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Are you a real estate investor looking for a good return? Consider investing in the sunny beach town of Sarasota, Florida. Prices have been slashed in half in many areas, interest rates are near all time lows, cost of owning is decreasing and you have plenty of great properties to choose from.

Sarasota FL real estate prices have dropped so much that it is now possible to buy a property and achieve a break even or positive cash flows. Sarasota has not seen that in many years. In some sections of town prices are back to 2000 levels. It won’t stay like that forever.

Many people use cash flow as a basis for determining value on commercial real estate. If an office building produces a $100,000 net operating income and you can buy the building for $1,000,000 then the capitalization rate (cap rate) is 10%. Investors use this approach to analyze properties. Some will require a higher cap while others are fine with a lower one.

If you were to analyze Sarasota residential real estate over the years you would notice a dramatic improvement in the rate of return on a single family home. Take a $300,000 home in 2005 that produced a net income of $10,000 a year. That comes to a cap rate of 3.6%. That same house may now be worth $150,000 and still produce a $10,000 net income. The cap rate is now 6.6%.

Where else can you achieve a 7.2% rate of return on your money? The stock market may produce it, it may not. Bank certificates of deposit won’t come close and government debt is no where near 7.2%. This increased rate of return has brought many investors back to the real estate market. This increased demand will create the bottom of the market.

Some real estate investors figure that the floor in home prices will come when a person can buy a home, get a mortgage and produce a break even cash flow. In the lower end of the Sarasota real estate market this is achievable. As prices continue to fall the rate of return improves. These returns will attract more investors who will eat up the excess inventory of homes for sale. This will ultimately create a balance between supply and demand and kick start appreciation again.

Will you accurately predict the bottom of the Sarasota real estate market?

Most likely you won’t. If you do it will be luck. Some will buy before the bottom, at the bottom and after the bottom. If you are within 5% of it then you are probably doing pretty well. If your time frame for owning real estate is many years then it is not as important to pinpoint the bottom.

The real estate boom years of 2003 to 2005 gave people the need for instant gratification. 10 years ago most people who purchased a home had the mindset that it was going to take awhile before they could rich off of real estate. They were in it for the long haul and had a time horizon of many years. That all changed during the real estate boom when people expected to make huge returns every month on their home. We have gone back to how real estate used to be. Rome was not built in a day.

View all Sarasota FL Real Estate for sale.

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