We read with some skepticism the reports in the local press regarding the numerous new large scale projects that have been announced by several developers and others. There seems to be some sort of a competition as to who will announce the larger and tallest buildings to be developed and almost every week we read the various announcements in the press. The ordinary height of a building and as a maximum, was up to now 8 floors. Suddenly we read reports about 30 floors and most recently another one of 40 floors height buildings. Various publications refer to a mixed development which includes shopping centers, offices, hotels and apartments, whereas others refer to the provision of hundreds nos of public parking, in addition to the needs of the project itself.Our skepticism emanates from the fact that are all these projects viable? If they are, do the developers have the funds to carry out these projects, which are in excess of what we have been used to so far and if yes, have they secured financing from banks who now look at development projects with a worrying eye? And if at the end all is well, who will buy all these New York style (admittedly from the artist impressions very attractive) projects.If we are to assume that the market will pick up in 2 years time, it will never be the same as at the golden years of 2006-2008 and in any case foreign demand is not particularly interested for city style developments, other than, to a small extent, in Limassol, which appears to attract the main percentage of Russian demand and others of the high end demand.Once and if all are positive these developments once they are completed and the projects are up and running, who will face the common expenses and running of the project problem? Very few projects are well managed not so much out of the indifference of the administrator, but as a result of the attitude of the occupiers. We seem to have an attitude problem, with the occupiers suspecting that the management is thieving them and the administrator cutting down on the quality of service in order to match income and expenses. For this size of projects, having numerous lifts, common parking, gardens, pools etc, one should expect an annual common expenses bill for a 2 bedroom apartment, which could reach around 300 p.m., whereas some services provided, such as health centers, which do not pay and thus they will need to be subsidized by the common expenses will shoot up the monthly bill (otherwise they will need to be open to the public and as such if this happens, it will not be private). We are all for these new ideas on paper, projects which will upgrade the development of the island and provide a number of landmarks, but the distance between the conceptual design and the execution/ smooth running of such projects/sales etc is very large, since such projects are untested and could be even dangerous for the developers during this difficult time of the global/local economy.At the end does one consider the traffic problems that these projects will create in particular the accessibility of these projects and especially during the rush hours? Do we have adequate infrastructure (in terms of access roads etc) to take these?We wish those daring developers all the best but just to be on the safe side, we suggest that they “light a candle” at their favorite saint, since they might find that his help will be needed!!
In this report I use figures from my area of the world … I know they don’t apply all over the world, but they should encourage you to get the figures for yourself.After all no report is going to make your money grow … it’s the knowledge you gain and “Your Application Of The Knowledge” that makes your financial wealth Grow.In another report I gave you a concept I borrowed from Phil Ruthven, a truly wonderful speaker on economics, on how he looks at Home Ownership.Now I want to look at the Tools we have available to help us Grow!real estate wealth,So folks, if you want Real Estate Development, you must use all the tools available to you to get some. Of all the tools you have, the single most important one is TIME.real estate wealth,1. Time is your greatest friend. Time to buy good investment property and let it double in value every 8 to 10 years or better.real estate wealth,2. Federal Government Real Estate Investment Tax Deductions are another tool the Government uses to tell you in Words, Dollars and Cents that they want you to get wealthy so you can look after yourself to your final days. real estate wealth,3. Correct Financial tools are also vital to your wealth development. See my report of Finance. I will go into some further detail in this section on the use of Evergreen Lines of Credit and how they work.4. Good Real Estate Management is the next tool. Well-managed and well-maintained real estate investments, that houses good quality tenants is also essential. Trying to do this work yourself, is a mistake. See my report on Property Management. real estate wealth,In Australia, it has been instilled in our consciousness, that we must all own our own home. And there is nothing wrong with the concept. It’s just that we should have been told to rent it out; Don’t live in it.By buying a house TO LIVE IN, while we are young, we are wasting the wealth creating tools of Time, Double Income, (if married) Property Income and Tax Deductions. No wonder so many people have to play catch up later in life. real estate wealth,So the first clue to Real Estate Wealth Development is don’t buy a residential property for you and you partner to live in. You buy a house as an investment and you rent elsewhere.Growth Tool No. 1 – TimeTime is your greatest friend. Real Estate is a long-term investment and by being loyal to it, the real estate will reward you handsomely all through your life. real estate wealth,You can prove this to yourself, as I did, by getting the figures of average house sale prices, from the Australian Bureau of Statistics for Brisbane, the largest City in Australia.To save you the trouble I got the figures and I painstakingly went through them in order to validate the old wives tale that, ” real estate doubles every seven years.”Well, it does better than that, you’ll be pleased to know.I was able to get the figures from 1973/74 to 1994/95. I think I started there because that was when I arrived in Brisbane on transfer from Melbourne. real estate wealth,That is a twenty-two years period, during which we had several credit squeezes, a few recessions and a few good times as well.In 1973/74 an average house price for the whole of Brisbane was $23,234.00. That average includes the best and worst house and suburb.Seven years later, in 1980/81, it was $43,470.00 an increase of 87%.However by the next year, the eight-year, it had risen to $56,757.00 giving an increase of 144% from 1973/74. So you see that it more than doubles by the eight year. real estate wealth,Going on a further seven years from 80/81 to 87/88, the $43,470.00 went up to $83,679.00; a further 92%.Interestingly, going on one more year to the eight year, it had again increased to $113,917.00 giving an increase of 162% from 1980/81.A further seven years from 87/88 to 94/95, the price of the average house in Brisbane went up to $163,325.00; a further 95% increase.
real estate wealth,Unfortunately the Bureau amalgamated the Shires of Logan and Caboolture into this statistical base and I could not extract the figure for the eight year.However on the evidence of the previous 22 years I believe it is safe to assume
the increase would be at least 5% making it an increase of 100%. real estate wealth,So these figures prove that over a period of 22 years the asset has increased by seven times its original value and all you would have to do is buy it at the beginning.I hope this gives you some idea of why TIME is so important to growth. And remember that I am talking about average prices, I am not talking about hot inner suburbs that will obviously do much better.If you REALLY understand these figures; you should ask yourself why you are willing to miss out on buying good real estate by stopping negotiating for the sake a few hundred or a few thousand dollars. I’ve seen this done many times because of stubborn-ness. Crazy! real estate wealth,For goodness sake it’s the Real Estate Asset that is in short supply; not money. If you have found real estate that fits your criteria; BUY IT!The Real Estate Development CoachCopyright Colm Dillon, October 2003All Rights Reserved.