How To Ensure Your First Investment Property Isn’t A Bust

American Apartment Owners Association - Wed, 08/16/2017 - 4:31pm

Investment property is a prime way to start your real estate portfolio and get in on the rental game. While it can be easy to get caught up in the excitement of making your first property purchase, it is important to take it slow and proceed with some caution. Jumping the gun on a property can be a costly lesson for buyers to learn. You could end up with an investment that costs far more than you bargained for.

Heed this advice from 10 real estate experts with Forbes Real Estate Council, as they offer insight into buying your first investment property. You’ll be able to avoid the common pitfalls that first-time investment property buyers make and ensure your entry into the real estate market isn’t a decision you’ll soon regret.

1. Don’t Be Too Eager

When looking for your first investment property, it’s critical not to “chase the deal.” I often see first time investors overpay for property because they are so excited and want to get started. Always know your numbers, and never exceed the right purchase price during the excitement of an auction or when negotiating with home sellers. – Jeremy Brandt,

2. Spend Time At The Property

Sit in your car outside of the property from 6 a.m. to 9 a.m. and 9 p.m. to midnight before you commit to buying it. You will see what is really happening at the building and in the neighborhood during those times. – Lee Kiser, Kiser Group

3. Check The Property’s Value

Anytime you purchase a property below the County Appraisal District, chances are you have hit a home run. Of course other factors come into play… repairs, updates, etc. However, follow this method and you will have the winning score. – Angela Yaun, Day Realty Group

4. Buy With Your Head, Not Your Heart

First-time investors don’t have the luxury of purchasing an investment property on a “gut” feeling. In fact, you probably need to buy on a bigger margin to account for all the things you know, the ones you don’t know and a buffer above and beyond that. Buying investment property can be expensive, so one or two bad choices can take you out of the game. Only buy if the numbers really make sense. – Tracy Royce, Royce of Real Estate

5. Focus On The Location

As a first-time buyer of investment property, the key tenets of real estate are location, location and location. If you buy an asset that “carries” itself, i.e. pays for taxes, insurance and maintenance plus provides some free cash flow, the chances are, given decent duration, that the appreciation will provide good investment returns from opportunities to refinance, higher rental incomes and sale prices. – Ridaa Murad, BREAKFORM | RE

 6. Get Your Numbers Right

Too often, I see new investors purchase a flip deal without leaving room for error. In a market that’s been hot for a while now, real estate wholesalers, agents and brokers have no problem selling you deals that don’t make sense. Buy flips where your all-in cost is less than 68% of fair market value. This way, if the market does correct, you have the best chance for a clean exit. – Abhi Golhar, Summit & Crowne

 7. Always Be Patient

Real estate is a cyclical industry. Even if asset prices were to fall, you don’t necessarily lose money/profit on the investment. The beauty of real estate is that there is an asset backing your investment. You can get creative about your exit strategy and explore refinancing or renting to get cashflow, rather than a sale. Over time, the prices are bound to rise again; all you need is patience. – Sohin Shah, InstaLend

8. Have A Buddy System

Don’t do your first investment alone! Make sure you are getting professional advice to make sure you are missing the little things that cost the most. Team up with an experienced person on your first couple of investments until you get a template in place. – Bubba Mills, Corcoran Consulting LLC

9. Just Do It

I hear frequently the lament “I wish I could get into real estate.” With the onset of short-term rentals, acquiring rental property is more profitable than ever. Location, location, location to capture the increased tourist market in an area is still a great piece of wisdom. Know what local rates are on long-term rentals, as well as comps from short-term rentals, and leverage the intel for funding. – Susan Leger Ferraro, Peace, Love, Happiness Real Estate

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

10. Choose Between Active Or Passive Investing

Active real estate investing is both time-consuming and hard to be successful at if it’s not your primary job. Most first-time investors lack the time, tools and experience that professionals rely on to avoid common pitfalls. Building experience incrementally through passive investing can be a great way to start. After learning more, you can then evaluate if becoming more active is right for you. – Ben Miller, Fundrise


The post How To Ensure Your First Investment Property Isn’t A Bust appeared first on AAOA.

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Major Rental-Home Companies Set to Merge as U.S. House Prices Recover

American Apartment Owners Association - Wed, 08/16/2017 - 4:14pm

After the housing market collapsed more than a decade ago, new investors poured in to buy foreclosed homes and rent them out. Now, a $4.3 billion deal suggests that the bargain-hunting binge in housing is finally over.

Two of the biggest institutional single-family landlords in the United States said Thursday that they planned to merge, an indication that the housing market has recovered much of the ground it lost in the financial crisis. And as home prices rise in many areas, affordable housing, for deep-pocketed investors and young first-time buyers alike, is becoming harder to find.

The two institutional landlords, Invitation Homes, a rental business spun out of the private equity giant the Blackstone Group, and Starwood Waypoint Homes said they would combine to create an entity with about 82,000 homes in more than a dozen big markets.

The deal could set the stage for other institutional investors to join forces. With fewer opportunities to buy homes at a discount, the keys to growth will be reducing operating costs, gaining market share and potentially increasing rent.

With consolidation, Wall Street-backed firms’ once-bold strategy of cleaning up the mess created by the crisis by going to foreclosure auctions and snapping up hundreds of cheap homes has ended.

Wall Street jumped into foreclosed homes reckoning that there would be a fundamental shift in housing, with millions of people losing their houses and becoming renters — at least until they could repair their credit scores.

On the eve of the crisis, the rate of homeownership — the percentage of households that own a home — hovered around 69 percent. Today, it is 63.7 percent, according to the United States Census Bureau. And last year, the number of new renters again outpaced the number of new homeowners, according to Harvard University’s Joint Center for Housing Studies.

But the economics of buying recently foreclosed homes to rent out has become more challenging for Wall Street firms that seek to generate double-digit returns for investors, and for publicly traded real estate investment trusts that promise shareholders hefty quarterly dividends.

For the past year or so, many institutional investors have had to compete with potential homeowners shopping for foreclosed homes posted for sale on multiple listing services.

“As home prices rise, most of the institutional investors are dramatically slowing the rate at which they buy new homes,” said Laurie Goodman, director of the Urban Institute’s Housing Finance Policy Center. “And with the easy money days behind them, they need a more efficient cost structure.” She said the merger was a way accomplish that by gaining further economies of scale.

Blackstone was one of the first private equity firms to begin buying foreclosed homes in the wake of the financial crisis, fixing them up and renting them out. The firm, which began buying homes in earnest in 2011, is estimated to have spent $10 billion on its foreclosed-home-to-rental bet.

Invitation Homes, which emerged from that push with almost 50,000 homes, is a company that Blackstone built from scratch.

Purchases by Invitation Homes have dropped sharply since 2013, when it was buying hundreds of homes each week. Its acquisitions are down more than 90 percent from then, and the period of “hyper growth” for the industry has passed, said a person close to the company who was not authorized to speak publicly.

In all, institutional investors have bought an estimated 200,000 single-family homes to operate as rentals.

But that is a fraction of the overall number of rental homes in the United States. According to housing industry estimates, there are as many as 17 million single-family rentals across the country, most owned by mom-and-pop landlords or firms operating fewer than 100 such homes.

Before the crisis, there were about 10 million rental homes, an indication of how many homeowners were displaced by the worst housing crisis since the Great Depression.

Consolidation among institutional investors began three years ago with American Homes 4 Rent, which owns 49,000 rental homes, buying Beazer Pre-Owned Rental Homes. A few months later, Starwood Waypoint bought Colony American Homes in an all-stock deal that valued Colony American at $1.5 billion. Most of the mergers since then have been small, and the deal between Invitation Homes and Starwood Waypoint would be the biggest in an industry that did not exist a decade ago.

The move by institutional investors into the housing market has been credited by some with helping to stabilize the sharp and steady decline in home prices early in the financial crisis. The presence of private equity firms and hedge funds in the market also helped attract the interest of smaller investors.

But big firms like Invitation Homes and American Homes have drawn criticism from housing advocates for renting their homes at prices that are unaffordable for the working poor.

Few renters with federal rent subsidies known as Section 8 live in homes owned by Invitation Homes and other institutional investors. That is partly because such investors have tended to operate in largely suburban communities and have avoided buying homes in urban areas.

In the past, Blackstone has said that 72 percent of houses owned by Invitation Homes have monthly rents within federal affordability guidelines for the markets where it operates.

This year, housing advocates and some legislators criticized Fannie Mae, one of two government-controlled mortgage finance giants, for agreeing to guarantee a $1 billion financing deal for Invitation Homes without getting any assurances that the company would do more to provide affordable housing.

Kevin Stein, a lawyer and deputy director of the California Reinvestment Coalition, a group that supports the rights of tenants and homeowners, said he was concerned that the merger of Invitation Homes and Starwood Waypoint would increase their power to raise rents.

“What is the level of concentration? This is a concern to our members,” Mr. Stein said. “There are so many communities in California where people are being driven out because of housing costs, and this is part of the dynamic.”

Under the terms of the deal announced on Thursday, each Starwood Waypoint share will be converted into 1.614 Invitation Homes shares. The total enterprise value of the combined company, including debt, would be $20 billion, the companies said.

Invitation Homes’ shareholders will own roughly 59 percent of the combined company’s stock, while Starwood Waypoint’s investors will own the rest.

Blackstone, which took Invitation Homes public in January in an offering that raised $1.7 billion in net proceeds, would continue to have a stake in the combined company.

After the merger, which is subject to the approval of shareholders, is completed, John Bartling, Invitation Homes’ chief executive, will step down. Fred Tuomi, the current chief executive of Starwood Waypoint, will be the chief executive of the combined company.

The new company’s 11-member board will include six members of the Invitation Homes board, including the chairman, Bryce Blair, who will be chairman of the new company’s board. Jonathan D. Gray, head of global real estate for Blackstone and an architect of its single-family rental trade, also will be on the board.

The combined company will operate as Invitation Homes and trade under the Invitation Homes ticker symbol.

On a day when a nervous stock market declined, shares of both Invitation Homes and Starwood Waypoint surged. Invitation Homes’ shares gained 3.91 percent; Starwood Waypoint’s shares rose 5.15 percent.


The post Major Rental-Home Companies Set to Merge as U.S. House Prices Recover appeared first on AAOA.

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What do buyers want more — a bigger house or a bigger yard?

Inmannews - Wed, 08/16/2017 - 3:05pm
Smaller homes with more outdoor space seem to be all the rage lately as homebuyers are abandoning the motto "bigger is better" when it comes to square footage. According to a consumer survey by Wakefield Research commissioned by residential construction company Taylor Morrison, 56 percent of buyers would be willing to sacrifice having a larger house for a larger yard. Why ...
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Brad Pitt’s tiny home and other affordable space-saving miracles

Inmannews - Wed, 08/16/2017 - 2:47pm
Homelessness, lack of affordable housing, natural disaster damage -- these are all global problems that can be alleviated through creative housing solutions ...
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July housing starts take turn for the worse

Inmannews - Wed, 08/16/2017 - 2:36pm
June's housing starts report was heralded as "welcome news" by National Association of Realtors (NAR) Chief Economist Lawrence Yun, who said increasing residential construction was the key to lowering home prices. This month, however, housing starts have taken a turn for the worse. ...
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The fastest-growing real estate companies in the U.S.

Inmannews - Wed, 08/16/2017 - 1:28pm
Every year Inc. magazine ranks the 5,000 fastest-growing privately held companies in the U.S. This year, 17 real estate companies made the top 500 cut, while 196 made the 5,000 list ...
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Home prices hit new peak in ‘extremely competitive buying season’

Inmannews - Wed, 08/16/2017 - 12:03pm
The housing market saw a series of ups and downs in Q2 2017, the majority of which were largely driven by low inventory unable to meet the demand of would-be buyers. This imbalance drove home prices to rise 6.2 percent, easily eclipsing the previous Q3 2016 peak of $241,300. The Q2 median single-family home price was $255,600, a 6.2 percent year-over-year and 6.9 percent quarter-over-quarter increase ...
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MID ‘a wasteful use of federal resources,’ says housing group

Inmannews - Wed, 08/16/2017 - 11:53am
How can the United States tackle the increasingly problematic issue of homelessness and housing poverty? The National Low Income Housing Coalition (NLIHC) thinks that reforming the mortgage interest deduction (MID) is the way to move forward. But it's going to have to lobby against the National Association of Realtors (NAR) ...
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The Inman Files: Can NAR and C21 reckon with ghosts of the past?

Inmannews - Wed, 08/16/2017 - 11:16am
I had a “suite meet” with new NAR CEO Bob Goldberg when I attended the trade group’s fat cat (leadership) gathering in Chicago this week. The affable new chief executive manages thousands of volunteers, a $380 million operating budget for 2018 and a sprawling team of lobbyists, educators, publicists and event planners ...
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Zillow exec Nick Bailey to take over Century 21 as new CEO

Inmannews - Wed, 08/16/2017 - 9:30am
In the mid-1990s, Nick Bailey was a rookie agent at Century 21 Real Estate (C21). Little did he know that 21 years later, almost to the day, he would be named CEO and president of the company at the age of 42, his career coming full circle.  ...
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Agents sell homes for more than FSBOs: study

Inmannews - Wed, 08/16/2017 - 9:10am
Academic research has often cast doubt on the value of real estate agents, but a new study will come as music to their ears. It suggests that homeowners will net roughly the same proceeds whether they sell through a real estate agent or take the FSBO (for-sale-by-owner) route ...
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From our new editor-in-chief: The future is the intersection of people, property and tech

Inmannews - Wed, 08/16/2017 - 8:24am
When I started working in journalism, there was no such thing as Instagram, Airbnb, Uber, or many of the other useful apps and services we take for granted today. At that time, many media outlets were still trying to figure out how to use the internet ...
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How to brand using your no. 1 resource — you

Inmannews - Wed, 08/16/2017 - 3:00am
If you are looking to build your brand as a real estate agent, look no further than the Law of Authenticity from The Go-Giver Leader: A Little Story About What Matters Most in Business; "The most valuable gift you have to offer is yourself." ...
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How to overcome real estate client objections with honesty

Inmannews - Wed, 08/16/2017 - 2:30am
When dealing with clients, it’s common they’ll have concerns that can turn into roadblocks. As a real estate agent, it’s your job to figure out how to overcome those objections for a successful transaction. What's the pullback method? What are good buzzwords and key phrases to use in objection handling? Below are a few strategies and scripts that will answer these questions.  ...
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10 things you should know about millennials to reach more prospects

Inmannews - Wed, 08/16/2017 - 2:00am
It seems that the housing market is experiencing a major shift that is sure to impact the future of real estate for at least another 10 years. As of 2016, millennial first-time buyers have surpassed Gen Xers and baby boomers. Millennials, born between 1980-1998, make up the largest group of first-time homebuyers at 66 percent, followed by Gen X at 26 percent ...
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Why it’s time to put a little soul back into real estate

Inmannews - Wed, 08/16/2017 - 1:15am
In our real estate world where social media, glossy eight-page brochures and fancy videos are our primary tools to attract clients, I want to challenge you this season to add the element of soul to your business ...
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Facebook Live vs. Snapchat: Should you leave one for the other?

Inmannews - Wed, 08/16/2017 - 1:00am
Are real estate agents turning away from Snapchat as Facebook continues to build on competitive features in its platforms like Facebook Live and Instagram Stories? The answer is undoubtedly: yes. And with good reason. Snapchat’s steady growth slowed by 82 percent after the launch of Instagram stories ...
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9 ways homebuyers can improve their credit scores

Inmannews - Tue, 08/15/2017 - 2:38pm
The real estate business is booming, and with a scarce supply of starter homes on the market, competition between buyers is fierce. To get loans quickly, potential homebuyers need to keep an eye on their finances and credit ...
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Folio Gmail extension for real estate adds feature to combat fraud

Inmannews - Tue, 08/15/2017 - 1:42pm
Folio by Amitree is now wired to search for and alert agents to emails that include financial information. ...
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NAR pres-elect: ‘This ain’t your daddy’s association anymore’

Inmannews - Tue, 08/15/2017 - 12:25pm
“Oh my goodness ... how did we get here?” National Association of Realtors (NAR) President-Elect Elizabeth Mendenhall asked the 2018 Leadership Summit crowd. “We’re here. There was some point in some time when someone came to you and said, ‘Do you want to serve in this position?’ And you said yes. You made that choice. You made that choice to be here and to be present, and you made a choice to own it.” ...
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