As the fed announces increasing interest rates for the first time since 2018, most new investors do not have a bunch of excess capital lying around to purchase a property without some type of mortgage loan.  While there are still many valid mortgage terms out there to meet the unique needs of the current borrowing community, there are some loan types that should be avoided at all cost. Below we will discuss some of the worst home loan types you should avoid as well as provide you with a few reasons why these are not as good as they sometimes sound.

Balloon Mortgages

Balloon mortgages may be structured in slightly different ways, but at their core they are all basically the same. After a small period of time passes, a large lump sum payment comes do.  With a balloon mortgage, you’ll normally make payments for around a 5-7 year term. After that you’ll owe the entire remaining balance of your mortgage loan, which can often mean a payment of several hundred thousand dollars.  Some balloon mortgages don’t charge monthly payments. Other times, the monthly payment is based on what you’d owe if you were paying your loan off over a longer period of time. Regardless, whatever terms these balloon mortgage offers, there will always be a large lump-sum payment.

A lot of borrowers sometimes will take out balloon mortgages because they offer lower interest rates or reduced monthly payments.  Generally, they hope to refinance their loan before the lump-sum payment is due.  Refinancing isn’t always possible, however, and if you can’t pay off your entire loan, the property could go into foreclosure and you could lose the property. This risk with these loans far outweigh the pro’s and this is why you should avoid balloon mortgages at all costs.

Interest-only mortgages

As interest rates continue to rise, understandably some may feel the need to consider more untraditional loans in hopes of offsetting the increased costs. Interest-only mortgages are structured so that you only pay for the interest on the loan and no principal. This means a lower monthly payment, however, the problem with these loans is that you don’t make any progress with paying off the property. You send interest payments every month without gaining any equity in your home.  Eventually, you’ll be required to start paying off your loan, or you’d be in debt forever. Here are a few ways this could happen:

Interest only loans are often structured as balloon loans. As discussed above, this means you pay interest only for several years and then owe a huge lump sum. Some terms may have a short interest-only period, afterwards, you’ll start to pay both principal and interest. These payments will be much higher than if you’d simply been paying principal and interest from the start. These loans carry a lot of risk. You could struggle to afford the higher monthly payments or balloon payments down the road. Since you aren’t building any equity in the property, you could be in trouble if property values decline. You could even end up owing more on the loan than the overall value of the home.

A 40-year fixed-rate loan

40-year fixed-rate loans are very similar to 20- or 30-year fixed loans. The difference, obviously, is that the loan repayment timeline is 10 years longer.  While these terms will lower your monthly payments, they also add a lot to your total interest owed. An extra decade is a very long time when someone is trying to be debt free. There’s a high probability you will carry your loan into your retirement years. This would also mean you will need to save additional funds for later. These loans may also reduce your ability to accomplish other financial goals because your interest costs would be much higher and you’d have to make that mortgage payment for an extra decade.

Instead of going with any of the above risky loan types as interest rates rise, it’s still best practice to stay with a traditional 15-year, 20-year, or 30-year fixed-rate loan. These loans have stood the test of time and remain the right options for most borrowers.  The above loan types often sound like good opportunities to potentially save on your mortgage. Chances are; however, interest rates won’t stay put for much longer and avoiding the above mortgage loan types will help keep you financial fit long term.

March 25, 2022

If you’ve invested in a rental property hoping to make money, you may find it hard to get a high return if you don’t have the right help. Selling your rental property requires proper timing, pricing, and marketing to the right audience.  Here are several tips to help you sell your rental property quickly and for the highest return on your investment.

Include Your Tenants

Having a tenant in the property could be an important factor in how much money you may make when it comes time to sell your rental property. You need to decide whether or not it’s best to wait until the lease expires, pay to relocate the tenant, or sell the property with the tenant still living in the home. These decisions can make a huge difference in how you sell your property. If you must wait until the current lease expires, you’ll be more at the mercy of whatever current market situations you face when it comes time to sell. If the market is hot, but your lease doesn’t expire for six months, you will likely have to wait to sell unless the tenant is willing to work with you. On the flipside, you won’t need the tenant’s help if you wait until the lease expires. When the tenant vacates the property, you can make any necessary repairs or renovations and get the home ready to sell. Without tenants in the house, you are free to market it as a primary residence or investment property.  If you’re selling the home with a tenant in place, you can sell when the market is hot, but you’ll need the tenant’s help.

Depending on the relationship, its often at least worth asking the tenant politely to allow scheduled contractors in to fix up issues the home may need repaired. If the tenant is staying until their lease ends, they likely wont mind someone enhancing the home.  Staging the home is also important to discuss with the current tenant.  Since you will likely need to market the property to other renters down the road, it’s worth trying to stage the home in a way that wont disrupt the tenant too much but also will enhance the appeal of the home.  Dont forget to work on the curb appeal as well. While you don’t want to ask your tenant for too much assistance to sell the property, having their help is valuable, especially when it’s time for the inspection and appraisal.

Know The Home’s Value

It’s easy to think a home is worth a lot more than it is without researching the current market trends. Researching the market value of newly sold homes in the area will help you understand how much you can make on the sell of your property.  Often, if you inflate the price because you believe your home is more valuable, lenders often wont approve the loan. Therefore, unless the buyer is paying all cash, you won’t likely get more than the home is worth.  You should look at several properties in the area that sold within the last six months and are similar to the home you’re selling.  It’s important to compare not only your properties size and location but also all of its features. Your property may have more or fewer features than the comparable properties, in which case, you’ll need to adjust accordingly.

Take Professional Photos

This seems minor, but bad pictures can often break a deal. The better the pictures you take of the home, the more potential buyers will look at your property, and the more interest you have in your home, the faster it will sell.  The majority of buyers nowadays will only see properties online because it’s more convenient or they do not live close to the property. Furthermore, investors often look to invest in other areas where real estate is cheaper or where home prices are increasing to get the best deal.  Needless to say, high quality pictures are an important part of the selling process.

Before taking photos, make sure the property is properly staged and decluttered. If you have tenants living there, ask them politely for their assistance to showcase the home properly. It’s also important that the photos are honest and realistic. There are many programs like Photoshop that will make it easy to manipulate photos, but this practice should be avoided. It is normal to utilize a wide-angle lens which allows you to capture more room in a picture without inflating its  true size. You should also use the sun to your advantage. Wait until the sun is behind your home to take exterior photos. You should also try to avoid shadows by taking photos at an angle.  It’s recommended to take interior photos mid-day, not too early, but not too late. Try to aim for around noon when the sun is the highest.

Learn The Market

As described above, it’s important to learn everything you can about the current market before posting your property for sell. Understanding what buyers want makes all the difference. If you’ve owned the property many years, it’s likely the market has changed. Knowing the latest trends will help you get the most for your home.  Don’t worry to much about making the necessary renovations.  You’ll make it back when you sell the home for more than you would have otherwise. If, for example, the kitchen or bathroom in the house is outdated, you may want to fix those areas now. Knowing what buyers/renters want will help you make the home more attractive for investors willing to pay more money for a property they plan to keep for a long time.

Making top dollar for your rental property requires that you do your research, price the house correctly for the area, and renovate and repair things before you place it on the market. It may take a little time to sell your rental property, but with the above tips, hopefully you will make the most profit possible and sell it faster than you would otherwise.

March 3, 2022

When investing in real estate there may be a better option for financing besides using a traditional loan every time. While it is true that traditional loans have been used to successfully secure many types of real estate investments, obtaining a traditional real estate loan comes with a lot of challenges. There are tons of boxes investors must check for a traditional lending institution to agree to fund their loans. Luckily, these challenges do not mean that investors who do not qualify for a traditional loan should give up on trying to invest in the real estate market. To the contrary, many investors do not even bother to go through the traditional loan process to fund their real estate investments. If you’re curious to learn what investors do when they need quick financing at affordable rates, the answer to your next investment funding could be in securing a hard money loan.

What Are Hard Money Loans?

Hard money loans are investment loans given by individual investors or companies who lend money to investors that are secured by the asset they are lending money on. The asset itself is used as collateral to reduce the risk for both the lender and the loanee.  Hard money loans are great for fast financing where investors need to purchase a fixer upper, quickly remodel the property and then sell it at a profit.  Most of the time, hard money loans are short-term loans lasting from 1 to 3 years. With the shorter loan terms, they also carry higher interest rates than traditional financing options like primary mortgages.  If you are considering whether or not a hard money loan is the right fit for you, here are three benefits you should consider before making a decision.

Processing Times

Traditional lenders usually take around 28 days to process and complete funding for a loan which is often way too long for fix and flip investors. If things are going well within those 28 days, investors could secure a hard money loan, purchase a property, and begin renovations.  For that reason, hard money loans have become a very attractive alternative to traditional bank loans.

High Approval Odds

One of the biggest challenges facing real estate investors today is simply being approved for a loan from a traditional lender like a bank or government agency. Lenders almost always evaluate the applicant’s credit status and annual income before deciding whether they will approve the loan.  A lot of times, banks will only provide a portion of the full loan amount, leaving the loanee with little to no choice but to find another way to fund the remaining balance of the loan in need.  Hard money lenders, on the other hand, don’t typically consider the investor’s credit or their income. The main requirement for determining approval for a hard money loan is whether or not the loan amount is equivalent to the collateral on the property value being purchased.

Flexible Repayment

You usually will have more flexibility when negotiating the loan terms for a hard money loan since they are funded by private investors as opposed to large financial institutions. You can usually customize the repayment options to suit your financial position which in return makes hard money loans very convenient, especially for someone who’s just getting started in the real estate business.

As an investor, you often have very few options with little turnaround time to secure the financing you need to purchase a property. A hard money loan can be a great fit because they do not typically come with all of the red tapes that come with traditional bank financing.  If you decide to fund your next real estate investment using a hard money lender, try to avoid making and quick decisions. Make sure you evaluate the terms of the agreement, any fees that may be included, and what interest rates will be involved, so you can make a wise decision that is best suited for your needs.

February 25. 2022

Bridge loans can often provide a worth wile solution for investors to take advantage of solid deals being offered especially when time is a competing factor. For example, often times when purchasing properties through an auction it is very important that buyers have fast access to funds as most auctions require funding within a month window.  In short, bridge loans are simply loans that help to “bridges the gap” between the selling of one property and the purchasing of the next one. There are other reasons and ways to use a bridge loan but this is the main one.  What few investors may not know, however, is that bridge loans can also be used to purchase and redevelop land in some scenarios.

The Basics

The basics of using bridge loans to purchase and redevelop land works the same way as if you were to purchase property. Either way you utilize a bridge loan you can expect higher interest rates compared to other traditional loans, but access to funds is typically a lot quicker than with other types of funding.

When it comes to purchasing land with a bridge loan, your exit strategy is of critical importance, and will likely be the deciding factor as to whether or not a lender agrees to loan you the necessary funds. A credit check, a significant upfront deposit as well has proof of previous experience will most likely also be needed.

What You Need?

While planning permissions are not an absolute requirement for obtaining a bridge loan, they can certainly help you to seal the deal. Lenders will generally have more confidence in the project’s completion if you have relevant permissions to proceed with any proposed enhancements ahead of time. The lower the risk of the deal you have the more lenders will likely be interested in your offer.

Increase Your Odds Of Success

Given their increased liability, lenders are often more conservative when it comes to approving applications for bridge loans for land purchases. In an effort to help guide our discussion on the specifics, in order to help increase your chances of being approved for a bridge loan for land development, you should focus on the following areas:

Property Portfolios — if you can show a portfolio with a proven track recorder of previous successfully completed projects, most lenders will be more inclined to approve you for bridge loan funding.

Exit Plan — A solid and detailed exit strategy is critical to secure a bridge loan for land improvements. A good exit plan should map out the specific ways you intend to pay back the loan by the end of the agreement.

Credit Score – While it is true that bridge loans are not only given to those with great credit, a higher credit score does offer a lender more assurance that you will be able to fulfill your financial obligations and therefore make you more likely to be approved for a bridge loan.

Planning Permission – You should plan ahead on most lenders requiring that you submit sufficient evidence of permission to develop any land before they will agree to fund your project with bridge loan financing.

Buying land with the use of a bridge loan is a valuable option for investors and land developers looking to acquire land, providing they have a clear exit strategy and sufficient evidence of any required permissions which may be needed.

February 18, 2022

Before entering into a new relationship with someone, it is not uncommon to ask yourself a series of questions first. Does this person’s values align with mine? Etc. It is no different when making a serious financial commitment like borrowing money from a potential new lender. There are some important questions you should always ask yourself and questions to ask the potential future lender before agreeing to anything in writing.  Below we will discuss several questions you should ask yourself before acquiring a new loan.

How Is Your Credit?

Make sure you have reviewed and understand your credit history as well as your credit score. The better your credit score, the lower the interest rate you will likely qualify for. Interest rate matters. If, for example, you were to borrow $25,000 for 60 months, the difference between how much you could pay with an excellent credit score and how much you might pay with a fair score, could be night and day. While a 100-point difference in credit score may not seem huge, it can be costly. With a fair score, your monthly payment could be hundreds of dollars higher, and you might end up paying thousands more for the loan over five years. Before taking out a loan, try to increase your credit score if you feel it is not where it needs to be. While it will take some time and effort, it is likely to pay off in a big way.

What’s Your Actual Budget?

The fact that you’re approved for a loan doesn’t mean you can actually afford it, particularly if you have lots of financial obligations that don’t show up on your credit report. For example, if you’re paying for your children’s education, monthly memberships, vacations, and several different hobbies, you may have trouble repaying the loan as agreed.  Even if you’ve been approved for a personal loan, take a hard look at your budget, including how much you spend on the things you enjoy each month. That way, you can make sure you can easily afford the monthly payments. In doing so, you may find you need to cut certain expenses in order to make way for a new financial obligation.

Is A Loan The Best Long Term Option?

We often spend money on things which provide great experiences and memories but no financial return. A great meal at a fancy new restaurant may be worth the price in terms of experience, but in terms of finances, you won’t likely see a return on this type of investment.  On the other hand, If you’re considering taking out a loan to remodel your bathroom or to install some new landscaping features, you could recoup your entire investment and then some. Before contacting a loan lender, determine whether or not you will likely see a return on your investment.  Now that you have a better idea of what you’re looking for in a loan, here are some more questions to inquire about with potential lenders:

What’s The Best Interest Rate Offered?

As the above scenario shows, monthly interest payments matter. A difference of 1%-2% can save you a lot of money long term. This is why it’s important to get comparative quotes from several lenders before settling on one.  The great thing about most loan lenders is that they will typically only run a “soft” credit check before letting you know if you qualify for a loan, and if so, what your interest rate will be. A soft check does not impact your credit score. It’s only when you decide to proceed with a loan that the lender runs a “hard” credit check that may ding your credit score a bit. Don’t worry, though. As long as you make regular payments on the loan, your credit score should rebound relatively quickly.

Is A Secured Loan Better?

Say you are interested in making several upgrades to your home to add to its overall value. If you’re trying to get the lowest possible interest rate, it pays to determine how much that rate would be if you opted for a secured loan rather than an unsecured loan. Most personal loans are unsecured, meaning you don’t put anything of value up as collateral.  On the other hand, a secured loan requires you to put up some form of collateral like a home or car in return for a lower interest rate. As long as its value is enough to pay off the loan if you fail to make the required payments, a lender may be interested.  Although a secured loan is likely to save you money, it’s worth remembering that If you don’t make payments as agreed, the lender has the legal right to repossess the collateral, sell it, and recoup their losses.

Are There Extra Charges?

With an excellent credit score there is no reason to pay for extras like an origination fee or an early payoff penalty. If your credit score makes you appealing to potential lenders, make sure to ask about fees. The difference between making a financial decision that works for you and one you may grow to regret is in asking questions before signing your name to a contract. Use the above guide to help make the right decision before you move forward on your next loan.

February 11, 2022

Before deciding whether or not a bridge loan makes sense for you, it is important to explore all of the variables and do your homework.  This process is critical to help make sure that a bridge loan is in fact the best solution for you. In an effort to help guide those out there who may be considering these types of loans, we will discuss a few key factors worth considering about bridge loans below.

Research

Before you even apply for a bridge loan, it is essential that you fully understand everything involved and this includes learning how bridge loans  work as well as considering all of the potential fees for this type of financing.  By definition, bridge loans are intended and designed to ‘bridge’ the short-term financial needs relating to a property or land purchase, but as with any loan, not all applications are straightforward and not all bridge loans are created the same. It’s important to get the correct expert advice at the right time in order for you to understand the process more fully and help ensure you get the best quote possible based on your individual circumstances.

Exit Strategy

Since bridge loans are based on a short-term repayment plan, having a clear ‘exit strategy’ will help both you and any potential loan provider rest easier knowing that you will be likely be able to repay the loan in a timely manner based on the loans specific terms.  When considering your repayment options, you should also account for the loan interest rates as well as any other fees that may be applicable, and to not just simply factor in the initial loan amount for repayment. Bridge loans are often of a short term nature so the monthly interest rates are often higher compared to longer-term traditional financing. This may mean that you will need to demonstrate to your loan provider that you can pay off the total loan in a shorter period and also have enough to cover the additional loan fees.

There are a few key ways of repaying a bridge loan on time. The first is to use funds that are due to you, but have not yet been received from the sale of a property. Second, is to re-finance your property and either pull out equity or lower your monthly interest and use the difference to payback the bridge loan on time.   As well as having a clear plan to pay off the loan, the length of the payment term is also a crucial decision. It can be tempting to simply pick the shortest loan period possible to minimize the total interest you’ll have to pay with the higher interest rates, but you should also factor in any potential delays in obtaining your repayment funds. For example, selling a property can often times be prone to falling behind schedule, which could mean you don’t have all of the funds needed to repay a bridge loan when payment is due.  This could result in defaulting on the loan if you’re not prepared as well as incurring additional financial penalties.  Similarly, if you decide to refinance an existing property, it’s a smart move to request an offer indication from your lender before applying for or deciding on your bridging loan repayment terms.

Choose A Trustworthy Loan Provider

Taking out a bridge loan is a huge decision and utilizing the best advice available to you is important in making a well informed decision. Finding the right bridge loan provider is also critical to ensure you get the right product and all of the processing runs smoothly and on time.  The factors we discussed above regarding bridge loans will hopefully assist you in accounting for all of the essentials and help make your final decision on whether or not to obtain this type of short term finance the right one for your specific financial needs.

February 4, 2022

If you are like many who are trying to figure out the best way to set aside enough money for retirement but are not quite sure which financial decisions are wise and which are risky, the whole process can be a bit overwhelming.  The good news is that no matter what your current retirement portfolio looks like, chances are, you are not alone. The good news is that there are some tried and true retirement strategies that are less daunting than some traditional methods which allow you to retire in comfort.  Below are a few key steps to build up your retirement portfolio through real estate.

Rental Properties

Rental properties are perhaps the number one best way to build up passive income. If done correctly, rental properties can bring in a positive cash flow from day one, adjust with inflation, and keep or even grow in value over time.  The right rental properties do not require much of your time or deplete too much of your set aside money for repairs.  Using a highly rated property management company can also take even more of the stress of maintaining a rental property off of your plate.  Depending on how you structure the deal, you could instantly begin earning hundreds of dollars a month or more for a commercial property while you are still earning and setting aside money each month. The best part though is that the tenants occupying the property are also helping to pay off the mortgage loan for you. If timed properly, rental property income can substitute your working income, giving you enough monthly cash flow for retirement.

Mortgage Notes

Mortgage notes are another potentially great income stream you should consider investing in. As opposed to owning a rental property, when purchasing mortgage notes, you simply fund the loan and lend money to someone else as they purchase a property and pay you back overtime, usually in the form of some sort of hard money loan.  Before moving forward, however, it’s critical that you completely understand the risks and do all of the necessary homework needed related to purchasing mortgage notes, including potential future scenarios involving the need to foreclose if the borrowers are unable to repay the loan according to the terms laid out in your purchase agreement.

Pay Off Your Mortgage

If you have a low interest rate, paying off your mortgage doesn’t need to be the first item on your list but it should be prioritized at some point before reaching the age of retirement. Paying off your mortgage before retirement is definitely recommended by most financial advisors as a wise investment strategy.  It’s smart to proceed with caution before considering pulling out equity by refinancing in order to make needed repairs around the property and should be considered along with many other factors including your age before deciding whether or not to do so. Refinancing can be beneficial depending on your situation, but that type of decision should be considered from all angles and with at net positive end goal in mind at all times.

Vacation Rentals

If you’re financially able and planning on buying a vacation rental for your retirement years anyways, It may make since to purchase the property now and have it start generating money for you in the meantime until you are ready to retire.  Vacation rentals in high demand tourist locations will often earn top dollar per night compared to more distant locations from local attractions on most online rental sites. You can use this additional rental revenue to pay down the mortgage on your vacation rental so that by the time you are ready for retirement, you have either paid down the mortgage significantly or entirely and ideally will only have to worry about property taxes and upkeep on the property as you age.  The best part about vacation rentals is that whenever you want to use it, you can block out the calendar, enjoy it, and then continue to collect monthly income once you are down using it for your own relaxation needs.

Purchasing real estate is a great way to increase your monthly income streams while continuing to keep up with fluctuating inflation and other market trends. Best yet, if they are set up as a passive income stream you can often hold them well into retirement without demanding a significant amount of your time or money to maintain. The passive income you can generate from purchasing real estate, is one smart strategy you can utilize as you approach retirement, to offset the money previously brought in through a monthly paycheck, in order to live the type of life you desire well into your retirement years.

January 21, 2022

Before you jump in and decide investing in real estate is a smart financial decision for you, it’s important to make sure that you understand the risks and rewards.  Below we will look at some of the most important criteria someone should consider prior to making any major real estate investments.

Geographic Area

It’s important you understand where the property you’re considering investing in is located and what the obstacles are for investing in one particular area over another.  You should consider where exactly you want to be investing based on your unique circumstance. Is it best for you to invest in a city or rather in the suburb or a more rural area? Some investors prefer investing closer to cities because there is more demand for housing and it can be easier to find tenants. That said, if you’re willing to spend the necessary time looking for good renters, then perhaps for your situation the suburbs would be a better fit since they tend to have lower crime rates than more populated cities.

Understand All Costs

You should have an in-depth understanding of all of the costs associated with making a large investment in real estate before making a final decision. For instance, it’s important to understand that there are legal fees and other expenses involved with purchasing real estate.  Making sure ahead of time that your budget is prepared for those extra costs as well as any other potential startup costs will put you ahead of your less informed competition. Don’t forget to account for the taxes on your investment returns, so you know what to expect at tax time every year.  Additionally, if you’re considering a residential property, then you should make sure to not forget about maintenance costs and utilities because those can eat into your profits often times before you realize it.

Get Clear On Your Goals

Being really clear on what your short- and long-term financial goals are ahead of time will help you determine the type of property that’s right for you. For instance, if your goal is to use this investment property as a retirement home, then maybe look into purchasing a vacation rental in a gated community since these properties are often good for retirees because they generally have a lower amount of crime.  If, on the other hand, your objective is to gain revenue from renting out a property long term, that will require an entirely different approach than focusing your time on vacation properties.

Get Insurance Coverage

You need to make sure you are covered in the case of an emergency with a good home insurance policy. There are many different insurance plan options designed to fit your investment properties specific needs, so it’s a must that you know what common things could happen ahead of time and protect your investment accordingly. For instance, if you’re considering purchasing commercial real estate, the property should be covered under property insurance because commercial properties are often more valuable than residential ones which often put them at a higher risk of being the target of theft and other crimes.  On the other hand, if you’re thinking about purchasing a vacation home, you’d be wise to have an insurance policy that covers natural disasters like earthquakes or flooding.

Above are just a few examples of the types of information you should consider when you’re thinking about investing in real estate.  Make sure that you take the time before making any final decisions to understand the specific market conditions, know what kind of property type is best for you, and always remember to protect your investment with good insurance coverage.

January 14, 2022

Real estate is one of the wisest assets someone can invest in. One big advantage real estate investment has over other industries is that the value of a property does not tend to fluctuate much from day to day. This is one main reason many investors choose real estate as their primary source of investment. Of all the various real estate options available; commercial, land, and residential properties are the 3 primary types of investment available if you’re ready to give real estate a try. Commercial properties specifically in most markets are in constant demand. Investing in commercial properties will likely increase your ROI overall.

Commercial real estate values are growing rapidly in many major markets. These are the primary properties that are home to a wide range of office spaces, retail stores, and countless different businesses. Any non-residential real estate that is not used for business operations is known as commercial real estate. Investing in commercial real estate is one of the smartest ways to expand your financial portfolio. Below we will look at a few of the top benefits of investing in commercial real estate specifically.

Positive Cash Flow

Compared to the many investment options out there such as the stock market, company shares, and cryptocurrency, the ROI from commercial real estate investment is generally higher. The generated ROI for commercial properties also tends to perform better than simply purchasing bonds. The stability of investing in commercial real estate makes for a healthier environment even if real estate markets temporarily become more volatile.

Build Equity

Equity is commonly described as the difference in value from what a property is currently worth versus how much money is still owed on the investment. When investing in commercial real estate, it is not uncommon to build equity in a much smaller time frame than other investment strategies allowing for more flexibility to leverage the earned returns as your investment in commercial real estate appreciates.

Investment Security

With commercial real estate, both the structure and land the land the property sits on can have significant value. This is one main reason why commercial real estate can be such a valuable asset. If you are able to invest in commercial real estate in the right location, you can often times avoid a negative income stream even during off-seasons or economic down turns. This is a very positive advantage if you have an investment portfolio with several different types of investments and want to help insure that the performance of said portfolio doesn’t take a hit overall. For these reasons and many others, commercial real estate has become the primary source of resource allocation for many successful real estate investors.

Leverage

The reality is that most of the time, even the savviest investors are not able to purchase a new real estate investment with cash alone and most utilize a mortgage or seek funding through the use of a hard money loan in order to secure their investment. This ability to acquire a new asset without paying for all of it up front is the leverage many investors require in order to grow substantial wealth over time. This is one reason so many investors have been able to build wealth by utilizing a loan from a bank or other 3^rd party lender service.  Commercial real estate can be a secure way to ensure you can repay the loan in a timely manner while building a higher ROI with an asset you will one day potentially own.

Above are just a few of the top ways investing in commercial real estate can be a significant financial benefit to your long-term investment portfolio. As with any investment it is important to do your research and make sure you understand the terms of any investment or loan you need to take before the deal is finalized.   Hopefully the above guide will assist you in learning more about the advantages of investing in commercial real estate.

January 7, 2022

Making the decision to purchase a vacation property as an investment is a serious life commitment. These decisions should never be made in the heat of the moment. It is vital to weigh all the advantages and disadvantages, and calculate the potential risks in order to avoid an unpleasant surprise for you. Below we will weigh the pros and cons of investing in vacation properties in the hopes of providing readers with the information they need to make a more informed decision before the next potential investment comes along. First, let’s look at a few pros of owning an investment property:

New Income Stream

One of the main reasons people decide to invest in vacation properties is the potential they offer in providing a new stream of income to their monthly financial positioning. Renting out just one vacation property in a good location can add hundreds if not thousands of dollars to your monthly income.  Owning multiple vacation rentals over time can lead many to make it their primary source of living.  There are a number of online hosting sites available nowadays to assist you in the process of keeping your vacation property occupied, especially during off season times.

Investing In Your Future

You have more flexibility with vacation properties to schedule rentals according to your future plans. Whether you’re looking to get away over a long weekend, gathering with family for the holidays, or simply planning some alone time, with a vacation property, you likely won’t have to look for a place to stay. Even better, you will be able to sell your vacation property when the right time comes and live on the money from the sale or use it to cover other expenses. The equity should allow you to spend money on your future health, travel, and other needs.

Now let’s take a look at a few of the potential cons of investing in a vacation property:

Expenses Increase Over Time

Vacation rental properties are not a thing that can be left unattended. You will need to make sure that cleanliness is maintained inside and out of the property, that needed repairs are handled in a timely manner, and that all bills are paid on time. It is also important that you not forget about paying for insurance.  There are many property management companies out there that can perform many if not all of these routine tasks for you but beware, they all come with a cost. If you do not have enough upfront funds and need a mortgage, keep in mind that your monthly expenses will increase significantly and there is no guarantee that the rental income will cover them until the end of payments.

Advertising and Maintenance Cost

You should expect to advertise your vacation property on several online platforms. You need to monitor these relationships closely, including review issues, looking at how your competition is performing, and improve your rental conditions to attract new renters continuously.  It may be necessary to add special amenities, such as allowing pets or having a pool. These types of amenities can increase customer demand significantly. The increased level of comfort can easily attract guests, but with the added enhancements comes added costs that will take time to recover.

HOA Restrictions

It’s important to research and make sure you understand all of the potential HOA requirements in the neighborhood before purchasing a vacation property in a particular area. Unfortunately, it is often the case where someone does not do their proper homework only to discover that the local HOA restrictions severely limit their ability to make enough revenue off of a vacation property to make it worth their while.

Prepare Before Investing

Before investing in vacation property, you need to consider several important factors, so that the business will bring not only money but also pleasure.  Vacation property investment can be a profitable investment with proper budget preparation and management. When buying a rental property, you should be well aware of the demand for rents in the region, prices, as well as costs. Prepare the accommodation for guests, always keeping in mind not about what you like, but the amenities that attract specific renters to your property.