People are moving. Single-family houses in the suburbs are opportunities real estate investors should consider.
According to an article in Mansion Global, apartment living in densely populated urban areas is already losing its appeal to Americans as they process their experiences during the coronavirus pandemic. Many people are eyeing options for relocating to the suburbs and a single-family home after facing the challenges of coming into contact with infected individuals in apartment building common areas and restrictions on their use of outdoor spaces like pools and game rooms.
Buyers crave —ROOM— living space, outdoor space, privacy, flexibility, and safety.
When you are researching a purchase of a rental property, evaluate:
Is there room for an office in the house?
Does the house have a good-sized yard?
Is there a pool in the backyard?
Is there a deck or porch that offers a sheltered option to living indoors?
Is the neighborhood safe to walk around in at night?
Is there a neighborhood association and is it restrictive?
Did local authorities try to restrict people’s use of their yard during the pandemic?
Consider taxes. People are richer in states where taxes are lower.
Big or tiny, single family homes in suburbs near major cities offer good opportunities for people to escape living in densely populated apartment buildings where entrances and recreation space is shared and access is restricted. If you need funding, apply now. I am working online with the rest of you.
There is one thing that we can all be sure of: no one knows what will happen next.
The coronavirus has thrown all the cards into the wind and the stock market goes up even along with virus infections and deaths while main street eyes reopening a percentage of their business capacity keeping their distance and wearing masks. Forecasting is impossible.
REI Capital Resources would like to know your plans so we can put funding strategies together and find private lenders that will fit your plans and goals as you forge ahead into the murky future. Please take this brief pole for us.
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.
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.
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.
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.
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.
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A blanket loan is a loan or mortgage used to fund the purchase of 2 or more pieces of real estate (Wikipedia, Investopedia). The real estate is held as collateral for the mortgage, but the individual pieces of property may be sold without retiring the entire mortgage. Builders and developers, investors in multiple apartment communities, or investors in more than on single family rental property use blanket loans to buy a large tract of land to subdivide or multiple properties to manage as a business. The rental investor may sell one property without redoing the mortgage on the other properties. The developer can create many individual parcels to be sold one at a time without securing a new mortgage each time the sale of a parcel is made.
The blanket loan has a release clause that allows the owner to sell a portion of the secured property and make a corresponding payment on the loan. The outstanding balance on the loan is adjusted accordingly without being completely redone or retired. Most single-house traditional mortgages contain a “due-on-sale clause,” which means the entire outstanding debt is due when the securing property is sold. If this is the type of mortgage a developer or an investor with multiple rental properties has, then each time they sell a property they have to redo all the paperwork to remake the mortgage.
The financial benefits for an investor include
Only have to pay the fees and costs of one loan rather than applying for and closing multiple mortgages.
Negotiated terms, such as the monthly payment may be better under the blanket mortgage, freeing up capital for further investment.
Acquiring more than one house to fix-n-flip under one loan when several come on the market at the same time would allow a flipper to take advantage of the opportunity to buy multiple properties all at once (saving time and fees) while still being able to sell them one at a time after they are refurbished.
The danger to the owner is that if he or she defaults on the mortgage, the lender may seek control of all the properties secured by the loan.
Like an old tin roof and gingerbread trim, hard money loans have a beauty all there own in the right hands. Hard money loans are short-term loans secured by real estate and used by fix-n-flippers to purchase and renovate property. They have high interest rates but only for a short time. These loans usually finance the purchase of the property and the renovations.
Secured by Real Estate
REI Capital Resources hard money loans finance up to 90 percent of the purchase price of the home, up to 100% of the renovation costs, and a maximum of 70% of the after-repair value (ARV). An appraisal is required.
High Interest Rates but for a Short Term
Hard money loans are intended to be paid back quickly (in 24 months) so the high interest rate does not hurt for long and is included in your budget calculations. Hard money loans usually do not have a prepayment penalty. REI Capital Resources interest rates start at 9.5%.
Lender fees, permit costs, property assessment fees, loan originating fees, loan processing fees, inspection fees, points, interest, closing costs are taken out of the loan. REI Capital Resources points are as low as 2.5%.
Monthly interest-only payments are made during the loan and
the principal repayment is made at the end of the loan term when the renovated
REI Capital Resources hard money loans carry minimum qualifications of a credit score of a minimum of 600, debt to income ratio of 35% – 45%, and experience that includes two to three past renovation projects or a licensed contractor budgeted to help.
More is Better
More experience and higher credit scores may qualify for
lower rates and fees and higher borrowing limits.
REI Capital Resources
REI Capital Resources is a hard money lender and is able to help you fund your project based on your
experience, 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.
I know a banker and his partner who recently purchased and remodeled a building that was once a doctor’s office. They turned the space into 7 small suites, a conference room and a kitchenette. They advertised for occupants with an ad looking for entrepreneurs with ideas for a business who needed some space in which to grow and offered seed loans for the startups. His motive is multifaceted, to rebuild the downtown business section of the town he lives in and to put some of his money to work for his community. He also wants his hometown to be vibrant and is offended when someone says, there is nothing going on in that downtown. Like all good investors, the partners are also interested in putting their money to work to make more money in the form of income.
These partners specialize in fix-n-rent business investments. Most recently the duo closed on a property that they will remodel from a Victorian house on the corner of a small downtown into a used bookstore, bar, and coffee shop with an outdoor patio area. The purchaser? A publisher who still loves physical books more than online articles.
What else has these small town fix-n-flip investors been up to? They remodeled a ballet studio into a financial investment office with a family psychologist renting a back office with a separate entrance, turned an insurance office into a yoga studio, turned a paint store into a gift and DIY furniture rehab shop, and helped a daughter purchase her mother’s restaurant business lock, stock, and liquor license.
If you are interested in putting your money to good work in your community, become a private lender and work with me. I am focused on funding success, both yours, and the buyers.
Competition for good rental properties is stiff, and in order to buy a property in a climate of competition a buyer need funds fast. As a broker, I help people find funds for their fix-n-flip and fix-n-rent project. Be a private lender with me and put your money to work for you.
Just this week, I said that one of the mistakes a real estate investor can make is not seeing the property in person before buying it. I said that so I could eat my words today, at least with regard to buyers of finished properties. I still think it is unwise for an investor to buy a property to fix, flip, develop, or fund without inspecting it in person. However, Multifamily PRO is reporting that augmented and virtual reality technology is expected to increase the number of residents willing to sign leases without visiting the property in person because they will be satisfied with viewing the property using virtual self-guided tours.
New technologies are and will be changing the apartment-buying, apartment-selling, apartment-living and apartment-operating experience. Considering this, investors, builders, and remodelers need to focus on communications and electronic infrastructure to support these new technologies when planning, budgeting for, building, and marketing multifamily housing. A few areas to focus on include:
Excellent Internet Connections
The first things to think about are internet connections, their quality, number, location, and security. Smart-home technologies like smart locks, lights, thermostats, as well as visual monitors for pets, children, and deliveries will be expected in the new high-tech apartment unit. These will impact the way the resident interacts with facility operators. For the resident, chat bots may make routine maintenance requests on behalf of the resident, reserve facilities, and schedule hair and dining appointments. For the facility operator, chat bots may provide routine information to residents and collect repair orders and rent payments. All these electronic interfaces will require excellent internet infrastructure in the multifamily complex.
Numerous Charging Stations and Outlets
The demand for electric cars, electric scooters, and electric-motor-assisted bicycles will drive the demand for charging stations and charging outlets at multifamily properties. Planning, budgeting, and locating these facilities for convenient access, exit, and safety will be important.
Locating Autonomous Vehicle Dropoff Points and Parking
Autonomous vehicles, both driven and flown, will need places to park and drop off clients, meals, and other products. This will affect the size of the parking area you will need and the layout of delivery sites around the building. Robots and drones may deliver and pickup within the apartment. A drone may deliver to a dropoff point with directions for a robot that will complete the delivery inside the apartment community. Conventional vehicles will also be expected to make deliveries and pickups and need space to maneuver.
Artificial intelligence technologies will enable facial recognition for customer identification and for criminal background checks, and these facial recognition systems can track a person as they move around a property. This will improve security but raise privacy concerns.
Planned Office Space in Apartment
People working from home will need an excellent internet
connection and may want an office available as part of their apartment.
An electronic interface between operator and potential buyer may be a way to design flexible space for the customer with the hope that they will stay longer in a space that fits them well.
These ideas, with some speculations added, came from the NAA
Apartmentalize conference in Denver through reporter Andrew Stephens on Multihousing
REI Capital Resources built its reputation on finding private funding for investors for quick turn purchases and difficult situations.
Give me a call or send an e-mail and share with me your plans and needs, and I’ll see what lending solution I can generate for you.
Depreciation is a decrease in the value of an asset overtime. When doing your due diligence research before making an investment in real estate, be sure to look around and consider those lurking circumstances that might decrease a property’s value.
Although location affects the value of property most because real estate is by its nature real and tangible, supply is also a critical factor in how real estate is valued.
Overabundance means there is more of an item or resource than is needed or can be afforded by buyers, so it’s value goes down because no one buys it at the current price. The value will continue to go down until it reaches a point where buyers decide it is worth the price to store, use, and maintain the asset until the value goes up again. One example of this is the overabundance of condos that were launched in Miami right as demand fell because of a shortage of foreign buyers that was reported in the wsj article, “In Miami, There Are too Many Condos and Not Enough Foreign Buyers,” by Candace Taylor.
New businesses and a new reputation may also impact the value of properties. For example a related article in the wsj reported recently that visitors to Miami’s South Beach has doubled in 10 years. The article “Wealthy Buyers Say So Long to South Beach,” by Candace Taylor, points out that the construction of new hotels on Miami Beach has made it a hot spot for spring breakers and the masses of students who come to party but not to buy has caused traffic congestion, litter, loud parties, and more danger in the neighborhood. As a result, the properties are not so attractive to wealthier buyers and the prices of upscale condo sales have tumbled in the first quarter of 2019.
Other natural changes near a property can affect its value. Some obvious ones are wildfires, sink holes, and earth quakes. Another is global warming. One reason Miami beach prices are falling according the same wsj article by Taylor is because of fears that sea levels will rise. Homes and condos at lower elevations have lost some value because of these fears.
Neglect and Lack of Maintenance
Abandoned homes tend to lose value because they are not lived in or cared for. They slowly fall into disrepair.
The value of houses can also go down because of events that affect buyers from other parts of the world. The wsj article mentioned previously explains that severe economic and civil disruption caused by socialist and totalitarian regimes in countries like Venezuela, Argentina, and Brazil can affect the ability of their once-wealthy citizens to purchase property abroad as the value of their currency falls compared to the dollar.
In the commercial real estate arena, as Jeff Levin pointed out in the Forbes Community Voice, trade wars between the United States and China has reduced funding for new building projects because China is decreasing its investments in U.S. commercial real estate and selling its assets, which brings down prices.
Competition for inexpensive properties to invest in and improve or to rent out for income 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.
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
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.
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.
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.
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.