowly, the revitalization of downtown DC neighborhoods. We're talking four or five years before any real action revved up.
Forget the new school that's coming, or new subway stop, and the harbor plans, yadda yadda yadda on and on. Make your offers on what you can verify TODAY!
In the case of two sisters and their Columbia Heights property, Valerie just printed out a new MRIS report showing their zip code's housing prices dropped 15% during the 4th Quarter of 2006. Our current research also endorses those stats.
Valerie will meet with the pair in an attempt to shed some light using the mighty black and white 3rd party report. The sisters should get it, don't cha think? Not always. In my 12 1/2 years of experience in the trenches some sellers (people period) only see what they want to see. In that case......
NEXT! Someone else is waiting for you!
Take Action,
Ken Williams
Much success to you.
Go to http://www.thewholesalewizard.com/ for more information.
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