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.
The thought of a virtual open house for an investment property might seem strange or daunting to some. Why would a potential buyer watch a virtual open house when they can just visit the house in person? In fact, many modern buyers prefer watching a virtual open house through Facebook or YouTube. It allows them to view the property without ever leaving the house–and if it’s a live video, they can ask the realtor questions along the way. And for realtors, they have the advantage of showing a property to dozens or even hundreds of clients at once without dealing with a large crowd.
Which is Better: A Live Feed or a Recorded Video?
Outfront points out that there are two types of virtual open houses: the live feed where viewers can watch the open house as it’s happening, and the recorded video where the realtor uploads a pre-taped video. Both options have their own set of advantages. With a live feed, potential buyers can ask the realtor questions as they walk through the house. A live video also creates a sense of excitement about the property. When people watch a live video, they feel like they’re actually tuning into an event, like a concert or a sports program.
A pre-taped video loses the excitement factor, but it gives the seller the chance to put together a professionally edited video that makes the property look as appealing as possible. It’s also a good option for sellers who aren’t comfortable talking to people in front of a live camera feed.
How Does a Seller Generate Leads Through Virtual Tours?
With traditional in-home tours, it’s easy to collect contact information and follow up with potential buyers. A virtual open house has no sign-up sheet, so it can be difficult for sellers to get potential leads. Reminder Media recommends ending the tour with a call to action, asking potential clients to submit their contact information. A seller could also set up an online form on their website, making it easy for buyers to get in touch with them. Once they get that information, the seller can send an email with all the details about the property and answer any questions they received.