Zoning in on Zoning

Zoning in on Zoning

Knowing what you can and can’t do with a piece of property is crucial; it can make or break many deals. I highly suggest you determine this before getting started in any real estate transaction. This can save you a lot of money, time, and energy. I am not kidding about the money part. So what is zoning, and why is it important?

Local governments create zoning ordinances to map out the physical boundaries of different zoning districts, which can occasionally be modified. To determine what your lot is currently zoned as, you will want to go to the municipal building. Zoning and some other ordinances can often be found online. However, do not, I repeat, do not rely solely on that as your only resource. Always go to the primary source to double check your information, especially if it’s a deal you intend to do yourself or invest in.

Now you are probably wondering, why the big fuss over zoning? Well, zoning determines what land uses are permitted in each district or classification. Some examples of classifications may include, but are not limited to residential, mixed residential, commercial, and conservation. Zoning ordinances also lay out all the juicy specifics, like lot size minimums and maximums, setbacks, and height restrictions. Please remember that land use and regulation laws vary from state to state. Therefore, you need to be familiar with the states you work with or at least know where to find the right information when needed.

Like stated earlier, zoning is a very important variable when doing any real estate transaction. Please familiarize yourself with zoning before you end up paying to do it later. Either way, you will have to know it. Now, take this and get out there and apply it.

How to Use Market, Rental and Housing Statistics to Determine a Market

How to Use Market, Rental and Housing Statistics to Determine a Market

Statistics are used to identify market trends and to measure and evaluate the potential success of marketing programs. The most important statistics an investor should know are the rental and housing statistics. So, how does one use this data to determine a market?

According to current trends, the number people who choose to rent instead of buy properties has gone up. This, in large part, is due to the enormous wave of foreclosures that swept the nation after 2008 and the economic upheaval of the Great Recession. Because more people have decided to rent, the number of sales and the availability of properties has been impacted. Adjustments need to be made when this happens, from house prices to interests rates and transactions. One should look within these current statistics to find the market they should target. They need to identify the demographic and behavioral patterns within these statistics to make sense of which people to target. Focus on what problems can be solved and identify what the demographic needs. For example, those who rent spaces will most definitely rent, so they fall under the target market for rental homes or properties with a negotiable mortgage that would fit their income. The price and costs for housing and renting may differ a lot and the demand for certain properties varies from location to location, so these things should also be considered.

The fine point where all these people’s needs and wants meet in the middle is what should be identified and targeted, and a close observation of the behavior of this demographic will surely produce valuable data. The secret to successful marketing is to identify the target market accurately.

What is a Real Estate Absorption Rate and How Does It Apply to You?

What is a Real Estate Absorption Rate and How Does It Apply to You?

In real estate, absorption rate is basically the length of time it takes to sell a house that is listed on the market. The rate is mostly based off of the number of months it takes before the home is sold. Absorption rate is a concept that helps people in the real estate world determine prices and sales activities.

Let’s take a large, urban area for an example. In the past six months, there were 20,000 homes sold. Six months is the common baseline when it comes to home sales. The number of homes sold will now be divided by 6. The result will be 3,333. This number will then be used as a divisor to the number of homes listed on the market. If the number of homes listed for sale is 15,000, the outcome will now be 4.5. Therefore, there will be 4.5-month supply of homes for sale on the market.

It is easy mathematics but that does not make it less important. In order to anticipate home prices and market activities, the absorption rate history of a certain market will be necessary. Absorption rate is vital to real estate agents because agents regularly need to determine the value of the properties they are selling. It is also helpful for buyers to understand the state of demand and supply for properties that agents will be presenting to them. All in all, absorption rates aid in decision-making when it comes to buying a property.

Most potential property buyers are wise and do extensive research before going face-to-face with real estate agents. If you are a seller who cares less about the absorption rate of your market, you’re making a big mistake. To become a top producing realtor, you must be well-equipped with knowledge about absorption rates and market activities. Awareness of the absorption rate of a specific market will help your success.

How to Calculate the Value of a Multi-Unit Property

How to Calculate the Value of a Multi-Unit Property

A multi-unit property is a building with separate housing units that are available for residential inhabitants. There are various forms of multi-unit properties, such as duplexes, quadruplexes, and townhomes, but the most common is an apartment building. Multi-unit properties are designed to house families by giving them separate units that are clustered in one structure.

If you own a multi-unit property, calculating its value is not a difficult task. All you need is the operating data. The NOI (Net Operating Income) is an important inclusion for the calculation of the value of the property. This is because the computation will derive from an income approach appraisal. NOI can be obtained by subtracting all the expenses from the gross income generated by the property. These expenses usually include management, landscaping, taxes, repairs, insurance, and maintenance.

The next important thing to consider is the capitalization rate. We need to divide the NOI using the value of the capitalization rate to come up with an accurate market value. Capitalization rate can be determined with the help of brokers, lenders, and appraisers. They are expected to know the market cap rate, which is the average of the cap rates for properties with common characteristics in one specific region. These cap rates are computed by dividing the purchase price with the NOI; variables that are presented upon purchase.

When the NOI and the capitalization rate are finally known, you can start calculating the market value of a specific multi-unit property by using the following formula:

Capitalization Rate/ NOI = Property Value

 

For example, if the capitalization rate is 7.5% and the NOI is $330,800, we will have the following equation:

$330,800 / .075 = 4,410,666.67

Property Value = 4,410,666.67

 

It is important to note that these variables are not constant. You should be able to understand how they work together to quickly come up with an accurate market value. Once you have the accurate operating data and accurate information from the real estate experts, computing the market value of a multi-unit property is just a calculator away.

Determining Market Value

Determining Market Value

A key first step in real estate investing is determining the Market Value or ARV – After Repair Value of a property.

Criteria used by many real estate investors and professionals includes the following:

Properties that –

  1. Were sold less than 1 mile away
  2. Were sold less than 6-8 months ago
  3. Have square footage that is 20% more or less than the square footage of the property you are looking at. For example:
    1. If you’re looking at a property with 1,400 sf then your range is 1,200-1,600 sf.

You should be looking for 3-5 comparable properties that are as close as possible to the number of beds, baths and square footage you want. Also try to find the same style of construction, as it is difficult to justify comparing a single-story ranch style home to a multi-level property.

Look at both online sources and sources from real estate professionals. With that in mind, here is a 3-step process:

  1. Local real estate brokers and agents have a great source of market knowledge, especially for obtaining both the average price that properties are selling for and the average price per square foot that the same properties are selling for.
  2. “Paid Sites” has their advantage in that the software they have available pulls from both County Records as well as the Multiple Listing Service (MLS). Do your homework and look for online customer reviews and compare them with other websites with the same claims. Here is a short list of some of those sites.
    1. https://www.realquest.com/jsp/rq.jsp?action=switch&page=main
    2. You can also check with the MLS in your area and ask about the fee for their temporary/limited access for investors. This is a great tool to use for searching and evaluating properties and determining market value.

There are many others but these are quite adequate for getting started.

The Importance of Demographic Research

The Importance of Demographic Research

Demographics is statistical data relating to the population and the particular groups within it. It is the kind of information that makes working in the real estate world a pretty challenging feat. Also, it is an indispensable part of the business, since it plays a great role with marketing houses and properties.

How important is demographic research? Well, this research provides the data that describes the composition of a population, such as age, race, gender, income, migration patterns and population growth. These statistics are an often overlooked but are a significant factor in how real estate is priced, what types of properties are in demand, and who is interested in buying what. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades. For example, the baby boomers who were born between 1945 and 1964 are an example of a demographic trend which will likely influence the real estate market.

There are numerous ways this type of demographic shift can affect the real estate market, but for an investor, some key questions to ask might be: How would this affect the demand for second homes in popular vacation areas as more people start to retire? Will they be able to even find buyers for their homes if they do decide to sell their property? These and other questions can help investors narrow down the type and location of potentially desirable real estate investments long before the trend has started. Basically, the ever-changing results in demographic research determine the demands, prospective buyers and also the prices of properties. Who is buying what? Who is interested with what? Is it part of their priorities?

Know this important data in your market because the more information at hand, the better decisions you will make.

Land Banking

Land Banking

Land banking refers to the keeping of land for future sale or development. In this post, we discuss land banking and keeping land for future use, especially for purposes of using it as an investment and selling it at much higher price than its current value. There are numerous advantages that are associated with this area of real estate.

One of the most renowned advantages of land banking is the fact that it enables land owners to generate profit from the sale of their land. If you own a piece of land that is likely to be useful in the future, you can keep that land and sell it at a time when its value has risen. In this way, you will be able to generate more profit from the sale of your land.

Sometimes land banking can enable you to sell a piece of land at a price that is far higher than its current value. This usually happens if the land is likely to be more costly in the future. Many land owners have benefited greatly from the sale of land at prices based on future price projections.

There are times when land becomes scarce or very expensive. However, you can buy a certain piece of land at a very low price and still develop it many years later. While your colleagues will be searching for cheaper pieces of land, you will be enjoying a piece of land that has the ability to appreciate.

Understanding Trust Deed Investment

Understanding Trust Deed Investment

Trust deed investments are nothing new. In fact they have existed for a long time, yet many prospective investors do not know much about them. In essence they are just like mortgages except for one difference: Apart from a borrower and a lender there is a third party involved – an investor.

Nowadays and in the current economic climate, trust deed investments help many mortgage borrowers who are in need of bridge loans. Mortgage brokers who partner with third party lenders are able to assist with a loan and it is part of their job to explain all associated risks.

Trust deed loans can bring above the average profits but only if all risks have been calculated and adjusted to the particular client’s needs. Hence a broker would have to ensure that the client’s future plans and financial resources are compatible with the financial risks involved.

Ever since the recession has hit the market such investments have created losses with similar percentages. Such losses were worsened in the past five years by brokers who failed to risk assess and inform their clients properly and offered inappropriate trust deed loans.

Today the dislocation capital markets means that many commercial banks are not equipped to provide bridge loans on strong collateral, even to customers who would have qualified previously. As such, investors can now provide private loans secured by quality collateral to strong borrowers with less risk than afforded previously.

Trust Deeds: What you should know

Trust Deeds: What You Should Know

Trust deeds, also referred to as deeds of trust or notes, are deeds whereby the legal title of real estate property is transferred to a trustee. This individual holds the deed as a form of security for a loan secured between the borrower and lender. In other words, trust deeds are formal documents that outline terms of a trust agreement and serve as additional security.

With trust deeds, the official property title is maintained by the trustee until the loan on the property is paid in full. Although the trustee is not involved with the agreement between the borrower and lender, this person is responsible holding the note unless the borrower defaults on the loan, at which time the trustee has the legal right to sell the property.

Additional Factors

Certain steps are taken in setting up deed trusts, including:

  • Real estate purchases are typically structured so the lender provides the borrower with money to buy the property.
  • In exchange for paying the seller, the buyer receives a grant deed for the property.
  • Immediately, the borrower executes a trust deed whereby the property is given to the trustee to be held in a trust until the loan between the borrower and lender is paid.

An escrow holder is always used when dealing with deeds of trust to ensure the transaction will not close until the funds, grant deed, and trust deed are handed over. With that, the transaction can be rolled back if for any reason one of the parties involved cannot complete his or her end of the deal.

Trust deeds are different from mortgages since the deed always involves a minimum of three parties: the borrower, lender, and trustee. The legal title for a mortgage goes to the mortgage company, whereas for a deed of trust, it goes to the trustee. In both scenarios, the borrower retains the equitable title. While there are distinct differences between mortgages and trust deeds, essentially, they are both security instruments.

Buy and Hold Strategy

Buy and Hold Strategy

The buy and hold strategy is a great means to accomplish the goal of yielding returns and creating cashflow. It also provides the opportunity for you to be a landlord. The concept of a buy and hold strategy is that an individual purchases a real estate asset, such as a residential property, and doesn’t sell it, but rents it generate monthly cashflow.

In the pursuit of a buy and hold strategy, one of the main decisions to consider is to whether or not to utilize leverage. More properties can be invested from the distribution of your investment capital by funding your purchases. At the same time, a risk is more diversified and total returns will be increased in a market situation in which the value of an asset is increasing over time. Paying for the property in full reduces losses in a depreciating market. Returns will also be increased in a flat market because income isn’t going towards interest payments.

One of the advantage in the practice of a buy and hold strategy is the acquisition of tax benefits wherein the tax rate imposed to a long-term profit is zero. This occurs if the total of your income and profits position you between the 10-15% tax brackets. Another advantage derived from this strategy is protection from inflation, which means that as inflation increases, so does the rent for your property. This helps to generate added cashflow as you hold your property for rent. However, the risk of adopting this strategy is the possible incurrence of expenses in managing with tenants who cannot pay their rents as due.

Self-Directing Your IRA

Self-Directing Your IRA

IRA stands for Individual Retirement Arrangement, which is more popularly known as an Individual Retirement Account. This allows persons to save money for retirement. The word “self-directed” easily implies that you, as the personal account holder, have full power over choosing and commanding your personal retirement account investments. The investment to real estate may be possible under a self-directed account, since you are able to use your retirement funds to invest in alternative assets through this type of account.

Nicknames are provided to self-directed IRAs that invest in particular assets, for instance, a self-directed IRA holding a real estate property is called a Real Estate IRA. It is required that a competent trustee acts as a proxy to hold the IRA account of the IRA owner under the rules of the Internal Revenue Service (IRS). Self-directed IRA trustees are qualified to manage the increased complications of documentation needed for transactions engaged in alternative investments.

A self-directed IRA allows you to diversify your investment into several different investment assets, such as real property, mortgages notes, and foreign currencies. You can invest in any of these assets, and others, through the use of your self-directed IRA.

There are also tax advantages obtained from self-directed IRAs. This is because no tax is imposed to investments under this account which could mean an acquisition of higher profits. Mix this benefit with the capability to actually diversify and invest in a variety of assets, and you could have a winning combination for a higher return.

Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is risk in using retirement funds for investing in real estate assets. It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds. Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at: http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice. Prior to acting upon this information, you may consult your own accounting, legal and financial advisors to evaluate the risks, consequences and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.

Tips for first time property investors

Tips for First Time Property Investors

Real estate provides a valuable option for those looking to invest. This can be attributed to the fact that it is associated with many advantages. But, like any other investment, you have to be cautious when venturing into real estate. As much as it is advantageous to invest, there are numerous challenges that you may encounter. You may fail to edge past those challenges if you are not properly informed. This post highlights some important tips for first time property investors.

First of all, seek audience with a reliable property investment educator. There are many business experts that can give you reliable advice on how to realize your idea to invest in real estate. Real estate educators can give you technical advice on the current assets that can enable you to generate more profit. They can even help you to have a clear picture of the current market. Such information will help you to make good investment decisions.

Property evaluation is also very important. When you are buying a property, you need to evaluate it based on certain attributes associated with it. For example, you can evaluate a certain piece of land before you buy to determine whether or not it’s going to be an asset that creates cashflow. This will enable you to know whether you are actually spending more than you need to be.

The use of multiple strategies is effective in real estate investing. Depending on the goals that you want to achieve, you can manipulate the buy and hold strategy as well as the banking strategy. When you do land banking, you can sell it at higher prices based on the hope that its value will rise in future. In the case of holding, you can hold on to land for many years and only sell it when its value has risen.

Trust Deeds

Trust Deeds

A trust deed is a formal arrangement between the lender and the borrower to allow the borrower to pay back the fraction of the debt that you can afford. Trust deeds are legal arrangements that can prove to be very important. One notable reason why they are important is the fact that they can enable highly indebted borrowers to regain financial stability. The time frame for a trust deed is determined by the lender after formal negotiations with the borrower. During this period of time, the debtor will be able to regain financial stability because one will only be required to remit payments that one can manage.

Every trust deed is associated with its specific validity period. A trust deed will be honoured for as long as its validity time frame has not elapsed. Under normal circumstances, the minimum validity period of a trust deed is 4 years. During this period, the borrower will be required to make monthly payments as stipulated by the trust deed. The borrower and the lender agree on a specific amount of money that is supposed to be remitted on a monthly basis until the debt has been cleared in full.

Sometimes extensions are possible if the borrower fails to meet the stipulations of the previous trust deed. New stipulations may be laid out or the same stipulations may be maintained until the borrower has liquidated the outstanding balance of the debt.

But, there are certain penalties that may be slapped on the debtor should one fail to clear the outstanding debts. The debtor may have difficulty getting into a similar agreement in future, so it is important to remain up to date with the expectations set on a trust deed.

Goal Setting (when investing)

Goal Setting (When Investing)

Real estate investing is fast-paced. To benefit in today’s market, investors need to act as fast as they can, because they’re not the only ones out looking for deals. Due to the time constraints faced by real estate investors, it is recommended to establish goals and develop a strategic plan prior to the purchase, sale, or rent of your own assets.

To establish strategic goals, personal research is required. The locations where you wish to invest must be studied thoroughly with the use of public property records. Also, network with other investors while attending property auctions. By attending these events, you may learn about the trends and potential markets that are useful for property investment decisions. Based from all the research you have gathered from all the activities stated beforehand, you can further your own investment plan and goals. Also, you can already determine your own niche, like rehabbing, or creating an income property.

To set goals for profit, you need to estimate your target annual profit from your property investments. Next, you can approximate the average potential profit from every real estate asset in one year. Finally, you can divide your wanted profit by the average profit per real estate to approximate the least number of real estate you must search and administer annually to accomplish the profit goal.

Residential Real Estate

Residential Real Estate

Compared to some investment assets, residential real estate properties focus on personal use rather than commercial. There are several categories of residential real estate, including connected/multi-unit residences, semi-detached residences, single-family detached homes, and portable residences. Connected/multi-unit residences include apartments, condominiums, and multi-family homes. An apartment is a single unit included in a multi-unit complex, with a condominium being similar. The common areas built inside the complex are occupied and possessed together. A multi-family house is usually viewed as a multi-story structure with separate units.

A duplex is one example of a semi-detached residence where two units are divided with one wall. However, a single-family detached residence is an independent residential property all together. Examples of portable residences include mobile homes, and houseboats. Mobile homes can function as a full-time residence, but are capable of being moved if and when needed. The point is, there are a variety of different residential real estate forms that can be invested in, and it’s important to know that even as you hone in on the area of real estate that interests you, like residential, it’s still important to look even further into the details to determine which asset within that area is best for your needs as an investor.

Self-Directing Your IRA

Self-Directing Your IRA

Most people have heard of an IRA before, but are not familiar with the self-directed IRA. Despite the self-directed IRA being unfamiliar, it’s actually been around for over 30 years.

What is a Self-Directed IRA?

The self-directed IRA is not that much different from the traditional IRA. The only difference between the two is that the self-directed IRA provides you with the ability to self-direct your retirement funds into alternative assets, including equity trusts, real estate, and tax certificates and much more.

Benefits

There are a number of benefits for using a self-directed IRA, including some of the benefits you get for regular IRA. These include tax-free profit, deductions, asset protection and estate planning.

Steps to Self-Directed IRA Investing

Before you can start with your self-directed IRA, you will need to identify the investment you want to make. Once you have found a viable investment, you will need to acquire the necessary funds. Any documents you acquire and use during this process, must be in the name of the IRA.

When the equity trust has received your application forms, the investment can be processed. When the forms have been completed and accepted, funds will be sent from your IRA. All documents and records will still be kept by the Equity Trust.

Investors who are ready to sell their investment must complete a so-called investment form. This form tells the Equity Trust to remove the investment from their account. Once the investment has been sold, the profits will end up in your self-directed IRA. The beauty of this is that no taxes will be imposed on this investment.

Self-directed IRA investments are definitely worthwhile, especially due to the fact that they are accompanied by so many benefits. Any investor can greatly benefit from this process.

Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is risk in using retirement funds for investing in real estate assets. It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds. Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at: http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice. Prior to acting upon this information, you may consult your own accounting, legal and financial advisors to evaluate the risks, consequences and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.

Facets of property management

Facets of Property Management

Real estate management can be associated with a number of different assets, and can involve property management, even if you’re doing land banking. In most cases, land banking is often considered as a subset of property management. But, it is sometimes considered as an independent method in countries where the terminology is ascribed to the management of land by local authorities. Property management is the most often refers to the control and management of real estate properties and assets. The owner of a property can manage it or entrust the responsibility into the hands of a professional property manager.

In property management, there is always need to monitor the activities that are taking place on a certain piece of land or real estate. As the manager of real estate, you have to be fully aware of all the activities that are occurring on your piece of land or property at any given time.

Property management also means checking the value of your assets and the current market demand. As a property manager, you have to regularly be evaluating your property’s current market value. If the need to sell the property arises, you will be able to sell it at a reasonable price and generate profit.

In cases where the need to sell real estate arises, a property manager will be responsible for the selling process, including the evaluation of the buyer. This includes looking into the prospective buyer’s financial history and whether or not they will be able to afford the property.

Tips for getting started as a real estate investor

Tips For Getting Started As a Real Estate Investor

Most people looking to invest their money could sooner or later turn to property. It is an established, proven and rewarding investment option. Although investing in this way may not seem as complicated as buying and selling stocks, you will still have to get your head around the basics if you want to be successful. This post has collected four of the most important things to keep in mind when investing in property.

  1. Be professional: Write a professional and detailed investment plan, outlining goals and timescales for two, four and six years.
  1. Learn about real estate investing: You can find huge amount of free information on the Internet but do consider buying a book with practical guidelines. At the same time, avoid guides that promise astronomical profits in a very short amount of time.
  1. Find the best local market: Do not limit yourself by only looking in your proximity. Often the market is booming a bit further away. You may worry about constantly having to travel for repairs and similar. However, making sure that the property is in top state before anyone moves will reduce this risk.
  1. The 1% rule: An old rule of real estate claims that a rental property generating 1% of the sales price per month is a good deal. This means that if the home cost $200,000, you could charge $2,000 per month in rent, or about 12 percent annual yield.

In the end, don’t forget that like anything else, the harder you work and the more effort you put into your real estate investments, the greater your success can be. Good luck!

Tips on Buying Rehab Properties

Tips on Buying Rehab Properties

Buying rehab houses in the real estate market can be a rather challenging task, especially for newbies. Also commonly referred to as “flipping houses, it generally refers to the business practice of buying real estate cheaply and then selling them later on at a profit, usually after doing some renovations or upgrades.

It can be an exciting and profitable business venture if you know what to look out for, which is not always so easy especially for inexperienced entrepreneurs. Fortunately, there are a few simple guidelines that will help you get started in the right direction:

1. See the big picture
Take a look at the property up for sale and try to visualize it in its final form. If you can picture a fantastic finish, go for it. If you have a considerable amount of doubt, it’s best to steer clear. There’s no point in buying something that you can’t picture being a success simply because it’s up for sale at a cheap price. Always think about the big picture before purchasing.

2. Calculate the numbers
Consider the overall value of the property right now and when you’re done making renovations. For example, tally up the purchase price, rough estimate of renovation/upgrade costs, and the legal fees involved. Then come up with an estimated selling price. Calculate the profit and consider if the return on investment will be worth it.

3. Research the history and current state of the neighborhood
Dig up some information about that particular piece of property. Ask around the neighborhood and perhaps even some realtors. Sometimes the history will make a difference in whether someone will want to purchase that property from you in the future. For example, a long history of mysterious deaths on the property may work against you, while a discovery that someone important was born there may drive up the value of the said property.

4. Determine the reason the owners are selling the property
Is the home a favorite spot for seasonal ants, flood prone, or a bulls eye for tornadoes? These could not only catch you by surprise in the middle of renovations (incurring heavy losses and delayed timelines), but leave you with unexpected expenses on top of a moral dilemma of whether or not to sell to someone else.

5. Check on legal issues
Are there any legal limitations on what can or cannot be done to the property in question? For example, it would be disastrous to discover that the property you bought with the intention of turning into a five-storied flat actually has a legal limit of four.

As you can clearly see, it would be extremely wise to avoid any rash decisions as just one misstep could turn out to be really bad for business. Take your time and follow the prescribed guidelines above and you’ll be a real estate rehab guru enjoying excellent cash flow in no time.

Land Banking – Be Sure to Land the Right Land

Land Banking – Be Sure to Land the Right Land

Land banking is the technique of buying a vacant, abandoned, undeveloped plot of land and holding on to it until a future date (preferably when the site prices go up) and then selling it.

Land banking has witnessed several self-made billionaires in America like Donald Trump and Bob Hope who have bought large shares of empty land that had not yet seen any sort of development and received hefty returns when their site prices went up.

Pros

Land prices are always on the rise. On that account, land banking is a diligent strategy to invest during the soft market stages with less and gain more in the bear market.

With the additions of the right developmental and industrial/urban council sanctions, the value of the land goes up.

Cons

Land is sold by communities and government at higher-than-market-prices, with the POP (promise of prospect) that the land will sell at a better price tomorrow. Say 10-15 years from the date of purchase.

When buying an empty land, parameters like size, dimensions, topography, natural terrain, site orientation, neighborhood characteristics, utilities available, accessibility, title checks are to be triple checked, as most of these aspects have to be imagined, since usually there is no real development around these types of lands.

Despite the substantial risks involved, an increasing number of Americans are investing under land banking to benefit from the current land property market that would (with the right land and right approvals) be the face of future development sites bringing in more returns than the original stake of investment.

What Is the Value of Land Banking Programs?

What Is the Value of Land Banking Programs?

There is a lot of value in legitimate land banking programs. In simple terms, land banking consists of aggregating parcels of land or distressed properties that will be developed or sold sometime in the future. With programs in the United States, eradicating underused, foreclosed, or abandoned properties to a productive state can be done quickly.

Unfortunately, land banking has been used as part of scams in some countries, whereby underdeveloped land is sold for a price above current market value with a promise that the parcel’s worth will increase dramatically thanks to local development. However, in the United States, there are viable programs that oversee properties with the goal of boosting revitalization in city neighborhoods that were at one time prosperous.

Many U.S. cities went through a period of deindustrialization coupled with increased suburbanization that resulted in a large inventory of vacant and abandoned residential, commercial, and industrial properties. In trying to come up with solutions, the first Land Bank was established in St. Louis, Missouri, in 1971, followed by others that have achieved great success.

The Real Value of Land Banking

By 2009, the value of land banking programs was accepted by the Department of Housing and Urban Development (HUD) and deemed a best-practice model for dealing with the collapse of the real estate market and abundance of foreclosures. The value of land banking programs is evident in many ways.

  • A reputable land bank is a one-stop-shop that offers all the necessary tools and resources for dealing with distressed properties.
  • A bona fide land bank has the ability to shorten current foreclosure processes, thereby speeding up the return of abandoned, vacant, and tax-delinquent properties to appropriate use.
  • The cost of adding emergency protection, inspections, law enforcement services, and others required in land banking neighborhoods is reduced by local governments.
  • Maintenance services for abandoned/foreclosed properties and vacant lots are another value of land banking programs.

Steering clear of land banks? It’s time to change your thinking.

Steering clear of land banks? It’s time to change your thinking.

Land banks – government entities or non-profit corporations – are a growing trend in the US and there are now over 120, each dedicated to returning vacant, abandoned and tax delinquent properties to good use.

The reputation of the neighborhoods managed by land banks and strict ownership criteria means that land bank properties are often overlooked by real estate investors. But land bank properties can be a personally and financially rewarding investment – for both organizations and individuals.

-Group investors

Each land bank has their own policies on re-sales. Some only sell to non-profits, while others will work with for-profit developers. You’ll have to align your plans to their own for that particular community – so if their focus is affordable housing, don’t expect to be able to buy up smaller properties for demolition and replace them with one larger home.

-Individual investors

Not all land banks sell to individuals, so check whether your local corporation is open to this. Although property is often sold at a bargain price, the buyer has an obligation to bring it up to local building code standards. For some purchases this can be a big commitment and it’s vital to view the property – often sold as seen – before purchase. Don’t get carried away by a rock-bottom asking price!

Finally, a note of caution for the adventurous. Land banking outside of the US usually refers to private real-estate investment schemes – and are often a con. Land is sold at inflated prices, with the promise that once planning permission has been granted, the land can be sold on for a good profit. In reality, there is often no development potential and investors lose their money.

Trust Deed Notes – A Brief Note

Trust Deed Notes – A Brief Note

A trust deed or a deed of trust is an intangible instrument of security. It has the qualities of a basic mortgage. The trust deed will declare that until the borrower pays back the debt, the borrower will be entitled to an equitable title alone. The legal title to the property will be transferred to the trustee.

Trust deeds are of two types:

Secured notes: These are backed by collateral, meaning the lender is given assurance in the form return and interest via the deeds of trust.

Unsecured notes: As expected, is not backed by collateral. Unsecured notes are mostly reserved for known acquaintances.

Trust deed investing is investing in loans that are secured by properties. Most trust deed investing is undertaken for short term maturity (usually under 5 years) when investing in trusted real estate investors.

What makes trust deed investing a good option?

The number one factor that drives trust deed investing is the high interest rate with almost no risk. Trust deed investors get their top single-digit returns monthly. Returns over 8% are not uncommon in trust deed investing.

The setback for this policy is that it is not liquid. Investments have to run their tenure or until the borrower has paid the loan back or when there is default, until the property is foreclosed and sold.

In the eventuality of the payment default by the borrower, the property in concern cannot be sold for more than the amount transacted for.

Trust deeds investments, backed by a promissory note that defines the amount and terms of the loan and high rates, are a relatively safe option for investments in real estate.

What is a Self-Directed IRA?

What is a Self-Directed IRA?

A self-directed IRA is an individual retirement account which is usually provided by financial institutions as an alternative investment for retirement savings. This account allows individuals to put aside some money for retirements which they can use in the future. It encourages savings and offers a number of benefits to the account holders. The account is referred to as self-directed since the owner of the account has full control over both selecting and directing their individual retirement account investment.

A self-directed IRA will involve a custodian who holds money in the account and will make investments in things like private placements, real estate, or other things depending on the owner’s directives. To begin utilizing a self-directed IRA, you must understand all the rules and regulations governing the investments as well as the tax implications. This is because the self-directed accounts put most of the responsibility on you as the owner.

The benefits of self-directed IRAs

There are many benefits of self-directed IRAs. One can access a wide range of alternative investments which are not actually offered by the brokerage firms and the banks. One also gets a chance to invest in what they know and understand well and they can directly manage their investments. By owning different commodities, the account owners can protect their wealth even when there is economic fluctuation. In addition, the portfolios are truly diversified to protect the owners against the possible market volatility, as well as harsh inflation rates. One will also get an opportunity to partner with friends and family while making more and more investments.

Self-directed IRAs are gaining popularity recently with a lot of investors expanding beyond stocks and bonds. Opening a self-directed IRA is simple and easy. All one needs to do is to determine the account they want, choose a fee option, fund the account, provide a copy of the national ID, and submit the new account kit and get started.

 

Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is risk in using retirement funds for investing in real estate assets. It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds. Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at: http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice. Prior to acting upon this information, you may consult your own accounting, legal and financial advisors to evaluate the risks, consequences and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.

Everything you need to Know about Deed of Trust

Everything You Need to Know about Deed of Trust

If you are one of those people who are not sure about what a deed of trust is all about, you are not alone. You have to keep in mind, that as an owner of a newly acquired real estate property, you sign a deed of trust at closing. There is a lot of paperwork to be dealt with at the closing, which makes it important for you to take your time and read them before you even considering signing. That being said, here are a few additional things to keep in mind about a deed of trust.

What is a Deed of Trust?

A deed of trust is not just a piece of paper, it is in fact a security for you loan. Additionally, the document is recorded and kept safe in public records at the same time. Essentially, a deed of trust comprises of three parties, which include:

  • The borrower, referred to as the ‘trustor’
  • The entity holding legal or bare title, referred to as the ‘trustee’
  • The lender, referred to as the ‘beneficiary’

The document serves as an instrument that identifies key elements of the agreement including the original amount of money borrowed, the different parties involved, legal description of the real estate property being secured for the mortgage and other details including the commencement and maturation of the loaned amount. Additionally, it covers additional factors including legal procedures, late fees and the requirements of the mortgage.

Who is a Trustee?

A lot of people find the deed of trust and mortgage to be quite confusing. This is primarily because a trustee is not required when you apply for the mortgage; however the same cannot be said about a deed of trust. The trustee is an independent third party that acts as nothing more than a neutral entity that does not represent the lender or the borrower.

Promissory Note and its Importance

As mentioned earlier, the deed of trust is a legal document that ensures security of the debt. This is made possible by securing any other property and promissory note is required as evidence of the debt actually existing in the first place. The note serves as a promise of payment, which is signed by the borrower and even contains key elements of the loan including payment obligation and interest rates.

Additional Factors to keep in Mind before Signing a Deed of Trust and Promissory Note

Before you actually go ahead and sign a deed of trust and the promissory note, there are some things that need to be kept in mind in order to make sure you are not in way over your head in the first place. You can start by reading the documents carefully and make sure it is exactly what you agreed upon. Moreover, there is no harm in checking for mistakes, important items to review include:

  • Trustor’s name
  • Balance of the loan
  • Amount that needs to be paid
  • Interest rates agreed upon
  • Physical address of the property
  • Any and all, prepayment penalties

Now that you know everything there is to know about deed of trust, you will be able to make more effective decisions that are in your favor. However, if you are not sure about something in particular, there is no harm in asking for help or seeking professional assistance.

Understanding Trust Deeds (Notes)

Understanding Trust Deeds

A Trust Deed is a legal document wherein the real property’s legal title is moved to the custody of a trustee. This particular deed is usually held as collateral for a debt between a debtor and lender. The debtor serves as the trustor while the lender is known as the beneficiary. On the other hand, the trustee serves as a third party that holds the trust deed to ensure that the deal between the lender and beneficiary are acted accordingly.

The purpose of enacting this strategic investment is to let the debtor acquire money from the lender to purchase a property.

Here’s how it actually works: you, the debtor, quote the amount of cash to the seller. The seller then performs a grant deed providing the property to the trustor. Next, the trustor can quickly perform a trust deed moving the property to the trustee to be detained in trust for the beneficiary.

A Trust Deed is more advantageous than a mortgage in the part of the lenders. This is due to the fact that the trustee has the capacity to foreclose on the real estate property in the event that the debtor fails to pay the loan.

Trust Deeds differ from mortgages, because they actually include three parties: the debtor, the lender, and the trustee. A mortgage, on the other hand, only involves two parties, the mortgagor and the mortgagee. Trust Deeds are commonly used as a means in funding real estate purchases in several American states, such as Missouri, Nevada, and Colorado.

Real Estate and Self-Directing Your IRA

Real Estate and Self-Directing Your IRA

A self-directed individual retirement account is a category in IRA backed by a few financial institutions in America that offer alternative investments for retirement savings.

The self-directing here implies that you, the individual account owner, having complete control over your retirement investments, will have access to your retirement funds to be used to invest in alternative assets, like real estate.

To be able to self-direct your IRA, you must first appoint a trustee to manage the IRA in terms of administrating the formalities required by the IRS.

Advantages of self-directing IRA to buy real estate

– Tax free gains

– Tax free positive cash flow

– Limitless property holding

– Potential to earn greater returns on invested capital

When you purchase real estate with a self-directed IRA, all income and gains gathered by your pre-tax retirement account investment will be routed back to the retirement account 100% tax-free.

How this works is that instead of having to pay tax on the returns of real estate investment, tax is to be paid at a future date, enabling the present investment to grow steady and uninterrupted.

From Land banking to mobile homes, there are a number of quality and reliable options for those interested in self-directed IRA investments.

Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is risk in using retirement funds for investing in real estate assets. It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds. Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at: http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice. Prior to acting upon this information, you may consult your own accounting, legal and financial advisors to evaluate the risks, consequences and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.

Value of Land Banking

Land Investments

The Value of Land Banking

Have you ever seen a property and thought it would have been a great investment had you gotten involved a few years back? If people only knew how much value a property could have after a few years, they would likely get involved as an investor sooner. Fortunes have been made with Land Banking.

If you’d like to possess a property with hopes it will appreciate over time, then Land Banking is an area of real estate to look at. This is a process of acquiring future property development sites now, at the present value (speculating the increase of value in the coming years).

Numerous property development enterprises purchase large pieces of land and place them in their land bank. This assures them that they will have enough land available for future property developments or parcel sales.

Even though big profits have been generated from holding a bank of land by numerous developers, there is also a flip side. Land Banking has caused the ruin of some developers when the values of the banked real estate declined. As always, take these risks into account.

When land banking, you’re basically banking on

  • The fact that you think the value of the land will increase over time.
  • In due time, you could very well move forward with a property development plan.
  • Sell the property at a higher value.

Land Banking is a good investment method. The value of land can appreciate every year. You can even decide to build on the land to further increase its value.

Land banking, much like the buy and hold strategy, takes time. But, that time can also lead to an increase in value and a greater ROI for you as the investor.

The Art of Setting Goals for Real Estate Investors

The Art of Setting Goals for Real Estate Investors

Investing in real estate will expose you to a hectic and fast moving market. You will need to be on your feet and rapidly exploit advantageous property deals. In fact a large proportion of house flipping deals (buy, restore and sell a property) happen in matter of weeks. Nevertheless, for you to succeed in the long term you will need to set your investment goals and prepare a plan for the future.

How to set your profit goals?

  1. Calculate your desired annual profit based on planned investments.
  1. Calculate the average profit that could be generated by your individual properties. To do this, look at similar real estate investors in your area or study property sales of the past year.
  1. Divide your annual target profit by the profit by the individual property profit. This will help you to estimate how many properties you will need to locate and manage this year to reach your profit goal.

Once you have set your profit goals, prepare the groundwork that will help you achieve them.

  • Look up similar investors in your region and review their range of properties and any business data that you can access. You could this by looking at press releases in the local real estate media (for small scale investors) or by purchasing business reports (large scale investors.)
  • Analyze public property records and find the best areas to go to. These records will reveal past purchases and sales. It could help you understand where your competition is making their biggest profits.

First time investment tips

First Time Real Estate Investment Tips

Investing in real estate is a great way to move toward financial security. However, it is not always guaranteed that property investments will yield the desired results, so it’s important to know where to start when thinking of investing. Here are some helpful Real Estate Investment tips that could help.

Select the right property at the right value

 

This is important if you want to select a property that has the highest probability to increase in value. If you are patient and well informed, you can wait to buy the property below its actual market price. This can be possible through research, as well as through gaining a real estate investment education that can provide you with the confidence and the background you need going into deals.

-Search for a reputable property manager, or become one yourself

A property manager can aid you with ongoing guidance and aid you in the management of tenants. As a result, you can achieve the best probable value from the property you own.

Learn the market and the developments of the location where you are purchasing

It is advisable to look at other properties available in the area and talk to some residents and real estate agents. In this way, you will be able to learn what markets and areas you should be looking at as you begin to invest.

-Inspect the age and state of the property

This is highly recommended because needing to fix the roof, walls, and other facilities in the first days of ownership can greatly minimize your earnings and provide you with a pretty shaky start. It is advisable that you take the time to inspect the property, and be sure you know what you’re getting into. Simply do your due diligence, and you could save yourself some heartache.