3 Ways Real Estate Investors Can Owner Occupy Their Rentals

by Patrick St.Cin

Property investments potentially have excellent returns and can diversify your portfolio to insulate you from recessions and other adverse economic conditions. There’s no single right answer on the best way to invest in real estate. Are you getting started in Real Estate Investing and wonder how to live in your investment property? 

Tip 1:  House Hacking

This can mean a few different things. House hacking is essentially a hybrid of buying a home to use as a primary residence and buying a rental property. In general, the term refers to buying a residential property with two to four units or with a Granny Flat/Additional Dwelling Unit in the backyard and living in one of the units while renting the others out. In theory, if you have the money you could purchase an entire duplex or four-plex and rent out any apartment to tenants. Keep your expenses low so you can keep rent affordable to entice prospective tenants.  You also could purchase property that you live in while renting out other rooms in the property. 

Either way, you’re the landlord. Be a good one, and you’ll be in a much better position to succeed in this investment. Keep the property in great condition, be readily available to your tenants when needed, and if necessary hire someone who can help with repairs.

Let’s say you find a quadruplex (four units) for $200,000. Including taxes and insurance, we’ll say your mortgage payment is $1,500 per month. After you buy the property, you rent out three of the units for $600 each and live in the fourth. Not only do you live for free (the rent covers your entire mortgage payment), but you’re generating a positive cash flow of $300 per month and are building equity in a more valuable property than if you had bought one unit to live in.

House hacking can be an excellent low-cost way to start building a portfolio of rental properties. Because you live in the property, even a multi-unit residential property can qualify for primary residence financing, which comes with lower interest rates and lower down payment requirements than investment property loans. You’re typically required to live in the property for a certain amount of time after you buy it, but once that period expires (usually a year or two), you’re free to repeat the process with another multi-unit property.

The obvious downside is privacy. There’s value in having your own yard, and it can create some awkward situations when you live in the same building as your tenants. Even so, if you’re a new real estate investor and don’t really need your own house, you may want to consider house hacking. This isn’t as much of an investment strategy as it is a side hustle, but it’s still worth mentioning here. With the emergence of platforms like Airbnb, it’s easier than ever to rent out your home when you aren’t around or to rent out a spare room in your home for a few days here and there.  

Tip 2: Tax-Free 2 Weeks Income 

One interesting aspect of this strategy is that if you rent out your home for fewer than 14 days in a year, you don’t pay tax on the money you collect. If you go out of town for the holidays or take a summer vacation, using your home as an occasional short-term rental can offset your travel expenses with tax-free income.

Landlord Tax benefits: 

  1. The mortgage interest deduction for the mortgage interest you pay to buy and/or fix up your properties. 
  2. Deductions: insurance premiums, repairs, utilities (that are not paid for by the tenants)
  3. Depreciation: You are allowed an annual deduction for the wear and tear your property experiences over time, spread out over 27.5 years for residential properties. Land cannot be depreciated.

Living with Tenants is Too Much – What is a Traditional Landlord? 

Owning rental properties is an excellent way to invest in real estate while building wealth and generating income. The return potential is strong thanks to a combination of income, equity appreciation, and the easy use of leverage when buying real estate.

However, owning rental properties isn’t right for everyone, so consider these drawbacks before you start looking:

  • Cost barriers: It can be very expensive to buy your first rental property. Most lenders want at least 25% down for an investment property loan and it’s smart to keep several months’ worth of expenses in reserves.
  • Uncertainty: When it comes to rental properties, vacancies happen and things break. While the overall return potential can be great, rental properties have considerable short-term risk.
  • Time commitment: Even if you hire a property management company, owning a rental can be a time-consuming form of real estate investing.

Tip 3: Vacation or Short-Term Rentals

A vacation rental tends to bring in more income per rented day than a comparable long-term rental property. However, there are some potential drawbacks to owning a vacation rental. Marketing and managing a vacation rental is more involved than a long-term rental. As such, property management is far more expensive — expect to pay a property manager about 25% of the rent on a vacation rental. That’s more than double the 10% industry standard for properties with long-term tenants.  Furthermore, you may need a special license in your preferred locations, which can be very expensive.

On the positive side, you may be able to use the home when it isn’t occupied. It can also be significantly easier to finance a vacation rental, especially if it meets your lender’s definition of a second home and you don’t use the rental income to qualify. There are loans options available for short-term rental funding.

Always buy property for the best possible price. You want to buy those properties that offer specific challenges that match your personal talents so you can use your skills to upgrade and enhance the value of the property and increase the Net Operating Income over time.  Obviously, the higher the rents and the lower your total monthly expenses, the greater your net income from the property will be. Costs that affect cash flow include principal & interest payments; property taxes; insurance; maintenance/repair costs.

Although we’re always quick to advise against borrowing too much and overleveraging your real estate investments, you also don’t want to be too conservative and underestimate your cash needs. The cost of refinancing is such that you may be able to refinance the property no more than once every several years, and if you suddenly need cash to overcome some unanticipated problems, the costs of short-term funds can be high. Borrow extra money or have an untapped line of credit available (which some lenders offer at no carrying cost to their best customers) to allow for reserves.

Joint ventures, wholesaling, fix-and-flip, and property management are just a few of the other ways investors can profit from real estate.   

If you need funding, apply now. I am working online with the rest of you.  

Patrick St. Cin

W – 512-213-2271

Patrick@REICapitalResources.com

http://www.reicapital.cash/

A Job: In June. In Texas

The Bureau of Labor Statistics released the Employment Situation report for June 2019 on July 19, 2019.

In June, unemployment rates were lower in 6 states and stable in 44 states and the District of Columbia. Nonfarm payroll employment increased in 4 states and was essentially unchanged in 46 states and the District.

Unemployment

Vermont had the lowest unemployment rate in June 2019, 2.1 percent. The rates in Alabama (3.5 percent), Arkansas (3.5 percent), New Jersey (3.5 percent), and Texas (3.4 percent) set new series lows. (All state series begin in 1976.) For Texas, the unemployment rate went down from 3.5% in May 2019 to 3.4% in June 2019.  Statistically, this was a significant decrease. Housing sales go the way of jobs. When there are more jobs and higher salaries, more families are looking for homes to buy near where they work.

Nonfarm Payroll Employment

Twenty-eight states had over-the-year increases in nonfarm payroll employment in June. The largest job gains occurred in Texas (+315,600), California (+296,100), and Florida (+218,800). The largest percentage gain occurred in Nevada (+3.3 percent), followed by Arizona (+2.8 percent) and Utah and Washington (+2.7 percent each).

Falls, Slips, and Trips

55% of the injuries reported by education, training, and library workers 55 and older were injured in falls, slips, and trips. 36% of the injuries reported by healthcare support personnel 55 and older were injured by falls, slips, and trips. 46.7% of the injuries reported by sales and related workers 55 and older were injured by falls, slips, and trips. 34.7% of the injuries reported by farming, fishing, and forestry workers 55 and older were injured by falls, slips, and trips.

Overexertion and Bodily Reaction

43.2% of injuries reported by installation, maintenance, and repair workers 55 and older were injured by overexertion and bodily reaction. 38.5% of injuries reported by production workers 55 and older were injured by overexertion and bodily reaction.

The Metropolitan Area Employment and Unemployment news release for June is scheduled to be released on Thursday, August 1, 2019, at 10:00 a.m. (EDT). The State Employment and Unemployment news release for July is scheduled to be released on Friday, August 16, 2019, at 10:00 a.m. (EDT). I’m looking forward to seeing how our Texas large metropolitan areas did this quarter.

REI Capital Resources is “focused on funding your success.” 

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.

Patrick St.Cin

W – 512-213-2271
Patrick@REICapital.cash
Info@REICapital.cash e 01050000

Adaptation and Survival in Commercial Real Estate

In 2019, the United States is the most preferred location for commercial real estate in terms of inbound capital according to the Deloitte 2019 Commercial Real Estate Outlook. This Outlook report hits hard on the ability of investors to be agile in their real estate businesses, but the agility must be based on awareness of trends that are occurring based on trend analytic and artificial intelligence applications that allow a business owner to see what is happening in and around his property so that decisions can be made quickly to adjust and/or mitigate and survive changes.

Some of the key terms popping up in the commercial real estate investor and real estate investor trust literature include diversification, multi-use properties, healthcare properties, data centers, distributions centers, flexible leases, and flexible spaces.

Healthcare Facilities Follow Domestic Trends

Investors seem to be increasing their investments in health care facilities that include senior housing and in data centers according to the 2019 CRE Outlook. Health care and senior living residents are looking like safer investments because they are not as dependent on global trade but more on domestic trends, demographic trends, and the health of the overall economy.

Data Centers Float Because Digital Goods Continue to Move

The 2019 CRE Outlook also shows that investors are putting more capital into data centers in 2019. Data centers seem to be more immune to global trade tensions at the moment because businesses are focused on expanding their digital infrastructure across borders, according to the wsj article by Esther Fung, “Real-Estate Stocks in High Demand as Trade Battle Brews.” Even though physical goods are stopped by tariffs, digital goods are still moving.

Distributions Centers Move Goods Within the Borders

Distribution centers that support the movement of goods within the United States are also looking like safer investments because they will not be as disrupted by global trade tensions that disrupt centers in port cities dependent on global trade.

Simulation Allows Buyers to Visualize Space Options

Investors are including “flexible spaces” and experiential and engaging spaces as part of a more diversified portfolio. When I read the Deloitte 2019 Commercial Real Estate Outlook, the term flexible space seems to refer to a marketing concept rather than the physical reality-morphing room seen on Star Wars. It involves using 3D and augmented reality simulation to allow buyers to visualize a new property in multiple 3D finished options both inside and outside and choose what they like best. I’ve seen an app like this on television recently that helps you visualize how to arrange furniture in an empty room.  The buyer participates in the space design.

Varied Experience Adds Value to a Space

Catering to mixed tenants is another way to diversify a property so that they are not all one type and come and go at one time. By making a property a mixed-tenant space, the landlord services tenants that  may be office workers or retail incubators mixed in with places to eat, workout, and shop all within walkable distances from one another other. The experience of renting the space is of higher value to the tenant because of the foot traffic and opportunities to network the space provides.

Flexible Leases for Mixed Tenants to Manage Uncertainty and Attract Startups

Working in tandem with the mixed tenant model is another business model that involves offering short-, long-term, and hybrid lease agreements of different lengths to varied tenants to fill vacancies in the short-term rather than having spaces continue to be vacant. The shorter lease lengths appeal to startup businesses and to established businesses struggling with market uncertainty. This strategy is a form of thriving on chaos in that agility is planned and business tenants can move around within a space or in and out of a space more easily as business fluctuates.

The message I received loud and clear from the wsj article and the 2019 Commercial Real Estate Outlook is that investors must become comfortable with change and agile in maneuvering to survive in the current marketplace.

REI Capital Resources built its reputation on finding private funding for investors for quick turn purchases and difficult situations.  This is still true today.  

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.

Patrick St.Cin

W – 512-213-2271
Patrick@REICapital.cash
Info@REICapital.cash n1 \lsdunhid

Backyards for Wellness and Community

Although installing a deck, patio, fire pit, outdoor kitchen, lighting, and fountains on an investment property once might have been risky, the current popularity of “health and wellness” have made buyers more inclined to look for features in a landscape that add opportunities to increase their wellness and to build community. For a real estate investor, this trend may justify increasing the landscape budget so that it can include features that invite people into the backyard where the sun, fresh air, sights of trees and flowers, sounds of leaves or water.  Amenities that soothe and refresh after a hard day at work may attract buyers looking for wellness. Lights, water features, decks, and fire pits provide places where families and neighbors can gather and might be attractive to buyers seeking both wellness and community.

An article in webmd.com, “Do You Need a Nature Prescription?” by Carol Sorgen, points out that researchers have found evidence that time spent in a natural setting, “whether walking in a park or gardening in your backyard improves mood, self-esteem, and motivation.” In the suburban backyard, working with the land you have, a real estate investor can tap into ecotherapy elements to attract buyers in 2019. The article by Sorgen, states that taking in the forest atmosphere such as the odor of wood, the sound of running water, and the scenery of a forest can provide health benefits for children and adults, including relaxation, reduced stress, lower pulse rate, and lower blood pressure. Danielle Small, writing for homluv.com says that creating a woodsy retreat in your backyard and adding water and lighting to your backyard may provide a real treat for a homeowner at the end of a hectic day.

Buyers are well versed in health and wellness these days so adding a fountain, waterfall, or a small pond along with a comfortable seat in the backyard may very well appeal to them from a health perspective as well as from a lawn-eating, lower maintenance perspective. Fountains and waterfalls can be made to blend into nature or to stand out and make a statement. A few strands of star-like lights in the trees can add a sense of serenity, calm, and romance to the backyard too.

As a real estate investor, common sense, tried and true, backyard landscaping techniques combined with some of the newer wellness and outdoor-living trends may be a useful combination to know as you plan your project budget and marketing campaign.

The fix-n-flip loan program is one of my most popular real estate loan programs. Competition for houses is tight. The ability to get fast funds to buy and remodel a property is important. 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.

Please give me a call or send an e-mail.

Patrick StCin, 512-213-2271

e-mail: patrick@REICapital.cash

Experience

When you see the term “experienced-based funding,” it means that in order to secure financing to expand your single-family, or fix-n-flip business, you will need to show the lender that you know what you are doing.  You need to provide proof of your experience in the area of your investment strategy and in the local real estate market.

If your investment strategy is to build and rent or build and sell, the lender will want to know that you have experience successfully building and selling homes in the neighborhood or area you are planning to build in. If your strategy is fix-n-flip, your lender will want to know that you have experience in renovation and know how to price the home so it will sell in the neighborhood it is in.  If your strategy is fix-and rent, the lender will want to know if you have experience renting or managing a rental or if you plan to partner with a company that has this experience.

As Samantha Goldberg, at Arbor.com reminds us, borrowers with understanding of the market and what types of property will rent at what levels will be attractive to lenders. Be prepared to support your investment strategy with a plan and experience.

She also suggests that securing financing with a lender you have done business with before is a good idea. Develop a long-term relationship with your lender, showing that you pay back your loans.

I’d like to be that lender.  Send me an e-mail and I’ll see what funding solutions REI Capital Resources can match with your needs.  We are always “focused on funding your success.”

REI Capital Resources Residential Construction Loan Program

We offer asset-based and experience based loans for residential construction on the following terms: Min FOCI 650, appraisal required, up to 90% of cost of lot + build, Up to 100% of construction costs if lot is free and clear, Max of 70% ARV, interest rates starting at 8.25%,and points as low as 3.5%.

Don’t forget, give me a call or send me an e-mail.

Patrick St.Cin

W – 512-213-2271
Patrick@REICapital.cash

Your Money in Real Estate

I can’t help noticing that according to the S&P Dow Jones chart from Investopedia, when you are looking at investing and foreign tariffs, real estate has much less foreign exposure than other types of investment, such as information technology and materials. So perhaps it will be a stable investment into the future.

REI Capital Resources is a loan originator for select investor single-family residential, multi-family residential, vacation rental and commercial projects. Our goal is to provide fast closing loans to fund your investment projects, so you don’t lose a great deal. This includes bridge loans for the acquisition of property.

Give me a call or send an e-mail for assistance funding your project.

Patrick St.Cin
512-213-2271
Patrick@REICapital.cash

A Job: Still a Good Investment

The Bureau of Labor Statistics released the Employment Situation report for April 2019 on May 3, 2019.

Nonfarm payroll employment increased by 263,000 new hires in April and the unemployment rate declined to 3.6 percent. This is a near 50-year low for the unemployment rate.

Good News for Texas
Two Texas metropolitan areas, Dallas-Fort Worth-Arlington, TX and Houston-The Woodlands-Sugar Land, TX had an increase in nonfarm payroll employment of +110,700, and +67,800, respectively between March 2018 and March 2019

In metropolitan areas with a 2010 Census population of 1 million or more, Dallas-Fort Worth-Arlington, TX posted one of the highest over-the-year percentage increases in employment at +3.0%.

Financial activities employment rose 12,000 in April. The industry added 110,000 jobs over the past 12 months with three-quarters of the growth in real estate and rental and leasing.

Construction employment rose by 33,000 in April, with gains in nonresidential specialty trade contractors (22,000) and in heavy and civil engineering construction (10,000). Over the last 12 months, construction has added 256,000 jobs.

Increases

Professional and business services added 76,000 jobs in April. Of this number, 14,000 were in the computer system design and related services, while 53,000 were in administrative and support services. Employment in health care rose by 27,000 in April and by 404,000 over the last 12 months. Social services added 26,000 jobs over the month of April. Manufacturing only added 4,000 jobs.
Decreases
Retail trade lost 12,000 jobs in April. In that number is hidden an increase in motor vehicle and parts dealers of 8,000 jobs and the loss of 9,000 jobs in general merchandise stores.

Little Change
Other industries (mining, wholesale trade, transportation and warehousing, information, leisure and hospitality, and government) showed little change of the month of April.

Hours and Dollars per Hour
Other interesting statistics in the Employment Situation report include: the average hourly earnings for all employees increased 6 cents to $27.77 over the month and the average workweek for all employees decreased by 0.1 hour to 34.4 hours a week during the month.

Frequently Asked Questions
The frequently asked questions on the Bureau of Labor Statistics Site, includes the question Does this data include undocumented immigrant worker? The answer is that it is likely that both the household survey and the establishment survey includes undocumented immigrants. Since the survey is not designed to identify the legal status of works, it is not possible to determine how many undocumented immigrant workers are included in the statistics.

two persons holding drinking glasses filled with beer

Photo by Tembela Bohle on Pexels.com

I am always focused on funding your success and I have more tools to work with. REI Capital Resources built its reputation on finding private funding for investors for quick turn purchases and difficult situations.

Contact me at
Patrick@REICapital.cash
512-213-2271

 

Sigh of Relief and Then … Start Planning For 2019 Taxes

Many of our customers are both employed and self-employed, painting a tax picture that reveals itself slowly as incomes, deductions, and taxes paid are added and subtracted from a variety of the tax forms. If you just finished your 2018 taxes, this is a good time to review how well your business and employment worked together to pay your 2018 tax bill.

Personal: Review your W-4
On the personal side, review your W-4 form with the payroll or human resources manager at your place of employment. The W-4 is the form you fill out that tells your employer how much tax to withhold from your paycheck. Did you pay too much and receive a big refund or pay too little and owe a lot, perhaps even having to pay fines for underestimating? The taxes withheld from your paycheck reflect your filing status (single, married, head of household) and the dependents you claim. Check to make sure the information on your W-4 form is accurate.

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Business: Set up a Paper and an Electronic Filing System
On the business side, make yourself a filing system so you can organize your business-related receipts and invoices in folders or envelopes if your receipts are paper and in computer files and folders if your receipts and invoices are electronic. Most likely you will need both paper and electronic files. Determine the categories your business expenses and income usually fall into and make folders and files that are named accordingly. Things like fuel, advertising, landscaping, construction materials, permit fees, banking fees, equipment repairs and maintenance, and new equipment purchases, contractor payments, interest on business loans, and home office expenses are common expenses in a fix-n-flip business. Check to see that your online folders are named the same as your paper files and then use that same name to enter the expenses in your Excel table or Quick books program. Remember, the IRS requires that you use these things for business if you deduct them.

Track and File Weekly or Monthly
File and enter your expenses weekly or monthly to avoid the pain of finding yourself in February of 2020 sorting stacks of receipts at the kitchen table for tax year 2019. You are bound to miss something and spend a lot of time searching for missing receipts. And, just running your unsorted papers in a shoebox over to your tax consultant means you are going to be paying them to sort out the papers, and they probably will not be able to do so without your help anyway.

woman in grey shirt holding brown cardboard box

Photo by bruce mars on Pexels.com

Bridge that Gap

Sometimes there is a gap that needs to be crossed or bridged temporarily between money going out for a new purchase and money coming in from a home sale. The bridge loan is the funding tool that applies in this multiple house situation.

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REI Capital Resources is a loan originator for select investor single-family residential projects. Our goal is to provide fast closing loans to fund your investment projects so you don’t lose a good deal.

Enjoy your day!

Patrick St.Cin
512-213-2271
Patrick@REICapital.cash

 

Cartoon used with permission

Delicious!

Did I mentioned avoiding termites when buying a house and appealing to the senses when staging your house for sale?  Yummy qualifies.   Looks like that is a tried and true professional fix-n-flip strategy.toon779-1

My I am still focused on funding your success and I have more tools to work with.

Contact me at
Patrick@REICapital.cash
512-213-2271

Used with permission.