Jun 5, 2017

Which Real Estate Investment Niche Is Right for You?

Real Estate Investment: What's The Right Niche For You?  One of the key questions to ask yourself when it comes to a real estate investment is, which type of property is best for your individual portfolio growth? There are many to choose from. Some investors diversify themselves across multiple niches. Others are adamant fans of just one type of property and strategy. Here are some of the pros and cons of each, so you can decide for yourself… Single-Family Housing Single-family housing is one of the most popular ways to invest in real estate today. It is easier to acquire and sometimes it is easier to purchase without the need for financing. It used to be primarily the domain of small individual investors but has grown to be a top choice for some of the largest funds too. The Pros: Largest amount of inventory Largest number of resale buyers Easiest for individual investors to tackle by themselves Most understood type of property The Cons: Large amounts of competition Vacancy can hit hard if you only own a couple of units Property management High cost of improvements per unit Multifamily Housing Multifamily housing includes quads and any type of property that includes more than one unit.  There can be a wide divide in size and cost. It can range from a small 15 unit single apartment building to a 1000 unit apartment complex and everything in between. The Pros: Large demand for rental housing Efficiency in property management Lower cost per unit Higher ROI on improvements made The Cons: Competition from capital-rich investors Requires daily property management May require more money or financing to buy and manage Smaller resale market than single-family homes Commercial Real Estate Commercial real estate encompasses a variety of sub-sectors and niches including; office, retail, medical, hospitality, industrial, and mixed-use. The Pros: Control over asset value through repositioning Ability to obtain non-recourse financing Prestige and pride of ownership Benefits for personal use for your own business The Cons: Limited resale market High level of professional management required Least understood by most investors Most likely to be impacted by economic changes and industry disruption When you stack up and compare real estate investment niches like this, each has its pros and cons. Each also has a variety of deeper niches possible. In single-family, you can focus on individual homes or condos, and in specific areas. Multifamily real estate can range from local rentals to specialized lofts or apartments for vacation rentals or hi-tech professionals. Commercial property could include warehouses, local strip malls, or boutique hotels. What is important is that investors understand the differences.  By selecting the optimal type based on your current circumstances and goals, you have a greater opportunity for success. Later you can add in other niches and diversify. Finally, recognize that there are various strategies for engaging in each of these niches too. You could go it alone, find a partner, be a private lender, flip them, or hold them for long-term cash flow and capital gains. What will you invest in?

Jun 1, 2017

Investing With Equity Versus Debt

Which is better; investing in real estate with debt or equity? Is it better to invest in properties with all cash, to use as much mortgage financing as you can, or to loan your money to investors with a debt investment? This is frequently a hotly debated question. On one side, you have the Dave Ramsey fans who shun virtually any type of lending or borrowing. Then you have the polar opposite real estate gurus recommending extreme leverage, and never using a dollar of your own. So, which strategy is best? How do they stack up against each other? Take a look at some of the pros and cons of equity vs. debt investing, and you decide… The Pros & Cons of Debt Investing Investing with debt can either mean using debt and borrowing to fund investments. Or it can mean using your capital to make loans and provide debt financing to others. Loaning your money for a return is a popular strategy with banks and venture capital firms, as well as affluent private lenders. On the upside, it can mean less management and overhead. You don’t own the property, so you normally don’t expect to pay taxes or insurance, or have to worry about repairs or tenants. That is unless the borrower stops paying. The downside is that you are only getting a percentage of the cash flow and return potential, and usually don’t get any share in rising equity. Others don’t have a ton of cash, and may be considering borrowing money to fund investments with debt. This can be through mortgages, lines of credit, loans from retirement accounts, or pooling together money from friends and family. There are great advantages in this, including lowering your risk in any one investment, while being able to diversify and grow your investments fast. It can also bring extra risk from lender fraud, and ending up underwater if property values take a temporary nose dive. While many would prefer not to borrow, it can seem like a necessity for many who need a way to get ahead, and who just can’t save fast enough. The Pros & Cons of Equity Investing Equity investing can have its advantages and disadvantages too. First and foremost, it has traditionally meant limiting the ability to invest and diversify. Most people can’t save $180,000 a year to buy an average home all cash to turn into a rental. Putting your entire nest egg into just one property can be risky. One major hurricane or earthquake, and you could have a nightmare situation on your hands. On the bright side, equity investing is often seen as less risky because you don’t owe the bank anything. You don’t have to worry about monthly mortgage payments, or banks faking foreclosure documents, or fraud like force placed insurance. You’ll also have more flexibility and liquidity if you ever need to sell. Plus, equity investors can enjoy superior net returns as they avoid all those bank and borrowing fees, extra closing costs, and interest. Summary As we can see; there are benefits of both types of investing. However, there are also hybrid options. For example; you could team up with your friends and family to invest equity into an opportunity. It’s not all your cash, but you don’t have to worry about a bank loan. Or you could partner up with peers like you and invest a small amount of cash into a small pool of rental properties. This again gives you equity advantages, but retaining the ability to break through the traditional limits and risks of going it all alone. How will you invest?

May 31, 2017

Preparing For This Summer’s Hot Rental Market

The sizzling hot summer rental market is kicking in. How can rental property owners be ready for it? Summer is traditionally the busiest time of the year in the real estate industry. The rental market can be flooded with renters who are motivated to secure new places before school starts again. This makes it a busy time for landlords, with a lot of additional competition. How can rental property owners get prepared and make the most of it? Market Research The first step is to do some fresh market research. Do your homework on the market. What is your competition offering? What deals are being offered to potential renters out there? What are market trends? Is it a landlord or tenants’ market? Visibility You can’t expect to capture your share of renter leads unless they can see you. Be ramping up advertising, and reaching out to your connections and referral network to be sure they know you have units available. Provide the Right Info In your ads and rental listings make sure you provide enough detail for prospective tenants to make the decision to take action. This can include photos, video, property information, leasing details, and more. At this time of the year, many are specifically concerned with school districts, and the ability to move in fast. Offer Attractive Deals Know what your competition is offering, so you can make sure you are offering competitive deals. Make sure the value is there. Know what is going to connect with tenants in terms of deposit, monthly rent, application process, and move-in money requirements. Infrastructure By this point, you should already have scaled up your infrastructure to handle the surge in business and communications. You’ve got to be able to respond to inquiries instantly and deliver consistently good service. Be sure to have a good team and systems in place to make this happen. Don’t Neglect Current Tenants All of the above is in addition to keeping your current tenants happy. With all the moving activity and the potential for attractive incentives being offered by other landlords and apartment owners, you want to take stock of your own inventory. Approach tenants early and find out if they plan to renew. Get those leases signed. Find out what you can do to keep good tenants. Or at least be aware of upcoming vacancies so that you can get marketing units early.

May 30, 2017

How To Invest in Real Estate If You’re A Non-Accredited Investor

Non-Accredited Investors: Real Estate Investing 101 The best investments have traditionally been reserved only for accredited investors. How do you get ahead, and get into profitable real estate investments if you are a non-accredited investor? For far too long the most appealing investments have been closely guarded and preserved for only already wealthy investors. That has been one of the key factors in the rich getting richer, while the poor get poorer. This divide is often the line in the sand between accredited investors and non-accredited investors. Newer rules may have opened a small window of opportunity for regular individuals. How can you take advantage of that? Accredited Investor Status The Securities and Exchange Commission (SEC) lays out the rules for qualifying as an accredited investor. In addition to big institutional investors like banks and pension funds, this also applies to individuals. To qualify you generally need to have a net worth of at least $1M. Or you need to be earning $200,000 per year, or $300,000 between you and your spouse. This requirement has long been used to separate who can invest in what. The public argument is that these restrictions ‘protect’ consumers. Yet, they also prevent individuals from many investments and control who can offer investments. The result has often been ensuring only the big old finance companies can control the flow of money, and only their best clients with the most money get access to the best deals. The JOBS Act & Crowdfunding Things began to change with the JOBS Act. This new law was introduced as a solution to breaking down the barriers and allowing more people to start businesses and offer opportunities while giving regular people to invest in a broader and better range of choices. Unfortunately, most crowdfunding platforms and companies with these opportunities have not actually begun accepting non-accredited investors. Why? Because the legal expenses can be costly oftentimes. Yet, structuring an offering and opening the doors to non-accredited investors, can mean a lot more up-front work for the crowdfunding platform. It also can afford the opportunity to a broader base of investors. Options for Investing in Real Estate Fortunately, there are some options for individuals who want to get into real estate investing and are eager to work their way up to accredited investor status. These include: Direct investment in properties all by yourself REITs and funds Select real estate crowdfunding portals Without a lot of capital or experience of your own, and to avoid the high multiple layers of fees from old traditional brokers, it is normally best to leverage some expertise and partners to get the best investments. This increases upside potential and lowers your risk, by going into some form of private partnership or crowdfunding offer. Just make sure you understand what you are investing in, and ask lots of questions if you aren’t sure.

May 26, 2017

How Passive Is Passive Investing, Really?

What exactly does passive income investing mean? How involved do you need to be to make passive real estate investing work? The Need & Desire for Passive Income Investments The need and desire for passive income is growing among investors. Individual investors, advisors, and economists have realized just how important it is to incorporate the cost of time and effort in an investment. Ongoing income or cash flow is a way to make the money you do have do the work. Some people win the lottery and then go broke by the very next year. What if they invested that money in working for them? There would be a different outcome. Passive income is vital for retirement. The truth is that we never know when we are going to have to retire. Some want to retire early. Others will be forced to quit work decades ahead of their expectations. Some are relying on social security or a pension to get them through their golden years and need more income than a low yield retirement account can offer. Many want to enjoy more financial surplus now. A surplus which can only be created by investing and generating passive income which is not based on how much work they can personally do. The Promise of ‘Passive Income’ in Real Estate While there are several options for generating passive income from real estate, buying and holding rental properties is easily the most common. Real estate is one of the most obvious choices of passive income investment because of the opportunity for cash flow.  A good real estate investment from a reputable source can offer security, cash flow, and equity growth potential.  For many real estate crowdfunding opportunities it is a low capital amount and ease of entry which really sets it apart, and makes it more accessible to the everyday investor. The Myth of Passive Income Real Estate Investing Sadly, despite all the hype and promises, most real estate isn’t really passive at all. Being a solo business owner, realtor or house flipper is not passive. Even the way most investors handle buy and hold rental properties is not really passive. For those who go out and find rentals, find tenants, and then hand the property off to a property manager they are still hands-on and in an overseeing role that takes time and effort. It is a lot of work and due diligence to find deals, negotiate and close them, manage property managers, and figure out the best times to exit. Multiply this by a whole portfolio of properties. It can be a full-time job. A good job, and often a well-paid one, but still a job, trading your hours and life for dollars. As Good as it Gets Fortunately, there are other alternatives to invest. One which can provide truly passive income. Turnkey real estate investing provides investors with end-to-end service from vetting and securing properties, leasing and daily management, bookkeeping, and identifying smart times to exit or restructure. Crowdfunding opportunities can take this even further by providing allowing you to invest smaller amounts of capital in multiple deals.  Do your due diligence and factor in the time needed to manage your portfolio of real estate. You may find that your time is worth the effort to look into a more passive way to invest in real estate so you can sit back and enjoy the cash flow!

May 24, 2017

What To Look For In Crowdfunding Opportunities

What should investors be looking for when evaluating real estate crowdfunding opportunities? Real estate crowdfunding is quickly rising to be a go-to investment strategy for investors. There are a number of options out there on the web today. Some are good, others not so much. So, what should you be looking at when checking out your options? Fit Make sure it is a good fit. Different real estate crowdfunding platforms rely on different strategies and models. Look for the one which matches your desired strategy, is a match in terms of the amount of investment required, and shares your values. Are you looking to flip houses, hold for long term passive income, get into commercial properties, or invest in residential real estate? Are you willing and comfortable to bet $50,000 on a new investment partner, or does $5,000 seem like a smarter move? Transparency There are some flashy looking websites out there, with appealing calls to action. Yet, some give very little detail about what your money will be invested in, and how. Others are far more transparent. Look at how much they are willing to share in general, how much they are sharing about how they do business, how your money is used, and other aspects. Those open to sharing tend to do far better over the long term than those operating who may be hiding aspects for other reasons. History They say the best indicator of future performance is past performance. So, how well has this platform performed in the past? What is the reputation of the owners and managers? See what data they share, but make sure you understand how it is calculated. References One of the best ways to choose or at least shortlist crowdfunding options is to get referrals. Ask around. Who have others had success with? Check out online reviews and see what others are saying about those you are considering. Ask the platform if they can provide references. The Numbers Do the numbers make sense?  How much detail will they provide on their business, and the individual opportunities they are offering? What access will you have to the numbers after you invest? What type of reporting is offered to investors? You want as much access as possible, and not only to understand what you are investing in, but how sustainable the model is, and how profits are being collected and distributed. Summary Real estate crowdfunding has emerged as one of the most attractive investment options available today. Hone in on the best option by using the above factors to shortlist and perform your own due diligence, and then test the waters before scaling up your investments.

May 17, 2017

Property Maintenance: Watch These Costs That Can Drain Your Budget

As a landlord it is important to be alert to these costs that can drain your property maintenance budget… Each income property opportunity is only truly as profitable as the management. That includes efficiency in management, maintenance practices, and accurate budgeting. Get your numbers wrong upfront, miscalculate repairs, or incur unexpected expenses, and your cash flow could dip into the negative, taking your returns into the red. Here are five factors to watch out for. Property Taxes Overlook the property tax factor, and it can hit your bottom line, hard. Property taxes are always in flux. Landlords must anticipate increasing property taxes. They rarely go down by themselves, and typically get more expensive every year. In some places, like Chicago, they have jumped up by double digits in a single year. There are two main components to property tax bills. The tax rate and the tax assessed value of your property. When properties appreciate they are assessed higher. Investors can also inflict higher tax assessments on themselves through improvements. Make sure you know how expanding square footage or bedroom counts could impact your property tax bills. Few may also realize that they have the right to challenge and appeal their property tax bills. That’s one reason that around half of all property tax bills in areas like Dallas and Long Island can be over-inflated each year. If you don’t appeal you are just throwing away returns. Utilities If not constantly in check, utilities can be a big drain on property maintenance resources. Water leaks and stolen electricity can bleed you dry. This can get extreme on multifamily properties that have many units and common amenities. Inefficient energy draining devices can be a major problem too. That includes air conditioning, in unit appliances, and community spaces. If you are the one paying the bills you have to be extremely diligent in watching for waste. Technology can help with that. If tenants are paying the bills, then bringing in greener and more efficient appliances can help make your offerings more attractive. HOAs Home Owner Associations can be one of the biggest threats to profitability when operating income properties. Today, condominium associations and HOAs have a lot of power. They can have multiple layers of fees. All of which dig into the net profits. In addition to dues, special assessments can be levied at any time and can bankrupt unsuspecting property investors. Without control of the board there is no control over the expenses.  If the association isn’t good at money management, they can fail and amenities can be neglected. Negligent Tenants Negligent or just careless tenants can really blow your property maintenance budget too. They can freeze out the AC on a regular basis, cause fires, wreck the landscaping, burn through garbage disposals, and soak up a lot of time in maintenance calls. More investors should perhaps be prioritizing the care tenants will take of the unit in the application process. Falling behind a couple weeks on the rent may be annoying, but you’ll actually make more profit on the late fees. Tenant Turnover When tenants leave, units have to be put back into rentable condition. Sometimes that may just be a quick clean up by a maid service. In other cases, it can be replacing appliances, flooring, windows, and even bathtubs. That is all in addition to remarketing for new tenants. That gets really expensive. If you are turning over tenants a couple times a year, and haven’t created a budget for that, it can get ugly for your finances. With this in mind savvy landlords choose renters correctly, not only based on their finances, but how they care for their homes, and how long they are likely to stay.

May 10, 2017

How To Make Your Rental Properties Stand Out On Listing Sites

How can you make your rental properties stand out on real estate listing sites? Check out these tips and tricks on how to stand out among the sea of homes for rent today. Price 90% of the battle to rent a home is all about price. If a property is priced right, it will rent, regardless of market conditions. What many property management companies don’t realize is this isn’t just about being realistic or offering a good deal. Pricing has to be strategic and technically accurate too. If you are off by just $100, then the right prospective renters might not even see your home come up in their search. Then it may as well not be listed at all. It’s essentially invisible. Knowing the comparables in the area and what the local market will support is very important.  Photos People are so busy and accustomed to immediate information, that pictures are an absolute must. Now some sites allow prospects to search by only listings that have images, or by those that have the most images. Make sure you rank high here. The more you can do to build trust, and give them a real picture of the property, the more qualified renters you will get looking. You’ll also waste less time on prospects who may not be a fit. If you really want to impress and stand out, provide a video or virtual tour as an option. Amenities & Lifestyle  Although the number of bedrooms and bathrooms count, amenities and lifestyle features can be even more important than just the basics. Expect renters to know what those stats are or they will move on to another listing that has this information. If they have to do a lot of research they will probably lose your listing and stumble on competing properties. So, if a listing site provides these features automatically, make sure your address and the map is right. If they don’t, include as much detail as you can that will appeal most to your likely clients. That may include local gyms, stores, schools, coffee shops, and distances to major transportation. Deals People want to feel smart when they invest in things. They want to get deals that they can brag about at dinner with their friends, and which make them feel good about justifying the decision to spend. Few people really know the market and what a good deal is. Sometimes you have to help them. You might do that by showing the comparison in value to other properties, provide a limited time discount if they can sign a lease by a certain date, or include incentives with the lease. If you are willing to hold seller applications, or contribute towards their move-in costs, work with low credit score tenants or be flexible on deposits, make sure you mention that too. Clear Contact Info Make sure that your contact information is clear, accurate, and easy to find. Include as many ways to contact you as possible so that they can reach out in their preferred medium. Too often sites make it hard to contact the real landlord. If they try to go through someone else you are at the mercy of them doing a good job at following up, or not showing them competing properties.   There are millions of rental property listings out there on the web. Consumers are busier than ever. In order to get your home listing noticed, and to get people to follow through to contact you, you’ve got to stand out and be different.

Apr 27, 2017

Does A Property Have To Be Vacant To Close A Deal?

Does a house need to be vacant before you can close on a real estate deal? There are many vacant homes across America today. However, some of the best house deals are those which still have people living in them. That could be the current owner who is in a distressed situation, or an existing tenant. Great deals can be negotiated on these properties. Yet, many new investors are not versed about this situation and how to handle it. You can write a deal and go to contract on any property, regardless of what it is occupied or vacant. Your contract can specify whether it should be vacated before closing. Sometimes quirks do come up; such as squatters moving in, or sellers not finding somewhere else to move in time. In these cases you may be able to postpone and extend the closing date until the property is vacated. If the property is leased, your local real estate laws may dictate that the lease survives the sale of the property. That means the new owner has to honor any existing lease. If you are buying an investment property this may be a great bonus. If the tenant is paying on time, then it saves you the time, risk, hassle, and money of going out to find a renter. Just make sure you verify their status, rents, lease term, etc. If the tenant isn’t paying, price in a discount for having to remove them, or ensure they will be evicted before you close. Many distressed sellers will find it hard to move. It can be hard for them to rent or buy anything. Others may just find their own purchase transactions are delayed, and don’t have somewhere to move immediately. In these cases you can extend your closing date, or even leaseback the property to the previous owners. This is not uncommon, but it can be unpredictable. If they were not paying their mortgage, and the mortgage company was not able to have them evicted, then how are you going to do it? If you need the property vacant, then it can be smart to help occupants move. Introduce them to a good real estate agent who will find them another home to buy or another rental. Or you may have an investment property they could rent. This is more desirable than leaving them in the existing property, as it breaks that emotional detachment and sense of ownership they may have. Get them into something they can afford to keep. Summary When buying a rental investment property, it can work well when a home is already tenant occupied. If there is a non-performing tenant, price that in or plan to have them out prior to purchase. If you are buying as a new residence, or to flip with major rehab needs, or you need a higher paying tenant – then have it vacated before closing. You have the right and it is good practice to walk-through the property within 24 hours of your closing. In conclusion it is also good to know the market and how quickly you are able to turn the property and have a new tenant in place. Keeping this in mind and being educated on the process of eviction should help you buy the right properties and not be afraid of purchasing rentals with tenants in place.