Wednesday, 17 February 2016

Forced Appreciation: A Booming Trend in Real Estate!

Forced Appreciation is buying something that’s not a good investment and turning it out into a good investment. Real estate investors can also use the force to make their investment worth their decision. Especially, the investors who own commercial properties that are value-based are prone to forced appreciation.
Assume that you can manage to get your rental to generate a little more income; this income divided by the capitalization rate will be the value your property will appraise for. So, you can force the value up by surging your income stream, and this is nothing but forced appreciation.
Forced Appreciation needs Foresight
  • The investors can’t just blindly get into forced appreciation, as it requires a foresight while buying any real estate deals, so that they can plan for the value creation. Firstly, the investor will have to see the value potential the property might have. Many times, the real key for being an ideal real estate value investor is seeing the value or opportunities that are missed by others.
  • The investors will have to analyse a few things like, are there any things that you can add to the property in order to increase the rent? Is the property capable of serving the tenants to its best? Is there any chance of redesigning the space so that it generates more revenue? Are there any services or amenities that can add more value to the property?

Make Your Strategy Work
  • Once you know how to create value to the property, you need to create a well thought out plan that lays out the vision of your value creation. The essence of your plan should spell out pointedly, how you are going to add value to your property and generate more revenue. This can help you in executing the plan; it can also help you in raising the debt and equity funds.
  • You can then sell your plan to the potential stakeholders. If you have found a solid deal having lots of value creation opportunities, it will be easy for you to get buy-in from potential partners. But finally, the ability to see the value in a deal and the ability to communicate it is the most critical thing, where you have to bring out your entrepreneurial spirit.
If you just look at it, the forced appreciation strategy looks really simple. But what’s hard to see is the hassle accompanied with the property. But a little hard work, unique strategies and marketing intelligence can turn out an average investment to a great one.

Tuesday, 9 February 2016

Commercial Real Estate Trends for 2016

The Commercial Real Estate (CRE) industry now seems to be in a solid grip when compared to the previous years. While the US economy continues to progress, the investors are seeing incredible performance across most of the property types and markets. So, what would be the future of Commercial Real Estate? Will it be fruitful? Here are the 4 trends that are expected to play a significant role in the on-going year.
  1. Global Urbanization:
It looks like the global urbanization trend continues in US as it does in the other parts, as the Millennials and boomers lookout for enhanced access to jobs and amenities, from shopping to healthcare. It’s been noted that, the US urban population has increased by 12.1% from 2000 to 2010, outpacing the nation’s overall growth of 9.7%. And, even the sub-urban seem to be taking more of an urban form, having mixed-use development and limited automobile dependence. While this trend of urbanization continues, it certainly creates a huge demand for retail, housing, offices and other property types.
  1. Rise in Interest Rates:
The interest rates seem to rise for sure this year; the forecasts may vary, but it’s more likely that, the Federal Funds Rate (FFR) will rise at least to 1% in 2016, with the treasuries of 10 years pushing fractionally higher towards 3% mark. There are number of factors for the interest rates being low for now, like limited inflation and the strong dollar. But, the Federal is more likely to weigh the effects of each and every move before it adds an additional friction to the current economic growth trends.
  1. Increased Capital Flows:
US property market is the most stable and transparent market in the world because of which it has been an easy choice for many investors. According to Real Capital Analytics (RCA), a research firm, just the foreign purchases of US real estate properties rose up to $62 billion with Norway, Canada, China and Singapore leading the wave. Looking at this statistics, a substantial proportion among the Association of Foreign Investors in Real Estate, expect increase in investments in US.
  1. Limited Supply Additions:
Limited supply additions seem to continue with only modest supply growth in the sectors like multifamily housing, student and senior housing, single tenant industrials and so on. As the last recession was a bit deep and protracted, the lending sources were extremely doubtful about funding new constructions. Also, many local and regional banks were hit by the residential mortgage crisis, and both the commercial and residential real estate were seen as highly risky sectors. Because of this many lenders decided to leave real estate, which resulted in limited supply.
Looking at the above mentioned points, we can say that the property landscape of US in 2016 will almost be similar to that of 2015. Also, many economists say that, employment situation of US would remain on its current path adding the demand for housing in various forms.