Real Estate Investing in a Recovering Economy

Last month the Federal Reserve announced that it would raise short-term interest rates to a modest range of 0.25-0.5 percent. In efforts to boost the ailing economy, interest rates were at a low near zero percent for the past ten years. The recent decision is meant to signal confidence in the the American economy and its growth, reports the New York Times. Fed officials also announced that interest rates will gradually rise as the economy continues to grow in the upcoming years. However, Fed Chairwoman Janet L. Yellen cooled overly enthused reactions, signaling that despite economic recovery progressing, it is still not complete. “The economic recovery has clearly come a long way, although it is not complete,” said the Fed’s chairwoman. Nevertheless, increasing interest rates will surely affect the real estate investment sector onward.

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The real estate industry is always held at the whim of American economic forces. If you are a landlord planning to borrow money as a mortgage, or a landlord hoping to rehab a home into a profitable sell, your cost of doing business will surely increase. However as the economy strengthens, so will the demand for rental units and home ownership. As the demand for rental units and homeownership rise, so do property values, profiting real estate investors. A stronger economy inevitably means profitability for landlords, despite rising interest rates.

As for REITs, conventional wisdom would suggest that rising interest rates negatively impact REITs. However according to wealthmanagement.com, this isn’t necessarily true 100 percent of the time. Contrary to expectations, REIT stocks outperformed the overall market the last time the Fed raised rates. In fact, during that two year period when rates rose, REITs saw returns of over 60 percent, outperforming the S&P 500’s comparatively low 20 percent. From this, we can conclude that the rule that applied for landlords also applies for REIT investors: as the economy strengthens, so does the value of rental units and property values.

Home, office, and retail REITs all have the possibility of boding well in light of the forecasted economic bolstering underway. Economic growth means higher consumer spending as well as job growth, positively affecting office and retail property investors. As an investor in properties, it is important to first weigh whether the anticipated earnings from monthly rents will be sufficient to offset higher mortgage, and maintenance costs. In Leveraged property investments, higher lender rates generally mean lower returns. Again however, a strong economy and an increased demand for commercial space will result in higher rents and a better valuation for your property.

As a an investor in the real estate industry, becoming a lender can decrease your overall risk. Private lenders can earn between 8-12 percent in interest. However with higher interest rates come higher risks. Brian Kline of realtybiznews.com suggets investing retirement accounts like IRA’s or 401ks in a first mortgage, which provides a high level of security when your investment is secured by the house or property. Keep in mind though, the lower the risk, the lower your interest rate.

The Basics of REI

When it comes to real estate investing, or REI for short, it’s clear that those who are in the know reap the most rewards. This is no easy venture to just plunge into. It’s much more than simply buying a property and selling it when the price seems grand enough.

 

So much more.

When dealing with real estate investments, the typical goal is to earn wealth on residential or commercial property based on the level of risk you’re taking, whilst simultaneously minimizing the amount of effort and time spent tending to your actual investment. This goal is much loftier than some might realize and requires carefully calculated choices when the initial investment is made.

Here are a few best-case scenarios that all should strive to reach when starting out in the real estate investment industry:

Lessen the risk

It’s a well known truth that, essentially, all real estate is extremely risky investment. Development of real estate, land, Tenant-In-Common (TIC) investments, private real estate funds, fixer uppers, and more have much higher risk profiles in comparison to purchasing a solidly established cash-flow investment property. This is because of the myriad of uncontrollable variables when it comes to those aforementioned investments. This is why, when investing in real estate, one should always consider taking fee simple title in their own name – or an entity they wholly own – to the properties you purchase. Remember to do the proper due diligence, analyze, test, review reports, etc., to make a lower risk real estate decision.

Fair cash-on-cash return payment

Buying property requires investors to take money out of their liquid financial assets (such as CDs, stocks, and bonds) and invest them into a very illiquid asset, or real estate. Whatever rate of return that was being earned on those financial asset (typical rates go from 4-6%), investors should strive to earn a fair cash-on-cash rate of return for their real estate investment. In order to accomplish this goal, investors need to pro forma their deals. They need to purchase cash flow-positive properties that will be able to earn investors decent returns.

Properties that don’t clog your Calendar

When deciding whether a fixer upper, vacation rental, low quality property, or college property is the smart investment for you, take a moment to figure out what the value of your time is. These properties will often call for your frequent attention, whether it’s tending to the physical property or its inhabitants. Data points to average properties rented to tenants with a decent credit profile with a longterm lease require the least amount of attention, making smarter than the previously mentioned investments.

Crowdfunding Company Launches New Program

In recent years, a significant number of crowdfunding companies have emerged which have focused their efforts on the real estate sector, and even more specifically, real estate investors. While most often, developers who are in the midst of fundraising millions of dollars for a project wouldn’t pay any attention to obtaining a small investment of $5,000, crowdfunding companies, like CityFunders turns those small investments into lump sums.

CityFunders utilizes the knowledge and expertise of seasoned real estate experts who bring up-to-date, insider neighborhood knowledge and key networking opportunities to its members through it’s marketplace. It also operates as an investment platform as well as a place to track your investments growth.new york city

The company has already executed thousands of deals, with over $85 billion in  investment transactions in NYC real estate from Crown Heights, Brooklyn to Chinatown, Manhattan, since its inception.

Recently, CityFunders announced a new platform of their company called InvestSelect. The new program will offer investors “variable rates of return topping out at 10%, based on the amount put into a project.” It operates by instead issues loans than investing equity in real estate, promising users a 9% return from interest rates on investments of $25,000 or less, and a 10% return for investors who provide at minimum $30,000 in $5,000 increments.

David Behin, co-founder of CityFunders and partner at residential brokerage MNS told Crain’s New York Business that “…the option of being able to earn a whole point more… is really going to speak to investors out there.”

CityFunders is just one of many crowdfunding platforms that present an alternative source of lending option for developers who may not otherwise be able to access the resources from banks or other lenders in order to obtain the capital needed for their projects. InvestSelect, specifically, creates an avenue for individuals with a minimal net worth, who would otherwise stay out of real estate investment, to invest in real estate, while providing a source of financing for developers.

Sounds like a win-win-win to me.

Bluerock Residential Growth REIT Acquires 204-Unit Class AA Whetstone Apartments in Durham, NC

Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“BRG” or “the Company”) announced today that it has acquired, through a joint venture, a 204-unit Class AA new construction apartment community known as Whetstone Apartments (“Whetstone”) in Durham, North Carolina. The property is located within walking distance of Durham’s top restaurants and is in close proximity to Research Triangle Park and the area’s many universities. READ MORE>>>

Bluerock Residential Growth REIT to Purchase 473-Unit Ashton Reserve in Charlotte, NC

NEW YORK, May 14, 2015 /PRNewswire/ — Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“BRG” or the “Company”) announced today that it will acquire a two-phase 473-unit Class A apartment community in Charlotte, NC, known as the Ashton Reserve Apartments in two stages. Located in the upscale Northlake submarket, this luxury community sits in close proximity to Charlotte’s Uptown Central Business District and University Research Park. READ MORE>>>>

Bluerock Residential Growth REIT Announces First Quarter 2015 AFFO per share of $0.13 vs. Guidance of $0.10-$0.11 per share; Pro Forma AFFO per share of $0.29 vs. Guidance of $0.26 – $0.28

Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“the Company”) announced today its financial results for the quarter ended March 31, 2015. READ MORE>>>

Bluerock Residential Growth REIT Agrees to Invest in Class A 285-Unit Luxury Apartment Development Project in Atlanta

NEW YORK, May 8, 2015 /PRNewswire/ — Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“BRG” or “the Company”) today announced that it has approved an investment of approximately $15.0 million in a joint venture to develop a Class A, 285-unit apartment community in Atlanta, Georgia, to be known as the Cheshire Bridge Apartments (“Cheshire Bridge”). Situated in a highly desirable location directly adjacent to Atlanta’s Buckhead and Midtown neighborhoods, Cheshire Bridge will be a five-story, luxury multifamily rental community on 3.88 acres. Total projected development costs are estimated at $48.2 million, or $169,000 per unit. READ MORE>>>

Board of Bluerock Residential Growth REIT Approves Investment in Durham, NC’s Class AA Whetstone Apartments

NEW YORK, May 4, 2015 /PRNewswire/ — Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“BRG”) today announced that its Board of Directors has approved an investment of approximately $12.3 million in a joint venture that will acquire a 204-unit Class AA multifamily project known as Whetstone Apartments (“Whetstone”). Located in a sought-after neighborhood of Durham, North Carolina, Whetstone is within walking distance of Durham’s top restaurants, events and nightlife and is in close proximity to Research Triangle Park, as well as the area’s many universities. READ MORE>>>

Bluerock Residential Growth REIT (BRG) Announces Acquisition of Class AA Park & Kingston Apartments in Charlotte, NC

NEW YORK, March 20, 2015 /PRNewswire/ — Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“BRG” or “the Company”) announced today that it has acquired through a joint venture a newly-constructed, class AA apartment community in Charlotte, North Carolina known as the Park & Kingston Apartments (“Park & Kingston”). READ MORE>>>

Total Income+ Real Estate Fund Pays 1Q Distribution of $0.38 per share; Up 2.63%

NEW YORK, April 2, 2015 /PRNewswire/ — Bluerock’s Total Income+ Real Estate Fund (“Fund or TI+,” tickers: TIPRX, TIPPX, TIPWX) announced today it has paid a first quarter distribution of $0.3781 per share, or 1.31% for the quarter based on the share price of $28.81 for shareholders of record as of March 27, 2015 (A-shares). This distribution represents a 2.63% increase year-over-year and an annualized distribution rate of 5.25%. READ MORE>>>