Do You Know About These 7 Investment Real Estate Value Killers?

Money is the primary motive for real estate investing, the essential reason why people invest in real estate, and typically the first thing people think of when they consider owning investment real estate.One of the advantages of owning income-producing property is that income generated from rent can be quite considerable if a property is bought and managed correctly. If a real estate investor doesn’t overpay for a property, keeps expenses down, the apartments rented, and the building well maintained, a real estate investment can generally make the investor money, even while the investor sleeps!Notwithstanding, there are there factors that can cause a real estate investment to lose value. Moreover, it can have a drastic effect upon a rental income property’s ability to generate profitability, despite the investor’s efforts.Okay, let’s look at undoubtedly the 7 worst contributors to the deterioration of rental property value.1. Neighborhood DeclineThe community surrounding the income property can change in a variety of ways that adversely affect your real estate income property. Increasing vacancy, for instance, can lead to reduced rents, which in turn means reduced maintenance causing building deterioration, in turn causing the whole neighborhood to slip into decline and therein triggering a domino effect that simply compounds the problem. The nearby construction of facilities such as sewer treatment plants and airports will also likely have an adverse effect on the area. Also, perhaps more subtle and slower in coming, is a decline due to increased crime, perhaps resulting from an adjoining neighborhood spill over.2. Impact of Adverse InfrastructureThe impact of being directly under the flight path of aircraft, for example, can have a negative impact on a property’s ability to attract (or keep) tenants. Likewise, construction of a major highway or intersection can limit access to the property, and cause noise and dirt by the construction to drive tenants out. Perhaps the result may be an increase in your investment real estate value, but construction can take up to a year or more and during that time you can expect your real estate investment value to drop.3. Controls and RegulationsGovernmental controls and regulatory changes to zoning can adversely impact real estate investment property. Real estate investors that purchase raw land for development, for instance, can see their plans grind to a halt because of a building moratorium or anti-development sentiment. All of which, of course, results in a plummeting value.4. Wear and TearWhether its air and heating equipment, driveway surface, electrical wiring, hot water heaters and boilers, roofing structure, plumbing or paint, sooner or later it will require maintenance and/or replacement. The value of investment real estate is reduced by the economic obsolescence (out-of-date) items if they are not properly maintained.5. Supply and DemandTwo major factors of supply and demand causes real estate values to go down: overbuilt and tight money. Overbuilt is straightforward. With multifamily property, for instance, overbuilt would imply that there are many more apartment units available to rent than there are tenants to rent the units. In this case, the market can decrease quickly and stay down for a long time when new construction gluts the market causing an overbuilt situation. Tight money means less availability of long-term financing from lenders and therefore less qualified buyers for your rental property.6. Lack of Proper MaintenanceA run-down property in the neighborhood, if left unchecked, could drive down the values of all adjoining properties. A deteriorating property, whatever the reason, will have an adverse affect on your real estate investment.7. Pressure to SellHighly motivated sellers may reduce a property to a bargain basement prices and smart investors watch for property owners who must sell to take advantage of the owner’s strong motivation to unload the property. Always try to avoid ever reaching the moment when you are forced to sell.

The New World of Real Estate Listing Marketing

As a writer for the New York Times website at About.com, I am privileged to write business advice and tutorials for real estate professionals. I find that there is still a lot of misunderstanding about the best ways to use the Internet to market their clients’ listings. Too many real estate agents and brokers spend too much money on print media, while neglecting the much richer environment and greater capabilities presented by the Web.Back in 2005, selling a home was easy, fast, and usually profitable. Get a real estate professional to throw it into the MLS (Multiple Listing Service), run some ads, and go to closing. Some home sellers even enjoyed bidding competition for their homes. Those were certainly “the good old days” of real estate.Contrasting today’s markets, we have double and triple the “days on market” in most areas, with homes languishing on the market unless aggressive price-slashing is implemented. And, that’s for normal homes at and around the median prices in most areas of the country. It is a tough market for those homes, but it’s even tougher for “special” homes. These homes could be special solely due to location, size and price. Others are homes on high value land with special development challenges and unique architecture. There is so much greater potential in the Web marketing of these homes than many real estate professionals recognize. Or, if they do recognize it, they still do not take advantage of it.Whatever the challenges, real estate brokerage and getting a home sold is all about “marketing,” not salesmanship. What’s the difference? Marketing is a planned activity that uses advertising and media to get the product in front of as many interested prospects as possible. It’s about doing a great job of presenting the product, and getting that prospect to respond. Advertising is used to get the word out, but marketing is the plan and structure of the campaign, as well as the selection of the media in which it will be run.How It’s Been DoneThere have been a whole lot of real estate brokers and agents doing the very same things for many years. And, most of them are still doing the very same things over and over again. Remember the definition of insanity: “doing the same thing over and over again and expecting different results.”
Put the property into the MLS (Multiple Listing Service).
Put some ads in the local newspaper real estate section, maybe some in color, others B&W. Almost all will have a single photo of the property.
Put an ad in the local “Homes” magazine; again with one photo, sometimes two or three if a larger ad is purchased.
In the last few years: put the property up on the broker’s website on a page titled “Our Listings” or “Featured Listings.”
Wait for the phone to ring.
Let’s talk about the print media advertising for a moment. While there’s still a place for print, especially for old style image advertising, the format can’t compete with the Web. Whether a daily or a weekly newspaper, the ads placed will achieve maximum exposure to the subscriber base of the paper only on the days it runs. If it’s a Saturday and Sunday placement, like many real estate ads, those two days garner the most eyeballs, but it’s over to a great extent when the next day’s paper comes out. Looking back to find a home in last weekend’s paper might involve getting it back from the bottom of the birdcage. Also, the only way a home buyer might see a home ad is to scan ALL of them. It’s not an efficient search process, and is more about convenience and having nothing else to do over morning coffee.Wait, aren’t those full color homes magazines a lot better? Well, they’re more colorful. But, they’re not any easier to search, as they are laid out by brokerage advertiser, not home characteristics, and rarely by location. My experience with placing ads in those magazines was a deadline for placement almost two months in advance of publication. No changes were allowed after that deadline. So, the material the target prospect sees there is a couple of months old before they ever come across it. And, they must go get that publication, as it’s rarely delivered to their home. Again, it’s more about something nice to read while they’re doing something else or waiting for the dentist. By way of contrast, the Internet home listing can be up and running in hours, and changes can be made at any time.What about the demographics for readers of newspapers? While they’ll happily tell you that they have maybe 178,000 subscribers, you really need to get the other characteristics of the readers. First, rule out any prospects too young to buy a home. Then, out come the ones with incomes below the necessary number to be able to afford the home you’re selling. Next go those who only read the “funnies” or the “sports” sections. Finally, throw out the majority of the remaining readers, as they’re not in the market for a home. That big number rapidly shrinks to a few thousand eyeballs, and that’s two-per-prospect.If you have a very old stack of newspapers, or some of those old homes magazines going back a few years, compare one of each from five years ago to issues running today. The new ones will be a lot thinner, with fewer ads and less color. Budgets are being cut by real estate companies, and print advertising is suffering. Why? Because it really doesn’t work as well as the Web, and costs much more. Too many brokers are afraid to tell their sellers the truth, so they keep running ads because that’s what their sellers think will sell their home. It’s not that it can’t work, but it’s far less efficient than the Internet, and far more people are using the Web for home shopping. The truly advanced real estate practitioner will put most or all of their listing and marketing efforts into Web placement, syndication, and innovative ways to present their listings via images and video.While many will tout their website and the nice rendition of their seller’s listings there, that’s pretty much all they’re doing. How many Web searchers actually find those listings on those local sites, and specifically the home that’s right for them? Not many. While it’s a fact that print is less effective than the Web in marketing a home now, there aren’t that many real estate brokerages that have managed a fully functional transition to the new real estate marketing world on the Web. They’ve cut their print budgets, but haven’t figured out how to do effective Web marketing of their sellers’ homes.The New World of Real Estate MarketingIt’s easy to say that print doesn’t work as well anymore, but the homeowner who wants their property to sell needs to understand what does work, and their Realtor needs to explain it to them. Let’s look at some statistics from the National Association of Realtors┬« (NAR), and their annual survey of home buyers and sellers. These statements are from actual buyers and sellers of homes in the survey period.
In 2008, 87% of all buyers used the Internet to search for homes, with 33% of all buyers saying it was their first step. Only 3% looked in their newspaper first, and less than half even looked there at all.
In 2009, the group using the Web increased to 90%. 36% made it their first step. Users of print media declined by another 7%.
In 2009, 77% of all home buyers found the Internet the most useful resource, second only to a real estate agent. Home books, magazines and newspapers were rated the bottom three resources important to them. This was below yard signs, open houses, television, and billboards.
These statistics leave no doubt about how home buyers are locating homes that meet their needs and desires. With the vast majority of buyers using the Web, it becomes a matter of developing a marketing strategy that uses the Internet effectively, and gets a home in front of as many prospects as possible. Some quick points illustrating the power of the Web for home sales include:
One resource states that more than 266 million people use the Internet in North America alone.
There are a number of large websites dedicated to real estate and home searches. Realtor.com alone accounts for between 6 and 8 million unique visitors every month.
Other sites, such as Zillow.com and Trulia.com are gaining ground on Realtor.com and have many millions of page views every day.
All of these sites bring targeted visitors. The site visitors are there because they have an immediate interest in buying or selling a home, mostly buying.
The biggest advantage: If your home fits the criteria of a buyer, they’ll find it easily using the searches at sites like these. Using keywords and search boxes for major features, getting to the homes that best meet their needs is fast and easy. You just can’t do that with print media, and they’ll drop that homes magazine when their turn comes up at the dentist.
I’ve worked in a consulting role with real estate professionals to help them to develop their Web presence and incorporate the established and developing best practices for marketing home listings in this dynamic medium.Advantages of Web Home MarketingWhile the numbers show clearly that people are using the Web to locate homes to buy, there are vast differences in the quality of the homes’ presentations:
Images are in full color, and can be thumbnail links to high resolution larger images to really present the property at its very best.
Text descriptions can be as long as necessary, not limited by budget or ad size as in print media. Along with images, a great marketing description can generate that email or phone call from the prospect.
Floor plans and land plats can be presented, a very rare thing indeed in print media.
Video is a tool that doesn’t even apply to print, but is very valuable in home marketing on the Web. While it doesn’t apply to every home, a video slide show or full motion video can get the attention of a buyer and result in a sale.
Syndication – This is a huge advantage to the home seller. Using a syndication tool and service, the real estate broker who is aggressively marketing their sellers’ homes will be able to have their home listed on dozens of the largest sites on the Web. And, it will happen in a few days, not weeks or months. And, unlike the paper at the bottom of the birdcage, the listings are available 24/7, 365 days of the year.
All a homeowner must do to fully realize the major advantages of the Web over traditional and old-fashioned marketing is to put themselves into the buyer’s shoes. If you were searching tomorrow for a home, perhaps a waterfront or view home in a high demand area, what would you like to see, and how would you like to find information?
Wouldn’t you want to quickly access home listings, but be able to “drill down” to those that meet your price range and criteria?
Would video or multiple full color and high resolution images be much more useful to you than a print ad with a single photo in newspaper print resolution?
Wouldn’t you rather find complete textual descriptive and property information instead of a few bullets and a “call us” number? This means all of the property details.
There’s simply no contest. The new world of real estate marketing is firmly entrenched on the Internet, and while print still has its place, it’s only in specific instances and limited applications.Work With A Broker Who Understands and Uses The WebWhen you sit down with a real estate professional to discuss listing your home, make sure that you’re not listening to the old “show and tell” with copies of newspaper ads and homes magazine pages in a scrapbook. What you want is a frank discussion of what works and how the full power of the Internet will be focused on marketing your home.It’s really quite simple in one respect. Print is ineffective, and the Web will sell your home. While the first half of that statement is true across the board, the second half is only true if you’re working with someone who understands Web marketing and listing syndication. The brokerage that shows you how your home will be richly presented online, with images, charts, drawings, documents and anything else that a buyer would want to see, is the brokerage you want to work with.