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July 2019

types of real estate investments to know

Real Estate Investing 101: How It Works in 2019

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We know you’ve seen it — an infomercial by an energetic self-proclaimed real estate investor. He has made millions of dollars perfecting the best practices for certain types of real estate investments and he wants to let you in on his secrets for the very reasonable price of only $_____. 

Image result for get rich quick real estate photo chart graph

Unfortunately, as is the case with most investments, there is no magic formula, golden bullet, or secret way to easy riches. 

If you are really interested in certain types of real estate investments, you need to do your homework, and we have outlined some basic principles and ideas for you below.

The Idea for Types of Real Estate Investments

types of real estate investments

To make money in real estate you need to ultimately buy a property and then sell it for more than you bought if for. That may sound easy, but real estate usually costs a lot of money and you’ll need financing to make most of these deals happen. 

But first let’s look at the ways you can make money without using any outside financing sources.

Quick Turn – Wholesale

A quick turn means you control a property for a short period of time and then get rid of it at a profit.

Picture this: You find a motivated seller that is willing to get rid of their property for $100,000. Then, you find a buyer that’s willing to pay $110,000. 

You play middleman, get the parties together and take the $10,000 as an assignment fee. 

Another way to do a no money down deal is to buy an option on a property. An option gives you the right to purchase a property at a certain price for a certain period of time.

If you can purchase your option for a cheap price, and if you can then find someone that wants the property, you can sell your option at a profit to that buyer. 

Of course, there are a lot of “ifs” involved, but these deals do happen.

Quick Turn – Retail

This is a more traditional way to make a good return in a hurry. You buy a fixer-upper, renovate it, and sell it for more than you paid for it. This is the basis of the many HGTV shows you have undoubtedly watched, and if you have been a careful viewer, you are aware of the pitfalls involved in certain types of real estate investments.

One excellent way to make money in real estate while reducing some stress is to buy a fixer-upper and live in it. While you occupy the property, you repair it. Since you are occupying the property, you would have the same monthly housing cost as you would anywhere, and your only additional costs would be for remodeling and renovating. 

This deal works particularly well if you are able to do the work yourself. If you are the type of person that needs help changing light bulbs, the occupy and remodel plan might not be best for you, however.

The Long Term – Renting

There are other ways to make money in real estate. You can buy a piece of property and then rent it. If you do it right, you can create monthly cash flow while have your tenant pay down your mortgage. 

Check this out: A savvy investor bought four houses in the year 2000 in Austin, TX. 

These were single family homes of around 2500 square feet, and they were purchased new for about $130,000 each.

The investor put $30,000 down on each of the and took out mortgages of $100,000 per property.

With taxes and insurance, the monthly payment for each property was around $850. The investor was able to rent each property for $1000 per month so the $150 profit margin he managed to generate each month was slim. Now, in 2019, the properties rent for $2100 each, and even though taxes have gone up, the investor is still clearing $600 per month per home. In addition, the mortgage balances on each home have been paid down to only $50,000. 

Better yet, Austin real estate has skyrocketed in price, so those homes are now worth over $300,000 each. If our investor sold the homes today, he would make close to $250,000 on each on each one!

Image result for renting investment property chart graph 2019

Equity Play

Another way to make good money in a rising market is to buy a property and rent it even though the rent collected may not total more than the monthly mortgage costs.

Even if an investor has to feed a property a few hundred dollars per month, big gains can be realized at the end. For example, an investor buys a $300,000 home. His monthly costs including principal, interest, insurance and taxes are close to $1900. He can only rent the home for $1700, but the value of the home increases to $400,000 in five years.

Yes, our investor technically loses almost $10,000 in cash flow over the five-year period, but when he sells the home for $100,000 more than he paid for it, the losses are erased. 

Of course, you need to take other things into consideration like repairs, maintenance and vacancies, but it you do your homework and are patient, you too can make money in certain types of real estate investments.

Curb Appeal Ideas for 2019

7 Design Ideas To Improve Your Home’s Curb Appeal

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In this post, you’ll learn how those curb appeal ideas can help boost your home’s value in the immediate future. Whether you’re looking to update your home for increased happiness with your home or to make a sale; here are the tips to help get you started today.

1. Start with a Clean Slate

Boosting your home’s value with curb appeal ideas is smart for a variety of reasons. Not only will you create a more beautiful and relaxing outdoor setting for your own enjoyment, but you’ll also increase your home’s resale value. Also, you’ll have plenty of options when it comes to various improvement projects. That way, you can take your time to create something truly special for your outdoors. If you’re interested in some fine design ideas for boosting your home’s curb appeal, keep on reading.

Many people find their yard quite bothersome simply because it feels cluttered and neglected. But, if you want to do something about it, your first step should be clearing out the mess. In case you have your garden tools and some other items or equipment lying around, make sure to get rid of anything you don’t need. Also, organize the rest properly and store it away. If you don’t have a practical shed, you can consider building a small one for your needs or using some other storage methods such as wooden crates, tin buckets, etc. Put these away in your basement if you don’t have enough space for a shed. And once you’re done with that, it’s time to mow the lawn and get rid of weeds. 

2. Take Care of the Greenery

Curb appeal ideas are all over the internet, but different people like different things. In that respect, you really need to think through what your best course of action is when greenery is concerned. If you don’t fancy flowers and colors much, focus your attention on evergreen hedges and shrubbery. Plant these along your fence and designated spots in your yard. Also, don’t forget to prune the trees accordingly.

But, if you’re a fan of a rich natural look, definitely look into different flower options as well. You can choose low-maintenance plants if you’re not much of a green thumb. Also, climbing plants tend to look great for a more layered and whimsical look. In the end, you don’t have to dig up your yard to get the benefits of greenery. You can use interesting planters to boost your curb’s natural appeal.

3. A Fresh Coat of Paint Does Wonders

If you’re not satisfied with the look of your yard even when it’s clutter-free and filled with greenery, the problem may lie in outdoor structures that feel old and worn. A fresh coat of paint can instantly elevate the look of your yard. Basically, repaint your fence and other structures you may have in your yard such as your shed.

You can also boost the curb appeal by freshening up your front porch. If you’re not keen on repainting your entire porch, at least repaint your front door. This is a great opportunity to introduce some vibrant colors and create pleasant contrasts for your exterior. 

Check out this Sydney House Painters blog for more paint inspiration and advice.

4. Add a Deck/Patio and a Garden Path

Nothing can transform your yard and boost your curb appeal as much as a nice lounging area outdoors. If you don’t already have a designated patio area (yes, you should add one!), you can create one by pouring concrete or placing decorative tiles. Of course, the most effective solution would be to hire professionals who can build an adequate deck for your outdoor space.

This investment is definitely worth it, regardless of whether you want to sell your home or enjoy it personally. Also, don’t hesitate to update your garden look either. If you’ve already taken the trouble to improve your greenery, add a garden path as well. With so many different garden path ideas, you can definitely find a solution that matches your taste and budget. 

5. Clean Everything Thoroughly

You can’t improve your curb appeal if your home exterior is dirty. In that respect, it’s essential that you give everything a thorough clean. Use a pressure washer on your driveway, your deck/patio and garden path as well as your front porch and fence. Moreover, if your house walls have some stubborn dirt on them, use a pressure washer to clean them as well. If you don’t have one, you can rent it for this purpose. Also, if you plan to use your older outdoor furniture for the lounging area, make sure to clean it properly, too. This also goes for furniture items you’ve got at flea markets and thrift stores as well as planters. Furthermore, clear out your gutters from dirt and debris. This will make a huge difference.

6. Curb Appeal Ideas for Front Door Décor

Aside from seasonal decorations, effective and timeless decorative bits for your front door area can definitely spruce up the look of your outdoor space. For starters, you can update your house number. This tiny detail can truly transform this particular area.

Outdoor carpets and plants should find their place here as well. If you want the plants around your doors to look great constantly, you may be better off with faux plants for this purpose. And even though it may not be front door décor specifically, don’t hesitate to update your mailbox as well, so that you can effectively round up your design project for the outdoors.

7. Use Proper Lighting

In the end, you can’t make the most out of your yard or boost the curb appeal properly if you don’t have adequate outdoor lighting. Think about it – even if it looks great during the day, if it’s completely dark during the night what’s the point?

That said, it’s crucial that you invest in effective outdoor lighting solutions. Motion-sensor lighting is definitely a go-to solution for many people, especially for the front yard and porch. But, don’t hesitate to use LED lights along your driveway. Also, torches, lanterns and similar are more than necessary for the deck/patio area. For a more whimsical look, you can use fairy lights. If you want to do the best possible job with your outdoor space design in order to boost your home’s curb appeal, don’t succumb to pressure or try to rush things. Proper planning and analysis are instrumental for a great end result. You may even want to consider discussing your best options with professional landscapers, so that you can focus solely on ideal solutions for your particular outdoor space.

real estate terminology

The Beginner’s Guide to Real Estate Investment Language

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For any number of reasons, you may want to invest in real estate. You may have attended a seminar, read a book or have friends and relatives that have made a lot of money—or claimed that they did—by simply and passively investing in real estate. Every investing arena has its own language, and if you really want to consider real estate as a viable investment vehicle, there are some examples of real estate terminology you need to understand, and following is a good list:

Debt Service

This refers to the amount of money is takes to pay—or service–a rental property loan or home loan every month. If the principal and interest of your mortgage note combined are $985 month, then that is the amount it will take to adequately service your loan. If you envision having multiple properties with mortgages on all of them, you need to add the required payments together and the result will be your debt service amount.

Operating Income

Take all of your gross rental income dollars, add them together and you get your operating income. This is a similar term to gross income meaning dollars you put in the bank before you pay expenses.

Net Operating Income

This is the amount of money left after you pay all of your expenses like taxes, insurance, yard maintenance, repairs, rental costs, and of course your debt service. Subtract your expenses from your operating income and that will give you your net operating income.

Short Sale

A short sale occurs when a distressed owner sells a property for less than what is owed to lenders. Lenders of course have to agree to a short sale, but by agreeing to a short sale they can avoid costly foreclosure proceedings that in some states can take years to complete. Short sales can be good investment opportunities if you do your diligence. You have to be patient, though, because sometimes banks just do not respond quickly to short sale offers.

Broker Price Opinion (BPO)

An appraisal is a formal document that carefully explains what a property is worth. If a house appraises at less than what it is being sold for, lenders typically reject the deal. In the short sale and foreclosure markets, however, banks will sometimes settle for a BPO—a more arcane real estate terminology example– that is an opinion of value authored not by a certified appraiser, but by a real estate agent or a Realtor.

Real Estate Owned (REO)

An REO property is one that a lender has foreclosed on and has listed for sale. Since the bank is the owner and may not even have a local branch, you have the chance to get a good deal. The bank does not have the same emotional attachment to the property than a soon-to-be foreclosed owner would, and therefore the lending institution may just want to get the property off of its books. REO properties are not a secret, however, and many that search out foreclosures will be looking at the same property that you are.

Loan to Value (LTV)

The LTV is the mortgage amount dived by the appraised value of the property. A $100,000 property financed with a $90,000 loan would have a 90 percent LTV. The other $10,000 would be your down payment funds.

While prospective homeowners purchasing their first home can buy a home with no money down—a 100 percent LTV—investors typically need more than that, sometimes up to 25 percent. Also remember that as a precursor to the Great Depression that began in 2008, homes were being financed with a 120 percent LTV.

Amortization Schedule

Be sure to go to www.bankrate.com to plug in your proposed loan amount, interest rate and loan term length. Then calculate an amortization schedule that will show you that with a mortgage loan, a large part of your monthly payment goes to interest and less to principal for a period of years before you start paying more principal and less interest. Amortization schedules are part of real estate terminology 101.

Equity

Take the value of your property, subtract everything you owe on it, and that will give you’re your current equity, or the net amount of money the property is worth.

Equity Play

Investing in rental property where the amount of money taken in monthly is not sufficient to cover the monthly costs but where the increase in value can be substantial can be labeled an equity play. In this situation you may lose money on a monthly basis, but you may also get it all back plus a profit when you sell the property.

Traditional Financing

When a property is financed by a bank or mortgage company loan to a buyer that can meet the lender’s stringent credit requirements, that loan, in real estate terminology, is called traditional financing.

Non-traditional Financing

Rent to own or contact for deed deals are two examples of non-traditional financing where home buyers with less than stellar credit can still have a method that leads to true home ownership.

If you are interested in becoming a real estate investor or managing your own property, you absolutely need to understand the terms explained above, but please don’t stop there. Read as much as you can, speak to fellow investors, and attend presentations and meetings to absorb all of the information you can find.