9 The Most Important Factors for Real Estate Investing

9 The Most Important Factors for Real Estate Investing

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Read these to know what to look for

What’s the most important thing to look for in real estate? While location is always a key consideration, there are numerous other factors that help determine if an investment is right for you. Here’s a look at some of the most important things to consider if you plan to invest in the real estate market. 

1. Property Location

Why It’s Important

The adage “location, location, location” is still king and continues to be the most important factor for profitability in real estate investing. Proximity to amenities, green space, scenic views, and the neighborhood’s status factor prominently into residential property valuations. Closeness to markets, warehouses, transport hubs, freeways, and tax-exempt areas play an important role in commercial property valuations.

What to Look For

A key when considering property location is the mid-to-long-term view regarding how the area is expected to evolve over the investment period. For example, today’s peaceful open land at the back of a residential building could someday become a noisy manufacturing facility, diminishing its value. Thoroughly review the ownership and intended usage of the immediate areas where you plan to invest.

One way to collect information about what are the prospects of the vicinity of the property you are considering is to contact town hall or other public agencies in charge of zoning and urban planning. This will give you access to the long-term area planning and make a determination how favorable or unfavorable to your own plan for the property.

2. Valuation of the Property

Why It’s Important

Property valuation is important for financing during the purchase, listing price, investment analysis, insurance, and taxation—they all depend on real estate valuation.

What to Look For

Commonly used real estate valuation methods include:

  • Sales comparison approach: recent comparable sales of properties with similar characteristics—most common and suitable for both new and old properties
  • Cost approach: the cost of the land and construction, minus depreciation— suitable for new construction
  • Income approach: based on expected cash inflows—suitable for rentals

3. Investment Purpose and Investment Horizon

Why It’s Important

Given the low liquidity and high-value investment in real estate, a lack of clarity on purpose may lead to unexpected results, including financial distress—especially if the investment is mortgaged.

What to Look For

Identify which of the following broad categories suits your purpose, and then plan accordingly:

  • Buy and self-use. Here you will save on rent and have the benefit of self-utilization, while also getting value appreciation.
  • Buy and lease. This offers regular income and long-term value appreciation. However, the temperament to be a landlord is needed to handle possible disputes and legal issues, manage tenants, repair work, etc.
  • Buy and sell (short-term). This is generally for quick, small to medium profit—the typical property is under construction and sold at a profit on completion.
  • Buy and sell (long-term). This is generally focused on large intrinsic value appreciation over a long period. This offers alternatives to compliment long-term goals, such as retirement.

4. Expected Cash Flows and Profit Opportunities

Why It’s Important

Cash flow refers to how much money is left after expenses. Positive cash flow is key to a good rate of return on an investment property.

What to Look For

Develop projections for the following modes of profit and expenses:

  • Expected cash flow from rental income (inflation favors landlords for rental income)
  • Expected increase in intrinsic value due to long-term price appreciation.
  • Benefits of depreciation (and available tax benefits)
  • Cost-benefit analysis of renovation before sale to get a better price
  • Cost-benefit analysis of mortgaged loans vs. value appreciation

5. Be Careful with Leverage

Why It’s Important

Loans are convenient, but they may come at a big cost. You commit your future income to get utility today at the cost of interest spread across many years. Be sure you understand how to handle loans of this nature and avoid high levels of debt or what they call over-leverage. Even experts in real estate are challenged by over-leverage in times of adverse market conditions and the liquidity shortages with high debt obligations can break real estate projects.

What to Look For

Depending upon your current and expected future earnings, consider the following:

  • Decide on the type of mortgage that best fits your situation—fixed-rate, adjustable-rate mortgage (ARM), interest-only, zero down payment, etc. Note that each type of mortgage has its own risk profile and you need to study each carefully. For instance, ARM includes mortgage rates that can change at any time driven by capital market forces and the borrower must accept any rate changes during the loan term.
  • Be aware of the terms, conditions, and other charges levied by the mortgage lender.
  • Shop around to find lower interest rates and better terms.

6. New Construction vs. Existing Property

Why It’s Important

New construction usually offers attractive pricing, the option to customize, and modern amenities. Risks include delays, increased costs, and the unknowns of a newly-developed neighborhood.

Existing properties offer convenience, faster access, established improvements (utilities, landscaping, etc.), and in many cases, lower costs.

What to Look For

Here are some key things to look for when deciding between a new construction or an existing property:

  • Review past projects and research the construction company’s reputation for new investments.
  • Review property deeds, recent surveys, and appraisal reports for existing properties.
  • Consider monthly maintenance costs, outstanding dues, and taxes. Costs such as these can severely impact your cash flow.
  • When investing in leased property, find out if the property is rent-controlled, rent-stabilized, or free market. Is the lease about to expire? Are renewal options favorable to the tenant? Who owns the furnishings?
  • Quality-check items (furniture, fixtures, and equipment) if these are to be included in the sale.

7. Indirect Investments in Real Estate

Why It’s Important

Managing physical properties over a long-term horizon is not for everyone. Alternatives exist that allow you to invest in the real estate sector indirectly.

What to Look For

Consider other ways to invest in real estate:

8. Your Credit Score

Why It’s Important

Your credit score affects your ability to qualify for a mortgage, and it impacts the terms your lender offers. If you have a higher credit score, you may get better terms—which can add up to substantial savings over time.

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).

What to Look For

Scores greater than 800 are considered excellent and will help you qualify for the best mortgage. If necessary, work on improving your credit score:

  • Pay bills on time—set up automatic payments or reminders
  • Pay down debt
  • Aim for no more than 30% credit utilization
  • Don’t close unused credit cards—as long as you’re not paying annual fees
  • Limit requests for new credit and “hard” inquiries
  • Review your credit report and dispute inaccuracies

9. Overall Real Estate Market

Why It’s Important

As with other types of investments, it’s good to buy low and sell high. Real estate markets fluctuate, and it pays to be aware of trends. It’s also important to pay attention to mortgage rates so you can lower your financing costs, if possible.

What to Look For

Stay up-to-date with trends and statistics for:

  • Home prices and home sales (overall and in your desired market)
  • New construction
  • Property inventory
  • Mortgage rates
  • Flipping activity
  • Foreclosures

The Bottom Line

Real estate can help diversify your portfolio. In general, real estate has a low correlation with other major asset classes—so when stocks are down, real estate is often up. A real estate investment can also provide steady cash flow, substantial appreciation, tax advantages, and competitive risk-adjusted returns, making it a sound investment.

Of course, just like any investment, it’s important to consider certain factors, like the ones listed here, before you invest in real estate—whether you opt for physical property, REITs, or something else.

By SHOBHIT SETH Reviewed by JEFREDA R. BROWN

https://www.investopedia.com/

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10 Home Upgrades That Will Cost You Less Than $100

10 Home Upgrades That Will Cost You Less Than $100

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10 Home Upgrades That Will Cost You Less Than $100

If you’re a home improvement show junkie, you may dream of remodeling your kitchen or bathroom, or installing some fancy landscaping, complete with a water feature. But those types of improvements can cost thousands. 

The truth is that you don’t have to invest in expensive, large-scale improvements to make a big difference in your home’s appearance. Many worthwhile and effective home upgrades can be done for under $100 each. 

See what these real estate industry experts suggest when it comes to making home upgrades on a budget.

And if you make one or two of these home upgrades per month — whatever your budget allows — in less than a year, you can have a home that’s more updated, brighter and less cluttered. 

remodeling

1. Paint Outdated Cabinets.

“Painting outdated cabinets white or light gray can increase a house’s value by thousands of dollars, and it is no secret that kitchens and bathrooms sell homes,”

said Kevin Bazazzadeh, owner of the real estate investment company Brilliant Day Homes.

“You will have no problem buying a brush or two, a small roller and a couple of gallons of good paint for $100 or less. A weekend and a little elbow grease can bring new life to an older kitchen and earn you some quick equity if you are trying to sell the house or a fresh look if you plan to keep it.”

2. Replace Kitchen Hardware.

“This includes all knobs and handles on drawers and cabinets,”

said Matthew Griffin, owner of At Home Real Estate Consulting. “This is the most affordable and easiest of all the upgrades. Getting rid of the 2002 gold-colored handles and bringing in a matte black or silver handle is an easy way to help your kitchen look less dated.

“Buying kitchen hardware by the piece can be expensive, but you can save by buying in bulk. You can find a pack of 25 matte black cabinet handles on Amazon for around $25. 

3. Add Solar Lights.

“Adding solar path lights to exterior walkways or porches is an affordable way to upgrade your outside space,”

said Jason Gelios, a top-producing realtor with Community Choice Realty in Southeast Michigan. “Solar lights have become much more affordable in recent years.”

If you’re going for the wow factor, you can find a 12-pack of sleek stainless steel solar lights, featuring eight LED lights each, on Amazon for $42.

4.Change the Light Bulbs.

“Changing the light bulbs in all the rooms costs $50 for about 16 bulbs at Home Depot,”

said realtor Alex Young of The Bowtie Group. “Making sure bulbs are the same color in fixtures (and brighter LEDs if possible) is a great way to help a room feel larger. Be sure to get bulbs that have color temperatures appropriate for the space. Bedrooms and some living rooms should have a slightly warmer light, whereas kitchens and bathrooms should have cooler light temperatures.”

5. Update Your Fireplace.

Elizabeth Leanza of Realty One Group suggested updating a dingy, brick fireplace with limewashing.

“It’s an affordable and simple lime-based solution that will give your hearth a fresh new look in just a short time, and can be a more forgiving medium than paint,” she said.

“Limewashing is one of the best ways to update a tired or dated brick fireplace without spending too much time or money. There are many available products to limewash your fireplace. You can order it at most home improvement stores for around $52.97, (that’s 0.67 a gallon!), and it’s more than enough to complete a small fireplace or brick accent wall. This is a worthwhile upgrade because it really helps update the home.”

6. Wall-Mount Your TVs.

“TV consoles and stands can look dated and cluttered,”

 said Khari Washington, broker and owner of 1st United Realty & Mortgage. “Mounting a TV to the wall and hiding away the equipment can make a room look open, fresher and cleaner.”

You can find TV mounts for 37- to 70-inch TVs for under $30 on Amazon. 

7. Repaint Your Front Door.

“One of the easiest and most cost effective ways to upgrade your home is repainting your front door,”

said Marina Vaamonde, founder at PropertyCashin. “The entrance to your home makes a huge impact, and not just in terms of first impressions. The feeling someone gets when approaching your front door makes a lasting effect on their perception of your entire home. Refreshing or completely changing the color of your front door is inexpensive, and it’s one of the biggest upgrades you can make to your home for under $100, in terms of effect.”

8. Change Out a Main Light Fixture or Two.

“Replacing dated or worn light fixtures can really make a big difference in the appearance of a home,”

said Mike Stewart, realtor and owner of Mike Stewart Professional Real Estate Corporation. “People like new. When you are selling a property, having modern or stylish light fixtures that match the rest of the home’s decor can really help get potential buyers excited about your property.”

You can find hundreds of light fixtures for under $100 on Amazon that will upgrade your home. Or take a trip to your local home improvement store to check out its selections.

9. Freshen Up Landscaping.

“Adding black or red mulch to the landscaping is another great way to upgrade the curb appeal,”

Gelios said. “Usually, big bags of mulch run $3-$4 dollars a bag.”

However, you may be able to find mulch on sale and sometimes big-box stores, like Home Depot, offer bulk pricing, such as if you buy 30 bags, the price will drop 35 cents per bag. 

10. Upgrade Your Bathroom Mirror.

“Everyone loves a clean, updated bathroom,” said James Watson, owner of Omaha Homes for Cash. “

What is the one thing in the bathroom that is constantly looked at? Sizes typically influence the price, however, most mirrors can be purchased for under $100.”

And if you don’t want to completely replace your mirror consider this suggestion from former mortgage broker, Danny Marshall of Mortgage Rate Guru: “Just adding a frame to your builder-grade bathroom mirror will instantly give it a lift.”

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Phone

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4 signs you’d be better off selling your home before you retire

4 signs you’d be better off selling your home before you retire

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If you’re retiring from your job, you need to make sure your finances are in order. And for many seniors, this means making a decision about what to do with the home they live in.

While some seniors prefer to stay put in their current house, others may want to sell – or may need to in order to shore up their financial situation.

It can sometimes be difficult to figure out what group you fit into. But you can get a good indication of whether unloading your property would make the most sense by watching for these four signs that suggest you may be better off finding a buyer for your home before leaving the working world.

1. You’re worried about running short of money in retirement

If you are afraid you won’t be able to afford to retire, selling your house could sometimes give you much more financial security.

ay, for example, you have a family home that’s worth quite a bit more than you owe on it because it has gone up in value over time or because you’ve paid down your mortgage – or both. In these circumstances, selling could be one of the best things you do. You can take the proceeds from the sale, use some of the money to buy a smaller and cheaper place you own free and clear, and invest the rest to bulk up your investment account. This could go a long way toward solving your money woes.

Not everyone is in such a good position, but selling could also help you be more financially secure even if you don’t have a lot of equity. If you can lower your housing costs, even if you don’t walk away with a big profit, you may still be better off.

2. You still owe a lot on your mortgage

Ideally, you’ll have your mortgage loan paid down by the time you reach retirement. But if that’s not the case and you still owe a small fortune, you may not want to commit to sending a lot of your retirement money to your lender.

In this situation, downsizing to a property with a smaller mortgage balance – and a lower monthly payment – could free up the cash you’d otherwise spend on interest. This can give you more to spend on other things you need after leaving work and no longer getting paychecks to cover your costs.

3. You have very high property taxes

Some homes have very high property taxes. If yours is one of them, housing may continue to cost you a lot of money even if your mortgage is paid off. Property taxes often increase over time, so you’ll be facing a real risk that your big tax burden will only grow as you get older and perhaps see your savings account balance begin to dwindle.

Moving to an area where you don’t have to pay the government so much for the privilege of owning your home could be quite helpful in freeing up room in your monthly budget if you find yourself facing a big tax bill each year.

4. You’re concerned about maintenance and repairs

Maintenance and repairs can become a financial – and physical – burden as you get older.

If you don’t think you can, or want to, take care of your house any more or if you are afraid it will be cost prohibitive to deal with your home’s issues, it can be better to sell ASAP while you’re still young enough to manage the move and before you sink a lot of money into repairs that may not increase your property’s value.

If any of these four signs apply to you, it’s worth thinking seriously about selling and relocating before you leave work. Doing so could make all the difference in terms of the financial security you have as a retiree.

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We are always eager to hear from you. Please fill out the form below and we will contact you as soon as possible. We always reply within 24 hours. Thank you in advance for contacting us and please give our contact information to any referrals you have.

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Address

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Phone

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(786) 859-3514

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