Category Archives: real estate

House Hacking to Build Real Estate Wealth

Owning your own home can help you achieve your goals if you want to build wealth. House hacking is when you rent out your home. You can rent out a spare bedroom, a part of your multi-unit property, or live with a roommate. How do you get started with house hacking?

Real estate investing can be intimidating for young people because of the 20-25% down payment required to get a loan. However, with house hacking, a tiny down payment can work. If you qualify for USDA or VA, you have a great advantage. You can get away with 0% down payment although their upfront fees are high.

Other options include a conventional mortgage and FHA loans. Not all houses are “hackable” in equal measures. When buying a multi-family home, ensure that it will still be able to meet cash flow needs should you decide to move. Having roommates so you can cut down on expenses is a great idea but having negative-cash flow will not help much. It is not financially impossible for most people, but it is socially impossible. You need to be flexible and trust people.

However, think of the financial benefits. You will save so much on the mortgage. Even people with families (including kids) can successfully house hack. House hacking requires money. Save up money while living in the house. When you move out you should be able to convert the property into a cash-flowing rental. Consider the following calculations before venturing into house hacking.

According to the 1% rule, the gross rent of a rental property should be equal to 1% of the value of each property every month. If a house is worth $200,000, the fair-market rent should not be less than $2,000 per month. With you living in the property, the 1% rule is not that significant. Evaluate the house as though you are renting it all out.

The 1% may seem impossible. In this case, consider multi-family rental properties. You will have a higher chance of earning more income compared to the value of the house. If you want to rent it out on Airbnb, be realistic in your estimate. You cannot assume that you will have visitors every day of the month, each paying the full price.

If the property passes the 1% test, see it will have a positive net operating income. This is what you can expect after paying the mortgage. When calculating your cap rate, factor in the idea that you will be living in the house as well.

The cap rate you want to attain depends on your goals. If you love the cap rate, it is time to decide whether or not the house is perfect for house hacking. First, calculate the yearly cash flow based on the amount you expect tenants or roommates to pay as rent. The result may be negative. Now, calculate the cash flow based on what you would receive if you were not living in the house (imputed cash flow).

Virtual Reality via Real Estate Industry

Normally, the real estate industry changes with time and is quick to embrace technology to enhance its services. However, when it comes to Virtual Reality technology it seems to exhibit skepticism. Those that hesitate to adopt it could be making a grave mistake while those that do could be doing themselves a great favor. 

The two most common problems faced by real estate agents are:

•    Having to manage time visiting one house after another, with obstacles like traffic making it even harder.

•    Having to hear buyers say, “it doesn’t look like the pictures” all the time. 

Virtual reality is the ultimate answer to these two issues. It makes it possible to virtually show many houses in a short time. This improves sales efficiency, allows an agent to attend to more buyers and show more houses.

Take a look at the various ways you can use VR to improve your sales and make real estate a delight.

1.    Guided Virtual Visits

This is a lot more like a promotional video but it is shot and produced in 360 degrees. It is an amazing method for existing properties. Real estate agents will also be able to show properties still under construction. It is possible to produce a virtual visit of an incomplete building by mixing several types of mediums in the virtual experience. By producing a high-quality 3D version of, say the bedroom, a buyer can have a clearer idea of how their future bedroom will look like when it is completed. 

2.    Interactive Virtual Visits

In the spirit of improving virtual visits, this experience can be even more interactive when movement is determined by the user. It is a mind-blowing experience for potential buyers. With almost everyone having heard of VR but yet to try it, this will be life-changing. This experience will have to be accommodated in a mobile app.

This experience is by hotspots that will appear in your field of vision whenever you shift your attention from one side to another. If you keep your sight on the hotspot, you will be transported to the hotspot’s location enabling you to virtually walk through the property at your own speed.

3.    Virtual commerce

Virtual commerce combines the interactive visit explained above and the ability to make custom adjustments to the home. It works just like e-commerce. This is totally amazing since you get to play with designs. 

To use VR you do not need complicated computers and materials like motion sensors. VR technology has made giant steps in the past year and its future is expected to be mobile, through apps.  If your real estate agency has a mobile app then integrating VR is super easy. 

VR technology is a great opportunity for people in real estate. It does not cost an arm and a leg; it is easily incorporated in existing platforms. It is a perfect way to improve your sales efficiency with no need for additional staff.

1031 Tax Exchange Frequently Asked Questions

After years of conducting tens of thousands of successful 1031 exchanges, we found that there are several frequently asked questions related to this type of transaction.

Equity and Gain

Is my tax based on my equity or my taxable gain?

Tax is calculated upon the taxable gain. Gain and equity are two separate and distinct items. To determine your gain, identify your original purchase price, deduct any depreciation which has been previously reported, then add the value of any improvements which have been made to the property. The resulting figure will reflect your cost or tax basis. Your gain is then calculated by subtracting the cost basis from the net sales price.

Deferring All Gain

Is there a simple rule for structuring an exchange where all the taxable gain will be deferred?

Yes, the gain will be totally deferred if you:

1) Purchase a replacement property which is equal to or greater in value than the net selling price of your relinquished (exchange) property, and

2) Move all equity from one property to the other.

Definition of Like-Kind

What are the rules regarding the exchange of like-kind properties? May I exchange a vacant parcel of land for an improved property or a rental house for a multiple-unit building?

Yes, “like-kind” refers more to the type of investment than to the type of property. Think in terms of investment real estate for investment real estate, business assets for business assets, etc.

Simultaneous Exchange Pitfalls

Is it possible to complete a simultaneous exchange without an intermediary or an exchange agreement?

While it may be possible, it may not be wise. With the Safe Harbor addition of qualified intermediaries in the Treasury Regulations and the recent adoption of good funds laws in several states, it is very difficult to close a simultaneous exchange without the benefit of either an intermediary or exchange agreement. Since two closing entities cannot hold the same exchange funds on the same day, serious constructive receipt and other legal issues arise for the Exchanger attempting such a simultaneous transaction. The addition of the intermediary Safe Harbor was an effort to abate the practice of attempting these marginal transactions. It is the view of most tax professionals that an exchange completed without an intermediary or an exchange agreement will not qualify for deferred gain treatment. And if already completed, the transaction would not pass an IRS examination due to constructive receipt and structural exchange discrepancies. The investment in a qualified intermediary is insignificant in comparison to the tax risk associated with attempting an exchange, which could be easily disqualified.

Property Conversion

How long must I wait before I can convert an investment property into my personal residence?

A few years ago, the Internal Revenue Service proposed a one-year holding period before investment property could be converted, sold or transferred. Congress never adopted this proposal, so therefore no definitive holding period exists currently. However, this should not be interpreted as an unwritten approval to convert investment property at any time. Because the one-year period clearly reflects the intent of the IRS, most tax practitioners advise their clients to hold property at least one year before converting it into a personal residence.

Remember, intent is important. It should be your intention at the time of acquisition to hold the property for its productive use in a trade or business or for its investment potential.

Involuntary Conversion

What if my property was involuntarily converted by a disaster or I was required to sell due to a governmental or eminent domain action?

Involuntary conversion is addressed within Section 1033 of the Internal Revenue Code. If your property is converted involuntarily, the time frame for reinvestment is extended to 24 months from the end of the tax year in which the property was converted. You may also apply for a 12-month reinvestment extension.

Facilitators and Intermediaries

Is there a difference between facilitators?

Most definitely. As in any professional discipline, the capability of facilitators will vary based upon their exchange knowledge, experience, and real estate and/or tax familiarity.

Facilitators and Fees

Should fees be a factor in selecting a facilitator?

Yes. However, they should be considered only after first determining each facilitator’s ability to complete a qualifying transaction. This can be accomplished by researching their reputation, knowledge, and level of experience.

Personal Residence Exchanges

Do the exchange rules differ between investment properties and personal residences? If I sell my personal residence, what is the time frame in which I must reinvest in another home and what must I spend on the new residence to defer gain taxes?

The rules for personal residence rollovers were formerly found in Section 1034 of the Internal Revenue Code. You may remember that those rules dictated that you had to reinvest the proceeds from the sale of your personal residence within 24 months before or after the sale, and you had to acquire a property which reflected a value equal to or greater than the value of the residence sold. These rules were discontinued with the passage of the 1997 Tax Reform Act. Currently, if a personal residence is sold, if residence was occupied by the taxpayer for at least two of the last five years, up to $250,000 (single) and $500,000 (married) of capital gain is exempt from taxation.

Exchanging and Improvements

May I exchange my equity in an investment property and use the proceeds to complete an improvement on a vacant lot I currently own?

Although the attempt to move equity from one investment property to another is a key element of tax deferred exchanging, you may not exchange into property you already own.

Related Parties

May I exchange into a property that is being sold by a relative?

Yes. However, any exchange between related parties requires a two-year holding period for both parties.

Partnership or Partial Interests

If I am an owner of investment property in conjunction with others, may I exchange only my partial interest in the property?

Yes. Partial interests qualify for exchanging within the scope of Section 1031. However, if your interest is not in the property but an interest in the partnership which owns the property, your exchange would not qualify. This is because partnership interests are excepted from Section 1031. But do not be confused! If the entire partnership desired to stay together and exchange their property for a replacement, that would qualify.

Another caveat. Those individuals or groups owning partnership interests, who desire to complete an exchange and have for tax purposes made an election under IRC Section 761(a), can qualify for deferred gain treatment under Section 1031. This can be a tricky issue! See elsewhere in this publication for more information. Then, only undertake this election with proper tax counsel and only with the election by all partners!

Reverse Exchanges

Are reverse exchanges considered legal?

Although reverse exchanges were deliberately omitted from Section 1031, they can still be accomplished with the aid of an experienced intermediary. Since reverses are considered an aggressive form of exchanging, your intermediary and tax advisor should assist you with exchange and tax planning based upon successful reverse exchange case law.

The Taxation Section of the American Bar Association has submitted suggested guidelines for the IRS in evaluating reverse exchanges and issuing new regulations. Although it is unknown when the IRS will make a definitive reverse exchange ruling, one is expected in the future.

Identification

Why are the identification rules so time restrictive? Is there any flexibility within them?

The current identification rules represent a compromise which was proposed by the IRS and adopted in 1984. Prior to that time there were no time-related guidelines. The current 45-day provision was created to eliminate questions about the time for identification and there is absolutely no flexibility written into the rule and no extensions are available.

In a delayed exchange, is there any limit to property value when identifying by using the 200% rule?

Yes. Although you may identify any three properties of any value under the three-property rule, when using the 200% rule there is a restriction. It is when identifying four or more properties, the total aggregate value of the properties identified must not exceed more than 200% of the value of the relinquished property.

An additional exception exists for those whose identification does not qualify under the three property or two hundred percent rules. The 95% exception allows the identification of any number of properties, provided the total aggregate value of the properties acquired totals at least 95% of the properties identified.

Should identifications be made to the intermediary or to an attorney or escrow or title company?

Identifications may be made to any party listed above. However, many times the escrow holder is not equipped to receive your identification if they have not yet opened an escrow. Therefore, it is easier and safer to identify through the intermediary, provided the identification is postmarked or received within the 45-day identification period.

Why Passive Investing in Commercial Real Estate is a Smarter Strategy Than Single Family Rentals

Most real estate investors deal with single family houses. Having bought their own homes, this process is something they understand. Moreover, buying a second home is an attractive venture to the homeowner who has witnessed the gradual equity growth of their first home.

This strategy is great. However, for the investor seeking to diversify in real estate, commercial real estate is a good way to build your portfolio. People do not realize it but having single family rentals is risky and tough. They come with many challenges such as:

No sustainable cash flow: many people purchase their single-family rentals with debt, hence little or no sustainable cash flow. Too much risk: there are great risks associated with owning single family rentals, especially when the property is leveraged. You may end up losing more than you invested. Lack of economies of scale: some large capital items such as cooling systems, driveways, roofs, and heating are used by one tenant.

When the property incurs sudden capital costs your cash flow can be temporarily wiped out. Costly management: when you own single family rentals, you either hire someone to manage them for you (at a huge percentage of your income) or do it yourself (at a great opportunity cost). None of these scenarios is desirable. 100% market dependent: asset value is purely dependent on the overall market—it is not correlated to its profitability.

Backyard reliant: investors will usually want to oversee their rental properties, so these rental homes have to be close to the investor’s residence. Because of these challenges, single family rentals can hardly be justified as a component of a diversified portfolio. The Alternative: Passive Commercial Real Estate Investing

When investors understand how commercial real estate investment works, they will start moving away from single family rentals.  An investor can directly own or operate commercial real estate. However, this is not easy as it requires specialization and a large amount of capital which may be a barrier to many investors. The better option is to be a limited partner with operating companies. 

Here is why:

Asset value in correlation to NOI (net operating income): this means that the greater market does not necessarily determine whether you lose or gain money. The value of the property is correlated to its net operating income. The operator controls the destiny and it is not just about betting on the market. Co-investing with professionals: when you are ready to passively invest, you can look for sophisticated groups with great track records.

Teaming up with veterans will help you mitigate some risk. Diversification: even in real estate investing, diversification is an awesome tool. Passive commercial real estate investing lets you choose a business plan, asset type, and geography with almost no limits. 

Loss limitations: your liability as a limited partner is set at the investment amount.

Rationality: because commercial real estate has its competitiveness grounded in rationality, it is possible to reliably project the performance of a property. Single family rentals are not entirely bad. However, investors should view them as a starting point in real estate investing. 

Before Investing in Condos

Everyone wants a small source of income on the side and investing in a condo is a good option. Whether you are seeking to add a condo to your portfolio or just want to buy a second house to rent out, you need to consider a few things before investing in a condo.

There are tighter restrictions imposed on financing condos than on detached homes. Lenders will usually ask for 20-25% down payment on investment properties. Other lenders will require that you live in the condo for not less than one year before you rent it out; otherwise you may have to pay a higher down payment. Ask your lender about any regulations concerning the financing of condos.

Condos do not appreciate quickly compared to detached homes. However, the market and area are large determinants of this. Experts advise investors to think of condos as long-term investments in order to realize the highest return on their capital. Hold on to it for at least 5 years. Most condo associations have rental caps. This refers to the limit put in place by the HOA or condo board on the number of units that should be rented out. Make sure you know whether or not the unit you are buying can be rented out. The units of a building under litigation, for any defect, can barely be sold because getting bank financing for such condos is almost impossible.

Even if you have all the money at hand, litigation is still something you should be cautious about. One major problem is a sign of many underlying issues. Special assessments are the fees that the HOA charges to cater for condo building repairs when the cost exceeds what is in the HOA account. These fees can cost a lot and they are mandatory.

A HOA will, in most cases, have scheduled site inspections so as to determine the state of the grounds and building. They also have information about any recommended upcoming repairs. Ask your agent for reserve studies so that you will know of any upcoming repairs and what they may cost. HOA fees can be high so it helps to know what is covered.

They cover sewer, water, garbage, grounds, a community center, security, exterior building maintenance, pool, etc. A HOA payment is more of a savings account for your house’s maintenance. You can incorporate this payment into the rent amount. It will be easier to access the HOA through your agent before buying the condo. Ask for as many documents as possible from the HOA and read them.

This will let you know how active and accessible it is. Buying a condo is one thing, renting it out is another. Check if all the units in the building are occupied and if not, find out why. Ask to know the rental rates in the building. Tenants are not easy to deal with. As a landlord, you have to address their issues carefully and in time. If you cannot do this, you might want to hire a property manager. 

How to Find a Rental Property in an Expensive Market

Investors venture into real estate hoping for long-term passive income. Rental income is capable of providing consistent passive income, but real estate investment can be risky. Buying at the wrong time may cause you to lose a significant amount of equity.

If you are a newbie rental property investor, you may want to keep your day job as you learn the ropes of real estate investing. Start by doing research on healthy markets then establish realistic estimated profits and rent prices. Experts recommend that you invest enough in the properties so that you can have a positive cash flow. This way, you will not have to spend your income to run the business.

Currently, it is difficult for newbie homebuyers to buy houses because most of the affordable ones are under negative equity. 18.8% of mortgaged homeowners in the U.S are underwater and cannot sell their homes without cash at the closing table. Because of this and expensive national rents, families have to rent at very high costs. The market may be ideal for landlords but not for rental property buyers.

To engage in bidding wars, you will need a lot of money. Fortunately, some of the areas where properties are most expensive are highly demanded by renters. Be a smart buyer and buy properties in locations where both the rent and demand for rental houses are high. Properties in expensive locations have a high chance of appreciating in value and so long-term investment guarantees profit.

If you do not have enough capital to buy rentals with cash, you should either invest in cheaper buildings or wait to buy. Do not go for prized properties, opt for working class neighborhoods instead where the rent is moderate. Before you buy rentals, plan your property management strategy carefully.

Some property owners, especially those with handyman skills, may decide to run the entire business on their own, from emergency upgrades to tenant requests to signing leases. This strategy may seem cost-effective, but it is not beneficial for all rental owners.

Some may have to hire property managers. Begin searching for rental property 3-6 months before you plan to buy. This timeframe will allow you to research the market and understand the current values. You can search online, or physically visit the units.

If you do not have the time, hire an agent. When choosing a rental property, look for the qualities you might want for your own home. What appeals to you will appeal to renters. When you are an onsite homeowner, you will understand what it is like to live in your property and make the necessary improvements.

Moreover, you will have access to affordable financing. Before you close on a home, invest in an inspection; and if upgrades are required estimate how much they will cost before you buy. Make the necessary upgrades immediately after buying for the safety of your tenants and to attract renters. 

Essential Tips for Buying a HUD Home

HUD homes were not that much of a hot topic in 2006 when the housing boom peaked. However, a housing bust followed making the HUD program a household name. A HUD home is basically a program by the U.S Department of Housing and Urban Development.

The government acquires HUD homes owing to foreclosures on FHA-insured mortgages. HUD aims at selling these homes to regain the monetary loss. During the recession, many people lost their homes giving foreclosure a negative connotation. However, purchasing a HUD home can be a great deal and an awesome experience. It helps to understand the HUD program and the foreclosure process.

Many people who want to buy HUD homes are not usually familiar with the entire concept, so do not feel alone. The first thing you need to do is explore the available official information on these homes. Remember that it is a government program and it has government rules. There is, however, a lot of information on the department’s website and it features frequently asked questions. In addition, you will find state-specific information and tips on inspections and loans.

At times, investors consider HUD homes gold mines. They see a huge potential for profit in flipping or renting them out. This means that you will be competing with seasoned investors who have access to capital. According to the law, when a home first hits the market, HUD does not accept any bids within the first 30 days.

You will find HUD homes listed on several realty sites like Re/Max Holdings Inc. and Trulia Inc. The most updated and comprehensive site is the government-run one, hudhomestore.com. If you are thinking about involving a realtor, they should be registered with HUD; otherwise, they cannot represent you. It is very important to buy a property with feasible interest rates and mortgage payments. There are online mortgage calculators that can help you figure out how much monthly mortgage you can afford to pay and any other factors that have an influence on your purchase. Window shopping is okay but secure financing in time.

Many buyers have lost their ideal homes to other buyers because of delayed loan approval. When you talk to mortgage lenders, make sure you are thoroughly informed. The two best options include the 203(K) rehab and renovation loan and the $100 down payment program. Read everything you can about the home’s history such as recent tax assessments, average sale price of similar homes, and sales history.

In your research do not neglect addendums to the property. There is a lot of legally mandated information that you cannot ignore—for instance, your dream home was probably a meth lab. There are states that require a seller, by law, to inform a buyer whether or not the property was used in production of meth. If the state you are shopping in does not have that requirement, do your own air quality audit. If a home was used as a meth lab, getting an FHA loan might be difficult. Make sure you complete the inspection before you make an offer. 

Reasons to Invest in Multi-Family Real Estate

Some investors cannot deal with the very volatile stock market and they, therefore, find real estate to be a great investment alternative. It also works well for investors who want to actively grow their capital rather than have their money in a fund under someone else’s management.

Real estate investing is awesome because there are so many strategies that you can successfully employ. Take Zhang Xin and Donald Bren, for instance. They are both real estate moguls who became billionaires by developing different commercial and residential properties. Sam Zell, Equity Residential founder, built his wealth slowly via an income producing portfolio of rentals.

There are many other real estate investors who have become wealthy through house flipping. Investing in rental properties is a great investment for people who would like an extra source of income and in addition, a slow and steady appreciation of portfolio value. In residential real estate, you can invest in two major types of properties: multifamily and single family. A single-family property consists of only one renting unit while a multifamily property (apartment complex) has a number of rentable spaces. Investing in multifamily properties is not that easy but it has its advantages.

See these three reasons why you should consider multifamily real estate instead of single family real estate. Single family homes are usually cheaper that multi-family homes when you are buying for investment purposes. Because of this, investors think that it is harder to get a loan for a multifamily property than it is to get financing for a single-family property. What they do not know is that banks are more likely to approve a loan for a multifamily property because such properties are consistent in generating monthly cash flow.

Having a few vacancies or some tenants paying rent late does not stop the cash flow. In the case of a single-family unit, when a tenant moves out the property becomes 100% vacant. Another thing, single-family rentals have higher chances of a foreclosure. A multifamily property, therefore, poses less risk for the lender. If you want your rental units’ portfolio to grow, investing in multifamily properties is a good option.

An apartment building with 20 units is better than 20 single family homes in different locations in terms of ease of management and time saving. Sometimes, you will need to have separate loans for each of the 20 single family homes which can be hectic. With one or two single family properties, hiring a property manager is not a wise thing to do financially because of the small portfolio.

Multi-family properties, on the other hand, bring in more money and the investor can comfortably enjoy the services of a property manager. There are many strategies that you can use in real estate investing and still become successful. Investing in multifamily homes has a lot of advantages such as the ability to employ a property manager, better access to financing, and better chances of growing your rental portfolio.

How to Pick the Ideal Location for Investment Properties

A great location will ensure that you have an easy time attracting renters and give you high financial rewards. Although people will have a different definition of the best location, a great investment location should appeal to your target market and be profitable for you. In this chapter, you will learn about picking the best location for your investment.

Real estate investment is like any other business. Therefore, demand and supply determine your profits. The ideal business should offer something that everybody wants or needs (high demand) and what it has to offer should not be easy to replicate (limited supply).  A real estate investment can only be successful if the tenants have good jobs. Understand the job market of the area. Consider the following:

  • The number of jobs; is the number increasing or decreasing?
  • The median salary; is it increasing or decreasing?
  • The types of jobs; low-paid laborers, high-tech or professional?
  • Diversified jobs; a stable variety of job sources or 1-2 main industries?

Population Growth

People are always moving to locations with better jobs. They are also attracted by things like natural attractions, weather, local politics, and the price of housing. 

The ideal location for real estate investing is one with an increasing population. The price/rent ratio is a great and easy way to evaluate the profitability of an area. 

The rent/price ratio is determined by dividing the median price by median yearly rent. For example, if the median housing price in an area is $200,000 and the median yearly rent is $15,000, then the price/rent ratio is $200,000/$15,000 = 13.33. A location with a high rent/price ratio is not good for business.

Small Scale Location Criteria

Convenience

You have a better chance of success if you own properties where many people would like to live such as near a major economic center. Romance, in this case, is something that makes people emotionally attracted to a location. The decision on where to live is based on emotion. 

Romance, depending on place, includes:

  • Proximity to green spaces and parks
  • Streets lined with trees
  • Beautiful scenery, etc.

Romance differs with the location and you will have to physically visit a location to find out. Walkability has been associated with more price resilience and higher property appreciation.

This is truer for metro areas than for rural areas and small towns. Everyone wants to live in a safe place. Avoid the worst areas, regardless of what they promise on paper. There are several sites online such as https://spotcrime.com/ and https://www.trulia.com/local/ which can give you the necessary statistics.

School Districts

Just like crime, you can find most information online, however, make sure you visit the area too and talk to the locals.

Public Transport

Proximity to public transit is an important factor in urban areas. Search Google to find public transit routes to help you in your research. Your attorney should share any CCRs (covenants, conditions and restrictions) when you are buying property. They are useful but can be limiting at times. 

Local Laws, Finances, Taxes, and Infrastructure

The local government will influence your investment. Pay attention to eviction laws, property taxes, rental laws, licenses, municipal services, and rent controls.

How to Invest in Real Estate

Investing in real estate is not complicated, expensive or difficult. There are so many places to put or invest your money such as bonds, stocks, mutual funds, savings, commodities, and real estate, among others. Each form of investment has its advantages and disadvantages. Here, the focus is on real estate investment. 

Many people resort to real estate investing mainly because they want financial freedom. Others are in it for the following:

  • Tax benefits
  • Leverage
  • Cash flow
  • Depreciation
  • Appreciation

The decision and reason for each individual is personal. Just ensure that you are committed before you start. Can You Invest in Real Estate While Holding a Full-Time Job? You can. There are so many kinds of real estate investing, not just what you hear from experts or the TV.  The ways to make money are also numerous. Some of the strategies and techniques may be demanding (40 hours a week) and others less demanding (less than 40 hours a year). The length of time you will need to grow your business depends mainly on your personality, investing strategy, timeline and knowledge. Real estate does not have to be your full-time career for you to amass wealth. You can invest on the side.  Benefits of Investing While Still Holding Your Full-Time Job. If you keep your day job, you will enjoy some benefits that full-time investors do not. The first benefit is that you do not need to spend the money you make in your investment. If you reinvest all your profits, your business will grow exponentially. Another thing, the stable income of your 9-5 will give you access to long-term financing from banks. 

To invest while still maintaining your day job you can:

  • Serve as a hard or private money lender
  • Buy-and-hold property
  • Invest in notes

Do You Need to Pay an Expert to Be Successful?

You do not have to. There are so many investors who have attained success without the help of experts. Most of these gurus just want to sell you the get-rich-quick dream. They prey on desperate people and they can be dangerous. Their main business is to sell you the dream. You can learn a thing or two from gurus but be careful.

Can You Invest in Real Estate if You Have No Money?

It is possible. However, you should understand that every transaction in real estate requires money. You can, therefore invest without using your own money but, other people’s money. This is a complex but important strategy. If you have no money, bring something else to the table such as education, connections, time, creativity, and intelligence. A lot of aspiring real estate investors begin their journey by working in the industry first. They earn income while acquiring hands-on education. Here are some real estate careers you can look into:

  • Mortgage broker
  • Real estate agent
  • Title/escrow agent
  • Appraiser
  • Resident manager
  • Project manager
  • Construction worker

Some people can make a lot of money in a short period of time—but this is rare. A good real estate investor is patient, persistent, and plans ahead. Aim at growing steadily over time until your dreams and goals are achieved.

Being a rental property investor is not easy, but it is straightforward and fairly simple. There is more to investing in rental properties than just buying and renting. Nevertheless, the strategies are easy to master and there are so many people you can ask. One of the best things about property investing is that you can shop around for a great deal and pay for less than the market value. Insider trading in the stock market is when you make a profit because you had some secret information. This is illegal in the stock market but not in the rental property market.

There are four main profit sources that you can capitalize on:

  • Appreciation
  • Loan pay down
  • Cash flow
  • Tax benefits

With property investing, you do not need to be physically present. You can even make money while sleeping.

5 Reasons To Refinance

There are many great reasons to refinance. With lower cost, adjustable rate, and 0-down options, traditional loan programs like 30-year or 15-year fixed rate mortgages do not always allow us to meet our financial goals. Today, even reducing your mortgage interest rate a little can save you big over the life of your home loan. Look below at 5 great reasons to refinance.

1. Lower Your Monthly Payment

If you plan to live in your home for a few years, it may make sense to pay a point or two to decrease your interest rate and overall payment. Over the long run, you will have paid for the cost of the mortgage refinance with the monthly savings. On the other hand, if you plan on moving soon, you may not be in your home long enough to recover the refinancing costs. Calculating the break-even point before you decide to refinance can help determine whether it makes sense.

2. Switch from an Adjustable Rate to a Fixed Rate Mortgage

Adjustable rate mortgages (ARMs) can provide lower initial monthly payments for those who are willing to risk upward market adjustments. They are also ideal if you don’t plan to own your property for more than a few years. However, if you have made your house a permanent home, you may want to swap your adjustable rate for a 15-, 20- or 30-year fixed rate mortgage. Your interest may be higher than with an ARM, but you have the confidence of knowing what your payment will be every month for the rest of your loan term.

3. Escape Balloon Payment Programs

Like adjustable rate mortgage programs, balloon programs are great when you want lower rates and lower initial monthly payments. However, if you still own the property at the end of the fixed rate term (usually 5 or 7 years), the entire balance of your mortgage is due to the lender. If you are in a balloon program, you can easily switch over into a new adjustable rate mortgage or fixed rate mortgage.

4. Remove Private Mortgage Insurance (PMI)

Zero or Low-down payment options allow homeowners to purchase homes with less than 20% down. Unfortunately, they also usually require private mortgage insurance, which is designed to protect the lender from loan default. As the value of your home increases and the balance on your home decreases, you may be eligible to remove your PMI with a mortgage refinance loan.

5. Cash in on Your Home’s Equity

Your home is a great resource for extra cash. Like most homes, yours has probably increased in value, and that gives you the ability to take some of that cash and put it to good use. Pay off credit cards, make home improvements, pay tuition, replace your current car, or even take a long-overdue vacation. With a cash-out mortgage refinance transaction, it is easy. And it is even tax deductible.

7 Easy Ways to Make Passive Income with Real Estate

Real estate is an amazing way to make passive income. You don’t even need to own commercial or residential rental properties. 

You have other options such as crowdfunded real estate investing. 

This is much like peer-to-peer lending. Their platforms match investors with ideal investment choices. In a case like this, investors do not have to bargain with sellers or involve themselves in ownership transfer and management of the properties. They also allow you to earn passive income without investing a lot of money. 

Here are seven of the most experienced crowdfunded real estate companies.

Rich Uncles

The minimum investment amount is $5. Anyone can get started. 

How It Works

Through crowdfunding, Rich Uncles makes it possible for everyone to invest in real estate. They have student housing and commercial properties and you can choose one or both.

Who Can Invest?

You can invest even though you are not an accredited investor but you should have a net worth of $250,000 or a minimum family income of $75,000. 

Fundrise

This is an online platform for real estate investing. The minimum investment requirement is $500. Mostly, they involve themselves in commercial property. 

How It Works

There is an eREIT investment funds list for investors to browse and choose the most suitable one. They also aim at cutting out the middleman.

Who Can Invest?

The only requirement is a minimum investment of $500.

Realty Mogul

You invest by buying stock shares in their LLCs. These LLCs then invest in a different LLC with the property title. This minimizes overhead. 

How It Works

Realty Mogul is basically all about buying stock shares.

Who Can Invest?

Both credited and non-accredited investors can invest. The latter, however, are limited.

stREITwise 

This crowdfunded-type REIT manages commercial property. Your private real estate asset portfolio will be professionally managed. The minimum investment is $1000.

How It Works

They will hold your initial investment for at least a year.

Who Can Invest?

Just like Realty Mogul, accredited and non-accredited investors can invest. 

EQUITYMULTIPLE

It allows investors to be a part of professionally managed commercial property. They have privately held REITs for accredited investors.

How It Works

A minimum investment amount of $5000 is required. Properties include:

  • Thriving commercial properties
  • Short-term loans
  • Value-add projects

Who Can Invest?

It is only open to accredited investors. 

RoofStock

This is not really a company for crowdfunded real estate investing. However, it makes it cheaper to own rental properties.

How It Works

Through equity investments, accredited investors can invest in a number of properties. 

They have a list of all their rental properties and you can browse to choose the one you like. They will arrange details such as closing and financing.

Who Can Invest?

Accredited and non-accredited investors alike can invest.

Crowdstreet

They focus on commercial property investing. Investors can get debt and equity investment deals.

How It Works

You choose specific properties and buy a stake. 

Who Can Invest?

This one is for accredited investors only. They have set a minimum investment amount of $10,000.

3 Things To Look For In A Home Purchase Lender Online

If you’re ready to buy a new house, you’re going to need a Home Purchase lender. And finding one online is convenient and simple! However, there are a few things you should look out for to ensure that your lender has your interests–and not his–as his top priority.

Make sure your lender offers options

There are a lot of options other than the traditional 30-year fixed rate mortgage. Depending on your needs and personal situation, an Adjustable Rate Mortgage (ARM) or Interest-Only mortgage might be a better fit for you. Or, possibly, you may prefer a loan with a longer or shorter term. A good lender should be able to offer you a variety of options so you can find the one that best suits your needs. Be wary of any lender that tries to push one particular type of loan.

Get your “pre-approval” in writing

Some Home Purchase lenders will “pre-qualify” you–but that doesn’t mean you’re guaranteed to get the loan! In fact, in most cases, “pre-qualification” means almost nothing at all. Choose a lender who will “pre-approve” your application instead, which is a more involved process. When you’ve been “pre-approved,” the loan officer has contacted your employer, bank, credit card companies, etc. Once you’re “pre-approved,” you’re a lot more likely to get the final approval on your loan.

“Lock in” the rate you’re quoted

Interest rates change almost daily–they can be down on Monday, and sky-high by Friday! And some lenders will quote you a super low rate to get your business, even though they know the rate may change by the time your loan is finalized. If a lender quotes you an interest rate, ask him/her to “lock it in” for 30, 60 or 90 days. Reputable online Home Purchase lenders will guarantee you your promised rate even if it takes another month or two until you close the loan.

Once you know your online Home Purchase lender is willing to offer you options, pre-approve your loan, and lock-in your rate, it’s time to compare rates, fees and other charges to make sure you’re getting the best deal.

If you’re ready to buy a new house, you’re going to need a Home Purchase lender. And finding one online is convenient and simple! However, there are a few things you should look out for to ensure that your lender has your interests–and not his–as his top priority.

Make sure your lender offers options

There are a lot of options other than the traditional 30-year fixed rate mortgage. Depending on your needs and personal situation, an Adjustable Rate Mortgage (ARM) or In.

3 Things To Look For In A California Mortgage Lender Online

Want to buy a home in California? If so, chances are you’ll need a California Mortgage Lender to help finance your new house. Fortunately, the Internet has made the mortgage process easy. You can even find a lender online with very little hassle! Here’s how to find a reputable California Mortgage Lender online:

Ask friends, family and neighbors

If you already live in California, some of the people you know in the state may have used a California Mortgage Lender online when they financed their home. Ask around among close friends and acquaintances to see if anyone can make a personal recommendation. Check with co-workers, family members and neighbors, too. A referral like this is often a good way to hear about the good–and bad–experiences people have had with various online mortgage lenders.

Watch out for predators

“Predatory lending” is a term generally used to describe any lender that is trying to take advantage of the borrower. Examples include charging high, unnecessary fees, pushing borrowers into a loan they can’t afford, or using lies and deception to obtain clients. Carefully review all fees and charges–your lender is required to give you a “good faith estimate”–plus the fine print, like loan terms and prepayment penalties. Be on the lookout for any false or misleading information, or any terms that are vague and unspecific. If the fees seem too high or too numerous, look for a different lender.

Check with officials

All California Mortgage Lenders and Brokers should be licensed with either The California Department of Real Estate or The California Department of Corporations. To help ensure your California Mortgage Lender is legitimate and reputable, check with these agencies to see if your lender is licensed. Avoid any lending company that is not licensed or has allowed its license to expire.

Be sure to check with your city’s Better Business Bureau office, as well. They’ll have a record of any complaints that may have been filed against your California Mortgage Lender.

Want to buy a home in California? If so, chances are you’ll need a California Mortgage Lender to help finance your new house. Fortunately, the Internet has made the mortgage process easy. You can even find a lender online with very little hassle! Here’s how to find a reputable California Mortgage Lender online:

Ask friends, family and neighbors

If you already live in California, some of the people you know in the state may have used a California Mortgage Lender online.