5 Reasons We Are Investing in Detroit

Most of us think of Detroit as the demolished city featured in Eminem’s music videos and aren’t surprised when we see headlines about its bankruptcy and crime. It’s easier not to think about Detroit. The collapse of Motor City hurts our American pride a little, and if we are totally honest, it’s just easier not to look anymore. 

But while the rest of the country isn’t looking, a movement is quietly underway to entirely reinvent Detroit. In fact, in the coming months you will begin to read headlines about Detroit “roaring back” and how the economy is “accelerating into a new era”. Mark my words. And that is why we are investing in Motor City with everything we’ve got. Here are 5 reasons why Detroit is a smart investment:

1. The hipsters are on the way. The much maligned, bike riding, mustache growing hipsters are a key demographic for real estate investors to watch. Before the renaissance that made Brooklyn a destination for upper middle class New York City residents, its grungy streets were taken over by hipsters. They biked, they sang, they painted, they opened boutique coffee shops and hosted live music festivals. They started small tech firms and made empty brick buildings with concrete floors into trendy apartments. They talked about new world orders and made kale smoothies -- and all the while transformed Brooklyn from a dangerous borough-to-be-avoided into the trendy $4000-for-a-two-bedroom-apartment place that it is today. Hipsters did that, and they are moving to Detroit en masse. As was reported by Venture Beat News just days ago, major venture capital firms are dumping money into young startups that are finding a home in the beleaguered city. There is still time to be an early adopter of Detroit investment, but that window will close, it’s just a matter of when.

2. Buy low, then do not sell. Of course we’ll want to sell eventually, but there is no rush. Detroit’s recovery is starting now. That means it has miles to climb -- and many junctures along the way for us to cash in our investment. For those willing to buy and hold, the potential for returns is higher than anywhere else in the United States. Make no mistake, the city parks will be cleaned up, the fountains will be turned on, and major corporations will put their names on the city’s skyscrapers. In fact, when the Detroit Convention Center went looking for $299 million of investments to renovate its facilities, they received $922 million worth of bids within two hours. Renovations like that will multiply the value of our investments exponentially. 

3. Don’t follow the crowd, follow Buffet. “I like to buy mispriced things,” Warren Buffet said during a visit last year, saying he would gladly buy a company in Detroit. The billionaire investor is well known for his uncanny ability to find bargains and then sell at the zenith of their value. If he has picked Detroit, that’s good enough for us.

4. It’s an emerging market that takes dollars. Most emerging markets are found in Asia or South America -- but some describe Detroit as an emerging market as well, it just happens to take dollars. It is emerging in the sense that it is developing totally new industries and is rapidly winning investor confidence in what it can do. Already investors have spent over $1 billion to renovate tourist attractions like its Greektown Casino, downtown hotels, and restaurants. $650 million has been poured into a new sports arena and into renovating the arena district. 

5. Detroit is investment friendly. To be sure, development plans will still have to go through standard city planning approval processes -- but Detroit is welcoming investors with open arms. Since they made it through bankruptcy proceedings, they have taken serious steps to invite the kind of investments that we’ve already described. The culture in Detroit is one where developers and investors and the city government are working well together. We are excited about being a part of a business friendly culture like that.While this point is not on our list of “official” reasons for investing in Detroit, we have to mention that it is a small matter of pride to be a part of the recreation of one of America’s icons. Motown has always been a part of America’s greatest successes, once being called the “Arsenal of Democracy” for its manufacturing support of the Allied powers during World War II. We want to see that city back on its feet, and we’re confident that it will be soon.

10 Facts about Chicago Real Estate Market

Increase in Real Estate prices:

Real estate prices in Chicago have been increasing constantly, and saw a growth of 11.8 percent in the year 2013. The prices further increased by 9.6 percent in 2014. The increase in prices indicates a robust and stable real estate market, that presents a great opportunity for investments in realty, as an investment asset class.

Median real estate prices:

The median price for homes in Chicago, Illinois in the months from October 2014 to January 2015 was around USD 225,000. This was an increase of 7.1 percent as compared to the prices for the same period a year ago. However, there was a decline of 9.9 percent in the sale of homes.

Chicago’s community areas:

Chicago’s population is approximately 2.7 million, living in 77 community areas. These community areas were determined by the researchers from the University of Chicago in the 1920s. Chicago has a total land area of 237 square miles and the community areas are classified into four different sides. These are the North Side, South Side, West Side and the Central.

Proximity to Downtown Chicago:

The proximity to Chicago also determines the price of homes. The price of one of the most expensive penthouse condominium is around USD 32 million. Downtown Chicago has much higher prices and offers homes in high-rise condos, while the prices are relatively lower as one moves further out. The property options available in the outskirts of Chicago include condominiums, single-family houses and townhouses.

Fewer number of loan defaults:

The number of loan defaults in the Chicago real estate segment has reduced significantly in the last one year. It is expected to drop to 2.5 percent by the end of 2015.

Buying is more affordable than renting a home:

An increase in the rents and the slow growth in the real estate rates have made it more feasible to buy homes rather than pay rents. Hence, it is logical to buy homes that are expected to appreciate rather than spend on rent.

Construction of new condominiums:

Property developers in Chicago have been adding newer inventory and are expected to add another 6,000 apartments over the next two years. This will increase the availability of homes, and will keep homes affordable.

Positive indications from S&P Homebuilder Index:

The S&P Homebuilder index has been on the rise and indicates positive growth in the Chicago real estate in future. This clearly means that buying homes is a good option for homeowners as well as investors who expect a decent return on their investments.

Reduction in loan foreclosure:

The foreclosure percentage in Chicago is higher than the national average; however it is on decline and shows positive signs for Chicago real estate segment. The November 2014 foreclosures were lower by 25 percent as compared to foreclosures in November 2013.

Rehabilitation of old properties:

The South Suburban Land Bank Authority and the Cook County Land Bank Authority have started the acquisition of dilapidated properties and redevelop vacant and abandoned homes. This will contribute towards improving Chicago's real estate segment even further.

    

Is the Starbucks Effect Real? No. Not Really.

In the past few weeks, there has been a story floating around the internet regarding the “Starbucks Effect” which was made famous in Spencer Rascoff's new book Zillow Talk. While it’s fun to consider, it is not entirely accurate when you look at the entire context around the concept.

When was the last time you were driving in the country and stopped at a Starbucks? My guess is never because Starbucks only puts their stores in urban locations.

The majority of Starbucks are in urban or suburban areas.  Appreciation and home values are higher in these areas than in rural areas.  This has little to do with Starbucks or any coffee maker and more to do with urban and suburban vs. rural.

Homes appreciate more in areas near Starbucks than Dunkin' but let’s simply take a Look at market demographics.  Dunkin' has a strong hold in small communities and also in more economically depressed areas such as parts of the Rust Belt that have not recovered in home prices yet due to major economic factors less than Dunkin' or Starbucks.  Also Starbucks has a higher profit per store and their ideal customer is a business executive or housewife buying a latte.  Dunkin' serves more of a blue collar crowd buying their entire lunch or breakfast.

This isn’t a matter of which franchise coffee store is best for real estate. It’s a matter of urban areas obviously having higher value than rural areas and a case of simple market demographics.

So can a Starbucks location be a good indicator of future real estate prices? Yes, it can. But you certainly shouldn't base a real estate investment on that alone. 

10 Facts to Know about San Diego Real Estate in 2015

San Diego is amongst the most playful cities in the United States. It is a warm, feel-good place that will make you fall in love with its beaches, food and people. In fact, almost everybody wants to live there. No wonder San Diego is every realtor’s dream destination.

2015 is set to bring in happy days for the real estate market here. The San Diego real estate market had become very conservative during the previous years and as a result of that, the number of homes sales in the city decreased by over 15% in year 2013. However, things have started looking up from 2014 onwards, as house prices have seen much appreciation.

Median housing prices are expected to be higher in 2015 than the current levels, as San Diego would always remain a desirable real estate destination. The reviving economic conditions have helped create new jobs, and thus demand for new properties is increasing.

It is difficult to predict actual rise in prices. However, home prices will definitely continue to rise. Government policy may put additional burden on buyers purchasing power, as announcements like  easing policy of purchasing mortgage securities and changing qualified mortgage rules will increase interest rates. Buyers are definitely not going to get many “Bargain homes” this year.

Researchers estimate that it could take almost four more years until the real estate market in San Diego reaches its pre-recession rates.

Five Reasons why Chinese Investors are Buying US Real Estate

West Realty Advisors, like many other firms are continuing to receive an increasing amount of inquiries from Chinese investors interested in investing in US real estate.

The increased interest by the Chinese in US real estate would have been a surprise in 2007 but no more now. According to the NAR, Chinese buyers now account for over 27% of foreign investments into the US real estate compared to under 5% in 2007 and trail only the Canadians. So why are the Chinese tycoons buying up properties in the US compared to their favourite destinations like Hong Kong, Singapore and Japan earlier? We will explain here the key to understanding Chinese real estate investments in the US.

  1. Investments in US real estate considered safe and profitable: According to the survey by NAR foreign buyers see US real estate investments not only as safe bets but also as extremely profitable. We must remember that post the 2008 housing bubble burst US home prices have fallen drastically and even in 2014 have not recovered anywhere near 2008 levels. The foreclosure rates on housing mortgages had risen since then triggering firesales. Chinese investors have made good of the buying opportunity picking up real estate mostly in California and usually in near densely populated urban centers unlike the Canadians or the Mexicans.

  2. Higher disposable income and increased credit availability: Nearly two decades of high economic growth in China have created multimillionaires. These investors now have significant surplus cash to invest. Further China has also relaxed credit  norms which has increased credit availability significantly. According to Bloomberg China’s ratio of household credit to GDP has risen from 105% in 2000 to 187% in 2012 and in a survey of 19 analysts it is predicted that credit loosening is unlikely to stop anytime before 2019 so we maybe looking at a sustained or even a growing rate of Chinese investments in US real estate.

  3. Benefits of the stronger Yuan: Chinese Yuan (RMB) now trades at close to 6.2 against 6.8 in 2009. This appreciation of the Yuan unlike other emerging currencies like the BRL, INR or RUB has made the dollar cheaper and this combined with lower USD denominated property prices have caused the US assets to appear “very cheap” in RMB terms.

  4. Chinese domestic real estate market seems highly “overbought”:  Prices in HK and Shanghai have gone through the roof in recent times and there are worries that there could be a potential “housing bubble” in the making. Already there are some indicators that the bubble has started cooling with property prices falling lately. Further the Government in China has increased regulatory oversight on real estate purchases which now makes the domestic market less attractive compared to the US.

  5. Layering and money-laundering: There are strict laws in China on capital flowing out abroad. However there are certain sections of the noveau rich which wants to protect their wealth amid a stinging crackdown in China. According to leading investment banks people are getting over the USD50,000 limit imposed by China by laundering money through Macau casinos and cooking the books of import-export companies. Sometimes these purchases are for investment purposes to overcome the recently bearish outlook on the Chinese economy.

Chinese investments in US real estate are picking up and are here to stay. Moreover unlike Japan in the 1980’s when such a story played out, Chinese investors have significant savings which will allow the economy to run at higher household credit to its GDP compared to similar Emerging Market economies.

 

10 things I learned from flipping 1000 homes

Recently we announced our most important milestone yet, surpassing 1,000 properties acquired, renovated and sold. It took five years to reach this milestone and now we have reframed our focus with a new goal: 2,000 properties in the upcoming 24 months.

In the process of completing our first 1,000 properties, we gained a tremendous amount of knowledge. We’ve realized that many things can go wrong when completing a renovation and while it’s not possible to eliminate these issues, with proper planning, the effects can be greatly reduced.

The following  are our top ten things we’ve learned from flipping 1,000 properties.

1. Resale value of the property can change by the time the property is ready.

Don’t get married to a value that could change by the time the rehab is completed months down the line. Comps can give you a great idea of where you should be but don’t take it as gospel. The market can move faster than you think.

2. You don’t always have to rehab the house, sometimes it only needs some paperwork and negotiations.

Sometimes you can get a property at a hefty discount because of a title or lien issue that might require a little homework to resolve. Some of these issues can take months (or even years!) to resolve so choose carefully and work with a title company you trust.

3. Don’t wait on Title and Escrow companies to finish their work, you need to consistently follow up.

Especially during the holiday season!

4. Add the second bathroom.

This always makes a big difference in the after repaired value.

5. Keep track of your progress.

Making meticulous notes of what went right and wrong will serve you well in the long run. It’s a good habit to start early so you can save time and money with future jobs.

6. Do the math, and make sure you have enough cash.

Running out of capital mid-rehab can add significant delays to your construction and into escrow. Make sure you have enough when you get started and give yourself a cushion in case there are unexpected hiccups.

7. Always look at worst case scenario.

This will ensure that even if you don’t hit your ideal numbers, you are making a profit if you prepare for any contingency. Make sure the deal is worth it even if you hit some delays and surprise repairs.

8. Credit terms and performances are more important than the price.

Making sure you can buy and sell the property with reliable financing will be more important in the long than going with a slightly higher offer that may not close on time, or ever.

9. Minimum whole dollar profit.

Set a limit for minimum profit that is acceptable to you. It’s probably not worth the deal if the percent returns look good but you’re only making a couple thousand when all is said and done.

10. Turn time.

Set rehab timeframes up front that are reasonable but keep a tight schedule. Turn times that run too long can kill a deal.

 

 

 

 

Goofy Pants Annual Fundraising Event hosted by West Realty Advisors

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West Realty Advisors is very honored to put on The Goofy Pants Golf Tournament Event benefiting Big Brothers Big Sisters. Many of our friends, families, and investors are keen on attending such events organized for a good cause. The Big Brothers Big Sisters Mission is to provide children facing adversity with strong and enduring, professionally supported one-to-one relationships that change their lives for the better. Last year’s Goofy Pants Fundraising Event was hosted at The Coronado Golf Course.This year we hope to have more participants, details to follow!

West Realty Advisors: 1,000 Homes in 5 Years

 

I am excited to announce that last week we hit a milestone that five years ago would have seemed impossible: our 1,000th piece of real estate.

Since 2009 we’ve bought residential housing in 26 different states with a strong focus recently on the midwest and northeast markets. We've created hundreds of jobs across the country and through this process we've established a name for ourselves in the industry for quality, integrity and value. 

The real estate industry can be volatile but with the help of our dedicated and passionate staff we’ve always prevailed. Now that we’ve reached the first 1,000, we are ready to raise the bar and have set a goal to acquire, renovate and sell 1,000 new properties in the next 24 months.

I would like to personally say thank you to our incredibly talented staff, contractors, service providers and most importantly our investors who’ve been there for us from the start. We are excited for what 2015 will bring and look forward to providing the same exceptional results to our investors that they’ve grown to expect in the past five years.  

 

Congratulations to James Paine, Finalist in the Emerging Generation Awards!

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Last night our founder and Managing Partner James Paine was announced as a finalist in the Emerging Generation Awards hosted by the San Diego Business Journal. The Emerging Generation Awards showcases the top leaders in San Diego under the age of 30 that are working to make a difference in the world and James was selected. 

We are excited to have such a passionate and determined leader in our company and look forward to the upcoming year at West Realty Advisors!

West Realty Advisors Participated in Habitat For Humanity

West Realty Advisors is proud to have been able to participate in helping build a home for Habitat for Humanity two years in a row. Habitat for Humanity brings people together to build homes, communities, and hope for lots of families. They offer a hand-up, not a hand-out. Hard working families will pay for their home through sweat equity and a zero-percent interest mortgage. When these families can call a home their own, they help build better communities.

James Paine Makes List of Top Ten Entrepreneurs to Watch in 2015

SanDiego.com has named our Founder and Managing Partner James Paine in the Top Ten Entrepreneurs to Watch in 2015. 

 

At the age of 5 James started his first business: repackaging the newspaper from his parents and reselling it to his neighbors for a nickel. From there his entrepreneurial drive continued and by age 10 he was running a profitable operation reselling candy at surf camp to his peers. By age 18, James started his own real estate business, cold calling and selling door to door.  After 5 years on the front lines of the real estate industry, James launched West Realty Advisors which this year will reach it's most significant milestone yet: acquiring, renovating and selling our 1,000th piece of real estate. 

 

Congratulations to James for being an incredible entrepreneur, founder and leader.