September 14, 2007

Flip jamaica Real Estate - The Buy Hold And Lease Strategy

Flipping Jamaica real estate is not as limited in scope as most property investors believe. The prospects are tremendous and we review another prudent option of flipping Jamaican property. It is even more fundamental to note that these strategies can be employed anywhere in the world once the real estate markets climate is good. Real estate in Jamaica is seen as a long term investment. This is mainly because most of the Jamaican property when being sold carries hefty taxes both to the vendor and the purchaser. This at times effectively wipes out significant earnings. The more prudent move would actually be to sell the Jamaican property but what is titled as ‘under terms’. This achieves two hefty pay bills for the investor. The first step in this process is to refinance the Jamaican property at a newly appraised Jamaican dollar value. This means you access a loan facility for the Estimated Market Value. Jamaican mortgage banks usually lend a maximum of seventy five 75% the EMV. This means that you should have not spent more than this amount in purchasing and rehabilitating the property. Once this is completed you can lease the property with an option to buy. The lease payments from the lessee should be able to at minimum pay mortgage payments (a risky venture as lease payments should be a minimum 15% more than mortgage payments). If the lessee after time accepts the buy option in the lease agreement you recover more cash on closing, avoid realtors’ fees and reduce capital gains taxes when filing your returns at the end of the year.

Is this a very feasible prospect? We at Worldwide Realtors Company Limited have employed this strategy over the last four years with mixed results. The best bet is that upon refinancing we need to find another project to go directly into to continue to work the capital. If this is not done then the capital can become burdensome. These are some of the problems we encountered.

  • New estimated market value did not exceed total expenditure by 25%
  • Difficulty in leasing Jamaican property
  • Reducing refinancing amounts as mortgage banks did not want to over leverage with one customer.
  • Inflation in the economy pushed up cost of repair material faster than Jamaica real estate value appreciated.

Though these problems might reduce overall profits in the short run, the strategy remains in tact and a very viable one to pursue. There are several communities that we believe have the best prospect for this, Meadowbrook, Hughenden, Constant Spring, Harbor View, Red Hills, Upper St. Andrew and some areas in Portmore St. Catherine. Due to the fact that real estate values for residential properties in these areas appreciate at a very steady pace these are the areas to hold on to. Other areas are more buy, repair and sell strategy perfect. The other flip strategy is actually the Buy Low Sell High Jamaica real estate flip strategy. We explore this in our next post.

1 comment:

The Book Bug Guy said...

hows your strategy working at this time?