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Property prices, rentals fall as COVID-19 impact

If you are thinking about buying a property or moving to a lower rent, now could be a good time as the COVID-19 pandemic continues to significantly impact the local real estate industry.

President of the Association of Real Estate Association Mark Edghill told the Business Guardian there’s a lot of inventory on the market and more coming onto the market.

Edghill said; “You get a few of the high end. You have quite a number of commercial properties and you have some in the upper middle income bracket that have been coming on the market.

“There were also several projects which were in works before COVID that are now becoming available in the $1.2 to $1.6 million range,” Edghill added.

He noted however, that rental prices have fallen across the board specifically in the commercial area, as there continues to be “so much inventory competing against each other.”

“It is coming down to something is better than nothing so if you have the option of someone looking to rent and you’re willing to drop your rent to a level to attract someone to take advantage of your space then that’s what people are tending to do,” Edghill added.

But, he said some cannot take a lower rent due to financial commitments, including paying a mortgage .

“They are then still going to find themselves in a problem because they have no tenants, they have no income coming in. So if they take a tenant at a lower rent, even at a loss it means they are still off setting what they have to pay on a monthly basis,” Edghill explained.

On residential rentals, he said because the income of many have been comprised due to COVID, people have been asking for price decrease.

“They are working less hours or getting less salaries or some are not getting any salary at all. So some people may have to relocate. We have people having to vacate one place to separate from each other because the two people cannot live together any more as they have been tapped in a house under quarantine,” Edghill said.

Less income

No revenue is earned by a real estate business unless a deal is closed which entails either the renting or selling and sometimes management of a property.

“Real estate agents will now have less income because they are closing less transactions,” Edghill said, adding that income largely depends on the clientèle.

He said for instance, if one agent has clients with job security and are actively seeking options, obviously there will be a lot of business.

“If there’s more clientèle in the middle income bracket for instance, between the $2 and 3.5 million bracket, you may not be doing too much business because you may not have many people feeling very secure given the current circumstances in the country and the economy,” Edghill said.

He added that banks are also being a lot more rigid in their mortgage approvals, paying particular attention to what sector the borrower operates and also looking at where the income comes from and how secure that might be in making mortgage payment commitments.

Edghill noted, however, that banks have been working with clients facing financial difficulty.

More value on homes

Terra Caribbean CEO Jean-Paul de Meillac said he anticipates the residential segment of the real estate industry to continue to move as people are now valuing their homes than ever before.

“Their home is what kept them safe during this pandemic and they have realised that if they are going to be spending more time in their homes they may as well upgrade a little bit. Others are looking to buy a more spacious home for their families or upgrade their homes,” de Meillac said.

Continues on BG5

He added trends, even after COVID have shown that buying continues in the affordable segment of the market which includes properties costing $3 million and under.

Rentals costing $10,000 and under also continue to do well despite tough times, he said, noting that in certain areas there have been a reduction in prices in residential rentals.

On the commercial side, he said there has been downward pressure.

de Meillac said pre Covid this segment was already facing challenges, particularly on the high-end side, categorised as A and B office spaces.

“With the downturn of the oil and gas industry three years ago there was an excess of office space on the market because the majority of that office space is built for the oil and gas industry.

“Now post COVID with the work from home arrangements this has placed additional pressure on the office segment of the market,” de Meillac added.

He noted on the retail aspect of the commercial market retailers have been cautious.

“Retailers are holding out for Christmas to see how this goes and if that does not go well then that segment of the market will feel further pain,” de Meillac noted, adding that restaurants which occupy rental spaces have also been negatively impacted.

In a interview with the Oxford Business Group which explored COVID-19 economic impact assessments de Meillac said as the country entered its fourth year of economic downturn, sellers have realised they need to adjust their expectations.

“Whereas previously a large portion of business came from sales at price points between TT$3m ($443,000) and $6m ($886,000), we have seen a decrease in sales at these prices, with most properties now selling at TT$2.5m ($369,000) and below.

“This demonstrates how much the majority of buyers can afford with combined incomes. Investors who in the past would have bought high-end properties to lease to expats have now exited the market,” de Meillac said.

He also noted there has been a marked change from house and land ownership to townhouse and apartment-style living. Developers, de Meillac said are now building properties at greater densities and offering products that are more approachable. “A ready-made townhouse is more palatable to first-time buyers than buying empty land or real estate in need of work. The market demands this type of mid-range property: it is affordable, offers ample security, and nowadays, with busier lifestyles and long office hours, hard-working individuals want to come home to a finished, maintained space,” de Meillac added.

Still some opportunities:

Edghill argued that despite challenging economic times there are still opportunities in the higher-priced bracket, both commercial and residential, .

“But those are few and far between and those buyers are definitely negotiating and looking for a deal. They are definitely not looking to pay pre-COVID valuation price,” Edghill explained to the Business Guardian.

He noted the middle and lower income bracket especially, has been impacted, adding that the revenue which individuals or businesses need to purchase or invest in properties comes from either their own businesses or their employment.

“There are people who have either lost their income or are surviving on reduced wages because of job loss or temporary suspension from work without pay due to a number of factors including reduced hours and business closures,” Edghill said.

He said business-owners in the middle and upper income bracket have found themselves financially impacted by the Government’s restrictions and are cautious consumers avoiding exposure, which compounded the already challenging business environment due to the downturn in the economy and reduced consumer spending.

“They obviously would not have had the revenue coming in that they previously did to afford them to invest in new or additional real estate,” Edghill said.

He said sectors that continue to maintain job security such as those in the public sector, supermarket, and pharmacy businesses and whose salaries have not been affected will still qualify for mortgages.

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#Real Estate 101 – Investment in Real Estate

A landlord who owns 10 properties says there are 2 types of people who should invest in real estate

Liz Knueven  

Becky nova
Becky Nova, a real estate investor and landlord. 

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

People tend to think that real estate investing is passive. But that couldn’t be further from the truth, according to landlord Becky Nova.

In her experience, being a landlord is best suited for certain types of people. “I think it’s important for people to always invest in things that they understand. If you are going to invest in real estate, you need to know your numbers, and you need to understand people,” says Nova, a real estate investor who owns 10 properties.

Based on her experience, Nova says there are two types of people who should invest in real estate.

People who want to own tangible investments

Compared to stock market investing, investing in real estate is much more tangible. Sometimes, it even involves hands-on work in a way stock investing never could. Nova says that this could be a big plus for anyone who’s motivated by the idea of more tangible investments. 

For her, investing is better when she can see what she’s investing in. “I can see when I get paid on a monthly basis as a landlord. Those numbers are much more tangible than money sitting in an investment account that I can’t look at for another 25 years,” she says. https://www.myfinance.com/r/4fdd3a65-b66e-48dd-a799-11f867bc6b20?utm_campaign=bi-refi-multi&utm_medium=embed&selector=%23piano-inline-content-wrapper+%3E+div%3Anth-of-type%281%29+%3E+div&placement=74e7b5bb24&mf_referrer=https%3A%2F%2Fwww.businessinsider.com%2Fpersonal-finance%2Fpeople-who-should-invest-real-estate-2020-11&_mfuuid_=ae39f246-fa8a-44fd-b961-6327d92d07c3

People who are good with customer service and research

In some ways, being a landlord is more akin to working in customer service than it is to being an investor. 

“It is a people management position when you’re dealing with tenants,” she says. Dealing with tenants and clients at all hours of the day is routine for landlords. 

And it requires a lot of organization and research. “You have to be educated, and you have to understand the legalities involved,” she says. Many cities have laws in place to protect tenants, and as a landlord, it’s your responsibility to know them.

In her experience helping other landlords, she finds that a lot of successes and failures come down to the amount of research and forward planning done.

“One question that I get all the time is, ‘There’s a problem with this tenant and I don’t know what to do.’ Usually, the answer should be addressed in your lease, but I feel like a lot of people skip those steps,” she says.”They don’t have a process put in place, which makes it very confusing and very stressful for both the landlord and the renters.”

Knowing the laws and how to work with people are both critical qualities for anyone who wants to invest in real estate. 

“You have to understand the ins and outs,” she says. MORE PERSONAL FINANCE COVERAGEWhy open a high-yield savings now when interest rates are downWho has the best CD rates right now?The best rewards credit cards7 reasons you may need life insurance, even if you think you don’tWho has the best online high-yield savings accounts right now?

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

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6 Simple Steps to Assess the Real Cost of a Fixer-Upper House

Large red brick home with American flag and green grass

6 Simple Steps to Assess the Real Cost of a Fixer-Upper House

This will help you figure out how much to offer for a fixer-upper.

Image: Susan Law Cain/Shutterstock

Trying to decide whether to buy a fixer-upper house?

Follow these seven steps, and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you.

#1 Decide What You Can DIY

TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.

Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.

Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

#2 Price the Cost of Renovations Before You Make an Offer

Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do.

If you’re doing the work yourself, price the supplies.

Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

#3 Check Permit Costs

Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.

Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.

Factor the time and aggravation of permits into your plans.

#4 Double-Check Pricing on Structural Work

If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.

Get written estimates for repairs before you commit to buying a home with structural issues.

Don’t purchase a home that needs major structural work unless:

  • You’re getting it at a steep discount
  • You’re sure you’ve uncovered the extent of the problem
  • You know the problem can be fixed
  • You have a binding written estimate for the repairs

#5 Check the Cost of Financing

Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings.

If you’re planning to fund the repairs with a home equity or home improvement loan, get yourself pre-approved for both loans before you make an offer.

Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.

Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation.

The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans.

A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

#6 Calculate Your Fair Purchase Offer

Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.

Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.

#7 Include Inspection Contingencies

Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

  • Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
  • Radon, mold, lead-based paint
  • Septic and well
  • Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

Related:

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5 Back-to-School Tips When Moving into a New Neighborhood

5 Back-to-School Tips When Moving into a New Neighborhood

Selling a house, buying a new home, getting a new job, adjusting to a new place-moving is hard! It’s even harder moving as a family with small children during back-to-school season. With a new school year gearing up, RE/MAX has five tips to make the transition of moving to a new place and meeting new people a bit easier on your little ones.

  1. Know your neighborhood

Before the first day of school, walk around the neighborhood as a family to meet the neighbors. Finding nearby families that also have kids will prove to be helpful on the first day of classes – a child starting school will be a lot less scared if they recognize a familiar face or two!

  1. Do your research

Visiting the new school together before the first day will bring comfort to both children and parents. Knowing where the entrances, lockers or cubbies, classrooms and lunchroom are located will help a child start at a new school with confidence. It can help mom and dad too, easing your mind about your kids getting lost or embarrassed.

  1. Keep in contact

One of the toughest parts about moving is the fear that kids have of losing their friends. Parents should promote a merging of two worlds: old and new. After the first day of school, encourage your kids to video call their old friends. Sharing stories helps them talk about their new experiences and gives them something to look forward to after a long day of firsts.

  1. Get involved

Adjustment doesn’t happen all in one day. The first few weeks will likely be tough for a new kid. As parents, getting involved at your child’s new school will help both of you. You can familiarize yourself with the community and put your best foot forward. As for your child, catching sight of a familiar face at school in the first few weeks is comforting, even if that face belongs to mom or dad.

  1. Find an ally

Summer is the peak moving season and the chances of you being the only family newly enrolled at school are slim. Take advantage of this commonality – seek out other new families and make new friends. You can use one another for advice (and some complaining) as everyone gets settled into their new community.

Finding the perfect RE/MAX agent can make sure you find the perfect home in the right neighborhood for your family. Find one to work with on remax.com.

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