Investors take advantage of hot market

Try a Google search for “real estate investing,” and prepare to read — a lot. The popular Internet search engine returns more than 6 million hits on the topic. The same search on Amazon.com returns a list of more than 600 books.

In the Washington area, with home sales measured in hours and days from listing to purchase, real estate investing carries a particular allure.

The statistics and assessments of experts in the field make real estate investment all the more attractive.

The National Association of Realtors recently revised its 2004 year-end home-sales forecast upward, with an expected jump in sales of 7.9 percent to 6.58 million nationwide. The median existing-home price is projected to climb 7.9 percent, as well, to $182,500, and the new-home median price is projected to rise 8.9 percent to $214,600.

The Washington area continues to strongly outperform the national market. And the Realtors group projects next year to be the second-best on record.

If that’s not enough to whet the appetite of a potential real estate investor, a recent report from the Urban Land Institute and PricewaterhouseCoopers pegs the Washington area for its “markets to watch” category, along with New York City, Southern California and Florida in the coming year.

The Washington area is a “government Mecca practically immune to economic downturns,” states the report, “Emerging Trends.”

Whether you are fully engaged in managing your investment portfolio or a passive investor, experts say, real estate investing should not be overlooked as a way to diversify your portfolio.

Still, real estate investing, like all investments, is not without risks.

“It’s very risky,” says area Realtor Frank Llosa. “People are not fully considering the risks. You can absolutely go wrong buying real estate investment property the wrong way.”

So what is the right way?

The first consideration is assessing your risk tolerance. Interviews with area Realtors suggest that the riskiest strategy in the current seller’s market is investment in “fixer-uppers” — the purchase of real estate in need of repair with the intent of reselling at a profit.

The reality is that profits are squeezed out of this type of investment in the current Washington-area market with potential “fix and flip” properties being sold at near what they would sell for in the current market fully restored, Mr. Llosa says.

He says he had one client who overpaid for a fixer-upper by underestimating the costs of improvements and repairs.

Investors are also likely to be pitted against general contractors in the area who specialize in fixer-uppers, says Joseph Himali, principal broker for Georgetown-based Best Address Real Estate LLC.

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