Overseas Chinese Web Guide

Category: Real Estate

  • Home Price Comparison

    coldwell-banker.jpgIf you are thinking about immigrating to the United States or moving within the United States, you are probably aware that housing prices vary from region to region. Fortunately, Coldwell Banker offers a Home Price Comparison Index, which allows you to see what an equivalent house in 4 different regions will cost. First, set the market value of house in a region you are familiar with. Then, select three other markets.

    Coldwell Banker told met that a $1,000,000 house in Palo Alto, CA is similar to a $438,000 house in Queens, NY, a $187,000 house in Phoenix, AZ and a $218,000 house in Las Vegas, NV.

  • Bad Loan or Bad Financial Decisions

    The Los Angeles Times ran an interesting article today on pay option loans. Essentially, these home loans work just like credit cards in that each month the lender only requires a minimum amount due. This minimum amount though does not even cover the interest due, leading to negative amortization. In other words, by just paying the minimum amount due, the borrower owes more and more each month.

    One conclusion you can reach is that negative amortization loans are bad. However, the real lesson I see is the danger of throwing good money after bad. Let’s take a look at the article. The homeowner bought a house in Corona 11 years ago. In that time, his house appreciated in value, growing from $129,995 to over $400,000. The lesson could have been about a savvy real estate investor. Instead, the borrower proceeded to strip out the equity from his house to pay off credit card debts, purchase a car, travel internationally, and invest in stocks and commodities.

    Let me restate this. The homeowner pulled money out of an asset that had tripled in value for him over 11 years, and poured it into discretionary spending and investments that ended up losing money for him. Therein lies the big lesson here. You don’t have to read Rich Dad, Poor Dad to figure what went wrong here.

    Taking cash out when refinancing isn’t like withdrawing money from your bank account. You take $40 out of your checking account at the ATM and the money is yours. You take $40,000 out when refinancing and you have to pay the money back. That’s the difference.

    Los Angeles Times:
    A Loan That’ll Get Ugly Fast

  • Real Estate Bubble

    After the Internet bubble collapsed, many investors pulled out what money remained in their stock portfolios and tried their hands in real estate investment. The theory goes that unlike stocks, real estate is a real asset — a piece of land or a ranch-style house in the suburbs — which can been seen and touched. And a house certainly feels more solid, reliable and dependable than an intangible share of stock.

    However, the important lesson from the Internet bubble isn’t that one asset class is superior to another, because you can lose money as easily in real estate as in the stock market. Instead, investors should focus on the issue of valuation. What is a particular house worth?

    The calculus for a homeowner and real estate investor is different. Besides looking at the sales price of comparable homes, investors also need to consider how much rent they can collect as well as whether they will be cash flow positive or negative. This is really important. While no one likes to see their assets depreciate, the real estate investor with a positive or neutral cash flow will ride out any market fluctuations more comfortably than the investor with a negative cash flow. No one likes to be chipping in money every month for a house that is continuously declining in value.

  • Real Estate Investment

    One of the basic concepts of economics is scarcity. And, one of the scarcest assets is land, especially in the coastal communities of California. Through outsourcing and international trade, we are now able to tap into an international distribution network of manufactured goods. A factory in China can produce more clothes, more shoes, more computers and more flat screen televisions, each better and cheaper than the generation before it. But, that same factory cannot produce more land for Californians. As a result, construction companies are building new housing further from existing communities, or finding infill in urban areas to repurpose existing buildings or lands for new houses.

    For areas rich in job opportunities, the housing market has proven to be extremely challenging – especially for buyers – in the past few years as median home prices have climbed upwards often seemingly at an astronomical pace. Sometimes, so much so as to evoke the “bubble” term reminiscent of the dot.com heydays. But, real estate is different. Sure, housing prices are governed by supply and demand just like stocks, but while you can issue new stocks, you cannot produce more land. That is the fundamental difference.

    For those seeking to invest in real estate, the Vanguard REIT Index Fund offers investors a low-cost means (i.e., 0.24% expense ratio as of Jan 31, 2004) to participate in the real estate market without the hassles of managing the property itself. For those who are able to provide a larger commitment in terms of time and effort, buying a second condo, home or even an apartment complex offers the next step up. Alternatively, if you can afford it, when you are ready to move into a new house, rent out your existing condo or home instead of selling it. This offers you the advantage of renting out a place with which you are familiar.

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  • Megan’s Law

    Megan’s Law is named after Megan Kanka, a 7-year-old child who was raped and murdered by a convicted child molester who lived in her neighborhood. At the time, law enforcement officials were prohibited from disclosing the presence of this child molester in the neighborhood. After this incident, the federal and state governments enacted versions of Megan’s Law to allow the release of this type of information to the public.

    By accessing the Megan’s Law database in your state, you can see whether a convicted child molester lives in your neighborhood.

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  • Location, Location, Location

    A home is more than just a place to live. Purchased wisely, a new home offers its owners a path to financial security. For those wise – or fortunate – enough to own some real estate that has appreciated significantly in value, the benefits of homeownership are self-evident. However, if you’re still hunting for your first house, how can you tell a hidden gem from a disaster waiting to happen?

    The first step before making this – or any other significant financial investment – is to get educated. If you’ve already interviewed some real estate agents, attended real estate classes at the local community center or read some real estate investment books, you’ve likely come across the cardinal rules for evaluating your next home: “location, location and location.”

    Why is location so important? Because location is the one thing that cannot be changed. Kitchens and bathrooms may be updated. Walls may be re-painted. Older windows may be replaced with newer dual-pane windows. Even a second story or another room may potentially be added. However, if a house sits on a busy street or next to an industrial area, your options are limited. Inevitably, all houses require certain compromises – whether it’s the location, layout or even the purchase price. Just make sure that you can live with any problems or that you can affordably fix those that you cannot live with.

    More Resources

    • Real Estate – Resource Center. From Nolo Press
    • Buying a Home Offers information for first-time homebuyers. From the U.S. Department of Housing and Urban Development.
    • REALTOR.com Search for homes, condos, townhouses and land in the multiple listing service (MLS).
    • MLSlistings Search for residential and commercial property in the Santa Clara, San Mateo, Santa Cruz, Monterey and San Benito counties.
    • mls.ca Search for Canadian property listings and data.