Nowadays, economic predictions in any sector of the economy are difficult to make under conditions of the globalized economy when a political conflict or environmental disaster may trigger new waves of economic crises and slow down the general development of a country. While some sectors of the economy might be less influenced by crises or are easier to be revitalized, the real estate sector is the one that needs long-term stability and clear predictability in the field. Although the current recession is not a one-day issue, the real estate sector has benefits for investing in both short- and long-term perspectives. The top efficiency of the distressed real estate purchase is described by the assigned scenario of $150.000 acquisition and detailed strategy of maximum investment return. First of all, let us be rational and consistent. It is the most unlikely that the amount devoted to a one-time purchase of distressed real estate aiming to earn profit is a unique activity outside a more grandiose investment strategy. In the case of this scenario, the suggested purchase is a part of a wider investment strategy or multi-investment plan, which is based on the diversification concept. In other words, the main aim of the scheme is to invest in various, diverse real estate on the basis of double diversification. In this context, geographical and temporal terms are used. Subsequently, from a geographical perspective, it would be advisable to invest in projects located in different states, since the situation in the real estate market varies from state to state. Thus, possible risks would be distributed between projects and the entire investment default would be avoided (Cornell, Longstaff., & Schwartz, 1996). In order to increase the ef... ... middle of paper ... ...orks Cited Cornell, B., Longstaff, F.A., & Schwartz, E.S. (1996). Throwing Good Money after Bad? Cash Infusions and Distressed Real Estate. Real Estate Economics, vol. 24, iss. 1. 23-36. Kaiser, R.W. (2005). Investment Styles and Style Boxes in Equity Real Estate: Can the Emerging Model Succeed in Classifying Real Estate Alternatives? Journal of Real Estate Portfolio Management, vol. 11, iss. 1., 5-21. Lerner, M. (2010, October 1). Cost-Saving Found in More Than Sale Price. The Washington Times, pp. C01. Reed, J.T. (2009). Distressed Real Estate Times. Third Edition. New York, NY: John T. Reed Publishing. Valley, M. (2011, July 12). Bank Failures Will Likely Pile Up in Southeast U.S. for Months to Come, Trepp Warns. National Real Estate Investor. Retrieved from http://nreionline.com/distressedinventory/bank_failures_pile_southeast_trepp_0712/
The Savings and Loans Crisis of the 1980’s and early 90’s created the greatest banking collapse since the Great Depression in 1929. Over half the S & L’s failed, along with the FSLIC fund that was created to insure their deposits.
Leonard, T., & Murdoch, J. C. (2009). The neighborhood effects of foreclosure. Journal of Geographical Systems, 11(4), 317-332. doi:10.1007/s10109-009-0088-6
The joint financial failures of the companies sparked a crash in the stock market. This served as a catalyst for a surge of bank failures because many New York banks were big investors in the Stock Market. The financial disaster began in New York and soon permeated its way throughout the country. Over a six-month period, over 8,000 businesses, 156 railroads, 400 banks failed, and 20% of Americans were unemployed By July of 1893, there was massive unemployment in factories and extensive wage cuts.... ... middle of paper ... ...currency.
United States. Federal Reserve Bank of New York. Quarterly Report on Household Debt and Credit. 2013. Web.
America is the land of opportunity and vast wealth, but what happens when a recession falls upon the country? Will the people of America survive? In Richard Florida’s article “How the Crash Will Reshape America”, he explains the different approaches America can be transformed to help them out of the economic crisis. Although Florida presented different solutions to help get through the times of the recession, the housing market whether we are considering new construction or renovations on existing homes, will lead a path to aid us in lifting the release of the perils of a recession.
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37, 103-117
The victims in the United States were: the largest commercial banks, the whole investment banking industry, the major savings and loans, the largest insurance company, and the two enterprises licensed by the government to smoothen the progress of mortgage lending.
When working within the realm of real estate, flipping houses is one of the most lucrative projects one can undertake. The premise of this idea is buying a home in need of repair, renovating it, and selling it at its newly appraised value. In high school, I worked alongside my mother to renovate a home in our small town of Trinidad, Colorado. The invaluable lessons I learned throughout this business venture gave me insights into the inner workings of house flipping. What I gained from this experience will lead to better decision making if I choose to take on another project. With a $150,000 budget, the most important aspects to focus on in a renovation would include updating appliances, applying fresh paint, installing proper flooring, and revamping the exterior. Assuming that the home being foreclosed on costs $110,000, I would allocate $20,000 of my budget for renovation expenses. This leaves a $20,000 buffer to be used as an emergency fund.
This paper is written to provide a reasonably comprehensive overview of Section 1031 of the IRC as it pertains to real estate transactions, and to offer some thoughts on the wealth-creation advantages that 1031 Exchanges offer.
Banks failed due to unpaid loans and bank runs. Just a few years after the crash, more than 5,000 banks closed.... ... middle of paper ... ... Print.
The essay, “How a Financial Pro Lost His Finances,” was published by Carl Richards in 2011. It discussed the situation of the financial crisis in 2008 when the value of homes and mortgages dropped and how people lost their cash. The purpose of the article is to explain how people lost their fortunes during the financial crisis and the housing boom, some of whom were financial experts. The boom came unexpected and did not spare the investors in the real estate industry. The author highlights different cases of investors who lost their fortunes in the aftermath of the housing boom. Although the author is a financial expert, he also lost his resources like other investors who did not have financial and economic knowledge. The author is among those who lost their homes. He explains the mistakes that he learned from the loss and made him better in understanding the economic trends.
With the emergence of the subprime meltdown, the United States economy was beginning to spiral into a recession in 2007. A downturn in the U.S. housing market turned into a global financial crisis. The downturn appeared in the middle of 2007 and the effects were felt in September of 2008. As indicated by Sharma (2009), “the months of August and September 2008 will be long remembered as the economic tsunami on Wall Street” (p.171). The mortgage finance industry collapsed and several government backed enterprises were in over their heads with massive amounts of defaulted loans. The subprime mortgage issue turned into an economic nightmare for the entire globe. Many backed mortgages were with overseas investor hoping to capitalize on the fast growing mortgage indu...
The Journal of Property Management (1998) reports that real estate has been freed up by certain laws in the 1990s, most importantly, the relaxation of the Glass-Steagall Act of 1933, allowing market access to real estate by banking institutions; the Taxpayer Relief Act of 1997, allowing property owners indefinite tax deferral on the sale of property (an estimated $91 billion to reinvest in real estate); and the 1998 appropriations bill which cuts housing costs by introducing "mark-to-market" rents (Anonymous, 1998, p. P6S). All of these translate into financial advantages for real estate companies. Interestingly, the 1990s have already seen changes that complement these changes. Most real estate companies have become management companies. Much like an investment portfolio, they not only list and sell property, but also manage and invest in a number of properties. In addition, they are taking advantage of mergers and agreements.
Real estate - owning it is the American Dream. It is a symbol of wealth and status. It has been so for generations and it will be so as long as there is an open market and land to sell.
When prices increase, the quantity decrease (Graph 1) and new firms enter the market in order to make economic profits. However this does not mean the real estate agents or brokers earn more money. On the contrary, the prices they charge may increase, but the number of houses each sell do not change (Goolsbee, 2005, Online). From this it is evident that the price of products in the real estate market is not affected by the entry of new firms.