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How to Syndicate a Real Estate Deal, Texas

How to Syndicate a Real Estate Deal, Texas

How to syndicate a real estate deal Texas

Real estate syndication is a way in which investors come together to invest in larger properties which they can’t afford individually.

Real estate syndication is group investments where all investors involve combining their individual money to purchase a large property that they are not able to purchase or manage individually.

Imagine a large commercial or residential real estate is up for sales and the cost of the property is very high. It will be very difficult for individual investors to purchase the property. When individual investors combine their resources, they will be able to purchase the property.

The aim of real estate syndication is to generate larger returns on investments.

In real estate syndication, there is always a person or group that will manage the property. The manager, who should be very experienced, will be responsible for decision making. The investors enjoy the profits from their investments.

Real estate syndications are actively regulated by the Securities and Exchange Commission.

How to participate in a real estate syndication

  1. Accredited investor – You need to earn more than $250,000 as an individual or $300,000 as a married couple. Or you can have at least $1,000,000 in assets. These assets should be outside your primary residence.
  2. Connections – You need to know the Sponsor or you need to be invited by a limited partner to invest in the syndication.
  3. Have a fundamental understanding of the syndication – You need to understand what type of real estate investments you will be investing in. You also need to know the timeline and returns for your investment.

How does Real Estate Syndication work?

A real estate syndication deal is pretty simple. It involves a Sponsor/developer and a group of investors.

A Sponsor or developer is the person who is physically involved in the daily operations and management of the property.

The investors are the ones with more money who invest more money to purchase the property but are not involved in the daily operations and management of the property. The investor simply invests money and gets a share of the profit based on time and the amount of money invested.

A Sponsor is usually responsible for investing a smaller portion of the investment capital. The Sponsor usually invests anywhere from 5-20% of the total equity capital required for the purchase of the property.

The investors are responsible for investing a larger portion of the investment. The investors are usually responsible for investing 80-95% of the total equity capital required for the purchase of the property.

Syndications are usually simple to set up and it comes with built-in protections for everyone involved. It is usually structured as a Limited Liability Company or a Limited Partnership. The Sponsor participates as the General Partner or Manager while the investors participate as limited partners or passive members.

The Sponsor rights and Investor rights, including voting rights, distribution rights, and the Sponsor remunerations rights for managing the investment are all written in the LLC Operating Agreement.

Real Estate Syndication profits

How do a Sponsor and investors make money in a real estate syndication?

The money in a real estate investment majorly comes from rental income and property appreciation.

The Sponsor distributes the rental income is to the investors on a monthly or quarterly basis in accordance with the pre-set terms.

The value of a property usually appreciates over time, hence investors are expected to make more profits when the property is sold.

When does everyone get paid?

The time for payment depends on the terms and when the investment gets matured. Some investments can take within 6-12 months while others can take a longer period of time. It could take up to 10 years or more. Everyone who is a part of the syndication receives a share of the profits according to their investment equity capital and the terms of the agreement.

How does everyone get paid?

Investors receive what is called a Preferred return.

A Preferred return is a benchmark payment that is distributed to all investors. Preferred return is usually about 5-10% annually of the initial money invested.

A Sponsor may earn an average acquisition fee of 1%. It could also be anywhere from 0.5 to 2% depending on the transaction and terms. Before a Sponsor will share in the profit as a manager of the property, all investors must have received a preferred return.

Here is an example of a payment structure of a real estate syndicate:

If for example, an investor invests 100k in an investment with a 10% preferred return, the investor could take home 10k each year once enough money has been made from the property to make payouts possible.

After all the investors have received their preferred return, the money remaining is shared between the Sponsor and the investors in accordance with the syndication’s profit split structure.

For example, if the profit split structure is 70/30, all the investors will receive 70% of the profits after they have received their preferred returns and the sponsor receives 30% after preferred returns.

How to Structure a real estate syndication deal

Real estate syndication deals are usually structured as an Equity Partnership, Private Loan or Capital Structure. It is very important that you understand how a deal is structured before you take part in it.

  1. Equity Partnership

In an Equity Partnership, all expenses and profits are shared between the investors and the Sponsor as stated in the deal documents.

Equity Partnerships tend to have higher risk more than a Private Loan. The risks often occur when dedication and due diligence is lacking in the parties involved. Equity Partnership can generate more returns for investors if risks are properly mitigated.

  1. Private Loan

In a Private Loan, an investor lends money to a Sponsor/developer who must pay back at the agreed time frame. A Limited Liability Company (LLC) is used to increase the level of protection, mitigate risks and provide opportunities for investors to become members of the LLC.

The investors can then enjoy the benefits of the LLC becoming partners with the developer or lend the investment funds to the developer.

  1. Capital Structure

Capital Structure is also known as Capital Stack. It refers to the organization of all financial capitals that are included in syndication.

Capital Stack defines who has the rights to the income and profits generated from the property all throughout the rental period up to the sale of the property. It also defines in what order investors will get paid and who has rights to the actual asset in case of default.

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Real Estate Investing in Land Dallas, Teaxs

Real Estate Investing in Land Dallas,Texas (Ultimate Guide in 2019)

Investing in land has become increasingly profitable. Investors are having more interest in land investment as it requires low or no maintenance and with good investment profits. Continue reading about Real Estate Investing in Land Dallas.

Investing in lands in Dallas has become increasingly profitable for investors. Investors boost and diversify their portfolios by investing in Land in Dallas.

The land is a limited property; it can’t be manufactured or created. The number of lands available now is the number of lands that are going to be available forever. The value of land will always appreciate as more buildings and constructions are been done. The need for land is continuously growing, creating a high demand for it.

The population of Dallas is constantly increasing and the demand for more residential buildings keep increasing. Lands are going to be needed for these buildings to be built.

It is not a question whether or not land appreciates because it will always appreciate. The only question you may ask is how much it appreciates. 

Benefits of Investing in Land in Dallas

There are several benefits of investing in land in Dallas. As an investor, you will find out that it is easier and more profitable to invest in land rather than investing in commercial and residential buildings.

Some good benefits of investing in lands include:

 

  • Lower start-up capital 

The prices of land are generally lower than the prices of commercial and residential buildings. Purchasing land requires lower capital. You can easily save up to have enough money to purchase a land unlike purchasing a building that cost a small fortune. 

More investors and taxpayers have the opportunity to invest in lands due to lower prices of land as compared to purchasing a building. You can start your investment with low capital and generate profit over time to expand your portfolio. 

 

  • It generates good profits

The land is one of the investments that always appreciate. The demand for land is always increasing due to population and economic growth.

As an investor, you can hardly run into a loss by investing in lands. The value of land appreciates over time. Land does not depreciate.

When you buy a land at a cheaper price and leave the land for some years, it appreciates in value and you make good profits.

 

  • Low maintenance 

Unlike maintaining a building, you do not maintain the land. Land requires very low or no maintenance. The only thing you might need to do is to cut down trees or clear off the bushes if you want.

Otherwise, you can leave the land as it is for years and its value will not depreciate. You don’t spend extra money on maintaining the land.

You also don’t need to hire a management company to help you manage the land or you don’t need to spend money repairing damaged parts. 

 

  • A source of additional income

You can make your land a source of additional income. You can do this by finding creative ways to make the land usable.

You can lease out the land for use as a parking space, playground, farmland, or to be used for special events. You can also lease it out to be used as a garage until you want to sell it.

You can lease out the land for a couple of years until you are ready to sell it. This way you make extra income from the land and still retain the value of the land.

 

  • Lower Taxes

The taxes of buildings and structures are much higher than taxes on land. You pay just a little amount of tax on a land as compared to the huge amount of tax you will pay on a residential or industrial building.

 

  • It is flexible

The land is a flexible asset, unlike buildings. You can use land however you want. You can decide to develop on it, lease it, or leave it to appreciate.

You are not limited to how you can use the land; hence its value continues to appreciate due to its flexibility. 

 

  • It is limited

The land is not produced or manufactured. They aren’t making any more of it. The amount of land available now is the amount of land that is going to be available forever.

Land is a valuable resource with limited quantities available. Most people do not realize this on time. There will be a time that land will be very scarce and this will skyrocket the prices of land. Holding a land for a long-term is a way to increase the profit you will make on the land.

Why you should invest in land in Dallas

Dallas is a good investment ground for land. Many investors are coming into Dallas to invest in land and more investors are still expected to invest in land in Dallas. 

You may be wondering why you should invest in land in Dallas, below are some of the reasons:

  • Absorption of undeveloped or underutilized land in Dallas-Fort Worth continues at a record pace

Different areas in the Dallas-Fort Worth are becoming very strong in employment. More people are relocating into the city due to the availability of jobs. Jobs creation does not only help to increase the economy of a city or a country, but it also helps to increase the population. 

More investors and partners are coming into the Dallas land investment market due to potentials and profits. There has been greater interest in land in Dallas-Fort Worth within the last two years than in the previous six years.

This is due to the growing population and economy in the city. Investing in land in the Dallas area has become increasing alluring and profitable to investors.

Low top rates, buy costs surpassing replacement costs, and diminished retail demand has made some investments riskier. However, the value of lands has continued to grow and land investments have continued to experience increased profits.

  • External factors are making land investments more attractive

Investors and buyers are getting more cautious, yet there is a reported increase in land interests in the Dallas-Fort Worth area. 

There is increased interest in lands in outer regions, especially in the concentric circles around Dallas-Fort Worth, as per the report.

Land investments are becoming increasingly when compared with other types of investments such as oil and gas, stocks and bonds, technology and other investments they are perceived to be riskier.

  • The so-called fairway is still a great buy-in and around the Dallas-Fort Worth area

The stretch of land limited in Interstate 35 East and U.S. 75 from downtown Dallas up to the Red River keeps on being a great buy. The risk of buying these lands are much lower if you keep them long-term. 

Southern Dallas keeps on pulling in new and reputable developers searching for land for short-term and long-term developments.

Forney to upper east Rockwall to Princeton still has lower costs per acre of land. West DFW has appealing short-term and long-term investments.

  • The increasing population keeps increasing the demand for land

 

The population of Dallas-Fort Worth is estimated at about 7.4 million. This makes the cities two of the fastest-growing cities in the United States. The Urban Land Institute recently named Dallas-Fort Worth as the top real estate market in the U.S.

An average of 300-600 people relocates to Dallas every day and these people will need new homes to live. This increase in the population of Dallas creates more needs for construction of new homes which increases the demand for lands.

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Airbnb hosting & Airbnb Property Management in Dallas & Fort Worth

Airbnb hosting & Airbnb Property Management in Dallas & Fort Worth

Don’t know where to find the perfect place to stay in Dallas or Fort Worth? Don’t worry, I’ll teach you how to find the best accommodation deals in these places using Airbnb.
What you’ll learn:

  • Airbnb Hosting in Dallas and Fort Worth: Finding the Best Place to Stay
  • Airbnb Hosting in Dallas and Fort Worth: 3 Advantages Revealed
  • How to Utilize the Airbnb Dallas and Fort Worth Portals (COMPLETE Tutorial)
  • Airbnb Property Management in Dallas & Fort Worth
  • How to Choose the Right Airbnb Property Management Provider

Airbnb Hosting in Dallas and Fort Worth: Finding the Best Place to Stay

Airbnb is an online marketplace portal that advertises available home-for-rent and other leasable spaces within a particular area to serve travelers. Currently, Airbnb actively operates in 65,000 cities and 191 countries.

If you are in Texas and found no place to stay overnight, you can check the Airbnb hosting in Dallas for temporary accommodation. If you want to spend the night in Fort Worth, you can also visit the Airbnb listing in Fort Worth here to find the best places to check in.

Airbnb Hosting in Dallas and Fort Worth: 3 Advantages Revealed

1. Property Posting:

If you want to advertise your property in Dallas or Fort Worth as a subject for a lease, you can post a listing on Airbnb for FREE.

The portal will only earn once a client reserved your property. After the confirmation of the booking, the Airbnb would ask for a 6-12% service fee from the client that is completely non- refundable.

2. Guest Gains:

One of the advantages of using the Airbnb service is the opportunity to select the perfect space since the portal would display a wide array of suggestions. You can even filter the results, like changing the language, setting the preferred type of amenities, and even grouping the result by rates.

Recently, the Airbnb also made a service expansion to cater the demands of the clients, such as adding restaurants and leisure parks.

3. Protection:

The Airbnb cannot provide a full assurance that your property would be free from any client- inflicted damage. To safeguard your property, you may require a Security Deposit to the guest before he or she can complete the reservation. Through the Security Deposit, the guest agrees to shoulder any property damages within his or her stay.

How to Utilize the Airbnb Dallas and Fort Worth Portals (COMPLETE Tutorial)

1. Book Early:

If you want to find the best place to stay while you are in Dallas or Fort Worth, you must book days or weeks ahead of time.

Here are the steps to place your early booking on Airbnb:

  • Install the Airbnb app or visit the Airbnb.com. Keep in mind that there’s no third- party domain for all the Airbnb transactions.
  • Enter your personal details. This may include the number of clients or guests, dates, and destination.
  • Select the type of room that you wish to rent. You can choose from the shared room, private room, or an entire home. You can also use the ‘Filters’ option to make the suggestions more specific.
  • After determining the specific type of home, the next thing that you must do is to click the ‘Contact Host’ if you want to ask some questions to the owner. If you want to proceed with the booking, just hover directly to the ‘Request to Book’ tab.
  • If you are new to Airbnb, you need to create an account before you can completely book a property

2. Examine the Location
3. Read Several Reviews for Your Reference
4. Check the Identity and the Veracity of the Host
5. Send an Email or Private Message to the Host
6. Check the Cancellation Policy and the Fine Print
7. Look for any Rate Adjustments for Longer Stays
8. Verify the Location of the Property
9. Place a Deal on Airbnb Portal

Airbnb Property Management in Dallas & Fort Worth

If you want to gain high profit in listing properties in Airbnb in Dallas or Fort Worth, it’s time for you to tap an Airbnb Property Management team.

What’s the use of employing Airbnb Property Management?

It’s for one thing- to WIN in the competition!

You cannot just get confident after posting stunning photos of your property on the website, much more that you cannot expect positive results by just furnishing your listed vacation house with the complete amenities.

What you need is a reliable Airbnb Property Management team that will do the job in maintaining your rental houses, such as processing of new reservations, facilitates checking in of guests, replenishing household supplies, and cleaning the entire property.

The Airbnb Property Management team would also ensure that the standards that you set are always met. This way, you will get more guests, not only from Dallas or Fort Worth but from other states and cities as well.

You’ll employ a property management team to make sure that the guests are fully satisfied with your property and would head back for another booking soon.

How to Choose the Right Airbnb Property Management Provider

  • Consult Search Engines:

To determine the most reliable Airbnb Property Management manager or provider, entering simple keywords on search engines would help. Consider the top three suggestions since they are the most reliable service providers based on guests’ reviews and Google algorithm.

  • Don’t Focus Much on Photos:

Instead of focusing on beautiful photos, make sure to read several reviews of a particular property management provider. Especially, that you are doing business in Dallas and Fort Worth wherein the competition is so high.

  • Check What You’ll get After Payment:

You need to ask the provider regarding the specific service or task covered in a particular contract or deal. Be careful with people who offer much out of a lower rate, most of these people are just hoax.

  • Set Your Priorities:

It is important to immediately inform your property management team regarding the specific area that you would like to improve. If you are after for the cleanliness of your property, make sure to tap the help of a provider that is known for such forte.

  • Talk:

You need to establish a firm relationship with the people, who will later on, do some significant maintenance to your property. You can compare your conversations with the Airbnb property management in Fort Worth with the one in Dallas and decide which of the two is the best pick.

Hope you get a lot of information regarding Airbnb in this article.

SHARE your thoughts now in the comment section.

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10 Habits of Successful and Effective Real Estate Investors (2019 Update)

No real estate investor intentionally sets out to be mediocre. No one wakes up and says, “You know, I really just think I’m not going to try today”. However, the fact remains that some real estate investors are much more successful than others. How does that happen? It really comes down to having the right habits, and being able to act on knowledge of the real estate market. What are the habits of the most successful real estate investors? Let’s take a quick look.

Investment Plan

Highly successful real estate investors always have a plan. They never fly by the seat of their pants. They realize that being unprepared in this industry is the same thing as being uninformed. You’ll need to have a plan that details how you’ll reach your short-term goals, as well as your long-term goals. Of course, that means you need to identify what those goals are before you start investing.

Market Knowledge

The most successful real estate investors have in-depth knowledge of the real estate markets in which they invest. While they might be active in more than one market, they take the time needed before getting into the market to understand the various drivers of the underlying economy, the shifts in the real estate industry and more. You cannot afford to invest in real estate if you’re unwilling to take the time to build that same level of knowledge yourself.

Honesty and Integrity

There’s no codified set of ethics that real estate investors must adhere to, but that doesn’t change the fact that the most successful investors are honest and act ethically. They’re upfront and take care of their reputation. They understand that a reputation for lacking integrity, dishonesty or unethical actions and decisions can cripple their efforts.

They Specialize

It’s tempting to think that most successful real estate investors are all over the board. It’s true that some of them are, but you’ll find most of the really successful ones specialize in a particular area. This allows them to build very deep knowledge about the area and then exploit that knowledge to make savvy investments that really perform over their preferred timeline. Think of this as apprenticeship training – you master one area, and then move on to another, eventually mastering most or even all areas.

Respectful

While you might think that real estate investing is about money, or real property, it’s actually about people. The most successful investors understand this intrinsically, and treat everyone with respect, from renters to business partners. They also understand that being respectful is the best way to gain referrals, which are responsible for a large percentage of their financial success.

They’re In the Know

The notion that you’re done with education when you get out of school needs to be eliminated. The most successful real estate investors are committed lifelong learners, and are willing to stay in the know about pretty much anything that will affect their markets, their investments or the real estate industry itself as a whole. This refers to everything from laws and regulations to shifts in political power to buying and selling trends for individual neighborhoods.

Knowledge of the Risks

While real estate investing doesn’t carry the same risks as playing the stock market, there are risks involved. Savvy investors not only understand those risks, but also know their own risk tolerance and tailor their investments toward those elements.

They Don’t Go It Alone

No investor is an island, and the most successful of them build a team to support their efforts. This includes a professional, reputable accountant who can help them handle the sometimes very complex taxation matters that go hand in hand with real estate. They also network with others, develop contacts with attorneys, form relationships with mentors and business partners, and more.

Now that you know more about the habits of the most successful real estate investors, you can begin to make progress toward securing your own financial future.

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Eight Tips for Launching Your Real Estate Investing Career (2019 Update)

Investing is a good way to build wealth and create a more financially promising future. Naturally, not all forms of investing are alike. There are stocks, bonds, hard assets like gold or silver, trusts, and real estate, among others. In this article, we are going to look at real estate investing and eight good tips for successfully getting started in this lucrative area.

Whether you have already spent a lot of time reading about and learning the key data, or you are just beginning to understand the many benefits of real estate investing, you need to start with one major tip:

  1. No time like the present – If you read headlines about real estate investing you realize that it is an area with the same fluctuations and changes as any other investment or asset class. This means that there is no ideal or right time to begin investing. Rather, it is a matter of understanding which kinds of real estate investments are appropriate in the moment. For example, in early 2017, investors heard from Warren Buffett that real estate investments of any kind were suggested, and other investing experts pointed towards commercial properties, including medical.
  2. Have goals – Your budget and your goals may not yet be in perfect alignment, but getting involved in real estate investing without solid short and long term goals is hazardous. In fact, this tip has to spill over into our next because without your first short term goals, you don’t reach the long term goals. And one of your main long term goals should be to invest “bigger” than you have already done. To do that means building the portfolio and having on paper and in capital what you need for a large investment.
  3. Plan for a big investment – Small steps are usually needed to take bigger ones, and the sooner you begin investing and setting goals, the sooner you get to do a big investment in a more lucrative asset class.
  4. Do some research – Not all real estate is a good investment vehicle. Start looking into the markets in the areas with the most promise. For instance, use search engines to find top cities or regions for investing in housing or commercial properties.
  5. Hold steady – This takes discipline and some nerve, but it is far too easy to bail out of a good investment because of unusual circumstances or troubling times. For example, a major REIT recently dealt with a massive sell off because a single area of its holdings showed signs of trouble. Rather than selling, investors should have held firm.
  6. Accept risk – There are no investments that are without risk, and this is true of real estate investments. You need to be willing to accept some risk, but if you are doing your research, holding steady, sticking to goals and choosing the most lucrative markets and regions, your risk should be kept to minimal levels.
  7. Diversify – As soon as you are able, make plans to diversify holdings. While you might enjoy heaps of success as an investor in apartment buildings or retail and combination use buildings, keep in mind that the old “eggs in one basket” system is not always the wisest. Be sure your portfolio has a good balance of single family, medical, commercial and other real estate.
  8. Seek help – All of these things are quite challenging to do on your own, though many before you have done so. However, why struggle and delay your success as a real estate investor when there are turnkey options available. There are real estate investment clubs that steer investors towards those “perfect fit” assets, and which can provide almost immediate success.

Hopefully, these eight simple tips can help you get started on a successful career in real estate investing today. Now is the moment to look to real estate as a strong asset class, and today’s the ideal day to begin.

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Six Clever Negotiation Tactics to Lock Down Your Next Real Estate Deals (2019 Update)

As a real estate investor, you will spend at least some of your time actually buying properties. The rest of the time, you might be rehabbing a property, or marketing a home, or inspecting potential purchases. However, there will be at least some buying involved. This means that you will be dealing with sellers (or their representatives, at least). The seller is going to try to get the best price possible for the property and it is your job to negotiate it to the lowest price agreeable to both parties.

This is where many investors run into trouble. Chances are good that even if you have many successful sales under your belt, you could have gotten those properties for less, and maximized your return even more. Of course, negotiating is as much an art as it is a strategy, and it can be difficult to gauge which sellers will respond better to which methods. We’ll cover some of the most effective negotiation tactics below.

Take Small Bites

It’s tempting to ask for everything you want all at once. It’s definitely faster, but you will find that it isn’t particularly effective. The problem is that you come across as demanding, and the seller just doesn’t want to deal with that. You’ll get better results if you ask for things here and there, slowly, over the course of the negotiations. This can do two things. First, and hopefully what you’ll find in your own experience, is that it actually works to condition the seller to say “yes”, rather than “no”. Second, it can wear them down. You do run the risk of annoying the seller, but it can be effective.

Offer Something in Exchange

Sometimes, getting concessions from a seller is as simple as offering something they want in exchange. This is pretty much the basis of all human interactions in one way or another. It’s even the basis for employment today – you give an employer your time in exchange for something you value, money. What does the seller want, and is there a way to give it to them without coming out the loser in the negotiations? Is there a way that both sides can win? Believe it or not, there is such a thing as a win-win in real estate investing. You just have to find out what is of value to the seller and whether or not it’s something you can part with.

Dig Deep for Intelligence

Being a successful real estate investor means that you need to be very good at ferreting out information that the seller might not really want you to know. For instance, just how motivated are they to sell? If they’re very motivated, what’s the reason? Are they on a firm timetable to be moved to the other side of the country and have to sell before the move? Is there something else at work? Find out what the seller’s motivation is and then play to that. This is particularly true when you’re competing against other investors for the same property.

Be Silent

Silence can be comfortable, or it can be uncomfortable. If you’re comfortable with it, use it as a tool to move your negotiations in your favor. Suppose the seller makes you an offer. Instead of replying either in the positive or the negative, you don’t respond at all. You remain silent, and say nothing. That silence stretches out, and the seller becomes uncomfortable. Perhaps they think they’ve offended you, or that you’re angry about the price they quoted. There is a chance that they’ll budge based on being uncomfortable. Of course, there’s also the chance that they won’t budget, but remember – nothing ventured, nothing gained.

Disarm the Seller

Most sellers are as on edge as you, the buyer, are. This can lead to stalled negotiations. You can turn the tables by disarming the seller. Be humble and agreeable. Point out the things you like about the property (but don’t give ground on your demands). You might be surprised at how much you can gain simply by being nice, rather than being combative.

Walk Away

The final tip is to just walk away. Chances are good that there are similar properties elsewhere in the same area. The seller probably knows this too, and if they see you walking away, they’ll be motivated to at least meet you in the middle.

With these tips, you should find your negotiations are simpler, easier and come out in your favor more often.

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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.