Investors rely on number crunching - experts say mind your cash-flow fundamentals

 

Part 1 o2 series

 

HONOLULU ADVERTISER , December 11, 2005

BY LISA SCONTRAS

Custom Publishing Group

 

Whether 2006 real estate prices continue to rise or level off, savvy investors are using proven fundamental strategies to build wealth in the coming year.

 

Record median prices in   November have extended the success of traditional buy-low-sell-high tactics despite recent predictions of a more subdued pace. Yet long-term investors are applying more stringent criteria to investment purchases these days that even Donald Trump would likely endorse.

 

According to Prudential     Locations partner and broker Karen Robertshaw, investors are closely examining the potential cash flow of each investment property.

 

“Is the probable rental income enough to pay for all the expenses — mortgage payment, real property taxes, maintenance fees, property management fees, gross excise tax — and if not, what is the negative likely to be and is that affordable?” says Robertshaw, emphasizing the importance of crunching all the numbers. “Is the property in good condition? And if it’s not, can the estimated fix-up costs be recaptured?”

 

But aside from the typical investor’s mindset to proceed with cautious optimism, Robertshaw contends that her clients are still upgrading their investment properties, selling one property to buy two, and buying and holding. And while some speculators are even still buying with the intent of flipping it quickly, more are in it for the long haul.

 

“If you can afford it, owning real estate is a good long-term wealth-building strategy,” she says. “Don’t have unrealistic expectations or expect to make a killing in a year. Think of owning real estate as a long-term investment.”

 

Robertshaw recommends first-time investors start with what they can afford.

 

“Consider a studio or a walk up,” she advises. “Remember, you are not going to live there, so the criteria can be more flexible.”

 

Broken down by neighborhoods, here is a list of the average 1-bedroom condominium homeowners association maintenance fees. Four-bedroom units can be nearly double

 

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