1. Longterm Renting
Only about half as many millennial are able to afford to own a home like boomers could a few decades ago. Even those who can afford to buy a home in the suburb often prefer to rent because it allows for more flexibility and proximity to work. More and more young professionals are instead choosing to see renting as a long-term housing solution.
2. Newly Constructed Luxury Rentals
The increased number of upper and middle-class rentals is leading to investors constructing luxury apartments with fancy appliances and amenities. These luxury rentals appeal to well-educated workers with money to spare and are often situated in city hubs. There is especially a growing interest in this in mid-sized, affordable cities like Charlotte, Houston, and Atlanta.
3. Single-Unit Rentals
Due to the increased interest in renting, there is more of a demand for single unit rental homes. This shift is good for investors because directly owning a home and renting it out to people often allows for higher profit potential. Single-family rentals do not usually shift with the stock market, making them a way to diversify a portfolio.
4. Multifamily Housing
Many people are starting to get creative with how they consider real estate. There are fewer people looking to strike out on their own and get single-family homes now. Instead, there is a big spike in multigenerational housing with summer homes, garage lofts, and mother-in-law suites accommodating several families in a single home. More adult children and elderly parents are living together, and there is also an increase in people who rent out bedrooms or have roommates even once they start a family.
5. More Joint Ventures
Investors can expect to see a lot of large capital partners partnering up with REITs to launch real estate ventures. This is happening because REITs had a very strong performance last year, and large capital partners provide more assets and management that can be used to advance this investment method.
An economic upswing that began in 2013 has North American baby boomers searching for buried treasure. It comes in the form of an inventory of affordable properties in several tropical regions that are suitable for both retirement and investing. Savvy investors are taking advantage of the opportunity to invest in rentals for snowbirds and furnish themselves with a second home in a Caribbean paradise. Experts in the following locals say now is the time to start digging for investment treasures that will pay off big time in the future.
Belize is located in mid-Cental America and is only an hour and 45-minute flight from Miami. Buyers can rest assured that the economy is stable, and the real estate market has matured. Investors will find no international pitfalls to trap them legally since Belize is a part of the British Commonwealth and there is no capital gain tax. Properties are less expensive than many other places in the Caribbean. Hot spots include the Cayo District and San Pedro.
The Cayman Islands also have a favorable economic forecast along with a popular vacation lifestyle. Their rules for international transactions strict and the British colony’s government is friendly to foreign investors. Titles can go in company or personal names. The Caymans have a housing inventory that is affordably priced. The average price of a two-bedroom condo is $350,000. Rented out at $2,500 net, the return on investment will be seven percent over time. Additionally, there is no income tax, property tax, or capital gain.
A varied natural landscape and a politically and economically stable country make Costa Rica a popular investment choice. A rising GPD is fueling investor interest. Canadian and U.S. tourists and snowbirds keep the rental market strong. Property can be bought easily with a simple tourist visa, and foreigners have the same rights as locals in terms of property ownership. Hot spots include the Southern zone and the northern Pacific coast.
The Turks and Caicos Islands
Located north of the Dominican Republic, the Turks and Caicos Islands have one of the Caribbean region’s fastest growing real estate markets. Depending on size and location, investors will pay between $250,000 and $800,000 for a condo and $250,000 for a home. Most properties come fully furnished because there is no room to store furniture. The Turks and Caicos have relaxed rules for conducting business. There are no taxes, but there is a one-time stamp duty payable at the time of purchase. These islands have a bright future as a vacationer’s paradise.
Deducting Loss Is More Difficult
Most investors end up with losses in the first few years of owning a property, and they used to be able to deduct this loss on their taxes. However, with the new legislation in place, people will not be able to deduct a loss for the tax year it occurs. Instead, they have to wait and carry over the loss to the next year. For new investors, this can make finances a little harder to keep up with especially without the cash flow from their investment.
Tax Brackets Are Slightly More Favorable
The adjusted tax brackets for the tax law mean that some people do not have to pay quite as much taxes as they used to. The savings are only very high for those in the highest tax brackets, but even people in lower tax brackets can still expect to save a little money with the new tax law.
Doubled Deductions for Depreciation
Real estate investors now have the option of doubling up to $1 million for certain properties. The regulations for using Section 179 deductions are a little complicated, but if you qualify, you can deduct things like furnishing, real estate depreciation, and interior improvements.
Investors Are Offered a QBI Deduction
A new advantage for investors will be the Qualified Business Income Deduction. This lets people take a 20 percent deduction on certain types of income, so it can provide big savings. Any investment operated as a sole proprietorship, partnership, trust, estate, or S corporation may qualify.
More Properties Qualify for Improvement Expense Deductions
Changes to regulations mean that investors may be able to offset up to 100 percent of their expenses for improving certain types of properties. Not all properties qualify now, but investors can use the deduction for many types of restaurant, retain, and leasehold properties.
Regarding losses, the developer will not be able to pay interest or promised returns on the investment. This is known as investment default and the risk is higher for crowdfunding investors than it would be in peer-to-peer or direct investing. Even when you thoroughly research a project before committing to it, this risk of loss is still present and may only take a slight downturn in the market.
1. Do your research
Doing your research as an investor means understanding both the market as a whole, the specific area you want to invest in and the type of real estate you are investing in. It means thoroughly vetting any partners you might be thinking of investing with as well as any attractive offers you come across. In fact, the more attractive an offer appears to be, the more carefully you want to research it. Nowhere is the old adage “if it’s too good to be true, it probably is” more true than in the world of investment. That doesn’t mean there are no “golden” opportunities out there, it just means most wealthy real estate investors generally got that way by being hugely skeptical and extremely pessimistic.
2. Develop a niche and stick with it
While Bo Jackson may have been outstanding at both baseball and Football, there is a reason most professional athletes stick with one sport. To be the best at one thing, you generally have to focus on that one thing - no matter how great you might be at a number of things. That doesn’t mean that any number of professional athletes don’t dabble a bit in a number of sports such as golf or skiing, it just means they reserve their primary energies, efforts and focus for one specific thing.
3. Don’t go it alone
Not only will you want to develop a network of educated experts to help you make the best decisions, but cultivating fellow investors can also help you minimize your risk. This doesn’t mean you need to partner with someone on every investment, but you can also tackle bigger fish with a team. If you want to do more than just dabble in real estate investment, you will want to build a strong, solid, stable network of support.
The goal of any investor is to diversify their portfolio. Some people tend to be savers while others are wanting to make money to invest in other projects. No matter where a person falls on the investment spectrum, everyone gets a little antsy when the interest rates are on the rise. Have no fear because there is still much profit to be made regardless of where the interest rate stands. However, both investors and savers should be wary of a few pitfalls and avoid them at all costs.
The Involvement of the Federal Open Market Committee
Anyone that has paid attention to the housing market has noticed that the interest rates are slowly creeping back up. Gone are the days of getting a home with a two or three percent rate. The hike is all part of a plan guided by the Federal Open Market Committee.
Investors worry that these rates help when it comes to money market savings accounts and certificate of deposits, but will it hurt the housing market? The good news is that the housing market is doing great. It’s unlikely that a crash like 2008 will ever be repeated. So the market can take a bit of a shift and remain unscathed.
The Difference in a Savers/Investors Approach
Just how much has the interest rate increased? The most recent increase happened in September of 2018. The rate rose 2.25 percent. In December of 2019, the rate is set to grow another three percent. Lastly, the FOMC says that the interest rate remains steady into 2020 and will then level off. Investing cash into savings accounts, money market mutual funds, and other accounts that are affected by interest rates can undoubtedly benefit savers. While savers may be elated by the news of the rates, investors are concerned.
Savers should know that present-day rates are not like days gone by where one couldn’t find a decent rate. Anyone that holds a bond will face a mixed bag. When the interest rates are on the rise, the value of existing bonds decrease. Part of the reason for the decline is that these older bonds must vie with newer ones that offer higher yields. It’s advisable to keep bonds maturities for a short while until the rates plateau. Any dividends made from the old bonds can then be used to invest in new, more profitable, ones.
Making Wise Investment Decisions
Investors are concerned because the stock market has taken a bumpy ride this year and the increase in September only added fuel to the fire. An excellent place to invest is in commercial mortgage securities. The rising rates cause mortgage REITs to increase dividends. Be careful about pulling money out of the market to quickly invest it into a savings account that may ultimately lose money because of inflation. Stay the course and keep the investment portfolio in line with risk tolerance and age.
The market for vacant plots is even more volatile than the market for residential and commercial real estate. It won’t take much for the market to take a downturn, leaving you with a plot of land that is essentially worthless to developers. To avoid that situation, you should have a quick exit strategy before you even make an offer on the land. You shouldn’t plan to hold onto the land for more than 36 months at the longest.
Even as you begin looking for land developers, your first concern should be to look for ways to earn passive income from the land. Depending on the location of the land, you can put up a billboard, divide it up into parking spaces, or turn it into a fruit and vegetable garden. There’s no reason this land can’t be earning you money from the moment you take possession of it.
Once you buy the land, you may think that you’ll just sit back and wait for developers to start submitting offers. That’s not quite how it works. If you really want to appeal to developers, it’s up to you to do the legwork to get the land ready for development. This means getting the land surveyed, applying for the necessary permits, and getting the property zoned. For larger plots, you might also have to get the land subdivided. Developers will look for land that already has been prepared in this way, which is commonly known as entitling the land.
As you search the internet, you’ll likely find more sites that offer listings for real estate investment opportunities. While you may have to continuously check these sources until you find the right venture, your perseverance will pay off. It’s better to search for a longer period than to jump into an investment opportunity that carries too much risk. If you take the time to determine what you’re looking for in an investment opportunity, your chances for success will be multiplied.
With unemployment low and rising wages, strong job growth also is contributing to the high demand for single-family rentals. The country’s healthy labor market also is one factor that is leading the Federal Reserve toward a rise in interest rates, which would result in higher mortgage rates. An increase in mortgage rates would be good for investors in single-family rentals. Some people will continue renting because higher mortgage rates will price them out of homeownership.
Increasing Asset Value
Asset Volatility Unlikely