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Tag: Real Estate Investment

  • Top 3 Mistakes to Avoid When Flipping Houses | Entrepreneur

    Top 3 Mistakes to Avoid When Flipping Houses | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    House flipping has grown in popularity over the past few years. The optimism of high profit margins and no need for tenant management or long-term property maintenance has made this method of real estate extremely intriguing for new and veteran investors alike.

    However, finding the right property to flip, house flipping costs and other hassles associated with this process can make it seem much less appealing. Below are the top three “don’ts” when flipping a property. Be aware of these common mistakes, and steer clear of them to make your house-flipping endeavor profitable and stress-free.

    Related: Looking to Invest in Real Estate? Learn How to Fix and Flip Homes With Guidance From These Investors

    1. Overestimating your abilities

    One of the most common mistakes investors make when beginning their house-flipping journey is overestimating their abilities. Confidence is key to success in your business goals, but it’s important to weigh that confidence with a realistic idea of what you can and cannot do.

    Construction/renovation abilities:

    Flipping a home usually requires substantial renovations and repairs. Since flipped properties were usually distressed prior to their flip, the process of flipping can entail major structural changes or repairs to complex systems like electrical or plumbing. While many investors have the ability to complete smaller-scale repairs or renovations, it’s best to leave the complicated tasks to the professionals.

    Not only can completing these repairs be dangerous to your health and safety, but they can also lead to costly mistakes and a final product that could disappoint buyers.

    Time management:

    Time management is a valuable skill in many industries, but it’s especially helpful when flipping a property. You should be able to accurately estimate the time needed for the flip, including the average time for each renovation, and which projects can be worked on simultaneously.

    If you have trouble with time management, your flip could be delayed, which could lead to increased holding costs and overall loss of profit opportunities.

    Real estate market knowledge:

    Knowledge of the market your project is in is crucial for a high profit margin. You should be informed on market trends, popular buyer preferences and surrounding property values before deciding which renovations to prioritize and how you should price your renovation while in the selling process.

    Money management and negotiation:

    Being able to effectively monitor and budget your finances is one of the key skills required in real estate investment. Especially when you’re flipping a home, you need to be able to plan where each dollar is going to ensure you aren’t creating a money pit. Keep track of your expenses, and be sure to store any financial records you obtain for tax purposes.

    Negotiation is another side of money management. Lacking negotiation skills can lead to you overpaying for the property or contractors to conduct your repairs. Having great negotiation abilities will help you land deals with suppliers or contractors and make your profit margin larger.

    2. Overdoing the renovations

    Another common pitfall that house-flipping investors fall into is getting too excited with the promise of your flip and overdoing the renovations.

    Reduced ROI:

    Your Return on Investment, or ROI, can be diminished when you over-improve your property. Renovations are meant to increase the property’s value, so when you indulge in unnecessary and extravagant upgrades, buyers may not be willing to pay more for those features if they don’t see them as valuable.

    Neighborhood incompatibility:

    It’s important to have in-depth market knowledge of the area surrounding your property. Specific neighborhoods tend to have a “price ceiling,” or a relative maximum amount that buyers are willing to spend on a home in that area. If you overdo the improvements on a property within a neighborhood with a lower price ceiling, you may not be able to find many interested buyers.

    Risk of overcapitalization:

    Overcapitalization is when you spend more money renovating the property than the property is appraised for at the end. This is obviously something you want to do your best to avoid.

    Related: Want to Make Money Flipping Houses? Here’s Your Step-By-Step Guide.

    3: Underestimating the cost

    The third issue investors run into when partaking in a house flip is realizing that they’ve underestimated just how much it will cost.

    Carrying costs:

    Carrying costs are the expenses that take place during the flip. For example, property taxes, utilities, loan interest and insurance all count as carrying costs. The longer you take to complete your flip, the more carrying costs you have.

    Renovation costs:

    Renovating the property is the most significant expense in your house-flipping endeavor. You will need to purchase materials, necessary permits and contractors/labor to complete the renovations properly. It’s important that you get quotes from multiple reputable contractors before settling on one to ensure you get the best possible deal, saving more money for possible unforeseen renovation issues.

    Financing costs:

    If you are borrowing money to finance and renovate your flip, you will incur various fees like loan fees and interest payments. If you are taking out a loan with unfavorable terms or high interest rates, consult a financial professional to see if this investment is the best choice for your business goals.

    Marketing/selling costs:

    When you’re done flipping your property, you will need to invest time and money into marketing and selling. Marketing is critical for attracting potential buyers.

    Selling costs can include real estate agent commissions and closing costs. Be sure to budget for these expenses in your original financing plan.

    Hidden expenses:

    House flipping is known for its tendency to blindside hopeful investors with devastating, expensive and unforeseen repairs. Electrical problems, structural damage and plumbing issues can pop up and the most inconvenient times and derail the entire process.

    It’s important that you budget for a contingency fund that can cover any disappointing surprises such as those listed above. Leave plenty of space in that budget after taking care of your foreseeable expenses.

    When it comes to property acquisition, renovation costs and the hassle of marketing and selling your property, some may decide house flipping isn’t for them. However, with a savvy business mindset and a realistic budget, this method of real estate investment can be a great boost for your portfolio.

    Related: How to Find Funding to Start a House Flipping Business

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    Dave Spooner

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  • Toronto housing bubble: Is it ready to pop? – MoneySense

    Toronto housing bubble: Is it ready to pop? – MoneySense

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    As an example, someone who considered themselves fortunate to secure a 5-year variable rate mortgage at 0.9% in early 2022 may have seen their interest rate soar to 5.4%, leading to a significantly higher required payment. For some, this situation is painful, and for others, it becomes unmanageable. In extreme cases, selling the home they purchased just a few years ago, because they can no longer afford it, may be their only recourse. 

    Source: Michael Pe, CFA

    Furthermore, demand from foreign buyers has also been curtailed by the Canadian government’s recent ban on non-Canadians purchasing property. Resident investors, who have significantly contributed to home price inflation, are also likely to be affected by higher interest rates and diminishing cash flow. 

    When will the Toronto real estate bubble burst? While pinpointing the exact timing of Toronto’s potential real estate correction remains challenging, signs of deflation may already be underway. The TRREB has its benchmark prices, designed to estimate the value of a typical home in the area without distortion from outliers. In October, the real estate board reported the benchmark at $1,103,600, indicating a 2.1% dip from September’s $1,127,000. 

    The prospect of a prolonged period of increased interest rates, driven by the Bank of Canada’s cautious stance amid inflation concerns, alongside reduced affordability, restrictions on foreign buyers, and decreased local investor activity due to higher interest rates, suggests the potential for further market deflation.

    When will housing prices hit bottom?

    Prices are dropping in Toronto, and in Canada as a whole. However, it’s uncertain whether prices will continue to decline or not. The Canada Mortgage and Housing Corporation (CMHC) forecasted home prices to increase in 2024. And according to recent stats from real estate firm Wahl’s 2023 GTA Housing Snapshot Report, underbidding has been rising over the past five months (81% in October). To me, the growth underbidding indicates there are less buyers and lower prices.

    Optimists may argue we’ve seen this environment before, with affordability as the ongoing issue. They may contend that the lack of housing supply and the resilience of the housing market will continue to drive up home values. However, certain conditions such as astronomical inflation and rapid interest rate increases have not been seen in decades. This present landscape contains a new set of headlines, setting the stage for potential falling home prices.

    While it’s impossible to definitively predict if and when the Toronto real estate market will experience a downturn, it’s evident that skyrocketing prices have created an affordability problem for many. 

    Simultaneously, though, it disproportionately benefited others, such as property investors. Despite current conditions suggesting diminishing housing demand, including that of investors, policy makers in Canada, including Toronto, must address and moderate this type of demand in the future. Even after interest rates come down. 

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    Michael Pe, CFA

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  • Family legacy: How to pass along the family cottage—and 3 things to avoid – MoneySense

    Family legacy: How to pass along the family cottage—and 3 things to avoid – MoneySense

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    There’s no one-size-fits-all solution. “Planning has a lot of moving pieces, and it’s very important to get it right, and it’s very easy to get wrong,” says Peter Lillico, partner at Lillico Bazuk Galloway Halka Law firm in Peterborough, Ont. He is also a speaker at the Cottage Life shows. “Every family is unique, every cottage is unique, and every cottage succession is unique.” Here, he breaks down the common misconceptions Canadians have about estate planning around the family cottage.

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    Myths around cottage succession 

    Identifying any potential issues is the first step in navigating how to transition the family cottage effectively. Let’s look at some common misconceptions and the solutions that work.

    1. Assuming everybody will get along

    Many parents assume that their children and other family members will agree on how to use and maintain the cottage. This is a mistake because it overlooks the potential for conflicts and differing expectations.

    For example, take a family with two adult children, one living in Alberta and the other in Ontario. The one who lives close to the cottage in Ontario may use the property quite often. However, if the expenses are split 50/50 between both, this can lead to arguments. Lillico says: “There are cottage sharing agreements that can, and should, be worked out beforehand.” Parents (and/or their adult children, frankly) can create agreements that outline rules around care and expenses, and whether they should be shared equally or allocated in proportion to usage, or whatever the family wants. 

    A cottage sharing agreement is a binding document that passes the ownership and control from one generation to the next. It doesn’t just include estate planning details, but also future rules around the cottage. It contains structured instructions for financial responsibilities, sharing usage concerns, division of ongoing labour and maintenance, and even dispute resolution. Lillico explains a real estate lawyer can help with the cottage sharing agreement, as well as “a worksheet that helps [parents] to consider how well suited the kids are for cottage ownership.” 

    2. Underestimating capital gains tax

    Some Canadian cottage owners may believe that succession of the property will leave their children with a valuable asset, but many underestimate the costs of capital gains tax and unforeseen maintenance expenses.

    As real estate prices increased over the years, the family cottage may have risen in value significantly, especially if it was purchased decades ago. This leaves owners facing capital gains tax when they sell the property. Capital gains tax is levied on the profit of the cottage, which is considered a capital asset. 

    Capital gains and losses are calculated based on the difference between the selling price and the original purchase price, adjusted for certain eligible expenses like renovations and improvements. (So, keep those receipts to lower the gain!) 

    A loss can be used to reduce owed taxes on a personal income tax return. A gain, however, is taxed, but not all of it. The taxable portion of a gain is divided in half, and that amount is added to the individual’s overall income and taxed according to their income tax bracket.

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    Debbie Stanley

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  • The Beginner’s Guide to Flipping Houses for Profit | Entrepreneur

    The Beginner’s Guide to Flipping Houses for Profit | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Flipping properties does not have to be complicated. This term refers to properties that are purchased then renovated — or “flipped” — for a profit.

    Follow the key tips outlined in the guide below to help you navigate this process and find a quality property to flip and sell.

    Related: This Company Aims to Revamp the House-Flipping Process For Both Buyers and Sellers

    Finding the right property

    To begin, you have to find the right property to flip.

    Establish your criteria:

    The first step to finding the right property to flip is to come up with a list of criteria based on what is important to you as an investor.

    Do you prefer single-family homes, multi-unit properties or condominiums? Based on your budget, how much can you spend on acquiring the property, and what kinds of renovations do you want to carry out?

    Having this list will help you determine what criteria are most important to you and will help to narrow down your search.

    Understand the market:

    Once you’ve decided on what kind of property you want to invest in, investigate potential neighborhoods and markets that work best for you and your investing goals. A property’s location has a substantial impact on what people are willing to pay for it. Neighborhoods that signal potential for a large return on investment often have good school districts, a strong job market or other signs of growth.

    Doing your research on the local real estate market is crucial for figuring out which properties are worth flipping. A market’s supply and demand, average time spent on the market and price trends are important to pay attention to, since these criteria usually will signal whether your property will be successful in that market.

    Distressed properties:

    Distressed properties like foreclosures, short sales or properties in need of substantial repairs are great for house flippers. You can acquire these properties at a lower rate than normal and spend more on high-value renovations that will give you a higher return on investment. However, be sure to inspect the property and have an idea of how much you will have to spend on the flip itself.

    Online listings, auctions and off-market opportunities:

    Online platforms, property auctions and off-market opportunities are great ways to find hidden gems in the market. Online platforms include Zillow, Realtor.com or Redfin. These platforms will provide details on the property and have photos, descriptions and relevant prices. They also have filters that can help you narrow down your search based on location, price and other factors.

    Auctions will usually feature properties that are being urgently sold and are distressed. Attend a few auctions as an observer before actively participating, since the process can be somewhat overwhelming without prior preparation.

    Off-market opportunities come from property owners who are willing to sell directly to you if a quality offer comes through. Use mail or local newspapers to get the attention of homeowners who are considering selling their home. Although this approach requires more effort than other methods, it leads to potentially better deals, and you do not have to deal with as much competition.

    Related: How to Make Money Flipping Houses

    How to flip properties

    Now that you’ve found a potential fixer-upper, you have to navigate the logistics of acquiring and repairing the space.

    Acquisition and ownership:

    If you are going to flip a property, you have to account for taxes, insurance, title fees and additional acquisition expenses beyond just the asking price. The “70% rule” states that buyers should avoid properties that cost over 70% of the after-repair value (ARV), the estimated value of the property after you flip it, subtracting repair expenses.

    Here is a link to a 70% rule calculator if you would like to use your own property and estimate your figures.

    Establishing a budget:

    Setting a budget is crucial for any home buyer, but it’s especially important when you are planning on flipping the home. Staying on budget ensures that you can turn a profit on the investment while retaining your personal funds.

    Most people will aim to make a 10% to 20% profit for each property. Research the average market prices to see what you can reasonably sell your flip for.

    Also, it’s smart to invest the money upfront to conduct a full inspection. These inspections typically are around $500 or more, and they will help you understand what kinds of repairs you will need to conduct before you can sell the property. Inspecting the property will help you understand exactly how much work this flip will require and whether it’s a reasonable undertaking for you.

    Repairs:

    Now that you’ve acquired your property, it’s time to repair and renovate it. Hire a contractor (unless you are one yourself), and start by looking for affordable improvements that can be made to increase value without transforming the entire space. You could repaint instead of replacing the cabinetry, change out old doorknobs and sink hardware, upgrade to energy-efficient appliances or install composite countertops instead of splurging on granite or marble.

    Kitchens and bathrooms are typically the most vital spaces to renovate in the home. Also, if you find that you need to replace the flooring in your property, explore hardwood. Buyers are often willing to pay more for properties that have hardwood in them.

    Related: 10 Lessons this Entrepreneur Learned from Flipping $100 Million in Real Estate

    Marketing your property

    Now that you’ve conducted all necessary repairs and renovations, you must market your property effectively so you can get a quick sale.

    Make sure that you use high-quality photography and staging since pictures and videos of your property will outperform written descriptions. Investing in a quality photographer is worth it. Also, staging your home with modern and attractive furniture will help potential buyers see themselves in that home.

    Leveraging listing platforms using Zillow, Realtor.com and a local Multiple Listing Service platform can help buyers learn more about your property. Highlight renovations and high-value features of your home within the listing to call attention to its best assets.

    Finally, be sure to host open houses to give buyers the opportunity to see your home in person. Also, when you see these buyers in person, it can foster an opportunity to connect with them and increase your chances of a sale. Virtual tours can help buyers explore the property interactively from the comfort of their own home. This is convenient for people shopping remotely and planning on relocating to your area.

    Hopefully, after absorbing the important information in the guide above, you feel more qualified to flip a property.

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    Dave Spooner

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  • Down payment for a second home in Canada: How much do you need? – MoneySense

    Down payment for a second home in Canada: How much do you need? – MoneySense

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    So, how much of a down payment do you need for a second home? That depends on a few factors, including whether or not you intend to live at the property. 

    Down payment requirements in Canada

    Every Canadian home buyer is required to have a minimum down payment when purchasing property. A down payment is the money provided up front towards the purchase of the home, and it is directly tied to the value of the property. 

    When buying a home, the down payment rules in Canada are as follows:

    Purchase price Minimum down payment required
    $500,000 or less 5% of the purchase price
    $500,000 to $999,999 5% of the first $500,000 of the purchase price
    +
    10% of the portion of the purchase price above $500,000
    $1 million or more 20% of the purchase price

    If you’re buying a home priced under $1 million and your down payment is less than 20%, you’ll need to purchase mortgage default insurance, also known as mortgage loan insurance—which protects the lender if you can’t make your mortgage payments. Using a mortgage down payment calculator is the fastest and simplest way to figure out how much money you will need for your home down payment.

    Minimum down payment for a second home in Canada

    Contrary to popular belief, there’s no blanket 20% down payment requirement for second-home purchases in Canada. In fact, the down payment rules for a second home are similar to those listed above for single-property ownership, as long as the second home will be owner-occupied, meaning the owner will be living in it. 

    “You can purchase a second home with 5% down as long as the property is intended for family use throughout the year and the mortgage is under $500,000,” says Samantha Brookes, CEO of Toronto-based Mortgages of Canada. 

    The 5% down payment requirement applies to second homes with one or two units in them. For properties with three or four units, the minimum down payment jumps to 10%.

    Buildings with five or more units are considered commercial buildings, and they require a commercial mortgage. Depending on the property’s location and the buyer’s cash flow, lenders may require a buyer to have a down payment of 20% to 35% on commercial properties, according to Brookes. 

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    Sandra MacGregor

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  • 6 Ways to Make Passive Income Through Rental Properties | Entrepreneur

    6 Ways to Make Passive Income Through Rental Properties | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    One of the oldest and easiest ways to create passive income is through rental properties. Luckily for investors and entrepreneurs, the property rental market remains strong and continues to grow. Based on data from the U.S. Census Bureau, more than 35% of households in the U.S. rent homes. Additionally, RentCafe reported that multifamily construction in 2022 reached a 50-year high nationwide, and according to Axios, “one million rental units are slated for completion through 2025.”

    Additionally, a recent GoBankingRates survey revealed that 14% of Americans don’t believe they will ever be able to afford a home, and 27% have no interest in buying a home, contributing to the demand for rental housing options. This is due to a variety of factors, including a low inventory of homes for purchase, barriers to homeownership such as high prices and high-interest rates, and a growing nomadic workforce that doesn’t want to be tied down to one location.

    Although rents appear to be stabilizing, demand for rental properties is still high and on-time rental collection rates recently rose above pre-pandemic levels. That means now may be a good time to rent out property, which may be easier than you think.

    Here are six types of rental properties that can help you earn passive income and even begin building generational wealth.

    1. Traditional investment properties

    Traditional investment properties have long been a popular choice for those seeking to generate passive income through rentals. It’s a rather simple concept: purchase a property, find tenants to rent it out and collect monthly rental income. Investors have the opportunity to decide whether to invest in long-term, mid-term, or short-term (vacation) rentals.

    Long-term rentals offer stability in rental rates and cash flow with a reduced risk of vacancies, while vacation rentals and short-term stays allow for higher rental rates with a higher risk of vacancies. Vacation rentals are also less passive, requiring more work to clean and ready the property in between stays and find tenants on a much more frequent basis. But the returns on investment can be much higher.

    There’s also a “mid-term rental” investment option, where the lease lasts for more than one month but less than one year (college student housing would fit into this category). Mid-term rentals require a bigger time investment than long-term properties but aren’t as demanding as short-term rentals. Some investors may want to diversify their rental property portfolio by owning a mixture of long-term, mid-term, and short-term rental properties, while others may commit to whichever style best suits their preferences.

    2. The accidental rental

    Investing in a new property isn’t always necessary to become a rental property entrepreneur. There are instances where you may already own extra property, such as a vacation home, a newly inherited property or perhaps you recently got married and both you and your spouse own your own home. Instead of selling these extra properties, you may consider renting them out.

    Sometimes, it’s more beneficial to hold on to a property over the long term rather than collecting a quick payout. Retaining properties for rental purposes cannot only help you build more real estate equity, but it can bring in a significant amount of passive income as well (and you may benefit from tax savings, but consult a tax professional on that). Combining the extra income with long-term equity gains can contribute to building generational wealth.

    3. House hacking

    Another strategy that has gained traction in recent years is “house hacking.” House hacking involves renting out a portion of your own home. If you own or purchase a property that is bigger than your housing needs, and you’re looking for a way to earn some extra cash, rent out a room (or several rooms).

    House hacking allows you to significantly reduce or eliminate your own housing expenses by using the rental income from renting out extra rooms to help pay down your mortgage and/or offset utilities and other costs of homeownership. House hacking can be a great way to start building passive income without the need for a large initial investment.

    4. Built-for-rent

    A growing trend in real estate is the “built-for-rent” market. Built-for-rent homes are built by companies that specifically design their properties for rental purposes only. These properties are often strategically located in desirable areas, ensuring high demand and consistent occupancy rates, and are marketed to people looking to maximize their returns on investment in the real estate industry.

    Investing in built-for-rent properties has become one of the most lucrative ways to generate a steady stream of passive income. By purchasing residential properties specifically designed for rental purposes, you can benefit from a consistent monthly income with minimal involvement. Typically, the built-for-rent company handles all aspects of property management, including finding tenants, handling maintenance and repairs, and collecting rent. This enables you to sit back and enjoy your rental income without the stress and time commitment associated with traditional real estate investments.

    5. Mixed-use properties

    A mixed-use property is a real estate asset that combines both commercial and residential spaces. This provides a unique opportunity to rent out both residential and commercial units. Leveraging the potential of these properties can lead to a sustainable and reliable passive income source, but there are several strategies to consider.

    One effective strategy for generating passive income through mixed-use properties is maximizing rental yields. This can be achieved by strategically curating a mix of commercial and residential tenants that complement each other. For example, having a retail shop on the ground floor of a residential building can attract more tenants and increase rental demand.

    Another strategy is to focus on choosing the right location for your mixed-use property by conducting thorough market research to identify the most profitable locations. For example, investing in areas with strong growth potential, high foot traffic, and a good mix of commercial and residential demand can increase the value and attractiveness of your property.

    In addition, look for other shared space opportunities like coworking spaces that provide short-term or flexible rental options that cater to the evolving and increasingly nomadic habits of modern workers. By taking an innovative approach to offering mixed-use rental spaces, you can tap into a variety of rental markets and maximize their passive income potential.

    6. Storage units

    When you think of rental properties, storage units usually don’t come to mind. However, renting out storage space can also generate passive income streams. There is a high demand for storage space, and fulfilling this need can help you earn money effortlessly by maximizing unused space. In addition to renting out traditional storage units, people can also rent out space in garages, basements, attics, and spare rooms. By getting creative and marketing effectively, you can effectively turn your empty spaces into profitable assets.

    Regardless of what kind of property you decide to rent out, technological advancements have streamlined property management, making it a more efficient and attractive endeavor. Property management tools and software automate many routine, time-consuming tasks such as listings, tenant screening, rent collection, and maintenance requests. This means you can spend less time on administrative duties and focus more on more important life activities, all while maximizing your passive income.

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    Ryan Barone

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  • Florida Ousts New York as No. 2 Most Valuable Housing Market | Entrepreneur

    Florida Ousts New York as No. 2 Most Valuable Housing Market | Entrepreneur

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    According to a recent report by real estate marketplace Zillow, Florida has surpassed New York as the second most valuable housing market in the United States.

    While California still takes the lead with a total residential housing market value of $10.243 billion, Florida comes in second at $3.810 billion, followed by New York at $3.650 billion.

    Overall, the U.S. housing market has experienced a significant resurgence, surpassing its pre-pandemic value by 49%, the report found. Leading the growth are the major metropolitan areas of New York, Los Angeles, San Francisco, Boston, and Miami, which have emerged as the most valuable housing markets.

    Florida is now the second most valuable housing market in the U.S., and Miami is the fifth most valuable metropolitan housing market. Alexander Spatari | Getty Images.

    Florida’s second-place spot was also driven by the fact that four of the six housing markets that have gained the most value since the pandemic are all in the state: Tampa (+88.9%), Miami (+86.6%), Jacksonville (+82.4%), and Orlando (+72.3%).

    Another factor driving the increase is the population surge, Zillow noted in the report, sparking both new construction of real estate and increased competition for existing properties. While the four most valuable metropolitan housing markets in the country (New York, Los Angeles, San Francisco, and Boston) have held steady over the past five years, according to Zillow, Miami has emerged in fifth place — taking Washington D.C.’s former spot, and also jumping from its ninth place rank in 2021.

    Related: The Inability to Afford a Down Payment Is Why Renters Keep Renting, According to a New Report from the Federal Reserve

    The appeal of warm weather, low taxes, and remote work flexibility has contributed to the population growth in Florida.

    “Where is the population growing? Florida, Texas, the other kind of warm weather, low-cost, low-tax states,” Craig Lazzara, managing director at S&P Dow Jones Indices, told Yahoo Finance in June.

    The data checks out, as Florida experienced a 4.3% increase in housing market value over the past year, and Texas a 1.5% jump, while high-tax states like California and New York experienced 3.3% and 0.2% declines respectively, according to the Zillow report.

    Related: In 20 U.S. Cities, Buying a Single Family Home Is Cheaper Than a Condo

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    Madeline Garfinkle

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  • 5 Tips for Evaluating Your Next Rental Property | Entrepreneur

    5 Tips for Evaluating Your Next Rental Property | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Are you looking to invest in a rental property but aren’t sure what the telltale signs of a good investment are? In this article, I’ll share five tips for how to evaluate whether a property is worth your time and money and what to look for in an investment property.

    From market research and risk analysis to comparing local rentals and calculating your Net Operating Income (NOI), this guide equips you with the knowledge to evaluate your next investment wisely.

    Related: 3 Things to Consider Before Buying an Investment Property

    1. Do thorough market research

    It’s vitally important that you conduct thorough research on your new property before taking action. Real estate investments can be lucrative, but they can also be a money pit without proper planning and preparation. That’s why the first step in how to evaluate an investment is to take the time to figure out exactly what goals and ideas you have for the property.

    You should have an idea as to whether you would like to rent the house out long-term or have a series of short-term renters. Long-term tenants serve as a consistent income stream, and you don’t have to dedicate as much time or effort into finding tenants to fill vacancies as often. However, short-term tenants allow you to raise rent prices between periodic leases, plus you have the opportunity to remove tenants who you’d rather not rent to again, even if you don’t have proper grounds (or funds) for eviction.

    You should also start investigating the market you’d like to invest in. There are many factors that influence how appealing a particular area will be to renters — for instance, an influx of new construction might lessen the demand for your rental, while attractive amenities, restaurants or school systems in the local area could increase the demand for and value of your property.

    It’s also important to realize the potential costs that come with a new rental. Do you want to offer a furnished unit? The cost of furniture and cleaning associated with a furnished unit can add up. You’ll want to consider these costs plus appraisal fees, inspections and other fees that can put a dent in your capital.

    2. Conduct a risk analysis

    Building on the last tip, conducting a risk analysis is a great way to plan for potential risks and be better prepared for hiccups when they happen. The real estate industry is known for being volatile, so to best protect your investment, expect changes in the following factors:

    • Essential service prices, like gas and electricity

    • Local employment rates

    • Property taxes

    • State and local laws

    • Quality of applicants

    • Government real estate policies

    A good way to quantify the level of risk for each factor is to assign each one a score of, for example, one to five — five being the highest level of risk. If a property has a higher risk factor score, be aware that it could potentially lead you to spending more money than you’re comfortable with.

    Related: How to Get the Most Out of Your Rental Property Investments

    3. Use comparable rentals in the area

    An important step in evaluating your new rental property is to see how it stacks up against the other properties in your local market. In doing so, you can keep your expectations on expected cash flow in check.

    Conduct a sales comparison by finding properties that are similar to yours and calculating the price per square foot that they sold for. Be sure to look at properties that have been sold within the last month so that your numbers are as accurate to the state of the current market as possible. When looking for comparable properties, try to find units that have approximately the same number of bedrooms and quality of amenities as yours.

    Additionally, consider whether the location that you’re researching is the right location for the type of renter you’re looking to attract. For instance, if you’re primarily targeting local families for your rental, you’ll want to evaluate whether the school system nearby is high quality. If you’re targeting young professionals, however, you might investigate whether the property is close to public transit. An excellent location can upgrade a mediocre property to an extremely desirable one, so don’t overlook this step when choosing where to invest.

    4. Calculate your NOI

    Your property’s NOI (Net Operating Income) is the total amount of income that it will generate, minus general operating expenses. It is calculated by taking your total rental revenue over a certain period of time and subtracting all regular operating expenses required to maintain the property over that period, such as the cost of repairs, property management fees, insurance, property taxes, etc.

    If you divide your NOI by the original price you paid for that rental property, you get the capitalization rate, which measures how long it will take for you to make back your initial investment. If you have a high cap rate, you have more revenue and a strong overall investment.

    However, it’s important to remember the few factors that could skew your cap rate calculation. When you use cap rate to evaluate a property prior to purchasing it, you’ll need to estimate the potential rental rate and total expected income. That means that you’ll have to find the cap rate after you research what similar properties are charging in your area. Also, if you intend to flip a low-value home, your cap rate will not include the cost of renovations or the fact that you will not be renting the space out and are selling it instead.

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    5. Consult a professional

    As an investor, you need to understand how a property’s current state will influence what it could be valued at in the future and how much you can profit from it at the time of sale. One of the ways to do this is to hire experts who are experienced in this field to give you an estimate.

    A professional property valuation estimates how much capital you’ll need to maintain a property. Maintenance costs are a significant factor in determining your overall profit from a rental property. A property valuation will take stock of larger assets like the roof, insulation or HVAC system to see what condition they’re in and how much you may have to spend to keep them functioning. You can also request a formal appraisal to have a professional estimate of the true value of the property based on factors like location, demand and lot size.

    The key to a great investment is solid upfront research. Real estate is a great way to be your own boss and possibly achieve streams of passive income — but first, you must dedicate significant time and effort to ensure your venture is a good one. Hopefully, the investment property tips above help you find a quality investment.

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    Dave Spooner

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  • Get Better at Real Estate Investing with Mashvisor — on Sale for Just $39.99 | Entrepreneur

    Get Better at Real Estate Investing with Mashvisor — on Sale for Just $39.99 | Entrepreneur

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    Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

    Real estate investors have always been lauded as finding the niche that’s most impervious to recession and best suited for capital gain. If you’re interested in improving your approach to real estate investing or getting started with it in the first place, then subscribing to a platform that delivers helpful data and actionable insights could help a lot. An example of such, Mashvisor has a lifetime subscription that’s on sale for just $39.99 (reg. $899).

    Mashvisor is rated over 4/5 stars on Trustpilot and it’s designed to help users better invest in real estate with market-finding tools like its Mashmeter score, rental revenue filter, and filters for other important components like cap rate and crime rate. It also has tools to help users find qualified properties, and those you can search based on location, rental strategy, budget, property type and size, etc.

    For the process of making investments, Mashvisor has more tools including its Airbnb calculator, which helps you figure out a property’s income potential, and its multiple-city search capabilities.

    Mashvisor also has features that help with short-term rental and Airbnb management. If you’re a business professional who travels then you understand how proper management can go a long way. Mashvisor uses AI and machine-learning algorithms to automatically send market insight updates and analysis to inform users on how to best manage their properties.

    You can also opt for the professional plan, which includes multi-family and foreclosure search capabilities among more added features.

    Prices subject to change.

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    Entrepreneur Store

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  • ‘Worst Investment’ Brady Bunch House Sells for $3.2 Million | Entrepreneur

    ‘Worst Investment’ Brady Bunch House Sells for $3.2 Million | Entrepreneur

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    The famous Studio City, California residence dubbed, “The Brady Bunch house,” hit the market in May with an initial price tag of $5.5 million and just sold — for under $3.2 million.

    The property’s new owner, Tina Trahan, is a dedicated fan of the iconic home and has no plans to reside there, The Wall Street Journal reported.

    Trahan, along with her husband, former television executive Chris Albrecht, have a penchant for collecting iconic real estate. Their past endeavors have included acquiring sections of Stone Manor, a colossal 125-year-old lakefront property in Wisconsin.

    When the beloved 1970s sitcom house first became available for sale, Trahan expressed her deep fascination with the single-story, mid-century ranch-style residence to her real estate agent.

    “I thought that was hilarious. It’s almost like a life-size dollhouse,” Trahan told the WSJ, adding that, even at the marked-down listing price, it’s still “the worst investment ever.”

    The house is adorned with classic mid-century furniture, including avocado green Knoll-style Tulip chairs, a matching kitchen pedestal table with a refrigerator, low-slung credenzas, and a Mondrianesque paneled screen above the staircase.

    Additionally, the listing by Compass notes that some of the fireplaces, appliances, and fixtures throughout the home are for decorative purposes only — which makes it perfect for the home’s newest buyer.

    Trahan told the WSJ that she intends to utilize the house for charitable and fundraising events, emphasizing that it won’t be inhabited for day-to-day living.

    “No one is going in there to make pork chops and applesauce in that kitchen,” she said. “Anything you might do to make the house livable would take away from what I consider artwork.”

    Courtesy of Danny Brown | Compass | TheMLS.com

    Courtesy of Danny Brown | Compass | TheMLS.com

    Courtesy of Danny Brown | Compass | TheMLS.com

    The house was primarily featured in exterior shots on the television show, The Brady Bunch, while the actual filming took place on a soundstage. Nevertheless, when HGTV acquired the property in 2018, surpassing a bid from *NSYNC singer Lance Bass at $3.5 million, the network painstakingly reconstructed it to replicate the on-screen home of the Brady family.

    Throughout A Very Brady Renovation in 2019 (a limited series dedicated to the renovation of the home, which included cameos from the original cast), designers expanded the house’s size, enlarging it from 2,500 square feet to 5,500 square feet, which included the addition of a second story.

    Related: South Park Creators Spent ‘Infinity Dollars’ Renovating Iconic Colorado Restaurant, Set to Reopen Soon

    As a result, the current home boasts five bedrooms and five bathrooms that have been meticulously restored. By the end of the series in 2019, HGTV invested an additional $1.9 million in the endeavor, according to NPR.

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    Madeline Garfinkle

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  • 5 Steps to Prepare to Sell Your Rental Property | Entrepreneur

    5 Steps to Prepare to Sell Your Rental Property | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Preparing a house to sell is quite the process. If you’re a real estate investor with current tenants, it can become even more complicated. However, whether you’re deciding to sell because of a shifting business plan, a big life change or interest in investing your money elsewhere, figuring out when the best time is to sell and how you plan on doing so should be top of mind.

    Here are five steps to take when preparing to sell your rental property.

    Related: 6 Tips for Successfully Selling Your House

    Step 1: Plan when to sell

    The first step in selling your rental property is to strategically plan when to put the property on the market. If you can figure out your area’s local market trends, you will more easily be able to see what times are most profitable to sell your rental property. Here are some indicators that it’s a good time to sell:

    Higher demand for housing:

    Is there a large influx of buyers, perhaps due to new jobs cropping up in your area? While demand is high, it’s a strong sign to start preparing to sell just in case this demand doesn’t last long.

    You have substantial equity:

    It’s possible that you bought your property for a reasonable price and have made good renovation decisions over the years and now have a good amount of equity from that property. You should consider whether your potential gains will outweigh how much you’ll make in cash flow if you were to keep the property: If not, it’s best to wait until you have a stronger reason to sell.

    Incoming drop in rental prices:

    There are a few signs that rent prices in your area are about to drop. Although these are not guarantees, an influx of new construction or lower interest rates could lower the demand for your rental. If you see these signs, it’s a good idea to get out ahead of the decrease and sell your rental property.

    Step 2: Communicate with your tenants

    Maintaining a friendly, professional relationship with your tenants should always be top of mind for you as a landlord. Undergoing the selling process will force your tenants to decide between three options: They can move out, wait for you to sell the property and then move out, or remain a tenant under the new owner. If they choose to stay, it’s in your best interest to stay on their good side and encourage their cooperation.

    Tenants are going to be inconvenienced during this process. They will have to deal with a new owner, potential showings and repairs, and they could have to renegotiate their rental agreement. While these inconveniences could prompt some tenants to be difficult, if you already have a strong relationship with them and offer incentives to make them feel appreciated, the selling process is much more likely to go smoothly.

    Some ideas for tenant appreciation are offering gift cards to those who stay throughout the selling process or setting up activities like food trucks to stop by your property. Showing that you care about the sacrifices they’re making with their time and privacy will go a long way.

    Related: 6 Strategies to Increase Your Real Estate Cash Flow

    Step 3: Repair and prepare

    Preparing your property for the market entails advertising, making necessary renovations or repairs, and creating a listing.

    The first obstacle in this step is evaluating the current state of your property. Are there any big repairs that need to be done? Do you need to replace the carpet or appliances? Perform a pre-listing inspection to identify any glaring opportunities for improvement.

    Then, arrange to fix anything you found in that inspection. Vacant units are the easiest to arrange service on because you don’t have to work around tenants’ schedules or inconvenience them by constantly being in their living space. Extensive projects sometimes require an empty unit, like installing new flooring or repainting.

    Step 4: Hire a real estate agent

    A real estate agent will help you navigate the advertising and showing process, along with any legal steps that may be included.

    Advertising is extremely important. A good real estate agent will guide you toward the best ways to advertise in your area based on population trends and the local market, and they may also give you recommendations on house showing etiquette. They may also have access to databases that make it easier for you to find a great buyer.

    Related: 5 Real Estate Mistakes That Could Make You Lose Money

    Step 5: Choose a buyer

    First of all, a great buyer must have the means to buy your property. This buyer could be a real estate investor like you or someone looking for their next home. It would be beneficial for you and your current tenants if you chose an investor who is willing and prepared to take on your active leases, so your tenants don’t have to move.

    Also, if you have kept detailed records that prove your current tenants’ reliable record of paying on time and in full, investors may be willing to pay more for the property. The new investor will have an almost guaranteed positive cash flow right after they purchase the property without having to put in extra work for advertising or dealing with and filling vacancies.

    However, this decision is ultimately up to you. A real estate showing agent will be able to provide experienced advice on what kind of buyer would be best for your business’s needs, so be sure to take the time and hire someone you trust.

    Selling your rental property is best done with maximum preparation. The more research and prep you do into the process, the easier it will be for you and for your tenants. Consult with professionals in the field if you’re unsure of how to proceed. Picking a plan and sticking to it will be the best course of action, and ensuring your tenants are fully in-the-know will ease your stress as well.

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    Dave Spooner

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  • The Entrepreneur’s Guide to Building Wealth Through Real Estate | Entrepreneur

    The Entrepreneur’s Guide to Building Wealth Through Real Estate | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Real estate, as an asset class, has long been heralded as a critical pillar of wealth creation for entrepreneurs. It is a tangible investment avenue, and its potential for consistent appreciation and income generation makes it an excellent wealth-building tool.

    According to the U.S. Federal Reserve’s 2020 Survey of Consumer Finances, real estate comprises about 30% of American families’ total wealth, demonstrating its significant role in wealth accumulation. In essence, real estate investment represents an accessible pathway for entrepreneurs to achieve financial prosperity — and here are six ways to make money in the industry.

    Related: How to Start Investing in Real Estate With as Little as $5,000

    1. Investing in rental properties

    One of the most conventional ways to create wealth through real estate is by investing in rental properties. The potential for steady cash flow from tenants provides investors with a continuous income stream, which is a form of passive income. For example, consider a property purchased for $200,000. If this property is rented out for $1,500 per month, the entrepreneur can potentially yield an annual return of $18,000, resulting in a 9% cash-on-cash return.

    Successful real estate investor, Robert Shemin, started with a single property and has now built a portfolio of over 400 properties. His estimated net worth is reportedly over $18 million, thanks in large part to his investment in rental properties.

    2. Real estate appreciation

    Property appreciation is another way real estate builds wealth. Over time, properties tend to increase in value — and if an investor holds onto a property long enough, they can sell it for much more than the original purchase price.

    Statistics from the U.S. Census Bureau show that the average price of a home in the United States was about $30,600 in 1940 (after adjusting for inflation). In contrast, by 2020, the average price had escalated to over $300,000, a tenfold increase. The renowned business magnate, Donald Bren, capitalized on this by acquiring a wide array of properties. Today, with a net worth estimated at $15.3 billion, he is one of the wealthiest real estate investors in the world.

    3. Real Estate Investment Trusts (REITs)

    For entrepreneurs who prefer not to directly manage properties, REITs offer a way to invest in real estate without the burdens of property management. REITs, essentially, are companies that own and operate income-producing real estate. As per the National Association of REITs, the compound annual return for equity REITs from 1972 to 2020 was 9.72%, outperforming the S&P 500’s 7.42% return over the same period.

    Investing in REITs is as simple as purchasing shares of a publicly traded company. You can buy shares of a REIT through a broker, just as you would with any other publicly traded stock. There are also mutual funds and ETFs (Exchange-Traded Funds) focused on REITs that provide further diversification. By making real estate investing accessible to a broader audience, REITs open a pathway to real estate’s wealth-building opportunities without requiring extensive capital or expertise in property management.

    An example of an entrepreneur who achieved remarkable wealth through REITs is Sam Zell, founder of Equity Residential. Today, Zell boasts a net worth of approximately $5.5 billion, with a large portion derived from his REIT investments.

    Related: 5 Proven Steps to Become a Real Estate Millionaire, According to an Investor

    4. Flipping properties

    House flipping involves buying a property, renovating it and selling it at a profit. Although this requires expertise and hard work, the potential for high returns makes it an attractive option for entrepreneurs.

    For example, according to ATTOM Data Solutions, the average gross profit for a flipped house in 2020 was $62,300, demonstrating the lucrative potential of this real estate strategy. Christina Anstead and Tarek El Moussa, stars of HGTV’s “Flip or Flop,” exemplify this success. They have built a multimillion-dollar business through property flipping, further highlighting the wealth creation potential in this approach.

    5. Investing in commercial real estate

    Commercial real estate (CRE) includes shopping centers, offices, warehouses and apartments. Generally, these properties yield a higher return than residential real estate due to longer lease contracts and higher rental rates.

    Investing in CRE allows entrepreneurs to diversify their portfolios and minimize risks. A report by CBRE showed that the average annual return for CRE was 9.5% between 2000 and 2018. Though it requires a larger initial investment, the high yield can lead to substantial wealth accumulation.

    Take the case of entrepreneur Rick Caruso, founder of Caruso, a company specializing in creating extraordinary retail, dining and lifestyle experiences. Through strategic investments in CRE, particularly in high-end retail centers, Caruso has grown his net worth to an estimated $4 billion.

    6. Developing raw land

    Another viable way of wealth creation through real estate is land development. Entrepreneurs can purchase raw, undeveloped land, then increase its value by obtaining the necessary permits and building infrastructure like roads, sewage systems and utilities. Once the land is developed, it can be sold to homebuilders or commercial developers at a profit or it can be utilized to construct properties, thus adding another income stream.

    Land development can be highly profitable, but it requires a keen understanding of local zoning laws, planning regulations and market conditions. Entrepreneurs also need significant upfront capital and patience, as this process can be time-consuming.

    Related: Why Real Estate Investment is the Ultimate Adventure for Entrepreneurs

    Reaping the rewards of your investment choice

    The avenues to wealth creation through real estate are vast and varied. Whether an entrepreneur opts for rental properties, capitalizes on appreciation, invests in REITs or decides to flip houses, real estate offers incredible potential for wealth accumulation. While success demands research, financial acumen and sometimes patience, real estate investment remains a proven strategy for entrepreneurial wealth creation. As illustrated by the above examples, those willing to invest the time and effort can reap considerable financial rewards, ensuring their journey towards sustainable wealth.

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    Ari Chazanas

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  • What to Consider When Determining the Value of an Investment Property | Entrepreneur

    What to Consider When Determining the Value of an Investment Property | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When searching for an investment property, what should you pay attention to the most? There are several factors involved in every real estate deal, and it’s not always clear which are the most important.

    Understanding these factors is the key to answering questions like, “Is buying rental property worth it?” or “Will my investment be profitable?”

    In this article, we discuss six of the top factors affecting property value and what to know when buying rental property based on these factors.

    Related: Considering Buying Your First Rental Property in 2023? Here’s What You Need to Know to Succeed.

    1. Location

    If you’re familiar with the real estate industry, you may have heard the mantra: “Location, location, location.” Location continuously proves to be the number one factor in determining a property’s success in the rental marketplace.

    Not only do renters want properties in certain cities, but they also seek out homes near:

    Neighborhood desirability plays a substantial role in overall property value. Attractive neighborhoods are walkable, include convenient amenities and foster a strong sense of safety and community. Of course, a renter with three young children might have different priorities and expectations for a neighborhood than a retired couple. It’s about finding a property with the best balance of what the local community has to offer and then ensuring that location will retain its value over time.

    2. Investment plan/purpose

    Not every investor buys a rental property with the same plan in mind or purpose for it. Your plan could be to:

    • House hack: Live in one unit and rent out the other(s).

    • Buy and hold: Buy a property to keep as a long-term asset to a stable portfolio.

    • Fix and flip: Buy a property and sell it after making capital improvements to increase its value.

    • BRRRR: Buy a property at below-market rates, rehab it, rent it out, refinance the mortgage and repeat the whole process with your next property.

    Not every market is suitable for every investment plan. For instance, the BRRRR strategy only works where there is an abundance of properties at below-market rates. The quality of the match between your intended investment plan and your chosen market is a key factor in your overall success.

    Related: How to Effectively Assess Property Value for Investment

    3. Expected cash flow

    Positive cash flow is a priority for all investors who are planning to rent out their properties. You need to know that the money coming in regularly from your tenants is enough to compensate for your monthly expenses, such as mortgage payments, repairs and insurance.

    Before purchasing a property, calculate its expected ROI, or return on investment. ROI for rental property is calculated by dividing your annual return by your initial investment or purchase cost. An expected ROI around or above 10% is a good indicator that you’ll have enough cash flow to not only break even with your property but also generate a profit.

    4. Appreciation

    Appreciation is a broad category that encompasses several individual factors. In general, appreciation is the increase in value of a property over time. Properties appreciate naturally the longer you hold them, but you can also “force” appreciation by improving the property via capital investments (e.g., adding a bathroom, renovating the kitchen, replacing the roof, etc.).

    A property that appreciates well not only gains equity and sells for a much bigger profit later, but it also impacts your cash flow now. A property with higher value can be rented at a higher rate, leading to more capital to work with and reinvest in the short term.

    5. Size and number of bedrooms/bathrooms

    A property with more livable space is almost always worth more than a home with less space in the same market. Livable space refers to space that is available for everyday use and is properly finished, heated and ventilated (for example, a closet is not livable space while a finished basement is).

    Additionally, the more of the following you have, the more your property can be worth:

    • Bedrooms

    • Bathrooms

    • Kitchens

    • Parking or garage spaces

    • Yard square footage

    6. Property age and condition

    Many people looking for a new home are on the hunt for a newer, modernized property in top condition so that frequent repairs are not a concern. This makes a home’s age and condition important factors that play into its value and overall success in the market.

    Renters and homebuyers want:

    • New, modern architecture (unless the home has historic value)

    • Modern plumbing, HVAC systems and roofing

    • Modern appliances

    • Curb appeal

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    Many buyers are on the lookout for turnkey properties, or homes that are move-in ready without any major repairs or renovations necessary. While turnkey properties cost more upfront, they often pay back their higher investment with the higher rents you can charge. It may be helpful to write up a checklist for buying a rental property with the amenities and features you want in a property and the amount you’ll pay for them.

    Let’s return to our original question: Should you take the plunge and become an investor? It’s a question that massively depends on the specific property, market and real estate goals you’re dealing with. But no matter where and when you decide to invest, these six factors can guide your thinking and help you find a property that will add sustainable value to your portfolio.

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    Dave Spooner

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  • The Benefits of Contrarian Real Estate Investing | Entrepreneur

    The Benefits of Contrarian Real Estate Investing | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Contrarians, in contrast to most investors, prefer to go against the prevailing market sentiment. By doing so, they seek out opportunities that others may overlook and attempt to capitalize on them. In this article, we will explore the concept of contrarian investing, its benefits, and how it can be applied to the real estate market.

    Contrarian investing involves adopting an approach that goes against the grain of popular opinion and prevailing market trends. Often referred to as “value investing,” contrarianism is based on the belief that markets are not always accurate or rational in their pricing of assets.

    Rather than following the crowd, contrarian investors seek out undervalued assets that others may overlook due to pessimism or lack of awareness. By taking a different stance, contrarian investors aim to identify undervalued assets and capitalize on their potential for future growth.

    Related: How to Profit From Value Investing

    The current real estate landscape

    The housing market in recent years has experienced significant challenges. Rising property prices and high mortgage rates have made it difficult to find income properties or affordable homes for renovation and resale.

    These market conditions can deter many conventional investors. However, for contrarian investors, these challenges can present unique opportunities.

    Contrarian perspectives in real estate

    Contrarian investors in the real estate market recognize that market fluctuations and rising interest rates are part of the long-term investment landscape. They understand that real estate typically outperforms other assets in terms of value appreciation and is less affected by short-term volatility compared to the stock market.

    Contrarians also consider factors such as population growth, economic development potential and property trends to identify potential opportunities that others may overlook.

    Contrarian real estate investors also look at regions that are unpopular or not trendy among most investors today. These areas can have hidden potential for economic growth, job creation and population growth. By looking beyond the popular, contrarian investors can capitalize on the potential gains that others may miss.

    Related: 5 Amazing Tips on Turning Real Estate Into a Real Fortune

    Benefits of contrarian investing in real estate

    1. Lower competition: Contrarian investors thrive on less competition and lower pricing. When popular sentiment is negative or hesitant, there is often reduced competition for real estate opportunities. This can provide contrarian investors with a better chance to negotiate favorable deals and secure undervalued properties.

    2. Favorable interest rates: Although interest rates have risen in recent years, they are still historically low compared to average rates over the past few decades. Acknowledging that interest rates are expected to rise further, contrarian investors understand the long-term nature of real estate investments and how today’s rates can still be considered attractive.

    3. Creative financing: Contrarian investors have the ability to think creatively and explore alternative financing options. This mindset can lead them to uncover financing strategies that others may not have considered, further enhancing their ability to seize valuable investment opportunities.

    4. Wealth creation through appreciation and cash flow: Contrarian investors recognize that real estate investments offer the potential for both short-term cash flow and long-term appreciation. By selecting properties that offer positive cash flow and have the potential for future value appreciation, contrarian investors can build wealth over time.

    5. Diversification: Contrarian investing can provide additional diversification to a real estate investor’s portfolio. By considering demographically or geographically different markets than conventional investors, contrarian investors have the potential to earn additional returns from diversification.

    Implementing a contrarian strategy

    Successful contrarian investing in real estate requires thoughtful analysis, research and the ability to identify opportunities others might miss. Contrarian investors should keep an open mind, constantly seek creative financing options, stay aware of market trends and economic indicators and conduct thorough due diligence on potential investment properties.

    It’s worth noting that contrarian investing can be a high-risk strategy, particularly if not implemented properly or if due diligence is not conducted well. However, by identifying undervalued assets that have the potential to appreciate with time, contrarian investors can generate substantial returns on investment that they might not achieve using traditional investment strategies.

    Related: This Boutique Father-Son Investment Firm Thrives By Ignoring Conventional Wisdom

    Contrarian investing in real estate is a bold approach that can potentially provide significant rewards for investors. By going against the crowd, contrarian investors have the opportunity to discover undervalued properties and capitalize on their potential for long-term growth.

    As with any investment strategy, it’s crucial to conduct proper research and analysis to make informed decisions. By embracing a contrarian mindset, aspiring real estate investors can set themselves apart and unlock unique opportunities in the market.

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    Roy Dekel

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  • Is the Real Estate Market on the Verge of a Turnaround? | Entrepreneur

    Is the Real Estate Market on the Verge of a Turnaround? | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The real estate market, like many other industries, has experienced a series of ups and downs throughout history. It feels all too familiar — almost like a recurring cycle that we’ve witnessed before.

    In fact, when we examine our current world, it’s clear that we still inhabit the same society with a similar, if not the same, socio-economic model and structure as we did decades ago. This begs the question: Are we truly on the cusp of an impending turnaround, or are we simply caught in the ebb and flow of a recurring pattern?

    Related: Is Buying Rental Property Worth It in 2023? | Entrepreneur

    History indeed repeats itself

    As market shifts play out, I think the similarities between the past and the present become glaringly apparent, particularly when examining the 1970s-1980s and the early 2000s.

    During the 1970s-1980s, the real estate market was plagued by rising inflation and interest rates, resulting in a dreary slowdown. Shockingly, recent data shows a disconcerting similarity.

    Our data reveals that the average time required for transactions to close increased from a mere 4.32 months in 2021 to a staggering 5.57 months in 2022. This extended timeline eerily evokes memories of the sluggish market conditions prevalent in the 1970s-1980s.

    Several years later, we observe a reprise of this pattern, with rumor-mongering and frenzied market activity fueled by lax lending standards and unhindered access to credit, easing the crisis brought by a worldwide health crisis.

    Equally disconcerting, the early 2000s witnessed a meteoric rise in housing prices coupled with a dangerous relaxation of lending standards. We see history repeating itself in the recent past. Home prices have soared to dizzying heights, propelled by strikingly similar factors.

    I’m not trying to downplay anything, but while the recent data doesn’t necessarily mirror the catastrophic subprime mortgage crisis and the subsequent global financial meltdown of 2008, it stands as a chilling reminder of the potential economic perils lurking around the corner.

    How speculative should we be based on recent history?

    Our data points from the past three years reveal some tantalizing insights into the real estate market. The overall comparison between 2021 and 2022 paints the same bleak picture of a market grinding to a slow halt, as indicated by the longer time taken to close transactions.

    During this time, we confronted the harsh reality that buyers and sellers may have entered a perpetual negotiation dance.

    Taking a look at the data for January to April of each year reveals the drastic fluctuations happening in the market. The surge in paid transactions in 2022 suggests a frenzy of buyer activity, driven by low mortgage rates.

    However, the subsequent decline in transaction volume in 2023 plunges us into a vortex of doubt, hinting at a potential slowdown or perhaps the awakening of rationality.

    Related: Why Every Entrepreneur Should Invest in Real Estate

    Relating our data to national statistics

    To gain a broader perspective, let’s compare our SetSchedule data points with national statistics provided by the NAR. According to the NAR, the real estate market experienced significant growth in 2021, with a surge in home sales and increasing home prices.

    However, as we entered 2022, the market started to cool off slightly, resulting in a slower pace of sales. It appears that the real estate market, no matter how localized or segmented, is not immune from the gravitational force of national dynamics.

    Forecasting a potential turnaround

    Analyzing the historical data and observing the current trends in the real estate market, it is reasonable to predict a potential turnaround or anticipate the repetition of an upward cycle that we have already experienced in the past. The similarities in the factors influencing the market today suggest a familiar pattern that may unfold once again.

    The decrease in the total number of days before a transaction is closed and the average time closed in the first four months of 2023 compared to 2022 hints at a glimmer of hope, a flicker of optimism in the hearts of buyers and sellers. Although the total number of paid transactions decreased, it would be remiss not to consider the erratic nature of market fluctuations and external influences.

    Looking ahead, if the trend of decreasing time to close transactions persists throughout the year, it may indicate a seismic shift toward a seller’s market. As the market gains momentum and competition among buyers intensifies, sellers can revel in the prospect of more favorable conditions and potentially higher sale prices.

    Related: How Does Inflation Affect Real Estate? Here’s What You Need to Know. | Entrepreneur

    As we navigate the ever-evolving real estate market, it’s crucial to acknowledge the patterns of the past while maintaining a cautious and informed perspective. History may repeat itself, but each market cycle brings unique dynamics and challenges. Analyzing the data, drawing insights and remaining adaptable, helps buyers and sellers make informed decisions in this complex landscape. Ultimately, the future of the real estate market will unfold with its own twists and turns, and it’s up to us to navigate them with wisdom and foresight.

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    Roy Dekel

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  • 4 Profitable Ways to Invest in Real Estate for First-Timers | Entrepreneur

    4 Profitable Ways to Invest in Real Estate for First-Timers | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When it comes to investing, few sectors offer the level of profitability and stability that residential real estate does. For first-time investors, this venture can be a powerful tool to generate income and accumulate wealth.

    The real estate market, particularly the residential sector, has consistently proven to be a solid investment choice. According to the Federal Reserve’s report on consumer finances, the primary residence accounts for about one-quarter of all wealth among U.S. households as of 2020. Additionally, a study by the National Association of Realtors found that in 2020, despite the challenges of the global pandemic, the median sales price of houses sold in the United States still saw an increase of 6.7%. These stats underline the remarkable resilience and profitability of the residential real estate market.

    When you consider investing, it’s hard to overlook residential real estate’s dual advantages — steady cash flow through rentals and potential asset appreciation over time. Furthermore, real estate investment has a long-standing history of being a hedge against inflation. As living costs rise, so does the value of properties and rental income, providing real estate investors with a level of protection against the dollar’s declining purchasing power.

    For first-time investors, investing in residential real estate can be a powerful tool to generate income, accumulate wealth and diversify an investment portfolio. And while the venture might seem daunting at first glance, there are several accessible strategies that can maximize profitability and mitigate risk. Armed with these strategies and a solid understanding of the market, you’ll be well-positioned to reap the rewards of real estate investment.

    Related: Why Savvy Investors Prefer Investing in Real Estate Over Equities

    1. House hacking

    House hacking involves purchasing a multi-unit property, living in one unit and renting out the others. The tenants’ rent can cover your mortgage and even provide some extra income.

    For example, if you purchase a triplex for $300,000 with a monthly mortgage payment of $1,500, and you rent out each of the two units for $800, you’re receiving $1,600 in rent. You’re effectively living for free and making a $100 profit each month.

    Start with market research to look for multi-unit properties in areas with high rental demand. Financial planning is critical here; ensure you have a solid credit score to secure a favorable mortgage rate. Once you’ve acquired the property, you’ll have to be ready to take on landlord duties such as rent collection, maintenance and conflict resolution. If you’re not comfortable with these tasks, consider hiring a property management company.

    2. Long-term rentals

    Long-term rentals can provide a consistent cash flow while also building equity over time. As a landlord, you can profit from rent payments and property appreciation.

    Consider a $200,000 property that rents for $1,200 per month. After expenses (mortgage, insurance, taxes, maintenance), you might net $200 per month. Over the course of a year, that’s $2,400 in cash flow. Plus, as you pay down the mortgage and the property appreciates, your wealth grows.

    For long-term rentals, the location is key. You need to choose areas with strong rental markets, considering factors like job growth, population growth and economic stability. When it comes to financing, it’s crucial to obtain a mortgage that allows you to generate a positive cash flow. Once you have tenants, you’ll need to manage tenant relations and property upkeep.

    Related: 7 of the Most Common Mistakes Made By Beginner Real Estate Investors

    3. Fix-and-flip

    Fix-and-flip is a more short-term investment strategy. This involves buying a property in need of work, renovating it and selling it for a profit.

    For instance, you might buy a distressed property for $100,000, invest $30,000 in renovations and then sell it for $170,000. After closing costs and expenses, you could net a substantial profit.

    With the fix-and-flip strategy, your first step should be finding a good deal on a property. Look for distressed properties sold below market value. You might need to work with real estate wholesalers or scour foreclosure listings. Budgeting is also crucial. Accurately estimate your renovation costs and potential resale value to ensure profitability. Lastly, you’ll need to manage the renovation process, overseeing contractors or even doing some of the work yourself if you’re skilled in that area.

    4. Short-term vacation properties

    The rise of platforms like Airbnb and VRBO makes short-term vacation rentals an attractive investment strategy. These properties can generate higher income than traditional rentals due to their per-night pricing model.

    For example, a beachfront condo might rent for $1,500 per month long-term. But as a vacation rental, it might fetch $150 per night. If you rent it for just half the month, you’re already making twice as much.

    Location is everything for short-term vacation properties. Choose a property in a high-demand vacation area, considering factors like tourist attractions, seasonality and local regulations. Once you’ve acquired the property, you’ll need to market it effectively. Listing your property on popular short-term rental platforms and investing in professional photography can help attract guests. Lastly, be prepared to handle frequent guest turnover or consider hiring a property management company that specializes in short-term rentals.

    Residential real estate offers an array of profitable strategies for first-time investors. By understanding and leveraging these methods, you can create a robust and profitable investment portfolio. Each strategy — house hacking, long-term rentals, fix-and-flip and short-term vacation rentals — has its unique set of benefits and considerations.

    Related: 5 Proven Steps to Become a Real Estate Millionaire, According to an Investor

    The secret to success in residential real estate investing isn’t much of a secret at all. It’s about diligent research, careful planning and strategic execution. By following the actionable steps provided in this article, you’ll be well-positioned to profit from your first residential real estate investment. However, remember that every investment carries risk, and it’s essential to thoroughly understand these risks before jumping in. Start small, learn as you go and scale up as you become more comfortable and experienced. With patience and persistence, your real estate investments can be a significant source of income and wealth accumulation over time.

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    Ari Chazanas

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  • 5 Ways Real Estate Investors Can Thrive in the Current Economy | Entrepreneur

    5 Ways Real Estate Investors Can Thrive in the Current Economy | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    In only six months, the average interest rate on a 30-year fixed mortgage has surged significantly, climbing from 2.65% to 3.17%. This substantial increase of 0.52% has undoubtedly caused concern for real estate investors. However, amidst the changing landscape, it is important to remain optimistic as there are still viable opportunities within the market waiting to be explored.

    The sudden spike in interest rates has undoubtedly created a challenging environment for those involved in real estate investment. Nevertheless, it is crucial not to succumb to worry as the market presents avenues for potential gains. Despite the rising borrowing costs, strategic and astute investors can adapt to these changes and uncover untapped prospects that align with their investment goals.

    Related: How to Invest In Real Estate Amid High Interest Rates and Inflation

    1. Keep your eye on the long-term prize

    The rising interest rates may make it more difficult to purchase property in the short term, but remember the long game. Real estate is an investment that can appreciate over time, and the key is to make smart purchases that will hold their value.

    Instead of buying a fixer-upper that may require expensive repairs, consider investing in a property already in good condition and with growth potential.

    2. Consider alternative financing options

    With the rise in interest rates, traditional mortgages seem less appealing to some. However, it is worthwhile to consider alternative financing options. One such option is hard money loans, short-term loans secured by the purchased property. While these loans usually have higher interest rates, they offer greater flexibility and are often easier to obtain.

    Hard money loans can benefit those looking to make a quick purchase or who need help meeting traditional lending requirements. By using the property as collateral, the lender takes on less risk, making the loan easier to obtain. Additionally, hard money loans can allow for more flexibility in purchasing, making them a valuable tool for real estate investors looking to act quickly on a good opportunity. Though they come with a higher price tag, hard money loans can be an attractive financing option in certain situations.

    Related: How Does Inflation Affect Real Estate? Here’s What You Need to Know.

    3. Focus on up-and-coming neighborhoods

    The adage “location, location, location” still holds regarding real estate. Although some parts might be unaffordable due to increasing interest rates, several good neighborhoods still need to be explored. As a prospective homebuyer, focusing on areas experiencing renovation projects with excellent educational institutions conveniently located near public transportation is crucial.

    When searching for a neighborhood, keep in mind that revitalization efforts can have a significant impact on property values. These areas often attract new businesses, increased foot traffic and community events. Furthermore, families with children should prioritize areas with reputable schools, as education quality can affect property prices. Lastly, being close to public transportation is ideal for those who rely on it for work or leisure activities. This not only saves time and money but can also increase the accessibility of the area to potential buyers.

    4. Diversify your portfolio

    Diversification is a vital aspect of achieving success in real estate investing. Although investing in a single property can be alluring, spreading investments across various properties and neighborhoods can help reduce the risk of loss. It’s crucial to explore different types of real estate investments, such as commercial or multifamily properties, and not limit oneself to only one variety.

    Investors should be bold in taking risks in exploring alternative types of real estate investments. Rather than relying on a single property, investors should consider diversifying their portfolio to include a range of assets. Commercial or multifamily properties, for instance, are excellent options for those looking to diversify their investments.

    Related: The Real-Estate Game Is Changing Fast. Are You Ready to Win?

    5. Take advantage of low inventory

    Rising interest rates can affect confident prospective homebuyers, leading to a decline in the number of available properties. However, this situation can present an advantage for real estate investors. With decreased market competition, investors may uncover valuable opportunities to acquire previously acquired properties beyond their financial reach. The reduced buyer demand creates a favorable environment for investors to find lucrative deals and expand their portfolios.

    The increase in interest rates has the potential to deter potential homebuyers, resulting in a limited supply of homes for sale. Nonetheless, this circumstance can benefit those involved in real estate investment. The decreased market competition opens avenues for investors to secure properties at favorable prices, which were previously unattainable. As buyers become scarce, investors

    In conclusion, while rising interest rates may pose challenges for real estate investors, there are still opportunities in the market. You can adapt and thrive in a changing market by keeping a long-term perspective, exploring alternative financing options, focusing on up-and-coming neighborhoods, diversifying your portfolio, taking advantage of low inventory and maintaining a sense of humor. Remember, real estate investing is a journey, and with the right strategies and mindset, you can navigate the challenges and continue to find success. So stay proactive, stay informed and keep investing with confidence.

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    Chris D. Bentley

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  • This Work Policy is Driving More Millennials to Buy a Home in Suburbia | Entrepreneur

    This Work Policy is Driving More Millennials to Buy a Home in Suburbia | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    In the grand game of real estate, there’s a new king on the board. The suburbs are not just surviving, they’re thriving, and it’s all thanks to the game-changer that is flexible work. Who needs a skyscraper view when your office is your living room, and your commute, is a mere amble from bed to desk?

    “We expect the ability to WFH to remain an incentive for young families to seek out more remote suburban and rural markets where housing may be more affordable,” a recent Bank of America report suggests. It’s like swapping a sardine-can city apartment for a comfortable, spacious home. It’s not rocket science; it’s simply the art of making work work for you.

    The five-day office week, like the dodo, is heading for extinction. Lawrence Yun, the chief economist at the National Association of Realtors, says, “A little bit of a longer commute is not a hindrance” if you’re not in the office Monday to Friday, 9-5. Not when you’ve got the flexibility to decide where and when you work. Why endure the daily urban rat race when you can occasionally roll with the relaxed suburban pace instead?

    Related: A New Remote Work Trend is Helping Employers Retain Talent Amid Labor Market Pressures

    Millennials: Not so urban after all

    Remember when we thought millennials were city slickers, with their Uber rides and brunch habits? Turns out, they’re embracing the suburban dream as eagerly as a kid pouncing on the last slice of pizza.

    Hyojung Lee, a professor of housing and property management at Virginia Tech, humorously notes, “We’ve always talked about millennials as urban people… But it turns out they’re not that cool anymore.” Indeed, some 45% of millennials now plan to buy homes in the suburbs, according to a recent Bank of America survey. That’s up from 33% in 2015. Perhaps it’s not about being “cool” anymore but about being “smart.”

    The gourmet exodus: A culinary revolution in suburbia

    This new suburban migration is not just about homes and workplaces. It’s also transforming the gastronomic landscape. Urban retail vacancies surpassed suburban ones in 2022, for the first time since 2013, according to the Wall Street Journal. Like ants to a picnic, restaurants and retailers are flocking to these thriving town centers.

    Consider the salad chain, Sweetgreen. Once a downtown staple, it’s now making the suburbs its main stage with 50% of its locations nestled there. And it’s not just salad — even big-name chefs are choosing suburban towns for their next culinary adventures. It’s as if suburbia has become the new Manhattan for the restaurant world.

    The face of suburbia is changing, too. Long associated with homogeneity, suburbs are now outpacing the national average for racial diversity, according to a Brookings Institution analysis. The stereotype of the white picket fence is slowly giving way to a vibrant mosaic of cultural diversity.

    The city still stands: A reality check

    Despite this suburban boom, downtowns aren’t ready to throw in the towel just yet. Yun reminds us that people are returning to city centers, even in the hybrid work era. And while suburbs close to cities are flourishing, demand in the far-out ‘burbs has dropped significantly since the pandemic’s peak.

    So, in this grand game of real estate, it’s not about cities losing or suburbs winning. It’s about recognizing that the playing field is changing. As we embrace the flexibility that technology affords us, our living preferences are evolving in turn. As I tell my clients whom I helped figure out their return to office and hybrid work plans, you need to go where your employees are, rather than simply trying to impose a top-down command-control structure on them — at least, if you want to retain your top talent.

    Related: You Should Let Your Team Decide Their Approach to Hybrid Work. A Behavioral Economist Explains Why and How You Should Do It.

    Cognitive biases: Unseen forces shaping our choices

    Underneath our decision-making processes, cognitive biases often run the show. They’re like puppeteers, subtly influencing our choices and judgments. Two key biases that might be influencing this suburban migration are the status quo bias and the anchoring bias.

    First, let’s consider the status quo bias. This is our tendency to prefer things to stay the same by doing nothing or maintaining our current or previous decision. With the onset of the pandemic, the status quo was disrupted, forcing us to adapt to a new “normal” — working from home.

    For many, this temporary change has transformed into a comfortable routine. The novelty has worn off, replaced by the status quo bias. We’ve become accustomed to the convenience, freedom and flexibility of remote work. The prospect of returning to our previous lifestyle — the daily commute, the rigid office hours — seems more daunting than sticking to the new status quo.

    The anchoring bias, on the other hand, refers to our tendency to rely too heavily on the first piece of information we encounter (the “anchor”) when making decisions. When the pandemic hit, the “anchor” for many was the vision of a lifestyle free from daily commuting and office constraints. This initial impression has strongly influenced subsequent decisions about work and living arrangements.

    Moreover, as we have seen suburban life flourish — with burgeoning retail spaces, diverse communities, and the promise of a more balanced lifestyle — these positive first impressions have only been reinforced. The anchor has been cast, and it’s landed firmly in suburban territory.

    By understanding these cognitive biases, we can make more informed decisions about our work and lifestyle choices. As we navigate this era of change, it’s crucial to challenge our biases, question our assumptions, and remain open to all possibilities. Only then can we truly make the most of the opportunities that the future of work presents.

    Conclusion

    In the end, whether it’s the city’s siren call or the suburb’s sweet serenade that wins your heart, it’s clear that flexible work has forever changed the way we live. It’s reshaped not just our working lives, but our homes, our communities and our landscapes. The suburbs are having their moment in the sun, not as a retreat from the city, but as a compelling alternative.

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    Gleb Tsipursky

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  • 3 Common Myths About Real Estate Investing Debunked | Entrepreneur

    3 Common Myths About Real Estate Investing Debunked | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Successful people know the value of investments. There are several ways to become extremely wealthy in life, but few carry the same track record as investing in real estate. Real estate investing is one of the best wealth generators in the world. There are arguably more millionaires in the field of real estate, than any other category of business. So what is a “real estate investor” and how can you become one?

    The term “real estate investor” often refers to individuals and businesses that buy, sell and renovate houses. However, you don’t have to be a professional house flipper to hold the title of real estate investor. Anyone in any industry that actively chooses real estate as an investment option is a real estate investor. Some individuals choose real estate as an alternative to stocks, bonds and mutual funds and others choose to add real estate to their existing portfolio of investments. The question often asked: Is it obtainable to everyone?

    Here are three of the most common misconceptions about investing in real estate.

    Related: 10 Reasons Why Every Entrepreneur Should Invest in Real Estate

    You have to be wealthy in order to invest in real estate

    When most people think of real estate investing, they think of mega-rich celebrities and their massive real estate portfolios. Just because you don’t drive a Lamborghini or draw a salary from a multi-million dollar trust fund doesn’t mean that you can’t invest in real estate. There are numerous ways to start investing that require very little out-of-pocket expenses.

    Traditional wholesaling and joint ventures are just a few methods that require little to no capital. Hard work and dedication are really all that is required to become a very successful real estate investor. With the right methods, you can flip your first property with very little money and possibly without ever spending a dime.

    You need good credit in order to finance real estate deals

    If you’re applying for a traditional bank loan, then you’ll need an adequate credit score for the approval process. However, there are a variety of other ways to secure financing for your real estate investments. Let’s take a look at two of the most common financing options that require little to no credit approval.

    Transactional funding aka flash funding

    Transactional funding is a short-term loan that is borrowed and paid back within 24 hours in most cases. This type of financing is common during a double closing that occurs back-to-back. It allows an investor to secure the A to B side of a real estate transaction. Then, once the investment is secured, the investor can sell the property on the B to C side. After they collect the funds from that closing, they immediately pay back the initial flash fund loan. In most cases these loans are secured by the asset being purchased and not the investor.

    Hard money financing

    Hard money financing is another popular strategy that real estate investors use to acquire investments. This type of loan is known as a bridge loan. It’s a short-term loan that allows the investor to purchase a property without a lengthy application or approval process like the ones required from traditional banks. Hard money loans are asset-based, which means they are not contingent on the investor’s creditworthiness. They are normally used in rehabbing projects where the investor purchases a property at a discount, then remodels the home and resells it at a profit, at which point they repay the loan. These loans rarely exceed a 24-month period.

    Related: 3 Ways Entrepreneurs Can Save on Real-Estate Costs

    You need experience to invest in real estate

    The fact that you’ve never invested in real estate, should not stop you from investing. A little research can go a long way. Experience is gained by actions. After all, to become an experienced driver, you have to drive. That doesn’t mean you should get into a sports car and hit the race track. It means you begin with driving around your neighborhood, your town, city, highways and eventually interstates, etc. It’s no different with real estate investing. Your first attempt at investing shouldn’t be a 500-room condominium with a 60-page purchase agreement. It should be an affordable single-family home in areas that you’re familiar with.

    There’s no question that you can begin investing with little to no previous knowledge or experience. However, if you are looking to fast-track your learning curve, you may want to seek out the assistance of a seasoned professional as a mentor. A successful investor can not only teach you what to do but more importantly what not to do. Being able to bypass costly rookie mistakes is a huge benefit and will increase your chances of success. Many successful business professionals have mentors and real estate is no different. Just make sure you do your research to ensure that you’re seeking counsel from a qualified advisor with years of real estate investing experience.

    Conclusion

    There’s a reason so many people turn to real estate as a vehicle to generate wealth. Simply put, it works. Don’t get discouraged by false information and myths about what is required to get started. The only thing stopping you from becoming a real estate investor is you. One of the world’s most famous investors Warren Buffett once said, “Be certain of your success, even when no one else is“. Don’t procrastinate, do your research and begin your journey.

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    Michael Ligon

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  • Is Buying Rental Property Worth It in 2023? | Entrepreneur

    Is Buying Rental Property Worth It in 2023? | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Picture this: It’s New Year’s Eve, 2022, and you’ve finally committed to a resolution you really want to keep. In the coming year, you want to buy your first rental property and start investing in real estate. But what will real estate look like in 2023? Will housing prices continue to drop? There seem to be more questions than answers.

    If this scenario sounds like you, you might feel intimidated by the uncertainties of the coming months. Deciding to buy your first rental property can feel like a scary or risky endeavor in any market climate, but doing so during a housing correction may seem even riskier. You might be questioning your decision and wondering, “Is buying rental property worth it?”

    Before you throw out your resolution, however, reconsider what you know about real estate and how to retain and increase its value. This article will hopefully give you some of the tools and resources to invest in any market and demonstrate that 2023 can still be a fruitful time to buy your first property.

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    What is a housing correction?

    First things first: What is a housing correction?

    A housing correction is a period during which housing prices start to fall in some places after a rapid rise. This fall is usually only by 10% or less, according to U.S. News & World Report. It typically occurs because home prices were unsustainably high in recent years, and the market therefore “corrects” itself to more reasonable prices that match the current supply and demand. Corrections are more gradual than housing market crashes, but they can last anywhere from a few months to a few years.

    Housing corrections are caused by interactions between a variety of factors, including mortgage rates, supply, demand, affordability, inventory and stock market trends. Analysts track these factors over time to look for signs that prices will soon fall. These signs can include a decline in sales, homes selling more slowly and homes selling for significantly less than just a few months prior.

    Many people who own property during a housing correction may worry that their properties aren’t worth as much as they used to be. However, housing corrections aren’t inherently “bad,” nor do they spell the death of your rental business. In fact, they can make home-buying possible for first-time owners or those looking to start their investing journeys without competing with high-capital peers. Corrections are part of the real estate cycle, and knowing what to expect can help you navigate one with confidence.

    What’s happening in 2023?

    Analysts and economists are monitoring the housing market, and many have predicted that a housing market correction has already begun or soon will. Today, the national housing market is up by only about 6% compared to March 2022, which is a relative slowdown in comparison to 15% a few months prior. Experts predict that house prices will continue to fall through 2023, with the markets that grew the fastest in the past year likely to see the starkest decreases (even up to 30% in overpriced cities).

    Why is this happening? Experts cite a few factors. For one, there are fewer people looking to buy expensive homes than there were in previous years. Many Baby Boomers now have fixed incomes and aren’t as interested in buying expensive homes, which is a natural cause of corrections. Meanwhile, young families are looking for starter homes.

    Related: 5 Tips for New Investors Who Want to Make Money With Real Estate

    How and why you can still invest during a housing market correction

    Don’t let decreasing prices discourage you from investing in real estate. A good deal is a good deal, and if you do your research, you have a good chance of securing a lucrative one.

    The key is to stay informed on market trends and be patient. Housing corrections are temporary, and they help transition from a seller’s market to a buyer’s market, so you can actually benefit from this period of low prices. Plus, as experts at BiggerPockets remind us, housing prices do not equal profit. There are a variety of other ways to earn revenue in real estate besides appreciation. Cash flow, value add deals and tax benefits all make real estate worth it even in less-than-ideal markets. It makes sense to be cautious, but don’t let that prevent you from taking advantage of great opportunities when you find them.

    Buying a rental property

    So, you’ve decided to buy a property in 2023: What do you need to know?

    When considering what to know when buying a rental property, one of the most important steps is analyzing the local market. Local data is more useful than national averages any day, as it will provide the clearest insight into the rental marketplace in the specific area you’re targeting.

    Calculating ROI:

    When choosing a property, the best way to get a picture of local demand is to survey local rent rates of comparable properties nearby. For a given property in that area, you’ll be able to estimate approximately how productive that investment will be.

    To do this, you’ll want to calculate ROI, or return on investment. ROI for rental property is the ratio of income you’ll generate to your initial investment or purchase price of the home. To calculate it, divide your expected annual return by the purchase price. If the resulting percentage is 10% or more, it is typically considered a good investment.

    Remember that you can increase your ROI by adding value to your property, then increasing the rental rate. For instance, if you add another bedroom and bathroom to a single-family home, you now have a property worth far more than the one you started with. You may have bought the house at below-market value during a correction, but you’ll soon make up for it in revenue generation and appreciation as the market leaves the correction period.

    Related: 6 Effective Real Estate Investment Strategies

    Legal and administrative tasks:

    You’ll also have some legal and administrative tasks on your checklist for buying a rental property. Namely, you should hire a licensed property inspector to review the property before finalizing the deal. You don’t want to discover that the home has severe infrastructural problems or water damage after you’ve already locked yourself into a price.

    Other important tasks include reading over the property title documents to confirm the seller’s ownership, confirming property tax receipts and writing up a solid property purchase contract. You may have an agent assist with this process. The goal is to clearly define and explain the terms of the sale so that you know exactly what you’re paying for. Many of these steps are also required by lenders to secure a mortgage — your lender has an investment in the property, too, so they also want to ensure you’re making smart choices.

    Becoming a first-time landlord doesn’t come without its challenges. The first step is to find and analyze a great deal that will lead you toward financial freedom. By following these tips, you can be a successful real estate investor in any market season.

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    Dave Spooner

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