5 Do’s and Don’ts of Investing in Real Estate

Owning real property is a goal for many investors. When done properly, investing in real estate can offer a number of benefits for individuals including the ability to diversify income streams and capture long-term capital appreciation. However, there are a number of ways investors get it wrong when it comes to real estate and the costs can be quite significant.


As you consider whether investing in real property is right for you, keep these key considerations in mind.


Do: Consider real estate as a diversification tool. One of the benefits of owning real property in addition to traditional investments like stocks and bonds is the diversification it can provide to your income and asset holdings. Having multiple sources of income helps reduce the impact on your finances, should one stream dry up. The real estate market isn’t directly correlated with the stock market either, so holding both types of assets can be a good thing.

Keep in mind that real estate can only help diversify your assets if it’s a component of your net worth – not a big piece of it. Also, consider location as part of your diversification strategy as physical location is a main driver of a property’s relative value. It is important to be familiar with the local market, but don’t overlook the added risk if your own home is in the same community. Of course being a long-distance landlord carries a different set of risks, so try to find a balance.

Don’t: Over-concentrate in one asset class. Just as real estate can provide diversification, it can just as easily concentrate your holdings in one volatile asset class. Investors just starting out may have a higher risk of real estate concentration risk as the property may represent a much larger piece of their overall net worth. Why may this be a bad thing? The real estate market can be volatile and while you can control how the property is maintained, the majority of factors that drive local and national markets are outside of your control. These factors can range considerably. Consider the impact of a major employer moving in (or out) of a community, changes in interest rates, sharp increase to property taxes, and changes to the public services offered in a community.

Do: Consider an investment property if your cash flows are already strong. Real estate can be quite cash-intensive so if you’re holding too much excess cash and find yourself with a large surplus each month, an investment property can be one way to put those funds to work for you. Real estate is unique in that it requires a lot of cash upfront (down payments greater than 20 percent are common) and ongoing cash reserves to maintain and cover for ordinary expenses, but the investment self is highly illiquid. Unlike a traditional investment where you can sell off some of your stocks as needed to raise a lump sum, you cannot sell a room in your property. Unexpected repairs, prolonged vacancies, or past-due tenants can lead to financial problems if cash reserves are light.


Don’t: Rush through your cash flow projections. As any professional real estate investor would tell you, the numbers have to work. Particularly when investing in a buy-and-hold property, your cash flow assumptions must be solid to help ensure you’re making a good investment. Do extensive research to obtain accurate income and expense figures and consider building out a model to tie it all together. A standard model should include provisions such as the cost of capital, expected vacancy rate, taxes, and a discount rate, which is essentially your required rate of return on the investment.

Cash flow modeling is a critical step before making a purchase, as real estate investing carries more risk than traditional investments. Not only is real estate illiquid, but it can actually have a negative value (being “underwater” for example) whereas with stocks, you can’t lose more than your investment.


Finally, consider scenario analysis as part of your cash flow projections. What if you were to invest cash in the market instead of buy property? What tax benefits may you sacrifice by renting your former primary residence instead of selling it? Depending on your specific goals, real estate may or may not be the best way to get there, and cash flow modeling can help you figure that out.


Do: Talk to someone who already owns an investment property. One of the best ways to educate yourself is to speak with someone who’s already faced the same challenges. New real estate investors are often surprised how much work being a landlord can be. It isn’t as easy as it looks on HGTV!


Hiring a property manager is an option, but will impact your cash flows. As a landlord, you’ll also need to ensure compliance with the numerous local and federal laws. Some states, such as Massachusetts have very strong tenant rights laws. Landlords may expose themselves to financial and legal risks if they don’t comply with housing discrimination laws, proper escrow procedures, building codes, and so on.


Investing in real estate is attractive to many individuals who like the idea of having a tangible asset with passive income potential. However, it is important to objectively assess the opportunity and be realistic about your potential net income after taxes. As an individual investor, it can be challenging to find properties with sufficient cash flow potential to justify the risk and opportunity cost, especially as there are many professionals with a whole infrastructure behind them that are trying to do the same thing.


Why You Need A Professional On Your Team When Buying A Home

Many people wonder whether they should hire a real estate professional to assist them in buying their dream homes or if they should first try to go through the buying process on their own. In today’s market: you need an experienced professional!

You Need an Expert Guide If You Are Traveling a Dangerous Path

The field of real estate is loaded with landmines; you need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and is ready for you to move into can be tricky. An agent listens to your wants and needs, and can sift through the homes that do not fit within the parameters of your “dream home.”

A great agent will also have relationships with mortgage professionals and other experts that you will need in order to secure your dream home. 

You Need a Skilled Negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands, of dollars. Each step of the way – from the original offer to the possible renegotiation of that offer after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.

Realize that when an agent is negotiating his or her commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family?

If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal. 

Bottom Line

Famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

Post courtesy of keepingcurrentmatters.com


2 Major Myths Holding Back Home Buyers

Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership,” which revealed that eighty percent of consumers either are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent.”

Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:

Consumers are often unaware of the option to take out low-down-payment mortgages. Only 19% of consumers believe lenders would make loans with a down payment of 5% or less… While 15% believe lenders require a 20% down payment, and 30% believe lenders expect a 20% down payment.”

These numbers do not differ much between non-owners and homeowners; 39% of non-owners believe they need more than 20% for a down payment and 30% of homeowners believe they need more than 20% for a down payment.

While many believe that they need at least 20% down to buy their dream home, they do not realize that programs are available that allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

2 Major Myths Holding Back Home Buyers | Keeping Current Matters

As you can see in the chart above, 53.5% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

6 Amazing Tips on Turning Real Estate Into a Real Fortune

At least 30 U.S. billionaires made their money from real estate; some say that it’s the greatest way to create real wealth and financial freedom.

These six tycoons and members of The Oracles suggest how you can invest $100,000 or start with nothing.

1. Start small.

Although I’m a businessman first, I’ve always been a part-time real-estate investor. You can do both, too. Have a business or career that creates positive cash flow, which you can diversify into part-time real estate investing. I’ve done it for many years.

If you’ve never invested in real estate, start small and don’t use all your money. No one’s ever looked back and said, “My first deal was my best.” You’ve got to learn how to read the contracts, build your network of specialists—for example, lawyers and realtors—and develop a good eye for it. This only comes from experience.

The beauty of real estate is that you can learn the ropes while starting small: find some cheap properties, like single-family homes, renovate-and-flips, multi units, or commercial properties. Try to commit as little as possible while you get some notches under your belt. Joel Salatin, my mentor, always said, “Make your mistakes as small as possible without catastrophic consequences.”

If you have zero cash, maybe do wholesale deals. A business partner, Cole Hatter, and I created a real-estate program teaching you how to put a property under contract for very little money down, sometimes less than $1,000; you sell that contract to another buyer before the contract expires. Worst case: you just lose under a grand. Best case: you make $5,000-15,000 positive cash flow that can be reinvested in long-term holdings. Tai Lopez, investor and advisor to many multimillion-dollar businesses, who has built an eight-figure online empire; connect with Tai on Facebook or Snapchat.

2. Think big.

It’s easy to give up on the real-estate game because you don’t have any money, but it’s the deal that matters, not how much money you have. Chase the deal, not your budget.

I know a guy who saved $50,000 and started chasing $200,000 deals. First of all, you can’t buy more than four units with that budget. The problem with four units is that each can only produce maybe $1,000 or $2,000 per month. And that’s only after you’ve done thousands of dollars in work around the units to make them rentable in the first place. That math isn’t difficult—there’s just not enough money to make it worthwhile.

Smart Tips for Decorating Your Apartment on a Budget

Following simple guidelines can help you decide when to splurge and when to save when decorating your apartment.

Decorating a new apartment can quickly go from exciting to overwhelming, especially if you’re on a tight budget. As a renter moving into a new apartment, you want to make your place feel like your own home, but without spending a ton of money every time you move. Herein lies the eternal rental decorating dilemma: Which items should be higher quality, and where can you get away with more frugal options? If you follow this set of savvy furnishing guidelines, your temporary digs can look great without breaking the bank.

Here are some rules to decorate by.

decorating your apartment

Choose quality when it affects your quality of life.

While it’s tempting to buy items at the lowest prices possible, you also want your purchases to add value to your life. So it’s worthwhile to invest money into certain furnishings while being more thrifty with others.

Save on: Decor

All home decor has to do to make your life better is look good. It doesn’t have to cost an arm and a leg to do it. You can find just about any style of wall hanging, throw pillow, or faux plant at discount retailers like Target or Ikea. Or find something truly original at consignment and thrift stores. “Go to a second-hand shop, choose pieces you like, refinish them yourself, and update the hardware on it,” says Debra Duneier, New York City interior designer and owner of EcoChi. “It’s good for the earth and your budget.”

Splurge on: Your mattress set

Great sleep is vital for a healthy body and mind, and purchasing a great mattress makes that possible. Buy one that’s new and high-quality, and it will last at least a decade. Though mattresses can be pretty costly, you can still find ways to get a good one at a decent price.

“Find name-brand mattresses at outlet stores, and look for sales at certain times of the year,” Duneier suggests. You can also test drive a mattress in a store and then bargain shop online.


decorating your apartment

Accent pieces are optional, good furniture is not.

Since you’re not buying for the long-term as a renter, you don’t want to compromise your savings when putting together your temporary home. But there are some items you don’t want to buy cheap, because cheap usually means flimsy, and you’ll end up having to re-buy them every time they fall apart.

Save on: Curio cabinets, end tables, and window treatments

Furniture that doesn’t do heavy-lifting, like end tables or display cabinets, can be less high-end. This is especially true for items you know you won’t reuse in your next apartment, like curtains or blinds.

“Whatever you buy for your windows, you probably can’t take with you because windows are a different size everywhere you live,” cautions Duneier. “But, you can find knock-offs of the latest styles, which saves you money,” she adds.

Splurge on: High-use furniture

Sturdy furniture made with quality materials is imperative for anything you’re going to sit or lie on every day, such as the bed frame for your master bedroom. If they need to support your weight and abuse day in and day out, be willing to shop for quality materials and construction—and to pay for it.


decorating your apartment

Cater to your unique lifestyle.

Do you have kids or pets? Will you entertain a lot or spend most nights out on the town? Do you travel for work, or are you a work-from-home warrior? The answers can affect which items you should splurge on.

Kids? Splurge on: Fabric-covered furniture

With kids or pets, “make sure you buy darker, durable fabric that’s stain- and spill-proof,” Duneier states. To determine if something will stand the test of time, ask lots of questions in the store, read online reviews, or buy and test something that has a good return policy.

Work from home? Splurge on: Office furniture

If you work from home, spend money on your office chair, Duneier advises. You clock lots of time there, so you should make it comfortable. Ergonomic chairs and computer stands are critical to avoiding injuries.

Never entertain? Save on: A dining set

While an expensive dining set might be the best investment for a frequent entertainer, if you don’t do much hosting, your dining area might not get much use. If you typically eat out or in front of the TV, you can get away with a dining room table that will last you through your next apartment, rather than your next decade. After all, your next apartment might not even have a separate dining area.


Post found on trulia.com

Raising Rent Without Feeling Guilty

Year-over-year inflation means that raising rent is inevitable for most landlords. However, it can be hard to pass the financial burden along to tenants, especially if they’re long-term and have a good track record.

Here are three ways to increase rent without resentment:

  1. Add a clause in your initial rent agreement.

    Telling tenants ahead of time that rent will increase 2-3% each year is a good way to alleviate any shock that comes from raising the rent when their lease expires. If they ask, explain that a small increase each year helps cover taxes and minor repairs.

  2. Include details in a letter.

    Typically landlords send out a letter at the end of a lease to renew or go month-to-month. This is a good time to introduce the new rent price and explain your reasons. Did you install new countertops or upgrade the storage in your building? Make sure your tenants know that!Pointing out improvements can help take away the sting a price increase, and helps tenants feel confident that their money if going back into improving the living conditions.

  3. Keep rent raises to a minimum.

    In the case of owner-occupied buildings, many landlords choose to take a low maintenance and reliable tenant over a small increase in rent each month. If you’re in it for the long-haul, it might not be worth it to potentially drive good tenants out. However, if you make the yearly increases small there’s a very good chance they’ll stick around.

  4. Distribute the costs.

    If you feel uncomfortable about raising the rent with a monthly fee, you can always consider changing how you charge for utilities. For example, if you currently cover water and electricity, inform the tenants that they will now be in charge of paying the bill and include it in their new lease. This is an especially good option if part of the reason you need to increase rent is higher utility bills.

Post found on fourwalls.rentler.com

8 Home Decor Trends That Will Be Out in 2018

Millennial pink, two-toned cabinets, and brass hardware are all going to have a serious moment in 2018. But, similarly, there are plenty of trends also on the decline. We asked some of our go-to designers and experts from Trulia’s Design Panel to fill us in on which decor trends are losing steam. While we may not agree with all of them (say it ain’t so, granite!), we understand why some people are moving away from these styles.


1. Exposed Lighting

Edison bulbs and exposed track lighting have been one of the biggest trends in lighting in recent years, but designer Hannah Crowell of Crowell & Co. told Trulia it’s finally time to let it go. “I am a lover of all things vintage and appreciate a nod to the past, but it just became too overly saturated,” Crowell says. David Charette of Britto Charette agrees: “There’s no reason to have exposed track lighting; it can be recessed in drywall for a much cleaner and aesthetically pleasing look.”


2. Granite Countertops

Even though this material is in just about every kitchen these days, people are starting to favor countertops that are more versatile and low-maintenance, like quartz. “Granite is durable, I will give it that, but it lacks the beauty of marble or the sleekness of quartz,” Crowell told Trulia.


3. Bamboo Flooring


Simply put: “Bamboo flooring is out, out, out,” Jay Britto of Britto Charette told Trulia, who explains that this material has low durability and has been oversaturated in the industry. Another reason: Bamboo was once hailed as an eco-friendly flooring option, but concerns have been raised about the negative effects it has on biodiversity and carbon emissions. Say no more.


4. Open Shelving

“Something that looks great in photos, but not in real life, is open shelving in a kitchen. I don’t have that kind of space to just have décor items stacked on top of each other,” says TV personalityand designer on the new season of Trading Spaces, Sabrina Soto.

5. DIY Storage

Thanks to Pinterest, millennials are all about embracing DIY ways to improve their homes. However, sometimes this approach is less than appealing. “Repurposing items like egg cartons and toilet paper rolls makes your space look junky,” Layne Brookshire of Ms. Placed Professional Organizing told Trulia.

6. Rose Gold

“Rose gold is finally gone,” says Genevieve Gorder, a designer on the upcoming Trading Spaces reboot, of the metal that’s reigned supreme for years. “People are moving toward more of a mixed metal palette and more muted colors.”

7. Reclaimed Wood

Apparently, there is too much of a good thing — even when it comes to rustic, eco-friendly reclaimed wood. “I think we have been phasing this one out for a bit and I am hopeful this trend continues,” Crowell told Trulia.

8. Bohemian Tapestries

No matter how much you love the word “groovy,” next year is when psychedelic, ’70s-inspired wall hangings are officially over. “These guys had a dormant period from around 1980 to last year, and I think they are headed back into hibernation,” Crowell told Trulia.

Post found on housebeautiful.com