Golden Years Can Be Made More Financially Comfortable With Real Estate Investments

14373309286_e5aeff0f2c_oReal estate investment is a feasible option for bringing about supplemental income and diversifying personal income. Specifically, these investments can introduce ample retirement income for investors interested in focusing on creating wealth for their golden years.

Ideally, retirement is the time in one’s life when one can sit back and reap the benefits of decades of hard work. Social security, annuity payments, retirement fund distributions, and, hopefully, a sizable pension should help to ensure that these years are indeed quite comfortable. Some forward-thinking individuals may recognize that they don’t have quite enough lined up to ensure financial comfort during those years, and they’ve turned to real estate investing in order to add to their retirement income stream.

With that said, deciding to invest in real estate isn’t necessarily as easy as 1-2-3. In fact, it requires that investors do homework, do the legwork, and put in the work. It isn’t for the faint of heart, it’s work may require that you deal with difficult tenants, electrical issues, vacant rental units, and innumerable conflicts and concerns. Only those who are willing to roll their sleeves up and devote time will realize the true value of real estate investment as a satisfying option for diversification and an additional path toward income creation.

Investment isn’t simply about bankrolling a project, the action can help to bring balance to an investment portfolio. Also, if that property happens to have been managed well, it will bring in an abundance of income no matter economic conditions, and it can appreciate in value over years, which will be beneficial to an investor.

Presently, real estate investors are in a terrific position, thanks to low-interest rates and rapid rent increases, which will continue its pace for another two to three years. While the growth in rent is bad news for renters, it’s excellent for those interested in property investment.

So, what are the steps that an individual has to take in order to become a goal-oriented real estate investor?

Begin by saving money. After gathering an adequate amount of cash, so that you might successfully afford a down payment, you should seek pre-approval for a bank loan, which will allow you to quickly acquire a great property. Always analyze your finances before pursuing an investment. Verify rental rates, consider the cost of upgrades and upkeep, and make sure you have access to a real estate agent who’s educated in the workings of real estate properties.

Real estate investments are the most profitable for those who calculate finances so that income from renting covers the cost of insurance, mortgage, upgrades, upkeep, and repairs. Research and financial planning are crucial parts of designing an investment and retirement plan.

From the current owners of a property, request a detailed profit and loss statement when considering a property, and utilize the IRS Income Tax Schedule E to determine if an investment property is worthy of purchasing. Numbers can be inputted into the tax schedule to see gauge whether expenses can be covered with the income coming in from rent.

Novice real estate investors should consider starting small, rather than opting to take on a large project. For instance, consider renting out two or four-unit apartment buildings. However, be weary of single-family home investments because you don’t want to be liable for the entirety of vacancy rate; vacancy risks are greater with smaller investments.

The trick is to locate a property that’s affordable for you, as a buyer, and for potential renters. That means selecting a property with a median property value ($210,000), which has the greatest risk and can invite a reasonable rental rate. Obviously, roomy units in desirable neighborhoods that have excellent schools will be attractive to renters, so always have that on your radar. If you know anything about real estate trends or potential areas that may receive an influx of residents, then seek that out. Well-established areas tend to have a lower return rate while return tends to be greater in “hot” and up-and-coming neighborhoods.

Some other things to consider: think about choosing a property that’s close to your own home for convenience sake. Also, choose your tenants carefully. It’s important to screen for financially responsible, reasonable, and clean tenants who will respect your investment. Your return can be damaged if litigation or eviction become an issue for tenants. Real estate investment is a true, long-term commitment that demands attention and awareness.  

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.

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