Rhode Island Real Estate

How does inflation impact real estate?

When it comes to making a real estate investment, it should come as no surprise that many people simply don't understand the fundamentals. Real estate news is full of stories about people in foreclosures, sub-prime loans and predatory lending practices that have left millions of buyers in financial straits.

A real estate investor should become familiar with at least the basics of economics and finance before making the decision to purchase a real estate investment. For example, economic trends are an important part of deciding when to buy, what to buy and how long to hold. Below are a few less-common numbers to know when tracking real estate trends for 2008 and beyond.

CPI or the Consumer Price Index. This is the average price of consumer goods and services purchased by households and also forms the basis for the official rate of inflation. The CPI excludes fuel, insurance, health care, tuition and other items so it is possible for individuals to have a different "personal" rate of inflation compared to the national average. The CPI for the summer of 2008 currently stands at 4.2 percent after several months of steady increase.

How to Use the CPI. Consumers tend to cut back and conserve spending as inflation increases. Since items cost more, many buyers delay moving or tend to purchase more conservative homes. Affordable homes in good repair, near public transportation and with low-cost utilities will fair better than others as a real estate investment.

PPI or Producer Price Index. The PPI is the cost of good for producers or manufacturers of products and services. Since increases tend to be passed along to buyers later, the PPI serves as a measure of future price increases or decreases. The PPI in the summer of 2008 currently stands at 7.2 percent for Finished Goods and 6.7 percent for Crude Goods.

How to Use the PPI. Keep an eye on the PPI to track the rate of inflation for finished goods and/or crude goods. Large increases often signify upcoming increase in the CPI which are likely to result in reduced spending among consumers.

How Inflation Impacts Real Estate. Inflationary pressures drive up prices for everything including real estate from raw materials and building supplies to the cost of labor and transportation. Although the impact isn't immediate, as the cost of building Rhode Island new homes increase, it puts upward pressure on pre-exiting homes as well. While it can be more difficult to sell during a downturn in the market, many experienced real estate investors will eventually benefit from the increased rate of inflation as property values rise.

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How can I buy income producing real estate?

With economists predicting $5-per-gallon gasoline, more consumers than ever are contemplating new ways to save money and create a sustainable lifestyle. One increasingly popular option is to combine home and business life into one quick commute by purchasing income-producing real estate.

A few generations ago it was common to encounter farmers or other small business owners who worked and lived on the same property; but as jobs moved away from the farms and into the manufacturing sector, greater numbers of people left the countryside in pursuit of jobs.

However, the advent of telecommunications has reversed that trend; it is now increasingly possible to own and operate a small business where you live. In fact, it might be possible to qualify for a Small Business Administration loan for the purchase of all or part of the Rhode Island real estate to expand or grow your small business. Here are a few quick tips to get you started:

• Check Zoning. Always verify that zoning allows the type of business use you have in mind for the property before purchasing. While a variance might be granted in some extenuating circumstances, it is better to err on the side of caution and assume the current zoning is the only one allowed.
• Financing Options. When it comes to purchasing the actual real estate, you might have several options available, including traditional residential mortgage loans or even SBA loans for small business owners.

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What are the bigest FSBO mistakes?

When it comes to selling Rhode Island real estate, many home owners are tempted to try the FSBO route before listing their property with an agent. Learn the biggest for-sale-by-owner mistakes made by most home owners with this quick checklist.

1. Pricing. Learning how to price a house right is more of an art form than a science. Most home owners price homes one of two ways: searching for other Rhode Island homes for sale nearby and seeing what neighbors are asking or simply setting a price they "wish" someone would take them up on. Remember, "asking" isn't "getting," so if you are serious about selling, take time to price right.

2. Underestimating Time. Showing a home takes time. Unless you happen to be retired with nothing better to do than show your home to strangers, be prepared to spend more time than expected. Calculate the time missed from work and other contingencies or risk missing a sales opportunity.

3. Lack of Marketing. Over 80 percent of home buyers begin their search by browsing online listings like those at Homes and Land; be sure your home reaches the most potential buyers by marketing your home online, in classified ads, home signs and other venues.

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Are you a real estate investor?

You might be a real estate investor if...

• You spend every weekend at a hardware store.
• You spend more on tools than you do computers, electronics and entertainment combined.
• You pick out transportation based upon how many tools it can carry and how well it travels over raw land.
• Your idea of fun is hanging out at real estate auctions and foreclosure sales.
• You know the daily interest rate and have an automatic alert set to notify you whenever it drops.
• You drive a ten-year-old truck (depreciating asset) but could pay cash for ten new trucks if you were willing to draw down some equity.
• You never finance depreciating assets.
• You look like a pauper but have an income for life.
• Your family and friends all laugh at your lifestyle until you retire young.
• You deliberately don't brag about your net worth for fear of being sued.
• You know how to use a "snake" but pay someone else to do it anyway.
• You think a home improvement project is spending quality time together.

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Where can I find Rhode Island Real Estate Resources?

If you are considering buying Rhode Island real estate, visit these helpful resources. From down payment assistance to weatherization program and more, there is something for everyone.

• Rhode Island Housing provides special financing opportunities, information and real estate news for the Rhode Island market. Visit http://www.rhodeislandhousing.org/ for more information.
• Don't Borrow Trouble is Rhode Island's financial counseling hotline. Call 800-436-3180 for free advice.
• Habitat For Humanity provides assistance for low-income families interested in volunteering to offset the cost of building a new home. To find the office nearest you visit http://www.habitat.org/cd/local/affiliate.aspx?place=62.
• The Rhode Island Weatherization Assistance Program helps renovate or improve homes to reduce utility bills or increase energy efficiency. Find out more by visiting http://www.eere.energy.gov/weatherization/cfm/index.cfm/state_abbr=ri.

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What are the Best Real Estate News Sources?

One of the key concerns for real estate investors and buyers is to understand the market and the primary source of up-to-date information is real estate news. Since all real estate is local, the best real estate news sources also tend to be local. To gain a better understanding of trends, growth patterns and other factors that will impact your investment turn to these real estate news sources.

Legal Notices: Every local newspaper in the nation has a legal section consisting of fine print and seemingly dull information. But once you understand what to look for, they actually offer valuable insight into what is coming down the pipeline in the community.

County Commissioners: Many areas provide transcripts or summaries of the meetings. Make it a point to stay up-to-date on activities taking place in your county.

Local Government: If you are not in the habit of reading about zoning permits, road construction projects, school bids or other routine local government issues, then make it a point to begin today. Every serious real estate investor must learn to recognize growth patterns well in advance.

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What are the Biggest Real Estate Investment Mistakes?

Sometimes it seems like everyone is a real estate investor, but during tough times it is easy to sort out the investors from the speculators. Find out the biggest real estate investing mistakes so you can avoid the pain of speculation and join the ranks of true real estate investors instead.

1. Buying Hype. Housing is a fundamental need that can also double as luxury or entertainment -- but only if people have additional purchasing power. During the height of the real estate bubble, housing prices outpaced the ability of most buyers to make minimum monthly payments. Counting on rising appreciation before you are able to sell is like playing a game of musical chairs ... Someone is left out when the music stops. Speculators play the "odds" while investors make decisions based upon facts.

2. False Hope. Irrational financial calculations based upon ever-rising appreciation, low vacancy rates and minimal repairs simply don't reflect reality. Real estate investing is hard work despite what the late-night gurus might say; if you don't think so then ask yourself why they are hawking books rather than buying more real estate. Speculators let the excitement get in the way of reason while investors face the cold hard facts by running the numbers.

3. OPM or Other People's Money. Borrowing money from family, friends, the kids college fun or your retirement is a sure-fire way to hurt everyone for years to come. Speculators play a game of all or nothing searching for a fast buck while investors take their time and grow a solid foundation for future success.

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