Investing in Apartments – Commitment and Study

Even in the coronavirus pandemic crisis investing in rental apartment property can still be a good way to add thousands of dollars to your income in the long term. If you buy apartment real estate that is in a good location with growth potential, but that is not too expensive, this real estate investment will likely recover after the crisis passes according to (Brad Hunter, Forbes.com). However, the investment takes funds and commitment over the long haul.

Appreciation

There are two way to make money from rental real estate. The first, appreciation, is a rise in value over time. This profit can only be realized by reselling the property after some time has passed or after you have made upgrades that add to the value. Generally, real estate appreciates in value over time if you are in the right location. Be sure to study employment and home buying trends in your local area before purchasing rental property.

Cash Flow & Coronavirus

You can also make money in the form of cash flow by collecting rents as income. The coronavirus pandemic is affecting the apartment rental real estate industry because many people, more people than we have ever seen before, have lost their income in only a few weeks, unemployment claims are up all over America, and tenants may not be able to pay their rents for the next couple of months. This will impact the ability of landlords to make money. Either the landlord forgives the rent and eats the loss for a while to keep the tenant, or the renter is evicted, and the property becomes vacant. In either case, the landlord is not receiving income on the property and may have to seek forbearance from their own lenders.

If a landlord has paid off his or her own mortgage on the property or if he or she has established an emergency fund as Dave Ramsey suggest (daveramsey.com), they will be able to weather the storm caused by the jobs lost in the pandemic shutdown.

Jobs and Renting

Either the jobs come back after the danger from the virus is past and businesses reopen, and the renters stay, or a new set of renters materialize because those people who are no longer able to afford their own homes move to apartments and construction of new homes slows because of coronavirus-driven delays caused by labor shortages, and supply shortages. More people may need to rent. In this case. It is likely the landlord’s income will return after some shaky months.

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Asset Rebound

Because the income potential should rebound, rental apartment property should not lose its value overtime as an asset. If the building itself remains sound, there is no reason why the property value will not increase as other investments tank and real estate once again looks solid and reliable compared to stocks. Also, if interest rates remain low, investors will be willing to take on more debt and are not restrained from purchasing property at higher prices. This will help investors who plan to sell their rental properties make a profit.

Single-Family Rentals

Investments in single-family rental homes may also benefit in the long run as more people work from home and need more room than apartments afford. Brad Hunter also suggests in his article on Forbes.com that the single-family-built-to rent-industry may benefit as people need that specially designed home office space with its own door and bathroom.

Due Diligence

Investment in rental real estate should remain attractive but be sure to do your due diligence.

Study everything from location, jobs, virus hotspots, distancing trends, supply chains, virus rebounds as they occur, and what the kids are doing now.

References:

Dave Ramsey online at https://www.daveramsey.com/blog/how-to-invest-in-real-estate

Forbes online: https://www.forbes.com/sites/bradhunter/2020/03/24/coronavirus-impacts-on-real-estate–why-you-need-to-think-short-term-and-longer-term/#6f2133345f6f

Investopedia, The Impact of Interest Rates Changes by the Federal Reserve. https://www.investopedia.com/articles/investing/010616/impact-fed-interest-rate-hike.asp

We have funds available so let us invest in something together.

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Patrick St.Cin

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Patrick@REICapital.cash

www.REICapital.cash

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Appreciation: Causes of the Rise?

What Can Make Real Estate Appreciate?

Appreciation is an increase in the value of an asset overtime. Depreciation is the opposite, a decrease in the value of the asset overtime. When doing your due diligence research before making an investment in real estate, be sure to look around and consider those circumstances that increase a property’s value. Tomorrow, we will talk about those circumstances that might cause a property to depreciate. 

Engraved in every real estate investor’s memory is the fact that location affects the value of the property most because real estate is by its nature real and tangible, a building, land, flora, fauna, and natural resources.

Using our imaginations and our memory, let’s review several things that can increase the value of an asset

Supply

Scarcity means there is a limited amount of some item or resource, so it becomes harder to find and worth more when you do find it due to competition for the limited resource. One example of a shortage creating a rise in value is the situation with single-family starter homes in the United States and the world. Although lower in price, single-family starter homes have become more valuable because there are not enough of them.   

Location

Some changes in a vicinity that increase home values may not be due to a physical change nearby, for example the employment rate goes up, the local economy improves, and/or the crime rates go down. These changes may be due to a new business coming in, but also may be due to regulatory changes that lower taxes or technological changes that allow people to work at home.

A physical change near the property can affect its value. Sometimes the value of a house goes up because of something that moves into the neighborhood or nearby, for example a water park or amenity that brings tourism or a research facility or fulfillment center that brings jobs and workers. Sometimes something that was there all along is discovered or becomes more appreciated than it was before, for example mountains and foothills with a view or the solace of desert spaces. Sometimes, a land use regulation may change causing a mini land rush.

Photo by Alexander Wendt on Pexels.com

Development

Development causes appreciation of houses. Let’s say that you buy bare land on the edge of a community and build on it. The value of the property will appreciate at least the value of the house.  If you buy in what is already known as the best district, you will most likely pay a premium price for that reputation and it will not go up over time because it is at the top already. If you buy in a place with a poorer reputation, such as a school district, and better management, government programs, or community involvement begins to improve the school district’s reputation, the homes in the area will likely appreciate.

Additions or Updates

Additions, enlargements, or updates of a home itself will appreciate its value depending on what is added and the quality of the materials and workmanship. These additions to quality might include finishing the basement, adding a screened-in porch, updating the bathroom or kitchen.

Global Investors

The value of houses can also go up because of things that happen in another part of the world that affects buyers or sellers.  Economic disruption or lack of opportunity in one country can cause people to invest in another country and move there, increasing the value of the property in that area. Wars and trade wars can also affect property value in a global economy. The wsj explains in a recent article that after housing prices fell in the United States, Latin Americans bought up luxury homes and condos in Miami.

Tomorrow, we will talk about what circumstances might make a property depreciate.

Competition for inexpensive properties to invest in and improve is usually pretty stiff. As a broker and a direct lender, it is my job to help you get a hard money loan easily and quickly. Private Lenders, not banks, are willing to help you fund your project based on the value of the property and its after renovation value. We have money to lend and you need money quickly. A perfect fit is out there.

Give me a call or send an e-mail to the contacts below.

Patrick StCin, 512-213-2271

e-mail: patrick@REICapital.cash