How To Invest In Passive Real Estate With Your IRA

I'm all about keeping more of all things that are good, especially when it comes to my hard-earned money. I also know that even the best financial advisors can't offer their clients, or have expertise in, every type of investment. Many financial advisors won't always tell you about a strategy for retirement is that is growing quickly in popularity. It's called a self-directed IRA, sometimes a checkbook IRA, and by having one, you are able to take advantage of a myriad of opportunities that may be outside of the options that your financial advisor is able to offer. Basically, with a self-directed IRA you can take all or part of your retirement account and roll it over into an account where you control the investments instead of the company that handles your IRA. I first converted some of my IRA holdings to a checkbook IRA about six years ago, and it’s how I began investing in passive multifamily real estate syndications. In addition to real estate, you can also invest your IRA in precious metals, oil and gas, private hedge funds, the list goes on and on. Whenever you are presented with an investment opportunity for which you might like to use your IRA, the very first thing you should do is consult your tax advisor. He or she can first determine if what you want to do is allowed by the IRS, and then advise you as to whether it would be better to use non-IRA funds or your self-directed IRA. Using my IRA to make my first couple of passive real estate investments took some of the risk out of taking those baby steps into real estate syndications, and it consequently opened up a whole new investing world that I didn't even know existed.

Why Has Housing Supply Increased as Sales Have Slowed Down?

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the inventory of homes for sale this year compared to last year has increased for the last four months, all while sales of existing homes have slowed compared to last year’s numbers. A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers Association are all in agreement that rates will continue to increase to about 5.2% over the next 12 months. “The rise in [mortgage] rates paired with this very strong price appreciation absolutely is slowing housing,” said Fannie Mae’s Chief Economist Doug Duncan. Even though rates are higher than they’ve been in a decade, they still remain below the average for the 1970s, 80s, 90s, and 2000s! Mismatch of Inventory Elizabeth Mendenhall, President of NAR, said it best, “Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.” Prices of starter and trade-up homes have appreciated faster than their higher-priced counterparts. Over the last 5 years, the lowest-priced homes have appreciated by 47% while the highest-priced homes have appreciated by only 24%. This means that supply (inventory) has finally caught up with demand and buyers are in the driver’s seat when it comes to negotiations. Natural Disasters Although not fully to blame for the national shortage in sales and inventory, natural disasters like Hurricane Florence, Hurricane Michael, and the wildfires on the West Coast have certainly had an impact. Members: Sign in now to set up your Personalized Posts & start sharing today!

Millennials, Gen Zers Have Changed The Real Estate Landscape: How The Industry Must Respond

According to the Urban Institute, in 2015 37% of millennials were homeowners, an 8% decrease from Gen Xers' and baby boomers' homeownership rate at the same age (25–34). Millennials And Gen Xers While demographic and lifestyle choices, as well as a desire for nonconformity, have contributed to the high rates of renting over owning among millennials, one of the main factors pricing millennials out of homebuying is, ironically, high rents. While baby boomers and Gen Xers saw homeownership as an opportunity to build wealth and as a place to settle down, millennials do not. Millennials are often unable to forgo renting in favor of homeownership, in part because of the high cost of living in the cities they choose to live, as well as the high debt load they carry following graduation. It is a double-edged sword in a manner of speaking: Low single-family housing supply is contributing to lower homeownership rates among millennials because developers did not see millennials demanding single-family homes. Changes Are Coming (Again) Although so much time and effort have been spent on understanding the millennial generation and their homebuying preferences, the market is on the cusp of yet another shift in homebuying trends as Generation Z (commonly defined as those born after 1995) prepares to enter the market and make their own mark. While millennials have suggested that developers and owners become more environmentally and ethically conscientious, it is Gen Z that is expected to enforce the ESG investment practices. It is important for property owners within the workforce housing space to familiarize themselves with their residents. Rather than assuming that what worked for one community will work for another, widen your outreach program to include roundtable discussions or focus groups that garner direct feedback from your residents. For now, millennials remain in the driver's seat, as they are currently the largest market and the right age to buy and rent homes.

Millionaire To Millennials: Don’t Get Stuck Renting A Home… Buy One!

In a CNBC article, self-made millionaire David Bach explained that: “The biggest mistake millennials are making is not buying their first home.” He goes on to say that, “If you want to build real financial security, real wealth for your lifetime, then you need to buy a home.” Bach went on to explain: “Homeowners are worth 40 times more than renters. You might literally have to buy a small studio apartment, but that’s how you get started.” Then he explains the secret to buying that home! Well, one, you pay the mortgage off 15-years sooner, that means you’ll be able to retire in your fifties. Number two, you’ll save a fortune (on potentially hundreds of thousands of dollars in interest payments).” What will it cost to pay your mortgage in fifteen years? He explains further: “For fifteen years, you got to brownbag your lunch. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one. Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists. He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. Members: Sign in now to set up your Personalized Posts & start sharing today!

Is Your City Prepared For The Opportunity Zone Impact?

In the meantime, what are local governments and municipalities doing to prepare for an acceleration of Opportunity Zone investments? Under its guidance, 30 cities to date have drafted Investment Prospectuses, clearly outlining their preparations for OZ impact. “We are helping cities highlight assets, partnerships and investible projects and businesses that will directly help the communities and families to whom the legislation was targeted,” says Aaron Thomas, Accelerator for America’s Director of Economic Development and Opportunity Zones. Getty By having cities draw up Investment Prospectuses, Thomas explains, “We’re saying, ‘If you’re going to put capital into these communities, here are the communities that are ready, and these are the things the community actually wants to do.' During the first quarter of 2019, Maryland Governor Larry Hogan and his administration created an OZ Task Force that just held its first of many-planned regional summits to “align Opportunity Zone goals with state and local economic and cultural priorities,” According to a statement by Lt. Gov. Boyd K. Rutherford. Workforce development grants and technology investments are being put into place, and millions of dollars have been allocated by the State of Maryland to support various aspects of OZ revitalization, from affordable housing construction to demolition funding of dilapidated structures. All of these examples should give communities and residents reason to be hopeful that good change is coming: that jobs will be created and that necessary investments will materialize. And yet, some cities still aren’t on board with Opportunity Zones. Says Aaron Thomas of Accelerator for America, “The potential downsides are precisely why it’s important that the people and organizations already living and working within Opportunity Zones lead the way in improving these communities.” When private capital and communities work closely together, the best outcomes are the likely result.

Prices In These Cities Have Seen The Biggest Increases Since The Housing Downturn

Good news, Denver. The real estate research site, HSH.com, uses the Federal Housing Finance Agency's Home Price Index to determine which markets have, or haven't, recovered and the latest analysis shows that Denver has seen the greatest amount of growth. As house prices start to slow around the country it is worth looking at which markets are still holding their own in a down market. Their analysis also showed that five markets have seen home values double. Here are the five metro areas that have seen home values more than double since their low point. Cape Coral-Fort Myers, FL (up 101.13% from bottom) Stockton, CA (+118.18%) Las Vegas-Henderson-Paradise, NV (+145.26%) Sacramento-Roseville-Folsom, CA (+100.56%) North Port-Sarasota-Bradenton, FL (+104.51%) One overall piece of good news was that the metro area that has shown the least recovery, Las Vegas, is only down by about 9% compared to its peak. Meaning, on the list of ten least-recovered cities it had the smallest gap compared to its peak. Thus, the worst performing city today (Las Vegas) is still better than the "best of the worst" about ten years ago. For more info and to see the cities that have recovered the least, check out the full report. Follow me on Twitter @amydobsonRE
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Student Loan Debt Still Impacting Millennial Homebuyers

Student loan debt, currently estimated at 1.56 trillion is still impacting Millennial homebuyers according to a recent report from Bankrate.com. According to the report “31 percent of Americans say they currently have or have had student loan debt stemming from their own education.” It goes on to reveal, "an additional 13 percent of American adults financed another family member’s school expenses through student loans.” People responding to Banknote’s survey, 31% report they have delayed homeownership. No matter how many possible solutions are tossed around Washington and beyond on reducing the crushing burden of student loan debt, it remains one of the top reasons Millennials (23-38) are putting off buying a home. Consider that 39% of the respondents earn an annual income of $80,000 and over. Bankrate.com’s Senior Economic Analyst Mark Hamrick based in Washington sees it this way. Michael Pulver, senior vice president residential mortgage manager at Genesee Regional Bank in Rochester, New York sees some light emerging from this very dark tunnel. “What we have been seeing is an increase in the number of Millennials who do want to move from renting to buying. There are now some better programs out there with minimized down payment requirements –less than 3% down. This increases the affordability to be able to get into a home for that Millennial buyer. Here in upstate New York affordability is good.” Consider a current listing price of $127,900 for a 1,454 square foot colonial with hardwood floors and “updated kitchen.” Rick Ross, longtime college educational financing consultant has some insightful thoughts on the subject.

7 Steps Investors Must Follow for a Successful House Flip

The good news is that flipping houses is a feasible way to earn cash relatively quickly! So how exactly do you get started flipping houses? The 7 Steps of Flipping a House 1. Whatever the case, look into how you plan to finance the deal before you look for the deals themselves. Luckily, there are alternative strategies: For instance, you could get creative and send out direct mail letters or find run-down houses by driving around. Will this deal actually make you money? You’ll want to make sure you analyze your prospect closely and back into whether you can get the ROI you want out of it. Depending on where you are, the closing process might involve different steps. Bonus: Sell that flip. The selling process might seem straightforward, but there are tips and tricks for selling for more money.

Everything You Need To Know About The Fannie Mae HomeStyle Loan

However, before you commit to a loan, you should research as much as you can about the loan program. Read it over to get a sense of whether or not this loan program is right for you. What is the Fannie Mae HomeStyle loan? The Fannie Mae HomeStyle loan is a conventional loan that is aimed at making renovations to an existing property easier for buyers. By combining these costs, you'll be able to save on interest payments and closing costs. How the loan works The HomeStyle loan is unique in that, rather than being based off the current value of the home like most other mortgages, it allows buyers to borrow against the "after repaired value" (ARV) of the home, which estimates what the home will be worth once all the renovations have been completed. The remainder of the funds is disbursed to the vendors once the work has been completed and inspected by a qualified professional. This loan does allow for the homeowners to take on a portion of the work by themselves. Pros and cons of the Fannie Mae HomeStyle loan Pros The renovation costs get bundled into your mortgage so you only have one monthly payment Cancelable mortgage insurance once you have more than 20% equity in the property You can use it on any type of property, including vacation homes and investment properties You can use the funds for any type of renovation, including those with luxury items Cons These mortgages can't be used to tear down and reconstruct a house, only to make renovations to an existing property Stricter qualifying standards in terms of credit score and debt-to-income ratio Borrowers must submit a construction plan for approval before their loan can close Due to the extra steps required with this loan, it often takes longer to close than a traditional mortgage The Fannie Mae HomeStyle loan vs. the FHA 203(k) loan Unlike the FHA 203(k) loan, the HomeStyle loan can be used to cover any type of renovation that you can dream up, including ones showcase "luxury" items like pools or hot tubs. In addition, the HomeStyle loan requires a down payment of at least 5%, whereas the 203(k) loan only requires a down payment of 3.5%.

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4 Reasons Spring is a Great Time to Buy a Home!

Here are four great reasons to consider buying a home today instead of waiting. Prices Will Continue to Rise CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.6% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.3% over the next year. An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home. Either Way, You Are Paying a Mortgage There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. As a renter, you guarantee your landlord is the person with that equity. It’s Time to Move on with Your Life The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings. Members: Sign in now to set up your Personalized Posts & start sharing today!