34: In this series and recent blog posts, we've explored baby boomers and millennials who are driving the greater Fort Lauderdale real estate economy. We've discussed regional factors affecting the listing, selling, and buying of homes across the market. We’ve also explored how for many buyers investment and real estate are intertwined for retirement planning.
We've also discussed substitution, or how buyers will "substitute" one home for another. Buyers looking for the right house ask themselves where is the right home for me, where is the right neighborhood for me, how do I find the right home or choose the right neighborhood?
The simple answer to all these is that to find the right house, neighborhood or investment opportunity, you should first find the right home realtor.
As we close out this video series, let’s return to the basics. Once you’re ready to buy a house, a duplex, or a triplex, whether with cash or finance, ask yourself, How do I start?
Whether a millennial first-time home buyer or even a baby boomer who’s looking to elevate their home experience, we have a saying in real estate. “Stretch yourself into the nicest neighborhood you can possibly afford.”
Fort Lauderdale has a host of “stretch” homes in beautiful, desirable neighborhoods. Consider Wilton Manors, Lake Ridge, Coral Ridge, Imperial Point, Oakland Park, or Pompano Beach. These are among a number of different communities that reflect different lifestyle choices or the style of living you desire.
If one of these neighborhoods is desirable to you, the goal should be to look at the least expensive house, duplex or triplex in the area and target it for purchase.
Sweat Equity in the Right House
How do you make a stretch home the right home for you? It’s called “sweat equity.” Buy a home in need of renovations, invest the time and money, and turn it into a neighborhood gem. It’s not necessarily having the most valuable home in the neighborhood or community.
It’s about finding the right house in the right neighborhood and possessing a willingness to make the necessary investment and retirement planning to make the home shine.
This investment - this sweat equity - can take a home beyond being the least valuable home in the market. To be sure, you’re also not looking to create the most valuable or expensive, either. That said, depending on the market or neighborhood, one can buy the cheapest house on the block and made it the nice house on the block.
In the end, this choice and “investment” delivers the buyer a nice house with all the benefits of ownership. These include the pride of being a homeowner, and the value appreciation in a market on the rise. In time, this asset can be part of a centerpiece of growing portfolio fund a future retirement.
Moreover, today, every month you’re not renting, you’re not spending $2000, $3000, or more each month on rent.
How Real Estate ‘Sweat Equity’ Works
Want an example of how practice of sweat equity can become an incredible investment tool? The videographer Gary Lanham Group entrusts with our production came to us looking for the right house several years ago. She bought a house in a highly sought-after neighborhood of Poinsettia Heights about nine years ago during the height of the Great Recession. Her investment: about $170,000.
Today, nothing there sells for less than $400,000.
Do the math: A $230,000 net equity gain in nine years is nothing to shake your head about. That's an important asset that can be taken into your retirement years and carried over into other investments.
How did she know a home in Poinsettia Heights would one day become the centerpiece of her investment portfolio? How did she know the value of homes in Poinsettia Heights, or any given area?
We’ve discussed using MLS data. MLS Data, short for Multiple Listing Service, gives you valuable insights. In concert with other resources, county real estate records and tax roll data, as well as listings, pending contracts, and sales reviewed by an experienced Realtor.
As we’ve said before, we work with clients to turn such data and statistics into knowledge to ascertain the current state of the market of area real estate. This knowledge allowed our client to target one of, if not the, cheapest house in a given neighborhood.
The Lanham Group finds the right house in the best neighborhoods.
This is not about exploring solely elite, exclusive, or expensive neighborhoods. But if one of those neighborhoods proves to have the right home you seek and which serves your investment requirements, it may be a wise move. Additionally, such a neighborhood may serve sentimental value. You may have been raised there, you may have family and friends there. You may want to be part of that community that neighborhood. For some homeowners, there is no greater joy than living in a place you’ve long called home.
What Home is the Right Home?
We then start looking at the houses, we seek those that have been on the market the longest. In Realtor speak, that's called “days on market.” As the phrase suggests, we look at how many days has a house been on the market with no contract activity. As we emerge from a seller’s market, it’s a changing paradigm. Sellers were used to getting top dollar because buyers didn't have many choices. Now there's more inventory. Buyers have more choices.
Additionally, the financial markets are facilitating this change. Interest rates have been stable for some time now. But moves by politicians in Washington to interfere with the Federal Reserve’s actions and artificially keep rates low when they are poised for an increase could scare markets.
Any rise could affect mortgage rates and the greater housing market. With every quarter point rise, there's less house they can buy. So for those sellers in the right niche, it’s critical to create a desirable home.
What they’ve discovered is that competition and interest rates combine to become a dose of reality based on what the market will bear. That's what the free-market economy is all about.
So we wondered how buyers will "substitute" one home for another. They will ask themselves where is the right home for me, where is the right neighborhood for me, how do I find the right home or choose the right neighborhood?
The question becomes, what can they afford? With more inventory, and appraisals coming into play, competition will drive buying decisions of a growing pool of available properties.
Another question is how can the right Realtor help the buyer, or seller, get the most out of a purchase or sale? We help both by looking at that data for a given neighborhood. We look at average days on market for single family, duplex or triplex properties. For those sellers who don't understand or don’t know how to read the numbers, we educate them. We present mathematical data.
The cold, hard facts reveal that new listings have 2.5 weeks to land that contract. After four weeks on the market, your listing might well be forgotten in the market or sold as someone’s stretch property.
For any millennial or baby boomer home buyer, they presents the opportunity to, “Stretch yourself into the nicest neighborhood you can possibly afford.”
The Gary Lanham Group can help guide you through the process. We can guide you through the ups and downs of listing and selling - or buying - your home. We’ll be at your side as you discover the pure pleasure and joy of being a first-time homeowner, or that buyer who sees the value and appreciation of establishing financial stability found by creating or adding to your investment portfolio.
To our team, you're the best kind of client to have - someone who enjoys this process. We want to be the Realtor to you, your family, and those whom you trust - and who trust your advice.
Gary Lanham Group at Coldwell Banker Fort Lauderdale Beach Office is a boutique real estate organization offering sales, leasing, and brokerage services to the Greater Fort Lauderdale area. A listings agent matches home sellers with buyers and tenants with landlords. While Broward County is our universe, we focus on real estate in Fort Lauderdale, Coral Ridge, Imperial Point, Coral Ridge Isles, Oakland Park, and Pompano Beach. Call us today at (954) 695-6518 or visit www.GaryLanhamGroup.com.