WILL JAPANESE BANKS CREATE OPPORTUNITY FOR INVESTORS IN HI ?
Hawaii has been pretty much left out of the REIT feeding frenzy that has boosted the real estate market in the rest of the country.
This is because its economy has been in a slump and the debt on the properties is greater than the value.
Now the Japanese banks that hold this debt are going to be forced to liquidate their non-performing assets. This will put Hawaii on the market at market price.
WHY DO PEOPLE BUY INVESTMENT PROPERTY
(Continued from Vol.5).
Leverage is the fourth element of investment. This is using other people's money to buy a larger property or make a greater profit than could be made with one's own money. Real estate is one of the most attractive forms of investment, because it lends itself to the use of leverage.
Positive leverage is using a loan to buy a property in such a way that the cash-on-cash yield of the transaction increases.
Negative leverage reduces the cash-on-cash yield. Sometimes, however it can still be advantageous to use when we expect the property to appreciate or when we plan to enhance the income stream on the property after acquisition.
Neutral leverage does not affect the cash-on-cash yield.
Sometimes we can increase the tax benefits of owning a property by using leverage. The true effects of leverage can never be determined until projections are done, taking the owner's entire situation into consideration.
Sometimes we can gain control of a property that we believe to be in the path of progress by using leverage. Also on a rental property, we can buy a property and let the tenants make the payments for us. Just because leverage may be negative does not mean we should not use it.
Seller financing is usually the best form of leverage, because we avoid all of the upfront costs involved in bank financing.
Private financing can help the seller's retirement plans as well as those of the buyer, thus making for a win-win situation.
The next issue will contain a summary of this topic and conclude this series.
LANDLORDS & PROPERTY OWNERS NOW SUBJECT TO FAIR CREDIT REPORTING ACT If you reject applicants based on their credit reports, you must tell them the name of the reporting agency and let them know that the agency is not the one who rejected them. They should be told that they have a right to get a copy of the report, dispute it, and have a statement inserted into it.
If they are rejected for other reasons, they have a right to request that reason and source.
For more information, go to the FTC home page at www.ftc.gov/os/statutes?fera/htm
NEW ACRONYM IS A MEASURE OF AN INVESTMENT'S VALUE EVA (Economic Value Added) is a measure of an investment's impact on "shareholder value". The new measure has several methods of calculation. The simplest is EVA=CFBT yr2/ Cap rate yr. 2 minus CFBT yr1/Cap rate yr1. CFBT is cash flow before tax. One of the advantages of EVA is that it generates a dollar amount instead of a percentage or a ratio.
SWITZERLAND HAS CHANGED LAWS ON FOREIGN OWNERSHIP
Lex Friedrich, the law, which regulates foreign ownership of property in Switzerland, has undergone revision. Mandatory approval is no longer required for purchases by international buyers. Capital investments in residential property and dealer-type trading in real estate and land, are still forbidden. The purchase of a vacation home, however, still requires the mandatory approval.
AIRPORT EXPANSION
By Verena Dean. Charlotte-Douglas International Airport is keeping up with the city's booming growth. Activities include construction of a third parallel runway and approval for a $19,000,000 package for airport expansions and improvements to be leased to US Airways. This activity not only improves the value of surrounding land, but also will hopefully revitalize the Wilkinson Blvd strip.
EUROPEAN UNION MAY NIX TAX INCENTIVES
The members of the European Union entered a non-binding agreement to dismantle special tax districts within 5 years in order to eliminate competition between members for foreign corporations.
There is some question whether existing incentive plans will be honored or whether the new agreement will be enforced retroactively.