For the past two years, resort real estate markets like Aspen-Snowmass have experienced unprecedented demand for real estate as people around the country sought refuge from the effects of the COVID pandemic. At the same time, technologies like Zoom have made working remotely outside a traditional office more acceptable and productive. Resort areas like Aspen-Snowmass that offer an outdoor quality of life and world-class recreational opportunities have been popular destinations. If you’re interested in real estate investing, there’s a new world that’s on the verge of exploding, driven by many of these factors that evolved from the pandemic. It’s called the metaverse and it’s already being embraced by large tech companies like Microsoft, Disney, Apple and Facebook, which recently changed its name to Meta.
Speaking broadly, the metaverse is the merger of two concepts that have been around for quite some time: virtual reality and a digital second life. While the concept of a metaverse has been tossed around in the science fiction realm for decades, it has now become a reality. Essentially, the metaverse is a connection of multiple 3-D virtual worlds that are all focused on virtual connection. In the next few years, the metaverse could change the way people interact with each other, and that’s why so many large companies are starting to take notice.
In addition to the enhanced social-interaction aspect of the metaverse, there are some tangible aspects that have recently become popular. Over the last decade, technology has transformed the physical real estate industry. Now, it’s possible to buy real estate in the virtual world of the metaverse. Global investment bank JP Morgan says “the metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenues.” Last month, JP Morgan set up a meeting lounge in Decentraland, a blockchain-based metaverse platform. Other companies like Walmart, Nike, Gap, Verizon, Hulu, PWC, Adidas and Atari are also staking out metaverse real estate for virtual showrooms and information centers for people to view products, get information and interact with others spending time in the metaverse.
The metaverse already has multiple marketplaces where users can buy and sell virtual real estate in much the same way the physical world has multiple places and locations around the world to buy, sell and own real estate. In addition to the presence of these virtual real estate marketplaces, each platform has variations in the way available metaverse real estate listings are formatted. However, virtually every platform where you can buy and sell real estate does have listing prices of property listed in the metaverse, the coordinates of the property on the metaverse’s map, and a general idea of where the property is located in relation to businesses, roads, popular sites, virtual mass transit, and other amenities. In that sense, metaverse real estate listings are very similar to their traditional counterparts.
In addition to the marketplaces that are available in some metaverses, there are also a couple third-party marketplaces that allow you to buy and sell metaverse real estate. Non-Fungible.com and OpenSea are currently two popular third-party platforms. Much like the built-in marketplaces, these third-party platforms allow you to view properties that are presently for sale, while also allowing you to look at properties from more than one metaverse at any given time.
If you’re interested in buying real estate in the metaverse, there aren’t a lot of real estate agents who work within the metaverse, but they do exist. The handful of metaverse real estate agents will work with investors to help them make an informed decision about a potential property purchase. If you happen to be one of the early pioneers that already own a piece of property in the metaverse, these metaverse Realtors can help you find buyers or renters for your space. Essentially, they can provide any of the services that a traditional Realtor can offer. However, you should be choosy about who you work with, especially since there are no licensing requirements.
As the metaverse continues to grow and evolve, the opportunity to take part in real estate transactions within it will continue to grow as well. You may want to buy a home or office in the metaverse to hold business meetings and entertain your friends in what many think will be the next evolution of human interaction. Think of it as a virtual 3-D Zoom meeting location. Real estate investments, be they physical or virtual, appreciate based on supply and demand. As real estate investors, metaverse real estate may offer some interesting investment opportunities. Just like the right URL addresses in the internet world have become highly valued, certain metaverse real estate properties could become highly valued as well. Like evolving technologies in the past, the metaverse could become the next boom real estate market.
Lori and William Small, CCIM are recognized luxury and commercial real estate experts with Coldwell Banker Mason Morse in Aspen. They can be found through their website theSmallsaspen.com or by email at thesmalls@theSmallsaspen.com.
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Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout The Wall Street Journal
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Robert McLister: Tax shelters don’t make housing more affordable, but those with the cash would be foolish not to use them
Published Apr 19, 2024 • Last updated 55 minutes ago • 4 minute read
With housing unaffordability near its worst-ever level, our trusty leaders are on a quest to right their housing wrongs and get more young people into homes.
Part of Ottawa’s big strategy to “help” is promoting tax-sheltered savings accounts and pumping up their contribution limits. That, of course, stimulates real estate demand amidst Canada’s population and housing supply crises. But save that thought.
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First-time buyers now have three government piggy banks to stockpile cash for a down payment:
1. The 32-year-old RRSP Home Buyers’ Plan — which lets you deduct contributions from your income to defer taxes and then borrow from the account interest-free for your down payment (as long as you wait 90-plus days to withdraw any contributions);
2. The 15-year-old Tax-free Savings Account (TFSA) — which lets you save after-tax dollars, grow your money tax-free and withdraw it without the taxman taking a bite;
3. The one-year-old First Home Savings Account (FHSA) — which is a combination of an RRSP and TFSA. It lets you deduct contributions from income, compound it tax-free and never pay tax on withdrawals used to buy a home. You can even save the deduction for a year when you need it more — when you’re earning more money.
Assuming you have the funds and contribution room, these tax shelters can combine to help you amass a supersized down payment.
“Looking at the FHSA alone, with the max annual contribution room of $8,000 for 2023 and 2024, a potential first-time home buyer could have as much as $16,000 deposited in the account today for a down payment,” says Eric Larocque, chief mortgage operations officer at Questrade’s Community Trust Company.
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“If you also add in the cumulative contribution room of $95,000 for the TFSA, it amounts to $111,000 in potential funds available — and that’s before incorporating investment gains from either account.”
And it doesn’t stop there. RRSP, TFSA and FHSA savings limits keep increasing. If first-timers have enough contribution room, down payment savers in 2024 can sock away even more in these tax-sheltered troves.
“Factoring in the recent changes to the Home Buyers’ Plan, which now permits RRSP withdrawals of up to $60,000 — up from $35,000 — we land at a potential total of $171,000 in deposited funds that can be tapped for a first-time home buyer’s down payment,” Larocque adds.
That’s quite a wad — easily enough to cover the 20 per cent ($139,706) down payment required to avoid mandatory (and pricey) default insurance on the average home. Canada’s average abode is now worth $698,530 by the way, according to the Canadian Real Estate Association.
Here’s the rub: Canada’s living costs are sky-high, and real disposable income has trended downward. So, how’s an average first-time buyer household, raking in less than six figures, supposed to amass such a stash?
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Based on national averages, saving 10 per cent of one’s pre-tax income per year (who does that?) would take a young FTB couple over 15 years to sock away $140,000. History shows what would happen to home values if you waited 15 years — they’d jet off without you.
If you have no other resources and your bet is that historical appreciation rates continue — despite slower population growth, more building and potentially higher long-term rates — you’re better off saving less and buying sooner with a five per cent down insured mortgage.
So, does Big Brother really expect your typical first-time buyer to max out all these savings plans? Nope. But hey, throwing a buffet of options at you sure paints a pretty picture of government effort, doesn’t it?
Ottawa’s dirty little secret is that these nifty programs crank up demand, turning renters into buyers. So don’t bet on them making the home-owning dream any cheaper, for first-timers or anyone else.
Take advantage of them anyway.
The government sets limits on these tax shelters with well-off home buyers in mind. One lucky bunch who can make use of all three down payment savings plans is the first-timer with prosperous parents.
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Such buyers can make a withdrawal from their parental ATM (a living inheritance, some call it), deposit that cash in all three savings vehicles above and reap: hefty income tax savings or deferrals (thanks to the FHSA and RRSP deductions); tax-free/tax-deferred growth on the investments; and tax-free withdrawals if the money is used to buy a qualifying home (albeit, you’ll have to pay the RRSP HBP back over 15 years, starting five years after your withdrawal).
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The more opportunities it gives people to save for a down payment, the more Ottawa worsens the imbalance between purchase demand and supply. And that, of course, boosts real estate values skyward — which is dandy for existing owners but contradictory to the government’s affordability messaging.
But hey, these tax treats are ripe for the picking. Home shoppers with the means — especially those with deep-pocketed parents — might as well take advantage of all three accounts.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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Successful real estate investors have long followed the adage: When there is blood in the street, buy property.
Historically, this approach has yielded dividends, and it explains the mindset behind a new venture from Hines, a real estate giant with over $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that seeks to capitalize on the recent troubles in the real estate industry.
The management at Hines has been carefully watching the real estate industry for decades, and they believe that today’s market presents the perfect opportunity for investors to buy distressed assets and sell them at a profit in the future. When you consider that nearly $4 trillion in commercial real estate loans are set to mature between now and 2027, it’s easy to see the logic behind Hines Private Wealth Solutions.
The developers behind many of those projects took out loans assuming they would be able to refinance at pre-COVID interest rates. Considering that current interest rates are about double what they were before COVID-19, that assumption looks more like a losing bet every day. It also means there will be a lot of foreclosures that a well-positioned fund can snap up for pennies on the dollar.
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That’s where Hines Private Wealth Solutions seeks to step into the picture. It’s already contracted with investing heavyweight Paul Ferraro, former head of Carlyle Private Wealth Group, and raised $10 billion in funds for the new project. It will offer its clients a range of investment options, including:
In addition to these offerings, Hines will also give personal guidance to its investors on how to best manage their real estate assets. It is targeting investors who want to turn away from the traditional 60/40 investment model by channeling more money into real estate and away from other alternative investments. Hines is banking on the idea that high interest rates and high inflation will be around for a while.
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When that happens, it becomes more important for investors to hold inflation-resistant assets. That’s a big part of why Hines is betting that real estate is near the bottom after years of declining profits resulting from high interest rates and major losses in the commercial sector. Hines’s conclusion that now is the time to buy real estate is based on long-term company research showing that real estate typically declines after a 15- to 17-year-long growth period.
Its research shows that the decline normally lasts around two years, which is about the same length of time the real estate market has been suffering from high prices and high interest rates. Theoretically, that makes this the perfect time to make aggressive moves in the real estate market, and the Hines Private Wealth Fund was conceived to allow investors to take advantage of current market conditions.
Despite the deep troubles facing today’s real estate industry, it’s not hard to see the logic in Hines’s approach.
“This is a great vintage, it’s a great moment. This real estate correction began really over two years ago, right when the Fed started raising interest rates,” Hines global Chief Investment Officer David Steinbach told Fortune magazine. “So, we’re two years into a cycle, which means we’re near the end.”
If Hines is correct, real estate investors will have a lot of good bargains with high upside to choose from in the next 12 to 24 months. The good news is that even if you’re not wealthy enough to buy into the Hines Private Wealth Solution, there may still be plenty of opportunity for you to adopt their investment philosophy and start scouting for an undervalued, distressed asset to scoop up. Keep your eyes open and be ready.
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This article $93 Billion Real Estate Giant Is Betting The Market Is About To Hit Rock Bottom originally appeared on Benzinga.com
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