Consider Commercial Real Estate

There are nearly endless career possibilities in this day and age. Almost any childhood dream could be turned into an actual profession it seems. As a career counselor, you might be amazed to learn how many adults in our society of option after option really have little or no idea of what kind of career is best for them. I meet with clients all the time who are dazed and confused with too many options and no real clue of what kinds of jobs fit them best. I mention a variety of job options to clients, but commercial real estate is one option that seems to come up quite often.

The thing about commercial real estate is that there will always be a need for people in that field. Why? Because our modern world is filled with people who are into businesses of all kinds. People will never stop needing space to rent or own for their businesses and services to the public. Therefore, going into commercial real estate as a profession is a wise move for anyone who wants flexibility yet job security for their future.

Basically, commercial real estate deals with all properties, both rental and for sale, that are not residential. So any coffeeshop, grocery store or book store that moves into an area must deal with a commercial real estate agent to make the purchase or rental agreement. Similarly, builders who specialize in buildings that will be used for non-residential things must use a commercial real estate agent in their planning and to rent or sell their buildings out for business.

If you are looking for a great career, then consider becoming a commercial real estate agent. Talk with current commercial real estate agents to learn more of what they do for a living. Think seriously about whether or not a job that works with the public is right for you, because a commercial real estate agent will be working with people constantly. If you are passionate about people and about business, then this could just be the profession for you.

Commercial real estate is a booming business that will continue to boom as long as people are in the business of selling things and offering services to the public. So jump into this profession while you can. Enjoy your days meeting with clients and helping them to secure the best possible space for the business of their dreams. You can be fulfilling your dream while helping others to fulfill their dreams as well.

Diversifying Through Real Estate

We should all diversify our investments over different asset classes. Real estate is an excellent vehicle for diversification.

Real estate rental properties used to be a perfect investment for high wage earners. They were able to deduct all the losses generated by the property - and when you added up mortgage payments, property taxes and maintenance, the losses could be substantial - from their gross incomes.

The IRS has rained on that parade. Real estate rental properties are now considered passive activity, even if you actively manage the property. The only ones who can take full advantage of real estate investing losses these days are the so-called “real estate professionals.”

However all is not lost. Even now you can deduct all the expenses of a rental from the gross rental income. If the losses exceed income, they are converted into passive activity losses which are not deductible against ordinary income, but are deductible against other passive activity income as well as any gain made when the property is sold.

Real estate investing offers several special advantages: the purchase can be highly leveraged, from zero down to the usual 20% down payment; the mortgage payments are generally tax deductible as are the taxes and expenses of maintaining the property; and if you own the property over a year, it is subject to long-term capital gains taxes – presently 15% - minus any accumulated passive activity losses.

Because of the highly leveraged nature of most real estate purchases, investors can afford to own multiple properties. Or you can start small, with one property, and use that as leverage on another house as your equity in grows.

However, real estate is unlike other investments. Unless you buy raw land, it requires management and maintenance, insurance and tax payments. There will even be continuing costs with raw land, property taxes and liability insurance being the major expenses. If you think you can’t be sued if someone trips on a log or falls into a hole on an undeveloped piece of property, think again. Ask your lawyer what the liability laws in your state are.

If you own rental buildings, they must be insured, properly maintained and rented out. Someone has to fix the problems and collect the rent. You can do this yourself, especially if you like being awakened at three in the morning because a toilet won’t flush – I’ve been there and done that. Or you can hire a management company to do this for you. Most work on a cost plus basis.

Because of all of this, you do need to find properties that either throw off good income from rents or have the potential for appreciation, especially if some repairs are done. In other words, you have to work out beforehand how any given piece of real estate will make money for you. If it won’t, keep looking.

Real estate prices are not as volatile as the stock market’s can be, but they do fluctuate. It is better to go into a real estate investment with a long term frame of mind and remember the rule “location, location, location”.

Over time real estate values tend to grow and, because of the leveraged nature of the investment, the growth is magnified. For example, 5% growth on $150,000 is $7500. But if you only have 20% down or $30,000 invested, that $7500 becomes a 25% return on your investment.

Of course you don’t have to own real estate outright. You can invest in “Real Estate Investment Trusts (REIT)”. These are professionally managed funds that usually invest in larger, commercial projects – shopping malls and office buildings. Your aim is long term capital appreciation. The investments are heavily leveraged and the tax benefits spread among the partners.

Since real estate does not necessarily move in the same directions as stocks or bonds and also generally tends to hold its value, this is a good diversification move, but you are unlikely to realize the gains you would see with individual real estate holdings.

Also, despite the fact that real estate is booming right now, it can and has fallen, sharply at times. There have been gluts of office space in major cities, overdevelopment of residential housing (remember the S&L debacle of about 15 years ago), or there could just be a general down real estate market from time to time.

Most of us have already diversified into real estate by purchasing our home. If the equity is preserved, this can turn into a major cash cow after several decades of use. If certain simple rules are met, you can exclude $250,000 ($500,000 if married and filing separately) of any gains you realize.

As you can see, real estate investing, if done properly, can be quite lucrative. But study the subject intensively before committing yourself. The library is full of good books on the subject.

Real Estate – The Boom Is Over

Sales of existing homes fell a bigger-than-expected 2.7 percent in October, a fresh sign that the red-hot housing market is cooling. The decline would have been worse without increased demand from displaced hurricane victims.

Though prices rose at the fastest clip in more than a quarter-century, the number of unsold homes rose to the highest level in 19 years. Analysts forecast that this backlog will dampen future price gains.

The National Association of Realtors reported Monday that sales of existing homes and condominiums fell by 2.7 percent in October, more than double the 1.1 percent decline analysts expected.

Economists said the latest report, which showed sales declines in all regions of the country, appeared to be a signal that the booming housing market was beginning to slow under the impact of steadily rising mortgage rates.

The decline in sales pushed the number of unsold homes to 2.87 million, the highest level in more than 19 years. It would take 4.9 months to deplete that inventory level at the current sales pace.

The median, or midpoint, price of an existing home sold last month rose by 16.6 percent to $218,000, compared with October 2004.

Economists predicted the buildup in unsold homes would help dampen the surge in home prices that saw 69 cities report double-digit gains in prices this summer, compared with the third quarter of 2004.

The sales slowdown was linked to the Federal Reserve's continued campaign to boost interest rates to combat the threat of higher inflation after the recent surge in energy prices.

Most analysts believe housing will cool gradually to more sustainable levels but will escape the adverse consequences that occurred when the Internet stock bubble burst in early 2000, wiping out trillions of dollars in paper wealth and helping to push the economy into a recession. But, many real estate ‘insiders’ see thing quite diferently, and are forecasting a much larger drop in real estate values because of the huge popularity of 100% interest only loans used to both in the purchase and re-finance of homes over the past five years.

The weakness in existing home sales in October followed an earlier report that construction of new homes and apartments fell by 5.6 percent last month, the biggest setback in seven months. Applications for new building permits, a good sign of future activity, fell by 6.7 percent, the biggest decline in six years.

The 2.7 percent drop in sales of existing homes would have been a larger 3.2 percent decline without a boost in activity from people relocating after hurricanes Katrina and Rita devastated the Gulf Coast.

Sales surged by 83 percent in Baton Rouge, La.; 32 percent in Mobile, Ala., and 14 percent in Houston. This more than offset sales declines of 42 percent in New Orleans and 44 percent in Beaumont, Texas.

The 16.6 percent increase in the median sales price was the biggest year-over-year price increase since a 17.2 percent jump in July 1979. The backlog of 2.87 million unsold homes was the highest since April 1986.

By region of the country, October's biggest sales decline occurred in the Northeast, a drop of 7.4 percent. Sales were down 1.9 percent in the Midwest and 1.2 percent in the West. Sales were down 1.8 percent in the South despite the big gains in areas where displaced homeowners relocated