A Delaware Real Estate Investment's Big 4 Advantages
When you see any title here containing the words “Delaware Real Estate Investment,” you won’t be terribly surprised if the gist turns out to be what a good idea! When you’ve had the experience of seeing clients succeed with many real estate investment projects, it’s an unavoidable conclusion. Unfortunately, also pretty yawn-worthy.
That’s why I was pleased to come across Grant Cardone’s piece in Entrepreneur magazine. We all like to see our opinions agreed with—but doubly so when you’re offered specifics that bolster your own conclusions. The article listed reasons why real estate investments are “your smartest investment.” Here are some of them:
- A real estate investment is a hedge on inflation. Inflation hasn’t been hugely important for a while, but serious investors have an eye out for the possibility. When you dig down, you find that real estate investments have “historically shown the highest correlation to inflation” of other major asset classes.
- Real estate investments enable positive cash flow. This was Entrepreneur's number one reason. Having an investment which throws off cash while building equity at the same time is any smart investor’s ideal situation. When a Delaware real estate investment produces an income stream that is significantly higher than the typical stock dividend, what investor wouldn’t be interested?
- Leverage. A typical Delaware real estate investment makes it relatively easy “to place debt on the asset” because of its built-in collateral value. Entrepreneur offered some math to back up the way low-cost debt works to multiply a real estate investor’s power.
- Maximizing tax benefits. Taxes can be the bane of any investor—so real estate provisions that lighten the load can be significant factors influencing your bottom line.
Those are four solid advantages of the eight detailed in Cardone’s article. The last reason was less demonstrable but, IMHO, just as real:
- “Feeling the pride ownership” (no further explanation necessary).
- Written by Russell Stucki
How a Delaware Property's Owner's Equity Doubled in 5 Years
Diana Olick is a well-known industry writer. Anyone with an interest in Delaware real estate can usually find something of value when she comes up with a new entry in her CNBC column (the one with the pun-worthy title, “Realty Check”). This month she commented on the rising housing market across the nation and its repercussions in terms of homeowner equity.
The piece points out that in the U.S., home equity has doubled over the last five years!
It’s hardly news that home values have been steadily on the rise—that’s been a trend long seen in the asking prices in Delaware and our Delaware listings. But the idea of homeowner equity actually doubling could be hard to believe.
That’s a claim that sounds a like quite an exaggeration…until you stop to think about what is actually being said. When a Delaware homeowner sees that their home’s “equity” has doubled, what it doesn’t mean is that its value has doubled.
Here’s a simplistic example. Suppose a Delaware homeowner’s vacation cabin was estimated to be valued at $100,000 in 2011. Doubling the owner’s equity doesn’t mean that today the cabin would be worth $200,000. The “equity” in the property is the amount of investment value currently owned: the difference between its market value (in this case, the original $100K) and the amount owed on its mortgage. So if there were a $70,000 mortgage outstanding on the cabin five years ago, its equity at that point would have been the difference: $100,000-$70,000—or $30,000.
Using CNBC’s calculations (actually, they relied on research from CoreLogic), for our example property to match the national average, today its owner’s equity would have had to have doubled to $60,000.
For many Delaware real estate owners, that’s not much of a stretch.
Keep in mind that as time moves on, for all mortgage loans other than interest-only loans, the amount owed is reduced with each payment. If the principal portion of the payments had averaged just $200 a month, the amount owed would now be down to $58,000. For the owner’s equity to have doubled to $60,000, the market value would only have to have risen to $118,000: and that’s a mere 18% rise, which works out to an average of 3.6% per year. That wouldn’t be unusual, considering the steady gains we’ve seen. Long story short: voila—investment equity doubled!
- Written by Russell Stucki
No News = Good News when it Comes to Delaware Real Estate
If, as the saying goes, “”no news is good news,” last week was almost a good week for U.S. real estate. Delaware real estate watchers like me found no hint of the kind of sweeping changes that can alter residential real estate patterns for buyers and sellers. Possibly because of the looming election, little space was devoted to real estate—with the exception of one thought-provoking discussion.
CNBC’s commentary embodied the major theme: they wrote about high-end real estate being subject to a “slowdown” and “uncertainty”—but then went on at length to explain why the “ultra-wealthy” have a “very strong intent to purchase real estate.” When you read articles like that— analyses that come down forcefully on both sides of a proposition—you know it’s a slow news week.
BTW, by CNBC’s definition, the “ultra-wealthy” are those with a net worth of more than $50 million. Delaware homeowners should sleep more soundly knowing they already own some of what the ultra-wealthy covet “very strongly.”
Stepping down from those precipitous net worth heights, news reports about the merely wealthy echoed a similar sentiment—internationally, too. YouGov is an outfit that surveys consumers across a dozen countries. They found the top echelon of consumers to be “cautious but optimistic” about real estate. YouGov reported that 45% of foreign buyers are looking to purchase real estate—nearly twice as many as those who plan to sell.
Homeownership levels began to edge back up from the five-decade low that The Wall Street Journal has been tracking—but were not yet making giant gains. On a newsworthiness scale, that news found its way almost to the bottom of the WSJ’s Real Estate section. Almost as an afterthought, the Journal mentioned “tentative signs” that renter families “are starting to gain the confidence to buy homes.” That could foreshadow real news, but apparently, not quite yet.
The reason that it was almost a no-news week is because there was a newsworthy account on a real estate-related news front. MarketWatch ran an in-depth report that spotlighted a trend that home builders and architects would be wise to note. The industry is “behind the curve” when it comes to building homes that accommodate today’s trend toward an “all-delivery, all-the-time” population.
As at-home grocery and household goods delivery numbers skyrocket and Amazon Prime cartons clog post offices everywhere, secure places for deliveries to be left are not yet being widely incorporated into houses. Mail slots won’t do it, “and curbside mailboxes aren’t set up to handle it.” Crime statistics bear out that the porch-pirate phenomenon is a rising problem.
There are several lock-box type solutions, but the design answer that I thought was the real newsmaker of the week was architectural: built-in drone drop-off platforms. NASA investigators told the Washington Post that homes need to be more drone-delivery friendly, with “chimneys turned into package chutes…or mailboxes that are tall enough to stay clear of pets and children.”
- Written by Russell Stucki
Sharing Creative Touches with Luxury Delaware Homes
You can find how-to books with strategies laying out do-it-yourself strategies for transforming a property into a “luxury” home. Likewise, there are scads of online lists of imaginative touches that imply they will do the same.
The idea is certainly appealing (but so is anti-gravity and time travel). But of course, the fact is that authentic luxury doesn’t come cheap. A significant portion of the qualities of Delaware luxury homes distinctions are intractable: in Delaware, they involve a home’s location, size, and the architectural features of the overall facility. For instance, most upscale Delaware luxury homes have a spacious living room; today, many feature an inviting area set aside for viewing a gargantuan wall-mounted flat screen TV. That’s a plus—but those with separate, professionally installed media rooms are a step closer to falling into the “luxury home” category.
It turns out that when you look at many of the lists touting “Simple Touches That Make a Luxury Home,” most are either not so simple, extremely expensive, or both. That’s not to say that actually employing some of the ideas might not pay off in terms of resale, but most involve substantial expense (and consequent risk). Still, there are other lists with more realistic titles— like “Adding a Touch of Luxury to Your Home” with ideas that involve more imagination than budget. They may not propel a simple property into the luxury class, but they can make a real contribution to a home’s livability and appeal—
- Layer floor coverings: strategic placing of throw rugs over hardwood or carpeting adds dimension and interest
- Improve visual coherence with wall cases, shelving, cabinetry or closed storage solutions (all these ideas actually systematically reduce clutter)
- Furnish to create focal points—every room can use an eye-catching center of attention
- Splash color: pillows on sofas; towels in bathrooms; pictures on hallway walls
- Rethink lighting: consider lamps and fixtures as key décor items rather than just light sources
- Add crown molding, chair rails, and baseboards—where surfaces meet, these simple architectural touches add subtle grace
- Written by Russell Stucki