A multifamily property is a dwelling that holds more than one unit, allowing several families to occupy the same building. These types of properties offer several advantages to those who are interested in getting into real estate investing, especially when their resources are limited. By reviewing the benefits listed below, you can determine if this is the right investment opportunity for you.
Reduce Operational Costs
Each property you own must be maintained to ensure your tenants enjoy a habitable residence. In addition to keeping up with repairs, this will involve maintaining the grounds, looking after the HVAC units, and conducting other types of preventative maintenance. This can be significantly less costly when all of your rental units are located within the same building. You’ll save on the time it would take to travel to each location, and you’ll save money by maintaining property features that service multiple apartments.
Save on Property Purchases
A single multifamily building that holds four units is going to sell for significantly less than buying four properties of similar value in the same market. When you live in one unit and rent the others to tenants, you can maximize the return on your investment by reducing your expenses. You’ll also save on property taxes in that you’ll only be paying taxes on one piece of property, even though you’re earning income on multiple units.
Eliminate the Work of Buying Property
For each property you buy, there are several stages to go through, including the assessment, inspection, title search, and offer negotiations. Instead of trying to buy several different properties and going through these steps with each one, it’s simpler and more cost-effective to buy one multifamily home. You can find a property with the number of units you want and save time and money throughout the buying process.
Owning a multifamily home provides many more benefits than those listed here. Overall, this is a better risk because, even if half of your units are vacant, you’re still earning income from the other units. This gives you the time to rent out those other units and maximize your income. Having all of your rental units centrally located will make it easier for you to manage the property and communicate with tenants. Multifamily properties are beneficial to own in a variety of ways, whether you’re a first-time buyer or a seasoned investor.
Real estate investing certainly carries a hefty price tag. It takes a considerable amount of up-front cash to buy a property, make the necessary improvements, and get everything ready for your property to start making money for you. If you don’t have all the cash you need on hand, don’t give up hope! There are multiple ways that you can get your hands on the money that you need to get your real estate investment up and running.
Government-Backed Investor Loans
Certain loan types, such as FHA or VA loans, which are backed by the federal government, often require smaller down payments ranging anywhere from 0% to 3.5% down. While that percentage may go up depending on your credit score, as long as you’re above a 580 on your credit score, you should be able to obtain the loan for a minimal down payment. However, these loans are only available to owner-occupants of the home. To be able to get a federally backed loan, you have to commit to living in the property for at least twelve months before you begin using it as an investment. Depending on what type of renovation your subject property needs, you may be able to start working on the property while you live in it.
Home Equity Line of Credit
Often referred to as a HELOC, a home equity line of credit is a solid choice if you don’t have access to six months worth of cash or liquid assets needed to back an investment property. To get a HELOC you basically let your home stand as collateral for the loan, which means you are at risk of losing the property if you can’t make the payments. To secure the investment in some capacity, you can consider only taking out a loan for the portion of the money you need, which will minimize your risk.
Private Money Financing
Instead of financing through an institution, a private money financing option puts you in touch with a private person who has access to the funds that you need. Depending on your relationship with the lender, they may be willing to finance all or a portion of the money you need to secure your investment property. The interest rate and repayment requirements will vary from private lender to private lender, so you’ll want to be well informed before you come to any agreements.
When it comes to real estate, a foreclosure may seem like a good deal. However, those amateur investors or home flippers might not realize what it takes to make a foreclosed home into an investment that pays off. Furthermore, even homebuyers should make sure to be aware of what a foreclosure requires to make a good home.
Purchasing a foreclosed home is similar to buying a used car from an auction. Consumers can save a lot of money if they have the time to search out these deals. A little bit of luck doesn’t hurt.
However, the people who do the best with these types of sales are those who are familiar with the product and make the call whether the lower price is a deal. Just because a foreclosed home is worth less than the property assessment doesn’t mean the estimate is correct. The professionals know this, but new investors may not.
This experience and knowledge help buyers make wiser decisions and mitigate risk. Instead of just looking at the price differential, they consider factors such as location. Is the home in a neighborhood where it’s likely to sell? Does it have unique features that help it stand apart from other properties? What work will be necessary to sell the foreclosure at a profit? Even if homeowners have no plans to sell soon, they need to consider the future resale value of their purchase.
Furthermore, investors must have a strategy that includes property acquisition as well as holding it until it sells. If an investor doesn’t consider the overall real estate market, which includes job and population growth, this property could be on their hands for quite some time. Investors may even lose money due to property taxes and maintenance costs.
Finally, the smartest investors know that foreclosures may not be the way to get the most bang for their buck. Some investors spend time listings of future auctions and content owners or lenders before the auction occurs. While this might not lead to a better price, it can ensure that an investor can close by eliminating the competition and eliminate the need to have cash for an auction. That lengthy closing process can also interfere with a homeowner’s plan to move.
While every field is impacted in some capacity by technological advances, it could be argued that real estate has the longest history of shifting in new directions when technology advances. Today, technology impacts every aspect of the real estate process. Before a buyer even contacts a real estate agent to look at the house, they can take a long look at the neighborhood, thanks to satellites. It has been reported that 70% of buyers look for homes online before they begin shopping. Technology continues to alter the way that we buy and sell real estate.
While many people see the blockchain as a way to potentially support cryptocurrency, but it may have even more practical applications in real estate transactions. Real estate contracts between sellers and buyers can be done with complete encryption protection and security checks that are built into the programming. Blockchain ledgers even provide the opportunity to securely save property title logs and other documents that are needed to complete a real estate transaction.
While AI sounds intimidating to some people, it can provide the opportunity for both potential buyers and their agents to streamline their shopping process. Recent advancements have created a way for prospective buyers to get a real-life, 3D look inside a home they may be interested in without having to schedule a showing, meet with their agent and drive an unknown amount of miles to get to the address. Not only is this a great deal for buyers who may have a hard time getting their schedules to work out, but it also frees up agents who may be juggling multiple clients.
Since the dawn of real estate, agents have utilized some CRM to keep up with contact information for various clients. Modern tech advances have enabled agents and brokers to plug a client’s information into their CRM and even send them an automated e-mail every so often to touch base and see where they’re at in their decision-making process. While this may sound minimal, not having to make a dozen phone calls a day to people who may not be committed to buying or selling is enormous for real estate professionals.
As the real estate market continues to grow, so does the competition for investment properties. A low inventory of homes and high demand for buyers and investors makes the competition fierce. A hidden gem in the real estate world that can often help investors avoid some of the competitors is the world of off-market property listings. However, like anything else, off-market property listings can come with their risks. If you’re a real estate investor looking into what your options are, here are some pros and cons to considering off-market property investments.
A significant benefit of working with off-market property listings is less competition for investors. When you’re looking into properties that are listed on the MLS, you’re essentially competing with both residential buyers looking for a home and investors with similar goals to your own. With off-market property listings, you’re decreasing your competition to a much smaller number. According to Mashvisor contributor, Sylvia Shalhout, “With an off-market investment property, there is likely to be only one or two other real estate investors putting up offers, if any at all. This means you have the advantage of getting good deals as no one else is making any offers to compete with yours.”
Off-market property sales tend to take longer, which essentially gives the investor more time to do their diligent research. Whenever you’re investing in real estate market analysis is essential, even when working with off-market properties. Since the sale is longer and finding the right information for your analysis may take more time, take advantage of the longer sales cycle.
Inaccurate Market Values
When properties are listed on the market, it helps determine their market value. One of the most significant issues with buying an off-market property is the inability to determine accurate market value. While it’s still beneficial to perform a market analysis for an estimate, without the property being officially listed on the market, the accurate selling value will be unknown.
You’re ready to make the jump into real estate investing, and you’re curious about the vacation home sector. Investing in vacation rental properties can be a great way of an extra income in real estate. Of course, there are essential factors to consider and risks you should know about. But, when it’s done correctly, a vacation rental property can be an excellent investment! Here’s why:
Higher Rental Income
One of the main factors that set a regular residential rental property from that of a vacation rental is the potential for a high rental income. Vacation rental property owners are often able to charge a higher rental amount due to its high demand. When you’ve chosen the right location and property that has a high demand for tourists, you are often able to charge higher rent costs, especially during seasonal highs. Consider any type of property close to a beach or boardwalk setting. Their properties go through high periods depending on the season, increasing their demand level for vacationers. Take a look at the rental costs within that area and see what other property owners are charging.
A great benefit that comes from owning a vacation rental property is the property’s overall appreciation level. Investing in a vacation rental property isn’t only about focusing on rental income. As the demand for vacation rentals continues to increase due to brands like Airbnb, so does the overall value of these properties. According to Mashvisor, the appreciation of your vacation rental will make it much easier to sell and profit from down the road.
Easy To Rent
As we previously mentioned, vacation rental properties are generally always in high demand, depending on the location. High demand for rentals makes them easier to rent. So, if the high season is longer, you can benefit from multiple tenants throughout the season.
An Extra Perk for You
Of course, your vacation rental is still yours. So you do have the opportunity to use it as your getaway for however long you’d like. With vacation sites, you can block off time that your vacation home isn’t available for tourists, and is exclusively yours!
As a real estate investor, making your property appealing to potential buyers or renters is a step in the right direction towards getting a return on your investment. While you might want to stray away from full “fixer-uppers” (at least until you gain enough experience), there are some renovations you might want to consider to add value to your investment property.
The floor throughout your property plays an important role in the renovation process. Is there carpet throughout? Or, can you find the hidden gem of original hard-wood? Figure out what interior look you’re going for, or look into current trends. If you want to keep the originality of the flooring, you can have them sanded and refinished for a fresh new look.
Updated Kitchens and Bathrooms
As we’ve mentioned, a full flip is a significant challenge unless you have the experience and resources. But, rest assured, there are a few great ways to update a kitchen without completely breaking the bank. Kitchen cabinets are often a focal point of what potential tenants or buyers are looking for. Cabinets are great to work with; if they have a good base and minimal damage, a quick sanding and fresh stain or a new coat of paint can go a long way. Finish them off with new hardware to complete the updated look. For countertops, you may want to consider replacing them if the current ones are dated.
Paint, Paint, Paint
A fresh coat of paint in each room goes a long way in “sprucing” things up a bit. Choose popular colors that are surrounding what’s currently trending. This is where you can have a little fun and figure out what potential renters or buyers are looking for.
Your focus shouldn’t just be directed toward the interior of your property; exterior matters just as much. Make sure your investment property is appealing to anyone that might be interested. Keep the grounds maintained well and consider a few different landscaping or garden options. The property being well kept on the outside is a great first impression.
So, you’re considering investing in real estate. You’ve done some research, but your first time around has you a little hesitant about moving forward. The key to success in real estate investing is doing your due diligence and finding an investment property that fits within what you’re trying to accomplish. Are you focusing on multi-family properties like apartment buildings or condos? Or are you taking a single-family approach with the intent to rent or sell? Either way, there are a few key steps to take before jumping into your investment.
Find a Good Location
The location of your investment property means a lot more than you might think. Whether you’re renting it to tenants or selling it after a flip, location matters. Do your research on the data and statistics of growth in the areas you might be interested in. From there, narrow your search down to a few select areas that you would consider buying an investment property in. Buying an investment property in an unfavorable area can lead to making it more difficult to rent or sell, causing you to struggle to obtain your return.
Stray-Away From Fixer-Uppers
While fixer-uppers are often the star of home improvement in the media, generally, they’re not what you want to start off with on your investment journey. Small renovations are doable and shouldn’t cause you too much stress, money, or work; really anything small and cosmetic shouldn’t be too much of a hassle. What you want to avoid are properties that need to be gutted entirely, or have issues within the core and foundation of the property. Foundational, electrical, or piping problems can run you into the red when it comes to fixing them, so make sure you’re looking into the property before you make the purchase.
Estimate Potential Earnings
When you’ve narrowed down your locations and property options, look into the potential for earnings and the return on your initial investment. If you move forward with this property, how quickly will you be able to rent or sell it? Is the local area on a streak of growth with new residents looking for home availability? These considerations and questions will help lead you to an accurate estimate of your potential earnings.
Look Into Market Averages
Take the time to research market averages within the area. What is the average income and employment rate? If you’re looking to rent your investment property, what do you surrounding rental costs look like? This will help you determine where your property stands, and how quickly you can see an investment return.
Previously, older generations used to save up their money to buy their houses and invest in the stock markets. Millennials on the other hand, decide to rent instead of purchasing a house. Many Millennials decide to rent instead of buy because of the large amount of debt that they have. Instead of taking on more debt, Millennials decide to forgo a mortgage.
A popular trend that we are seeing within real estate is that older generations are selling their homes ad renting apartments or condos while the younger generation, the Millennials, are continue to rent and invest in real estate properties. In this blog we will take a look at why millennial real estate investors are on the rise.
Millennials are the most populous generation in the United States.
The Millennial generation is the group of people born between 1982 and 2000. With over 75.4 Millennials in the United States, they have have the greatest impact in housing market shifts. This is why it’s important to understanding Millennials’ real estate and investment strategies.
Millennials are skeptic about the stock market.
Many of Millennials believe that real estate investments have a better return than investments made in the stock market. A lot of Millennials have this mindset because many of them were in college during the 2008 recession and found it challenging to find a job. Back in 2007, over 65% of Americans were investing in the stock market. Today, half of that percentage has left the stock market and is instead investing in real estate.
Real estate is on the up and up and Millennials have noticed.
One study shows that 86% of Millennials are planning on buying a house one day even if they are renting now. Some Millennials are known for being entitled and lazy, but they are actually pretty savvy investors. In general, they are producing a greater return on their investments. Millennials have been able to identify areas of population and job growth and track real estate market areas that are on the rise.
Millennials are investing in real estate online.
In recent years, there has been an increase in crowdfunding investments. Online crowdfunding lets anyone invest in real estate for a smaller initial investment. A lot of crowdfunding companies will require an initial investment of anywhere between $500 to $5,000.
One of the benefits of investing in real estate online is that you don’t have to deal with the hassle of being a landlord. Usually the crowdfunding or syndication companies will outsource property management.
If you are looking to invest for the first time overseas or if you are looking to expand your foreign property holdings, but don’t know where to start, I can help. I’ve gone ahead and collected the best places around the world to invest your capital for the year 2020.
One of the very best places to invest in real estate this year is Panama. In Panama there are many apartments you can purchase for rental opportunities. Thanks to neighboring country buyers from Argentina, Colombia, and Venezuela, Panama City’s market has remained stable and has grown quite well over the course of the decade. The same can’t be said for many other markets in this region, where some have struggled or even collapsed.
North Americans as well as Europeans are investing with Panama but Panama has recently forged a new relationship with China. This relationship has the potential to fuel the economy and make it soar. In the 1990s, many Chinese helped to grow the Vancouver economy and it is expected that they will do the same for Panama City. This will cause Panama City’s property prices to grow as well.
Brazil is a big country that has many different property markets. In 2020, focus on the Fortaleza area. Fortaleza is located along the coast and is big tourist attraction. Rentals that focus on the local holiday marker are said to earn more than 8% net yield reliably.
It’s best to look for investments along the beachfront, you will find that many of the prices are great bargain.
Thailand is known for their agriculture as well as their strong economy and expanding tourism. In 2018, Bangkok was one of the most visited cities in the world, ranking above London and Paris. It being such an attraction to tourist easily grabs the attention of investors.
The one downside to investing property in Thailand is that there are restrictions put in place on how foreigners can own property. Under most circumstances foreigners are only able to own land leasehold. Although this is seen as a setback, there is some positive news. Foreigners are allowed to own condos freehold, as long as they don’t own more than49% of the entire condominium complex.
Due to this leeway, the condo market has many foreign investors. While a condo may not be your first investment choice, it may be a blessing in disguise. Compared to an individual property, condos are cheaper and easier to mange. You won’t have too many issues managing these properties if you are across the world.