Most of us are more comfortable investing in real estate in the market that we are most familiar with, the local market where we live and many of us grew up. We know this market so well because we live in it. We know the good and bad sides of town and we know the trends and the values. This is a comfortable place to put our money. It is more predictable because of our knowledge.
The problem is that many of our local markets are not doing so well right now due to either the market cycle or the real estate and economic downturn. In many markets it is a perfect storm as downturn and down market come together. That is where we find markets like Las Vegas, Detroit and some in Florida. Then there are some special cases that have unique challenges such as New York State where property taxes are as much as three to four times those is in emerging markets in the south.
I can testify that there are few deals that can survive the property tax whammy that our local and state governments have saddled us with. New York is not the only state but it is the best example of how far wrong the taxation issue can go and how stifling it is to real estate investment. In order to make the cash flow in such deals work, one must put much more cash into the deal. This in turn reduces one?s return on investment. What we see is investors sitting on there properties because that is really all they can do. Selling under these conditions only works with inflated unrealistic prices or taking significant losses.
Local brokers tell me that real estate investors are disappearing from the market place as they fail to find promising deals and financing. This is a mixed blessing as with fewer competitors, those of us who have learned to deal in this environment have a clearer field but we also have a larger challenge making deals work.
What can we do to continue to build our portfolio and wealth? There is an answer to this.
