Real Estate: Opportunities in the US real estate market

Prices are falling dramatically and in some places namely in Florida and Las Vegas prices for residential real estate have fallen by more than 50%.

By JOHN BENZAQUEN
real estate 88 (photo credit: )
real estate 88
(photo credit: )
There has been much talk about the effect of the subprime mortgage crisis in the US on its real estate market. The collapse or near collapse of many financial institutions which dealt in subprime mortgages, as well as, the vast amount of fore closures have all affected the real estate market. As a result, mortgage banks are now much more selective and much more cautious and the large numbers of foreclosures have created a glut in the market which force prices down. Prices are falling dramatically and in some places namely in Florida and Las Vegas prices for residential real estate have fallen by more than 50 percent while on a national average prices have fallen by over 30%. And the crisis is not yet over. Each foreclosure brings further falls in prices, and each time a financial institution announces losses it means that there is less money available fort mortgages. This is bad news for those US residents who want to buy a dwelling and need finance and it is also bad news for those who for diverse reasons need to re-finance their mortgages. But a falling market also presents many opportunities for investors especially those with ready cash. "The current real estate downturn in the US has created many investment opportunities. This holds true for US investors with ready cash but it is even more true for overseas investors," said Ami Segal, President of Forum Ltd. in an interview with The Jerusalem Post . "The dollar has weakened in the money markets of the world which means that the buying power of the pound sterling the euro the yen and yes the shekel has increased substantially and real estate in the US are considered very good bargains". Segal should know. Forum Ltd. operates a series of investment funds which among other things invest in real estate. They company recently launched a new fund called "US Special Opportunities", with a growth target of $100 million in assets under management. "Money for this fund was raised mainly from investors in Israel in addition to investors from the US. This fund specializes in the investment of rentable commercial and office real estate mainly on the east coast. The fund does not invest in residential real estate," said Segal. Segal explains that although prices of commercial real estate has fallen less than residential real estate there are still very good investment opportunities to be had. "Before the crisis yields on commercial property were around 6% to 7% a year. Now they are more in the region of 10% plus. With regard to real estate investments in the US we operate to gether with Benerofe one of the largest estate agents on the east coast who have been in business for over fifty years. Benerofe has the knowhow and the connections and we are better able to locate good potential investments for the benefit of our investors," said Segal. The fall in real estate prices in the US coupled with a weak US currency may tempt overseas investors to buy property in the US on the cheap. But this is easier said than done. For those who live in the US investing in property in America is a relatively simple matter especially if the property is near ones place of residence. Not so for those living abroad. It is one thing for a large overseas corporation to make big investments in property - residential or otherwise. They have the resources to assess the potential profitability of the property, they have resources to collect rent and to undertake maintenance work and last but not least they know how to deal with the authorities. When a private person buys a property in the US they usually buy an apartment or a house which is then rented out. To make sure that the rent is paid and that the bills are paid it is necessary to acquire the services of an estate agent or a lawyer. This does not mean that it is not possible for a private person to acquire property in the US but what it means is that costs may be high and in some cases it makes the investment unprofitable. Furthermore most overseas investors usually take out a mortgage and that way they can leverage their financial resources. However, as mentioned before, US mortgage banks have become much more cautious than before and therefore it is doubtful if they will be willing to extend credits to overseas buyers of a single house or apartment for investment purposes. In consequence those still who want to take advantage of the many opportunities in the US real estate market could do so through the medium of investment funds who specialize in such investments or by buying shares of real estate companies involved in real estate projects in the US. Going it alone is risky.