Expensive to Build in The USA? Not Even Close!

Hi Folks,
   Welcome back.

   We often hem and haw about prices, and how expensive things are, but if you lived in Switzerland, you might think differently about things! True, it's a beautiful country and has a reputation for delectable chocolate, but it also topped the list of the "Ten most expensive countries in the world to build", in a recent article.

   According to a story on InternationalEat.com, "Switzerland remains the most expensive place in the world to build new properties", with data pulled from the latest EC Harris report. Using UK prices as a baseline, construction costs in Switzerland are more than 25% higher than anywhere else in the world (the story adds that the "price of construction in Switzerland is 71% higher than in the UK"). Mathew Riley of EC Harris said that he was not surprised to see Switzerland and the Scandinavian countries as the most expensive places to build, since "high labour costs and the need to import materials are all combining to drive prices up."

   Taking a step back, Europe came in as the most expensive continent in which to build, with 8 European countries populating the Top 10 list. The other two countries were both Australia and Canada. The cheapest countries to build in? It was a tie between India and Sri Lanka (construction costs estimated to be 72% cheaper than the UK baseline).

   If you are a builder or a contractor, you have seen your profit margins get slimmer and the competition on the rise, and the results of this report point to the need for Western economies to, "start planning ahead now to guarantee access to the raw materials needed for future construction projects."

   As for North America, the report finds that the average construction costs in the US are around 10% lower than in the UK, however, as the economic recovery progresses, these costs are likely to rise.

   In terms of construction spending during August 2011, we were at $799.1 billion (Up 1.4% from July and almost 1% from August 2010). Public Construction was on the upside, at 3.1% above July, and more specifically, Educational construction and Highway construction both posted gains of 3.5% and 4.3%, respectively. Private Construction Changes were negligible to minor.

   Penny for your thoughts...

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Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #constructioncosts #Switzerland #Europe #UK #builder #contractor #constructionprojects #rawmaterials #public #private #educational #highway

The Building Trades Association (BTA) Accepts Our Membership

Building Trades Association (BTA)

Hi Folks,

   Happy Friday to all of you !

   Today, we are excited to announce that we have been accepted as a member of the Building Trades Association, or BTA, which consists of member companies involved in all phases of the building and construction industries.

   BTA had invited us to submit a membership application, but I personally figured that since our segment of the industry is different than their regular types of members, that it might be a stretch. Ultimately (and fortunately), we were accepted, and I believe it is primarily due to the vast amount of Builders that list their homes on our website.

   Some of the other top brass over here were mentioning to me at our morning meeting that they think it's also about our longevity in the industry and the service we provide to the Building/Construction segment. Whatever the deciding factor(s) were, we are honored to be a part of this highly-respected trade association. (You can view our BTA Membership Certificate Here)

   On a different topic, on Wednesday the 17th, the New Residential Construction figures are being released, so we'll keep an eye on those numbers.

   Also - don't forget to sign up to receive our Blog via E-mail. It's very easy...On top of the upper right column (under, "SUBSCRIBE BY E-MAIL", just enter your E-mail address, and when you receive the confirmation E-mail, click the link. Super-easy !

May You have a Wonderful Weekend, and Happy Rent-to-Owning !
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

What Can Go Wrong With Rent to Own ?

Hi Folks,
   It's Friday ! Hope your week has been phenomenal.

   As our title suggests, today we will be looking at some issues that may arise when doing a Rent to Own Transaction, as well as a few solutions to help you out.

   A common problem in this economy is the steady decrease in home prices. This represents an overall problem for the market in general, but it has a specific effect on a Rent to Own deal. For example, Aaron Galvin, Managing Broker of Luxury Living Chicago, says that if a tenant has been renting a private condo or a home for the last year with a specific purchase price which was established at the beginning of the lease term, a decrease in property value will impact the decision of the tenant to buy the property. If the tenant was ready to buy the home, he obviously does not want to overpay.

   Galvin proposes the following solution; "Do not establish a purchase price when signing a lease. Instead, a tenant should disclose their desire to ultimately purchase the property at the end of the lease term and negotiate a percentage of rent back toward the final purchase price.", so, in other words, "No dollar amount should be set until the value of a home is determined at purchase time." This would, of course, be in writing, and agreed to by both parties.

   Gary Parkes, a Mortgage Lender with Acopia Home Loans, suggests some additional solutions, including a few proactive ones. Parkes says that using a realtor, and "having them thoroughly research the comparable properties will help minimize the likelihood of that happening.", however, if this advanced planning does not work and the "house appraises for lower than the agreed price you have a few possible solutions that can resolve this issue."

   Parkes says that, "in a majority of cases the seller will ask for a copy of the appraisal to review and will lower the agreed upon sales price to match the appraisal.", however, if the seller is, "unable or unwilling to do that, the next option would be to meet half way or pay the whole difference." He reminds us that you can decide to pay more that the appraised value, but, "the lender will base how much they lend you on the lower of the sales price or appraised value.". Fortunately, he points out that a situation like this typically is resolved and the purchase does occur.

   Another potential issue is due to potential human interactions, or "PHI", as I like to call it. Shuki Haiminis, President of Lofts.com, has presented an example of this type of issue. Haiminis brought a couple to see a loft development, which they loved so much, that instead of just renting it, they want to do a Rent to Own transaction. The developer hesitantly agreed, but the couple assured him that, "there was no way that they would not be buying the unit."

   Ultimately, the process went forward, and the developer, "put his own money and labor into customizing the space for them with their specific requests.", and Haiminis says that, "While he would probably have made some of the changes, in solely a rental deal he definitely would not have put in as much as he did."

   What was the end result? A Negative PHI...the couple split up! So, "not only did they not buy the Loft but they had to terminate the rental lease as well." Haiminis said that the developer, "should have required a small down payment maybe equal to one months rent to show good faith." This is a good point. Builders/Developers - pay attention to that one !

   Some other things that can happen along the way are issues with the down payment funds and with income statements, and Parkes, who experiences things from the buying aspect daily, and has examined each of these for us.

   Down Payment Money: Parkes says that, "Many people do not realize that they will have to explain where any non-payroll deposits came from and many people do not like having to answer these questions for privacy reasons". Lenders often look over the previous 2 months of bank statements, and they will need to know where the money came from. Parkes suggests that you, "have an account with the money sitting there already for 2 months.", so that you do not need to, "source all your deposits", and that, "Even if you are receiving a gift for a down payment, these same factors can be applied to the gift giver."

   Income: Parkes warns that if you are considering buying a home within the next few years, you need to, "be careful in the amount of write-offs you take on your tax returns", since, "Lenders use the tax returns to determine income in our current lending environment-even for those salaried borrowers such as teachers, non-commissioned employees, etc.". Additionally, he says that, "Yes, you will have to pay more in taxes but it will help you qualify for a loan. It is a tough pill to swallow, but by planning ahead you can prepare", since, "A lender will generally look at the previous two year tax returns in determining income."

   Ultimately, there are pros and cons with any type of real estate transaction. The pros of Rent to Own are being able to try a home before buying it, and being able to get into a home you might not normally be able to under your current circumstances. For a seller, being open to Rent to Own gives you an extra tool to help sell your home, and to have a serious tenant who could potentially own the home and will treat it as if it is already their own home.

Have a Great Weekend, and Happy Rent-to-Owning !