Using the Web and social media to sell real estate

The United State real estate market offers right now the best appreciation and stability potential world wide. This is the shared opinion of many international investors who join together into an association that takes care of representing their trade, information and political needs inside of the US. Its name is Association of Foreign Investors in Real Estate and brings together 180 other organizations in 21 separate countries.

AFIRE (afire.org) has its headquarters in Washington DC, very close to the source of all political and legislative decision in the United States and has the first and foremost purpose of deliver timely and precise information on any new law or tax regulation that could affect international investors so that they stay abreast of the change and can be competitive with domestic investors.

The United States offer the most stable and secure real estate market for international investors.

Every year, AFIRE conducts a survey among its members to establish which international real estate market offers the most stability and security and which has the highest appreciation potential. The latest survey published at the beginning of 2010 shows that the United States still offer the most stable and secure investment environment.

The closest competitive nation is Germany that ranks about half and then we have Canada, France, Australia and the UK.

The Unites States real estate market offer the highest appreciation potential world wide according to AFIRE members..

The United States also offer the best appreciation potential even when compared to growing economies like China and Brasil or to established economies like the UK, Germany and Canada.

The perception of potential appreciation in the US has been increasing steadily in the last four years.

Considering the historically low prices of real estate, the United States have been increasing their perceived appreciation potential constantly in the last four years and today most of properties can be bought well below their replacement value, which means they are undervalued due to the presence of a high number of foreclosures, but have the potential of going back to their correct values once banks will have depleted their reserves of repossessed properties.

Who comes today to the United States can find investment properties that produce a net income that can be more than double of what could be obtained in Europe for a comparable investment or can find a quality vacation home well below market value and in very nice locations.

Roberto Mazzoni

Since October 2007 there has been a 43% decline in value of commercial real estate and an additional drop between 17 and 20% is anticipated this year, and probably is not going to stop any time soon, actually the credit crunch will continue probably until 2014.

Learn the secrets of commercial loan modification.

Vacancies have increased 40 basis points (0.4%) in May 2010 which is the greatest increase in history and the overall decrease for the first half of 2010 is 200 points (namely 2%). There are 3.5 trillion dollars worth of loans that are outstanding and that are about to come due in the next 12 to 14 months due to the illiquidity in the credit market. Before granting any loan or renewing a loan, banks are watching very closely two parameters that are important in commercial real-estate: debt-to-income ratio (the amount of money coming in as compared to the debt payments to be made) and debt-service coverage ratio (the amount of cash flow available to meet interest and principal payments).

So even if it is a performing asset, the banks decide not to move forward with the financing and leave the commercial property in what is called “strategic default” or “technical default”.

The “Congressional Oversight Panel” estimates 1.4 trillions in commercial loans that are going to reach their terms in the very near future. The largest losses are scheduled to begin in 2011 and it’s going to be in the range of 200 to 300 billion dollars.

The Board of Governors of the Federal Reserve issued a policy statement advising financial institutions to extend and restructure loans whenever possible, but who gets to decide whether a loan is going to be extended or not. Find out in this thorough video explanation.

Roberto Mazzoni

It is a simple concept and yet it will have a sweeping effect: banks are less comfortable in lending money in commercial projects than before and have reduced the loan to value ratio to 65%, which means that they will give you 650 thousand dollars on a one million dollar property provided you put 350 thousand of your own money in the deal.

Loan to value in commercial real estate loans has changed dramatically.

This would all be fine if the lending application were started today and if the market were stable or growing. Yet in the majority of the scenarios, with very few exceptions like Texas, the value of commercial properties is going down and many of the loans that will become due or will have to be renewed by the end of this year and next year have been given four or five years ago, when the market was booming and when banks were more comfortable in working with a 70% loan to value ratio.

And the 65% is not actually even related to the cost of reproduction of the building (how much would it cost to build it again), yet it is based on the “as is” value calculated today that might be quite far from the original value calculated 5 years ago. Some experts in loan evaluation say it might well turn out to be 60% or 55% of the real loan to value ratio once you factor in a series of elements that banks are now considering in reducing the actual value of the property.

This video gives you the varied opinions of commercial real estate experts based on what is going on today in the market.

Roberto Mazzoni