Six Real Estate Investment Practices You Should Stop Now.

Managing your real estate investment business effectively is the key to continued profitability in this fast-paced industry. Knowing what not to do is just as important as understanding the positive principles of successful property investments. Here are six practices you need to think about when buying, selling or brokering real estate transactions in the modern marketplace.

Stop-Sign-in-the-Real-Estate-Market


#1. Failing to Perform Due Diligence

Doing your homework on the local real estate market is critical to your success as a real estate investor. Some of the most important things to consider before making a move in real estate include the following:

  • Current number of homes on the market in your area
  • Average sale prices & Average time on the market
  • Number of distressed properties available for purchase
  • Rental occupancy rates and average monthly revenues collected on rental units
  • Purchase prices for comparable properties
  • Neighborhood details to include demographics, crime stats, walkability, school district information and public transportation options
  • Zoning restrictions applicable to the property

Intangibles can be as important as these practical factors. Determining whether a particular neighborhood is in decline or in demand, for instance, can help you decide on the likely value of a property now and into the future.

#2. Failing to Consider All Expenses

When calculating the likely return on investment for a property, remember to include maintenance costs, property taxes and homeowners’ association fees into your figures. According to the experts at Zillow, typical operating expenses can add up to between 35 and 80 percent of the revenues generated. Aiming for between 40 and 50 percent can provide you with a healthy profit on your ongoing investment.

#3. Misunderstanding the Element of Time

Especially when purchasing distressed properties, timing can be critical to your own success and to the financial well being of the seller. Rushing into a deal, however, can be counterproductive. Missing out on potential revenues is never as damaging as taking a loss on a real estate investment. By taking your time and analyzing the pros and cons of each potential transaction, you can avoid making a costly mistake when time is a critical element. You need to learn how to say “no” when it matters most (i.e. investing in anything.)

#4. Utilizing Outdated Technology

Do you rely on an outdated, mobile-UNfriendly site that takes forever to load? Clients today are tech-savvy and finicky. If they’re unimpressed with the ease-of-use ways you communicate, advertise, and respond to them, they’ll likely not give you a second chance. A recent survey showed that 45% of consumers say a bad website is WORSE than no site at all. Everything from applications, to rental payments, to advertising should be online and easily accessible for every party involved. If you’re not managing the properties make sure your property manager is up to speed.

#5. Overextending Yourself Financially

Adding properties to your portfolio can increase your potential revenues to help you build wealth. However, failing to maintain adequate cash in reserve can leave you in real financial trouble if unexpected setbacks occur. The loss of one or more tenants, unexpected repair costs or legal entanglements can drain your available cash on hand. By ensuring that you have sufficient monetary reserves to manage these expenses, you can maintain an even keel even when unexpected financial storms arise.

#6. Going against Your Gut

Intuition is a valuable tool for investors in any field of endeavor. In the real estate field, going against your gut instincts can saddle you with a bad investment that can drain away potential revenues. In general, always listen to that internal voice and walk away when a property deal doesn’t seem quite right. The reverse is not always true, however; if a questionable investment appeals to you, it may be the wisest course of action to move on and examine other options — when all else fails, fall back on tip #1 and do your due diligence.

By avoiding these six pitfalls, you can increase your chances of long-term profitability in the field of real estate investment.

Use Mobile Friendly Website Instead of Revestor App!

Please Do Not Use Revestor App – Many of you have asked questions about our app and have mentioned issues you have had with it. So we wanted to make sure to clear up any confusion about it. Our efforts have been spent updating the entire website to be mobile friendly so you are able to use it on any device. There is no need to use the old Revestor app anymore. If you have it please delete it and use our website on your mobile browser instead.

It is on our list to have our iOS app updated but for now our mobile website works just as well as it does on a desktop. If you want to be able to quickly log on and search properties, you can add Revestor to your phone or iPad’s home screen. Here are the illustrated directions below using safari on an iPhone.

Press the middle icon on the bottom screen of Safari (the square with an arrow pointing out of it).

Revestor home page iPhone

It will bring up this screen of options, select Add to Home Screen.

revestor iphone share

You will then be able to name it whatever you would like.

revestor home screen save

This is what it will look like once saved as an icon on your home screen.

Revestor home screen add icon

Thank you for your patience and loyalty as we continue to grow and better our services.

Do You Like Free Money? Six Tax Tips For Homeowners

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Buying your own home can provide an added sense of security for your entire family. With every mortgage payment, the amount of equity in your property increases to improve your overall financial position. This major purchase also comes with some important advantages that can help you save money on your taxes year after year. Here are six of the most important tax benefits associated with purchasing and owning a home.

Tax Tip #1: Mortgage Interest Deductions

For those who itemize deductions on their annual income tax returns, the mortgage interest deduction can add up to real savings each year. According to the Internal Revenue Service, better known as the dreaded IRS, the average mortgage interest deduction adds up to $12,615. The taxes that would otherwise be due on this amount can add up to thousands of dollars, making mortgage interest an important deduction for the 75 million homeowners in the United States.

Tax Tip #2: Home Equity Lines Interest Deductions

The interest paid on a secured home equity line of credit or loan is also tax deductible. These financial arrangements can provide added flexibility for homeowners in managing major expenses while reducing the overall level of tax obligation for these individuals and families. By opting for a home equity credit line over traditional revolving credit accounts, it may be possible to save a significant amount on taxes over the course of the loan. Transferring high-interest credit card debt to a lower-interest home equity loan can not only reduce monthly payments but can also offer significant tax advantages for qualified homeowners.

Tax Tip #3: Closing Costs and Points

Depending on the terms of the mortgage and purchase agreement, buyers can usually deduct any origination fees from their taxable income. Most homebuyers pay at least one percent of the total cost of the home in points to reduce their monthly payments over the life of the loan. Points are generally deductable if the following criteria are met:

  • The loan is secured by the primary residence of the buyer.
  • The points are within the amount normally and generally allowable for the area in which the transaction took place.
  • The buyer paid at least as much at closing as the amount of points deducted from annual taxes.
  • The cash method of accounting is used to figure income and expenses.

A qualified tax attorney or real estate professional can often provide detailed information regarding the deductibility of points on income tax returns.

Tax Tip #4: Property Tax Deduction

Property taxes on both primary residences and vacation homes are tax-deductible. This can add up to real savings on state and federal income taxes.

Tax Tip #5: Tax-Free Rental Arrangements

Renting out your home for a couple of weeks each year can be a financially profitable venture, especially if you maintain a vacation home in an exotic or in-demand area. Best of all, the fees received for rental agreements of two weeks or less need not be reported to the IRS and constitute tax-free income to you and your family.

Tax Tip #6: Tax-Free Profits on Sales

Homeowners can also deduct a healthy chunk of the profits derived from selling their primary home:

  • Up to $500,000 for couples filing jointly.
  • As much as $250,000 for individuals.

 

By taking advantage of these benefits, you and your family can enjoy the greatest possible tax savings year after year.

 

To Fix & Flip Or to Buy & Hold – That Is the Question: Statistics to Help You Decide

As another fiscal year draws to a close, many investors are trying to decide whether they should hold on to their real estate properties or sell them for immediate profits. Some say the glory days of “flipping” are over, but we’re not so convinced that’s true. Read on for all the info you need to make an informed, right-for-your-situation decision.

fix flip buy hold

 

Here are some of the most important stats and trends you need to know to make the right choice about your investment properties.

 

Existing Home Sales in Decline

The National Association of Realtors (NAR) compiles statistics on a monthly basis regarding new and existing home sales and trends in the real estate marketplace. Here are some of the most important stats from their August 2015 report.[i]

  • 8% — percentage that existing home sales fell by month-over-month between July and August 2015. However, home prices were on the rise thanks to limited inventories and relatively low new home construction in the single-family residential marketplace.
  • 2% — percentage that year-over-year home sales improved by as of August 2015.
  • 7% — percentage of foreclosures and short sales that comprised the market in August 2015, holding steady from the previous month.
  • 18% — percentage below market value that foreclosed homes sold for in August 2015.
  • 12% — percentage of market value that short sales typically when sold.
  • 12% — percentage of real estate investors that accounted for sales in August 2015.
  • 60% — percentage of investors who paid cash.
  • 7% — percentage of gain over the $228,700 median price for all existing housing in August 2015.
  • 32% – percentage of first-time homebuyers.

Depending on your target audience and your expected return on investment, it may be worthwhile to research your local real estate market to determine the current value of your investment properties.

 

Rents Continue to Rise

On the other side of the equation, property owners and managers continue to enjoy high occupancy rates and increasing rental revenues in almost all areas of the country.

  • A joint report by Axiometrics and MPF Research indicates that the single-family rental market may have finally reached a tipping point. After months of low vacancy rates and high rents, builders and property owners are seeing a slight rise in the number of vacant units. This is attributable in part to the increased construction of apartment complexes and rental units across the U.S.[ii]
  • The 2015 Rental Market Report from Rent.com paints a rosier picture of the overall outlook for rental property owners in the current economic environment. Based on information from property managers across the country, this report indicates that high occupancy rates and demand for rental properties are driving current favorable conditions for real estate investors nationwide.[iii]

These statistics make a good case for holding on to high-performing rental properties in the current economy.

 

Future Predictions

The financial experts at Fortune are predicting increases in average rental costs of 8 percent or more in 2016.[iv] This will constitute a real windfall for real estate investors who stay the course and rent their properties for ongoing profit. These rent increases are attributable to high demand and low inventories that are expected to continue throughout the upcoming year.

At Revestor, we specialize in giving real estate investors the tools they need to succeed. Whether you are investing and and/or flipping your first house or your thirty-first, we’re here to help you make the most of your investments no matter what the housing market has in store.

 

[i] http://www.realtor.org/news-releases/2015/09/existing-home-sales-stall-in-august-prices-moderate

[ii] http://www.multifamilyexecutive.com/property-management/reis-vacancies-rise-in-3q_o

[iii] http://www.rent.com/blog/2015-rental-market-report/

[iv] http://fortune.com/2015/10/07/rents-rise-housing/

 

 

Real Estate Crowdfunding: The Future of Real Estate Financing is Here {Guest Post}

In the past few years, crowdfunding has become one of the most effective and popular ways for companies and individuals to raise capital over the Internet.  In fact, since Congress passed Title II of the JOBS Act in September 2013, one of the industries that’s benefited the most from crowdfunding has been the real estate industry.  These provisions, which allowed for debt and equity crowdfunding to become a legal and viable option, have spawned a new method for real estate investors and sponsors to raise capital for their projects, without having to rely on their local banks and hard money lenders for financing.

The genius of the real estate crowdfunding model is in its simplicity.  Typically, in a real estate crowdfunding scenario, a developer of a property brings a deal to the table by submitting the details of their project to a platform.  The project is then vetted by the platform to make sure the investment is a sound and lucrative venture.  After the platform has conducted their due diligence they will then host the project on their site, giving investors the opportunity to contribute funds towards that particular loan.  As the project moves towards completion, the Borrower pays down their loan with interest while the contributors receive dividend distributions as a return on their principal investment.  The exit strategy for the Borrower depends on what type of project they’re working on.  Regardless, the peer to peer lending process is fairly simple for all parties involved and everyone is able to benefit from the experience if all goes as planned.

Ultimately, Patch of Land’s real estate crowdfunding platform bridges the gap between traditional and hard money lenders by combining the best elements from each.  This concept provides a fast and reliable solution for real estate investors looking to borrow funds and raise capital for their projects in an easy and repeatable way.  Here are just some of the benefits of getting a peer to peer loan through Patch of Land:

  • Access to Capital – Our large network (or “crowd”) of accredited investors provides you with a source of capital that never runs dry.
  • Speed to Close – Our tech-enabled platform helps us work with a sense of urgency to approve and fund your loan in as little as 7 days.
  • Prefunded Loans – After we’ve approved your loan, we will fund you at closing first, then offer your deal to the “crowd” second. This is opposed to traditional real estate crowdfunding platforms that make you wait until the “crowd” fully funds your loan before moving forward with your financing.
  • Nationwide Reach – We operate in every state throughout the nation with exception to a select few.
  • Brand Your Business – The projects hosted on our industry-leading platform are listed on CNBC’s Crowdfinance 50 Real Estate Average which means investors throughout the world will take notice and recognize your business.
  • Easy to Repeat – Once we’ve worked with you in the past we’re able to close your loans even faster in the future.

pol - logo - 2014-02-27 TAGLINE REV VERT HIGH RES

For more information on how you can use real estate crowdfunding to finance your next project, visit Patch of Land.  Our Lending Parameters, FREE Borrower Handbook, and Application Center will provide you with the educational resources you need to get started on financing your next short-term residential or commercial real estate loan today.

 

Guest Post by:
Marco Rivera with Patch of Land
marco@patchofland.com

How Rising Interest Rates Will Affect Real Estate Investors

Homebuyers rejoice when interest rates drop, but rising interest rates can actually be a good thing for investors. Because high rates make homes less affordable, the rental market improves, giving real estate investors a chance to improve cash flow and increase their return on investment.

Mortgage Rates

For investors participating in all-cash deals, higher interest rates don’t have much of an impact on the cost of acquiring new investment properties. Investors who rely on financing will pay more for residential and commercial buildings, but the positive effects of rising rates should cancel out most slight increases in costs. Any investor with an existing variable-rate mortgage should expect to pay slightly more each month. For example, a 0.25 percent increase in the Fed rate could increase mortgage interest rates and the cost of borrowing for an investor.

Rental Rates

When interest rates increase, buyers have several options. Making a large down payment or buying a less expensive home are both good ways to reduce the amount of financing needed, but these options just are not feasible for all buyers. It’s also possible to take a variable-rate loan with a low starting rate, but many buyers are more comfortable with fixed-rate mortgages.

When rates increase, some buyers stop shopping for homes and decide to rent until rates decrease. This is great news for investors. As the demand for rental units increases, investors are able to raise rental rates, increasing their monthly cash flow. If an investor owns a 4-unit property with a 100 percent occupancy rate, raising the rent by just $100 per month results in an extra $400 of income per month. The extra money can more than make up for the slight increase in mortgage costs related to rising rates.

Occupancy Rates

Rising rates can also have a positive effect on occupancy rates in the rental market. When rates are low, it’s more affordable for renters to finance home purchases. As a result, some renters decide to buy their own homes, leaving investors with vacant units. When interest rates increase, renters are more likely to stay in their units, keeping occupancy rates steady.

Cap Rates

In addition to influencing the amount of mortgage capital available, interest rates also influence property values and net operating income (NOI). If an investor is able to raise rental rates without incurring additional expenses, NOI increases. Provided the property’s value stays the same, an increase in NOI results in an increased cap rate. Increased occupancy rates also have a positive effect on NOI. Rising interest rates often lead to decreased demand, lowering the value of some properties. However, the increase in NOI is often enough to offset a small decrease in property value when calculating cap rates.

The Fed rate heavily influences much of the activity in the real estate market, but rising rates are not always a bad thing for investors. Higher rates do increase the cost of purchasing an investment property, but they also have a positive effect on rental rates, occupancy rates and cap rates.

Sources

Bankrate: Do Rising Rates Trigger Lower House Prices?

CNN Money: Why Your Rent Check Just Keeps Going Up

Investopedia: Capitalization Rate

Forbes: Raising Rates Can Be Good For The Housing Market

Top Fix and Flip Markets of 2015

This year’s best Fix and Flip markets have been announced according to the Q2 2015 U.S. Home Flipping Report.

Among markets with at least 50 completed single family home flips in the second quarter, those with the highest average gross ROI were Chicago, Illinois (61.2 percent), Dayton, Ohio (60.6 percent), Harrisburg, Pennsylvania (60.6 percent), Ocala, Florida (56.8 percent) and Baltimore, Maryland (56.7 percent).

biggest flipping returns

Metro areas with the highest average gross profits in dollars on completed single family home flips in the second quarter were San Jose ($261,946), Los Angeles ($171,954), San Diego ($141,483), Washington, DC ($139, 927) and Seattle ($131,028).

Check out more details of the report here.

What’s your Exit Strategy?

When investing in real estate one of the key things you need to consider is whether you are going to Buy and Hold the property or Fix and Flip it. Each option has it’s pros and cons. We give you the calculations to see what your outcome would be either way.

Initially, on each detail page the calculations will be set to Buy and Hold. To calculate Net Profit (before taxes and inflation) and Return On Investment (ROI) we initially assume that you’ll hold the property for 5 years at an estimated appreciation rate of 4% per year. We also take into account 8% in closing costs when you sell the property.

Screenshot 2015-09-16 10.23.33

You can also change your exit strategy to Fix and Flip. We initially assume that you’ll sell the property for 143% of what you bought it for, that you’ll spend 10% in improvements and 8% in closing costs. We even calculate how much it will cost you in mortgage payments and expenses between the time you acquire the property until you sell it.

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Check it out for yourself at Revestor.com!

Revestor Tip: Don’t Forget to Do Your Research

Although it might seem like common sense, many investors get caught up in the hype of an investment and forget to do their due diligence.

Before even looking into an investment property, you need to figure out where you would like to own an investment property, what kind of property you want, how much you can afford to put down, and how much you are willing to spend to fix it up (if necessary).

Once you have your list of investment criteria, you can begin to look for properties matching your needs. That’s where Revestor comes in. You are able to create a search for your exact criteria and you will be notified when new properties match your search.

Once you are in the process of purchasing a home, you need to make sure to ask every question possible. You not only need to know everything about the house itself but about the surrounding area as well. Some key questions are:

  • Why is the homeowner selling?
  • What is the current mortgage and expenses on the property?
  • What was the last sale price and when was it purchased?
  • Has anything been renovated or does it need to be?
  • Will there be any zoning restrictions if you want to expand?
  • What is the average income of the surrounding neighborhood?
  • What is the average price of the other houses in the neighborhood?
  • Are there any liens on the property?
  • What is the crime rate in the area?

As an investor or real estate agent, do you have any other key questions you ask before moving forward with a property? Share them below!

Top 9 Things Every New Landlord Should Know

While a great deal of attention is given to the rights of renters and tenants, landlords also enjoy protections under the law. If you are new to the residential real estate field, understanding your rights and responsibilities can go a long way toward ensuring you have a smooth path to profitability. Here are nine things every landlord should consider before signing their first lease agreement.

#1. Do Your Due Diligence

Checking references and performing a basic credit check before signing a lease will provide you with added information on potential renters. This can help you avoid unpleasant confrontations later and can better make certain you are leasing to quality tenants in your properties. Be sure to check on employment and residence histories; these can often offer greater insights into a renter’s stability and reliability.

#2. Maintain a Safe Distance

In nearly all cases, your renters should pay their own utility bills. This can protect you from unexpected costs during cold winters and hot summers. Additionally, if your tenants decide to move out unexpectedly, this will prevent you from being on the hook for unpaid gas and electric bills.

#3. Insist Tenants Have Renters’ Insurance

Tenants should be insured. This will help protect you from potential liability in case of damage to your tenants’ property should there be a disaster such as fire or flood. In the event a tragedy occurs, you want to be sheltered from lawsuits should your tenant claim you were negligent in taking adequate care of the property. Require proof of renters insurance before handing over the keys.

#4. Pay Attention to Details

Your lease agreement should include detailed stipulations about acceptable activities, prohibited practice and financial matters. Consulting with an attorney who specializes in real estate law in your state can often provide you with added assurance that all contingencies have been considered in your rental or lease agreement. These legal professionals have the experience and knowledge needed to protect your interests effectively in the real estate market.

#5. Don’t Be Afraid to Evict

Unpaid rent represents a drain on your financial resources and revenue streams. If your tenant fails to live up to his or her obligations to you, begin eviction proceedings immediately. Rather than discussing the matter at length, it is generally best to involve your attorney during the initial stages. Financial discussions can easily become heated; by allowing your lawyer to speak for you, you can ensure the most positive outcome without the risk of a nasty or confrontational encounter.
#6. Maintain a Financial Buffer

Even the best tenants can suffer monetary setbacks. By planning for the worst, you can be ready when rent payments are late or don’t turn up at all. Most experts recommend that you keep at least six months of reserve cash on hand to weather unexpected financial difficulties due to tenant evictions, repair costs or other emergency expenditures. By saving up for a rainy day, you can protect your ongoing profitability from your rental ventures. To keep things organized you should also setup a separate bank account for your rental income and expenses.

#7. Stay on the Right Side of the Law

Familiarizing yourself with the legalities of renting or leasing a property in your city and state can help you avoid some of the most common and costly mistakes new landlords tend to make. Many municipalities offer a helpful guide for tenants that outlines their rights under the law. This document or brochure can also provide you with valuable information on your own responsibilities and restrictions when renting or leasing a property. You can also google “landlord laws in Phoenix” or “landlord laws in Arizona” for information on your city or state.

#8. Make Your Expectations Clear

Even if the allowable activities of your tenants are spelled out in the lease, it’s a good idea to discuss key issues with potential renters during the first interview. Some of the most common points of contention include the following:

  • Can tenants repaint, change the carpet or otherwise remodel the property?
  • What type of damage/repair costs may be taken out of a security deposit?
  • Who is responsible for minor and major repairs? First $100 is tenants responsibility?
  • What activities constitute a breach of the lease agreement?
  • In the event of a late rent payment, when would a late fee apply and how much would it be?

#9. Do a Walkthrough at the Beginning and End of a Lease

And get it signed by all parties. Typically, you would be there for the initial walk through, and both parties would sign. This would be a place that a tenant can note any existing damage to the property, essentially clearing them of any sense of responsibility later on or upon vacating the residence. Most often, they would have an additional set time—48 – 72 hours is usually reasonable, but you should check with your attorney—to add any further issues they find upon moving in and getting settled. Be sure to keep this document in a file to compare upon move-out.
By discussing these matters upfront, you can often achieve an amicable relationship that can lead to increased profits and reduced tenant turn over. These nine guidelines can help you achieve a higher degree of success and better financial reward as a landlord. Be sure to take advantage of all the tools and resources that are available to you before making your move into this often lucrative, yet sometimes high-stakes endeavor.