It’s that time of year for reflection and to count our blessings. Best of all, it’s the perfect time to look forward with optimism to 2016, a year promising all of the normal entertainment associated with a presidential campaign year.
Our year in real estate is over, culminating in one of the best Decembers for closings on record; over $15,000,000 in property value closings for the month. Our year end closing of 28 units included too many leases, but still ended up as our second best year in GCI since joining Coldwell Banker in 2003. The property mix supports my projections several years ago in this blog; a higher percentage of our sales were in income-producing properties than ever before, pointing towards the trend away from the greed of Wall Street and instead investing in the wealth of real estate.
There’s a very small window remaining open for low interest rates. The real “buy” is not stealing the income property right now, which is impossible in the better areas. Instead, it’s making an educated purchase of an income property at a fair price, but locking down the interest rate for as long a term as possible. Several lenders are offering straight 30-year loans with a fixed interest rate, and I am telling everyone reading this right now; in the not too distant future we will all rue the day we did not lock down these rates on mortgages on more investment properties. Future inflationary trends will spike to rates between 8% and 12%, and 4% money will be the basis of a very profitable investment decision.
Even if you feel you are unable to generate the 25% down payment by yourself, call me. I have a lot of parties looking for “partners” to invest with, and even a lesser percentage of a good property today is better than 100% of nothing tomorrow. I personally am attracted to the 4 unit apartment buildings we see near the Grove and Palms and Mar Vista, where rents have skyrocketed in the past two years. Even with L.A. City Rent Control, the transient nature of most tenants allows the landlord to reset the rents back up to fair market value fairly often. Plus, the infusion of enough capital for a 40% down payment will almost guarantee a neutral cash flow from the beginning. It’s a long-haul play, so if you get skittish for an early return, stick with stocks and the gyrations of Wall Street. I personally prefer the steady crawl of annual rent escalations, generating increased cash flow that in turn accelerates the pay-down on principle. But this means no greed; take the money out later when you and the loan are retired rather than now when you are in the peak of your earning years.
What to look for in 2016? Well, we will certainly see incremental increases in the Federal Reserve’s short term rates, working their way down to long term mortgages. We’ll also see a further polarization in our country between the “haves” and the “have nots”, and the zealots from the right and left wings. The net worth gap between the top 5% and the rest of us will continue. Most importantly, watch for my Facebook announcement in the first quarter of my first book, “23 Hours”.
Happy Holidays from our family to yours. Be safe with your travels and be smart with your investments. It’s never too late to start.