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Archives for December 2018

Best Real Estate Investments: Tips for Searching

The real estate investment market may seem like a bit of a closed hole at times. From the outside looking in, you wonder how you could possibly break into the scene with all that’s going on. From the inside, you might be running into the same problems regardless. Being an investor means dealing with a lot of moving parts. Putting those parts together can feel like piecing together a jigsaw of a clear blue sky.

house on top of a money pile
Quick Navigation
Here Are Some Tips for the Best Real Estate Investments
1. Build a Network
2. Strategize Your Taxes
3. Keep Up on Maintenance
4. Understand Your Property’s Environment
5. Keep Your Portfolio Diverse
6. Set Up Reserves
7. Consult with Experts
8. Stay Focused, Be Patient, and Think Through Everything
Keep the Right Mindset

Whether you have skin in the game or are just starting out, there are always new things to learn about finding the best real estate investments. When you need to sort the wheat from the chaff, having in-house knowledge can help make the process a little bit easier. We’re here to help provide some tips to help you out on the open market.

Here Are Some Tips for the Best Real Estate Investments

Depending on your experience, some of what you’ll find here may not be the most earth-shattering stuff around. However, no matter how well versed you are in the investment sector, it helps to refresh your memory. Polishing your intuition, skill set, and reserve of knowledge can never hurt. However, if you’re new to the game, then you may want to bookmark this and take notes.

1. Build a Network

Humanity will be your best, most valuable resource when it comes to just about any field. You may be a writer, a physician, a filmmaker, a carpenter, or an investor - what you are doesn’t matter. No man is an island, and if you decide to maroon yourself on one you’ll end up drowning. Find the value in your peers and build a relationship that will benefit everyone involved.

an icon that shows people connected around the world

Constructing a network takes time, but it’s better to think of that as an investment. You’re investing in relationships, investing in people, and investing in yourself. As you strengthen these relationships, more opportunities will appear, and your chances of nailing the best real estate investments increases. Connections create connections, self-fulfilling as long as you work at maintaining them.

2. Strategize Your Taxes

The more you can save come tax season, the more wealth you’ll accrue for continued investment. Imposed taxes due to your investment in property are inevitable. However, there are plenty of steps you can take to mitigate how much comes out of your pocket. Start off by consulting with your accountant on what laws are in place that are going to apply to your investments.

image showing a head with various items all around

Once you have a clear idea of how you’re going to be affected, you’re able to confidently move forward. You can provide housing, sustainability for the disabled or veterans, collaborate with charities, and capitalize on other tax write-offs.

3. Keep Up on Maintenance

We’ve all been in a situation where we felt ignoring a problem would make it go away. There’s something very human about that. However, no matter how much we’d like to leave things be, problems simply don’t solve themselves. Houses don’t heal like humans do. Rather than letting a prevalent issue continue on in your property, you need to address this front on. While your tenants may report major issues when they come up, chances are they might not be so willing to mention smaller issues. 

an image of a house

Things like cracks, leaks, and other assorted damage to the house will compound into real issues quicker than you’d like. Take the time to do regular inspections of your properties to ensure they’re in proper shape. The sooner you deal with a problem, the less money you’ll have to shell out in the future to fix it.

4. Understand Your Property’s Environment

While owning a property that you don’t live in may feel insubstantial at times, it’s still a real place. It helps to remind yourself of that. Everything is affected by its environment, including weather, culture, and living conditions. While you’re researching for the best real estate investment opportunities, make sure to expand your vision.

Real estate located in an area prone to harsh weather may endure long-term damage and increased rates. A house located in a high crime area will not be as ideal a place that reputable tenants will be looking into. There are all sorts of factors to take into consideration when investing in real estate. Keeping an awareness of possible external issues will help direct your investment focuses and weed out potholes.

a man reading a map

5. Keep Your Portfolio Diverse

man working

Investing in nearby real estate is a good place to start, but staying centered in your own neck of the woods for too long can turn out to be risky. As you expand and stretch out your investments, you should broaden your horizons at the same time. Start looking in other cities and states for real estate opportunities. Keeping a diverse portfolio provides essential protections for worst-case scenarios. 

The issue with staying in one area you’re familiar with is that you’re prone to the whims of a volatile market. Staying familiar with your real estate is great, but preventing yourself against financial fallout is better. The more you diversify into other areas of the country means having a backup. If one of your properties bites it hard on a year of poor returns, having another property in a separate market area protects your overall investment.

6. Set Up Reserves

A bad year can deal a lot of damage to your investments. Doing what you can to prepare for that eventuality will save you heartaches in the future. As always, start out by forming a budget and a timeline for your properties. The trick here is making the budget and timeline reasonable, and then anticipate going over those limits. As long as you keep round half of your budget as reserves, you can afford a little breathing room.

The more savings you can accumulate provides a buffer for any eventuality. Establishing a rainy day fund helps cover unforeseen expenses and provides sustainability for vacancies. Any emergencies that arrive can then be easily and readily dealt with. The key here is to establish a clear distinguishable line between what constitutes an emergency and what doesn’t. Ideally, you’ll rarely be tapping into this fund.

7. Consult with Experts

real estate agents discussing something

There’s no reason not to leverage every resource you have to make the best real estate investments possible. Taking advantage of services that help supplement your understanding and current makeup of the real estate market can prove to be invaluable.  The more you consult, the simpler things become and the easier it is to profit in the long-run.

It can’t be stressed enough that humans are going to be your most valuable resource for investing. While we may now have the entire world’s knowledge at our fingertips, there’s nothing that beats the trust and professional know-how of an expert. Having someone to double-check your investments will help minimize mistakes and solidify your chances of success.

8. Stay Focused, Be Patient, and Think Through Everything

Having self-control when it comes to managing properties, examining the market, and making investments is the most valuable thing to do for yourself.

There are all sorts of techniques, tips, and tricks you can research, but you’re the lynchpin. Everything rides on you and your control over the situation. Stay focused and make a plan. Running into the real estate market without having an idea of where you’re going will result in more trouble than it’s worth.

hands holding a miniature home

Being an investor isn’t a race. Take your time to examine everything, and make decisions with a clear head and knowing mind.

Keep the Right Mindset

We may not be in school any more, but that doesn’t give you the right to slack off. 


Being an investor means there’s a lot of work to be done. Before you leap into the market, you might want to make sure you have the right mindset first. Finding the best real estate investments may not happen right away, and in fact take some time to nail down. The point is not to be discouraged and see it as a challenge. You’ll run into some troubles along the way, but each is a stepping stone rather than an obstacle. Everything you endure gives you more experience to use in the future. What matters then is how you use it.


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What are Reits and How Do They Work?

skyscrapers

Finding the most advantageous markup in the world of investment denotes a certain browsing market for opportunities. The fact that, at any given moment, an investment can make or break your bank means that even the most appealing bids could spell disaster. That’s a part of the excitement of being an investor, the ball of the game. 

Quick Navigation
What Is a REIT?
Where Does the Income Come From?
What Are the Average Returns You Can Expect?
Should You Invest in a REIT?

If you’re the sort of person who plays on the line, reaping in reward based on chance and gumption, that’s commendable. However, for the most part, the main source of investment revenue for the rest of us comes from reliable sources. What can we back safely while promising decent returns for our efforts? We certainly can’t all wager our bets on volatile bubbles like cryptocurrency. An investment hinged on real estate has proven a valuable resource for investors. Building a base centered on income-producing real estate is pivotal to constructing a solid portfolio for profit. That being said, the best fixture for real estate income, without forcing you to personally manage and accrue real estate on your own behalf, would be through using a real estate investment trust or REIT.

What Is a REIT?

small wooden home structure and coins

REITs are companies that provide the means to invest in income-producing real estate properties. In order to cash in on these investments, it involves obtaining stocks and becoming a holder in these companies. From here, the process becomes fairly simple as far as earning money goes. As the REIT collects on income, via rents and leases on their owned properties, they then provide compensation for their investors.

The compensation comes in the form of dividends, which REITs are required to divvy out 90 to 100%. This results in the company, as a whole, being able to retain its status via tax exemptions and profits through paying their shareholders. The system as a whole pays off well for all involved, and is regarded as one of the highest, steadiest paying investment opportunities on the market.

representation of reits

Where Does the Income Come From?

magnifying glass

The stability of a REIT stems from its ability to cater to both small and large investors. The prime income is derived from the tenants who reside in these properties owned by a REIT. The rent and leasing income then is distributed to the shareholders. By providing such a large output, investors are able to receive high dividends while maintaining long-term appreciation.

People always need somewhere to live. It’s precisely by capitalizing on the housing market that provides sustainability for all types of investors. REITs provide staples for comfortable and consistent revenue that other investment opportunities might not.

  • Liquidity
  • Long-term performance
  • Sustainable yields
  • Portfolio diversification
  • Transparency

Now, when it comes to investing in REITs, there are several options you can choose from. When it comes down to it, REITs only come in two categories: equity and mortgage. Your preference is basically on what sort of investment you want to focus on, whether you want something that’s more volatile but delivers on better profits or an investment for the long-term.

Equity REITs

With equity REITs, you’re going to be investing in physical properties. Due to the nature of REITs, you won’t actually shell out any money to personally own real estate. Instead, your support is founded on primarily rental incomes. This will also include any acquisition, management, renovation, selling, or other such responsibilities of the aforementioned properties. Since equity REITs cover physical assets, their values are more manageable as well as fiscally flexible to maintain. These sorts of REITs cover office spaces, houses, retail, and most any other sort of structural space. They make up about 90% of the real estate market, making them the most common form of REIT. 

Mortgage REITs

By comparison, mortgage REITs are less focused on physical real estate and focus more on the payment aspects. As their name suggests, mortgage REITs are only relevant in regards to mortgages. Since they aren’t as plentiful or commonly traded as physical real estate, a REIT of this sort makes up a fraction of the market. If the former, REIT covers the tangible real estate properties that people pay money to use, the latter focuses on profiting off of the deals that provided them the means for their purchase. Mortgages are loans given so that everyday folks can afford to live in houses. While certainly not limited to simple houses, and can be applied to plenty of other spaces, a mortgage is a mortgage. The longer a mortgage exists, the more interest will be applied for their recipient to pay off. The function of a mortgage REIT is to profit off of this interest. By purchasing a share in mortgage REIT, you gain a much stronger leverage in the market than with an equity REIT. However, since it’s more powerful, with a leverage of 5:1 as compared to an equity REITs of 2:1, it’s much more volatile and risky.

What Are the Average Returns You Can Expect?

The reason why REITs are so popular are due to their high value and return. With provided immediate dividends, supplemented with long-term security, what matters next is having an understanding of what to expect. Most importantly, the question will probably be on the tip of your tongue: what will the average returns be?

The average returns will, of course, be dependent on a variety of circumstances: what sector you’re involved in, what sort of REIT you’ve invested in, and so on. They’re wont for fluctuation, like any other stock-based company. However, as REITs are for the moment somewhat undervalued and overlooked on the market, there’s been steady growth.

Real estate agent holding a miniature house

An Upward Trend

Since the housing collapse in 2008, the REIT market has been undergoing slow but steady rebuilding. After the bubble broke, and the REIT market bounced back, we’ve been steadily making our way toward better and better returns on investments. As of now, the market is seeing positive returns, climbing a yield of 0.29%. For every investment you make, the goal is making that investment worth more in the long run. If you buy stock for $100 and sell it for $200, then that’s a return of $100 to you. If you’re planning on investing now, the market is looking healthy. For your total returns, you’ll be looking at a 22.6% increase in value on your REIT. So far, the market since the 2008 collapse has been showing signs of growth, so it’s looking like it’s going to go up in 2019 as well, though it may not be a drastic change. However, that’s only covering the total return, and may not be indicative of what you personally will be receiving.

Looking at the Average Return Rate

What’s important to keep in mind is what the average return will be. While 22.6% is indicative of the market as a whole, the average return tells a slightly different story. In the real estate investment market, REITs are actually the best performing out of all competing fields. The average annual return on a REIT has proven to be about 10%, staying consistent for the past decade. This high average return rate carries a certain amount of security with investing in REIT. It’s derived from the average of the past ten years of total annual returns. Though ten years ago was among the lowest the REIT market had been, its testament to an expanding and strengthening market is evident in its average return rate.

Should You Invest in a REIT?

Considering the strength and continual growth of the market, REITs are and have been considered a safe bet for years. With pronounced high return and consistent long-term incomes, the result is a reliable investment. However, though the REITs themselves aren’t subject to certain taxes due to the nature of their structure, they still are taxed. It’s not a perfect system, but it works well. You’ll still be required to file taxes based on your REIT dividends, but the benefits outweigh the cons in the long run. REITs provide an easy way to manage, sell, and purchase real estate properties without being forced to own the properties yourself. It’s a form of financial security, allowing you to gain profit with reduced risk. All that’s left is to decide which kind of REIT is what you’re looking for.


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