Tag Archives: investing

5 Tips Real Estate Investors Need to Know to Find Good Deals

With real estate prices reaching ever-higher highs in large swaths of the country, the availability of deeply discounted properties is drying up. And that means it’s getting tougher for real estate investors and home flippers to find great deals worthy of their time and cash.

“There are fewer foreclosures to buy, but there’s more interest in buying foreclosures,” says Daren Blomquist, senior vice president at ATTOM Data Solutions, a real estate data firm. “Competition, even at the foreclosure auction, is pushing prices up.”

Bank-owned property sales, foreclosure auctions, and short sales still made up 16.9% of single-family home and condo sales in the first quarter of 2017, according to ATTOM. But that’s down from 20.3% of sales a year ago.

“Back in 2007, you were getting 20% off the actual value” on bank-owned property sales, Leland DiMeco, owner and principal broker at Boston Green Realty, told ATTOM’s Housing News Report. “Now you have them selling for 5% off, if that.”

So how can established and aspiring real estate investors and home flippers find a real deal?

Tip No. 1: Be proactive and look for off-market properties

Some landlords prefer to quietly shop around their properties to investors instead of listing them publicly. This way, the owners don’t upset any tenants currently living there.

“There is quite a bit of the pie that does get moved around, legitimately, but just off-market,” DiMeco told ATTOM.

So would-be investors shouldn’t wait for property owners to find them—they should find these folks themselves.

“If you like a neighborhood, you can go knock on doors,” Blomquist says. There might be “homeowners who may want to sell and don’t even know they want to sell yet.”

Tip No. 2: Act fast and pay with cash

There are still deals to be had—if you act quickly, says real estate investor Brandon Turner, author of “The Book on Investing in Real Estate With No (and Low) Money Down” and “The Book on Rental Property Investing.” He owns 52 rental units in 18 properties and has flipped about a dozen homes in Grays Harbor County in Washington.

“You have to work faster than everyone else,” he says. “I try to make an offer within 24 hours of a new listing coming on the market—the same day, if possible.”

Paying all cash can also sweeten the deal for sellers who might have multiple offers, he says.

Tip No. 3: Don’t ignore potential tear-downs

Real estate investors might not initially see the value of buying an overpriced, small, or run-down home within the city limits. But many of these homes in desirable locations can be sold to a developer to be torn down. Then a multifamily building or larger home can go up if the zoning permits it. And that can translate into some serious moolah.

It requires some vision and a bit of a leap of faith. With a potential tear-down, “it may not be a good deal to buy it as a single-family home. But if you can buy it for what it could be, it can be an excellent way to find value and deals,” Turner says. However, this approach is not without risks and obstacles.

“If you’re going to build a new house, it takes a good while to get all the permits,” he adds. “The danger is if the market begins to decline, you might be unable to sell it.”

Tip No. 4: Seek out nasty, smelly homes

Investors shouldn’t shy away from hardcore fixer-uppers and “nasty” homes, says Turner. That’s because there is not as much competition for these potential diamonds in the rough. Many lenders won’t issue loans on these properties if they’re in really bad shape.

“The stinkier the house, the better,” Turner says. “Smells are easy to fix. A good coating of oil-based primer, new carpet, and cleaning will take care of almost any smell.”

He typically looks for the “nastiest house in the nicest neighborhood,” he says. Even homes in need of serious TLC can be profitable if they’re in the right location.

“You can’t fix a neighborhood, but you can fix the house,” he says.

Tip No. 5: Look in another city or state

Many would-be property investors living in pricey parts of the country would love to become landlords—but can’t afford to do so in their own cities. So they can consider buying in lower-priced markets such as the Midwest.

“Look in other geographies that aren’t in your backyard,” Blomquist says. Focus on places that are growing “that still have a lot of lower-priced inventory available.”

But they should make sure to do their homework first to make sure they understand the neighborhood they’re buying in and who their potential tenants or buyers would be. This includes how much they can realistically charge.

Landlords might need to hire property management services if they can’t afford to get there quickly if something breaks. And that eats into profits.

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Remember, becoming a real estate investor is still risky

Despite the stinky homes, investing in real estate might seem like a glamorous way to make a little extra cash—just look at all of those home flippers on HGTV! But in reality, it’s not risk-free.

Landlords sometimes have tenants who trash homes or don’t pay the rent on time. Flippers might encounter permitting problems or find costly structural issues in homes that cost quite a bit more than expected.

“We’re in a booming housing market. Everyone’s confident if they buy a piece of real estate it’s going to go up in value,” says Blomquist. “That’s true for the long term.

“This housing boom is on a lot more solid foundation than what we saw 10 years ago,” he says. “But you have to be very cautious because, in the short-term, we have seen … that prices sometimes do go down.”

Courtesy of realtor.com

Become a Real Estate Investor With 3 Easy Investments

Becoming a real estate investor is much more feasible than most people think. There’s no question that real estate investing comes with risk, like any investment. But with risk can come reward, and real estate has that in spades.

“Real estate is one of the few investments where your upside is truly unlimited,” says Than Merrill, CEO of San Diego’s FortuneBuilders and CT Homes. “With the right property in the right location, you can make 15% to even 30% on your money.”

“You can make money in hundreds of different ways through investing in real estate, and that keeps it interesting,” says Realtor® Ed Laine, partner and broker at Miller Laine Properties in the Seattle area.

Here are three great ways the average investor can start a real estate portfolio.

Savvy investment No. 1: Rentals

People will always need to rent houses, says Laine, which can provide a steady income for landlords.

“A rental property is an investment that pays itself off over time,” says Laine, adding that he named his first two rentals “Son No. 1’s college account” and “Son  No. 2’s college account.”

Owning a property and renting it out allows you to grow your monthly income—or at least make enough to cover your costs.

“I don’t think of it as ‘buy and hold,’ but ‘buy and collect checks,’” Laine says. Of course, he’s partly kidding—anyone who’s been a landlord knows there are times you have to deal with renters who pay their rent late, flooded toilets, and other costly hassles.

Being a landlord can also offer major tax benefits. Most rental property owners can write off the mortgage interest and depreciation and generally don’t pay taxes on the income, Merrill notes. You can also use your rental property to claim deductions, such as repairs and insurance.

Savvy investment No. 2: House flipping

When you’re flipping houses as a real estate investor, on the other hand, it’s anything but “buy and collect.” In fact, this is a real estate investment strategy that requires a lot of work, acknowledges Merrill.

“Rehabbing properties remains one of the most lucrative real estate exit strategies, but it requires an acute attention to detail and a lot of experience to master,” Merrill says.

To make flipping profitable, carefully consider your property and how much needs to be done. Start with the purchase price and then figure out how much you’ll need to invest (whether it’s time, money, or both) to get it sparkling and sale-ready.

Collaborate with a trusted contractor to come up with the “after repaired value” and then compare it with the selling prices of properties in the area. Make sure the comparable properties are in the same school district and have as many similar characteristics as possible, from bedrooms and bathrooms to lot size and garage type.

Don’t forget to factor in closing costs and “carrying costs,” the mortgage and insurance you will be paying until the home sells.

Savvy investment No. 3: Real estate investment trust

Boy, does that sound complicated. But investing in a real estate investment trust, or REIT, could be the easiest real estate investment of all. A REIT is a way to increase the amount of real estate in your financial portfolio without requiring you to actually buy a piece of property. Modeled after mutual funds, REITs allow anyone to purchase stock in large-scale properties.

“I describe mutual funds as a pooled investment which allows a group of co-owners to employ the services of a professional asset manager. A REIT is the same thing, related to real estate,” says Warren Ward, owner of WWA Planning & Investments in Columbus, IN. “The main advantage of owning a mutual fund also applies to a REIT—immediate diversification.”

If you own a rental property or are flipping houses, you are dependent on that market specifically. If you’re not in the right area, your investment could be plunging. By contrast, owning a REIT allows you to diversify geographically and in the types of real estate owned—from residential to commercial.

Ward’s advice if you want to jump into the world of REITs is to stick with widely traded ones.

“Lots of brokers have sold their clients nonpublicly traded REITS, but their pricing is not transparent. That makes them hard to value and very difficult to sell if you need to,” he says.

Another benefit of REITs? You don’t have to collect rent checks or manage subcontractors, and you still own real estate. Maintaining a rental or preparing a house to flip takes a lot of work, says Rycal Investment Group founder and CEO Simon Calton.

“Countless arduous tasks will eat into your time and, if you’re not careful, your capital,” he says.

By contrast, he considers REITs to be an “armchair” investment, as there are no management requirements and no surprise maintenance issues.

“REITs and real estate funds will often yield higher returns and have more security, but cost less and hold less risk for the investor than direct property investment,” he says.

Courtesy of realtor.com

Real Estate Investing: How to Make Money in the Current Housing Market

Forecasters say that mortgage rates above 4 percent are here to stay. With that in mind, it’s important to realize what high mortgage rates mean and how they affect your current and future real estate investments.

As a seasoned real estate investor and house flipper, I’ve seen a lot of changes come and go in the housing market. I’ve come to realize that even the toughest and hottest housing market can still leave investors reaping the rewards.

Right now, prices for houses are higher due to the extremely low supply of homes. Very few homes are being built, especially in the low end-range. While it may seem like it’s slim pickings in terms of real estate investing, there are still good deals available; it just takes time and savvy investing smarts to find them.

Even though there are fewer listings in today’s market, rising prices present opportunities for people to sell homes that need work. While there are opportunities in both buyers’ and sellers’ markets, my advice when it comes to real estate investing is to always leave yourself plenty of room for unknown costs or changes in the market. That way, you can flip in good, bad or even mediocre markets. The trick is never assuming prices will increase and accounting for all costs. Investors get in the biggest trouble when markets change and they bought based on estimated future appreciation.

Real estate agents have also felt the effects of the current housing market. Along with the market changes and higher rates, real estate agents are competing in a smaller pool of homes. There are many buyers and prices are rising. Normally this makes a good seller’s market, which is good for agents, but this market is different because there are so few homes for sale. (Agents love a seller’s market, but not when there are no homes to sell!) They are suffering under fewer sales and less money, causing many to drop out of the business altogether. The bright spot for investors is that agents still in the game have much more time on their hands and investors may be able to find hungry agents who have both the time and the drive to find them deals.

As far as worrying about the current political climate, I don’t think the market will change much based on new policies. If anything, lending guidelines will get looser, making it easier to get loans. Prices are higher, but if you invest wisely based on ratios and profit margins, you can make money with low or high prices. It can be tougher to get cash flow on rentals in a hot market, but there are many markets in the U.S. that are still great for rental property investing. I think supply and demand are the biggest factors when looking at housing prices, and supply is not going to increase for single-family homes any time soon, so bear that in mind.

While rising mortgage interest rates can hurt buyer demand and buying power, you can still make money in real estate no matter what the market is like. It takes a huge jump in rates to significantly affect buying power.

Furthermore, I don’t think rates will cause a housing crash, either. The last crash happened because of inflated demand caused by loose lending guidelines. The builders over-built, and it all started to crumble when everyone realized how many people who should have never gotten a loan in the first place got one they really couldn’t afford. This time around, the people who are getting loans have much stronger financial capabilities and stability. There is also not the over-building that caused issues we saw in the past. So, even if there is a crash, many investors will do just fine. In fact, the last crash created more tenants and increased rents in some areas, while prices decreased. The trick is creating equity by purchasing below market, buying with cash flow, and not over-leveraging.

Regardless of the current interest rates, people will always buy and sell homes, which means there will always be opportunity to make money flipping or as a landlord.

Post courtesy of RISmedia.com

3 Real Estate Investments That Produce Good Returns

Since the early days of America’s Wild West when homesteaders competed in land lotteries, the allure of owning your own piece of property has never wavered. Real estate investing is not just one of the most glamorous investment vehicles today, but, according to Entrepreneur, if done right, it can also be one of the most profitable.

Of course, as with most big goals in life, this is often harder to achieve than it sounds. From narrowing down your property options and picking a geographic area to invest in to figuring out how to fund your initial investment, there are many things to think through before making your first real estate investment.

In this post, learn about three real estate investments that can reliably produce good returns.

Residential Multifamily Units
For the purposes of real estate investing, a multifamily building can be anything from a simple duplex with a shared wall to a full-on multi-story apartment complex complete with parking garage and onsite amenities.

The key here is that you have multiple potential income streams from a single piece of rental property. As one multifamily building investor tells Business Insider, “the more doors, the better.”

With a multifamily property, you can be making money even if one or two units lie vacant for a month or two, whether due to maintenance needs or just a temporarily sluggish rental market.

Commercial Multi-Unit Office Space
With this type of real estate investment, here again you see a multi-unit concept, but instead of renting to singles, couples or families on the residential side, you will be renting space to solopreneurs, partnerships and corporations on the commercial side.

As My Stock Market Basics points out, you may earn less per unit on commercial property rental income than you would with multi-unit residential property rental income, but in exchange you will devote less time, effort and energy (not to mention money for repairs and maintenance) by investing in commercial property.

If you have the equity to get into the commercial real estate market in a growth area, you can be earning a stable return on investment without many of the typical headaches of dealing with tenants on the residential side of the real estate market.

Real Estate Funds
If, for some reason, you are not keen to invest the sweat equity into commercial or residential real property, you can still deal yourself into the real estate investment market by participating in real estate funds.

These funds work much like mutual funds do, using trusts or crowdfunding to help a group of real estate investors acquire an interest in residential or commercial property without the headaches that can come from outright ownership and day-to-day management.

Investopedia recommends these possibilities:

  • Real Estate Investment Trusts (REITs) – REITs offer hands-off investing with dependable dividend payouts at 90 percent of the fund’s taxable income.
  • Peer-to-Peer (P2P) Lending – Often called crowdfunding, P2P lending gets you into the real estate investment market for a low initial investment and a potentially high (5-12 percent) return.
  • Dividend Stocks – Look for “dividend aristocrat” stocks, which are so labeled because they pay increasingly greater dividends from one year to the next.
  • Index Funds – These are mutual funds tied to the real estate market index.

With these three options to choose from, you are likely to find a real estate investing entry point that works for your budget, available time and goals. The best thing about investing into real estate is that there really is no one “right” or “wrong” strategy to use that can guarantee success. Rather, by doing your research, planning carefully and always aiming to operate from a cash surplus, you can set yourself up for ultimate success.

Courtesy of rismedia.com.

4 Real Estate Trends for 2017 Investors Should Be Aware Of

Photo credit: ImageFlow / shutterstock.com

Real estate investing carries a certain degree of risk, but it also has the potential to be very rewarding. One factor that may contribute to your success as a property investor is the ability to adapt when necessary. Staying abreast of the latest developments and trends in the commercial and residential markets is important if you want to stay ahead of the curve. As 2017 looms on the horizon, here are the most significant trends that may impact real estate investors in the near future.

1. Drone Technology Takes Off

Earlier this year the Federal Aviation Administration (FAA) approved the use of drones in commercial activity. For real estate agents, that opens the door to new possibilities in terms of how they show available properties. That also expands the scope of how investors are able to vet homes, office buildings or other potential investments.

A drone video feed could allow you to view a property from every possible angle without having to see it in person. You can check for any possible defects in the structure that are visible to the naked eye before moving on to a more in-depth inspection. That could save you time and money in the long run if the drone video exposes a serious flaw. (For more, see Delivery by Drone: New Rules for Flights.)

2. Global Economic Growth May Be Muted

In terms of the worldwide economic forecast, the global economy is expected to grow by 3.4% in 2017, according to the International Monetary Fund (IMF). While that’s an increase over the 3.1% growth rate for 2016, it still represents a slight downgrade of the IMF’s original forecast. That was triggered by a dampening of the economic outlook in the wake of the U.K. Brexit and a U.S. economy that didn’t grow as quickly as initially expected. (For more, see Brexit’s Effect on the Market.)

While global markets were shaken after the recent presidential election, they’ve more or less rebounded. However, now that the Federal Reserve has raised interest rates by 0.25%, the second increase in a decade, there may be a dampening effect on stocks. Taken together, those factors could work to quell the real estate market to a degree, as well. Investors may need to consider how foreign markets may be affected by a global slowdown and what that could mean for U.S. real estate.

3. New Home Construction Will Regain Steam

After a period of slowdown, 2017 looks like it may be the year that housing starts begin to climb once again. Kiplinger’s predicts that single-family-housing starts will rise 11% in 2017, up from the 9% increase estimated for 2016. With inventory 4.3% lower than it was a year ago and home prices continuing to rise, there’s an opportunity for builders to fill the gap in demand.

Commercial construction is also expected to see some positive growth in the new year. According to Dodge Data & Analytics, U.S. construction starts will grow by 5% for 2017, totaling $713 billion. That’s an improvement over the 1% increase in commercial construction reported for 2016, although it falls short of the 11% gain reported in 2015. While the increases on both the residential and commercial sides are modest, they’re still a positive for investors whose focus is on ground-up properties.

4. Optionality Will Reshape the Way Properties Are Used

The sharing economy has had an impact on the way people work, vacation or simply catch a cab, and it’s also leaving its imprint on the real estate market. According to the Urban Land Institute (ULI), optionality is adding a new dimension to the way that property investors – and their tenants – define the use for a particular space.

Co-living is perhaps the most visible example of this phenomenon. Companies such as Common, WeLive and Commonspace are putting a new spin on apartment living by offering units that combine private living space with communal areas for cooking, dining and socializing. A 2017 forecast for the U.S. and Canada done by ULI and PWC features optionality front and center as developers seek to identify the best use for investment properties. (For more, see Is Cohousing Right for You?)

The Bottom Line

These are just some of the things set to influence commercial and residential real estate in 2017, and they may afffect some investors more than others. As the new year gets underway, reviewing your property investments while analyzing your goals for the next 12 months is a wise move. Understanding what trends are poised to take off can make it easier to spot potentially valuable investment opportunities going forward.

Post courtesy of Investopedia.com

6 Reasons To Invest In Multifamily Real Estate

With interest rates at historic lows and a strong rental market encompassing much of the country, people are investing in real estate. Many investors automatically think “single-family home” when they set out to buy a property, and while this may be a smart move in cities where the rental market is hot, like Austin, TX, or Provo, UT, there are definite advantages to buying multifamily real estate that should not be overlooked.

Here are six tips from real estate pros on why buying a condo, duplex, or townhouse can be a wise decision.

1. There’s less maintenance with condos and townhouses

If you’re buying a property with a homeowners’ association (HOA) that takes care of the exterior, you’ll have fewer landlord responsibilities on your plate. With condos and townhouses, everything outside your own walls is typically considered a common area, which your HOA takes care of using the dues you pay. These common areas usually include the landscaping around the building, the roof, parking garage, and amenities such as a pool and clubhouse.

Remember to factor in the monthly HOA dues before you invest: Dues in condo and townhouse communities could run you hundreds of dollars per month. “HOA fees often cause rental property to be a net loss every month,” says Lucas Machado, president of House Heroes in Florida. If you can still come out ahead after crunching the numbers, the next step is to make sure the HOA has adequate reserves. Do this by “requesting financial statements from the HOA,” says Machado. If the HOA is poorly run, you could be charged a special assessment fee to pay for a major expense. Finally, make sure you even can rent out the unit. “Renting out a condo or townhouse may not be possible under HOA rules,” says Machado.

2. You can save on taxes and insurance with a duplex

Think of buying a duplex as snagging a deal at a BOGO sale. A duplex is really one structure, but one that has been divided into two apartments, either side by side or upstairs/downstairs. As such, when you buy a duplex as an investment property, you can rent out one of the units and live in the other, or you can rent out both units. Maryland resident Maria Moser owns a duplex and reaps the benefits. “It is deeded together, so I have a single county/state tax payment and a single city payment as well as a single insurance payment,” she says. And there’s another bonus: “With two rents coming in, one [unit] can be vacant without any issues.”

3. It’s easier to get started in investing with a duplex

You typically need a bigger down payment to buy investment property than you do when buying a property you will live in. “When buying as an owner-occupant, a buyer may only have to put 3% or less down, while investors usually have to put at least 20% down,” says Mark Ferguson, a Colorado real estate agent and creator of InvestFourMore, a real estate investment website.

If you don’t have the down payment funds to buy investment property, you can still get in the game by buying a single-family home and living in it for at least a year (or whatever the lender requires) and then renting it out. “But most banks will not count rental income right away,” says Ferguson. “This can make it tough for investors to buy another house right away — their debt-to-income ratios will be high due to two house payments.”

To put this owner-occupant practice to work for a duplex purchase, you’d live in one half of your duplex and rent out the other. “When buying multifamily, rent is coming in while the buyer lives in the property, which will cause the rental income to be counted sooner and make it easier to buy another home,” says Ferguson.

4. You could make more money with a multifamily unit

The potential to earn more money — otherwise known as having “greater cash flow” in investor lingo — can be greater when you buy multifamily homes for sale. “The rent-to-purchase price ratio is almost always much better with multiunit investments,” says Casey Fleming, author of The Loan Guide: How to Get the Best Possible Mortgage. “I own a four-plex in Albuquerque [NM] and a condo in Rio Rancho, a suburb. They provide cash flow much better than a similarly priced single-family would have.”

5. Your odds of being on the “corner of Main and Main” are greater with a condo

To be successful in the landlord business, you need to own property in an area where people want to be. “Proximity to universities, colleges, and urban areas will always provide a steady stream of people who want to rent,” says Shawn Felker, a New York, NY, agent. Typically, you can get the best location, particularly in a big city, when you’re buying real estate in a building. By being in a building or complex, you may also be able to snag a condo with unique views or other appealing amenities, like a community pool, that will attract potential renters. This is where buying a condo can be a great choice — and the home’s value can appreciate significantly over time.

6. You’re looking for retirement income

Baby boomers have always broken new ground, so as this group approaches (or is in) their retirement years, they’re redefining the way they live. Many boomers choose to live in age-55-plus retirement communities. Others prefer to rent, so a shared-housing arrangement can present a great investment opportunity for homeowners. Empty nesters who have plenty of spare bedrooms can rent out one or all of them to fellow retirees, creating a sort of Golden Girls situation. If you do this, make sure you have a lease and specify house rules, such as a laundry schedule, which food will be shared, and who pays for which utilities.

 

Post courtesy of trulia.com