Why Southern California Real Estate is a Great Investment in 2016

Prices are continuing to rise on home sales in Southern California like elsewhere through much of the country, with the typical real estate agent seeing fewer buyers. What this means for the average home buyer is less affordability. While that’s not good news for the typical family looking to move from renting to buying, it is a positive turn for investors. At the same time, commercial real estate provides options for investors who want to enter the market or add to their portfolios.

Read any news report and you’ll notice that first-time buyers are struggling to afford housing in Southern California. According to data from Trulia, the median first-time buyer in this area would have to spend 88 percent of their income on a home. Since this is impractical, it demonstrates the lack of options for the demographic.

How does this impact investors? With fewer buyers driving the market up further, expectations are growing that the prices will actually have to come down. As investors watch the housing market, they can capitalize on those properties.

Flipping Houses

While prices aren’t good for first-time buyers, they are still providing a profit for investors who focus on flipping properties. Redfin discovered that three of the neighborhoods in the country offering the best market for flipping houses were located within Los Angeles. Two of the hottest neighborhoods were Mt. Washington and Silver Lake, ranked at second and third for gains. This is the markup percentage between the purchase price and resale price.

Even though LA real estate is hot, much like the rest of the southern region, investors can locate older homes in need of improvement and make enough updates and repairs to warrant a high price at resale. They are grabbing these undesirable properties because of the potential they see in them.

Markups produced an average gain of $31,000 for 2015 in Mt. Washington while Silver Lake saw gains averaging $307,000. The tenth place neighborhood, Los Feliz, had gains that averaged $241,000. Flippers can do extensive remodeling and still walk away with massive profits. With interest rates remaining low for mortgages, investors with the cash for a down payment and the affordability to make the payments and pay for renovations will still see income potential in the increasingly expensive Southern California market.

Commercial Properties

Investors not interested in single-family dwellings for flipping can still find lucrative opportunities in commercial properties. If they talk to a real estate agent in Orange County, they will discover that multi-family dwellings have a vacancy rate of just 3.3 percent, which means new developments will be in high demand.

Industrial properties has the second lowest vacancy rate at 3.4 percent and retail has a rate of 4.6 percent. Both of these real estate subcategories offer potential for investors who are looking for a sound investment. These figures are according to the National Association of Realtors. An experienced real estate agent can provide guidance as to where the best possibilities for future developments exist.

According to the same report, the focus for investors today is in rentals rather than flipping. New construction is still low, which is a prime area for investors who want to take advantage of the economy. Since many buyers are looking to move to another rental instead of purchasing a home of their own, they will be looking at new-builds with more amenities and space than their current units. Investors will have no problem filling properties with tenants if they should choose this avenue.

Demand for housing will continue to increase as more people seek rentals. This growth is largely driven by Hispanics as well as other minorities. In fact, the increase is projected to be 77 percent minorities versus 23 percent whites in new rental units.

In addition to the lack of sufficient housing, the improving job market and income growth is helping propel multi-family housing forward. For non-residential real estate, technology companies are driving the demand for new structures. Office space is continually needed, which is the primary focus for many developments in the area.

The story for investors who are looking at Southern California real estate to add to their portfolio is the opportunities are still here. However, they are going to have to do plenty of research to discover the right areas to place their funds, not only in the type of real estate for investing but in the right location with continued potential for profit. 

 

Article source: http://www.nuwireinvestor.com/articles/why-southern-california-real-estate-is-a-great-investment-in-63756.aspx

6 Tips for Negotiating With D.R. Horton

When you work with a large production builder like D.R. Horton, you can rest assured your project will be completed both correctly and on time — an ever-so-elusive two-fer when it comes to new construction.

These companies build homes in their sleep; they’ve worked out all the kinks, and they have it down to a science.

In other words, why wouldn’t you want to work with D.R. Horton? The company has long been the top builder in America, closing far more properties than any of its competitors.

Big builders give you great value. You’ll more than likely end up with an affordable, high-quality home that’s both thoughtful and thought-out. Their floor plans have been tested across countless markets, and they’ve been tweaked over time to ensure customers are getting exactly what they need in the most efficient and cost-effective manner.

Making the Most of Your Big-Builder Experience

D.R. Horton knows exactly what it’s doing, but that doesn’t mean you can’t negotiate with its leaders. Let me be clear, though: “Negotiate” doesn’t mean “try to get the upper hand.”

When negotiating with a company like D.R. Horton, your goal should be for everyone to win. If you give a little, you’ll get a little.

With that in mind, here are six ways to have the best possible experience with a big builder:

  • Seek immediate inventory. At any given time, large production builders will have immediate inventory available in your target neighborhood — and the idea of a quick sale on one of these homes will cause their eyes to light up. There’s absolutely nothing wrong with immediate inventory; these houses are still pristine and brand new. Builders just want to get rid of them, and they will offer you a nice discount if you agree to close within 30 days.
     
  • Use the builder’s preferred vendors. Builders will be more flexible if you agree to use their preferred vendors — such as the mortgage or title company they’ve been working with for decades. This gives a builder much more control over the entire process, and building leaders will be happy to sacrifice a small slice of their profit for this luxury.
  • Avoid lot premiums. In new developments, the nicest lots — like the ones that back up to a beautiful park — will often sell at a premium price. As nice and convenient as a park in your backyard might seem, the lot directly across the street probably has no premiums on it whatsoever. You could end up saving up to $30,000 if you’re willing to walk a few extra steps to the park.
  • Don’t over-customize your home. As I mentioned earlier, companies like D.H. Horton have been perfecting their floor plans for ages. In all likelihood, a base-model home will already include most (if not all) of the features you’ll need. Paying an extra $50,000 for fancy carpeting and paneling doesn’t necessarily add $50,000 to the value of your home. Only incorporating features you need (rather than everything you want) will give you the most bang for your buck.
  • Timing is everything. You’ll get the best prices if you buy at the grand opening or the grand closing of a neighborhood. At the start, builders are working on momentum, and they’ll usually price homes below market so they can attract hordes of interested buyers. Once they’ve finished building the neighborhood, they will want to quit paying overhead on the remaining unsold houses and offer them at discounted prices.

    It’s also important to note that the last day of the month, quarter, year, or fiscal year are all advantageous times to buy. Large production builders pay bonuses and commissions at the end of every month, so the sales staff will always be more willing to talk discounts during this time.

  • Boost your down payment. Some builders (D.R. Horton included) will take as little as $500 down to start building your home. If you raise that down payment, however, you’re more likely to get something in return. An offer of 5 or 10 percent upfront could be a wise move, especially if the builder has committed to options and extras. Look at it from the builder’s standpoint: The company shoulders a lot more risk building for someone who puts $500 down than someone who puts $5,000 down.

If you want the job done properly and on schedule, working with a large builder is definitely the way to go. You simply cannot match a large builder’s proven experience, seasoned production crews, and willingness to offer great deals.

Follow the above tips, and you’ll successfully negotiate yourself into a humble new abode.

An entrepreneur at heart, CEO Mike Kalis leads the team at MarketplaceHomes.com, a Detroit-based brokerage that specializes in new construction sales and property management. Marketplace has sold more than $1.5 billion in new construction homes, gained a controlling interest in more than 2,000 single-family properties, and been a four-time Inc. 5000 list awardee. In addition to his managing partner role at Marketplace, Mike is a venture capitalist and investor in ZipTours. 

Article source: http://www.nuwireinvestor.com/articles/6-tips-for-negotiating-with-dr-horton-again-63743.aspx

The Big Problem With House Price Indices And Estimates

Property news usually goes one of two ways, up or down. But with so many unfulfilled prophecies of bubbles on the Internet, you have to wonder where they’re getting their information from – especially if you want to invest. The first thing journalists look at are house price indices (HPI), not debt, vacancy, rental or construction rates,

In essence, HPIs are online databases of single-family house prices that monitor national and local variations in home values. The principal is simple: information on the value of each property transaction is collected over certain period of time (e.g., one/three months or a year) and then crunched into an average or median price that buyers and industry experts can use to get an idea of the market.

These three ominous words are meant to spell out the “real” state of the real estate industry, which unfortunately, is far more complex than that. Basing a decision on a HPI is about as safe as buying a house at auction blindfolded depending what other people are bidding. In fact, Mark Twain was probably looking at a house price index when he uttered these famous words: “There are three kinds of lies. Lies, damned lies and statistics.”

HPI methodology, be it an official source like the Federal Housing Finance Agency (FHFA) or industry players like National Association of Realtors (NAR) or Zillow, is rife with complacency. So much so that is even uncharacteristic of statisticians, who publish thick handbooks on their method that read like an apology in disguise. They can get so absurd that I’m actually starting to enjoy reading them, especially when they write things like this:

No data on the housing characteristics is required to calculate the median [house price]… The set of houses traded in a period is typically small and not necessarily representative of the total stock of housing.”

Eurostat, Handbook on Residential Property Prices Indices (RPPIs)

There are many reasons to get rattled by HPIs. For example, just last year property portals around the world were celebrating Spain’s long-awaited real estate recovery. However, in my profession, it doesn’t pay to jump on the bandwagon too soon so I did some research and discovered a darker truth: Spain’s real estate recovery hinges on five local markets that absorbed 70% of all transactions – not that anyone else reported on that angle. Without further ado, here are some of the big (and many) problems with house price indices.

The Repeat Sales method

This method, used by the FHFA, only includes houses that have been sold twice or more. Obviously, there are some gaping holes in a system that doesn’t take into account new home sales, especially in markets where there’s a lot of building going on. Luckily for them, no one ever reads the HPI manual except for some academics like Nagraja, Brown and Watcher from Fordham University and the University of Pennsylvania who are also sceptical. Here’s what they say:

“Previous research has shown that repeat sales homes are fundamentally different from single sales; in light of this work, it is difficult to argue that such indices can truly represent the housing market.”

House Price Index Methodology

“The indices are computed from a small subset of all home sales. Consequently, they may be unrepresentative of the housing market as a whole. We find that in our data, the sample size is reduced significantly if only repeat sales homes are included: between 33% (Columbia, SC) and 64% (San Francisco, CA) of the data are single sales homes.”

Repeat Sales House Price Index Methodology

Averages, medians and adjectives

 

“One major drawback of simple median based indices is that they provide very noisy estimates of price change.”

Eurostat, Handbook on Residential Property Prices Indices (RPPIs)

Persons tasked with calculating the index use averages and medians to determine a market-wide estimate. The (arithmetic) average simply adds all the house prices together, then divides the total by the number of houses. It’s not used because it can be deformed a few excessively high or low sale prices. A weighted average, as used by the FHFA, assigns more value to certain segments in an attempt to balance the results according to dominant price categories. Another option, the median, finds the central point above and below which 50% of the houses were sold respectively. This can also be skewed by excess around the edges of price distribution, but is still the preferred method for Trulia, Zillow and NAR.

Some indices also use the geometric average (like the British Land Registry) or the mode (the value that occurs most often). If you use all these methods on the same data set, you will come up with surprisingly inconsistent results, as demonstrated by the experts at Knight Frank, a global property giant: 

Geometric average

 

Asking prices, sale prices and cognitive bias

While most HPIs use sale prices to calculate market trends, it’s not unusual to find some that only reference asking prices, especially if it’s an online property platform like Trulia, which provides both. There are a few practical indicators like market conditions and competition that can cause these two reference points to diverge, making asking prices ill-fitted to evaluate the market. At the same time, we are victims of a cognitive bias that leads us to naturally overestimate the value of our belongings including the home we are putting on the market. So never take it for granted that a HPI is based on sale prices, make sure it is.

No house was created equal

No one has really figured out a way to factor in property characteristics like the size, number of rooms, etc. Say you want to buy a home in Austin (TX), Zillow will tell you that the median home value is $247,500 as of March 2016, which is 8.7% higher than last year. But the average American town has houses and condos of different sizes and shapes: one house has a private entrance, a swimming pool, three bedrooms and bathrooms – the other has one bathroom, a bedroom and a tiny garden right beside the highway. So realistically, an average or median price doesn’t mean much here. Furthermore, this value could focus on a densely developed area like New York where there are more condos than houses. In this case, if there are more condo sales, the value will reflect this and won’t mean much for people trying to buy an actual brownstone, will it?

Non-disclosure states

There are 12 non-disclosure states in the US, the laws of which basically prohibit the collection of transaction sale prices or public access to them. As a result, any company compiling house price estimates for the region have to find alternative sources of data like real estate agencies, which are going to be partial because no company has the monopoly of the market.

 

Should we just ditch HPIs?

The answer is “no”, even if they are very approximate measures of the market, because they are good indicators of housing trends. They reflect the state of demand in that area, but also how prices evolve, allowing us to chart the current stage of the real estate cycle. Knowing if it’s growing, stagnating or falling is fundamental to making a good investment and planning your exit strategy whether you are in it for the long haul or just a quick buck. There’s no easy way to overcome the methodological bias of HPIs but knowledge is power, so the more sources you can find and cross reference, the more relevant your conclusions will be.

Article source: http://www.nuwireinvestor.com/articles/the-big-problem-with-house-price-indices-and-estimates-63731.aspx

Real Estate Investment Guide – the Cost of a Bathroom Remodel

If you are looking to make money investing in real estate, one of the most common ways to do so is to add value to a property. By identifying property defects and/or detractors (things about the property that turn people off) and then cost effectively rectifying them, it is possible to dramatically increase the value of a property. The trick is ensuring that the improvements you make generate a positive ROI. In other words, the value after repairs (increased rent, property value, etc.) must exceed the cost of the repairs/upgrades. The most common upgrades that generate a positive ROI for investors are Kitchens and Bathrooms. For the purpose of this article we are going to focus on Bathrooms. Whether you plan to market your property to renters or prospective buyers, they are both going to want nice functional bathrooms.

First things first – you need to think about what items you are going to include in the remodel, from water saving showers to best flushing toilets. How do you figure out what you should include in the remodel? The easiest, and probably best, method is to spy on your competition. If you’re planning to resell the property, then go scout out other homes in the neighborhood – what types of things do you find in those bathrooms? What features, materials, etc.? Now, that you know what the competition is offering, plan to one up them. Bathrooms are one of those things that can help set your property apart from the competition, so make sure your bathrooms are a notch above the rest. When trying to allocate your budget, concentrate your efforts on the master bathroom most importantly – while the kid’s bathrooms should be decent, you want to impress the buyers first and foremost, not their children. 

Before you go too crazy, though, don’t forget about the budget; property investment obviously is not going to work if you spend more money than you can get back from increased value – never lose sight of the ROI. So now that we got that out of the way, how much is a bathroom remodel going to cost?

Basic bathroom remodel

One of the biggest deciding factors in how much a bathroom remodel is likely to cost is the size of the job. We are going to start by looking at a basic bathroom remodel. If the bathroom of the property needs more of an uplift than a complete overhaul you may only need to do a basic remodel. You could replace some of the fixtures, such as putting in a new tub. You could also put in some new light fittings and repaint the existing cabinets. If you do most of the work yourself and/or use off the shelf products, you should be able to complete a basic bathroom remodel for between $3,000 and $15,000. Remember that the look of a bathroom is one of the first things that attract buyers/renters so it might be worth spending a little more on the accessories you use.

Mid-range bathroom remodel

If the bathroom is in need of more work, or you want to make a statement with the room and quality fixtures, then you need to be realistic with your budget. Depending on your location, and how much work is required, you should be prepared to pay anything from $15,000 to $30,000. For this price you should be able to get a better flushing toilet, better performance from the faucets and shower and new cabinets. You may also be able to make minor amendments to the plumbing.

High-end bathroom remodel

If you are aiming to attract high end renters or buyers to the property, you will probably want to make sure that the bathroom looks incredible as well as preforming at a high level. Often this means that you will want to just start from scratch. If you remove everything from the bathroom start fresh – including moving the plumbing around – then you need to be prepared to pay the price. A complete remodel like this will normally cost between $30,000 and $100,000, or potentially even more. Of course, you have complete freedom of design and you can opt for individually designed cabinets and accessories for that special touch.

As you can see, bathroom remodels can come in many shapes, sizes and prices. Before setting your budget, and deciding on what to include, make sure to scout out the competition – make sure your bathrooms set your property apart in a good way, and not in a bad one. As an investor, though, don’t lose sight of the end game. You want to make your property more valuable, but at the end of the day you’re making the upgrade because you want to make money. If you spend $30,000 to increase your property value by $10,000, that math isn’t going to work in your favor. Make sure every dollar spent adds more dollars to your pocket. 

Article source: http://www.nuwireinvestor.com/articles/real-estate-investment-guide--the-cost-of-a-bathroom-63722.aspx

Should The Federal Government Forgive Mortgage Debt?

Tens of thousands of homeowners will be able to avoid the loss of their homes under a new principal forgiveness program from the federal government. The trick is not to lower interest rates or somehow raise borrower incomes, instead the government will simply cut loan balances to the point where the mortgages become affordable.

There are several problems – huge problems – with principal reductions.

First, lenders never, ever, want to convey the idea that debt is negotiable. You can talk about modifying the interest rate or loan length and maybe delay a few payments but anything less than full repayment of the debt is typically seen as off-limits and non-negotiable. Once debt is negotiable, when do the negotiations end?

Second, if Smith can get a principal reduction then why not Jones? A lot of people run into tough times; if lenders allow Smith’s loan balance to be reduced because an employer downsized then why not offer the same benefit to co-workers and neighbors? And if similarly-situated co-workers and neighbors can’t get a reduction then how is the system fair to them?

Third, speaking of fairness, when property values go down there’s often a widespread call for principal reductions, but when home prices rise no one says lenders should get more, that mortgage debt should grow. If what’s good for the goose should also be good for the gander, there’s a lack of balance here.

The One Only Case For Principal Reductions

There is, however, one situation when principal reductions make sense, the very second every other possible option is worse. Not marginally worse or slightly worse, but vastly worse, a potential result so awful that in a moment of lender desperation and despondency even principal reductions seem tolerable, in the sense that cutting off a toe is better than losing a leg.

The issue is so complex that according to Mel Watt, director of the Federal Housing Finance Agency, his organization spent two years weighing every argument before coming to the conclusion that government-controlled Fannie Mae and Freddie Mac should begin offering principal reductions as a way to hold down foreclosures.

Speaking in March, Watt explained that “it would not be an overstatement to say that this has been the most challenging evaluation the Agency has undertaken during my time as Director. We are, however, drawing close to the end of this difficult process, and I expect to announce a decision within the next 30 days about whether we have been able to find a ‘win-win’ principal reduction strategy or whether, on the other hand, we will take principal reduction off the table entirely.”

This, in the language of Washington, is a trial balloon. If the public blow-back is too great Watt could always say principal reductions had been considered and rejected, there’s wiggle-room in his statement. Alternatively, if financial lobbyists cannot produce enough yelling and screaming on Capitol Hill to make front pages nationwide, then principal reductions will become a reality.

In fact, barring a massive public outcry, the Watt plan was already cast in concrete. We know this because the day BEFORE his speech The Wall Street Journal reported that “the plan approved by the Federal Housing Finance Agency marks the first time that Fannie and Freddie will reduce mortgage balances on a large scale for struggling homeowners since the housing crisis erupted. But it doesn’t go as far as some housing advocates wanted.”

Notice the expression, the plan approved…. Does anyone doubt that this was a done deal?

Because it was a done deal, there was no surprise when in mid-April FHFA announced that after due consider it had decided to go through with principal reductions.

It’s estimated that 33,000 borrowers can potentially be helped with principal reductions, about 16 percent of the deeply-underwater loans held by Fannie Mae and Freddie Mac.

The two GSEs own 200,000 loans which are at least one-year delinquent. On average, such loans have not generated payments in three years and roughly 18,000 have been on the books without a payment for five years or more. Foreclosing on such properties will simply seal their fate as massive losers, but foreclosure will not get back lost value. Alternatively, forgiving principal that would have been lost anyway might get some of the loans back into the “win” column, producing monthly income, higher asset values and fewer claims against mortgage insurers.

Why Not Before?

The obvious question raised by the Watt plan is why principal reductions were not done earlier. How many of the more than seven million homes lost to foreclosure could have been saved? Would so many homes continue to be underwater? How much in lender losses could have been avoided? Why didn’t the government offer liability relief to lenders in exchange for principal reductions and prevent years of court battles and litigation costs? Could we have avoided the Federal Reserve’s zero interest rate policy (ZIRP) if real estate losses could have been reduced early in the crisis?

“Investors lost hundreds of billions of dollars as a result of mortgage-related declines in the financial sector,” said Rick Sharga, executive vice president at Ten-X.com, an online real estate marketplace. “Investors have every reason to ask if the ‘rules’ have been changed, if a future mortgage crisis will see faster principal reduction efforts, when debt forgiveness delivers a better financial outcome than other loss mitigation strategies.”

As examples, Bill Gross, the famous bond investor now with the Janus Capital Group, pointed out in early March that Citibank was priced at $500 in 2007 and had fallen to $38; Bank of America was at $50 a share and dropped to $12; Credit Suisse fell from $70 to $13; Deutsche Bank went from $130 to $16, and Goldman Sachs saw share values drop from $250 to $146.

If there’s another mortgage meltdown you can bet that principal reductions will be high on the list of potential remedies, a lot higher than in 2007. The Watt plan will make principal forgiveness increasingly acceptable, a concept no longer seen automatically as a financial evil to be avoided at all costs.

Bill Gross, for one, seems to have already outlined his position.

“Banking/finance,” he says, “seems to be either a screaming sector ready to be bought or a permanently damaged victim of write-offs, tighter regulation and significantly lower future margins. I’ll vote for the latter.”  

Article source: http://www.nuwireinvestor.com/articles/should-the-federal-government-forgive-mortgage-debt-63707.aspx

Smaller Commercial Properties are on the Upswing

Big trophy properties in larger cities have certainly benefited from the recent strong real estate market, but bigger story recently has been about the recent resurgence of smaller commercial properties. 

Transactions involving assets priced under $5 million were at record levels during 2015, even as higher-priced locales like Manhattan and San Francisco became too pricey for many institutional investors.  Sales volumes of small-cap assets — which were up 14.4 percent through the first half of 2015, as compared to 2014 — are moving at the fastest clip since at least 2005.

The Small-Balance Difference

The small-balance commercial real estate market behaves a bit differently than that for larger Class A properties.  Global investors don’t seem to chase the small-balance market, for one thing.  Another differentiator is that the small-balance commercial market tends to move more in tandem with the residential housing space, which has also ticked up as of late.

The investor who buys a small-cap property is a different breed from the REITs and pension funds that have been buying up large assets in San Francisco and Manhattan, according to George Ratiu, a commercial analyst with the National Association of Realtors.  The investor in smaller assets often needs to take out commercial bank loans to purchase a restaurant, a strip mall or warehouse building. 

While individual properties can sometimes be riskier if they are based on only a few tenants, in other respects the small-balance market seems to exhibit some degree of stability.  “The prices in the small-cap CRE (commercial real estate) domain don’t have the same peaks and valleys as the large CRE market,” said Randy Fuchs, principal at Boxwood Means, a research group that surveys trends in smaller commercial properties.

Small is Beautiful?

Small-balance commercial real estate is also an increasingly fragmented market.  The top 15 small-balance lenders took over 20 percent of sub-$5 million originations during Q2 2015, for example, but those same banks seem to be shedding small-balance real estate loans.  “Despite their dominance in the small-balance commercial space, commercial banks face increasing competition for smaller loans, especially from the growing herd of alternative and non-bank lenders,” said Fuchs. “The trend of small business real estate loans within bank portfolios is declining — and seemingly irreversibly so.”

Record-low vacancies and recurring gains in leasing demand would seem to assure another solid year for the small-balance space, according to a recent Small Balance Advocate report.  Rents for small cap warehouse and flex buildings are doing particularly well, with office and retail rents also on the rise, albeit at a more modest pace.

Enthusiasm for development by industry participants seems to be curbed by insufficient rents and the somewhat indeterminate course of the nation’s economic recovery. Rent growth is likely to persist as long as the demand-supply gap persists.

Lands of Opportunity

Certain areas in California are leading the comeback, while annual returns for selected Florida cities are among the best in the country, including Sarasota and Fort Lauderdale.  To some extent these latter regions are “playing from behind,” since they had precipitous losses during the recession. As a result, however, lenders and investors may still find attractively priced assets in some of these markets.

In general, large cap CRE price trends (seen, for example, from the Core Commercial (CC) component of Moody’s/RCA CPPI), suggest that some investors and lenders are pursuing higher-risk strategies in the high-end market.  Higher asset prices and associated lower returns are leading some to hope that more economic growth will prop up values.  Large-cap prices seem to have increased, too, in secondary and tertiary markets, even though property fundamentals in those non-major markets have not recovered nearly as much relative to major markets.

Small-cap CRE investors face similar opportunities and risks in local markets, but the lower prices at which many of these assets still trade may offset the risk of any overly ambitious capital growth expectations. 

Article source: http://www.nuwireinvestor.com/articles/smaller-commercial-properties-are-on-the-upswing-63695.aspx

10 Best Places to Invest in Senior Real Estate

Senior citizens aren’t known for being made of money. In fact, they often struggle to make ends meet with a measly pension or retirement fund. Some seniors live on social security alone, which means their income is an average of $1,300 per month, leading to a yearly salary of just $15,600.

Approximately 30 percent of homeowners who are 65 years old or older are still paying off a mortgage, with the median amount owed being 79,000. It’s difficult to stretch that money to cover all costs, so many seniors opt to sell their family homes in search of something smaller and easier to manage.

Fortunately, there are several places where housing costs are low, making them great places for seniors to retire on smaller incomes. If you’re looking for a great investment property to market towards seniors, here are some places to look:

1. Albuquerque, New Mexico

The climate is warm, and the daily forecast is usually sunny, which makes it ideal for those with achy joints. There’s plenty to do for seniors in the area, and the cost of renting or buying a home is low, as is the cost of living.

2. Austin, Texas

Another warm location, Austin is a hub of activity and events, which could keep seniors occupied day and night. Housing costs in Texas are notoriously low compared to the rest of the nation, and retirees could keep their monthly expenses at less than $1000 per month.

3. Asheville, North Carolina

The economy is strong in this small city, and the cost of living is three percent below the national average. It’s full of doctors, and includes plenty of culture to keep retirees entertained.

4. Athens, Georgia

The tax climate is great, and the fact that’s it’s home to University of Georgia means there are plenty of affordable places to live, surrounded by entertainment for the elderly. It’s also rated high on the walkability index, and the crime rates are extremely low.

5. Boise, Idaho

As the state capital, Boise promises plenty of culture, both in the city and in the surrounding areas. The cost of living is a little higher than the nation’s average, but the median home price is very low, and it’s a college town, meaning there are always fun events on the schedule.

6. Cape Coral, Florida

If enjoying coastal scenery is your idea of retiring, Cape Coral is the place to be. Both the cost of living and median home prices are low, and the weather is incredible. The crime rate is low, and the air quality excellent.

7. Buffalo, New York

If you don’t mind a little cold during the snowy winters, Buffalo is an extremely affordable place to live. The city provides senior discount cards, good for local businesses all over the city, and there are always events going on to keep you busy.

8. Columbia, South Carolina

One of the best perks about living in Columbia is that those over the age of 60 receive free tuition to the University of South Carolina if no longer working. Housing and cost of living remain affordable, and there are also plenty of discounts for the city’s local businesses and entertainment venues.

9. Grand Rapids, Michigan

This small lake town is loaded with culture and low costs of living. Retirees can live on less than $1000 per month, not counting what they spend on discount services from local businesses.

10. Spokane, Washington

The green scenery of Spokane is breathtaking in the summers, and the temperatures are moderate year round. Cost of living is very affordable, and it’s surrounded by plenty of recreational activities. There’s no individual income tax, making it an excellent tax climate for retirees.

If you’re looking to make an investment in retiree real estate, these are some of the best places to look. The cost of living, median housing prices, and recreational activities in each area put these U.S. cities at the top of the list. 

Article source: http://www.nuwireinvestor.com/articles/10-best-places-to-invest-in-senior-real-estate-63692.aspx

Rental Property Investing for Beginners: Smart Tips to Take Your First Financial Step Forward

Investing in rental properties is one of the best ways to begin accumulating wealth. You not only build equity in the properties you own as you pay them down, but if you work your numbers right, you should also be generating some positive cash flow each month. However, like any other type of investment, there are some things you need to know before diving into the deep end of the pool.

Here are some smart tips to get you started with rental properties:

Fix Your Financial Situation

Don’t do anything until you’re sure that your credit and finances are in good shape. If your credit history is questionable, you’re likely to have trouble acquiring financing. A high debt-to-income ratio is a red flag that will prompt most lenders to reject you right away. It would be best to take care of any outstanding debt before attempting to get financed for a house. 

Educate Yourself

Before purchasing any properties, take a few months to familiarize yourself with the real estate business and learn what will be expected of you as a landlord. There are lots of books you can read and clubs you can join where you can meet other investors that can answer just about any question you may have. Social media sites are great places to meet investors, mortgage brokers and property managers. For all you know, the investor whose brain you decide to pick might end up partnering with you on a profitable deal sometime in the future.

Check Out Lots of Properties 

As tempting as it may be to buy the first property you see that you think you can afford, it might not be a good idea. As a new investor, it’s going to take some time for you to learn how to spot a good deal and if you jump too soon, you may overlook something important and become discouraged when it doesn’t go as planned. Visit properties in different neighborhoods and ask to view units that are occupied (if it’s okay with the tenants). You’ll get a feel for what types of tenants you can expect to attract with each type of property in various neighborhoods and hopefully you’ll see what a well-managed rental looks like on the inside. 

Prepare for Expenses

Although it does happen, it’s unlikely you’re going to slide right into a property that doesn’t need any repairs whatsoever. Even if nothing’s “broken,” it’s advisable to do at least some minor work to the property for the purpose of improving its appearance and curb appeal (think paint and landscaping). Furthermore, you’ll have to set some money aside for things like accounting, legal fees, garbage collection, pest control and vacancies. Remember that regardless of who your tenants are, they’ll probably stay for a few years and leave. At that point, the mortgage, taxes and other expenses on the property will have to continue getting paid, no matter how long it takes you to find new tenants.

Hire a Property Manager

Just because you’re investing in rental properties doesn’t mean you have to be the person answering the phone whenever something breaks in one of your units. Property managers make it their business to take care of these and other administrative tasks for you, so you can concentrate on other things, like looking for your next property. They can even find new tenants and screen them for you. 

Think Realistically

There’s nothing wrong with being optimistic, but your expectations of this real estate investing endeavor should always be grounded in reality. You’re not going to become a millionaire overnight and some of the deals you get involved with may seem rather modest until you develop the ability to spot better ones. If you quit your job expecting to make a fortune, you could find yourself heavily in debt and in worse shape than when you got started. There’s lots of money to be made in this business, but you’ll have to look at lots of properties, learn various types of buying strategies and figure out cost-effective ways to handle property-related expenses.

Above all, learn to enjoy this new venture you’re undertaking. Get to know as many people in the business as you can and read every book on real estate or rental properties that you can get your hands on. The more you know about how things work and how to avoid the pitfalls, the sooner you’ll start making the kind of money that allows you to quit your day job and pursue this full-time.

Article source: http://www.nuwireinvestor.com/articles/rental-property-investing-for-beginners-smart-tips-to-take-your-63686.aspx

10 Renovations to Consider to Boost Resale Values

Real estate can be an excellent investment, but there are many variables you have to consider. It’s fairly common knowledge that renovating a property can increase resale value, but it’s difficult to determine which renovations are actually worth your time and effort. When it comes to investment, if it doesn’t increase your resale value, it’s not a worthy investment. On that note, here are some of the best renovations to consider.

1. Luxury Elements

The more luxurious the design of the home feels, the more you can add to the asking price. You might not have a full luxury makeover in the budget, but including stone pillars on the home’s exterior, a unique shadow cabinet in the living room, or a rec room in the basement can give your home the allure of a customized luxury home, without the hefty price tag.

2. Front Yard Makeover

Curb appeal is everything when selling a home. It’s the first impression homebuyers get of the property, and it can affect how they feel about the rest of the home. Things like brightly colored planters under the windows, paver walkways, healthy grass, and other landscaping elements can justify adding a little more to the asking price of the home.

3. Updated HVAC System

This replacement is very attractive to homebuyers because it promises efficiency and well-dispersed climate control throughout the home. It’s important to note that this renovation costs an average of $15,000, and you may not receive the full amount in return after you sell. It’s best to do this renovation if you plan on living in the home for a few years before selling, so you get a little value out of it.

4. Windows

Adding new windows can be pricey, but can brighten up a space, improve efficiency, and significantly increase the asking price. While adding new windows, consider adding light dimmer switches, to allow adjustable lighting control in every room. It’s a touch that will make a house feel much more homey.

5. Kitchen Remodels

Of course, the kitchen updates will always increase the value of your home. It’s the first thing the majority of homeowners consider. Updated flooring, granite or marble countertops, extended cupboard space, and excellent space planning can improve the value of both your kitchen and the property as a whole.

6. Bathroom Facelifts

The second thing homeowners look at when considering a home is the bathroom. Most of the time, though, you don’t need to overhaul your entire bathroom to get the job done. Instead, install a few new fixtures, change the tile in the shower, add crown molding, paint, and refinish the cupboards to give your bathroom a facelift, without the cost of a full renovation.

7. Attic Bedrooms

You can get as much as 73 percent of your investment back by adding a bedroom in your attic. This allows you to market your home as a four bedroom instead of a three bedroom, for example, which can raise the asking price by tens of thousands. Any time you add square footage to a home, it immediately amps up the value considerably.

8. Minor Cosmetic Updates 

You don’t have to make huge changes in order to raise your property value. Simple cosmetic updates like painting the front door, removing popcorn ceilings, replacing paneling and wallpaper with regular paint, and painting kitchen cupboards increase the home’s value.

9. Neutral Changes

If you’re making changes to a property with selling in mind, don’t limit potential buyers with far-out designs. Keep your changes fairly neutral in order to appeal to a wider audience. A safari-themed bedroom might seem like a dream come true to you, but it might be a deal breaker for someone else.

10. Professional Work

There will be some projects you can do for yourself, but it’s best to leave the majority up to a professional. The finished project will be more polished and safe, and it will help you justify the asking price. 

Article source: http://www.nuwireinvestor.com/articles/10-renovations-to-consider-to-boost-resale-values-63679.aspx

Bad News For Tiny Homes Is Good News For Mobile Home Parks

The recent announcement that “tiny homes” may receive much greater scrutiny by the U.S. government is good news for the mobile home park industry. While “tiny homes” have been the darling of cable TV, the entire industry has been skirting local zoning laws and skipping the intent of HUD to regulate their manufacturing. So what happened to “tiny homes” and how to mobile home park owners benefit from these actions?

Tiny homes rely on prefabrication and arrive on a flatbed truck

“Tiny homes” are traditionally built on a frame foundation, and are delivered as one unit on a flatbed truck. Since they are not on wheels, they are not classified as mobile homes and, as a result, fall under a different set of laws. While HUD regulates and overseas the construction of mobile homes, tiny homes have skirted these regulations by claiming that they are more like portable buildings. But the problem is that portable buildings are not supposed to be used for permanent dwellings. HUD is now saying that they may take over the regulation of tiny houses, and this will no doubt kill off 90% of the manufacturers, as they will not have the financial capability to be regulated by the U.S. government.

Tiny homes are often installed in RV parks, yet they are not allowed by zoning

Most tiny homes end up in RV parks, as they are illegal to place on regular residential lots in most cities. But that ushers in a new problem. Most RV parks are not supposed to allow for permanent residency, as the city intended them for the exclusive use of tourists passing through, not families seeking city services, such as schools. Many disgruntled municipalities have started to crack down on those who seek to live permanently in those RV parks.

The reduction of elimination of tiny homes is good news for mobile home parks

While most Americans have been watching shows such as “Tiny House Nation” on HGTV, and thinking about what life would be like in a tiny home, most mobile home park owners have known the illegalities of this fad. They have quietly sat back and waited for the authorities to enforce their own rules. So what’s the legal route to living in an inexpensive and smaller home? It’s called a “mobile home” or “manufactured home”. These are regulated by HUD and fully legal to reside in mobile home parks. There’s no grey area and no danger of losing your investment. In fact, the industry has been around for over half a century, and works just fine.

Conclusion

At some point in the near future, the door will close on “tiny homes” as we know them. The government will shut down the manufacturing and only allow those who can afford the requirements and scrutiny of HUD to continue in operation. And you will no longer be able to place them in cities, as they will be banished from RV parks and, as a result, have to go where there’s no zoning way out in the county. These will be sad developments for those who like the concept of “tiny homes” but positive for park owners who will retain the only legal micro housing option in the markets they serve.

Article source: http://www.nuwireinvestor.com/articles/bad-news-for-tiny-homes-is-good-news-for-mobile-63658.aspx