Scott On Money

REIT is an acronym for real estate investments trusts. A REIT is a lot like a mutual fund of real estate. They come in all varieties. Some invest in commercial property, some in residential property, others in malls or even timber lands.

But why would you do this rather than just go buy real estate yourself?

REIT Characteristics

REITs are liquid. If you buy a REIT today it is likely much easier to sell than a house or office building. In this respect they are very much like mutual funds.

REITS are divided into manageable chunks. REITs are sliced into small pieces just like companies and mutual funds allowing everyone to buy a little slice of property. This is great since not everyone can pop for the loan on a ten million dollar property.

REITs are internally diversified. A REIT typically owns more properties than most individual investors could manage.

A REIT does not require you to be a property manager.

REITs are generally big and can take advantage of economies of scale on administrative and maintenance expenses.

Direct Investing Characteristics

Typically more tax advantaged since you don’t have to takes gains every year as REITs force you to do.

Direct investing allows you to directly contribute to your investment and create value with your hard work or creativity.

Direct investing can leverage your personal vision or knowledge to make uncover a pearl of an opportunity. If you think a revitalization project will result in a big increase in property values in a neighborhood it is unlikely that a REIT will help you take advantage of that.

This just scratches the surface of the options available to you. If you want to know more go to your broker’s site or money.msn.com to read the prospectus from a REIT or two.

Posted by Scott at 11:27 PM | Permalink | Comments (0) | TrackBacks (1) | Subscribe | Digg | del.icio.us | Technorati

I personally am not sure what amount of price declines we are going to see in the real estate market. Long term rates are still in the low 6% rate which keeps things relatively affordable. One area I have not understood for a long time, from a buyers perspective, is condo conversions. They generally are not nearly as nice as regular condos and don’t afford a significant discount to regular condos.

Today the local paper reports on a major slow down of condo conversion sales in San Diego. How this relates to single family homes and more conventional condos only time will tell. Those of us with money tied up in San Diego real estate will have to wait to see the full impact.

Posted by Scott at 12:25 PM | Permalink | Comments (0) | TrackBacks (0) | Subscribe | Digg | del.icio.us | Technorati

Almost a year ago I asked "where will housing prices go?"

I recently had an opportunity to look into this in depth given my refinance. The best I can tell prices in my area of San Diego have gone up 5-10%. My house for example went up 5%.

I also have friends and relatives looking into housing and I'll say that the range in Southern California seems to be +/- 20% from where it was a year ago.

Now, as with a year ago it looks like the next six moths will be very interesting.

Posted by Scott at 05:02 AM | Permalink | Comments (0) | TrackBacks (0) | Subscribe | Digg | del.icio.us | Technorati

I recently refinanced my mortgage. I used bankrate.com to locate a broker.

The good faith estimate came and the fees were a bit higher than what I found on Bankrate but it was still a great deal.

The closing comes and the fees are (surprise) higher than originally quoted. I was stuck as the fees that where already out of pocket dwarfed the saving of dropping the deal and starting over.

What to do?
1) Get the broker or mortgage company to give you, in writing, which fees you'll be stuck with if you don't close.
2) Get the mortgage broker to give you firm quotes for the fees.

A lot of the excuses were around title insurance and such. I got quotes but they were in the ballpark of the good faith estimate or higher so I passed. There is no reason that these quotes can't be made firm.

Learn from my troubles.

Posted by Scott at 08:43 PM | Permalink | Comments (1) | TrackBacks (1) | Subscribe | Digg | del.icio.us | Technorati

Owning a home in San Diego I'm deeply interested in trends in the housing market. We've certainly seeing the prelude to pricing leveling or declining in the lengthening of time on market of the homes here. The Happy Capitalist gives his take on the housing prices. I think he's right on with the underlying drivers.

I think the supply and demand factor is localized factor in real estate. Ten miles east of me homes are about half the cost of mine. Ten miles west of me they are about twice as much. These localized markets make prediction a little bit tougher.

I'm spending some time getting prepared for whichever direction the market goes. If it goes down I'm going to look at REITs or maybe buying my own rental property. If rates come down I'll look to take money out of my place to invest elsewhere.

Posted by Scott at 02:45 PM | Permalink | Comments (1) | TrackBacks (0) | Subscribe | Digg | del.icio.us | Technorati