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What is a Joint Venture Partnership?

What is a Joint Venture Partnership? 150 150 admin

Joint Venture Partner Deals

Real estate investing can seem like a difficult way to grow your portfolio, but it doesn’t have to
be. In Canada, joint venture partner deals are a fantastic option for those looking to invest
funds in a specific project, but who may not know all the ins and outs of the real estate
industry.
In this blog post, we’ll tackle what joint venture partner deals are, why they can be a good idea,
and how joint venture partner deals work.
What are Joint Venture Partner Deals?
If you’re interested in investing in real estate, but you don’t have the knowledge, connections,
and skills to make it happen on your own, a joint venture partner deal can help make your
project dreams a reality.
In a joint venture partner deal, typically one person provides the investment funds (and can act
as a passive investor) while the other brings the skills needed to develop the real estate and
perform the ground-level work.
However, don’t think that you only have to have one partner for a joint venture deal. Parties of
more than two are allowed to form these agreements – there is no limit to how many people
can support the project.

Project Options

There are many different project options, including fix and flips, multi-unit buildings, rent-

to-
owns, student rentals, real estate developments, and lastly, buy, renovate, refinance and holds.
Keep in mind that in a joint venture partnership, the partnership only lasts as long as the
specific project. It’s also good to know that these partnerships can take on a variety of different
legal structures, which we’ll discuss in more detail later.
Why are Joint Venture Partner Deals a Good Idea?
It’s difficult to be successful in the field all on your own. A joint venture partner can help you
throughout the entire process. By combining resources with others, you’ll be able to actually
get the work done in a joint venture partner deal.
You’ll share the risks of the project – but you’ll also share the profits. Having a joint venture
partner helps you grow your portfolio substantially. With real estate investments, you can often

earn a better return than what average mutual fund investments will net you.

How do Joint Venture Partner Deals Work?

There are different ways to configure a joint venture partner deal; however, as we mentioned
before, there’s one common arrangement.
One person will be the hands-on partner, who scouts for great investment opportunities (for
instance, under-valued properties) and puts together deals. The other person is responsible for
qualifying for the mortgage and handling the financials.
It’s common for one investor to have a great deal lined up and the skills to make the project
come to life, but they lack the cash to realize it – which is why they need a private equity
partner to make it happen.

However, this is not the only situation that occurs. Sometimes, the investor already owns the
land – or building – that the developer wants to transform. The investor can arrange a joint

venture partner deal so they still have a stake in that property.
Again, keep in mind that more than one party can form a joint venture partner deal. For larger
investments, it might be a good idea for two or three parties to come on board.

The Agreement

Perhaps the most important part of the process is the drafting of the joint venture partnership
agreement. It specifies each member’s role and responsibilities. When tax time comes, CRA
looks at this agreement in detail.
When it comes time to draft the joint venture agreement, each party’s contributions,
responsibilities, and share of the profits will be determined. Typically, the parties either split
profits based on an agreed percentage, or there may be a preferred equity arrangement.
It’s important to decide who will be making which decisions regarding the building or
renovation process, the potential sale of the property, or the management of the property after
the project’s completion.
In Canada, if you’re interested in investing but you’re worried about protecting your assets, you
can form a corporation to officially sign the agreement. Or, if you already have a corporation
you can use it to invest in the project. If it’s a particularly large project, you might want to form
a specific corporation just for that one real estate development, to protect your other assets.
Taxes
Keep in mind that, depending on the type of investment you and your partner agree upon,
there will be tax consequences.

If you already have a corporation or if you will form one for this joint venture partner deal, then
the taxes can be reported through the corporation. However, the developer can report the
property on his own personal tax return.
It’s important to know that, if you are investing with a joint venture partner, profits from
residential resale are almost never subject to HST. Pay close attention when you draw up the
joint venture partnership agreement to how you’re sharing the profits – and the taxes.
Another consideration to keep in mind is your exit strategy – make sure you have one in place
for the end of the project. Most Canadian joint venture agreements have a duration of either
three or five years.

While it is possible to extend the agreement past five years, it’s still a good idea to have an
agreed-upon end date at the beginning of the process.
Also, you should include a conflict-resolution clause in the agreement. This is important in case
something unexpected happens and you no longer can participate in the partnership. And while
it’s never pleasant to think about, make sure you have plans in place in case one of the parties
passes away.

In Conclusion…

While the world of real estate investing can seem like a complicated place, it’s much easier to
navigate when you partner with someone who has the knowledge, connections, and skills to
make your real estate dreams a reality.
By entering into a joint venture partner deal, you can reap the rewards of real estate
investment without having to put in the hours of work. Consider partnering with Pal Property
Solutions on a joint venture partner deal to start growing your real estate portfolio. Contact us
for more information!

Best Time to Buy a House

Best Time to Buy a House 150 150 admin

Best Time to Buy a House

When you are ready to buy a house, you may be wondering ‘is it a good time to buy a house?’. When you choose to purchase your home is an important factor that can affect more things than just the price of the home. In this post, we’ll go over some tips to help you determine the best time to buy a house. Keep in mind that the home-buying search, no matter the time of year, typically lasts about 4 and-a-half-months, according to data.

When is the Best Time of Year to Buy a House?

The real estate market ebbs and flows depending on the season and location. As you may already know, spring/early summer is the peak season for both home selling and buying and winter is when the typical real estate market experiences a slowdown. But, that doesn’t mean you have to absolutely rule out winter for home buying as long as you have some strategy.

Benefits of Buying in Spring/Summer

The summer real estate market is just as hot as the summer sun. That means you’ll have a lot more choices of homes to choose from in the late spring and early summer months. Your home shopping experience will be a little more enjoyable during the warmer months because of the warm weather you can go freely from house to house without worrying about snow or ice. You’ll also be able to get a better feel for a home’s landscaping. In late summer as temperatures spike, you can also get a feel for a home’s air conditioning and how well it works.

Cons of Buying in Spring/Summer

In the warmer months, you’ll face more competition in the real estate market since it is the most popular time to buy a  home. Prices are also higher due to the high demand which means you likely won’t encounter any savings while buying a home in the peak buying season. Statistics show that homes listed early in May sell for more money than homes listed any other time of the year. As late summer rolls around and the temperatures start to swelter, your open houses may become a little more uncomfortable. But, that also means with the spring real estate frenzy over, home prices are likely to start to drop.

Is August the Best Time of Year to Buy a House?

August is the time when the market is likely to experience more price drops than spring or early summer and there’s far more inventory than in the winter, creating a potential sweet spot for buyers.

Benefits of Home Buying the Fall

As the temperature starts to get back down to comfortable levels, you’ll find yourself feeling comfortable again walking through open houses and spending time looking at the outside of the home and what it has to offer. It’s also the time of year when sellers will start to decrease their home prices, good news for your pocket.

Cons of Fall Home Buying 

You’ll likely find fewer homes on the market in the fall, which means fewer options for you to choose from. Another downfall to buying a home in the fall is as yards start to turn brown you may not get the full picture of a home’s outdoor and landscaping potential.

Benefits of Winter Home Shopping

Is it a good time to buy a house in the winter? You might automatically think ‘no.’ While the market cools down along with the temperature, it doesn’t mean you have to rule out winter home buying completely. If you are looking for a deal, winter may be your best bet to buy a home. With fewer homes on the market and a slower real estate market overall, you’ll have the ability to save some money on your home purchase. You’ll also have less competition from other buyers, which means you won’t have to worry about being out-bid. Sellers will also likely be willing to accept your offers below asking price when the market is slow. Another benefit to the winter is sellers who put their homes on the market in the winter may do so because they need to move for work or another time-sensitive reason and they will be more motivated to sell.

Cons of Winter Home Shopping

The cons of buying a home in the winter include a limited supply of homes to choose from and the possibility for inclement weather. If you are home searching in a winter climate, you’ll have to worry about driving through snow or ice and not being able to see some of the home’s outdoor features and landscaping if it’s covered in snow. 

Conduct Your Own Local Research 

As we mentioned, real estate markets vary by location. If you are looking to buy a home in Florida, you won’t have to worry about trekking through snow or freezing cold temperatures while you are out looking at homes. So that means that home prices are less likely to fluctuate as much throughout the year as other parts of the country where they experience temperature changes during all four seasons.

As you can tell, it’s hard to pinpoint the exact month or season to buy a home, because it depends a lot on location and how the real estate market is where you are looking to purchase. Each season has its own unique advantages and disadvantages when it comes to home buying, so make sure to do some research before you set out on your home buying journey. The true best time to buy a house depends on your specific needs, interests, and location.

If you have any questions about buying or selling a house or would like to find out more about the best time of year to buy a house, please don’t hesitate to contact us at Pal Property Solutions. We are experts in real estate investing and would love to answer any questions you may have.

What Credit Score is Needed to Buy a House?

What Credit Score is Needed to Buy a House? 150 150 admin

What Credit Score is Needed to Buy a House?

Getting approved for a mortgage is an increasingly challenging and tedious process. The higher your credit score, the more likely you are to get approved and get a favorable interested rate too. Your credit score is an important piece of the pie to get you approved and on your way to your dream home. Data from the CBC shows the average price of a home in Canada is $504,350. That’s a lot of money to save up for a down payment and depending on your situation can be downright impossible which is why it is so important to keep a healthy credit score so you can be approved for a mortgage.

What is a Credit Score?

Your credit score is a three-digit number that includes all of your credit-related activity into one average. It’s like a GPA but for your finances. In Canada, credit scores range from 300 to 900. The higher your credit score is, the greater your chance is of getting approved for different loans, including a mortgage.

How Can I Check My Credit Score?

There are a few ways to check your credit score in Canada. First off, you can go directly to the source and pay for your credit report. This can be done via Equifax or TransUnion. If you’d rather obtain a free credit report, you can check your credit score for free by using RateHub.ca’s free credit score tool.

It’s important to check and monitor your credit score so that you can know if you have a decent enough score to purchase a home.

 What is a Good Credit Score?

A credit score of 650 and above is considered good. Having a good credit score will make you a desirable candidate to get a loan. If your credit score is 750 or higher, you are in the excellent category and will have even more luck and better interest rates.

What Credit Score Is Needed to Buy a House in 2020?

 In order to purchase a house in 2020, you must have a credit score of at least 640. But, depending on the lender, somewhere between 620 and 680 could be considered the minimum. There are other factors that go into whether you are approved for a loan for example if you have a high income but no debt you are more favorable than a borrower with a higher credit score than you but lots of debt.

What Else is Considered When Applying for a Home Mortgage?

 Other factors that are taken into consideration include:

  • Income
  • Employment history
  • Expenses
  • How much you’d like to borrow
  • Current debt

They will also calculate your monthly housing costs, this is not simply your mortgage. Your monthly housing cost also includes:

  • Mortgage
  • Property taxes
  • Cost of heating and utilities
  • 50% of condominium fees, if you are purchasing a condo

Next, your overall debt load will be calculated and weighed. This includes:

  • Your credit card payments
  • Car payments
  • Lines of credit
  • Spousal support payments
  • Child support payments
  • Student loans
  • Other debt

You might think that once you’ve started the mortgage application process you’re in the clear but this not the case. Until you have closed on your home and you have the keys in your possession with all of the documents signed, sealed and delivered you could not:

  • Take out new loans or lines of credit including for a new car or any other shiny objects
  • Quit your job
  • Stop making payments on any outstanding credit
  • Make large deposits or large withdrawals
  • Close credit account
  • Make payment on collection accounts
I Have a Low Credit Score, Can I Still Get a Mortgage? 

In talking about the minimum credit score to buy a house, we’re talking about going through the big banks. If you choose to go through a more non-traditional lender, they may have less stringent approval processes.

Some of the options for people with low credit scores to lend through are credit unions, trust companies, and subprime lenders. These kinds of lenders are a good alternative for people with less than favorable credit.

If your credit is not the best, another option to still be able to buy a house is to save, save, save. If you have enough money saved up to make a sizeable down payment, you will look a lot more appealing in the lender’s eyes.

One thing to note is that mortgages with these types of lenders typically come with higher interest rates, so you might want to hold off and work on raising your credit score.

How to Improve Your Credit Score 

There are a few tips and tricks to quickly improve your credit score in order to buy your home:

  • Pay your bills on time
  • Pay your bill in full
  • Don’t carry a large amount of debt that is left unpaid
  • Don’t use more than 30% of your available credit card limit
  • Avoid applying for a lot of new credit at once
  • Review your credit card statements for any signs of fraud
  • A secured credit card is a good option for rebuilding your credit

It’s important that before you make a purchase on a home you have some cash saved up. Obviously, you need money for a down payment but there are a lot of other costs associated with purchasing a home, including:

  • Realtor fees
  • Home inspection
  • Appraisal costs
  • Taxes
  • Insurance
  • Registering your deed or mortgage

As you can see, there are other options to buy a home if your credit is not in that sweet 600 range. But, they come with some downfalls. So, it’s recommended that you take the time to work on your credit score and then buy your house, if possible.

If you have any questions about your credit score or how to improve it in order to buy a house feel free to reach out to us at Pal Property Solutions. We are experts in real estate investing and would love to help you out.

 

How to Get Your House Ready to Sell

How to Get Your House Ready to Sell 150 150 admin

How to Get Your House Ready to Sell

So, you’re ready to make a move: whether for your career or you are looking to relocate to a better area for your family. First, you need to sell your current home or at least get it on the market. In order to sell your home quickly and at the best possible price, you need to get your house ready to sell. In this post, we’ll go over some tips to get your home to enter the real estate market with a splash.

  1. Do Some Research: First thing’s first, you’ll need to do a little bit of research about your local real estate market before listing your home. You’ll want to do some homework on the value of your home by looking at recent sales in your neighborhood and surrounding area in order to figure out the best listing price for your property.
  2. Find a Reputable Real Estate Agent: We encourage you to do some research beforehand so that you don’t go into the meeting with your real estate agent blind. This will help both parties get the home listed appropriately and as soon as possible. Just like it’s important to research your neighborhood and home values, you should do some research before hiring a real estate agent as well. We recommend interviewing a few of them, whether you get referrals by word-of-mouth or online. Meet with a couple of them and ask them what they know about your neighborhood, where their recent sales have been, and for how much. Ask about their level of social media engagement and if they know any potential buyers right away.
  3. Cleaning and De-Cluttering: Now it’s time to make your home look immaculate in order to show it in its best light. You don’t want potential buyers to be hit in the face with the smell of cat urine upon first opening the door. You also don’t want potential buyers to have to step over magazines, dirty clothes, and Twinkie wrappers while they are trying to look at your house. So, you’ll need to do a deep cleaning of the home including the carpets, you can do this yourself or hire a professional. It’s also important to get rid of any clutter you have that’s junking up your home. Remember, buyers will look in closets, cabinets, and pantries, so those need to be organized too and not used as a catch-all for junk. This process will only make it easier on you when you have to pack up and move as well.
  4. De-Personalize your Home: When you’re cleaning and de-cluttering, be sure to put away family heirlooms and pictures as well. Think of this as a head start on packing that will also help the buyers have a clean slate to imagine how their family will fit in your home instead of being bombarded with pictures and personal objects that represent your family. If you have any furniture that is particular to your taste or statement pieces that stand out and are sure to distract buyers, it’s a good idea to put those in storage before putting your house on the market. You want buyers to get a sense of the home and not be distracted by any furniture or decor that you have, especially if it is a hot pink couch or a dead bear on the wall.
  5. Light it Up: In order for your home to be shown in the best light, you need to do so literally! Maximize the light in your home as much as possible. This means opening the blinds and drapes every time there is a showing in addition to replacing the lampshades and buying lightbulbs that have higher wattage. You want your home to be as bright and cheery as possible.
  6. Hide the Pets: We know, it’s hard to believe, but not everybody is an animal lover and the presence of your furry family member could drive buyers away, especially when cat litter is staring them right in the face, your dog’s chewed up ball or the smell of pets. Try to hide your pet’s items and take them out of the house during showings.
  7. Think About Renting a Storage Unit: As you can tell from these tips to get your house ready to sell, you’ll be needing to get rid of some stuff to make more space and make your home look as best as possible. It’s a good idea to look into renting a storage unit that way you’ll have a safe, secure place to put your belongings, including the bigger pieces of furniture, until you are ready to move them permanently.
  8. Have a Garage Sale: Another great way to get rid of clutter and even make some cash is by hosting a garage sale. If you’re moving far away or are planning to buy new furniture when you move, a garage sale is a simple way to get some of the larger pieces of furniture and decor off your hands without having to worry about storing it, shipping it, or moving it.
  9. Call a Handyman: If you’ve sold or bought a house before you know that a home inspection is inevitable. So, why not get out in front of it? Hire your own handyman that can take care of some of the basic repairs before they become a problem. Some of these repairs can also be done by you, depending on your skill level. Consider fixing leaky faucets, patching holes in walls, fixing drawers that jam, and replacing any lightbulbs that have burned out.

 

If you follow these tips to get your house ready to sell, you will be ready to list your home on the market in the best condition possible in no time. As you can see, most of the tips on the list are small changes that will ultimately help you out during your move as well.

 

At Pal Property Solutions, we are experts in real estate investing. If you have any questions or you are looking for more tips on getting your house ready to sell, please don’t hesitate to contact us, we are happy to help you!

How to Quickly Sell Your Home

How to Quickly Sell Your Home 150 150 admin

How to Quickly Sell Your Home

There are many reasons why a person would need or want to sell their home quickly, when you list a home on the real estate market, the last thing you want is for it to sit there and sit there and sit there. That will prohibit you from moving, whether it is for work, or moving into a home better suited for your family or even your dream home. If you move before you sell your home, you may find yourself struggling to keep up with multiple mortgages. Plus, the longer a house sits on the market, the harder it becomes to sell. Perhaps you have invested in real estate and you are eager to make that first sale and see some return on your investment. In this post, we will cover how you can get buyers basically begging on your doorstep to sell you their home. So, let’s give you some tips to sell your house fast, shall we?

1. Find a Stellar Real Estate Agent: You want to really do your research and find a
good real estate agent. Before choosing an agent, look at their listings and see their
recent sales and how long the properties they list typically stay on the market. You
want to choose a real estate agent that actually makes sales and money. It’s also
important that the agent you choose knows the area and is well-connected so they
can bring in potential buyer after buyer with ease.

2. Reduce Your Price: We hate to say it, but in order to sell fast, you have to make
some adjustments to your price. If a buyer feels like they are getting a steal, they
are more likely to act fast before anybody else has the chance to. We understand
that you still want to make a profit, especially if you are a real estate investor. This
is where a professional agent can really be beneficial to help you decrease the price
enough to sell your house fast while still allowing you to make a profit.

3. Sell to a Home-Buying Company: This is probably the fastest way to turn your
house into cash and the only way that you can absolutely guarantee a sale of your
home. By using a home-buying company, not only will you be able to sell your
house fast, but since most of these transactions are done in cash, you take out the
hurdles of underwriting and dealing with the bank. If you’ve ever seen those signs
on the side of the freeway that say “We Buy Ugly Houses,” that’s exactly what we
are talking about here. Just remember, it is a great option for a quick sale, but not
the best option to get a great return on your investment. These home-buying
wholesalers will typically sell a home at 60 to 70 cents on the dollar.

4. Clean and De-Clutter: Nobody wants to buy a house that looks like it belongs on
an episode of ‘Hoarders.’ When listing your home and hoping to sell it quickly, it’s
time to get rid of all that stuff that you swore you would someday… the time has come.
You want to present your home in a clean, neat way to potential buyers so
that they can see all that your home has to offer without stepping on Aunt Becky’s
wedding dress from 1992 or wading through stacks of Garth Brooks CDs that have
accumulated on the basement floor. It’s time to give your home a fresh, clean start
in order to attract potential buyers. Remember, buyers are likely to open closets,
cabinets, and pantries. So, those will actually need to be organized and cleaned
instead of having everything jammed away in them and hoping for the best.

5. Stage Your Home: The better your house looks, the faster it will sell. So, if you
are looking to sell your house fast, it may be time to call in the pros. Staging is a
common tactic in real estate, and it helps to make spaces look more visually
appealing and larger. It is likely the stager will bring his or her own furniture and
decor, so make sure you are able to place your home items in storage.

6. Sell to an Investor: Another great way to sell your house fast is to sell it to an
investor. This may be an especially helpful method if your home is in need of some
TLC and the investor is looking for houses to flip.

7. Sell to a Developer: This option is not feasible for everybody. But, if your home is
on a large lot or is even in a condition to be torn down, this could be a great option
for you to sell your home quickly.

8. Take it to the Auction Block: Selling your home at an auction is another way to
not only sell it fast but also to have a cash sale.

9. Create Curb Appeal: How your house looks on the outside is also important in
order to sell it quickly, in fact, the outside is where potential buyers will get their
first impression. Luckily, you can create some curb appeal pretty easily by:

• Trimming shrubs, overgrown trees and hedges
• Clearing walkways
• Cleaning windows
• Getting rid of cobwebs
• Replacing anything that is broken outdoors like lighting or
your mailbox
• Paint your front door
• Add some beauty by planting flowers

10. Get Flexible When it Comes to Showings: We know that showings can
sometimes be an annoying part of the home-selling process. But, in order to sell
your home fast, you’ll need to open up your schedule for the showings. Last
minute showings, late-night showings, early morning showings, weekend
showings, no matter when the potential buyers want to come look at the house,
you’re going to need to be available if you want to sell fast.

If you are looking to sell your house fast and have any questions or concerns, please don’t hesitate to contact us at Pal Property Solutions. We are experts in real estate investing located in  Hamilton, Ontario. We specialize in solving complex real estate matters for home buyers, sellers, and investors. Pal Property Solutions is a real estate solutions company located in Hamilton, Ontario.

Real Estate Investing 101: A Guide for Beginners

Real Estate Investing 101: A Guide for Beginners 150 150 admin

Real Estate Investing 101: A Guide for Beginners

Getting started in real estate investing can seem like an overwhelming and sometimes daunting task. But, if done correctly, real estate investing is one of the smartest moves you can make financially. In this post, we will go over some important tips for people getting started in real estate investing.

Types of Real Estate Investments

  1. Residential Real Estate: This includes apartment buildings, vacation properties, houses, and so forth. Investing in residential real estate is the easiest area to invest in for beginners.
  2. Commercial Real Estate: This includes office spaces, retail stores, and any other building used for business. This form of real estate investing is a little more expensive than residential real estate and you will likely be responsible for more property. If an apartment complex has four or more units it is considered commercial. If a complex has three or fewer units, it is deemed residential.
  3. Industrial Real Estate: This includes warehouses, storage units, car washes, and any other large structures that are used for special purposes.
  4. Land Real Estate: This is an easy way to get your start in real estate investing but it is also the least lucrative form of real estate investing. Land real estate is when you buy undeveloped land and rent it out or wait for the price to appreciate.

How Do You Make Money in Real Estate Investing?

There are three main ways to make some income by real estate investing. Those are collecting rent, selling a property for more than you purchased it for, and collecting interest from loans.

Tips for a Great Start in Real Estate Investing

 

  1. Know The Market: You will likely need to use the help and expertise of an experienced real estate agent when first starting to invest in real estate. But, don’t solely rely on them. It’s important that you do your own research and get to know and understand the properties and property values in the area you plan to invest in. Knowing the market or markets will help you choose a target market where you want to get started investing. You may want to choose the area where you live, a vacation area, an area where real estate prices are higher than average or an area with lower than average real estate prices.
  1. Choose Rental Properties: Rental properties are a great source of passive income and are a great choice when getting started in real estate investing. The easiest option for rental properties is turnkey properties. This means the property is already renovated, has renters, and is ready to go. This is a good choice when just getting your feet wet in real estate investing because it allows you to dive in smoothly. If your rental property needs maintenance, this is where a good property management company can help you get everything looking great and working how it is supposed to.
  1. Don’t Overwhelm Yourself to Start: We know getting started in real estate investing is an exciting time and the possibilities are endless, but in order to be successful, you want to start small. Try investing in just one property to start. As you get more experienced and used to the day-to-day life and duties of being a rental property owner, you can add on more properties.
  1. Invest in a Vacation Rental: This is a win-win for you because you’ll have the chance to earn passive income and you will have a spot to vacation! If you choose an investment vacation rental that is far away from where you live, you will definitely need a team of property managers to look after it for you while you are away.
  1. Find a Mentor: It’s important to find someone that has experience investing in real estate and that you can lean on with any questions and concerns. You can also bounce ideas off of them and you’ll have someone to talk to in the event of difficulties. If you do not know anybody that invests in real estate in your personal life, a property manager can fill this spot for you. Property managers are experienced in real estate investing, dealing with tenants, and any other issues that you may come across.
  1. Start Flipping Properties: We know you’ve seen the shows on HGTV about house flipping, now is your chance to do it in real life. House flipping consists of investing in an underpriced home or building that’s in need of some TLC. You are responsible for the renovations and bringing the property back to life. Then, you are able to sell the property for a higher price than you paid for it, creating a profit for you.

Types of Real Estate Investing Income

 

  1. Real Estate Appreciation: This will happen gradually, so don’t expect to see appreciation immediately or even in the first few years of owning your real estate investment property. When there is a change in the real estate market, your property will often increase in value. This happens frequently when the area where your investment property is booming and grows and becomes a hot spot where a lot of people are looking to live and are willing to pay top dollar.
  1. Cash Flow: This income comes typically from multi-unit real estate investments. An investor is able to collect a steady stream of cash every month from tenants in the form of rent. This type of income comes from apartment buildings, office buildings, storage units, and retail properties.
  1. Ancillary Income: This type of income can be huge for a real estate investor. Ancillary income comes from things within your property like vending machines, cash-operated laundry machines, and video games.

 

We hope this guide to real estate investing for beginners will serve you well as you dive into the exciting world of being a real estate investor. Pal Property Solutions are experts in real estate investing, and we encourage you to please reach out to us if you have any questions about the real estate investing experience.

 

How to Get Started in Real Estate Investing

How to Get Started in Real Estate Investing 150 150 admin

How to Get Started in Real Estate Investing

Financial investments lead many people to a more financially rewarding life. An investor has various options for investment, including stocks, bonds, and retirement savings. Real estate investing sits near the top of the list, but for most the process can seem difficult and time-consuming. You may wonder how to start investing in real estate and how to create wealth investing in real estate without having it take over your daily life. We have taken the time to create a quick guide to help you get started.

How do I start investing in real estate? 

Beginning a new investment process can be overwhelming. Getting started is the hardest part. How do you know how to start real estate investing? Begin by identifying the possible strategies of real estate investing, which ones suit your goals/needs and level of risk the best.

The Lowest Risk – Renting in an Existing Property aka House Hacking

Do you own a home? Have you considered renting a room or several rooms in your home? If you have more space than you need or can open up space to earn income, consider renting the room out to others.

Renting comes with more than one option. Rooms can be rented long-term to people in the community that are looking for a place to live. Figure a monthly rent for the property based on your region’s typical rent amounts for the same amount of space as in your rental. Decide who pays utilities, on extras fees for pets or damage to the property, on any rules while living there, and develop a contract with payment guidelines as needed. You can rent month to month or longer.

Many people rent out rooms in their homes or in their second properties as vacation rentals through services like Airbnb, VRBO, and TripAdvisor Rentals. The renters pay vacation rates, which are higher than a long-term rental stay, to stay for a night, a week, or a few weeks. The situation is short-term and can be advertised through the chosen vacation rental site. The site may have some benefits such as initial screening, scheduling, and payment processing. You still set the guidelines for your property, so be upfront about it on the site.

Whether you’re renting short or long term, renting your own property requires maintenance. Generally, that means you have to fix whatever breaks or isn’t working, or you must hire a repair person. You’ll also be responsible for frequent room cleaning on short-term rentals and occasional cleaning between long-term renters. 

You might think, how much money do I need to start investing in real estate? In the beginning, you’ll need to have enough money to cover maintenance, upgrades, cleaning, and to cover months when the rooms are empty. You may face difficult tenants including some who do property damage. A rental market slowdown can occur. Even with the costs involved in cleaning and upkeep, if you’re room isn’t making you money now, why not rent it as an investment in your future? You could be building equity for additional investments with very little risk to your current finances.

Thinking Bigger – Purchasing Rental Properties

It’s more of a commitment to make an intentional investment in rental properties, including homes and multi-unit buildings. In this case, you make money two ways: Through rent collection and building appreciation. Your investment and risk bump up a big notch when you’re purchasing a new property to rent. For the investment to pay off, look for a growing market with steady rental history and expected property appreciation.

Depending on your skills and the size and location of your rental property, you may want to handle the tasks of maintenance, upkeep, and cleaning or hire a contractor to take care of these needed responsibilities. You’ll spend more to hire out but often it’s necessary, especially as your investing business grows. Your costs will include paying a mortgage, property taxes, and insurance plus any utility costs not included in the rent. You may need to spend money on advertising and on a leasing representative as well.

Rent prices should be market-based yet pay for your property over a number of years that you determine is acceptable. Use this as a deciding factor in your purchase decision. Once your mortgage is paid, you’re making mostly profit aside from the regular expenses. Also, if you decide to sell the building, a building that sells for more than the purchase price can offer income for living or for future investments.

More tenants and more properties mean more problem calls, more visits with prospective renters, and more potential renter issues. If you can manage all the responsibilities, purchasing rental property can be a great investment.

Buying to Sell – House Flipping

Watching home improvement shows on house flipping makes it look very doable. It is doable, as long as you know what’s involved and are willing to work hard to meet the challenges. Flipping a house involves finding an undervalued house that needs work and is in a good market to sell at a higher price, enough to cover your purchase price, all improvement expenses, any expenses incurred to hold the property, real estate sales costs, and a profit to make it worthwhile. You fix up the property and list it at the best price possible.

You can buy a house to flip and live in it while you remodel it. This process saves money as you’re not paying a mortgage or rent for another home while working on the project. It’s not easy to live this way, so many people flip a house they aren’t living in. 

If you chose the right house in the right neighborhood, will you do the updates yourself or will you hire contractors? It’s important to research contractors to find those that are reliable and perform quality work. It’s equally important to get on-the-money estimates on all your projects, so that when you walk through you can determine if you can afford the repairs within your budget and still make a profit.

Flipping isn’t for everyone, but some people get hooked on it and make a lot of money in the process. Maybe it’s time for you to explore this real estate investment option.

Changing It Up – Investments without Property Ownership

Not every real estate investment involves owning property. Listed below are real estate investment opportunities that can be very lucrative. These methods represent how to get into real estate investing without owning property. Some require a small investment to begin, while others require a major investment.

Real Estate Investment Trusts (REIT): Companies that own commercial real estate offer REITs to investors, some publicly traded while others are privately held. REITs are known to pay high dividends. The public trades tend to be less risky to purchase. It’s a good place for new investors to begin. To go this route, open a brokerage account first to find a REIT that’s right for you.

Real Estate Mutual Funds: Many investors are familiar with mutual funds. Real estate mutual funds contain investments in real estate companies and REITs. Different funds have varied goals for diversification, offering more of that diversification to individual investors for the amount of money they can invest in one REIT. Mutual fund companies provide information and analysis for the investor’s use. Investors can make choices on the funds based on this information and the mix of property types or geographical regions for investment.

Real Estate Investment Platforms: In an online platform, real estate developers are looking for investors to finance their projects. It’s risky with investors counting on receiving regular distributions from the project. You may need a large investment to enter the platform and invest, depending on which one you use, and the platform will charge a fee. Real estate investment platforms may be too speculative for the beginning investor who can’t afford a high-risk investment that can’t be sold easily.

Now that you know the various types of real estate investing, you may still wonder if all the methods all open to you. Important decision points include your investment budget and your acceptable level of risk. These factors vary by investor.

Is Real Estate a Good Investment in 2020?

As long as you do your research and make well-informed decisions, real estate investing can net a very profitable gain. Depending on your budget, the market you’re in, and the general state of the economy, some investments will make more sense than others. If you choose the right way to start, your investment will succeed. Real estate investing experts Pal Property Solutions can guide you on the road to investing in real estate. Contact Pal today with your real estate investing questions.

 

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