Real Estate is Still Profitable to Hold and Pass On featuring Jennifer Olson Spadine with Guardian Property Management and Services, LLC
Written by John P. Palen for Minnesota Business Magazine June 2012
It may seem that real estate is no longer the best investment or asset due to depreciating values in recent years. But in reality, the buyers' market is prompting more people to add real estate to their portfolios and holding it for future returns. Real estate offers tax advantages and is available to anyone as an investment. Plus, it can be passed on to the next generation.
Investors currently fall into two camps: intentional and accidental. In either case, real estate is a smart decision if the overall business plan and the risk involved in investing are thoroughly understood.
"The real estate industry is prime for investors now," says Jennifer Olson Spadine, owner of Guardian Property Management and Services, LLC in New Brighton. "You can buy homes cheaply and it's easy to find renters to cash low it now. When home values increase again, there will be nice equity to profit from upon sale."
Aside from experienced real estate investors who began purchasing foreclosed properties in 2010, there are also accidental owners who decide to rent out a home rather than try to sell it in a depressed market. Services such as Spadine's can assist the owner in locating and qualifying renters, collecting rent and maintaining the property.
Additionally, Spadine states that compliance with real estate rules and regulations as well as having a clear understanding of complex landlord statutes is imperative in order to protect owners from risks that could jeopardize their real estate or personal assets.
"Real estate is not a passive investment. You need to treat it as a business," she says. Spadine knows this from the experience of purchasing her real estate business in 2004, then experiencing a complete loss of income in 2009. She had to reinvent Guardian with a new business plan, employees who could transition to a real estate brokerage and management model built upon strict accountability. Last year, the business reported $1.1 million in revenue.
Spadine's clients own or rent properties in the Twin Cities metro area and down the I-94 corridor through Monticello, Albertville and St. Cloud. Properties range from modest to luxury single-family homes to condos, and from market-rate, multi-family housing units to affordable housing. They also provide commercial real estate maintenance and services.
Real estate is a consideration for investors, but the holding period for real estate is traditionally much longer than we saw during the flip frenzy in the early 2000's. Currently, there are plenty of renters to fill properties, and as economic times change, renters will become more qualified to purchase, prices will increase, and we will see more flipping.
Successful investors are buying right - paying below current market value and minimizing risk with low debt-to-equity ratio. There is still a forecast of continued foreclosures. Location and condition are critical for resale value whenever the tide eventually turns. The bottom line is, real estate is still a good investment for those with a solid plan and the intention of building long-term, not short-term, wealth.