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A Window Of Opportunity: OZs Are Ripe For Real Estate Investing

They are among the nearly 9,000 census tracts that have been designated Opportunity Zones by the federal government and are ripe for real estate investment. The Opportunity Zone (OZ) investment is part of a new community development program offered through the Federal Tax Cuts and Job Acts of 2017, which encourages private investment in low-income urban and rural communities. They are a unique vehicle for smart investors who want to maximize their capital gains while investing that money altruistically to rebuild and reenergize communities. Earlier this year, governors from all 50 states were asked to identify low-income or low-performing areas in need of infrastructure investment. Under the OZ program, investors can defer taxes by taking capital gains from other investments and placing them into businesses or real estate assets in the OZ. For investors who aren’t as well-versed in real estate, these funds provide several benefits: • There is less risk because the fund will invest in different assets and geographies, as opposed to being exposed to the performance of just one market. • Companies creating the funds are usually sophisticated and adept at understanding the economic and social climate for each geography, ensuring smarter investments. It can be a capital investment in a startup company located in the OZ or the development of new residential and commercial buildings. While many investors will look to place their money in funds, there are opportunities for savvy real estate investors and developers as well. But while we await guidance from the government, it would appear from the onset that this program will be mutually beneficial to both investors and the communities in which they operate.

The 6 Real Estate Trends to Watch in 2019

So, what does 2019 have in store for real estate investors? They will affect everyone, driving up costs for home buyers and creating more demand for rentals. Single-story homes will increase in value as demand rises. Millennials are finally ready to purchase their first homes despite headlines saying they “can’t afford them.” But because they are largely seeking affordability and quality of life, they are having to trade in the urban life they crave and head out to the suburbs. Investing Is A Lifestyle Many people want to be successful real estate investors. The problem is that the average person starts at the last step of the investment cycle rather than at the beginning. The property. For instance, if your personal investment philosophy were to invest for monthly cash flow, it would make no sense invest in a number of properties with an aggressive, highly leveraged debt ratio that allowed for no cash flow. As rich dad said, “Business and investing are team sports.” In order to be successful in any market, especially ones that you don’t live in, you need to have the right team. So, if you’re looking into becoming a real estate investor, 2019 could be a great time to do so.

Should Real Estate Investors Be Worried About U.S. Stock Market Volatility?

The downturn rippled through world equity markets. Should real estate investors be worried? Yes, says Richard Barkham, Global Chief Economist & Head of Americas Research of CBRE, but only if policy makers overreact. Black Monday raised fear that the global economy was slipping into another serious recession, like that of 1979 to 1982. Interest rates were lowered and government spending was increased. Since the global economy remained in relatively good shape, the stimulus stoked inflation and fueled a property boom, particularly in the U.K. Real estate did well for a couple of years but crashed in 1989, not as a direct result of Black Monday but of the mistaken policy response, CBRE explains. The bursting of the dot-com bubble in the early 2000s was spread over three years, but the DJIA lost 27% of its value between January and October of 2002 alone. Interest rates were lowered, the U.S. moved to a zero-interest rate policy and government spending increased. Far more damaging was the housing market boom, ignited by aggressive interest rate cuts, which fell apart in 2007, continued CBRE. Bottom line: The global economy is in good shape and real estate investors should not fear a real estate crash reports CBRE.

Five Reasons Why Your Real Estate Investments Aren’t Earning You Money

His responses were stable cash flow with some potential for appreciation, long-term time horizon of 5 to 10 years, not tolerant of high-risk investments and his real estate experience was limited to the purchase of his single-family residence. This means that he lost out on the last five years of cash flow and appreciation, and his money suffered from five years of creeping inflation — a poor outcome. Plenty of people desire to be in real estate, but consistently fail to invest successfully. No Clear Objectives The primary reason investors I meet do not make any money in real estate is because they have not taken the time to establish specific, clear objectives. Most investors have answers for the questions I asked our representative investor above and believe that is sufficient for moving forward. Lack Of Time A real estate investment must be viewed as a business. As with any business you have clients (tenants), vendors (property managers, contractors, utility providers) and possibly employees. We constantly acquire properties for our investment funds, and a key gating factor when deciding whether to pursue a property is if we have a quality property management firm in place to run it. Inability To See The Big Picture When buying properties across the U.S. and in many different markets, there are two critical factors we look for before considering an investment: net population increase and diverse economic base. How can you tell if you are buying the right property?

How Much Does a 2-Bedroom Apartment Cost in Your State?

Only in 22 counties in the United States is a one-bedroom home affordable to someone working 40 hours per week at federal minimum wage. That’s from the National Low Income Housing Coalition (NLIHC) report, which outlines the mismatch between wages and rent every year. (Fair Market Rent is an annually updated government estimate, typically the 40th percentile of the gross rent in an area.) NLIHC estimates that the average renter’s hourly wage in the United States is $16.88. The average renter in each county makes enough to afford a two-bedroom in only 11 percent of U.S. counties, and a one-bedroom, in only 43 percent. The national “housing wage” in 2018 is $22.10 for a modest two-bedroom rental home and $17.90 for a one-bedroom, the report estimates. (That’s how much an average renter in the U.S. would need to make to afford a modest apartment at fair market rent, without paying more than 30 percent of their income towards housing. Still, in not a single state, city, or county can someone earning federal or state minimum wage for a 40-hour work week afford to rent a two-bedroom home at fair market rent. The incredible shortfall in affordable units remains the more stubborn, intractable problem. Between 2005 and 2015, apartments costing $2,000 and more increased by 97 percent, according to Harvard University’s Joint Center for Housing Studies; Meanwhile, those under $800 decreased by 2 percent.

The 22 American cities with the most million-dollar homes

LendingTree collected real estate data from more than 155 million properties across the United States to calculate which cities have the highest concentration of homes worth $1 million and up. Four cities in California have more than 10% of homes valued over $1 million. LendingTree then calculated the concentration of million-dollar homes in each city by dividing the number of homes valued at $1 million or higher by the total number of homes in the statistical area, according to the report. The data shows that expensive properties are more likely to be on the coasts than inland America with the exception of Denver, Colorado. Four cities in California have more than 10% of homes valued over $1 million, and San Jose is the only place where the median home value (among all homes) is above $1 million. Charlotte, North Carolina SergeevDen/Shutterstock Percent of million-dollar homes: 1.02% Median value of homes: $187,000 Median value of million-dollar homes: $1,295,000 2/22 21. Baltimore, Maryland Jon Bilous/Shutterstock Percent of million-dollar homes: 1.07% Median value of homes: $270,000 Median value of million-dollar homes: $1,214,000 3/22 20. Riverside, California sirtravelalot/Shutterstock Percent of million-dollar homes: 1.12% Median value of homes: $332,000 Median value of million-dollar homes: $1,339,000 4/22 19. San Diego, California Vacclav/Shutterstock Percent of million-dollar homes: 10.55% Median value of homes: $563,000 Median value of million-dollar homes: $1,384,000 19/22 4. San Francisco, California Andrew Zarivny/Shutterstock Percent of million-dollar homes: 40.03% Median value of homes: $891,000 Median value of million-dollar homes: $1,409,000 22/22 1.

Financing turnkey rental properties

We all know that in a real estate investment “cash-is-king.” But, if an investor does not have that much cash in hand, finance is definitely required to meet the purchase price of an investment property. There are many options available to finance turnkey rental properties. What is a Turnkey Property A Turnkey Property or a turnkey rental property is a real estate investment property (mostly a house or an apartment) that an investor can buy and rent in a short period of time. Financing Turnkey Rental Properties If you need financing to purchase a turnkey rental property, you must pay attention to the information given below. In that case if you take 10% of it out and invest into some turnkey rental properties in some of the fastest growing real estate markets, it may be a good investment for a passive rental income. Financing Turnkey Rental Properties With Loan There are multiple factors and conditions that affect on getting a loan for the purchase of a turnkey investment property. Types of Mortgage Options For Financing Turnkey Rental Properties A fixed-rate mortgage means your mortgage interest rate and your total EMI of principal and interest will stay the same for the entire term of the loan. Can FHA Loans Be Used For Financing Turnkey Rental Properties You can generally rent your FHA home if you have lived in it long enough. Lenders Financing Turnkey Rental Properties Finding lender for financing turnkey rental properties is a not a tough job. Another top-rated direct mortgage lender for conventional, VA & FHA home purchase or refinance loans is The J.G.

Is a Rental Property the Best Way to Grow Your Wealth?

Owning a rental property in addition to your primary residence can be a way for you to build wealth, especially if you may be averse to investing in the stock market. With a rental property, someone else pays your mortgage, and over time your equity grows. So, before you decide to invest in a rental property, consider calculating the return on your investment to see if investing in a rental property is really the deal you thought. How to Calculate the Return on Investment of a Rental Property Like any investment, you need to understand the expected return on investment (ROI). Before you can calculate the true ROI of a rental property, you have to factor in all the costs associated with holding that property, not just the purchase amount. And remember, property taxes don’t typically stay the same each year. In addition, this calculation should be done for every year you anticipate owning the property, as your return will change over time. Conclusion Rental properties can generate income, but the return on investment doesn’t typically happen right away. As with any investment, rental properties should be viewed as a long-term investment, not an instant cash cow. Paul Sydlansky, founder of Lake Road Advisors LLC, has worked in the financial services industry for over 18 years.

Should you use home equity to delay Social Security?

For some time, reverse mortgage lenders touted a strategy that involves obtaining a HECM early on in retirement in order to delay taking Social Security, therefore maximizing the benefits you can receive. For every year that you can delay taking Social Security from 62 to 70, you can get as much as 8% more. According the CFPB report, the expense of taking a reverse mortgage means that by age 69, the cost of the loan exceeds the cumulative lifetime benefits of a reverse by $2,300. “For consumers whose main asset is their home, taking out a reverse mortgage to delay Social Security claiming may risk their financial security because the cost of the loan will likely be more than the benefit they gain. “The CFPB’s analysis, misrepresentations, and inaccurate conclusions fail to provide a comprehensive review of potential benefits of Social Security deferral and proper use of home equity,” Hopkins wrote. “Using a HECM to fund Social Security delay does not create greater risk for retirees experiencing spending shocks or needing to move later in retirement, because reduced distribution needs from the investment portfolio and the subsequent reduction in sequence risk offset the reverse-mortgage costs and preserve overall net worth,” Pfau wrote. “We found that while financial advisors are interested in the idea, they have a very, very, very difficult time persuading their clients to defer their benefit,” Dickson said. I can tell you that there are situations where the reverse mortgage loan would make sense. There are many factors that need to be considered,” Holland said. Ultimately, Holland said issuing broad statements about financial planning strategies is problematic, because it all depends on individual circumstances.

Dos And Don’ts When Reinvesting Real Estate Returns

But when it comes time to sell these properties, are there right and wrong ways to roll over the proceeds to new real estate investments? Hornstock bases his insights on his firm's two decades of experience in partnering with real estate investors to maximize returns tied to real estate investments. His firm specializes in providing services that add value in leasing, investment sales, property management, construction management and advisory, and by organizing opportunities for its clients to participate in the ownership of real estate. "First things first, you have to understand the goal of reinvesting," Hornstock says. The sale of a business or an investment property normally requires the seller to pay tax on the gain at the time of sale. The seller can postpone paying taxes on the gain if the proceeds are reinvested in a similar property as part of a qualifying like-kind exchange. If your grandfather bought a property in 1950 for $100,000, and it's been kept in the family since, and you sell the building for $1 million, you'd normally have to pay taxes on the gain of $900,000. New under the revised tax laws is the qualified business income deduction. Timing and location In Hornstock's view, worrying about when to reinvest makes no sense. Doing your due diligence, getting comparables, you can do that in five minutes but you still have to be able to process the information, because there's a guy in New Delhi doing the same thing."

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Why Your Mortgage Is Getting More Expensive

Mortgage rates have increased for five consecutive weeks, according to Bankrate data, bringing interest on a 30-year fixed rate loan to 4.44 percent—the highest level in 11 months—while home prices continue to rise due to a lack of available homes. Inflation and wage growth recently found a groove, while the Federal Reserve’s plan to raise short-term interest rates multiple times for a consecutive year has reduced the value of government debt. (Bond prices and yields are inversely related.) Homebuyers Should Get off the Fence Mortgage rates are moved by the yield on 10-year Treasuries, rather than short-term rate hikes by the Fed. That’s why mortgage rates fell throughout 2017, for instance, even as the central bank raised the federal funds rate three times. Immediately after the 2016 election, investors sold government debt en masse, causing the 10-year yield to rise from 1.88 percent on November 8 to 2.60 percent five weeks later. That dramatic rise was predicated on investors thinking a newly Republican-controlled Washington would bring about faster economic growth through infrastructure spending and tax cuts. By the first week of September, the 10-year yield was 2.05 percent. Prices have been rising below the Fed’s 2 percent target, according to the central bank’s preferred prices gauge, for years now. Meanwhile, Bloomberg reported in January that China, the largest foreign holder of U.S. debt, may reduce or cease U.S. debt purchases, causing market jitters.