7 Easiest Ways to Get Into Real Estate Investing

7 Easiest Ways to Get Into Real Estate Investing

RECBL - Real Estate News

(TNS)-Only 15 percent of Americans are investing in real estate other than their primary residence, according to a real estate investing study by RealtyShares. In fact, two-thirds of Americans believe that investing in real estate is too difficult, too costly or beyond their capabilities. This might be true if they were considering commercial real estate investing, which can be a risky move for new investors, but there are safer options.

What Is Real Estate Investing?
Investing in real estate means buying property to earn income and build wealth, either on your own or with the help of real estate investment companies.

Many investors own more than one property, and their earnings include rent paid by tenants and the equity they build through appreciation. Investment property owners have different tax considerations for their investment properties than they do for their primary residence.

Investing in real estate doesn’t have to be intimidating. Here are seven ways to start investing in real estate now:

Rental Properties
Buying rental property is one way to get started in real estate investing. Buying a rental property starts with choosing the right property, and then finding renters, maintaining the property, dealing with tenants and collecting rent each month.

One stumbling block might be locating an affordable property worth investing in.

"Traditional real estate investing is alive and well, although it’s largely dependent on geography," says Aaron Milledge, founding partner and chief compliance officer of Targeted Wealth Solutions, LLC. "In some places, home prices have appreciated so much that it may be difficult to find a lucrative deal."

Rental properties not only provide rental income, but also tax benefits not available with other investment opportunities. An additional advantage is that you have more control over your rental property than you do over investments such as the stock market.

Live-In Flips
House flipping involves buying a property at a discount, improving it for the purpose of appreciating its value, and then selling it at a profit. A live-in flip is a property the investor lives in while renovating it.

Living in your flip benefits you in two ways: First, you can make money when you sell the house later; second, you avoid having to pay for a separate home to live in.

"Flipping a house-acquiring, repairs, and selling can be completed in six months and result in a substantial payday," says Lucas Machado, real estate investor and founder of Home Heroes, LLC. "Flips can earn tens of thousands of dollars in a short time frame. It’s the best strategy for those that need capital in the near future."

Multifamily Homes
Multifamily properties are buildings which house more than one family. The fact people always need a place to live results in consistent demand for rental units, regardless of the overall economic environment.

Investing in multifamily homes can be lucrative if it’s done properly. Justin Taber, real estate investor and a licensed REALTOR(R) in Ohio, recommends living onsite.

"While you live in this property, you will be living either for free or heavily subsidized by renters," Taber says. "When you move out, you will be making money. In about 30 years, once this property is paid off, your cash flow will be quite substantial-just in time for you to start thinking about retirement."

Crowd funding
Crowd funding is one of the newest and easiest ways to access the real estate markets. Rather than buying an entire property or financing a development project on your own, you can buy into a very small share of a property or project using a real estate crowd funding platform.

Not all platforms are created equal. Look for one led by real estate professionals qualified to screen investments. From there, you can choose which specific real estate investments you want to buy into. Distribution of future gains is proportionally based on the ownership shares investors purchased.

"These private placements are illiquid, though, meaning that you may have a hard time selling your investment if you need to raise cash quickly," says Milledge.

REITs
Real estate investment trusts (REITs) are a special form of security that invests in real estate. Unlike most other investment vehicles, REITs must pay out at least 90 percent of their taxable income as dividends to investors. When you invest in a REIT, you’re essentially paying a professional management team to do the work of investing your money in real estate while you reap the profits of REITs.

REITs are an easy way to invest in real estate because you don’t need tons of money.

"The initial contribution to invest in a REIT is very low," says John Barnes, certified financial planner and founder of The Annuity Assistant. "For example, you could buy shares of a REIT which manages apartment complexes for $500. Contrast this with a direct purchase in an apartment building, which might cost you $500,000, and the many risks that go with it."

Real Estate Wholesaling
Real estate wholesaling is when there is a middleman involved in the transaction between the seller and the buyer, with the wholesaler serving as the middleman.

Kyle Alfriend, owner of a real estate business in Ohio, sums up what it’s like to be the middleman: "You focus on only finding the property, negotiating the price, and then selling that agreement to another investor. This is called wholesaling and requires no out-of-pocket money from you."

The fine line of separation between real estate wholesaling, which doesn’t require a real estate license, and real estate brokering, which does require a license, has led some states to set guidelines for wholesaling activities. Texas law, for example, requires that unlicensed wholesalers disclose their financial interest to prospective buyers.

Rent Out a Space in Your Home or on Your Property
Renting out part of your home or property is probably the most immediately lucrative investment you can make, and you won’t need outside funding or a new piece of property. Instead, find opportunities within the property you already own.

Perhaps you’re a homeowner with a garage apartment that only needs a bit of TLC to make it ready for renters, pr maybe you have a spare room in your home that’s sitting empty. With a little bit of money up front, you can start renting it to a tenant almost immediately. Alternatively, advertise the room as a vacation rental on an online booking site such as Airbnb.

Michael McDonald contributed to the reporting for this article.

(C)2017 GOBankingRates.com, a ConsumerTrack web property
Distributed by Tribune Content Agency, LLC
Source: American Home Shield(R)

CashBuyersLists.com                                                           Please like, comment and share.  Thank you.

Real Estate Exit Strategies: Have a way out

Real Estate Exit Strategies: Have a way out

RECBL - Real Estate News

As a real estate investor and private money lender, our business sifts through leads all day long. We review the information we’ve received and the many possible real estate purchases. We have come to learn the most essential part of our process is having an exit strategy. For the strategy to work, we strive to understand our sellers; their motivation, connection to the property and their goals, as we walk through the process.

We create and hypothesize different scenarios and outcomes in order to prepare our Plan A and additional contingencies. New real estate investors sometimes don’t prepare an exit strategy which ends up leading to a negative outcome which deters the new real estate investor from moving forward in the real estate industry.

As investors, it’s critical we have planned an exit strategy and contingency plans in case our plan A doesn’t go as planned. There are numerous unforeseen circumstances which can happen during the investment which will drive up costs, extend time frames and potentially eliminate the feasibility of plan A. Therefore, we always require a contingency plan B. But, you don’t have to stop there.

Planning your exit strategies isn’t just needed for getting a loan or selling a property. Having a plan for negotiating with sellers and buyers can also affect how you may pursue each of your exit strategies.

Negotiating without a plan, just shooting from the hip, can lead to disaster as you may be giving away your best hand and there’s validity to the argument “you make your money when you buy”. Planning can not only save your current deal thousands but, perhaps, save you millions over the course of your entrepreneurial career!

As a real estate investor, you have quite a few exit strategies:

Sell the Investment. The granddaddy of real estate exit strategies is the fix & flip where you purchase a below-market property with a value add component to it. Before you even entered the investment though, you planned for predictable expenses and came up with your break-even amount needed. You then efficiently (cost and time-wise) rehab and resell the property, often to a retail buyer, for an attractive profit. Duplicating this process correctly a few times can add massive income chunks to your investment business.

Shameless Advertisement: One of the biggest expenses for flippers are real estate commissions, averaging about 6%. As a lender and real estate flipper myself, I recognized this as one of the massive downsides for my investors and partners as it consumes such a large chunk out of the potential profits.

Cash Out Refinance – Long-Term Hold & Appreciate. The second option we like is cash out refinancing your loan via a conventional lender which allows you to hold the property for positive cash flow and appreciation. If you own the property in cash then there is no need to do the cash out refi.

Long term holding of your asset may not add huge chunks of cash, immediately, to your pocket but this builds wealth over time. If you buy a property and then rent it out you may be able to create positive cash flow, when factoring in all your property’s expenses. In addition to that extra cash flow, you now have an asset that will build equity. In the future, you could either cash out by selling all your properties and profiting from equity gains or you can continue to build it alongside your other passive income rentals.

Lease Option. You can do a lease option as well. The property can most likely still be leveraged with another loan in this scenario but you would need to make sure your rental income meets or exceeds your debt service. Check to see if your mortgage allows this–most private lenders would not allow this as a balloon would probably be due before the lease was up or the option was exercised.

A suggestion is not combining the lease and option like some do. You want to have a lease so you can evict if necessary and a separate option agreement which gives them the option to purchase at your agreed upon terms. Though, an attorney may be needed to legally delineate the specifics such as purchase price, option fee, percentage of rent going toward purchase and time frame of option.

Wholesale. Typically reserved for properties you don’t fully own, rehab or finance, is the wholesale exit strategy. You may not own the property but you have negotiated an assignable contract which gives you, or your assignee, the right to purchase the property within a certain time frame for a specified price (usually under market value). You find a buyer willing to pay that specified price plus your assignment fee. You can close this in a few ways but your result should be a win/win/win situation for your seller, your buyer and, of course, yourself.

Seller Financing. You can always seller finance your investment property, yet the property may need to be owned in full before you could do that because your title would be clouded. Also, any title transfer may trigger the due on sale clause in your mortgage.

Another recommendation is doing seller financing paperwork through an attorney due to Dodd Frank regulations which govern that type of transaction.

Raise money from partners and investors. You can get money from investors or partners to pay off your investment property’s debt and get more time for other exit strategies. Before you do this, please check federal, state and local laws before you start soliciting for money from investors. The SEC dislikes when you do not have the proper instruments drawn up for solicitations. In either case, I would target accredited investors as they have more funds available for investment, are typically more savvy with their investment decisions and can stand to lose a few dollars more than the average non-accredited investor. The aforementioned is definitely in a security specialized attorney’s domain as they can draw up the legal offering documents necessary for your investment you wish to solicit.

That being said, instead of immediately seeking out passive investors you can also seek out active partners, who can not only provide you with cash, but help on some areas of decision-making that you may have been struggling with.

Nuclear Option. Talk to your lender. If you need to exit quick and your other exit strategies are not working out, what do you have to lose? You never know, they may want to partner with you, extend, or modify your loan to fit your unique situation.

There are plenty of options available for the lender to assist you with. However, I’ve noticed the correlation of how big the bank is to how little they are willing to assist the borrower. Yet, if you succeed you could get a forbearance and pay a bit later, lower your payments for a certain amount of time or modify your mortgage. Lastly, if the property has very little equity, the lender may consider a short sale, which they will NOT like but may need to do.

Pro Tip: Pay on time and communicate. As a lender, I know I’m more willing to listen if you haven’t missed any payments yet and have communicated effectively throughout the loan process thus far.

Before you enter into an investment, try to come up with your exit strategy. Here are a few questions which may help you decide on exit strategies for current and future investments:

• What are your goals? Do you want to build wealth or a larger amount of income right now with long-term appreciation? 

• What is your knowledge and experience in the various exit strategies? 

• What is the time frame you need to exit by? Time is money and you can run out of both.

• What is your negotiation strategy with your buyers and tenants?

• What profit, future rents or appreciation are you predicting on the deal?

• To whom will you market this exit strategy to, what kind of buyer?

• How will you market the exit strategy? Don’t rely “only” on the MLS.

• What are the current sale and rental market conditions like?

• How are supply and demand in your market?

One question often neglected is how will the exit strategy affect your taxes? Capital gains? If you don’t know I would suggest you question your CPA.

Knowing most of these can help you decide on an exit strategy that’s correct for your investment and your business’ needs. Nevertheless, if you don’t know the answer to a lot of these you may want to take some time, gather more information on your investment, and attend a few local REIAs to network with like-minded individuals to get more perspective.

Do you have additional exit strategies for our readers? Let us know at businessdevelopment@cashbuyerslists.com

CashBuyersLists.com                                                                                   Please like, comment and share.  Thank you.