Making Money With Property

If we take the time to study real estate and the investors,  then understanding what steps investors take to become so financially successful. You’ve seen it before in magazines probably while sitting in the waiting room for an appointment. Story after flowery story of regular people who have built their property portfolios and hear their talk focused on how they’re working on financial independence.

Although there are different paths you can take to make money from property, there are only a couple that really work the best and that is from rental income and from capital growth. These two things will be your sword and shield on your adventure to financial independence.

Let’s cover the first one. Through the method of rental income, money is put in your pocket directly. If you are making more money on the rented property than you are spending on it for means of maintenance and upkeep, then the cash flow is positive.

The second method greatly depends on the property increasing in value. Property will most likely always increase in value over time, typically just like gold and other precious metals.

Your Property Manager is crucial!

The main premise of the word “Turnkey” for real estate investment properties means that everything is already in place, and done for you. Your property manager is the engineer that makes the train run…the oil that makes the engine roar….the straw that stirs the drink! They make sure that your rent is collected in a timely manner. They create and build a strong, positive relationship with tenants. They make sure that repairs are handled properly. They market for, and place qualified tenants. All of these take A LOT of time and energy. But, this kind of effort is the key to an ongoing performance of your asset. Your property manager needs to know your expectations and what you require from them. To properly convey this, constant communication, and clearly defined parameters will ensure your investment is safe and secured. Spending time in building your relationship with your property manager is one of the ways to convey, and communicate your visions, and goals. This time spent will definitely be worth it. Once your visions, goals and expectations are properly defined, your property manager will have a clear picture on what, and where to help for the betterment, and success of your real estate investment property business.   

Carpe Diem (Seize the day!!)….Don’t wait to invest!!

The 2015 State of the Nation’s Housing Report was just recently released  by the Joint Center for Housing Studies at Harvard University. Due to the diminishing supply of quality rental units and dramatically escalating rents, the report concentrated on the challenges renters in this country are facing. But, information found within the report that revealed that now is definitely the time to buy.

Home prices still below peak values and mortgage rates still near historic lows, the monthly mortgage payment on a median priced home is less than almost any time in the last 25 years.  Here is a graph which helps visualize the data from the report:

 

 

 

 

 

With home prices increasing and mortgage rates historically low and projected to increase, NOW is the time to buy.

 

 

 

 

 

 

The foreclosure crisis of 2008 in the U.S. created a gold mine for investing in rental properties!

Primarily due to the mortgage, and foreclosure crisis of 2008, a very large percentage of American households has been driven by renters, especial to mention would be of single-family residences (SFRs) renters.

The second half of the twentieth century is being characterized by suburban society where Owning the stereotypical modest home with a white picket fence was long a hallmark. But because of the Great Recession, foreclosure crisis was triggered and made renters out of millions to be  former homeowners.

In  many areas, buying a home today is difficult for many because of the tight credit and low for-sale inventory. And to add, even as demand for the luxuries offered by a single-family residence – more space, (even a sense of) more security, a yard and access to good, suburban schools – remains robust.

Due to these facts, SFR rentals today have become an increasingly visible and viable option for millions of families nationwide.

The convergence of three trends explains much of the growing popularity of SFR rentals:

The Foreclosure Crisis. According to Wikipedia: ” The 2010 United States foreclosure crisis, sometimes referred to as Foreclosure-gate or Foreclosuregate, is an ongoing and unresolved issue in the United States and refers to an apparently widespread epidemic of improper foreclosures initiated by large banks and other lenders. The foreclosure crisis was extensively covered by news outlets beginning in October 2010, and several large banks, including Bank of America, JP Morgan, Wells Fargo, and Citigroup temporarily responded by halting their foreclosure proceedings in some or all states. The foreclosure crisis has caused significant investor fear in the U.S.^[5] A 2014 study published in the American Journal of Public Health links the foreclosure crisis with an increase in suicide rates.

One out of every 248 households in the United States received a foreclosure notice in September 2012, according to RealtyTrac.”

Because of such, early during the Housing Bust, foreclosures forced many former owners to become renters, often in the same homes or neighborhoods where they previously resided.  This contributed to the growing number of renter households early in the recession.

Investor Activity. Investors bought many of the bargain homes, coming from the rising number of foreclosure resales because of price drop, with the intent of renting them. It gives more expanded options available to the growing population of renter households, but also constrained the supply of entry-level properties in the for-sale market.

Inventory Crisis. There are challenges and struggles facing potential new home buyers because of the competitive market characterized by low for-sale inventories, large numbers of all-cash offers, and rapidly increasing prices which made buying a home less affordable and drove potential buyers to the single-family rental market.

Below is the Chart  which illustrates some of the trends in the Market for SFR renters, and compare compare the residents of SFR rentals with those of owner-occupied SFRs and tenants in more typical apartments.  Compared to SFR owners, SFR renters tend to be younger, less-affluent families.

The homeownership rate increased sharply during the Housing Boom, but has declined steadily, reversing the prior decade’s gains by late 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. rental growth is exploding – 13 million renters by 2030!

 

According to the Urban Institute (UI), the rental market is about to take off in ways that have not been seen in decades. UI predicted that over the next 15 years, millennials, young adults who reached maturity during or in the wake of the financial and housing crises, will reach peak home-buying age and, in large numbers, find themselves ready to form households but unable to purchase properties. This will ultimately lead to a 13 million renters in the population by 2030, which exceeds the projected number of rental units expected to be available at that time by fully 4 million[1].
Because of this trend, many investors are now interested to get involved in the rental market either by purchasing existing properties to turn into rentals or by investing in new construction. “The rapid growth of the renter population will create significant demand for new rental housing construction and encourage a shift of owner-occupied dwellings to rentals,” predicted UI. Owner-occupant household formation will likely be driven in significant part by senior households headed by those 65 years and older.

For further details please check the link below: http://realtormag.realtor.org/daily-news/2015/06/12/report-renter-growth-explode-2030

Returning Equity Boosts Real Estate Markets

Real estate equity is coming back. If you own a home or invest the odds are that you’re very much richer than you were just a few years ago. While we don’t have a full recovery yet, there’s evidence that the housing market has become more attractive in most metro areas.

According to the Federal Reserve, homeowner equity peaked in 2005 when the value of U.S. homes — market value less debt — equaled a rosy $13.1 trillion. Unfortunately things went downhill from there as a result of the financial crisis, by 2011 homeowner equity had fallen to $6.4 trillion and millions of American homeowners saw half their real estate equity disappear.

This was not just an academic matter. Without equity, borrowers could not refinance as rates fell and they couldn’t sell without bringing cash to closing. The alternatives were short sales, foreclosures and staying in place. In the end, more than 7 million homes were lost to foreclosure.

Now the good news: Between 2011 and 2014 homeowner equity went from $6.4 trillion to $11.3 trillion. That’s an increase of $4.9 trillion. With any luck it’s not unreasonable to believe that equity as measured on a cash basis might return to 2005 levels in the next year or so.

More Equity, More Possibilities

More equity means more homeowner options. Qualified owners can now borrow against their homes, borrow more than a few years ago or do nothing and avoid additional debt.

The situation with reverse mortgages is a little different. More equity suggests that older homeowners, those above age 62, can more readily get reverse financing. However, the FHA’s rules for such loans have tightened so it takes more equity to get a loan of a given size when compared with a few years ago. This is important because nearly all reverse mortgages are originated with FHA backing.

According to RealtyTrac, May foreclosure starts were below the pre-crisis levels seen in 2005 and 2006. Part of the reason for fewer foreclosure starts is that with additional equity it’s increasingly easy to avoid foreclosure. As long as market value at least equals mortgage debt plus closing costs owners in financial trouble can just sell for a fair market price without damaging their credit.

For many borrowers home equity lines of credit — so-called HELOCs — have been a ticking time bomb, a bomb which can now be diffused in many cases because more equity is available.

A HELOC is essentially a huge credit card secured with a home, a way for owners to extract equity without selling. In general terms HELOCs have two phases: a “draw” period when cash can be taken out and a “repayment” period when borrowers must repay the debt outstanding at the end of the draw phase.

For instance, the Smiths got a $100,000 HELOC in 2005. The loan has a 10-year draw period and a five-year repayment phase. In this case Smith had a $90,000 balance at the end of the draw period and must now repay the debt over five years at 6 percent interest. This means the required monthly payment will go from zero during the draw period to $1,739.95 per month for the final five years of the loan term.

For many households such a massive and immediate additional debt is a sure route to poverty if not foreclosure. However, with additional equity many homeowners can simply refinance their current mortgage or a get a second loan to replace the HELOC. If they refinance into a new loan at 4 percent and with a 30-year term, the monthly cost to finance an additional $90,000 falls to $429.67 — an expense which is far easier to absorb.

According to a recent Experian study, HELOCs originated between 2005 and 2008 and representing $265 billion “are outstanding and nearing the repayment phase.” For millions of homeowners increased equity is the key to avoiding HELOC-based foreclosures.

It’s Not All Rosy

While the great equity increase seen during the past few years is surely welcome, the housing sector remains fragile for several reasons.

First, some markets continue to struggle. The National Association of Realtors reports that in the first quarter home prices were up in 148 metro areas but down in 25.

Second, with growing equity we’re seeing more first-timers getting back into the market. NAR says in May that first-time buyers represented 32 percent of the market, up substantially from the 27 percent seen a year ago.

This is good news but not great news — historically first-timers have been about 40 percent of the market so there’s room for further growth.

“More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise,” says Lawrence Yun, NAR’s chief economist.

And therein lies the problem: Rising prices will dampen the influx of first-time buyers — and fewer first-time buyers will make it difficult for prices to rise.

Third, cash is a flighty measure. It may or may not be worth a lot of buying power and buying power is the real measure of wealth. For instance, the Reserve Bank of Zimbabwe has just issued a $100 trillion note, a currency with a lot of zeros that has the same buying power as 40 U.S. pennies.

A decade ago American homeowners had equity worth $13.1 trillion. However, because of inflation, the Bureau of Labor Statistics says it takes $15.951 trillion in today’s dollars to purchase the same goods and services.

If we think about real estate equity after inflation, it means the growing equity seen in recent years is good, very good, but the financial place where we need to be to equal the heady times of 2005 is still further down the road.

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To search and research real estate data for more than 100 million properties nationwide, sign up for a FREE trial to RealtyTrac.

For the latest real estate news and trends get a FREE issue of our award-winning real estate newsletter, the Housing News Report.

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Related News
Info Graphic: Homeowners Taking Equity off the Table
Why The Fed Fears Higher Interest Rates
Top 10 Housing Markets with Home Prices Furthest Below Pre-Crisis Peaks

To search and research real estate data for more than 130 million properties nationwide, sign up for a FREE trial to RealtyTrac.

For the latest real estate news and trends get a FREE issue of our award-winning real estate newsletter, the Housing News Report.
Credit to: http://www.realtytrac.com/news/home-prices-and-sales/returning-equity-boosts-real-estate-markets/

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Buying life insurance for your parents: Is it wise?

Peter Buffet, son of Warren Buffet (investor, entrepreneur and philanthropist– ranked as the world’s wealthiest person in 2008) quoted his father regarding his views on inherited wealth. He said his father’s view was that he would give his children “enough money so they would feel they can do anything but not so much that they could do nothing.” We have to think of creative ways to break the cycle of financial bondage and start contributing to future wealth instead of poor financial health.

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I really liked that quote from Peter Buffet!

Tim DeCapua – Handling Real Estate Rejections

Interesting read…

Kate Dircksen Seattle Blog

If you feel your tax evaluation is too large, specifically taking into consideration the economic downturn, filing an appeal can be value the time it normally takes. The bonus is that you don’t typically have to keep legal counsel for this – just file the charm and be prepared to combat for a lower evaluation. This means that you’re going to require some information of your method and have the info about your residence at hand but Tim Decapua the information will benefit you in the lengthy run so it’s properly well worth getting. And there’s the hundreds of dollars in home taxes you could conserve.

Trying to get dressed in the early morning can be a hard process if all your belongings are scattered by way of out your closet. One of the biggest things home proprietors complain about is lack of closet place. Usually, it’s just a little…

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