Real Estate Info

Archive for the ‘Property Tips’ Category

When you hold an FROR (First right of refusal) on a real estate property (or any other asset for that matter), it basically means the current owner of the property is obligated to offer you the property (to purchase) whenever he/she decides to sell the property. In case the owner sidesteps the person holding First right of refusal, and sell it to another buyer, the FROR holder can take them to court for reparation.

To understand how FROR works, let’s have a look at this example. Mr. A owns an apartment and rents it out to Mr. B. After living there for some months, Mr. B develops an interest in purchasing that apartment, for some reasons the transaction cannot take place straight away. However, Mr. B asks for an FROR agreement and Mr. A agrees. Now, once the agreement is signed by Mr. A, he is now restricted to offer this apartment to Mr. B before he finalizes the deal with any other party. For example, when he’s approached by a third party with an offer of say, $450,000 USD, and he is willing to accept, he must first contact Mr. B and make an offer for him to buy this apartment for the same amount ($450,000). It is only after Mr. B refuses to buy, when Mr. A will be free to sell the property to the third party. Remember, Mr. A can not ask for a better price, he must offer the property to Mr. B for the same price, which was being offered to him by the third party.

Question is why a seller in his /her right mindset would agree on presenting someone with an FROR contract. Answer is, because it doesn’t really hurt the seller in anyway. However, there are some minor plus and minuses attached to this contract. For example, seller can ask for a small amount as a fee for an FROR contract, also such contract may add a little value to the property. Coming to the negative side, real estate agents are reluctant to deal with such properties, in case the holder of FROR accepts the offer and make a purchase; the agent will be deprived of any commission whatsoever. However, the best thing about First right of refusal is that it doesn’t have some predefined clauses or terms, seller and buyers are free to negotiate and jot down their own specific conditions.

There are some modified versions of FROR as well, one of them is Right of First Offer, in which seller has to approach the holder before putting the property on sale.

Buying a vocational property (also known as Second Home) can be a handy investment, for it can serve two purposes. First, it saves you plenty of expenditures when you are visiting that place in holidays, second you can rent it out to visitors on temporary basis and enjoy good monthly income when you are not using it. What’s more? You can turn it (or some part of it) into a restaurant or a shop if it is located at a place that gets plenty of visitors, during the course of a year. In short, owing or investing in a vocational property can be advantageous in many ways, but only if you choose the right location and pay attention to details. 

First, you need to make your mind on what will be the primary purpose of this property? Would you be using this place a lot, as a vocation spot? Will it serve mainly as a place away from home and the normal hectic life? Or, the sole purpose of this purchase is getting income? Ideally, if you are going to buy a vocation property, it should be intended (and able) to serve both purposes, so that you’ll be able to derive some value from this investment, in any case.

Location:

Whatever your intended future usage of vacation property is, the location is going to play an important role. Being a vocation property, it is supposed to be at a less crowded area, away from the normal hustle and bustle of urban cities. It can be a small hill station (especially if you are looking for a vocation property in South Asian countries like India & Pakistan), a cottage at some beach or a farmhouse in some peaceful vicinity. You should make a choice after considering both, your inclination and the investment viewpoint. Also, keep in mind the travel factor.

Price:

Prices depend mostly on the popularity of area and the number of visitors it get. The availability of the basic necessities like electricity, gas, clean drinking water or the facilities like internet access and security, also matter. If you can foresee some place getting more tourists in the future (for example a new road is under construction, which will make it more convenient to reach there), you can expect significant hikes in near future. Generally, the closer some vacation spot is to a big city, the higher its land and properties will be priced.

Types of Vacation Property ownerships:

You can own a vocation property in more than one ways, in accordance with your budget and usage. For example “timeshare”, where more than one party use the property for a prearranged, fixed period. You can use it personally or rent it out for the time period allotted to you. You can also go for fractional ownership, where you actually own a fraction of property (in contrast with timeshare, where you are entitled to “use” the property for only 1 – 2 weeks in a year).

You must have heard about those real estate investors, who purchased some property at extremely low prices, in a relatively lackluster real estate market. Then for some reasons the property prices soared and the property owners earned huge profits in no time. They are some lucky guys? Aren’t they? But before you start envying them for being the fortune’s favorite, let’s get your facts straight. The fact of the matter is that it is the market analysis and foreseeing capability that makes the difference, more than luck or fortune. Real estate market plays an important role in the process of property valuation, even more than the property itself. Therefore, next time when you are about to invest in some residential or commercial property, spending some time in evaluating the market can make huge difference.

An overview of the market and economy:

Have a close look at the ongoing situation of real estate market; do you see a bullish or bearish trend? Do you think this trend is going to continue in coming days or there are some signs of change? The overall economy has a direct effect on real estate as well, if there is economic growth in some regions, real estate prices are supposed to grow as more and more people and businesses will step in to take advantage of the growing economy. If you can retain a residential or commercial property or even some vacant land in this region, it can bring huge yields. Projecting a bullish or bearish trend is not an easy task unless you have got the drift of economic ups and down. However, you can take help from some experts (though, they might get it wrong as well).

Vacancy rate, Rentals, Prices:

If you are looking for short term investment, where you wouldn’t have to wait for longer period before you start earning, then look for these indicators. Vacancy rate of a real estate market is obtained by dividing the unoccupied units to the total units available in the market. You can have an idea of the existing property prices and the possibility of rise or decline in rentals or property prices, in near future. A significant change in mortgage rate can also boost or reduce sales.  

You should also check for the infrastructure and development work going on in the real estate market and adjoining areas, in particular if some big companies have recently entered or left the market.

Even with the news of price decline from majority of the property market, buying a real property is still an expensive purchase by any standards, especially if you are talking about one of these expensive markets. Do you think being in the list of the “most expensive real estate markets” is good or bad? Answer to this question is debatable, however going through the list and looking at the prices in the cities like London, Moscow or Tokyo can give you a kind of breather (or nightmares if you happen to be a buyer looking for a piece of property in these cities).

If you thought property prices in cities like Dubai, Singapore or Mumbai are way too high, you must take a look at the prices in London, Monte Carlo or New York. This might gives you an idea, what really is “expensive” in real estate terms.

London:

Often dubbed as the most expensive city, London lives up to its reputation in real estate sector as well. From the property prices to the cost of living, food to transportation, capital of England is not for faint hearted consumers. Property prices are always on the up due to high wages, high demand, and low supply (unlike other developed cities, London doesn’t have a profusion of skyscrapers). West London and Central London are the most expensive areas in city of London.

Monaco:

Monaco, mostly famous for its tourists attractions (and most famous among these attractions is of course, the casinos). The main residential area is called Monte Carlo, and the average per square meter price in this area is actually higher than London. Monte Carlo enjoys the highest property prices in the world, thanks to its no-tax policy that attracts the cream of the crop (rich celebrities and business people).

Hong Kong:

Rich culture, one of the world’s leading economies, and a very impressive skyline, Hong Kong is the most expensive real estate market in Asia, and it might be competing with the top real estate markets in the world if Chinese economy continue to grow at this speed.

New York:

Despite a sharp decline in prices, in the first quarter of 2009, New York property still rates among the most expensive ones in the world, though it may slip further on the list as the prices continue to fall due to the financial crunch. Manhattan, which is the most desired area for property buyers in New York, has recently witnessed a decline in both property prices and sales.

One of the brightest galaxies in the southern sky is known as Centaurus. True to the origin of its name, The Centaurus is projected to become an equally bright addition into the skyline of Islamabad (at present this Gamma city has no real skyscrapers, though some towering buildings are under construction or at least in pipeline). The developers of this project WS Atkins have Burj Ul Arab on their credit, which is accredited as the icon for Dubai city, therefore when WS Atkins claim that The Centaurus will become the identity of Pakistan, it should not be considered a mere hyperbole. The best thing about this complex is that the construction work is going on unstopped, in spite of all the chaos-like-situations Pakistan has to face these days. Going by the construction work, The Centaurus is all set to be completed at the end of 2010 (or maybe a little later).

The Centaurus is actually a combination of four soaring buildings and one shopping mall, with one seven-star hotel, two residential towers, a huge shopping mall and one separate tower for offices. All of these buildings have been incorporated into one magnificent design. The land purchased for this project was most likely the most expensive land purchase in the history of Pakistan.

Seven Star Hotel:

The Centaurus complex will be hosting a luxurious hotel with 350 rooms. A high rising building, The Centaurus Hotel will be the tallest of these four buildings (hotel, two residency towers and one corporate tower). This hotel will offer a huge ballroom, spectacular central atrium, limousine service, pools and spa facilities. With plenty of world class services, this hotel will be a good place for foreign tourists coming to visit one the most well-planned cities in the world.

The Centaurus Residence:

What’s better than residing in a seven star Centaurus hotel? Perhaps, residing permanently in equally stunning apartments? The Centaurus Residence offer 1, 2, 3 and 4 bedroom apartments. Two towers having 22 storeys in each tower, with first rate security, back-up systems for uninterrupted power supply, health clubs and swimming pools. Even though the prices of these apartments and penthouse are rocketing high, more than half of these residencies are said to be sold, already.

The Centaurus Corporate:

Shortest of the four buildings (22 floors), The Centaurus corporate is an exquisite location for multinational firms and offices. This centrally air conditioned building will provide all up to the minute facilities and services, making it a world class place to set up your business office.

Centaurus Mall:

When completed, Centaurus mall will be the biggest shopping mall in Pakistan, offering a huge variety of stores including well known brands, restaurants and a cinema.