The Big Question….

Lately I’ve been asked by a lot of people “How is real estate doing in Grand Junction”.  I have the out look on life that the glass is half full. So I’m always hopeful and optimistic that things and situations will get better, or for the present you can find something good.

As we approach spring, I’m even more optomistic. Everyone feels refreshed when the seasons change, especially when spring and summer approach. From my experience spring time has always seen a pick up in the real estate market, even in slow markets.

The information I have looked at in the past few months has lead be to conclude that now is a good time to buy. I don’t say that as a Realtor, but rather as an consumer looking to buy myself.  Interest rates are still looking good and home prices are being reduced.

There are some good deals to be found out there. For example a property cane across my desk just this week of a new constrution home that the seller is taking a loss on, they are selling it for less than what they owe on it. It’s a 2400 + square foot house, with nice ammenities, custom tile and solid surface counter tops in a nice neighbohood, and the seller just reduced it $55,000. For someone looking in the particular price range of this home, it’s a steal.

In addition many of the lenders are now working with the large banks on REO (Real Estate Owned) or bank owned homes. I think we will start to see some of these homes come down the pipeline. Some of the leders and banks are working out some great lending guidlines to help buyers and investors pick up these homes, for little money down and no PMI (private mortgage insurance).

To answer the question about how Real estate in Grand Junction is doing. If you are listing your home to sell, you will have to price it accordingly to compete with the inventory out there. If you are buying then you have a lot to choose from and you can make some great offers on most homes. 

I personally think it is a much safer time to buy and sell right now. Grand Junction had a market boom 2 years ago, homes were selling high and in turn buyers were buying high. With the market now, sellers are selling lower, and buyers are buying lower. You may be saying to yourself “well I would rather sell high and buy low”, well we all would love to to that, but that’s not the case with real estate. One problem people are running into that bought a couple of years ago, when they bought high, is that they may be able to sell their home for what they bought it for, and some homes would not sell today at the price it was 2 years ago. So the owners are realizing no additional equity. The reason I say it’s safer to buy now, is with home prices lower, you will not be getting yourself into that situation. 

I think the Grand Junction real estate market is leveling out, and for those that buy now, they will realize some slow equity growth in the next couple of years. I know that some people out there think things will still get worse, but like I mentioned before I’m optomisitic that we can move forward in a positive direction in the Grand Junction market.

If you have any thoughts or questions, I’d love to hear from you.

Andrea Haitz, Broker Associate

Heiden Homes Realty and Associates

735 Rood Ave. Grand Junction, CO 81501

970-201-3578

www.AndreaHaitz.com

RETURN ON EQUITY “How hard is your investment working?”

The question as to when to sell an investment property depends on many factors, including: the likelihood of future appreciation, the cash flow it produces, the ease or difficulty of managing the property, and the property’s fit in an investor’s overall investment portfolio. A real estate investor should not overlook a simple measure to determine how hard their invested dollars are working: the property’s “Return on Equity.” By analyzing return on equity, a real estate investor can compare a particular property with other potential investments in an effort to maximize the return on their investment equity. 

Example: A small fourplex was purchased several years ago on very favorable terms. It produces a nice cash flow that resulted in an extraordinary 20% return the first year. Even with the following assumptions, which would produce a high return on equity, the return falls to less than 5% after 7 years.

•  10% down payment
• 90% Loan-to-Value (LTV), 7% fixed mortgage over 30 years
• Appreciation at an average of 4% per year
• Annual net income increasing by 2% per year

Year      Value         Debt (7%)       Equity    Equity % Value   Annual  Net Inc.   Return on Equity                                                                                                            

1         $300,000   $270,000           $30,000         10.0%                 $6,000                     20.0%

2         312,000     267,020             44,980            14.4%                6,120                      13.6%

3         324,480     264,062            60,418            18.6%                 6,242                      10.3%

4        337,459     260,890              76,569            22.6%                6,367                       8.3%

5        350,957     257,489             93,468             26.6%                 6,494                      6.9%

6         364,995     253,842             111,153          30.4%                6,624                       5.9%

7        379,595     249,931              129,664          34.1%                 6,756                       5.2%

8       394,779     245,737               149,042           37.7%                6,891                       4.6%

9       410,570     241,241               169,329          41.2%                 7,028                       4.1%

10     426,993    236,419               190,574          44.6%                  7,168                        3.7%

 

  As evidenced in the chart above, the investor in this example has a return on equity that starts diminishing significantly after about 7 years of ownership. In order to continue obtaining a much better return on invested equity, an investor should consider exchanging this one investment property after 5-7 years and acquiring multiple replacement investment properties. Later on, the investor will benefit again by exchanging these investment properties and exchanging into more (or larger) properties with leverage that will continue to produce a higher return on their equity.

For question on Grand Junction real estate or Grand Junction investment real estate, contact Andrea.

Andrea Haitz, Broker Associate
“Taking Real Estate to New Heights”
Heiden Homes Realty and Associates
970-245-7777 office
970-201-3578 cell
www.AndreaHaitz.com

Used with permission from:

 Asset Preservation

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