Buying raw land is a lucrative investment for a seasoned real estate developer. It is flexible, cheaper than improved land, and appreciates over time.
A bit of creativity is all it takes to turn the area into a premium location. Still, the developer must use strategies that work for that particular location. Here are some tips.
Buy Raw Land in Cash
Land investors pay for land on a cash basis. It gives the buyer a competitive edge during negotiations, saving significant amounts of cash in the long run. Besides, most home equity lenders shy away from financing raw land purchases. There are a few instances when loan financing is an ideal option:
- If the purchase will cripple the investor’s liquidity.
- When the investor wants to save up enough cash for improvements.
Land Flipping – Buy and Sell
Land flipping involves buying land cheaply and listing it as an owner-financed sale for a quick cash return. For example, an investor can get a tract worth $20,000 at a throw-away price of $5,000. Without making any improvements, the investor can put this land up for sale as a financing option of say $300 per month for the next five years. By the 5th year, the investor will have received total payments amounting to $18,000, which is still close to the original value of the land. This strategy works best when the investor wants incredible returns within a short period.
Hedging - Buy and Hold
In instances where there is stiff competition, the investor may decide to buy and hold the property until conditions improve. Also, in the event of a recession, the land investment provides ideal hedging against inflation.
Land for Cultivation
The land is an excellent asset for agribusiness. Instead of hedging, the investor can buy the farm, cultivate it, and then sell it after the harvest. It is a win-win scenario for property buyers with expertise in farming.
Land entitlement strategy involves buying then zoning the raw land for a specific purpose like residential, commercial, or farming. Investors should study the current property trends before settling for the zoning option.
Land takes time to sell. But, with the right strategies and market understanding, an investor can turn an undervalued raw estate to a premium commercial unit. Here, timing is vital.
Refinancing of a rental property is the most honorable thing for a person to engage in at this time. He or she can seek to refinance a rental property as an investment since it increases the cash flow and lowers the payments. The concerned party will thus establish low rates, and a constant flow of income is guaranteed.
Advantages of Refinancing Property
Lower Interest Rates
The interest rate that one is likely to face in the real estate business is high. The high rates charged can be attributed to the risk present in the real estate business. Lenders will charge highly to mitigate the risk of defaulting that can be present in the business. Refinancing seeks to lower the rates incurred when investing in real estate.
Change of Mortgage Term
Refinancing provides one with an opportunity to renegotiate the mortgage terms. Thus, enabling one to secure an agreement that will allow for lesser interests accruing and shorter payment durations. As an investor, it is easier to enter into an agreement that pays a fixed amount monthly other than the one whose rates change every month.
Refinancing allows a person to own the property when the mortgage balance is zero. Lender will be lien to the property until the mortgage is paid back. The lien will be entitled to seize property following failure to make the payments borrowed on the stipulated time.
The Right Time to Refinance
The right time to seek refinancing is when the interest rates are low, and the value of properties is high. During this time, the refinancing party is at liberty to borrow larger amounts at lower interest rates.
Obstacles to Refinancing
- Low credit score and unclear sources of finances.
- How to Avoid Issues and Delays with Refinancing
- Prepare and organize necessary documents to avoid issues and delays.
- Places to Seek Refinancing
Refinancing entities include; banks, credit unions, private lenders, hard money lenders, among many other sources.
Refinancing is the best option for lowering the rates changed in the real estate business. Other advantages of engaging in refinancing entail changing the mortgage terms to one’s convenience and increasing the cash out equity options. The best time to seek refinancing is when the interest rate is low, and the property value is high. To avoid delays in refinancing, the preparation of necessary documents is key.
If done right, multifamily property renovations are an absolute goldmine to maximize investors’ return on investment. As more exquisite multifamily properties join the real estate world, older assets, consequently, require an upgrade. Enhancing the aesthetics and available amenities of older communities ensures that they remain abreast of the competitive real estate market. Below are mistakes to avoid when it comes to multifamily property renovations.
Ignoring the Housing Market and Demographics
Undertaking multifamily property renovations without analyzing the housing market is a costly mistake. For any investment, making renovations should translate to more returns.
When considering renovations, perform a real estate market survey, especially with actual tenants. Then, re-design the property based on the tenants’ upgrade requirements, not on general trends.
Ignoring the Property Age
The property age, to a great extent, impacts the overall cost of renovation. Older assets command more renovations to remain at par with the more modern property.
However, the investor must also consider the expected returns upon performing renovations. Always ensure that the renovation budget doesn’t outweigh the expected returns.
Ignoring the Energy Efficiency Factor
Most investors often overlook the energy efficiency of their property. Energy efficiency benefits both the tenants and investors since the energy bills and turnover rate reduce significantly. Moreover, lower energy consumption means increased property value.
Embracing energy-efficient initiatives for the multifamily property could be as simple as adopting energy-saving lighting. Reduced energy usage also lowers the cost of regular maintenance checks.
Not Hiring Professional Contractors
Going for a low-cost general contractor will reduce the whole renovation process to zero. Despite having tempting offers, such contractors will have the investor making losses instead of desired profits.
To avoid this mistake, conduct extensive research regarding prospective expert contractors. The contractor of choice should bear substantial experience working with multifamily properties. Reviews from other real estate investors come in handy during the vetting process.
Traditional real estate has been turned upside down by the introduction of virtual technology that assists home and commercial buyers and sellers.
Real estate, once considered a transaction resulting from a personal relationship between agent and seller, was already changing before the COVID-19 pandemic, but it is evolving now more than ever.
The benefits of virtual reality (VR) in real estate include the following:
(1) Distance is irrelevant.
Are you thinking of becoming a snowbird and looking for a home in Florida while living in Pennsylvania? Instead of booking multiple trips, you can narrow down the neighborhoods and homes you are interested in online from the comfort of your home.
(2) Properties under development come to life.
Design of commercial properties has always been guided by architectural drawings and two-dimensional mock-ups. Now, VR allows three dimensional views and makes it easier for buyers to request and implement timely changes because they are able to see the building in a more realistic view.
(3) VR is cost effective.
Yes, the technology costs money, but it quickly pays for itself. Consider the popular app called RoOomy. It allows for virtual staging.
According to Thinkmobiles.com, since 1985, real estate agents have been actively staging homes. Staged houses sell in 80% less time and often for higher prices.
RoOomy opens the staging process to the homeowner and allows the person to visualize how the house could be furnished to best meet his or her needs and preferences.
Because it is technology-based, the components can be reused. Gone are the days of the realtor dragging pictures, plants, and decor from a sold home to the next house for sale.
V-commerce goes one step further and allows the homeowner to purchase the actual piece that he or she has virtually staged in the home.
With so many benefits, it is hard to believe there are people who are not sold on the VR real estate experience.
Sam DiBianchi, founder of DiBianchi Real Estate in Fort Lauderdale, Florida tells Fortunebuilders.com,“Real estate is personal. Technology cannot get personal with a potential buyer or seller–it’s impossible.”
DiBianchi adds that VR is an excellent tool, but he believes it should be used as a tool and not be the all-encompassing real estate experience.
If the S&P CoreLogic Case-Shiller Home Price Indices are anything to go by, then the West Coast real estate is experiencing a boom. More home buyers are looking to Phoenix, San Diego, and other West Coast cities for the best real estate opportunities. If you are an investor, what are the top 3 spots to consider for real estate investment at the West Coast? Check them out below.
San Jose is a high-income capital of Silicon Valley with an excellent history of long term investment opportunities. Here, home values are some of the most expensive in the United States. Yet, the San Jose market is currently a buyer’s market with some of the most successful high-tech firms on the listings. In turn, sellers are willing to accept the asking value or below. Zillow estimates the median prices for San Jose at $1,002,873. The last ten years saw the industry appreciate by 77.36%.
In the Los Angeles area lies Hawthorne, a hidden gem for rental properties. Up to 70% of the residents here own or live in rental units. In turn, expect a high and steady rental income from your investment. The average monthly rent stands at $1,736. Typical neighborhoods with rental values are on an upward trend of as high as 194%, including Delta, Washington Ave/W135th St, and Del Aire. Plus, most home sizes fall in the two bedrooms’ apartment complex category.
When you are looking for an affordable real estate investment opportunity on the West Coast, get to Anaheim. With a median price of $685,000 and an appreciation rate of 41% in the last three years, this buyer’s market is popular with single-family homes. Further, it is a favorite tourist spot home to attractions like Disneyland that push up the rental income of the houses. Average mortgage costs stand at $2,535. Then, expect the sellers to lure you with competitive listings as they tap into the lower demand.
Other prime real estate spots at the West Coast include east of Los Angeles as you get to the Interstate 710, Portland’s’ rental units that are popular with students, and Oakland that is now appealing to a higher class of tenants. Then, liaise with an experienced broker who will take you through the steps of owning a part of the West Coast today.
A substantial investment portfolio includes commercial real estate. This type of investment remains as one of the best in providing excellent risk/reward profile to investors. Let’s review five reasons why investing in commercial real estate should be considered for growing wealth.
EXCEPTIONAL APPRECIATION OF ASSET VALUE
Compared to other investments, commercial real estate has historically shown outstanding appreciation in value. Real estate can increase in value due to internal factors such as renovations and cost-effective improvements. Also, due to external factors such as supply and demand in the market.
Property owners in the United States benefit from the real estate tax code in place.
Mortgage interest and depreciation deductions can affect a large portion of a property owner’s stream of income. It is advised to consult a tax professional to understand all of the tax advantages received from owning commercial real estate.
Commercial real estate is considered a hard asset, meaning it has a valid inherent value. The land the property sits on has value, as well as the structure built there. Choosing a quality location and asset creates security to investors in knowing that the property will earn income no matter of the existing tenant. This is where commercial real estate proves to be a stable investment compared to the stock market, which dramatically fluctuates.
LEVERAGE AND INCREASE CURRENT CASH-FLOW
An investor can multiply net spendable cash by borrowing at a lower cost than the property returns to them. For example, if person A loans person B $10 and asks for $12 back, a two-dollar interest fee is applied. Then, if person B takes those $10 and lends it at a $3 interest fee, without any additional investment, they can pay back the $12 they borrowed from person A, and still make one dollar in profit. That’s positive leverage, and it is commonly practiced with commercial real estate.
SIGNIFICANT INCOME AND SPENDABLE CASH
A huge benefit of commercial real estate is that assets are usually secured by leases. These provide a regular stream of income. Compared to stock dividends, commercial real estate dividends are significantly greater.
It is recommended that the benefits of owning commercial real estate are carefully considered as well as the challenges one might face. This type of investment is full of advantages that allow an investor to grow the value of their investment portfolio securely.