Benefits of Investing in Commercial Real Estate

Benefits of Investing in Commercial Real Estate

Most new real estate investors shy away from commercial ventures because they find the prospect a little too intimidating. While there might be a slightly bigger learning curve involved, taking this path can lead to a more rewarding experience. Those new to real estate investments may be surprised to learn just what benefits are involved in investing in commercial real estate.
Earn More Income
Compared to a residential multi-family home, commercial real estate, such as an office or retail space, can provide a significantly higher income potential. Even compared to high-performance stocks that may earn you an annual 2% to 3% return, investing in commercial property can result in a 5% to 15% return. Of course, your income potential will depend on the number of tenants, but, overall, commercial real estate offers the highest income potential.
You Can Build Equity Faster
By leveraging your investments, you can purchase more commercial properties within a shorter time frame. This is done by making a small down payment on the commercial property and financing the remainder of the purchase price. Since the lender can rely on the income potential of the property, they’re more likely to approve loans on commercial real estate. You can use this strategy to invest in several commercial properties within a shorter time frame, growing your equity faster than you would in investing in residential real estate.
There’s Less Risk
A commercial property will have many more tenants than a typical multi-family residence, so losing a tenant will have a lower impact on your income. You’ll be able to use the income generated from the rental payments from the remaining tenants to cover the difference. Additionally, commercial tenants are often expected to pay for the expenses of maintaining the property. They may have to cover the costs associated with maintaining common areas, taxes, and other building expenses.
Protect Your Investments
You’ll have more security in protecting your investments in commercial real estate. In addition to the land, which has value in itself, you’ll own the property on the land. As you develop that property to suit your tenants, any improvements you make will boost the property’s market value. Even when you lose a tenant, you still have the value and equity in that property.
Before you commit to residential real estate investments, it may be worthwhile to learn more about commercial real estate. You can make use of resources that will enable you to invest what you have as a means of getting your foot in the door while enjoying the benefits that commercial real estate investing provides. Giving it a try can result in a more positive experience than you anticipate.
Real Estate Investing Trends to Look Out for This Year

Real Estate Investing Trends to Look Out for This Year

The real estate market is always changing, but staying on track of real estate trends can help people to make wise investments. These five huge shifts in the real estate market are likely to be the biggest trends of 2019.

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.

Tropical Property Markets To Invest In

Tropical Property Markets To Invest In

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.

Cayman Islands
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.

Costa Rica
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.

How the New Tax Laws Will Affect Real Estate Investors

How the New Tax Laws Will Affect Real Estate Investors

How you prepare for taxes can be the difference between making a huge profit or ending up in the hole following a real estate investment. Due to some reforms to US tax regulations, real estate investors now have even more opportunities to save money, but there are also some new challenges they may encounter. These changes are likely to make a big difference for real estate investors in the upcoming years, so it is important to fully understand them.

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.

With the new regulations in place, real estate investors need to be wary of what an impact these changes make on their investments. Make sure to brush up on your research to find out how these new tax regulations will affect you.
What is Real Estate Crowdfunding?

What is Real Estate Crowdfunding?

What is real estate crowdfunding?
Crowdfunding may not be a new option in real estate investing, but it is opening up new opportunities for young investors. Bringing this option to a larger community via the internet allows investors to take advantage of opportunities outside of their local markets. It also provides a forum for developers to find new investors and to share exciting news and updates about their projects. While real estate crowdfunding is an opportunity that benefits developers and investors equally, it still carries the risk that accompanies any real estate investment.
The Advantages of Crowdfunding
One of the greatest advantages of real estate crowdfunding is that it provides an opportunity for young investors to get started with little capital. Instead of having to come up with a larger portion of investment capital, investors can contribute what they have to a project. Their share of returns will be smaller, but it is an opportunity to get involved.
Additionally, investors can learn more about the real estate development process. As investors, they can offer their insights and contribute to the decision-making process. Since there are so many developers turning toward crowdfunding, investors have greater choice than ever before as well. They can choose among projects that appeal to their interests, while also selecting opportunities that represent the best chances for growth.
The Disadvantages of Crowdfunding
While crowdfunding does offer more opportunities, the risks that accompany those opportunities are just as real. Like any real estate investment, crowdfunding projects also rely on the strength of a given market. If that market suffers a hit, the investor will most likely lose money on the project.
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.
While real estate crowdfunding does carry risk, the potential for growth and profit is still enticing. These options allow investors to get started with little capital, letting them grow their funds over time. It’s not only a good opportunity for young investors. It offers seasoned real estate investors to pick and choose among the most promising projects. What are your thoughts on real estate crowdfunding?
3 Habits For Successful Real Estate Investment

3 Habits For Successful Real Estate Investment

Real estate investment is generally considered to be one of the least risky types of investment. This is partly due to the fact that there are any number of ways to make money off of real estate investments, as opposed to other more traditional methods of investment. That being said, no investment is 100% foolproof, so being a successful real estate investor requires following some fairly specific disciplines. Here are 3 habits of successful real estate investors.

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.

If you are currently a real estate investor or have dreams of being one, forming these habits will be incredibly beneficial.
Investors and Savers Are Concerned About Rising Interest Rates

Investors and Savers Are Concerned About Rising Interest Rates

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.

What to Know When Investing in Vacant Land

What to Know When Investing in Vacant Land

It’s important to consider the ways that investing in a vacant plot of land differs from other types of real estate investments before committing your resources. A vacant plot of land presents different challenges, but it also offers unique opportunities. Learning more about these differences can help you determine if this is the right route for you, and it can help you identify the best opportunities in your market.
Plan a Quick Exit Strategy
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.
Don’t Let the Land Sit Idle
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.
There’s More Work to Be Done
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 is the case with any type of real estate investment, it’s also up to you to do your research in advance of investing in any property. This means conducting title searches to ensure the land has a clear title and researching the market to evaluate the land’s potential value. As long as you do your due diligence, investing in land and offering it for development can be a lucrative opportunity.
How to Find Investment Properties

How to Find Investment Properties

Investing in real estate is an exciting opportunity, but, for those new to this type of investing, there are many unanswered questions. One of the biggest concerns new investors face is in finding the opportunities that will earn them a good return on their investment. There are actually a number of different ways to find new real estate investment opportunities, but you will still have to do your due diligence in researching any property you do find.
The Grapevine
This is still the best way to discover new properties that have just been listed and those that may be hitting the market soon. Since most properties don’t stay on the market for long, finding out about them early is often vital. Let people know you’re looking and you may hear about listings ahead of the public.
It’s hard to meet anyone who’s not familiar with Craigslist and it nears the top of the list for the most visited websites in the world. Think of it as a global classified ads site and you’ll begin to understand the significance it plays for investors. You can find deals for just about anything on Craigslist and that includes real estate.
Do Your Own Marketing
This is similar to word of mouth advertising, except that you’re trying to reach a much larger audience. By using print and digital marketing to notify the public about your real estate investing interests, you’ll bring sellers to your front door. This can help you find opportunities that will never reach the public eye if you act quickly enough.
This is a real estate listing site that specializes in sharing listings for commercial properties. The site hosts listings for apartment complexes and smaller multifamily homes as well as for restaurants, shopping centers, and other small business real estate ventures. LoopNet is often a good site to visit to find your next investment opportunity.
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.
Why You Should Invest in Single-Family Rentals

Why You Should Invest in Single-Family Rentals

After a year marked by stock market volatility, many investors are looking for alternative investments to stocks. Such investors should consider the advantages of investing in single-family rentals.

High Demand 

A low level of homeownership is one reason single-family rentals are in high demand. People are not seeking homeownership at the high rates of the past. Some seek single-family rentals to maintain their freedom to live anywhere. Others are would-be homeowners, but they have large amounts of debt from student loans and credit cards that make it difficult to qualify for or to pay a large mortgage.

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.

Low Inventory 

Currently, there’s a low inventory of single-family homes. The combination of high demand and low supply means landlords can charge more in rent (see below).

Rising Rents 

A single-family rental has excellent potential for providing investors with positive monthly cash flow because rents are rising. Rental rates are expected to continue increasing in the near future.

Increasing Asset Value 

The value of single-family homes has increased over the past year and is forecast for continued growth in 2019. Long-term investors in single-family homes are likely to see these assets gain value over time.

Asset Volatility Unlikely 

Asset volatility is common in the stock market. However, prices in the housing market are not correlated to the stock market. The stability found in the real estate market may be attractive to equity investors.

Different Tenants 

Cultural shifts and demographic changes have put new faces on tenants who rent a single-family home. Young adults are not putting the cultural value on homeownership that previous generations did. Although many young adults aren’t planning a home purchase, they still want the benefits of a single-family home, such as a yard and additional bedrooms, for their children. Downsizing baby boomers rent because they either cannot afford or don’t want a new mortgage.