Expect 5 Basic Delaware Real Estate Investment Truths
If you go looking for insights from successful Delaware real estate investors, depending on which areas they concentrate on, you could come up with a variety of takes. Despite the distinct differences that separate the commercial and residential investment spheres, there are some time-worn truisms about the real life experience that would have most investors nodding their heads—
- Expect to work at it. The myth of buying real estate, watching it appreciate, then just cashing in is a two-dimensional expectation. A typical Delaware real estate investment has to be discovered, investigated, negotiated, cared for, cared for some more—and sometimes sold—for it to ring up the profits that make real estate investing so lucrative. The best investors relish doing all of it.
- Expect to interact with a wide range of people. Math skills are important, but people skills are up there, too. Just about anyone can do the arithmetic that produces accurate cash flow projections, but being able to network with real estate professionals and lenders—and manage close working relationships with tradespeople—are also vital for sustained success.
- Anticipate changing conditions. Economic conditions are always in flux, so Delaware and Delaware market conditions are always on the move. Last decade’s real estate investment strategies don’t guarantee success today—and certainly not tomorrow. Anticipating and planning for changing conditions is work that can pay real dividends.
- Expect losses. Any investment—including real estate investments in Delaware—involve some degree of risk. Serious real estate investors are those who profit the most from multiple investments over time. Necessarily, they expect that some projects won’t pan out as expected. Not expecting that to be true would be a rookie mistake.
This fifth one is ancient: it sounds like something Ben Franklin could have come up with:
- A fast nickel is better than a slow dime. Strangely enough, this truism can be misinterpreted. One commentator thinks it means “owning real estate is easy; getting paid is tricky.” I think its core meaning is that knowing just when to sell is a terrific real estate investment skill.
- Written by Russell Stucki
What to Make of Mortgage Interest Rate Event (& Non-Event)
It was fairly clear that the table had been set for last week’s Federal Reserve meeting to result in a minimal rise in mortgage interest rates. Their Fed Funds rate directly influences the mortgage interest rates that banks observe. Since Delaware real estate activity can be spurred or dampened by the monthly payment amounts Delaware mortgage lenders offer applicants, this national story has meaningful local repercussions.
It wound up as a non-event that nonetheless spawned action—albeit in a minor way. In May, Chair Yellen had said that a rate increase would be “appropriate” over the summer months. In the lead-up to last week’s meeting, other Fed governors had strongly implied that it was now time for a slight Fed Funds bump.
Still, most commentators kept their prognostications vague; they had been vociferously anticipating a move for many cycles, only to hear serial postponements from the Fed. In addition to having been burnt before by Fed head fakes, there was also another reason why a no-go might happen this time around. Regardless of what the jawboning had been, economic and employment growth was still stuck in first gear—and a rate hike could retard improvement.
The commentators weren’t wrong to hold fire. Once again, the Fed did nothing (except make even more noise about an interest rate hike…later).
Yet, even so, the market forces that nudge mortgage interest rates one way or the other did seem to react. After the non-announcement, rates barely budged at first—but then continued steadily lower (the lowest in weeks, in fact). By week’s end, the Mortgage News Daily announced that the string of moves had brought mortgage interest rates into a “post-Brexit range”—similar to the conditions “that sent rates plunging toward all-time lows.”
The reasons last week were less than certain, although frustration with the Fed’s lack of coherence was fairly unanimous. CNBC interviewed big time investment manager Bill Gross, who said that investors were left “very confused” by the meeting’s outcome. He pointed to the likely rate raise that Yellen had emphasized at last month’s Jackson Hole speech, as well as to Fed Vice Chair Stan Fischer’s earlier assurance that there would be two hikes this year.
All this left Delaware mortgage interest rate watchers to make their own assessments about what to expect for future conditions—most importantly, whether current favorable low interest rates could be counted on for long. There had been at least one indicator that optimists could welcome. Almost unnoticed was a footnote to the Fed’s announcement. Back in June, the Fed had predicted the lending rate to end 2016 at .9 percent. It now said the likely number would be .6%. That would result in Delaware mortgage interest rates still comfortably in the historically low range—hardly a flashing red light for would-be borrowers.
- Written by Russell Stucki
Could "Millionaire Flight" Affect Selling Your Rehoboth Beac
Nobody in Rehoboth Beach can escape the fact that we are now engulfed in the full-bore election year media onslaught. You would need to be living under a rock not to have noticed—and the rock would have to be somewhere out of earshot of radio and tv.
Fortunately, since this is a space where we discuss buying and selling homes in Rehoboth Beach, we try as best we can to steer clear of politics; so let’s enjoy this island of non-partisanship…or perhaps that’s impossible, because of the topic, which is too interesting to ignore…
Recently, a study came out of Stanford that answered an intriguing question: do higher taxes drive wealthy people out of state? If you ever plan on selling a high-end Rehoboth Beach home, the answer would be more than academic. Whether our own state’s position on the tax rate hierarchy could measurably affect high-end property marketability—that is, if the well-heeled set are beginning to allow changes in state tax tables to determine their home base—is very much at issue.
So this investigation (it was sponsored by the U.S. Treasury Department), which focused on millionaires, came up with the statistical answer to the question (as Forbes put it) of “Do High State Taxes Drive Away the Rich?
For any agent running million dollar listings—or for any multi-million-dollar property owner considering selling their home in Rehoboth Beach anytime soon—that’s one fewer factor to have to address. The study found that U.S. millionaires who earn over $1 million annually are actually one of the groups least likely to relocate to a new state. It could be because their seven-figure incomes are tied to their current locale; or it could be because in the rarified atmosphere mega-incomes provide, marginal tax rates don’t matter (I doubt that—high income folks usually have plenty to worry about, and taxes are certainly in there).
Also interesting: the lower your household income, the more likely you are to move. In a mobile society like ours, that seems to make good sense—and is somewhat reassuring. People are still chasing opportunity; are still motivated to go where jobs can be found.
So what does this mean for those selling a home in Rehoboth Beach? Or buying one?
- Written by Russell Stucki
For Rehoboth Beach Real Estate Investors, a "Bubblicious" Re
If you are one of Rehoboth Beach’s real estate investors (or have been interested in how real estate stacks up against other investment classes), the insights of AIG investment honcho Doug Dachille would likely get your attention. Dachille is American International Group’s Chief Investment Officer. That makes him the decision-maker for the insurance giant’s $350,000,000,000 (that’s billion) portfolio.
Last Friday, Bloomberg TV aired a candid interview on the subject of how he feels real estate investors are likely to fare. The attention-getting interview ran under the heading, “AIG’s Dachille Rejects ‘Bubblicious’ Critique of Real Estate.”
It might seem that your typical real estate investor in Rehoboth Beach has little in common with the director of such a gigantic bankroll, but that’s not necessarily the case. It turns out that insurer AIG—just like any local real estate investor—labors under the necessity to safely maximize returns in order “to back obligations to policy-holders.” With government debt interest rates unappetizingly low, it has set the giants (like AIG, MetLife Inc., and Prudential Financial Inc.) scrambling for investment outlets. One answer has been to enter the arena of real estate investors, principally as lenders.
“Insurers hold funds for long periods of time…[so they] have been counting on real estate lending to obtain higher yields available to investors who are willing to sacrifice liquidity.”
So where does the “bubblicious” headline come in? It turns out to be a rejection of an earlier analyst who appraised the current real estate market as looking “a little bubblicious”—one that could face shocks should interest rates climb. That kind of worrisome analysis could cause some sleepless nights for Rehoboth Beach real estate investors with memories of the previous real estate bubble.
A return to peaceful snoozing would have been restored if they happened to catch Dachille’s response. With a very sizeable ($22.9 billion) portion of AIG’s stake in direct commercial mortgage loan exposure, he sees the ability to raise rents as a satisfactory counter to the inflation risk. “Commercial real estate is very similar to an inflation-protected bond,” he said; “What’s…bubblicious?”
Dachille regards the sector as presenting an attractive place for long-term returns—with a risk factor on a par with alternatives currently offering much lower yields. He revealed that AIG has been scaling back investments in hedge funds for a number of reasons. One that might ring true for Rehoboth Beach real estate investors is many funds’ relative lack of transparency. As Bloomberg summarized, “He was uneasy about funds when he can’t track their trades.”
- Written by Russell Stucki