In challenging times there are always tremendous opportunities for smart investors to make profit. Investing in property can be an excellent way to generate wealth, and thanks to the current global economic crisis, buyers are now enjoying the upper hand in the real estate market. Here are some tips to help you invest in real estate:

Decide on an investment strategy
To be successful with your investments, you must consider your objectives before you commit your money. Are you trying to make a short-term gain, or are you planning to invest for the long-term? Do you need a constant income stream or are you more concerned about the growth in investment value?

When you are clear on your investment goals, then you can select an acquisition strategy that best suits your needs. If you have long term objectives to achieve property appreciation, you might purchase land or invest in a depressed area that you foresee will improve in the future. If you wish to make a quick profit, you might renovate a fixer-upper for immediate resale. If income is your priority, you might look for properties with high rental demand.

Know the costs
To determine if you can make a profit from real estate acquisition, you have to factor in the transaction fees that come with buying and selling properties. Along with the deposit which is usually 10 to 15 per cent of the cost of the property, you must have the funds for the closing costs, which can vary.

Some of the closing costs that you may have to pay include:
1. Attorney's fees: preparing the sales agreement, fee for transfer, preparing closing documents;
2. Professional fees: valuation report, surveyors ID report;
3. Government fees: stamp duty, registration fee, transfer tax, stamp duty on mortgage document;
4. Mortgage processing fees: commitment fees, mortgagee's attorney fee

You have to also consider recurrent costs such as mortgage payments, peril and home insurance premiums, strata fees, property tax, repair costs, as well as maintenance and security fees. Email advice@financiallysmartonline.com for a checklist that can help you to keep track of the various charges.

Find sources of financing
For most investors, acquiring real estate requires using other people's money. Borrowing to finance an investment can sometimes be risky, as you need to calculate if the interest costs are justified by the rental income and/or increase in property value.

If you decide to get a mortgage, remember that it may affect your ability to attain loans for other purposes, and that the payback will be a new monthly expense on your budget. If you are depending on rental income to pay the mortgage, devise an alternate plan if the tenant doesn't pay on time. Also bear in mind that your mortgage rate could increase with market interest rates.

If you pool money with others to purchase, think about the legal considerations of joint ownership. If you choose to use your personal funds, be careful not to deplete all of your savings. Remember that real estate transactions can take several months to complete in Jamaica, so it might not be easy to get back your cash in the event of an emergency.

Use expert advisors
There can be several pitfalls to real estate investing for the unseasoned investor. The first rule of success is finding the right location for your property. How can you tell if the area you have chosen will increase its value in the future? What about the physical property - will it require costly repairs that are not immediately obvious?

Then there are the legal considerations of property transactions. Do you know if the details in a sale agreement will affect the cost and completion time? What about the rental agreements - how can you protect yourself from unscrupulous tenants?

When it comes to real estate, you will need to depend on the advice of knowledgeable experts. Don't try to cut corners - find the best realtors, lawyers, contractors, or property managers that can help you to profit from your investment.

Be prepared to commit your time
Investing is not a spectator sport - just like any other business, you have to be willing to commit time and effort to achieve your objectives. If you want to be a successful real estate investor, you need to develop your skills in negotiating, basic accounting and property maintenance; and continually keep abreast of industry developments.

Copyright © 2009 Cherryl Hanson Simpson.
Cherryl is a financial consultant and coach, and the founder of Financially S.M.A.R.T. Services, Jamaica's number one source for practical, down-to-earth and independent answers for all questions relating to personal finance. Cherryl is currently writing her first book, The 3 Ms of Money. See more of her work at www.financiallysmartadvice.com and www.financiallysmartonline.com
 

As we turn the page on 2009, a challenging year globally, we all wonder what 2010 has in store for Jamaica's real estate market. With a look back at the last 6 months of 2009, we may be able to see what shape the Jamaica real estate market might take for 2010.

Stimulus package - In July 2009, with real estate transactions trending downwards, some realtors felt that we were heading towards a buyers market. This prompted the government to bring forward the reduction in transfer tax originally intended for January 1, 2010, to August 1, 2009. Leading realtors noted a spurt in real estate transactions, and we had the expansion of one real estate agency (La Maison), and the opening of a Re/Max franchise, suggesting some room for growth in the market.

Property development - In general, it appears to the casual onlooker that not much new development took place in 2009, and developers seem to be just finishing up properties that were in the pipeline with a view to get them sold as quickly as possible. Carib Cement, a major provider, cut cement prices to clear inventory, and at least one luxury townhouse complex was being sold at very reduced prices. Some NHT projects were put on hold, while others were approved. Go figure. An attractive St Catherine project, El Prado Verde, has caught some attention.

Mortgages - Home equity loans are on the rise, but for the leading mortgage lenders, JNBS and VMBS, new mortgages declined in 2009. Delinquencies also increased, including at the NHT. Auction properties have likewise increased, but there are few takers when they get to auction. NHT regardless announced new benefits, and confirmed they had the cash to back it. JNBS declared a profit, however, so it seems no government bailout is needed for our mortgage market just yet.

So we can make a few educated guesses based on the foregoing. The number of approved mortgages will stabilize or continue to trend downward based on worsening economic conditions. There probably will be no flood of new or existing inventory to fuel a true buyers market across the board, as people may take home equity loans instead of selling, and although one developer is taking a bet, developers seem generally cautious about new projects based on the trends of current ones. As opposed to upgrading, renovation is also an option homeowners will likely explore, not to mention the fact that there are deals to be had in the rental market that potential buyers may also choose to opt for. On the flip side, the intended economic effect of the stimulus package is not likely to be fully realized.

Even with the above information, it will be difficult to see beyond the first six months of 2010. One thing is for certain, both buyers and renters are more discerning, shopping around more, and using the internet in their search. Person looking to move real estate in 2010, whether selling or renting, should endeavour to provide value and be open to negotiation. 

In a challenging real estate market, potential buyers will be seeking to find bargains, and are expecting sellers to negotiate price quite a bit. However sellers you can increase bargaining power by increasing the value that the potential buyer will perceive in their property. If you are selling your home, here are a few tips to help increase the attractiveness of your property in the eyes of your potential buyer.

Declutter - If you are moving, you most likely know already that there is some stuff you don't want to move with. Take some time, room by room, to decide what you want to throw away, what you should give away, and what you want to keep. Aim to get rid of stuff you haven't used in the past 18 months. Get boxes and get the stuff that you're not going to move with out of your house before showing it to the public. Your house will look and feel lighter, and more airy and attractive.

Paint - If you haven't painted in a while, aim to do so in at least the kitchen and bathrooms, where potential buyers pay keen attention. Ensure the paint job is neat and in keeping with the theme of the rest of your house, and by all means avoid gaudy colours, which are taste-specific. Potential buyers must not think that they need to repaint these areas as soon as they move in. Also, so re-paint watermarked ceilings after you have made repairs to roof leaks.

Garden - If your home has a garden, by all means ensure that it is neat. Mow the lawn, trim the hedges, prune the trees, get rid of weeds. For apartments, and townhouses, try to reduce the number of potted plants to a bare minimum; ask a friend to house-sit a few of yours if you feel you have too many. Replace broken or mildewed pots as well.

Update fixtures - If you can afford to, updating the bathroom and kitchen fixtures is a worthwhile effort. Unless the cabinets are in disrepair, even if you don't update the entire kitchen or bathroom, potential buyers will not necessarily see the need to do an immediate overall updrade if fixtures are updated, and the area freshly painted in a complimentary colour. Also, do upgrade decoratives like shower curtains and towels.

As a rule, don't spend more on renovations than you can recoup through the value from the sale, and because buyers don't want the most expensive house in the area, if doing other more costly renovations, don't over-improve based on the average value of houses in your neighbourhood. 

Looking for an affordable, quality home in St. Catherine? Then you must check out El Prado Verde.

This new community in Spanish Town by Merit Development will feature 195 3 bedroom, 2 bathroom single family, single-storey homes with a minimum living space of 117.89 sq m (1,269 sq ft). Three different floor plans are offered, with the essential difference being the the option for a den and/or trellised carport.  Lot sizes range from 378 sq m (4,072 sq ft) to 814 sq m (8,761 sq ft) and will be fenced. A nice surprise is that all electricity and telecommunication services will be installed underground. The model units which are already completed offer attractive finishes, and a spacious layout.

The best part is that pricing starts from an affordable J$7.9m up to J$9.1m. The project is scheduled to be completed in February 2010.

The Realtors Association of Jamaica reports that there has been an increase in real estate transactions since the August 1, 2009 reduction in stamp duty and transfer tax.  President of the Association, Edwin Wint, , says most of the new transactions involved residential properties, and noted that "Some owners who might have been deferring their sale have moved it forward given the revision. Several leading brokers have indicated that they've seen an (increase) in the number of properties coming on the market since the reduction in the taxes." Mr. Wint indicated that determining the exact increase in the market will take another three months.

In the mean time, it certainly seems as if realtors remain optimistic about the real estate market. In August, La Maison Property Services expanded into the Montego Bay market, to meet what it says is the demand for high-level professional services as real estate developments climb in the western end of the country, and we also saw the the re-opening of a local Re/Max franchise, Re/Max - Elite.

By all indications over the past 6 months, Jamaica's real estate market has been softening. Lending rates went up making borrowing for mortgages more expensive and more difficult to qualify for. Over the period, realtors have acknowledged that turnover has been slow and properties are staying on the market longer. Deborah Cumming of Century 21 noted recently that we are now in a buyers market.

Based on the economic climate, buyers are still not rushing to buy real estate. Low real estate sales means lower revenues for the government and the financial institutions. The following moves have been taken recently to stimulate the market

• Government calls on KSAC, parish councils to speed up building approvals, aim for 90 day turnaround
  
• House begins debate of bill re amendments to strata titles act
• National Housing Trust to offer 40 year mortgages, will also allow borrowers to carry debt up to age 70
  
• Reduction in transaction taxes (transfer tax and stamp duty) brought forward from January 2010 to August 2009.

Additionally, a number of new NHT and HAJ projects are in the pipeline. We think these are combination of good initiatives and should help accelerate real estate sales for the months to come.

If you own real estate in Jamaica, and are thinking of putting it up for sale, remember these two things. 

Property taxes -  When a property is being sold, before it can be transferred, it is a requirement that the property taxes are paid up to date. This is particularly important for those who have not paid property taxes for some time, as there is usually no provision to pay outstanding property taxes from the buyers downpayment. Property owners were recently reminded that property taxes were due and payable as at June 30, 2009, after which they would be subject to a penalty.

Utility bills & strata fees - Power and water in particularly are usually also required to be fully paid up, and in the case of properties governed by a strata, it is also a requirement from most mortgage houses when financing a home purchase that strata fees must also be paid up. There have also been recent reports in the media of the effect of unpaid strata fees on property values, so there is a double whammy from unpaid strata fees.

So if you want the sale of your property to go as smoothly as possible, remember these two things. Buyers would do well to ask sellers about these two issues as well.

It is a well known fact that the real estate industry of most countries is a general indication of the direction of the economy. Just look at the effect of the crash of the US mortgage market and it's effect on their economy, and by extension, the global economy. Locally, it seems we're also definitely feeling the effects.

The Global Property Guide recently did a pretty fair analysis of the state of the Jamaican real estate market. In addition to the factors mentioned, we've in fact already seen that local mortgage rates have shown recent increases, making it more difficult for borrowers to access loans, and hence more difficult for developers and home owners to dispose of properties. The real estate industry has been targeted by the Government in it's attempts to stimulate the economy, with two recent reductions of transfer tax and stamp duties, the next of which is expected to take place in January of 2010 (Deborah Cumming thinks this delay is dangererous, although veteran realtor Andrew Issa thinks this will happen sooner). The Jamaica Mortgage Bank will soon issue a bond to help developers fund projects, and the Minster of Water and Housing Dr Horace Chang has urged the construction industry to use local materials to help keep costs down.

One thing is certain at this time: in light of the economic conditions, sellers certainly seem more willing to negotiate, and potential investors are urged to keep their eyes on the market as there definitely are good properties available at reasonable prices.

There are many variables to consider when building your home. First things first, you have to acquire the land on which you wish to build. Just like when buying a home, you should think location, location, location. Whether the lot of land is fully serviced by utilities should also be a major consideration. The lot on which you plan to build your home will also have certain restrictions which you must observe, eg. how many feet away from the boundaries you should build.

Have an architect design your building according to your specifications, and ensure that your building plan is submitted for approval to the necessary governing bodies, usually the parish council or the KSAC. Building your own home can be challenging, but can also be one of the most satisfying things you accomplish once it is over, as you should have gotten exactly what you want. Check out www.real-estate-jamaica.net for more tips, and see this recent article from the Jamaica Gleaner for more information on building your home in Jamaica.

Jamaica's Minister of Finance Audley Shaw announced during his budget presentation on Monday April 24 that effective January 1, 2010, stamp duty will be reduced from 4.5% to 3%, and transfer tax from 5% to 4%. This will result in savings for both buyers and sellers, and although the implementation of this measure is 9 months away, it means that persons selling property at that time can accept a deposit of 10% (as opposed to the regular 15%) since both stamp duty and transfer tax are normally paid out of the buyers downpayment.

Certainly this will most certainly be a timely and welcome reduction when it is in fact implemented, and we can't help but think how much it would help to boost the slow sales that agents are reporting in the upper end of the market if implemented sooner, but hopefully it will coincide with a reduction in mortgage rates and put the industry back on a positive path.