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Income Calculation

Apr 12, 2022

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Average ROI of Real Estate in 2022

Before you invest in real estate, there are a lot of factors to mull over when determining which investment will work most effectively to meet your financial goals. A return on investment (ROI) is one of the most significant details investors take into account to determine whether a real estate investment will be worthwhile. After all, the whole point is to make your money work for you, right? As many real estate investors know, it's not always a question of getting out what you put in. In fact, with the multiplicity of real estate investing options available on the market and variables that can affect any venture over the course of its term, projected returns don't always match up to reality. With that in mind, some investment options offer more reliable returns than others.In this article, we will take a look at the average ROI a real estate investor can expect in the United States, how to calculate it, and what you can do to maximize your return on investment. Quick Definition: ROI Return on investment is a metric used by investors to determine the total gain they will make from an investment project after accounting for the associated expenses. Returns are expressed as a percentage of the total amount you have invested. They indicate what percentage of that value you have gained back by investing.The higher returns an investment offers to the investor, the better it is considered to be. The real estate market is one of the highest return investments in the world.  Complications in Calculating ROI When you start to think about the viability of a real estate investment, it's worthwhile taking time to understand the external factors that could influence your overall ROI calculations. These may include the terms of your financing agreement and expense increases that occur outside the spheres of your control.For example, when a property gets refinanced or a second mortgage is taken, your interest may increase, or you may be charged refinancing fees which affect your bottom line. If you're the owner of a commercial or residential property, increases in utility rates, property maintenance, or property taxes can also impact the overall costs of your investments. Secondary calculations may be necessary to adjust your ROI expectations in this case.Certain investment types such as professionally managed commercial real estate syndications or REITs can bypass these additional expenses. How Do You Calculate ROI?When an investor calculates ROI, they essentially figure out the ratio of an investment's profitability compared to the amount spent on it. It might sound complex, but in most cases, it isn't. Generally speaking, the ROI of an investment is the total gains minus the total cost, divided by the expense of the investment. Here is what the formula looks like:(net gain - net cost) / net cost = ROIWith this in mind, it's important to note that many investments come with variable factors. These variables may include your investment strategy, the sum of money you initially borrow, maintenance and repairs costs, and your mortgage terms. Each can independently affect your ROI. Let's take a look at how to calculate ROI for various investment property scenarios. Resales and Cash Sales Imagine an investor purchases a vacant foreclosure property for $100,000 cash, and she knows that similar homes in good condition can sell for $200,000 locally. She spends $60,000 renovating the property and then takes it to the market with a resale price of $200,000. Let's have a look at the numbers:Net profit (200,000 - 160,000) / net cost (160,000) = ROI (0.25) = 25% returns.The investor leaves the deal with a 25% return on investment. Rental Investment Property To determine the ROI for a residential property, we add a few more steps to the ROI calculation. You can begin by calculating your projected annual rental income. A common way to achieve this is to look for the monthly rental value of similar properties in the area you want to invest in, then multiply this number by twelve.When you have your expected annual rental income amount, you can determine what the rental property's net operating income (NOI) will be. The NOI shows how much profit you make per year after accounting for all property expenses. Notably, we don't include the mortgage in these expenses, as the mortgage value is used later on. Some of the following expenses may contribute to your net annual costs:The purchase price or your down payment Monthly expenses, including insurance costs and utilities Tax expenses Improvements and maintenance costs And homeowners association or other applicable fees you payThe following equation helps calculate your net operating income.Annual rental income - annual operating expenses = NOIWith your net operating income, you can calculate your ROI like so:NOI (annual rental income - annual operating expenses) / mortgage value = ROI Multifamily Syndication PartnershipsIf you're looking for a passive investment, partnering with a professional syndicator means you can enjoy the returns without doing any work (or the calculations). Professional multifamily crowdfunding syndicators like Holdfolio allow investors to select which investments they want to participate in and invest the amount of money they choose.Holdfolio has vertically integrated property management, construction, and real estate investment experts to manage investments. This means passive investors have access to the excellent returns multifamily property offers without doing any of the work themselves.Holdfolio invests alongside their partners to ensure that everyone wins together. What's more, you can invest in commercial real estate for as little as $20k! If you want to experience the advantages of great returns in real estate investment without the burden of property management, contact Holdfolio today. What is the Average ROI in Real Estate? With so many different types of investment strategies and variables in the real estate spheres, it's hard to find a single average that encompasses the entire market. The S&P 500 Index has determined that the umbrella average ROI in real estate over the past two decades has been around 8.6%.However, there are limitations to this value. First, this value is measured across various investment strategies, such as residential real estate investment, commercial real estate investment, and REITs. Secondly, estimating the long-term average comes with limitations due to major market fluctuations. An example of this is the dramatic collapse in housing prices during the financial crisis in 2008 or the unprecedented economic turmoil of the covid-19 pandemic.Nonetheless, many investors and analysts alike use this number to determine whether a strategy or project is likely to deliver higher-than-average returns. Another value worth considering when you purchase a real estate investment property is the average ROI real estate investors in your local area see for their investments. What is a Good ROI for Real Estate Investors? Based on market standards, a good return is any return that exceeds the benchmark set by the S&P 500 Index average. That said, what any given individual considers to be good returns in a real estate investment can vary depending on their risk tolerance. As a general rule, high-risk investments have the potential to produce higher returns on investment than low-risk investments. However, this means that investors must have the financial backing to absorb the loss if their investment falls through.On the other side of the balance, risk-averse investors may be happy to gain lower returns for an investment that provides them with more certainty. How Can Real Estate Investors Get Above Average Returns? Profitable real estate investing is driven by the multitude of strategies and asset classes an investor has to choose from. Between commercial real estate, residential real estate, flipped property investment, real estate investment trusts, and other professionally managed investments like syndicates, investors can design their investment journey as they please.Whether you want to invest a lot or a little, manage your asset actively or enjoy an entirely passive investment, or choose between high-risk and high-returns or low risk and more certainty, real estate investments cater to nearly every investing appetite. Here are a few ways to get above-average returns with real estate. Diversify One way to increase your average return is to protect yourself from risk. When you diversify your real estate portfolio, you incorporate a variety of investments or asset classes into your portfolio. Diversifying can help protect you against potential risk because one asset class will respond differently to market shifts than another. For example, if you are invested in rental properties and the local market takes a hit causing the value of houses in the area to drop, a commercial real estate investment will not be affected in the same way.Diversification offers hedging against inflation and market shifts in any investment portfolio. So if you're not yet in the real estate market, a small real estate investment can help protect your finances and increase your average returns. Get Above Average Returns in Real Estate Investing the Easy WayThe simplest way to get above-average returns in your real estate investment is to invest with Holdfolio. Our partners receive a current average return of 19.33%, which is over twice the national average! What's more, Holdfolio investors are entirely passive, meaning there are no ongoing maintenance and management expenses attached to their investments, nor are there any demanding property management responsibilities. Our investment specialists perform in-depth market research to ensure projects produce consistently good returns for everyone. To check your return on investment with us, you can use Holdfolio's return on investment calculator. This tool factors in the amount you wish to invest and the duration of your investment to predict your total investment returns at the end of your term, making it easy for investors to calculate their return on investment.If you're looking for a completely passive commercial real estate investment that produces higher than average returns with reduced risk, talk to Holdfolio today. Alternative Ways to Measure Returns Return on investment is one metric used to determine how good an investment is likely to be, though it doesn't encompass all aspects that contribute to success in real estate investing. Investors and financial advisors commonly use several metrics, as outlined below, to build a more comprehensive picture of the profitability of an investment strategy when applied to a specific investment property. Cash on Cash Return Calculating cash on cash (CoC) return uses a similar formula to the ROI calculations, though it substitutes a few values to give you a slightly different picture of your investment returns.Rather than using your property price, you look at all the cash you have injected into the property (including the purchase price). Instead of calculating the difference between your rental income and your expenses, you look at your annual pre-tax cash flow. Here is the equation that determines cash on cash returns:Annual pre-tax cash flow / total cash invested = CoCCash on cash returns can vary depending on your location and market conditions. The range usually sits between 6% and 12% returns. Capitalization Rate The capitalization rate (or cap rate) is a ratio of the annual rental income a real estate asset produces to its current market value. Cap rates are an effective way to compare the profitability of different asset classes or localities. The cap rate is determined by dividing a property's NOI by its sale price, purchase price, or the fair market value (FMV) of the property. Here is the equation:Net operating income / fair market value = cap rateSimilar to CoC and ROI, the average capitalization rate of a real estate asset will vary depending on your location. The range is generally from 6% to 12%.Internal Rate of Return Calculating the internal rate of return (IRR) is how financial analysts, investors, and real estate professionals evaluate property over time. It compares a real estate asset's future value based on today's dollar, with the asset's current value to determine the profitability and risk involved in the investment.The calculation is somewhat more complicated than the above equations, though there are plenty of IRR calculators easily found online. Final Thoughts The average ROI real estate produces is a critical metric used by investors and financial analysts to determine the viability of any given investment. Most investors want to know their money is working hard for them and producing good returns. However, depending on the risk tolerance, some investors may have to sacrifice above-average returns to attain a more secure and low-risk investment option to grow their wealth.In general, diversifying your real estate portfolio is one of the best ways to protect your investments against potential losses and achieve above-average returns. However, for many, this will require a significant investment of time and resources to achieve higher than average returns.Investing in professionally managed commercial real estate with crowdfunding syndicators like Holdfolio is a popular way for passive investors to achieve significant returns for as little as $20k in the bank. If you want an entirely passive, low-risk investment that produces consistently excellent returns, contact Holdfolio today.
Sale House

Feb 8, 2022

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How to Invest 250k: Our Guide

Many people want to invest for retirement but feel they need to have millions to start. The truth is, $250,000 is enough to begin your journey towards an early retirement. However, you might want to consider longer-term investment strategies for growth. With such a big amount, you'll be relatively comfortable during retirement and might not need to leave your money in ISAs or savings accounts. The question is, what investments should you make with your $250,000? Presently, savings interest rates are below two percent, bonds are bubbling, and the stock market is volatile. While you may need the money for paying off your debts, helping your loved ones, or furthering your education, it's best to invest it and watch it grow, making you millions. Suppose you came into money through selling a business or inheritance you'll need to come up with an investment plan. When investing, the primary thing to consider is whether your investments will grow and continue to yield profits in the long term. The following investment ideas will keep increasing in value rather than fall.Property investment Investing in assets Investing in stock market Peer-to-peer investingHowever, before starting, it’s best to do your due diligence while considering other relevant factors like risk capacity and tolerance. The following are ways to invest $250k, grow your funds, and enjoy financial freedom. Investing in Real Estate Property Property investment is a great way to make long term wealth once you pick an area of preference like residential or commercial real estate. While 250k might not get you a great property in megacities like New York City, consider buying in a small city or an area with a growing and thriving student population. There are numerous properties to buy in these areas. You might decide to rent your properties out to young professionals in newly industrialized areas or students if you buy close to a school. Suppose you invested in a flipping project, you'll need to make some improvements which will take time before selling the house for cash. So, does a new investor make wise investment property decisions? Firstly, note that investing in a property isn't the fastest way to make money except through crowdfunding. You've got to invest time, pay attention to your investment, and ensure you're not buying a money pit. Secondly, consider researching the area you intend to buy in to avoid making mistakes.Property prices tend to rise sometimes, but in some megacities, they increase faster. Look for "up and coming" cities, and you're on your way to making money.An investment property will your tenants to pay off your mortgage overtime before their monthly rent payments will serve as a source of passive income for you. There are also numerous platforms to invest in, or you might consider looking into Real Estate Investment Trusts (REITs).One of the upsides of crowdfunding platforms is that they allow you to earn without being saddled with landlord responsibilities.  How to Get Started A platform like Holdfolio makes investing easy without looking for new tenants or taking a mortgage. With Holdfolio, you're eligible to invest with as little as $20,000. Your investments will be spread across many residential and commercial properties expertly chosen by the platform managers.While there are varying profits, Holdfolio investors enjoy an average return of ten percent or more. Thus, investing $250,000 in real estate through a crowdfunding platform like Holdfolio will ensure you earn more income passively. On the other hand, you might also want to look for an attractive 2 bathrooms, 2 bedroom rental property to buy. Rental properties were attractive investment options in 2021 due to low-interest rates, a trend we are hoping to continue seeing in 2022.The rental income value has also gone up. Peer-to-Peer Investing  You might want to consider peer-to-peer lending as an investment option. This lending option cuts out the middleman (the bank), allowing individuals to lend or borrow money for many reasons. Investors might want capital for a startup or investment purposes. Some lenders might want to support their vision. With peer-to-peer lending, you'll keep the interest for yourself rather than allow banks to take it. Interest rates are usually high with peer-to-peer lending, and presently, there's a low basic interest rate, so you might want to consider this investment option. The borrower's reliability is likely to determine how much you'll make in interest. You might earn more profit by lending to less reliable borrowers; however, you're taking more risk. Some peer-to-peer lending groups rate their borrowers according to their reliability. That way, you know who you want to lend your money to before deciding to proceed.Note that this isn't the only risk with peer-to-peer lending. Ensure you research the group you're using before making any real commitment or invest your money in safe options like real estate. Invest Your Solo 401(k) Into Real Estate  If you have a kind of self-employment income or own your own business, consider stashing away a considerable chunk of your income for retirement in a Solo 401(k). This account enables investors to save more for retirement than the standard 401(k). You'll make your contributions on a tax-advantaged basis to enable you to become eligible for lowering your tax bill when you contribute. What's more? It allows you to contribute close to the annual limit in Roth or traditional tax loans and savings. This way, you get to invest money directly into real estate funds or properties of your choosing. You can also use leverage when you have up to a quarter of a million dollars. Consider moving part of your funds into your portfolio. It helps if you invest in rental vacation homes, apartments, raw land, multiple investment properties, multifamily homes, or commercial properties.Finally, consider mixing promissory notes and hard money loans to other investors in your retirement account.  Investing in the Stock Market$250,000 is a large sum and will afford you the opportunity to spread your investments across many portfolios, which is best if you intend to invest in stocks and bonds. You don't want to invest your money in a single business or sector and risk losing it when there's an economic meltdown, do you?Don't forget to do your homework. While a business might appear exciting now, you need to check if it has the potential to succeed in the long term? Check the sector and its growth, management, and the founder's ambition. Are their ambitions realistic?It's best to conduct this check for every business you intend to buy shares in and ensure you monitor the stock market closely. If you use a broker, make sure to read their reviews.In the past, many investors preferred buying stocks to save for retirement through tax-advantaged retirement plans, like SEP IRA, Solo 401(k), or 401(k). More so, you might want to invest in bonds, index funds, growth stocks, and other securities using a brokerage account.Although you don't have any upfront tax advantages with brokerage accounts, you'll get the opportunity to invest in many ETFs, stocks, and others. More so, the account is more liquid than a tax-advantaged retirement plan. Contrary to the practice of retirement accounts charging penalties when an investor makes a withdrawal before their retirement age, it's easier to sell securities like stocks and bonds and to access funds without any penalty whenever you want. However, you'll need to pay capital gain taxes when you sell your securities.  Buy a Business While buying a business is a good investment option, it isn't for everyone and requires a hands-on approach compared to other options already mentioned. However, owning a business allows you to build something that could offer you long-term income for years to come. Suppose you buy a business, consider building it big that others can run it. You'll be responsible for overseeing the big picture planning while enjoying a passive income stream. How to Get Started While you might want to buy a local business or franchise, it's best to do your due diligence. Consider buying an online business with a fully-developed website, affiliate marketing, ads, product sales, etcetera. Another option is to start your own business. However, it requires extensive research to run an online or offline business and monetize over time. Who It’s Best For Owning an online business is a wise investment option for investors who don't mind putting in extensive effort to scale it. Thus, it's perfect for people who intend to build something and sell it later or earn passive income.  Investing In Assets Suppose all the options discussed above don't interest you; you might want to consider investing your money in assets. However, you've got to be sure you're buying what will increase in value over time. Some material assets to invest in which will continue to increase in value include the following:Antiques Art Precious metals like diamonds or gold Rare musical instruments Collectible items like rare vinylBefore embarking on any investment journey, consider talking to a financial advisor. Don't forget that no investment is entirely secure, and you might lose or make no profit. Given the USD volatility resulting in a depreciating or weak dollar sometimes, you might want to look offshore for stable but high-yielding assets to buy. Also, decide on the municipal bond ETFs for example: SMB, PVI, HYMB, CMF, PWA, NYF, CXA, INY, SFI, PWZ, and SHM.  Invest in CryptocurrencyLast but not least is investing in cryptocurrency. Although people thought crypto would not gain mainstream acceptance, that hasn't been the case. Presently, cryptocurrencies like Bitcoin are being adopted as a payment option, and Bitcoin ATMs have sprung up in some countries. Due to the large-scale adoption of crypto, investors are beginning to see it as a great way to grow their funds. Thus, cryptos like Bitcoin will soon hit $200,000 per coin. Suppose you'd like to invest in cryptocurrencies, you might want to start with Bitcoin. However, other coins like LiteCoin and Ethereum are cheaper but great too. You'll need a crypto app to safely store your coins until you want to conduct a transaction.Note that cryptocurrencies are volatile and fluctuate. An investor can gain today and lose everything tomorrow, unlike investing in real estate that will only continue to increase in value.  Investing In Real Estate for Extra Passive Income With $250,000, you're eligible to invest in real estate. Experts believe that real estate prices and rents will continue to increase in 2022, and the housing market will continue to grow stronger. Thus, now is the best time to enter the industry. While one investor might want to get personal loans to buy property, make a down payment, rent the property out and earn monthly income and regular cash flow, another may prefer a hands-off option like crowdfunding. If you want to earn passive income through real estate crowdfunding platforms, these are the top three to explore. Holdfolio As an expert in equity investment in multifamily value-added deals, Holdfolio sources all its deals personally. Fortunately, there are no extra fees like other platforms sourcing third-party deals charge. Investors enjoy direct access to talk with the sponsor, which is also the platform, unlike some platforms serving as middlemen between sponsors and investors. Previously specializing in single-family residential rentals, Holdfolio currently focuses on multifamily value-added deals. However, each transaction comes as a single property, meaning there aren't multi-property funds. Holdfolio invests its own money alongside investors' funds and offers complete bankruptcy protection with projected returns varying from 15 to 19 percent IRR.  Fundraise This crowdfunding platform offers a way for both non-accredited and accredited investors to invest in real estate properties through private funds. Since its establishment in 2012, Fundraise has consistently generated regular returns, regardless of the state of the stock market at any given period.  CrowdStreet CrowdStreet offers accredited investors the opportunity to invest in private real estate opportunities in 18-hour cities (secondary towns with higher rent yields, lower valuations, and higher growth potential due to demographic trends and job growth).The three platforms are free to sign up to and deliver passive income.  Step-by-Step Guide to Turning 250k to $2 Million in No TimeAchieving a seven-figure investment portfolio is often a long-term game unless you win the lottery. Thus, you'll need a roadmap to help you achieve your goal. Consider starting with the following steps:  Assess Your Starting Point Before starting your journey towards growing your $250,000 into $2 million, ensure you take stock of your finances. While you're already doing well with your savings, you'll need to consider things like the amount of debt you have, your earning and income potential, and overall financial goals. Also, consider your investing time horizon. An investor with 30 years until retirement and another with ten years won't have the same success rate. Suppose you have only $250,000; it's best to make provisions for emergencies before plunging the rest into investments. Gauge Your Risk Tolerance Risk capacity and tolerance are two significant factors to consider while determining your approach to investing. Normally, taking more risks brings the potential for earning higher returns. However, you might experience a higher potential for losses. Risk tolerance is the amount of risk you're comfortable with as an investor. On the other hand, risk capacity is the quantity of risk you need to meet your goals. To determine the investments you'll need to turn your $250,000 into $2 million, you've got to learn how to balance your risk capacity and tolerance.  Certificates of deposit, bonds, and cash are examples of safe investments with a low potential to lose money. However, you aren't going to witness spectacular growth from these investments.On the other hand, stocks have the potential to deliver better returns, mainly if your investment is in small-cap companies with tremendous growth potential. Nevertheless, you'll need to accept the volatility the stock market offers. Determine the risk you'll take to hit the two-million-dollar mark and see if you've got the stomach for that kind of risk.  Run the Numbers After gauging your tolerance level, your next step will be to do some math while considering certain factors. Notably, there are three things you'll need to keep in mind, including your investment's rate of return, how long the investment will last, and the amount you intend to add every month.Assuming you're 35 years old and planning to retire at 65, and thanks to your diligent savings or inheritance windfall, you have $250,000 to invest, the fastest way to grow your capital to $2 million is to increase the amount you invest every month. The other option is to exceed the seven percent annual investment return. However, the second option is harder to achieve. The market could make you lose if you aren't as proficient in picking great investments as you thought. Note that the sooner you want to retire, the more you will need to invest each month. For instance, if you're over 45 years old and will be retiring in 20 years or less, you'll have to boost your monthly investment amount to achieve your goal.  Allocate Your Assets WiselyRegardless of your investment window, it'd be best to consider asset allocation while growing your $250k to $2 million. Allocating an asset entails determining the balance you have in your portfolio and the corresponding return and risks. The way you allocate assets might largely depend on whether you want a passive or active investment strategy. If you prefer being more hands-on or involved in your investments, consider going for mutual funds, trading individual stocks and bonds, or exchange traded funds for the best returns. Conversely, if you intend to be hands-off and inactive, it's best to invest in passive mutual funds like index funds. The key to succeeding with either option is wisely allocating your liquid assets, meaning you need to rebalance periodically to ensure your asset allocation meets your investment goals while reserving a specified amount in your emergency fund.For instance, suppose you're aiming for a 70 percent to 30 percent split of bonds to stocks, consider checking your portfolio a minimum of once a year. That way, you're sure not to drift away too much from those numbers.If you're utilizing a Robo-advisor platform for your investments, you might want to consider and take advantage of automatic rebalancing. Robo-advisors help you determine the perfect asset allocation depending on your goals, time horizon, and tolerance level. After that, it automatically adjusts your budget to enable you to stay on course and make more money. Minimize Taxes and Fees When investing $250,000 to get $2 million, don't focus entirely on growth and forget taxes and fees. You'll need to keep your investment tax liability and costs low to enable you to hang on to your investment returns. When it comes to the fees, you might want to understand some concepts like: Trading fees for people buying and selling stocks Expense ratios for exchange-traded funds and mutual funds Asset management fees to the management company in charge of handling themFor taxes, your tax liability will be determined by the amount of time you hold the investments and whether you intend to invest in tax-advantaged retirement accounts or taxable brokerage accounts. In an IRA, 401(k), or other tax-advantaged accounts, you defer taxes on investment growth till you're ready to make withdrawals when you retire. However, a Roth IRA allows for a tax-free distribution when you retire. With taxable accounts, you'll need to pay long-term or short-term capital gains tax on your investment gains. However, it depends on the period you hold the investment. The rate for long-term capital gains tax applies to ventures held longer than a year. The best part is, it's more favorable to investors. However, you can manage taxation by using tax-loss harvesting (underselling stocks to offset reported gains). Ensure you don't buy similar investments within 60 days after selling to avoid triggering the wash-sale rule and wiping out tax benefits.  Investing Tips to NoteAlthough any of the investment options mentioned above will be an excellent choice for your $250,000, you'll need to think about your investment purpose. Are you considering a long term investment without having to change your strategy? Do you want a quick profit? Don't forget to think about how soon you might need to access your initial investment amount or decide whether you plan to allow your $250,000 investment fund to stay for ten to 20 years. Suppose you intend on making a long term investment, consider a brokerage account or Solo 401(k). Other options include cryptocurrency, buying your own business, or investing in properties.Suppose you're a new investor, consider consulting a financial adviser for financial advice on how to turn your $250,000 into $2 million. Ensure you find a qualified financial expert by doing your due diligence.  Calculators are also ideal in estimating the amount you'll need to invest before reaching $2 million. However, ensure you get the best calculator to get a correct estimate.  The Bottom Line There's no secret formula or magic wand to wave to turn your $250,000 into $2 million. Everything boils down to strategy and how involved you want to be in the investment. The further you're from retiring, the better. However, even if you have less than 20 years before you stop working, it's possible to reach $2 million. Having $250k to invest will ensure you enjoy a financially successful future. However, your work isn't entirely done. Investing your $200,000 in a viable and strategic way will help you build your finances and attain financial freedom in the years or decades to come. Now you don't have to wait till you have millions before starting your investment journey. Don't allow your money to languish in a savings account where it won't grow due to inflation. Investing in any options mentioned above, especially real estate, is a surefire way to turn your $250,000 into $2 million. However, consider your life goals, ability to take risks, and age to find an investment option tailored specifically for your needs. When you finally decide to invest your money, ensure you make the best choice. You might decide to invest all your money into one of the options we discussed earlier or split it into two, with one half for stocks and bonds and the other half for buying property.However, investing in property through real estate crowdfunding platforms like Holdfolio is one fast way to grow your $250,000 and earn passive income.Do you want to start your real estate investment journey but don't want to be actively involved? Holdfolio is a real estate crowdfunding platform that enables you to put your money to work while earning a passive return. With zero active participation and as little as 20k, you can earn steady income from properties you wouldn’t be able afford as an individual investor.
Investment Returns

Feb 2, 2022

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Real Estate Syndication Returns

Real estate investing never goes out of style. Now more than ever, there are several creative and innovative ways to invest in real estate and make a profit. What are the most viable options? Real estate syndication and multi-family crowdfunding.Real estate syndication offers you the opportunity to be a passive investor. Here, you give your money to professionals who can invest and pay you a return when due. Although the entire process may look complicated and leave you confused, Holdfolio is on hand to provide you with the perspective you need. At Holdfolio, we guide our clients through the entire process of investing in real estate syndication. In this comprehensive guide, we'll explain how you can calculate real estate syndication returns and what returns you can expect from your investment. What Is Real Estate Syndication? As the name suggests, real estate syndication involves investors coming together to pool money to invest in real estate deals. A syndication comes in handy when you’ve reached your investment limit or when you do not have enough capital to fund a new investment deal.Real estate assets such as mobile homes, self-storage units, apartments, and land are available through real estate syndication.There are two parties involved in typical real estate syndication deals: the sponsor and the passive investors. Both parties contribute differently to the syndication process. Who Is a Real Estate Syndicator? A real estate syndicator, also known as the general partner or the managing member, is responsible for developing the investment strategy, finding investors, negotiating with the seller, and formulating a business plan.Real estate syndicators execute the due diligence on prospective property acquisitions. They underwrite the deal and arrange the financing. Syndicators typically provide five to twenty percent of the total investment amount with personal funds. The syndicator also receives an "acquisition fee" for seeking out a deal.Syndicators are often tasked with asset management. They work closely with the property management team and handle investor relations. If property management isn’t outsourced, the syndicator may volunteer to do the job and receive payment via returns. To avoid mishaps, the syndicator must be good at active management to oversee the property effectively.A syndicator is responsible for the introduction and execution of the entire process from start to finish. At the close of the deal, the syndicator is the one in charge of asset operation. Their main priority is flawlessly executing a business plan and giving passive investors quality returns. Passive Investor Defined Passive investors are responsible for financing 80% to 95% of investment capital. These investors can earn passive income through real estate syndications. As a passive investor, you'll be eligible for income from the investment either on a monthly or quarterly basis. Also, you'll receive a return if the property is sold on a predetermined exit strategy.In addition to great returns, there are tax benefits, appreciation, and equity pay down attached to the investment. The property's value gradually increases over time, bolstering an investors’ return on investment (ROI). Also, because they own a property, investors receive tax benefits through their K-1 tax filings. Returns on Real Estate Syndications For real estate syndications, multi-family properties are the most stable asset class. This stability stems from the fact that folks will always need a place to live. Thus, multi-family deals and apartments will always thrive.Experienced syndicators look towards properties with the potential to appreciate. Distribution of returns in real estate syndication always follows pre-agreed terms in the operating contract.To calculate what returns passive investors should expect to get from a syndication deal, we’re going to be looking at four metrics. These metrics are used to measure the performance of an investment. Cash on Cash Return Calculated annually, CoC return is a gauge of your return on investment. To get an accurate figure, you check the cash flow return against your original investment.Let's say you invested $200,000 in a syndication deal, you receive $16,000 in distributions at the end of the year. Since $16,000 is 8% of your total investment ($200,000), your CoC (Cash on Cash) return is 8%. CoC returns are not static as they're meant to increase yearly during the lifetime of the investment. As the general partner implements the business plan to optimize the property, CoC should average around 8 percent per year. Equity Multiple Equity multiple seeks to calculate the cash distributions on a real estate investment. The equity multiple also takes into account the initial investment and compares it to the total equity attached to that property. Simply put, the equity multiple establishes the percentage of investment returns relative to the total capital invested in that structure.A tad bit similar to the Cash on Cash return metric we've just examined, the difference here is that the equity multiple takes into account the total investment value received and divides it by the investment sum total.To put things into perspective, let's give a real-world example:So let's say that you decided to get a real estate property for $100,000 and after two years, you decide to sell it for twice the amount — $200,000. If the deal goes through successfully, it has delivered an equity multiple of 2. On the flip side, if you received $150,000, you have an equity multiple of 1.5.With the equity multiple, investors are often led by impressive values like a 2.5. Regardless of the value, a skilled investor should always consider the timing as most metrics, the equity multiple included, are just projections.When the projections look too good to be true, it might be time to ask the manager about the property's track record and if it backs up those numbers or not. Internal Rate of ReturnThe internal rate of return calculates how much gain an investment is expected to make annually. It makes the Net Present Value (NPV) of all cash flow equal to zero. Why is the NPV set to zero? To determine the value of annual ROI over time.If you're not a math geek, calculating the internal rate of return might be strenuous. Regardless, Excel comes in handy when calculating IRR. All you need to do is type in the IRR and reference the cells. This add-on will calculate your IRR using inputted variables and tell you what percentage of your investment grows annually. For a more detailed explanation on how to go about this you can watch this tutorial. Preferred Return  Preferred return is also known as a class A share in real estate syndication. Here, the syndicator decides what percentage it’ll be before presenting the deal to investors.Preferred return usually ranges from 5% to 9% and must be paid out to investors before the syndicator takes his part of the returns. This metric examines the total passive income an investor can expect to make from a deal minus the sales proceeds.It’s important to note that in real estate syndications, equity is usually split "70/30" or "80/20," with the more significant bulk going to investors. The remainder (30% or 20%) is the carried interest that belongs to the sponsor. It’s paid from the remaining cash flow after the investors have been paid, and it’s their payment for curating a profitable deal. How Real Estate Syndications Work On the surface, real estate syndications appear to be straightforward. However, the process is demanding because of the numerous things that need to be done, like going through due diligence documents and private placement memorandum among other things. Although these tasks might seem overly complex, syndication is similar to other real estate investments. The only difference is that real estate syndications happen on a larger scale.There are three phases involved in real estate syndications. The bulk of the work is for the syndicator, and from start to finish, they are fully engaged. It falls to the syndicator from sourcing investor capital to the final liquidation. Let’s take a look at the three phases:  The Origination Phase This phase spans several months and requires a lot of work. At the originating stage, the syndicator locates the perfect property, does due diligence, and works actively to raise funds required for acquisition.Here, the syndicator does conservative underwriting to determine projected ROI values. They also negotiate the property’s purchase price, conduct a physical inspection, and audits the property's financial record to ensure nothing is amiss.At this point, the business plan is formulated alongside several strategies to ensure everything works in the long run. The Operation Phase This phase is all about executing the already drawn up business plan. The plan features steps the syndicator intends to take for harnessing the property's optimal potentials and making high profits.In the operation phase, the syndicator is responsible for renovations or general repairs, executing rent increases, lease renewals or lease-up plans. Additionally, they're charged with collecting rent, property maintenance, leasing out vacant units, paying property tax and insurance, distributing cash flow to investors, and giving reports on the asset’s condition.The operation phase usually spans over several years, as long as the deal is active. So, till the "beat" stops, activities by the syndicator remain ongoing. The Liquidation Phase Investors receive their capital through liquidity. At this stage, the syndicator executes renovation and repairs to make the house attractive to potential buyers.When these clients come around, the syndicator offers facility tours, prepares financial reports, reviews offers, and negotiates a purchase contract. Once the deal goes through, they'll give each investor their percentage of the profit.To enter a real estate syndication, you don't have to look for other investors and suitable commercial real estate as there's a service that goes through the hassle for you. With several entities providing this solution, Holdfolio ranks high. They also accept accredited and non-accredited investors. Without further ado, let's take a look at the inner workings of Holdfolio. Investing With Holdfolio: What Does It Entail?Holdfolio has been in the real estate arena since 2014 and has built a trusted and reputable brand over the years. While we’re famous for our investment in single-family properties, we offer crowdfunding opportunities for investors. At the moment, we have a budding clientele of over 300 investors.The minimum investment amount is $20,000. With this amount, you will gain access to mouthwatering investment opportunities and earn a passive annual income without lifting a finger.Holdfolio also spares you the stress of looking for the right real estate properties. As it stands, Holdfolio manages over 3000 apartment units with an above-average investment return. The current track record? A mind-boggling 19.50% ROI.Another reason to consider investing with Holdfolio is that we, unlike most other platforms, have offerings tailored to suit non-accredited investors. Benefits of Real Estate Syndication Generally speaking, there are many benefits attached to investing as a whole. However, several perks are particular to real estate syndication, including:Reduced RiskThe reduced risk-benefit of real estate syndication is a recurring theme as you share risk with other investors on a deal. Since you can invest a minimal amount of money into several projects at once, there’s no risk of losing your money if one project crashes. Syndication is focused chiefly on multi-family units. Therefore, if a few tenants move, the remaining will cover operational costs.Tax BenefitsInvesting in real estate syndication deals passes tax deductions down to investors. Now, you can compound your money for years as an equity holder without paying taxes.Passive Income Syndication remains one of the best passive income forms in real estate. Besides initial due diligence on the property, you do not have to do anything except monitor your account balance.The bulk of the work is left for the sponsor and you're eligible for returns at the year's end. It’s an excellent idea if you’re a busy person with money to invest.An Inflation Fail-ProofInflation is an integral part of every economy. When it happens, it reduces the value of your cash at hand, stocks, and bonds. However, real estate prices tend to increase during inflationary periods, resulting in more profits for the investor.Forced AppreciationThe values of multi-family properties are determined by NOI (Net Operating Income). There are two options open to management to increase net operating income. The first is through rent increment. Expense reduction is the other alternative. When these options are applied by the investor, a "forced appreciation" happens.No Danger of Liability ExposureThe two parties involved in a syndicate play different roles. While the management team controls funding and decides how the deal pans out, investors are only concerned with making funds available.Consequently, investors can never be held responsible for any decision the management team makes. If you are amongst the former group, you won’t be in the line for  any lawsuits that may arise. Real Estate Syndications: Why Exercising Caution Is a Must  While the returns on real estate syndication are often significant and are an excellent way to generate passive annual income, treading with caution before becoming a member is non-negotiable. For starters, some sponsors lie about projected returns to attract investors. If you’re not adept at reading real estate market cycles, talk to a professional before you make any move. You might want to apply the brakes and check things out once projected returns are above 20%.The performance of the deal usually varies from the projected returns and that’s normal. However, the difference between both shouldn’t be too significant in the grand scheme of things.Don’t be afraid to ask questions when you’re unclear about something. You should be able to trust your sponsor with your hard-earned money. When necessary, ask for track records, proof, and do your research. Major Takeaway Rather than have your money lie dormant in a savings account, investing it will see your money work for you and bring in annual returns.Very few investments offer most investors the financial freedom attached to real estate syndications. This investment form grants you unfettered access to deals considered inaccessible in the past.At Holdfolio, a leading real estate syndication firm, your money is in safe hands. From start to finish, tested and trusted professionals are in charge to ensure you get optimal returns on a yearly basis. If you'd like to start your real estate syndication journey with us, the adventure begins here!
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Mar 30, 2021

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5 Reasons a Property Management Company is Key to Your Rental’s Success

The Benefits of a Property Management Company A property management company could be a beneficial component to your rental's success. A property management company, otherwise known as a PMC, deals directly with prospects and tenants, saving you time and worry over marketing your rentals, collecting rent, handling maintenance and repair issues, responding to tenant complaints, and even pursuing evictions. This allows you to outsource some of the tasks you don't want to deal with for a small fee. Below are five reasons that will encourage you to look into hiring a property management company for your rentals. 1. Property management companies are full of industry experience.  Hiring a property management company provides many benefits to both new real estate and veteran investors. PMCs give you a support team full of individuals who have many years of experience in the industry and can assist you in making the best decisions for your rental. A majority of property managers are licensed real estate agents, meaning that they have a good understanding of the industry. This allows you to have a group of professionals that know how to price your rentals accordingly. Property managers also have in-depth knowledge of the fair housing laws and local laws that affect both landlords and tenants. These laws are very specific, and without a deep understanding of their complexities, one could easily break them.  2. A PMC is an established point of contact for tenants.  One benefit to having a property management company at hand is the fact that it relieves you of having to constantly keep in contact with your tenants. A PMC can also prevent you from losing money because he or she will work diligently to place new tenants in your property so it doesn't sit idle. An experienced PMS can make life easier for your tenants with someone available at all times, especially if you happen to be busy or out of town. This is very convenient for addressing problems like noise complaints, parking issues, etc. It also is beneficial when tenants need to make maintenance requests for things such as replacing fire alarms or lights. Allowing someone else to handle many day-to-day responsibilities saves you valuable time.  3. Property management companies will handle tenant issues.  One of the biggest benefits of property management is that the property manager will handle tenant screening. Having experience with hundreds of applications, property managers tend to be able to spot the red flags that a potential tenant may possess. This could include not being able to pay rent, or having a history of causing damage to the property over time. Property managers can also save you the trouble of having to evict people who can't pay rent on time, and ensure that the process of paying rent is simple. Additionally, a PMC can handle any lawyer fees that may be associated with evictions, and damages made to the property.  4. A PMC can market your rental for you. Another upside to hiring a property management company is that they can take over all of the marketing responsibilities. A PMC will typically develop a marketing strategy for each property that is dedicated to targeting your market segment to get the best results possible, from messaging to the platforms your audience is active on. These professionals have a deep understanding of needing to fill your property with great tenants so that you can turn over the property quickly. A valuable tenant could mean the difference between having to replace carpets or simply having them cleaned.   5. Working with a property management company saves you money on maintenance & repairs. A property management team saves you time. You won’t have to go to the property to fix every problem that may come up such as clogged toilets, broken appliances, and dealing with locked out tenants. The team will handle problems as soon as possible, which will keep tenants happy. It is also a great way to save money because an experienced management team is better equipped to find a cost-effective solution to a common problem.Hiring a PMC is a simple way to save time managing your property. With a PMC, experienced professionals deal with time-consuming tasks, at a relatively low cost, allowing you to scale your rental properties and increase your cash flow.
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Jan 27, 2021

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The Pros and Cons of Investing in Multifamily Real Estate

Investing in multifamily real estate is a smart way to diversify your portfolio. Investors find multifamily real estate attractive because it lends itself to a slow and steady return on investment. Between Covid-19 and rapid changes in politics, today’s economic outlook is uncertain and rookie and seasoned investors alike are looking for investments that will grow their capital. Multifamily real estate is less complicated than other commercial real estate opportunities and can generate a strong cash flow. Keep reading to explore the key pros and cons of multifamily investing.  What is multifamily real estate? A multifamily property contains more than one rentable unit - like an apartment complex or high-rise. Investing in rental properties, like multifamily units, is a preferred strategy for investors who want to generate an additional monthly income at a relatively low cost.   What are the pros of investing in multifamily real estate? Investing in a multifamily property holds its fair share of advantages. Large demand = lower risk. Multifamily investing is considered a safer investment than other real estate assets. Even in the face of economic uncertainty and poor job markets, people need a place to live. During an economic downturn, rental properties may see a boom as people sell their homes, relocate, or move into a rental.  Grow your portfolio faster. Investing in multifamily real estate is a unique opportunity to expand your portfolio in a short period of time. It’s a lot easier and timelier to acquire 30 apartment units than to acquire 30 single-family homes. Avoid the headache of multiple loans, sellers, and inspections by investing in a multifamily property.  Streamline your property management. Investing in a multifamily property improves daily efficiencies in your property management. By managing one property with multiple units, you save time and money traveling between properties to perform maintenance duties. Also, it makes more financial sense to hire a property manager for a multifamily property rather than a string of single-family homes.  Increase your cash flow. One of the biggest advantages to investing in multifamily real estate is the ability to significantly increase your cash flow. Investors are attracted to multifamily properties because of the predictability of income each month. In both bull and bear markets, rents are collected each month, and units are easily turned over for new leases leading to a steady cash flow. From lower risk to higher rewards and increased efficiencies in your property management, put your investment capital to work with multifamily real estate. View open investments with Holdfolio.  What are the cons of investing in multifamily real estate?  Despite the strong advantages of investing in multifamily properties, we wouldn’t be doing our due diligence if we didn’t share some of the drawbacks of this investment strategy. Increased competition. The advantages of multifamily real estate draw attention from new and experienced investors alike, creating strong competition in the market. This can pave the way for more experienced investors to crowd out the market because they may be more likely to pay in cash or appeal to sellers. Newbie investors may find luck partnering with experienced investors or joining a real estate crowdfunding platform like Holdfolio.  Higher upfront cost. Depending on where you’re investing, multifamily properties can be extremely expensive, much more expensive than a single-family home. Cost tends to be the biggest barrier to new investors, even for seasoned investors. Most banks look for investors to put down at least 20% as a down payment. However, banks are more likely to grant loans for a multifamily property than a single-family because there is less risk involved. Despite the higher upfront costs and competition, avenues like real estate crowdfunding platforms have become attractive to multifamily investors. Crowdfunding platforms allow investors to put a small amount of capital into a property to become a shareholder. Diversify your portfolio and increase your cash flow with multifamily real estate in 2021. Assess the pros and cons and seek the best investment for your wallet. Start investing with Holdfolio today. 
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Nov 20, 2020

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The Impact Of The Coronavirus on Real Estate Investing in 2021

It’s been more than six months since COVID-19 hit the country, and ever since then millions of Americans have been affected by the financial, economic, and social implications of the pandemic. From national lockdowns to financial insecurity, the real estate industry has been dramatically impacted. But, what does real estate investing look like in 2021 as we begin to gain more certainty on the path forward? Keep reading to learn about investing in real estate in 2021. The Impact Of Coronavirus On Real EstateWhen the coronavirus shut down businesses and schools across the country in March, the effects of the pandemic on real estate and investing were felt almost immediately. Tenants fell behind on rent, mortgages went into forbearance, vacation rentals were canceled, and property sales decreased. Despite the effects of a national lockdown, the real estate market has seen a rebound in the second half of 2020. In fact, home prices were up 15% year over year at the start of November and Zillow predicts that home values will increase 4.1% in 2021 due to renewed market optimism and spikes in sales this summer and fall. While the long-term effects of the coronavirus on real estate are still uncertain, rebounds in the market this fall have given investors and buyers hope for 2021. Real Estate Investing Opportunities In 2021New and experienced real estate investors may be unsure where their best investing bet lies in 2021. While there are housing booms in cities across the country, many Americans still find themselves in precarious financial situations and may not be in a position to buy a home. This poses a unique opportunity for house flippers. With lower demand in some areas, prices are driven down and the opportunity to flip houses is valuable and lucrative. Access to capital and loans may be an issue for some investors with lenders slower to give out loans at a time when many people’s finances are in a sensitive position. This positions real estate crowdfunding platforms at the forefront of real estate investing in 2021. Crowdfunding platforms allow investors to invest in real estate in a low-risk high-reward model. The initial investment is low, it’s mainly passive, and is a simple way to diversify your real estate portfolio. Learn more about real estate crowdfunding platforms for accredited and non-accredited shareholders like Holdfolio. Vacation rentals also provide a way to make some extra cash on the side. With people in between jobs or considering relocation, the demand for short-term living arrangements is on the rise. Rental platforms like Airbnb and VRBO can also be more lucrative as you charge guests more for a short-term stay versus traditional renting. Lastly, the value of apartment complexes continues to rise. With cities converting office spaces into apartments and young people looking to rent instead of buy due to job insecurity, expect multi-family investing to be on the rise in 2021. Real estate investing in 2021 may seem uncertain. But, there are many unique opportunities to diversify your portfolio with real estate in the new year. Assess your options and seek the best investment for your wallet. 

Jun 15, 2020

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Q&A for New Investors: Part 2

Here is Part 2 of our Q&A Interview for new investors. How long will the investment be? Holdfolio’s goal is to own our real estate over the long term to collect rental income & take advantage of the benefits of owning real estate. It is in the best interest of everyone that we sell the property at the right time, this event may occur sooner or later depending on market conditions, performance factors, and desires of the investor members. If it is not the right time to sell, then Holdfolio will continue to hold onto the property for cash flow. Do investors share in any of the tax benefits of owning real estate? Yes. We will be writing off depreciation on the property and all other business expenses related to the operation of the rental properties. So, the taxable income you earn from the investment will be reduced by these tax benefits. What makes Holdfolio different from other crowdfunding platforms? Holdfolio is operated by full-time real estate investors. This means there are no middlemen and all the opportunities on the platform are sourced by Holdfolio. How do the legal agreements describe the relationship between investor members and the manager? For the most part, the manager retains the right to make all day to day decisions, however there are certain decisions that will be made through a vote of the investor members in order to reach a majority consensus. The partnership is facilitated by a limited liability company & the manager is the responsible party for the acts of the company. Investor have zero liability. When are profits distributed to investors? Holdfolio disburses profit to investors quarterly. This means that you will receive profit from your investment deposited directly into your account during the first couple weeks of January, April, July, & October. To date the average return to partners is 10.17%. *This return does not take into account possible increases or decreases in the value of current investments. Further, the performance of our portfolios in the past does not guarantee that they will be successful in the future. More information about our track record is available to registered users. How do I get my invested capital back? After Holdfolio holds the property to collect rental income, the property can be sold for a profit or refinanced with long term debt. In the event the property is sold, you will receive the return of your invested capital plus the profits from the sale. If the property is refinanced, you will receive a return of your invested capital & still keep ownership in the property. It is also possible for you to sell your ownership to recoup your investment. In this scenario, either Holdfolio can purchase your ownership, or we can assist in a match-making effort to find someone interested in purchasing your ownership. Holdfolio retains a first right of refusal to purchase your ownership should you decide to sell. In general, you cannot sell your ownership within 12 months from your initial investment date.

Jun 15, 2020

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Q&A for New Investors: Part 1

Here at Holdfolio, it is common for us to receive similar questions from new investors. This interview was conducted with one of our investors. What kinds of questions did you have for Holdfolio during the brief introduction call?  The call mostly was getting to gain a better understanding of how Holdfolio operates. What is the minimum investment? It can vary depending upon the specific investment opportunity but is typically $20,000. Why did you choose Holdfolio? It is a passive approach and the returns are attractive. I'm not looking to spend time managing the investment and didn't want the liability and potential headache that comes with owning real estate myself. What were the steps and processes to invest with Holdfolio? It was pretty simple. I went through a 3-step process online to invest. After signing the investment agreement I was able to fund my investment. I had the option of sending a wire or mailing a check which was deposited to Holdfolio's escrow account. How much time do you spend managing your investment with Holdfolio? I log on to my dashboard every so often to check the status of investments. Everything is updated quarterly. I was get email updates and distribution details so it's really nice.

Aug 23, 2017

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Foreclosures 101: What They Mean For Investors

  Foreclosures continue to be one of the hottest items in the world of real estate. How do they work. What is the appeal for investors? What ways are there to participate?Foreclosures 101 A foreclosure is a legal proceeding which seizes real estate from an owner and liquidates it through a sale to compensate creditors. The most common reason for foreclosure is when a homeowner fails to pay their mortgage payments. Once a loan payment becomes 30 days late, it goes into default. Depending on where the property is, it may move into the legal foreclosure process once that payment is 90 days late. Although some lenders have dragged their feet on foreclosing when there are a lot of them, in order to preserve their own balance sheets. There are other reasons for foreclosure too. This includes past due property taxes, HOA liens, federal tax liens, and condemnation due to property condition or eminent domain, or other breaches of contract with a mortgage lender. Sometimes the owner is genuinely at fault for failing to keep their end of the deal. In many other cases lenders have fraudulently foreclosed to seize assets, or it is the result of paperwork glitches. Once a foreclosure is granted, properties are generally offered at auctions. If no winning bids are received, the creditor gains control of the property.What Foreclosures Mean for Real Estate Investors In one word – it means ‘opportunity’. Foreclosed properties need to be sold, and are typically offered by motivated sellers who are in need of selling that asset fast. This normally means they can be purchased at a discount. As of August 2017, Realtytrac reports there were 626,631 properties in the US in some stage of foreclosure. Discounts mean that real estate investors can buy these properties, and acquire them in a good equity position. They can sometimes be immediately resold for a profit. Though many may require significant repairs and updating before they are fit for renting or resale.How to Buy Foreclosure Homes There are a variety of ways to acquire foreclosure properties.In pre-foreclosure directly from the owner Via the MLS At foreclosure auctions Buying non-performing loan notes and foreclosing Via real estate wholesalers Participating in a fund or partnership which buys, rehabs, and rents themForeclosures continue to be a popular topic in real estate investing. They can still offer value to investors. There are many reasons homes get foreclosed on. There are several ways to participate in these opportunities for all levels of investors from brand new to highly experienced.