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Here’s Why You Should Add CRE To Your Portfolio

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Investing in commercial real estate can be confusing to a new investor, with dizzying numbers and jargon — making investors wary of entering the market. However, investing in institutional-style real estate is actually easier than you think—and the perks are great to boot.

Sound income potential, along with solid stability and protection to weather a downside during volatility in the market. What’s not to like? Here are some ways (and reasons) to get started.

You don’t have to be an expert

Investing in CRE doesn’t require you to be an expert at it. Here’s where sponsors come in. And no, a sponsor isn’t an advertiser. “Sponsor” is just industry jargon for asset operator who syndicates that funds and makes the deal happen.

The sponsor would become your partner to handle anything from funding to managing the investment. They manage the asset. You collect the income.

Even though you’re not managing anything, you should only investing in properties and/or sponsors you’re comfortable with. (Here are a few factors to consider.)

Long-term thinking

Another upside to investing in commercial real estate is its long-term focus. It protects your downside and is engineered to collect big returns over time.

On the flipside, if you’re just looking to make quick buck, CRE might not be the right investment space for you. Plus your money’s locked up for a pre-set contractual period — you can’t just cash out anytime you want.

How do you choose a deal?

These institutional-style deals used to be circulated among so-called “accredited investors,” an SEC distinction given to “sophisticated investors.”

The SEC put this rule in place to make sure uninformed investors don’t lose money in deals they don’t understand. But it also created a barrier for good investors who couldn’t qualify for the distinction.

Crowdfunding

The JOBS Act came around, allowing everyday investors to own a piece of assets like the World Trade Center through real estate crowdfunding. There are tons of online marketplaces that give you access to syndicated deals. And if you’re not into that? Well, there’s always REITs.

Real Estate Investing

Chicago Real Estate Mogul: Here’s How You Flip Houses

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Chicago-based Sean Conlon is a real estate investor extraordinaire. He started his career in the early ’90s, quickly becoming the top residential realtor in the nation with nine figures in annual volume.

Conlon’s the host of CNBC’s real estate show The Deed. In this video, Sean gives some insights into how to become a real estate investment master.

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Real Estate Investing

​4 Tips For Managing Your Airbnb

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I’ve been talking a lot about vacation rentals lately.

No, I haven’t gone out and bought one…yet. But, I want to!

And interesting factoid… Nearly 45 percent of all real estate purchases in the United States are made by people in search of profit. Investing in a short-term rental property is a great way to generate a steady income stream.

With the use of websites like AirBnB, just about anyone can turn a condo or house into a short term rental property. This is a great source of income for many families, and can be for you too!

But, most investors think that managing a short-term rental property is just too much work. The reality is, it’s not easier or harder than any other rental, you just need the right management in place.

There are a lot of options out there, but I’ve recently stumbled upon some software such as Rentbelly, which helps you manage property like this and makes it a lot easier.

The biggest hurdle that you will have to overcome as a short-term rental property owner is keeping enough bookings. This hurdle can be overcome with the development of a comprehensive marketing strategy.

Here are some essential tips for properly managing your short-term rental property.

1. Get A Feel Of What’s Happening In Your Local Area

Renting out your property in the off season can be a bit difficult. The only way to combat the lull that occurs during this low season is by staying up to speed on the events happening in your city. Knowing what events are coming up in your area can help you market your rental to the right audience.

Running targeted Facebook ads is a great way to connect with prospective customers. These ads allow you to target Facebook used based on things like their occupation, location and age. Once you know what type of event is happening in your area, you can make decisions regarding what type of people may attend this event. With this information, you can fine tune your Facebook ads and get more bookings.

2. Set The Right Minimum Stay Requirements

Setting the right minimum stay limit is crucial when trying to make money with your short-term rental. Ideally, you will want a higher minimum stay limit. While this may initially deter certain consumers, it will allow you to make more money in the long run.

Accepting a one night booking in the middle of a week can make you miss out on a one week booking later on. Realizing that short-term rental success is a numbers game is your first step to achieving your financial goals. Setting a minimum stay of three to four nights will guarantee that each booking will have a higher value overall.

3. Focus On Keeping Your Property Well-Maintained

In the world of short-term rentals, only the most pristine properties get consistent bookings. This is why you will need to devote time and money into keeping your rental property in good shape. If you are like most property owners, you simply don’t have the time to do this work on your own.

Instead of letting your short-term rental fall into a state of disrepair, you need to hire professionals to perform essential maintenance. With a minimal investment, you can avoid extensive repairs and keep your property booked solid.

4. It’s All About Great Customer Service

If your short-term rental is located in a larger city, chances are there is a lot of competition. Finding a way to set your property apart from competitors is something you need to view as a priority. One of the best ways to do this is by going above and beyond for your guests on a consistent basis.

Anytime a guest calls you with a problem, you need to address it in a timely manner. By providing guests with this type of service, you will be able to get great reviews from them. These reviews are like gold when it comes to attracting new bookings for your property.

If you are unsure about how to properly market your short-term rental, working with professionals is a great idea. They will be able to develop and carry out marketing campaigns on your behalf for a reasonable fee.
This article originally appeared on idealrei.com. Read the full article here.

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Real Estate Investing

Here’s How To Get A Mortgage You Can Actually Afford

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So, you’ve finally decided to purchase a home. After years of contemplating if you should buy or rent, then saving, building your credit etc, it’s now time to dive in and get it.

Purchasing a home is exciting. After years of dreaming, you’re finally getting a place that you can call your own.

It’s really easy to get caught up in the excitement making you forget to ask one crucial question – how much “home” can you really afford?

…and, once you decide how much you can afford, you should stick to it. It’s all too easy to decide on a price, then find the home of your dreams is only $25,000 more. Then you start thinking, “we can make this work…” But, can you really?

According to statistics, the median monthly mortgage payment for homeowners in the U.S. is $1,030. That’s a lot of money.

While you may love the fabulous kitchen or huge backyard one house offers – if you can’t pay the mortgage every month or get the cash to fix what’s broken, your home’s never going to be a blessing.

The good news is, determining how much ‘house’ you can afford isn’t rocket science. You can use the four tips here and utilize online tools to help you figure things out.

Build a Solid Foundation

There are countless people who have gone broke by buying a house simply because they believe it’s the “grown-up” thing to do. However, life events such as having a baby or getting married aren’t reasons to buy a house.

The time will be right when the money is right. Before trying to figure out how much house you can afford, be sure you are financially ready to purchase a home.

To do this, ask yourself the following questions:

  • Are you debt free and have an emergency fund of three to six months put back
  • Do you have enough cash to cover moving expenses and closing costs?
  • Can you afford a 15-year-fixed-rate mortgage?
  • Can you make a 10 to 20 percent down payment?
  • Do you have enough money to set aside each month into passive investments above and beyond your mortgage?

If you answered “no” to any of the questions above, it may not be the right time to purchase a home. Wait until you have a better financial foundation.

If you are currently financially stable, then move on to the next tip.

Maximize Your Down Payment

One of the biggest costs in a new mortgage is PMI or MIP. Both of these are different ways of saying that you need to pay an extra fee every month because you didn’t put enough down.

If you can get to 20% or more, then you won’t have to pay mortgage insurance for the lender. This can save you hundreds of dollars per month.

When buying a home, remember – the more money you can put down, the better. Higher down payments mean lower mortgage payments every month and the ability to pay your home off faster.

While the best option is to pay 100 percent of the home cost in cash, this isn’t viable for most. If this is the case, then try to put down at least 20 percent. By doing this, you can avoid paying for private mortgage insurance.

Calculate the Costs

All you need to do to figure out what you can afford when it comes to buying a home is to crunch a few numbers. If you need help with this, consider using a mortgage calculator with down payment, which will help you figure things out.

If you want to do things manually, consider the following:

  • Add up all the income you bring in every month. If you bring home $2,000 per month, and your spouse makes $3,000, then your total monthly take-home pay is $5,000.
  • Multiply your total monthly take-home pay by 25 percent to determine your maximum mortgage payment.If you are bringing home $5,000 per month, then it means that your mortgage payment should not be over $1,250 each month, including insurance and taxes.

Remember, your bank or lender will tell you that you can afford WAY more than that. In fact, some loans allow you to get to 40% or even 50% of your income going toward loans. While they may allow it, it isn’t financially smart to borrow every dollar you can afford.

Don’t Forget About Maintenance and Capital Expenditures

When comparing if you should rent or buy, most people look at the total rent, compare it to the mortgage, and say it’s better to buy a house.

What you are forgetting is that rent includes all the maintenance costs in a home whereas a mortgage does not.

As a general rule of thumb, it’s good to plan on spending around 1% – 2% of the total home value every year in maintenance and CapEx.

Major capital expenses are things like a roof or HVAC that last for several years. Even though you might have 10 years left on your roof, you should start saving for it now, along with the dozens of other major items that will not last forever.

So, if your home is $200,000, you should think about adding another $2,000-$4,000 per year in maintenance and capex. You definitely won’t be spending this much every year, but what you don’t spend now will be spent in a year or two when you have to replace a $12,000 roof, replace a garage door, etc.

If you have higher end appliances and fixtures, you should be more toward the 2% whereas standard grade homes can be closer to the 1% mark.

Conclusion

When you know your numbers, you will be able to shop for a mortgage and a home with confidence. Trying to determine what you can afford without considering the tips here may leave you with a home that’s going to cause you financial hardship in the future.

Remember, buying a home is not an investment, it is an emotional decision. Once you recognize that, you can begin to take it seriously and make decisions based on actual facts, rather than be driven entirely by your desires. If you base everything on the emotions involved with buying a home, you’ll dive right into a mortgage that you can’t really afford.

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

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