No Comments

A Few Helpful Tips for Investing in Real Estate Using Retirement Funds (2019 Update)

Your retirement fund is an important tool for ensuring that you’ll have the money needed to live the lifestyle you want once you reach retirement age. Whether we’re talking about a 401(k), a traditional IRA or a Roth IRA, you can invest in a number of different vehicles to grow your wealth. That includes real estate, although most investors are unaware of it. What should you know about investing in real estate using retirement funds, though? There are several important rules that you’ll need to be aware of before taking any action with your retirement fund.

Deposit and Purchase Price

One of the first things to understand is that the deposit and purchase price for any real estate should be from the retirement account. That money cannot come from any other account, and it cannot come from a disqualified person.

Titling Considerations

You cannot put the title of the purchased property in your name, or in the name of a disqualified person. In fact, the title to the real estate should be put in the name of your retirement account.

Can the Real Estate Benefit You?

The only benefit you can receive from the real estate is to ensure retirement success down the road. It cannot offer any sort of immediate benefits, including indirect immediate benefits. For instance, you can’t purchase a vacation home that you’ll use every now and then, or an office in a building that your fund owns.

What Types of Real Estate Can You Invest In?

You can invest in pretty much any type of real estate, from a vacant lot to an income-producing property to timberland, depending on your needs. The primary rule is that you can only benefit from the real estate during retirement, not now.

Can My Fund Purchase Property I Already Own?

No, the fund cannot purchase any real estate that your currently own. Again, you cannot purchase real estate that you will use in any way, as that would be considered an indirect benefit, and is against the IRS’ rules.

How Do You Pay for Property-Related Expenses?

Any money used for the property, say for upgrades, repairs, maintenance or the like, must come from your retirement fund. It cannot come from you, or from a disqualified person.

Can You Use the Income Generated from Real Estate?

Any income generated by real estate purchased by a retirement fund must go back into the fund itself. You cannot use it directly, as that would be considered an immediate benefit, which is not allowed under IRS rules. You can benefit from it once you begin drawing disbursements from the fund after retirement, but not until then.

These are just a few of the important things you’ll need to know about purchasing real estate using your retirement fund. It is possible, but there are strict rules in place. There are also UBIT rules in place governing issues related to loans obtained to purchase real estate with a retirement fund, and other considerations you’ll need to make.

No Comments

5 Trends in Commercial Real Estate You Need to Watch in 2019 (2019 Update)

Anyone interested in getting into the commercial real estate game needs to understand that emerging trends can have a major impact on your investing activities and the amount of success you enjoy (or don’t, as the case may be). Whether you’re a seasoned investor or you’re just getting into the act, here are five of the most important trends for 2019 that you need to watch.

Changing Regulations

It’s not just a new year, but the start of a new presidency. President Trump has already said that he plans to strip down Dodd-Frank and make major changes. Those changes will affect you, either for good or ill. There’s also the possibility that some specific banks will benefit more than others, and if that’s the case, there’s the potential for legal action. Again, this may have no effect on you, but it bears watching.

Less International Competition

It’s no secret that American investors have had to fight it out with international investors for prime real estate in many of the nation’s largest markets. That seems poised to change. In particular, Chinese investment may be lightening. If true, this means that you’ll face less competition, and possibly enjoy better pricing, but that remains to be seen.

Fewer Regulations

Tying back into Trump’s drive to strip down Dodd-Frank, you may see fewer regulations in the investment world. The immediate upshot of this may be that you have an easier time securing financing for your real estate investments. With fewer regulations, banks are able to be freer with their capital, but this may also come with increased risk.

Higher Interest Rates

This one has been a long time coming (and it’s not quite here yet, so things might change), but the Fed is finally set to raise interest rates. They are expected to go up by a quarter of a point. This will affect several things, but most notably the interest rate you pay on commercial real estate loans, as well as lenders’ willingness to make loans in the first place. If they’re able to charge more interest, they may be more willing to take bigger risks. There is also concern about the larger national deficit increasing inflation, which may also have a big impact on interest rates.

Alternative Lending Solutions

Finally, there’s a shift away from traditional bank lending. Part of this is due to the ongoing repercussions of Brexit, which is making UK lenders unappealing options for financing, but also to the rise of non-bank lenders. Crowd sourced financing and groups like Blackstone are poised to make a big difference in the commercial real estate industry, so pay attention when choosing your options.

These are just a few of the trends that you’ll need to watch in 2017 if you’re considering or already involved with commercial real estate investing. While none of these trends has really changed the landscape just yet, they do have the potential to have significant impacts on any commercial investments, from individual investors to investment groups and everything in between.

No Comments

The Most Important Factors for Investing in Real Estate (2019 Update)

Are you considering real estate as a means of investing and building your wealth? It can be a very rewarding choice, and there are many different ways you can go about it. However, there are quite a few things that you’ll need to know before you make your first investment. There are many factors that you’ll need to understand, and we’ll cover the most important of those below.

Location, Location, Location

You’ve heard that the mantra in real estate is location, location, location, and that’s true in real estate investing as well. It really is all about location. You need to consider every aspect of a property’s location before you determine whether it’s a worthwhile investment option or not. What aspects should you consider? How far is the property from major shopping and dining venues? What about businesses? Where are amenities located, and what’s the prospect for the immediate area in terms of growth and development? Where’s the nearest interstate or major highway? What about warehouse districts or transportation hubs?

Have the Property Valuated

A professional property valuation is a vital tool for any would-be property investor. Why is it important to have an independent valuation done? Simply put, it ensures that you’re getting what you pay for, and that the value of the property is greater (or will appreciate higher) than the price tag. There’s also the fact that pretty much every step of the financing process will hinge on the valuation. The income approach is a suitable valuation method for rental properties, while the sales approach comparison can be used for old and new properties. The cost approach is best suited to newly constructed properties.

Your Purpose

What will the purpose of the investment property be? What is your investment horizon? Both of these are crucial considerations, because real estate has high value, but is not particularly liquid (not in comparison to other investment vehicles, at any rate). There are multiple purposes that you can use here, ranging from buying and using the property yourself to buying and leasing, buying and selling in the short term, or buying and selling down the road. Each offers different benefits (and drawbacks), as well.

Your Income Possibilities

When considering any type of real estate investment, you need to know how you plan to make money. There are multiple ways to do this, and several different combinations that includes more than one way. The income possibilities will affect your number of profit opportunities, as well as your cash flows. For instance, you could expect to only see cash flow from rental payments, and inflation makes this a smart idea. However, you could also expect to reap benefits from appreciation and a sale in the future. Depreciation can be used to offset a tax burden, and it may be possible to provide some minor (less expensive) renovations and reap a higher sale price down the road.

The Loan

Unless you have a significant amount of existing capital (and sometimes even then), you’re going to need a mortgage to take advantage of real estate. Know the type of mortgage that will best suit your ultimate goals for the property, as well as your expected cash flows.

New or Existing?

New construction is sometimes quite affordable (all things considered) plus the potential to customize many aspects. However, existing construction can be even lower priced, although there may be a need to invest a significant amount of capital in renovations and improvements. There is also the question of past ownership when buying an existing property. For new construction, you’ll need to consider the reputation of the construction company, but existing construction will require you to consider the deed and any old appraisals, as well as estimates of maintenance and utility costs based on the past.

Is Direct Ownership Right for You?

Finally, for many real estate investors, direct ownership is a great choice. However, if you don’t want to deal with the hassles that come with being a landlord, indirect investment through an REIT or a similar setup might be the better choice, as these can allow you to reap financial rewards without the headaches that often go hand in hand with direct ownership.

No Comments

Top 10 Reasons to Buy Multi-Family Investments in Dallas, Texas (2019 Update)

Multi-family homes are a great investment for many reasons all across the country. And no one who has paid any attention to the real estate market lately can have failed to notice that Dallas and other urban Texas areas are the hottest place to be for real estate investing. What happens when you combine these two investing cash cows? Here are our top 10 reasons to consider investing in multi-family properties in Dallas.

1. Easier Management

When all of your units are clustered in a single property, it’s far easier for you or your manager to take care of the property and tenants. Everything from collecting rent to dealing with paperwork is far more simple when you have multiple investments in one streamlined work flow.

2. Dallas’ Thriving Population

The Dallas area is booming. Not only is it the 6th largest metro area in America, it also ranks in the top 15 metro areas worldwide. In 2014, the population was well over one million and growing, and the rate of growth over the past 15 years has exceeded seven percent.

3. Multi-family Properties Bring Tax Breaks

The government appreciates it when investors provide housing. It keeps the city operating, and it keeps new workers and consumers coming into the city. Investors get tax incentives for providing this service. In some cases, depending on the depreciation of the property, investors could pay as little as no property tax at all.

4. Fortune 500 Companies Go to Dallas

There are over 20 Fortune 500 companies headquartered in Dallas, which not only means that massive populations of employees and their families live in the city, but also that young professionals seeking great jobs are coming to the city as well.

5. Multi-family Properties Hold Value

A properly rehabbed multi-family property will attract a steady stream of income for decades, and that’s a very attractive fact to other investors. Thanks to the assurance of long-term income, it’s possible to sell multi-family properties for top dollar even years after you initially invested.

6. Dallas is a College Town

Over a dozen colleges and prestigious universities call Dallas home, and that means that thousands of students regularly need housing during the school year. Not only that, but the employees and faculty of each university need housing as well. Over all of these colleges, Dallas hosts more than 300,000 students alone each year.

7. Multi-family Properties Appreciate More Readily

Forcing appreciation can be difficult with a single-family home, where you often are stuck with what you’ve got. But a multi-family property can be improved in many ways. Add on-site laundry, add a play ground, make a communal hang out space, or a gym. Any of these could force appreciation.

8. Forbes Put Dallas on the Map

Forbes has frequently featured Dallas as the top city for young professionals, and the third fastest growing city in the country.

9. Dallas Has the Fastest Job Growth Rate

Additionally, jobs are growing at a miraculous rate compared to the rest of the country. This leads to higher demand for fast and affordable housing.

10. Texas Attracts Business Owners

Because Texas has fewer business regulations and tax laws, it’s a haven for business owners. They bring employees, who need housing, and affordable multi-family properties are the best way to capitalize on this trend.

No Comments

4 Unexpected Ways to Reduce Risk in Real Estate Investment (2019 Update)

All investment methods carry risk, including real estate. It is crucial for any aspiring investor to understand that. You’ll need to know your risk tolerance before you get started, or you could find that rather than growing your wealth, your investments drain it, instead. With that being said, there are quite a few ways that you can reduce risk in real estate investments, and we’ll touch on four of the options available you might not be aware of.

Insure Your Investment

Insurance is everywhere today, and can be purchased for everything from your car to your pet’s life. If you’re concerned that your real estate investment might head south, there is insurance that you can buy to safeguard your wealth. However, understand that it can be expensive. In fact, there are quite a few different forms of insurance depending on your investment method.

For example, if you flip homes, then you can invest in builder’s risk insurance. If you are worried about how you’ll make payments if your renter skips out, there’s loss of income insurance. There’s actually a form of insurance for just about every threat you might experience. It’s definitely worth looking into.

Due Diligence in Marketing

Did you know that the right amount of marketing and outreach can help reduce your risks when investing in real estate? Yes, it’s true. Think about it – if you’re running into risk, it’s because you don’t have a renter, or because the house you bought to flip hasn’t sold yet. Marketing gets the word out about your property to your intended audience. The more you market and get the word out to the wider area, the more people you’ll reach.

Obviously, the larger the pool of potential buyers or renters, the lower your risk of not having someone move in or take the home off your hands. However, you can bet that if you don’t market at all, you’ll end up with a significant loss. You don’t even have to do the marketing yourself. If you’ve partnered with a property management firm, they can help spread the word. Be proactive about handling your risk, and you’ll find that you face less than you had anticipated.

Keep Your Residents Happy

Whether we’re talking about a single-family home as a rental or a multi-family property, you need to ensure that your residents are happy and well taken care of. What does this mean for a property investor? Simply put, you need to be able to anticipate what your tenants will need, and then supply it before they can look for it elsewhere. You might consider low-flow fixtures to save on utility bills, high-efficiency HVAC systems to reduce electric bills, or something completely different.

You also need to be proactive about maintenance, upkeep and heading off potential problems. If you let something slide for too long, you can bet that your tenants are going to walk away, leaving you with an untenanted property and a loss of income. If nothing else, come right out and ask your tenants what needs to be improved, or what they would like to see happen around the property.

Property Management Matters

We touched on property management a little bit ago, but it bears mentioning once more. A quality property management company can do a great deal to reduce your risk with real estate investment. A proactive firm will help ensure that you have tenants as often as possible, going to great lengths to market the property when one tenant leaves and vetting potential new tenants to ensure the safety of your property and reduce the likelihood that they’ll leave before the rental agreement or lease is up. They can also provide you with important warnings that things are not right with the property, if the tenant is causing damage, or if there’s another issue that needs to be handled quickly.

With these four options combined with the more conventional risk reduction methods, you should be able to ensure smooth sailing for your real estate investing needs.