Picking Your Time To Sell
If you, like most people, consider that
your real estate asset must ultimately pay off, then selling
is the most important point in the life of your investment.
The two main areas of recovery on real
estate investment revolve around two revenue streams: rental
income and speculative profit upon sale. Accordingly, it
stands to reason that an investment strategy can be developed
that takes advantage of either stream, or a mix of both.
Regardless of the strategy you choose,
real estate is still an investment, and with investing always
comes risk. in this article, we will briefly explore the
two types of strategies that lead to the position you will
be in when you sell, and we give you methods to manage risks
within each.
The first step in planning for your eventual
sale, as well as serving the call for effective risk management,
is to chose which recovery you are most comfortable with.
If you are looking at earning through rentals,
several rental strategies are available to the real estate
investor in the Bahamas. With any of them, you must chose
your property with desirability and market access in mind.
There is not much wisdom in owning a property that only you
like, or one that just does not have a ready market for acquiring
tenants.
Vacation Rental
Property: This is a burgeoning industry in the Bahamas,
with a thriving international market of people seeking
out the island experience for time periods of a few days
to a month or so at a time. The common trait in this market
is that they wish to have an adventure with a tropical
flavour, but still have the comforts of home at their disposal.
Long-term Residential
Rental: This market is centered in the urban areas
of the Bahamas - Nassau and Freeport- and is comprised
of white-collar, tourism-oriented and temporarily posted
foreign management personnel.
Commercial Rental: Again,
this is best cultivated in an urban market where the tenancies
will be shops and retail-oriented, with some need for light
industrial.
If you are more interested in purchasing
property with a speculative upside, it will pay to study
the market with your broker to determine just where it will
be smart to locate. There are many areas with opportunity
for near, medium and long-term return, and a thorough investigation
will be required to match your needs with what is out there.
Whether you're looking to purchase a house,
duplex, 50-unit apartment project, or commercial property,
you need to carefully review the property's economics. Are
the rents used in your projections realistic? Are the expenses
correct? Can you live with the cost of investment mortgage
financing? What happens when you have a vacancy? Is there
enough cashflow to cover it?
Are you putting money aside in a reserve
account? How much money do you have to spend on repairs?
Some investors believe that they should never repair a property.
Unit inspections in occupied units will uncover problems
that can be solved while the tenants are still living there
and while there is cash flow, rather than waiting for a vacancy.
The urban areas of the Bahamas are presently
better bets as there is a larger pool of potential buyers
and tenants. That condition is swiftly changing as the world
finds out about the Out Islands (called "Family Islands" by
the natives), long-known by native Bahamians to contain a
goodly portion of the beauty that the Bahamas is well-known
for.
Deals abound throughout many secluded islands
that are now experiencing positive annual tourism growth.
Certain of the Family Island communities such as George Town,
Exumas, Harbour Island, and many of the Abacos communities
are proven performers. Up-and-coming areas such as Governor's
Harbour, Eleuthera, Long Island, Cat Island are viewed as
being next on the path for development. With beaches and
scenery of world-class standard to set small hotels and luxury
residences, these are viewed as vacation destinations for
the near future.
The Exit
Every good investment strategy has an exit,
a way for you to recover your investment and its hopefully
healthy returns.
The best exit is one planned before making
your first step to invest, and is the most important part
of your overall plan.
You will need to ask yourself some serious
questions about your goals and what it is going to take to
fit your desired outcome within your present capacity.
It is also good to have a backup plan,
just in case something beyond your control changes. For example,
If you purchase in an area that is held up by a change in
either supply or demand in the market, what will be your
fallback?
Many people who make investments in Bahamas
properties use a great strategy for their investment backup
plan - they use the property themselves, and have the attitude
that they can simply enjoy themselves while the variation
in the market adjusts itself.
For the wise investor, the time to sell
is really established before you purchase with the formation
of a sound exit strategy. By developing your most favorable
exit strategy, your path has been set out for you.
You can indicate the perfect timing by
benchmarking the time to sell against an event, for example,
after the personal benefit you have used as a justification
for purchase is depleted. As you have purchased wisely in
a "good" area, your sale becomes your exit.
In other cases where rental revenues have
been enjoyed, another way to stimulate a selling point is
to go into the rental business with the idea that you will
actively look for a buyer in your rental clientele. After
all, they have lived in your home and if a relationship has
developed, they are very familiar with the home.
Given all the facts, it is very possible
to arrive at the point of selling based on a predetermined
plan. By paying attention to the conditions of the market,
your own desires and capabilities, and with diligent application
of the requisite good management that any prospective investment
requires, you will be assured of enjoying the fruits of your
planning when you sell.
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