Straightforward Ideas for Investing in Real Estate

Straightforward Ideas for Investing in Real Estate

Straightforward Ideas for Investing in Real Estate

Real estate is one of the most intriguing industries in the world. It is an industry that has helped create some of the best-known billionaires like Donald Bren and Stephen Ross. The industry has also helped secure the future of many retirees. In this article, we will look at some of the most common ways you can use real estate as an investment.

Types of Real Estate Investments

As with all types of asset classes, there are several examples of real estate investments. The most common of them are:

  • Residential Real Estate Properties: These are houses that are built specifically for households. The types of houses can be apartments, townhouses, condominiums, and vacation houses. Investors make money by either leasing the buildings or by selling them.
  • Commercial Properties. These are properties that are developed specifically for companies. A good example of a commercial property is an office block. Investors make money by either leasing the offices or selling them to companies.
  • Retail properties. These are properties that target retail companies like Target, Walmart, and Macy’s. A good example of these properties are shopping malls.
  • Mixed Use Properties. These properties combine the three types of properties above. They will have a residential, commercial, and a retail section. They promote the concept of live, play, work.
  • Industrial properties. These are properties that are used by companies for large-scale operations. They include factories and warehouses.

Why Use Real Estate as an Investment?

There are several reasons why most people love to invest in the real estate industry. Some of these reasons are:

  • High rate of returns. The returns in the real estate sector are enormous. A few months ago, billionaire Ken Griffin bought an apartment in New York for $238 million. This was a sweet return to the apartment’s developer.
  • Ease of raising capital. Unlike other types of investments, banks will always love to give you capital to invest in real estate especially if you already own the land.
  • Earnings in perpetuity. If you build residential rental property in a good location, you will always have capital, especially after you retire.
  • Safe investment. Investing in real estate is a safe investment that has very limited risks. In most cases, you can reduce the risks by having a good insurance.
  • Tax benefits. There are a number of tax benefits that come with real estate investing. For example, you can use depreciation to reduce the amount of taxes you pay.
  • Government support. The Department of Housing and Urban Development has several incentives for real estate investors.

Ways You Can Use Real Estate as an Investment

House Flipping

This is a relatively old concept but one that has been growing of late. In fact, many large companies like Zillow and Redfin have entered the industry. The idea is to buy a house, improve it, and sell it at a higher price. With online listing platforms like Zillow, Trulia, and Opendoor, marketing the property is relatively easy.

Real Estate Development

You can decide to develop the properties by yourself. To do this, you need to buy a piece of land, get the necessary approvals by the local authorities, hire a contractor, and get the work done. This method has a number of issues. First, in some localities, the process of getting an approval is very long. Second, the cost of developing a project is relatively high. Third, it takes time for the project to be completed. To reduce the costs, we recommend that you pool your resources with a few friends. We also recommend taking financing from banks. As a developer, you can make money either by selling the property or by leasing it to your tenants.

REITs Investing

Real Estate Investment Trust (REIT) are listed securities that you can invest in. REITs differ from other stocks in various ways. They must generate 95% of their income from the real estate. They must have a minimum of 100 shareholders, have no more than 50% of the shares held by 5 or fewer individuals, and invest at least 75% of its total assets in real estate assets and cash. REITs must also distribute their earnings to shareholders. Examples of REITs are Boston Properties, General Growth, Vornado Realty Trust, and AvalonBay Communities. A benefit of investing in REITs is that they are efficient in returning capital to investors.

Online Real Estate Investing

Another option for investing in real estate is using the various online real estate investment platforms. A good example of such a company is RealtyMogul, which allows people to invest in vetted real estate projects. The minimum amount one can invest is $1,000. Another online company that you can use is FundRise, which allows people to invest in real estate starting from $500. Other similar companies that you can use are PeerStreet, RealtyShares, and Patch of Land.

Bottomline

Real Estate industry is an ideal method to invest your money, especially now that interest rates and unemployment rate are low and wages are rising. It is a safe way to build wealth and make passive income. However, like in all types of investments, you need to take time to learn more about it before you invest.

 

 

10 Deadly Errors Real Estate Investors Make

10 Deadly Errors Real Estate Investors Make

10 Common  Real Estate Mistakes Investors Make

Real estate is one of the most popular investment avenues to most people. Some are attracted to the industry by the sweet returns they can generate. Others are attracted to the industry by the flashy lifestyle of real estate developers they see on TV. Others simply want to generate quality passive income. Like in all types of investments, real estate is a risky industry. It is an industry where many people have lost a fortune. In this article, we will look at the most common real estate mistakes that people do and how to avoid them.

Following the Crowd

Following the crowd in real estate investing can be a very dangerous thing. This is because when many investors are doing the same thing, it tends to lead to oversupply. When there is an oversupply of anything, the price tends to fall. A good example of this is in the U.S. retail sector. In recent years, the number of dead shopping malls has continued to increase. This has happened partly because most people are using online platforms like Amazon to shop. The collapse of these malls has led to huge losses among the mall developers. These are developers who flooded the mall industry during its boom. To avoid this problem, you should dedicate a lot of time on research.

Too Much Debt

Unless you have won a lottery, it is almost impossible to do make big real estate developments without financing. In fact, the biggest real estate companies in the U.S. carry a lot of debt with them. Developers have been attracted by the low interest rates. However, it is a mistake to take a lot of debt for three main reasons. Interest rates could rise, which will increase the amount of money you have to pay in interest. Second, it might take a longer period for you to get tenants or buyers. Finally, there could be disasters, like hurricanes that might affect the value of your projects. To avoid this mistake, we recommend that you take a small amount of debt that you can manage.

Wrong Contractor

A contractor is very important when you are putting up real estate projects. This is a company that will do the hard work of building and furnishing the house. While many contractors are highly-professional people, there are many bad apples in the industry. These are contractors who are known to cut corners and use substandard materials. Using such a rogue contractor can expose you to a lot of risks, including the collapse of the building. To solve this problem, we recommend that you get referrals from people you trust.

Wrong Location

It is always said that location is the most important part of any real estate project. If you are building a shopping mall, it needs to be at a good place to attract traffic. If you are building a residential project, it needs to be at a good location with close amenities. Selecting the wrong location can end up costing you a lot of money. To solve this problem, you should do your research.

Paying Too Much

A common real estate mistake many investors do is paying too much for their property. This is especially the case for house-flippers. These are people who buy houses for the purpose of improving and selling them. The mistake of paying too much is that most people will not be prepared to pay too much for the property. Therefore, you should always do your research before buying a house to flip. Research on the nearby property values and the demand in that location.

Poorly-Taken Marketing Pictures

This is a common mistake that many real estate professionals do. They don’t present their offerings well. The reality is that most homebuyers who use the internet are drawn to the story and the images. That is the main reason why most agents pay thousands of dollars for photography equipment. If you are selling your property, we recommend that you invest in excellent real-estate staging equipment.

Going it Alone

We get it. You don’t want to share the profits of your real estate project. However, going it alone can expose you to so much risk. This is the main reason why many real estate developers team up during the construction. Similarly, you should partner with a few friends to develop the property. Ideally, you should select partners who bring diverse skills to the job. For example, if you are a marketer, you should find a partner who has construction experience.

Planning on the Fly

Investing in real estate has so many moving parts. For example, you need to know the zoning, get a contractor, draw a business plan, get financing, forecast cash flows, and find suppliers. Therefore, it is very important for an investor to plan well when investing in real estate. This plan should be done by consulting qualified experts in the industry.

Wrong Tenants

Building a real estate project is one thing. Managing it is another thing. The simplest process to deal with this is to hire a qualified agent. The agent will ensure that the property is marketed well. They will also vet the tenants to ensure that tenants are vetted well. Tenants are vetted on their ability to pay the rent, their type, and whether they are legally required to rent the property.

Not Diversifying

As with all types of investments, diversifying is essential. For example, if you are investing in stocks, owning one company is riskier than owning three or four stocks. The same is the case for real estate projects. You should not rely on just one source of income. For example, if you have invested in commercial property, you should work hard to diversify in other industries too.

Final Thoughts on Common Real Estate Mistakes

Real estate is a great industry that has made many people wealthy. However, it takes a lot of work and effort to succeed in it. In fact, in the past, we have seen many real estate companies collapse. We have also seen many real estate projects remain incomplete for a lot of time. Using the tips described above will help you become a more successful investor.

4 Ways to Get Started in Real Estate Investing

4 Ways to Get Started in Real Estate Investing

Ways to Get Started in Real Estate Investing

Real estate is one of the best asset classes you can allocate your money. Historically, returns in the industry have been better than those of other classes like stocks and bonds. This performance has been driven by increased population growth and the ever-growing population. While most people have a dream of investing in real estate, very few people do. In this article, we will explain a few ways in which you can start investing in real estate.

Reasons for investing in real estate

Before we look at the best way of getting started in real estate, I will first explain why real estate makes a good investment.

  • Real asset. A property is a real tangible asset unlike stocks, which are usually certificates of ownership.
  • Hedge against inflation. When there is inflation, the price of property rises as well. This is unlike stocks, which tends to fall when inflation is very high.
  • Cash flow generators. When you own rental properties, you will always generate funds from the investment.
  • You can use your real estate investments to get financing from banks. You can then use these funds to make other investments.
  • The rise in the value of real estate investments is highly predictable because it is determined by economic growth and demographic changes.

Types of Real Estate Investments

There are several types of real estate investments. Before you begin your investment journey, you need to determine the type of investments you want to make. These types are:

  • Residential real estate. These are properties like condominiums, townhouses, single-family homes, and apartments.
  • Commercial real estate. These are properties like offices that are used by companies for their offices.
  • Retail real estate. These are properties that cater to retailers like department stores and supermarkets.
  • Mixed-use real estate. These are properties like malls, which have both residential, commercial, and retail.
  • Industrial real estate. These are properties that are used by companies for their manufacturing processes and warehousing.
  • These are publicly-listed real estate companies that you can buy their stocks.
  • Online real estate marketplaces. These are companies like Fundrise and Peerstreet that allow people to invest in real estate.

Step #1. Read About Real Estate

As with all types of investments, reading is of great importance. Reading will introduce you to the terminologies used in real estate. It will also get into details on about the pros and cons of investing in all the types of the industry. As you do this, you should read books from people who have succeeded and those who have failed in the industry. Some of the books we recommend are The book on rental property investing by Brandon Turner, The book on flipping houses by J. Scott, The Intelligent REIT Investor by Stephanie Kelly, and Mastering the Art of Commercial Real Estate Investing by Doug Marshal. After reading widely about the various real estate investment methods, you should decide on the one you want to specialize on.

Step #2. Talk to Industry Experts

After deciding on the type of real estate investment you want to get into, we recommend that you talk to industry experts. If you have friends or relatives in the industry, the better it will be for you. Talking to these people will give you first-hand information about the industry. If you don’t know people in the industry, you can easily find them in the popular real estate seminars and conferences.

Step #3. Come Up With a Business Plan

You should now come up with a business plan. This plan is essentially important if you are planning to raise funds from venture capitalists and banks. They will want to know more about your plans and how you intend to make money. The plan should specify your strategy, the amount of money you are investing, and your expertise in the sector.

Step #4. Start Building

After getting funds and the required permits, you should now start building. To do this, it is recommended that you use a good contractor. The contractor should have many years of experience in the industry and a good reputation. Remember, getting an inexperienced contractor can cost you a lot of time and money.

Step #5. Market the Properties

You should start marketing the property even before the construction is done. This is because you want the properties bought or occupied as soon as the construction ends. The best approach is to engage the services of a good property agent. These agents have the experience and expertise in the industry to ensure that the properties are either sold or leased within the shortest time possible.

This process is only for investors who are building their real estate projects. If you decide to invest in REITs, online property platforms, and house flipping, the process is relatively different. For example, for REITs, you need to do your research to find fast-growing REITs that have a better yield. If you are investing in online real estate platforms, you just need to be prequalified, deposit funds, and then invest. For house flipping, you just need to buy a property, improve it, and then sell.

Summary

Real estate is a great industry that has created so many wealthy people around the world. However, the industry is a very complex one. Stories have been written about real estate investors who have gone bankrupt. Therefore, you can avoid some of these mistakes by taking time to prepare. The insights explained in this article will form a great starting point for you.

4 Ways to Get Started in Real Estate Investing

Most Affordable Down Payment Mortgages For Buying a Home

A down payment is one of the most challenging things to have when applying for a new mortgage. This is simply because most people don’t have access to the vast amount of money that is required by the mortgage companies. For example, if you are buying a house that is valued at $200,000, you are required to offer a down payment of $6,000, if you are using a 3% mortgage down payment. This is a lot of money to many people. In this article, we will look at the options that are available to you especially when you are buying your first home. In this article, we will look at the most affordable options when it comes to down payment issues.

Veterans Administration (VA) 100% Financing

This option was conceived by congress more than 70 years ago. The goal was to support the families of those people who have served in the military. It was also conceived to be an alternative to the cash bonuses that existed at the time. The mortgage gives servicemen access to mortgages, where they are not required to pay any down payment. This has made it one of the most affordable mortgages in the United States. In fact, it has helped close more than 21 million loans. More than 300k of these mortgages are given out every year. These mortgages are eligible to many veterans in the US military. They are also available to those who are active in duty and the surviving spouses of those who are diseased.

USDA 100% Financing

These loans are known officially as the Section 502 mortgages or the Rural Housing Loans. These loans are given by the Department of Agriculture as part of the USDA rural development guaranteed housing loans programs. These mortgages were developed with the goal of helping farmers achieve the American dream of owning a home. This loan finances 100% of the home purchase and allows one to get a better than average mortgage rate. Another difference between this mortgage and the rest is that one has to take a fixed rate loan. In addition, they do require mortgage insurance. For purchases and refinancing, a 1.0% mortgage insurance fee is required.

FHA Loan

This is a loan that is insured by the Federal Housing Administration (FHA). Unlike the previous two, the FHA does not offer the loans. Instead, they are offered by commercial entities but is insured by the FHA. They were designed to help low-to-moderate income borrowers have access to homes. There are a few things you need to do to qualify for the mortgage. First, you need to have a good credit score of at least 580. If you have a weaker score of between 500 and 579, you can get the mortgage but you need to give a ten percent down payment. There are two primary types of FHA mortgage. The first is the Upfront Mortgage Insurance Premium (UFMIP) and the Annual MIP. In the UFMIP, you pay 1.75% of the base loan amount at the time of closing.

HomeReady Mortgage

The HomeReady Mortgage was created in 2015 and is backed by the US government. It is available to most lenders but it is ideal for homebuyers in lower-income and minority-heavy areas. The mortgage allows a down payment of at least 3%, which is lower than the averages usually offered by commercial lenders. There are a few guidelines that enable you to qualify for the HomeReady program. First, you must not own another house in the country. You must also complete a homeowner counselling course. Third, you must have a low income. Fourth, you must have limited cash to make the down payment. Further, you must have a credit score of above 620. You will get a better rate if you have a better score. Another benefit of HomeReady is that you can cancel the mortgage insurance if the home equity reaches 20%.

Convectional 97

The Convectional 97 loan is a mortgage that enables the borrowers to have a loan-to-value (LTV) of as high as 97%. This means that your down payment will be just 3%. This loan was created by the Federal Housing Administration after a study that was conducted found that the biggest barrier to buying a home was the hefty down payment that is required. The loan that is taken must be a fixed-rate mortgage and the house to be bought must be a single-unit family home, cooperative, condo, or a planned unit development. You must also pay a mortgage insurance.

Final Thoughts

Recent research shows that one of the biggest barriers to home ownership is the down payment amount. People simply cannot afford the vast amount of money that is usually asked for by the lenders. The plans explained in this article can help you find relatively affordable mortgages.

The Queens Real Estate Market is Peaking, Now is the Right Time to Sell

The Queens Real Estate Market is Peaking, Now is the Right Time to Sell

Why Now is The Best Time to Sell Your Queens House

In the 2008/9 global financial crisis, the housing sector in the United States went through a challenging period that led to a significant decrease in housing prices. Shortly afterward, the housing market in the US saw significant gains. This was boosted by the Federal Reserve, which brought down the cost of borrowing. In turn, this led to more job creation, relatively higher wages, and more homeownership. As demand increased, house prices rose. The chart below shows the increase in the house price index since 1987.

 

Source: Fed

At the same time, mortgages too have been on an upward trend. According to the Federal Reserve, the outstanding mortgage in the country has risen to more than $15 trillion. The good news is that mortgage delinquencies have been on a downward trend.

However, the great bull run on the housing market is showing signs of weakness. In the past year, the housing starts have been on a downward trend this year. In June, the starts were at 1.269 million after reaching close to 1.35 million in 2018. The same is true with the business permits, which is close to a two-year low.

Queens is one area that has seen significant growth in the real estate market in the past decade. This growth is attributed to the higher wages in New York and the falling unemployment rate in the state. According to Zillow, the median house price in Queens has risen from $425k in August 2009 to $649k in June this year. This is shown in the chart below.

Source: Zillow

However, there are signs that the housing market in Queens is softening, which means that now is a good time to sell. As a real estate investor, your goal is to buy low – as you possibly did in 2009 – and exit when the prices are at their peak. As shown in the chart above, there is a likelihood that the median price will flatten or even decline. We base this on a number of reasons.

Why Queens House Prices Could Fall

The first reason is that of market cycles. The US economy has gone through cycles of boom and bust. In boom cycles, the price of most things usually goes up. The price then burst when the cycle ends. The current economic growth passed ten years in July this year. This makes it the longest phase of expansion, which increases the chances of a downturn.

In recent months, signs that the economy could weaken – and possibly go to a recession – have increased. In August, the yield curve has inverted three times. A yield curve usually inverts when the short-term government bonds yield better than the longer-term bonds. This happens because investors are afraid of the future of the economy. The inversion of the yield curve has predicted 7 of the past recessions.

Second, the trade war is increasing the likelihood of the labor market being affected. Many companies in the United States have either paused investments or are considering doing that. This is because they are unsure of how the trade war will end. If the uncertainty continues for a long time, there is a likelihood that the unemployment rate in Queens will increase. This will affect the pricing of the housing market.

Third, New York and other high-tax states are seeing more people leave. These people are leaving to other low-tax states. Indeed, a number of the biggest employers in New York have started moving to other cities. The outward movement of people is not a positive thing for the housing market.

Fourth, the Federal Reserve could continue hiking rates. In the July meeting, the officials decided to slash rates for the first time in a decade. This is after increasing rates by 4 times in 2018. While lower rates are better for housing, the officials are torn about cutting further or leaving them where they are. If they decide to increase rates further, it could have a negative impact on the economy.

Finally, there are signs that the housing market is getting saturated. In New York alone, there are more than 20,000 new apartments coming to the market this year. In Queens, the number of towers being constructed has been on an upward trend. Almost 4,000 units are coming up in the Queens area. This saturation could make the prices decline, especially for old houses.

Summary

The housing market in Queens – and in the US – has been on an upward trend in the past decade. However, there are signs that the bull market is coming to an end, which means that the prices could start falling. Therefore, as a homeowner or investor in Queens, this is the best time to consider selling before the houses fall.

Congress Extends Refinancing Plan That Can Save Homeowners Thousands A Year In Mortgage Payments

Congress Extends Refinancing Plan That Can Save Homeowners Thousands A Year In Mortgage Payments

House prices are rising in the United States. This is simply because of the strong economy, the low unemployment rate, slightly better wages, and the demand of housing from foreigners. The historic low interest rates have also contributed to the surge in housing prices. The government has done a few things to make the housing industry affordable to many people. In this article, we will look at some of these programs and how you can use them to buy a house.

HARP Program

In 2009, following the global financial crisis, congress passed the Home Affordable Refinance Program (HARP) to help underwater refinance with lower rates. This helped them afford homes at a time when the economy was going through challenges. The program, which was modified severally in over ten years, helped people refinance up to 125% of the value of their homes without insurance. However, the program ended in 2018, when the demand for those refinancing slowed down.

HARP Alternatives

Today, it is not possible to access HARP because it expired in 2018. Still, there are alternatives that you can use to finance your house purchase.

The first alternative to HARP is the High Loan-to-Value Refinance option that is offered by Fannie Mae. This option offers refinance opportunities to borrowers that have Fannie Mae mortgages. The borrowers eligible have a history of paying their payments on time. However, these borrowers have an LTV ratio for a mortgage that is bigger than the maximum allowed. The borrowers using this facility benefit in four main ways.

They reduce the monthly principle and interest payments. This is an essential thing at a time when most Americans are living paycheck to paycheck. They also have lower interest rates, shorter amortization term, an a more stable mortgage product.

To qualify for the high loan-to-value program, you need to pass a number of qualifications. First, as mentioned, you need to have a Fannie Mae mortgage. Second, you must have a good track record paying back your mortgage. In this, you need to have no 30-day delinquencies in the past 6 months and no delinquencies that are bigger than 30 days. In addition, the mortgage that you are refinancing must not have been previously delivered as a Fannie Mae DU Refi Plus or Refi Plus mortgage. Finally, you must have at least 15 months between the Note Date of the mortgage that you want to refinance and the Note Date of the high LTV refi mortgage. You can check whether you qualify for the program using this link. The table below shows the minimum LTV ratios.

The second option available to you is the Enhanced Relief Refinance Mortgage that is offered by Freddie Mac. This product provides opportunities to borrowers who have mortgages with the company and those who are making timely payments but are unable to take advantage of the no-cash-out refinance offering. They are unable to do this because the new mortgage is more than the maximum LTV limit. To qualify for this relief program, you need to meet a certain criterion.

First, you need to have interest in reducing your principal and interest payments. Second, you want to reduce the monthly principal and interest on your First Lien Mortgage. Finally, you want to refinance into a more sustainable mortgage that promotes long-term home ownership. Some of the mortgage products that are available are convectional 15-, 20-, and 30- year mortgages. The table below shows the minimum LTV ratios for this program.

Final Thoughts

Home ownership is the ultimate American dream. While buying a house is always a difficult thing, these two options that are backed by the government can help you accelerate your dream of owning a home. Before you enroll, it is essential that you take your time to discuss this with a qualified financial advisor who has been in the industry for many years.

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