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Are You Ready for Real Estate Investing?
Real estate investing is among the oldest and most rewarding asset classes. It's a great way of building wealth and can be one of the more reliable types of investment. New investors are usually aware of these benefits, but some are not aware of the several different categories of real estate investments available. For a savvy investor, focusing your efforts on a specific niche can be the first step in succeeding in your pursuit of financial independence and the benefit of a passive income. What do you need to know about the best types of real estate investment opportunities for your needs? Let's find out. Types of Real Estate Investing In 2020, the revenue from the property management field reached an unprecedented $88.4 billion in the U.S. If you're a prospective investor determined to develop, acquire, own or flip real estate, you should first understand the industry by dividing property investment into its various categories. Residential Based on US Census Bureau records, renter-occupied housing units accounted for about 30.4% of the overall inventory during the fourth quarter of 2020. Renting just makes sense for a large portion of the population, even if they have a choice to rent or own a property. These properties include houses, apartment buildings, vacation houses, and townhouses where individuals or families pay you to reside in the property. Details about their length of stay are stated in the rental or lease agreement. Pros: short leases (due for renewal every 6-12 months) allowing you to capitalize on any positive adjustments in the market conditions. Commercial Office buildings and skyscrapers basically constitute commercial buildings. Property owners lease out these spaces to companies or small business owners, who then pay rent to use the property. Commercial real estate prices have been on an upward trend. This statistics indicates this category has a considerable ROI in the long term. Pros: Benefit of longer leases, usually multi-year. Typically, this approach helps generate greater stability in cash flow and often cushions you as the property owner from rental rates decline. Cons: Markets fluctuate, and its possible rental rates may increase rapidly within a short period. Due to the dated agreements, a property owner may not have the flexibility to increase the rent to match the competitive market rates. Industrial These properties generate income from customers who frequent properties such as industrial warehouses, storage units, distribution centers, manufacturing facilities, and other purpose-built properties. As a real estate investor, you charge significant fees and earn service revenue as a means to increase your return on investment. Retail Retail properties include shopping malls, strip malls, retail storefronts, among others. Depending on the agreement type, property owners can also receive a portion of sales generated by the stores alongside a base rent. This strategy helps create an incentive for them to maintain the property in remarkable condition and attract shoppers. Mixed-Use Typically, mixed-use properties blend any of the above classifications into one project. This catch-all category of real estate investments is attractive for those with considerable assets since they offer a level of built-in diversification that helps control risk. Real Estate Investment Trusts (REITs) REITs have risen in popularity in the real estate investment community as an alternative way to invest in real estate. They are popular with investors who don't want the responsibility of overseeing the management of an investment property. But what's a REIT? This real estate investing strategy involves investment in shares of a corporation dealing or owning real estate properties and allocating a considerable amount of its earnings as dividends. Cons: tax complexities. Dividends don't enjoy the same favorably low tax rates common stocks attract. But REITs can be an excellent addition to your investment portfolio, preferably when you buy them at the right value—with an adequate margin of safety. Besides, you can also opt for more esoteric areas like tax lien certificates. As a rule of thumb, lending money for real estate is regarded as real estate investing and can also be accounted for as a fixed-income investment. Akin to investing in bonds, you generate your returns by lending money in favor of interest income. Investing in a real estate/building and later leasing it back to a tenant, for instance, as a restaurant, is at par with fixed income investing instead of an actual real estate investment. In this case, you're simply financing a property—but this somewhat hedges between investing and financing. Overall, you technically own the building and have a claim to its appreciation and profits. Getting Started in Real Estate Investing Every kind of investment has its share of potential benefits and shortcomings, and real estate investing is no different. Smart investors minimize their risks by anticipating the twists in cash flow cycles, economic cycles, potential for natural disasters, and changes in lending traditions. So, it's best to analyze and weigh the opportunities very thoroughly before deciding if real estate investing is the right choice for you. Real estate investing can carry many rewards with benefits potentially lasting a lifetime. If you apply due diligence, you can capitalize on the available opportunities in what can be a fun and lucrative path. To view the original article, visit the iHomeFinder blog.
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How to Use the BRRRR Strategy to Your Advantage
If you're looking for a real estate investing strategy that will help you achieve your goal of financial independence, look no further than the BRRRR strategy. This particular real estate investment strategy is one of the most common methods that property investors use to generate passive income, and to grow their overall net worth. With that in mind, we've created a Guide to the BRRRR investment strategy below. Read it over to learn more about how this strategy works, and how you can use it to your advantage. What is the BRRRR strategy in real estate? Before getting into specific detail about how to make BRRRR investing work in your favor, it's important to take a closer look at how this investment strategy works. In light of that, we've taken the time to break down the step-by-step process below. Here's an explanation of how each component of BRRRR investing works from an investor's perspective. B: Buy The first step in this process is to buy a rental property. In this case, you'll want to focus on buying a distressed property so that you can negotiate a purchase price that falls below the property's fair market value. If you can do that, your initial investment will be lower and you'll have better profit margins when it comes time to rent out your BRRRR property. R: Rehab The next step is to rehab your rental property. Truthfully, since you've focused on buying a distressed property, it may take a little bit of work to make the property rentable. So choosing the right renovations will be key. Instead of trying to increase the property value the same way you would with a fix-and-flip investment property, you should concentrate on providing upgrades that will appeal to tenants—such as providing new appliances, or putting in new hardwood floors. R: Rent Once you've rehabbed, your investment property, the next step is to rent it out. At this point, your goal should be to bring in as much rental income as possible. R: Refinance Then, when possible, it's time to refinance the home. In particular, you're going to want to choose a cash out refinance, which allows you to borrow more than you owe on the home and receive the difference as cash. Ideally, you will also be able to secure a better interest rate on your loan. R: Repeat The last step in this process is to use the money you've received from your cash out refinance to buy another BRRRR property and to rehab it. Ideally, you will continue to use this method to continue to grow your real estate portfolio until you've reached the point of total financial freedom. How to use the BRRRR investment strategy to your advantage Now it's time to get into how to really use this strategy to your advantage. We've included five of our best tips below. So take some time to read them over so that you understand how to apply them to your own real estate investing strategy. Focus on buying below fair market value First and foremost, when you buy a property, it is absolutely crucial to make sure that the purchase price falls below the appraised value. Not only will this make your initial investment more affordable, but it will also ensure that you have more room to work with when it's time to decide how much money to put into repairs. However, above all, buying at a lower price also means that more rental income goes into your pocket each month. Carefully budget your rehab cost Next, it's absolutely crucial that you maintain a strict budget for your rehab cost and make sure to stick to it. At the end of the day, your goal should be to achieve the highest repair value possible without over-improving the property. In order to gauge how much you should spend and what repairs make the most bends, be sure to look at other rentals in the area where the property is located. Make note of which particular features are commanding the highest rents, and be sure to put those on your to-do list. Maintain positive cash flow as you rent Once you've achieved your full repair value, the next step is to rent out the property. Here, your focus should be to maintain a positive cash flow. In order to do so, you'll need to focus on keeping your operating expenses as low as possible, and finding a tenant who is willing and able to pay a decent amount of rent each month. To that end, it may make sense to avoid using a property manager as that will help you keep your costs low. While it may mean more work for you, especially when it comes time to market the property and vet potential tenants, it will be worth it when you can eventually enjoy the extra income. Leverage your equity with a cash out refinance Many real estate investing resources recommend using a hard money loan, or private money loan in order to finance your next investment property. However, hard money often comes at an extremely high interest rate and private money can be hard to find unless you are well connected. With that said, a cash out refinance is a good option for many investors. It allows you to leverage the equity that you felt up in the property, and borrow cash at an affordable interest rate. Best of all, you have the option to use the money however you see fit, which means it can cover the down payment and closing costs for your next investment property. The bottom line As a real estate investor it is easy to dream of achieving financial independence, but that is much harder to put into practice. However, the BRRRR strategy can provide you with a step-by-step formula for growing your real estate portfolio. With that in mind, don't hesitate use the BRRRR method and the tips provided as you get started on your real estate investing journey. Armed with this knowledge, you should have all the information you need to take the first step toward becoming an investment property owner. To view the original article, visit the Transactly blog.
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Reasons to Invest in Real Estate as a Real Estate Agent
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Wealth Building Strategies for Real Estate Agents
Financial success is a key part of any career. In a Secrets of Top Selling Agents webinar, "Got Wealth? Use Real Estate For More Than a Paycheck," Dirk Zeller tells listeners how to create this success and build their wealth through real estate. Dirk Zeller is an internationally-acclaimed speaker, best-selling author and CEO of a premier coaching company, Real Estate Champions. During his webinar, Zeller encourages agents to learn how to control their income in an effort to build their own wealth.
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Foreign Real Estate Investing: How Much Do You Know?
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Moderne Ventures' Virtual Demo Day
Thursday, May 21, 2020 at 11:00 AM PDT Join us to gain first access to Moderne Ventures' 2020 Passport Companies through a virtual Demo Day from our founders. These companies are recognized for leveraging technology and innovation to provide solutions to leaders in the multi-trillion-dollar industries of real estate, finance, insurance, hospitality and home services. Companies include: Aclaimant Addressable Bend hOM NumberAI Suburban Jungle A Q&A session will follow presentations. Register now!
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How to: 3 Steps to Investing in your Real Estate Business this Year
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Top 3 Tips for Agents to Build Wealth through Real Estate Investing
As a real estate agent entering the field, what prompted your interest? Real estate agents enter the business for many reasons--many for the love of working in the industry, while others for the vision of creating lifetime wealth. Looking over a span of 20 years, what I have seen overall are many real estate agents that have built wealth developed it in their everyday business. This article is meant to be an initial step to educate and place you on the path of financial success through real estate. It's about enriching your career and lifetime goals through the buying and selling of real estate.
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Market Investment Properties to Get Ahead During the Off-Peak Season
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Working with the Investor Client: 10 Tips for Success
This post comes to us from the Market Leader blog: Many new real estate agents dream of tapping into a network of investors who constantly buy and sell homes, imagining that it will provide an easy route to commissions and repeat business. But when they actually hook an investor client—or think that they have—then, it's often a different story. Here's the deal: The investment property sale is a very different process than a residential sale to an owner-occupant. With owner-occupants, you are selling the dream. You're selling the home-sweet-home, the pitter-patter-of-little-feet, the cinnamon-in-the-kitchen, hearth-and-home fantasy ideal. Tap into that dream and the client's bought it. With investors, it's a whole different ballgame. The successful investor has ice water in his or her veins. You're not selling a dream; you're selling ROI. If the number is there and it beats the investor's hurdle rate, and you get the timing right, then you should have a sale. But hitting that hurdle rate is hard—especially with an agent's full commission thrown in the mix. What's more, lots of people will blow smoke, calling themselves "investors." They will get you to do a ton of unpaid legwork for them, when in reality they're all hat and no cattle. They either don't have the capital to do the deal, or they are looky-loos and tire-kickers, or they're just emotionally unable to pull the trigger on a property, no matter how much financial sense it makes.
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The Hidden Cost of Paper Transactions
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Is That Tech Investment Worth It?
Summer is winding down and, for many real estate professionals, this means preparing for budget season. Now that we're well into the third fiscal quarter, you're probably just starting to think about how to best allocate your resources in 2013. Should you set aside money for the rumored iPhone 5, or would finally investing in a CRM make more sense? When considering a new tech purchase, it's easy to be distracted by the "wow" factor of the latest gadgets without thinking about their often high price tag. In order to preserve your bottom line, think of that new phone or software as more than just a toy--it's a tool that can help your business grow! In order to decide if a potential tool is a worthy investment, ask yourself if the benefit gained is greater than the money spent. Does it save you time? Will it streamline your workflow? Is it something that you will use frequently? If it's something that you will only use once or twice, it's probably best to just hold off. If you do decide that a new gadget or software program is a worthy investment, here are a few things to keep in mind in order to maximize its value.
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