Connect with us

Real Estate Investing

5 Strategies To Close Your First Real Estate Deal

Published

on

2 of 5
Use your ← → (arrow) keys to browse

2. Look Outside The Big Markets

Housing-UnderSupply

Outside the big cities where competition is fierce, startup investors can look to secondary markets with strong rental returns. For example, Rochester, NY, has great deals for investors seeking yield.

And best of all? By using an FHA mortgage, you only have to put down 3.5% for your down payment. Which means you can own an entire building for as little as $5,000. Bank will finance the rest.

2 of 5
Use your ← → (arrow) keys to browse

Real Estate Investing

Real Estate Crowdfunding: 5 Platforms That Are Paying Out 8% A Year

Published

on

If you’re looking to garner the benefits from real estate investments without the hiccups related to the market’s expenses, real estate crowdfunding platforms are a great way to lock in your investment.

Apart from perks like hedging your money against inflation or high interest rates, real estate crowdfunding comes packed with some major tax benefits. Here are five platforms that generate around 8% average returns annually:

1. Fundrise

With assets worth over $1.4 billion to their credit, Fundrise has channeled investments into construction homes and loans, office buildings, and multifamily developments, amongst others. An investor can expect dividend yields that average 8% for an annual fee that varies between 0.15-1%.

2. GroundFloor

For as little as $10 and no middlemen, investors can gain exposure to short-term, high-yield returns that average 10% annually. One of the platform’s biggest USP is its option to invest in Limited Recourse Obligations (LROs), while allowing the investor to choose the loan or the property details. LROs can generate competitive returns when compared to traditional assets.

3. Small Change

The platform is tailored largely for the social conscious and impact investors. It invests in projects that include green buildings, eco-friendly materials, and affordable housing. One factor that differentiates Small Change from other platforms is its no-fee policy – the company instead splits profits, pegged at over 8% annually, with its sponsors.

4. RealtyShares

Although the minimum investment amount is pitched at $5,000, the platform has various offerings for the investor to choose from – be it equity or debt, smaller commercial properties or residential properties. RealtyShares’ payout can be either monthly or quarterly, and returns can be anywhere between 8-20% for a fee of 1% on equity and a 2% interest rate on debt.

5. RealtyMogul

With a portfolio that’s worth over $1 billion, the platform has exposure to shopping centers, hotels, real estate loans, commercial facilities and apartment buildings. One of their more popular stake is a 15% share in the Hard Rock Hotel Palm Springs. Investment periods range from six months to a year and enjoy an estimated 8.5% returns annually.

It is no secret that crowdfunding real estate projects have gained huge popularity, and the numbers throw light on this – nearly $2.5 billion worth of investments in the real estate market are through crowdfunded platforms. There’s tremendous growth projected for the industry, which means individuals gain access to more opportunities for investments and improved portfolio diversification.

Continue Reading

Real Estate Investing

Vacation Rentals: How Profitable Are They?

Published

on

In the past, vacation rental owners had to perform the necessary maintenance tasks and market the properties to find guests or pay someone in the locality to do so on their behalf.

Bookings were low and the cost of maintaining the vacation homes was high. Thankfully, the firms that manage vacation rentals are using new technologies to eliminate these issues and deliver a comprehensive service on a high level that the vacation rental industry has not seen.

Many travelers are avoiding staying in hotels in favor of vacation rentals.

Why Vacation Rentals?

Some of the benefits of vacation rentals include:

  • Variety – Vacation rentals offer different decor, amenities and views among other things. Travelers select their own vacation rentals and preferences based on their budget and how they want to define their vacation such as close to the beach or a golf course among other locations.
  • Additional space – Vacation rentals are more spacious than hotels and are therefore popular with people traveling with their families.
  • Comforts of home – Vacation rentals provide the comforts of home and some of the things that a typical home does not have. There are multiple bedrooms, comfortable living rooms and adequate space to sprawl out. Vacation rentals are more comfortable than staying in the bedroom of another person like with Airbnb.
  • Privacy – Vacation rentals have private entrances and private balconies. Therefore, patrons do not have to walk through the lobby after returning to their unit.
  • Cost effective – Since vacation rentals are spacious, families often rent them together. This makes the homes more cost effective than hotels.
  • Easy booking and check out – Technology such as online payment platforms enable guests to save time. They do not have to wait in line to check in or out.

Improving Vacation Rental Technology

Technology has played a huge part in making the short-term rental market grow. Online listing firms such as Airbnb make it easier for guests to book the home they want to stay in.

New technology-driven management firms are also making it easier for homeowners to maintain and market their vacation rentals. As a vacation homeowner, you can easily manage your property by using vacation rental management software.

With this software, you can manage rental channels. These include HomeAway, Expedia, and Airbnb using one app or platform to reduce management time and increase profits. This means that you can manage your property without having to enlist the services of a professional management firm.

Are Vacation Rentals Really Profitable?

Investing in vacation rentals is an excellent way to earn passive income.

A survey done by HomeAway, which is a short-term rental marketplace, found something interesting. People who rent out second homes earn more than 33,000 dollars annually in rental revenue. On the other hand, at Airbnb, the average vacation rental owner collects yearly rental revenue of about 11,000 dollars.

Most of the vacation rental owners using the Airbnb platform don’t perform as well. They may only rent out only a single bedroom or rent out their homes irregularly. They do not treat their homes as true vacation rentals.

These figures are an indication that vacation rentals are profitable. They are popular with people renting properties for a short period. They can also outpace long-term rental properties when it comes to potential rental income. To increase your chances of earning higher rental revenue, you should do the following things:

Do the Math

It is not that straightforward to figure out the amount of money your vacation home can bring in. However, online tools can enable you to calculate the potential cash flow to your property.

You can use these tools to calculate the average daily rental rates, revenue, and occupancy rates. By using these projections, you can then subtract items such as interest, PITI, management fees and maintenance expenses. Then you’ll get a cash flow forecast.

Evaluate the Location

The other factor that will determine the amount you will earn as rental revenue is the location. If you buy a vacation home, which is close to a popular destination like a ski resort or beach community, then it is likely that it will bring in a higher rental income. An excellent location close to a major airport or a vacation spot that people visit year round will have the best impact.

Assess the Scene

Apart from the accessibility and popularity of a destination, you also need to consider the setting. For instance, it is more cost effective to invest in a vacation home located in the mountains compared to a beachfront vacation home. However, such a home is not likely to bring in as much income as a beachfront property can.

The peak season for vacation rentals lasts about 12 weeks.

The trick is trying to rent the vacation home during the off-peak periods or when you do not want to live in the house. Try your best to keep your vacation home occupied by advertising it on platforms like HomeAway and Airbnb. You can even seek advice on the best ways to keep a property occupied from a property management firm that manages vacation homes.

Set the Price Right

To maximize occupancy, you should price your vacation home well. You can price your propertyslightly lower than similar properties so that it will be occupied more frequently. Furthermore, you should keep an eye on events like festivals and conventions that occur close to the location of your vacation home. When the demand is high, take advantage of it and adjust your rental charges accordingly so that you will not miss out on revenue.

Vacation homes are unique in that they are both an investment and a lifestyle upgrade. While they perform equally as well as conventional rental properties, they offer the benefit of having a place to stay for your own vacations.

A vacation home can bring in a good return on investment if you can keep it rented out most of the year. If you hold the vacation rental for many years, then you will make a return, which is comparable to or greater than you would have made if you had invested in stocks.

This article originally appeared on IdealREI. Follow them on FacebookInstagram and Twitter.

Continue Reading

Real Estate Investing

Commercial Real Estate: Property Types And Classes

Published

on

Before you start investing in commercial real estate, regardless if it’s via online crowdfunding or through a syndication, you want to know what sort of investment you are getting into.

In general, crowdfunding and syndications both invest in commercial real estate. Single-family properties are too cheap for developers to raise capital on. There is a fixed cost of raising capital. So, developers focus on $1m+ properties.

And usually those are commercial real estate projects.

Since commercial real estate is new to most investors, we’re going to cover the different property types within commercial real estate, as well as the different classes of property and neighborhoods.

Asset Class vs Property Type vs Property Class

An asset class is a group of investments that have similar characteristics and behave similarly in the marketplace.

Equities (stocks), fixed income (bonds), and cash equivalents (money market) are the 3 traditional asset classes. Additionally, there are 2 alternative asset classes that are extremely common as well – real estate and commodities.

There are a whole host of alternative asset classes which professionals may agree or disagree on them, such as valuable art, numismatics, or other collectibles. Increasingly many are looking at crytpo currencies as an alternative asset class.

Each asset class can further be broken down. For example, there are 11 sectors for stocks (healthcare, industrials, technology, etc).

A lot of people will ask about asset classes in real estate. What they actually mean to ask is about property types within the asset class of real estate. There are no asset classes within real estate because real estate is an asset class.

Property types are what the real estate asset class is broken down into. Just like stocks have 11 sectors, real estate has a variety of property types from office to multifamily.

Real estate does have a “class” rating system as well, which may be part of the reason why people confuse the terminology.

Property classes in real estate are referring to a rating system we use in the real estate industry to help us categorize neighborhoods and property types. This is generally on an A to D rating scale where A is the nicest properties and D is the oldest and most run down.

Real Estate Property Types

The asset class is an overarching and very broad type of investment. Within real estate, there are 4 primary types of property which include:

  • Residential
  • Commercial Real Estate (CRE)
  • Industrial
  • Land

Each one of these can be further broken down. For example, farming and resource extraction (mining and oil) are uses for raw land.

We’re going to focus on commercial real estate because that is what most investors are buying when they want to buy income producing property.

Types of Commercial Real Estate

There is almost an unlimited number of types of commercial real estate, but here are the most common ones you’ll see.

Multifamily

Multifamily is a type of commercial real estate because the owners buy it to produce income, not to live in.

Multifamily is anything that is 5 units and above (in the United States).

There’s really no reason for it except that the primary mortgage lenders Fannie Mae and Freddie Mac will back personal/residential mortgages on any owner occupied property 1-4 units, but not 5 and above.

So, a homeowner can get a traditional mortgage on a 4 family, not on a 5 family.

4 family properties are technically multifamily. But, they are excluded because they are bought by typical homeowners. Commercial multifamily property is exclusively 5 units and above.

Garden style, mid-rise, and high-rise buildings are 3 sub-categories of multifamily to be aware of.

Retail

Retail is the subcategory of commercial real estate that includes all shopping. This includes everything from a building with a single retail tenant in it (such as a fast food restaurant), all the way up through shopping plazas or even shopping malls.

It is a really complicated space because there are a variety of lease terms that can directly impact the value of the asset. For example, a single tenanted building with a lease that is about to expire is worth far less than the same building with a new 10-year lease.

Additionally, there are different types of malls, shopping centers, outlets, and more that complicate the space.

Regardless of how they are broken down, they are all considered retail.

Office

Similar to retail, these can be multi-tenanted or single-tenanted. But, unlike retail, these can range from giant skyscrapers to small office condo developments.

Self Storage

Self-Storage is relatively new to the list and is not included in most other breakdowns of commercial real estate. But, it should be.

Self-storage is one of the fastest growing and most stable CRE investments available. Supply simply cannot keep up with demand in many markets, and available spaces are being leased up at unbelievable rates.

Hotel

These are properties that are owned and operated for the purpose of very short term rentals. Can also include motels.

Mobile Home Parks

Mobile Home Parks are a huge sub-category. It’s often overlooked or counted as a sub-category to multifamily, but that’s not accurate.

Mobile home parks were very popular in the 70’s and earlier, but few new MHPs have been built in several decades. As such, occupancy is high and stable.

On the other hand, infrastructure is aging and investments in underground water/sewer, roads, and electrical can be very costly.

Special Purpose

This just captures all the other unique types of commercial real estate out there such as amusement parks, bowling alleys, and more.

Classes of Property

In residential and multifamily, the property/neighborhood class is a rating from A to D. It describes the overall age and quality of both the neighborhood and the individual property. For example, you might hear that this is a C class property in a B class neighborhood.

Multifamily is anything that is 5 units and above (in the United States).

There’s really no reason for it except that the primary mortgage lenders Fannie Mae and Freddie Mac will back personal/residential mortgages on any owner occupied property 1-4 units, but not 5 and above.

So, a homeowner can get a traditional mortgage on a 4 family, not on a 5 family.

4 family properties are technically multifamily. But, they are excluded because they are bought by typical homeowners. Commercial multifamily property is exclusively 5 units and above.

Garden style, mid-rise, and high-rise buildings are 3 sub-categories of multifamily to be aware of.

Retail

Retail is the subcategory of commercial real estate that includes all shopping. This includes everything from a building with a single retail tenant in it (such as a fast food restaurant), all the way up through shopping plazas or even shopping malls.

It is a really complicated space because there are a variety of lease terms that can directly impact the value of the asset. For example, a single tenanted building with a lease that is about to expire is worth far less than the same building with a new 10-year lease.

Additionally, there are different types of malls, shopping centers, outlets, and more that complicate the space.

Regardless of how they are broken down, they are all considered retail.

Office

Similar to retail, these can be multi-tenanted or single-tenanted. But, unlike retail, these can range from giant skyscrapers to small office condo developments.

Self Storage

Self-Storage is relatively new to the list and is not included in most other breakdowns of commercial real estate. But, it should be.

Self-storage is one of the fastest growing and most stable CRE investments available. Supply simply cannot keep up with demand in many markets, and available spaces are being leased up at unbelievable rates.

Hotel

These are properties that are owned and operated for the purpose of very short term rentals. Can also include motels.

Mobile Home Parks

Mobile Home Parks are a huge sub-category. It’s often overlooked or counted as a sub-category to multifamily, but that’s not accurate.

Mobile home parks were very popular in the 70’s and earlier, but few new MHPs have been built in several decades. As such, occupancy is high and stable.

On the other hand, infrastructure is aging and investments in underground water/sewer, roads, and electrical can be very costly.

Special Purpose

This just captures all the other unique types of commercial real estate out there such as amusement parks, bowling alleys, and more.

Classes of Property

In residential and multifamily, the property/neighborhood class is a rating from A to D. It describes the overall age and quality of both the neighborhood and the individual property. For example, you might hear that this is a C class property in a B class neighborhood.

This article originally appeared on IdealREI. Follow them on FacebookInstagram and Twitter.

Continue Reading

Trending