Closing costs comprise a large chunk of what you might have to pay for as a borrower and property buyer. Failing to factor closing costs into your budget can have a detrimental impact towards your ability to keep up with your mortgage payments. Here is everything you need to know about closing costs.
What Is It?
Closing costs, as the name implies, refer to the costs that a borrower must pay when he/she finalizes the purchase of a property, be it residential or commercial. While these costs can add up to a considerable sum, both parties involved in the transaction shoulder a portion of the closing costs.
What Fees are Involved?
The seller pays a number of the fees that make up the closing costs of a property he/she is trying to sell. These include the real estate broker’s commissions, which can easily reach up to six percent of the property’s purchase price. Other expenses included in the closing costs are your application fees, legal representative’s fees, and any discount points that are useable. Taxes are also tacked into a property’s closing costs, which can sum up to about 15 percent of the agreed-upon purchase price.
What is a Title Search?
Another common cost category you’ll encounter when trying to close on a property is title search. A third-party company performs a comprehensive background check of the property to make sure there are no undisclosed heirs and unpaid claims on the property being sold. Home buyers are also expected to pay title insurance fees, which basically covers the policy holder of any costs associated with ownership issues.
How Do You Minimize Closing Costs?
One way to minimize your closing costs is to pay cash for the property. You can reduce your total costs by as much as 1 percent of the property’s purchase price. You also effectively eliminate fees, such as loan origination and appraisal charges. You can also cut your closing costs, as a buyer, by foregoing the services of a realtor. Instead, deal directly with the owner. While this means more due diligence required on your part in order to make sure the transaction is completed properly, it helps you avoid the hefty commissions paid out to a realtor.
Make sure you fully understand your exact closing costs before you even sign any paperwork or give a confirmation to the other party involved. You can find a number of free closing cost calculators online that can help you determine your estimates.
The level of success you put into your career in real estate will determine the amount of success you enjoy. While this is basically true of any career path, there’s a more direct link between effort and success when you rely on commissions for your income. You should take the time to prepare for the other changes a career in real estate will bring into your life.
Plan Your Career
Once you undergo the necessary education to pass your licensing exam, you should take the time to create a specific path for your career in real estate. This will involve setting short-term goals for yourself. Each short-term goal should take you one step closer to achieving your long-term objectives. Your strategy should include a marketing plan and a system for covering your expenses. Keep in mind that you’ll essentially be an entrepreneur, so you should prepare for all of the expenses and responsibilities that any new entrepreneur faces.
Plan For a Period of Limited Income
If you can keep an hourly job as you get started as a real estate agent, you should consider the benefits of staying employed. Otherwise, you should have a modest nest egg upon which you can draw to support yourself as you launch your new career. Just as a new business struggles to turn a profit in the first three years of operation, new real estate agents don’t usually earn a decent income until they have established themselves in their local communities.
Choose a Niche
It will also help you find greater success as a real estate agent if you can focus your efforts into a specific niche. For example, you might have an interest in offices and business parks. By focusing your career on those specific types of properties, you can create a marketing strategy that targets entrepreneurs and small business owners. You’ll save time, money, and energy when you’re not spreading your efforts too thin.
Keep in mind that you will be your own boss even when you work for a brokerage firm. This means you’ll have to find ways to stay motivated and work more efficiently. Developing a strategy that you can follow on a daily basis will help you sell more properties. In addition to working harder, you should also look for ways to be more effective as you serve your clients.
Many commercial real estate owners have had to close down or sell their assets during the Covid-19 coronavirus pandemic. As they undergo a period of recovery, they have to reopen their doors and think of new ways to sell to the public. There are various solutions available to help business and property owners as they regain strength after a pandemic.
Put Safety First
In the final days of a pandemic, a commercial building owner needs to put the safety of customers first. This means promoting a cleaner, more sterilized environment for all managers, employees and visitors.
Put the Customers’ Needs First
Every customer’s needs and interests change during a pandemic. Most people focus on buying the necessities first along with the items they want to enjoy. It is recommended that sellers find out the bestselling products in the markets at the moment and reprioritize the products that they are selling in their stores.
Keep Up to Date With the News
The news informs everyone about the state of the pandemic in the local community and in the greater nation. Most importantly, business owners need to know the status of local infection rates and the guidelines that politicians are recommending. Their greatest chance at recovery lies in staying informed and relevant to today’s issues.
Choose Traditional vs. Digital Methods
During the pandemic, many business owners transitioned to virtual settings. They took on more digital marketing methods to reach out to clients online and over the phone. As the health crisis is ending, more companies are returning to their physical offices and buildings. It’s necessary to know which businesses, workers and services will return to their previous states and which ones will remain virtual.
Every business’s marketing campaign should be improved and resumed as it was before the crisis began. This means learning how to market again but to a changed audience. Every marketing campaign needs improving to meet the newest, latest demands in the market.
The commercial real estate industry has never remained stable under any condition. But during the recovery period of a pandemic, most consumers are eager to start buying again, and that includes buying business property. Business owners have many opportunities to recover and bounce back from this temporary downtime.
The 2020 occurrences transformed the operations of commercial real estate. The pandemic quickened the pace of numerous modifications that were underway. Consequently, tenants and investors had to rethink the best way of running their businesses and utilizing their spaces. However, it is hard to distinguish the changes that will remain and the ones that emerged as an immediate reaction to the pandemic. Investors aiming to allocate their money to commercial real estate should consider the following trends.
Strong Demand for Industrial Property
Industrial real estate will continually have strong interest due to increased E-commerce transactions. CBRE research shows that every $1 billion used in incremental e-commerce produces an extra warehouse space of around 1.25 million. Commercial real estate demand is expected to remain robust considering the 44.5% rise in e-commerce sales from the first quarter of 2020 to the second quarter. The same research reviewed that industrial space absorbed by the end of 2021 will be around 250 million square feet exceeding the historical annual absorption of 211 million square feet.
Adoption Of Omnichannel Sales in Retail Trends
Due to Covid -19 and other changing patterns, the retailers cannot solely depend on storefronts. They must optimize their income-generating ways by using digital devices and platforms. Therefore, retailers need to use both storefronts and digital channels like social media and websites. Subsequently, this leads to considerable investments in digital capacities and increased traditional sales strategy.
Increased Demand for Stock Room
Shifting to digital platforms means more incoming orders from various channels. Therefore, retailers are likely to continue converting their sales floor into mini delivery centers in their stock rooms. Apart from pulling, packing, and shipping orders via digital channels, space will also manage the business’s local pickups.
Rise of Alternate Assets
Private real estate exposure is likely to rise in 2021. Most asset allocators will prefer private real estate because it offers resilience during this imbalanced recovery. Negative yields and high equity valuation from government bonds will potentially push more investors to alternative assets. Serious wealth advisors and wealth managers are likely to engage in private real estate, especially data, industrial, and healthcare centers.
In conclusion, commercial real estate trends in 2021 will drastically change following the ongoing covid-19 pandemic. Some of the changes will outlive the pandemic, while others will vanish when the pandemic ends.
For any Millenials considering or even beginning to scope the real estate world, you’re on the right track. Real estate investing is one of the smartest moves anyone could make, considering the versatility and potential returns. Investing in property comes with neat benefits like passive income, tax benefits, and full control over not only the property and your investment strategy but also your profits.
That being said, deciding to invest in property can be super daunting. Where do you start? What do you do with the property?
To nudge you in the right direction, here are some essential things that Millenial real estate investors should know before jumping in.
Know your budget and credit score
While it’s not necessary to be wealthy to invest in real estate, having some savings will help buffer any risks from investing or at least reduce the uncertainty.
Establish a financial goal and investment strategy
Know your goals and the best plan to get there. Generally, most investors don’t need to pay for an entire, say $250,000 property. This is for the Millenials who are still struggling to pay off school debt: don’t worry, you can invest as well. The cool thing about real estate investing is you can purchase most properties with a down payment, which tends to about 20% of the total price. Options like getting a bank loan or lending from a trusted partner are also helpful for millennial real estate investors with limited cash at their disposal.
Scope the market
Knowing where to look for viable property options requires looking at patterns like population growth, rental demand, and job availability.
Consider the type of property.
Here, you have a few choices at your disposal. The top types of real estate include single or multi-family properties, syndications, or buy & hold turnkey funds. Single or multi-family properties are in high demand and involves a short-term strategy. Syndications are larger, commercial properties with a group of investors, resulting in less risk. Turnkey real estate funds are longer-term investments that offer immediate passive income from tenants already living there.
When you know the type of property you’re looking for, it’s time to take a look at locations you’ve identified based on the real estate market. With your budget in mind, figure out if you want to flip a house or if you’d rather be a long-distance landlord for a turnkey property.
Above all, millennial real estate investors must continue learning and growing. While the first step is to try it out without hesitation, further education will make Millenials savvier in their real estate journey.