October 26, 2022

So, interests rates are rising and you need some money for a quick fix and flip? Many people looking to break into this business do and often struggle to determine what place is the right place to secure the financing that they need. The good news is, hard money lenders can help.  However, there are some people who have trepidation’s regarding hard money lenders. Perhaps they have heard a horror story in the past, perhaps it is the name “hard money” or perhaps it is the fact that they just don’t really understand what a hard money lender is.  The good news is, hard money lenders aren’t as scary as you think. In fact, they, in general, tend to make getting loans quite easy. Here’s what you need to know about hard money lenders and what they offer.

Why You Should Turn to Hard Money Lenders

Hard money lenders are private investors that are dedicated to helping people get short-term loans secured by real estate. These lenders specialize in short-term real estate investment opportunities such as fix and flips.  They typically give out loans for about 12 months, but they may lend longer, and they will ask you to provide monthly payments of interest or interest and some principal and at the end of the loan (when you sell your fix and flip) you will make a balloon payment for the remainder of the loan.  These lenders are going to work with you one-on-one and base their decisions on the deal they are presented with. They aren’t going to comb through your financial records. Instead, they are going to look at the potential for your fix and flip to earn money and base their loan terms on that.

What are the Pros of Hard Money Loans?

There are many pros of the hard money loans you can get from these lenders, this includes:

• Speed of Approval—you can typically get these loans secured very quickly compared to other mortgages, typically because the lender is mostly focused on collateral not all of the other financial documents that mortgage companies need from you.
• Flexibility—one of the biggest benefits of working with hard money lenders is that they can be more flexible than traditional loan officers. These lenders will evaluate each deal individually and are often more flexible with individuals than large companies are.
• More Approval Rates-with hard money loans, you can avoid issues with getting your loan approved. Credit issues, or bankruptcies aren’t going to prevent you from getting a loan approved in the way they would with other mortgages—hard money lenders are more focused on the deal.

So, if you have been apprehensive about hard money lenders in the past—now you know about just how helpful they can be when you need cash for your upcoming fix and flip. Keep this information in mind before you find the right financing for your investment property, as a hard money lender may be just the ticket to you getting the money you need to make your fix and flip dreams a reality.

March 3, 2022

When investing in real estate there may be a better option for financing besides using a traditional loan every time. While it is true that traditional loans have been used to successfully secure many types of real estate investments, obtaining a traditional real estate loan comes with a lot of challenges. There are tons of boxes investors must check for a traditional lending institution to agree to fund their loans. Luckily, these challenges do not mean that investors who do not qualify for a traditional loan should give up on trying to invest in the real estate market. To the contrary, many investors do not even bother to go through the traditional loan process to fund their real estate investments. If you’re curious to learn what investors do when they need quick financing at affordable rates, the answer to your next investment funding could be in securing a hard money loan.

What Are Hard Money Loans?

Hard money loans are investment loans given by individual investors or companies who lend money to investors that are secured by the asset they are lending money on. The asset itself is used as collateral to reduce the risk for both the lender and the loanee.  Hard money loans are great for fast financing where investors need to purchase a fixer upper, quickly remodel the property and then sell it at a profit.  Most of the time, hard money loans are short-term loans lasting from 1 to 3 years. With the shorter loan terms, they also carry higher interest rates than traditional financing options like primary mortgages.  If you are considering whether or not a hard money loan is the right fit for you, here are three benefits you should consider before making a decision.

Processing Times

Traditional lenders usually take around 28 days to process and complete funding for a loan which is often way too long for fix and flip investors. If things are going well within those 28 days, investors could secure a hard money loan, purchase a property, and begin renovations.  For that reason, hard money loans have become a very attractive alternative to traditional bank loans.

High Approval Odds

One of the biggest challenges facing real estate investors today is simply being approved for a loan from a traditional lender like a bank or government agency. Lenders almost always evaluate the applicant’s credit status and annual income before deciding whether they will approve the loan.  A lot of times, banks will only provide a portion of the full loan amount, leaving the loanee with little to no choice but to find another way to fund the remaining balance of the loan in need.  Hard money lenders, on the other hand, don’t typically consider the investor’s credit or their income. The main requirement for determining approval for a hard money loan is whether or not the loan amount is equivalent to the collateral on the property value being purchased.

Flexible Repayment

You usually will have more flexibility when negotiating the loan terms for a hard money loan since they are funded by private investors as opposed to large financial institutions. You can usually customize the repayment options to suit your financial position which in return makes hard money loans very convenient, especially for someone who’s just getting started in the real estate business.

As an investor, you often have very few options with little turnaround time to secure the financing you need to purchase a property. A hard money loan can be a great fit because they do not typically come with all of the red tapes that come with traditional bank financing.  If you decide to fund your next real estate investment using a hard money lender, try to avoid making and quick decisions. Make sure you evaluate the terms of the agreement, any fees that may be included, and what interest rates will be involved, so you can make a wise decision that is best suited for your needs.

November 11, 2021

When looking for areas to buy an investment property, it’s critical to look at a variety of different factors when making such a big decision. Picking a community and home you want to live in long term is quite different from choosing a house for someone else to live in. While many investors look only at the property, the most successful investors consider the type of person who would want to live in the neighborhood where the home is located. Smart investors look for homes that will give their renters a certain quality of life. When looking for your next fix and flip opportunity, consider the below location issues before moving forward with a new investment project.

Consider HOA Restrictions

While most HOA’s allow most any qualified renter, sometimes they may require additional interviews or steps to approve people for a particular neighborhood. Unfortunately, some HOA’s policies can go to extremes in an effort to create a more appealing and safer environment for the community. These policies can lead to unnecessarily strict rules that must be followed or fines can be issued for even the most minor offenses, such as putting the trash cans out a few minutes too early on trash day. It’s important to understand all the fine print of any HOA restrictions a neighborhood may have before agreeing to purchase a new investment property in the area. Not understanding these rules is one quick way to ensure a lot of headaches and complaint calls from your future tenants down the line.

Appealing Location

Is it in a location where tenants would want to live? Renting out a property in a desirable neighborhood with beautiful things around it helps possible renters say yes. Additionally, when you’re looking at short-term/nightly rental options, an appealing location where people would normally travel to for vacation is also a good investment. Just because you find a good deal on a property doesn’t really mean it’s a good deal if no one would ever move there.

Local Attractions

Are there attractions nearby that lots of people what to see? Are there amusement parks, nature trails, or other live music venues? Your rental property should be near things that someone would enjoy experiencing. This is especially true for short-term rentals. When people are planning a vacation, they want to go somewhere with different attractions close by so they can take in the highlights of whatever location they are visiting.

Home Amenities

What amenities does the house itself feature? Is there a pool, hot tub or firepit with outdoor spaces with plenty of seating to entertain friends and family? Are there smart home features available? Does the home feel cluttered or does it create a natural flowing environment? Is the backyard fenced and private or is it open? These are just some of the home amenities to consider as you think about the kind of property to buy.

Rate of Turnover

When looking for a new long tern rental property, you should look for a location where there is likely to be a good amount of turnover each year. This means that there are always new people coming and going who would be qualified to rent your home for a 12-month lease or more. In areas near colleges, universities, and military bases, you’ll be more likely to find the most possible renters as compared to a small town too far from employers and amenities. The turnover rate should be due to relocations or college students graduating and not because crime rates have skyrocketed in the area.

Crime Rates

Crime rates are perhaps the most important. You’ll want to not only look at the overall rate but the types of crimes being committed in the area. Some areas have domestic disputes and not very many crimes from outside the home. Other areas have much higher rates of theft and vandalism, while still others might have an issue with burglary and more violent crimes or gang activity. For this reason, it is very important to look at not only the crime rates, but where the crime is happening, how frequently it occurs, and if the issues have been resolved in recent months.

Neighborhood quality is one of the most important criteria for prospective renters and unfortunately is often over looked by investors looking to do a quick fix and flip and make a fast buck.  Using the above guide will hopefully be useful in considering other important factors to consider in order to be successful long term with your future investment portfolios.

September 17, 2021

Investing in real estate can be quite profitable, but like any investment it requires capital in advance in order to enjoy the benefits it offers. This capital is essential to keep your real estate business moving in the right direction. From purchasing your first duplex to paying for the upgrades on your previous fix-and-flip, without the proper funding, you can not call yourself a real estate investor. Luckily, there are many options for investors to raise the capital they need to fund their real estate projects. Below are three smart ways for raising the funds you need in order to be successful.

Secure Funding With A Private Lender

Know someone who is interested in investing money and wants to receive I higher return than simply having their money sit in a standard bank saving account? Getting a loan from a family member, colleague, or friend is one smart option before going to a bank to fund your latest real estate project. While you will need to pay the loan back with interest and guarantee a certain return on their investment most of the time; you can typically get the funds you need much faster, and with less red tape than going through a financial institution.

Find A Highly Rated Hard Money Lender

There are many hard money lenders nationwide who are happy to fund a loan if the terms are right. It is important that you do your research ahead of time on any hard money lender you go with and select a reputable company to do business with prior to signing on any dotted line. Directories such as hardmoneyhome.com are great resources because consumers are able to leave reviews of their experiences with different lenders, making it much easier for you to research and find the best company to meet your needs. While higher interest rates are usually standard with most hard money loans, there is less red tape and it is easier to qualify for these loans. Hard money loans are best suited for quick projects such as fix and flips or bridge loans to float you in-between real estate projects.

Find A Trusted Partner

Partnering with someone you can trust is a great way to share the responsibilities and workload of investing in real estate. It is important that each partner is clear on the expectations of each deal and any potential profit or loss on an investment prior to moving forward with a partnership. While partnering with someone is not without its own obstacles, it can be a great way to share the risk and reward on investments. Dividing and conquering your responsibilities is also a great way to gain a competitive edge on your competition.

Regardless of which method best fit for your needs when securing funds for real estate investment, few investors have all of the capital needed to fund their investment projects. Researching all financing options and picking which option is best for you is critical to you being successful within the real estate industry. Hopefully, using one or all three of the above options will benefit you in all of your future investment endeavors and help you to grow a diverse and profitable portfolio.

July 16, 2021

When investing in real estate there may be a better option for financing besides using a traditional loan every time. While it is true that traditional loans have been used to successfully secure many types of real estate investments, obtaining a traditional real estate loan comes with a lot of challenges. There are tons of boxes investors must check for a traditional lending institution to agree to fund their loans. Luckily, these challenges do not mean that investors who do not qualify for a traditional loan should give up on trying to invest in the real estate market. To the contrary, many investors do not even bother to go through the traditional loan process to fund their real estate investments. If you’re curious to learn what investors do when they need quick financing at affordable rates, the answer to your next investment funding could be in securing a hard money loan.

What Are Hard Money Loans?

Hard money loans are investment loans given by individual investors or companies who lend money to investors that are secured by the asset they are lending money on. The asset itself is used as collateral to reduce the risk for both the lender and the loanee.  Hard money loans are great for fast financing where investors need to purchase a fixer upper, quickly remodel the property and then sell it at a profit.  Most of the time, hard money loans are short-term loans lasting from 1 to 3 years. With the shorter loan terms, they also carry higher interest rates than traditional financing options like primary mortgages.  If you are considering whether or not a hard money loan is the right fit for you, here are three benefits you should consider before making a decision.

Processing Times

Traditional lenders usually take around 28 days to process and complete funding for a loan which is often way too long for fix and flip investors. If things are going well within those 28 days, investors could secure a hard money loan, purchase a property, and begin renovations.  For that reason, hard money loans have become a very attractive alternative to traditional bank loans.

High Approval Odds

One of the biggest challenges facing real estate investors today is simply being approved for a loan from a traditional lender like a bank or government agency. Lenders almost always evaluate the applicant’s credit status and annual income before deciding whether they will approve the loan.  A lot of times, banks will only provide a portion of the full loan amount, leaving the loanee with little to no choice but to find another way to fund the remaining balance of the loan in need.  Hard money lenders, on the other hand, don’t typically consider the investor’s credit or their income. The main requirement for determining approval for a hard money loan is whether or not the loan amount is equivalent to the collateral on the property value being purchased.

Flexible Repayment

You usually will have more flexibility when negotiating the loan terms for a hard money loan since they are funded by private investors as opposed to large financial institutions. You can usually customize the repayment options to suit your financial position which in return makes hard money loans very convenient, especially for someone who’s just getting started in the real estate business.

As an investor, you often have very few options with little turnaround time to secure the financing you need to purchase a property. A hard money loan can be a great fit because they do not typically come with all of the red tapes that come with traditional bank financing.  If you decide to fund your next real estate investment using a hard money lender, try to avoid making and quick decisions. Make sure you evaluate the terms of the agreement, any fees that may be included, and what interest rates will be involved, so you can make a wise decision that is best suited for your needs.

March 5, 2021

If you’ve ever thought about investing in rental property, now may be a good time. Mortgage rates remain historically low, and rental income could offer valuable protection against ongoing economic uncertainty. Many economists are predicting a wave of foreclosures in 2021, which may lead to more people looking for available rentals. So, how do you finance a rental property? The answer, for most people, is the same way you finance the purchase of your own home: with a mortgage. Whether you plan to live in the property or not, a mortgage is the most secure method of financing a rental purchase because it’s secured by the home.

How are rental mortgages different?

Mortgage lending is all about risk levels. A typical mortgage for an investment property carries a higher level of risk than a mortgage for a primary home, simply because the mortgage holder isn’t living in the home.  To discuss in more detail, below are three ways a rental property mortgage differs from a mortgage for your primary residence.

1. You May Have to Make a Larger Down Payment

In most cases, the minimum down payment required for investment property is roughly 15% to 20%. Comparatively, you can make a down payment on your own home of as little as 3% in some cases. However, for a down payment lower than 20% on your own home, a borrower is required to pay for private mortgage insurance, which can cost between .25% and 2% of the loan balance per year. It is worth noting that private mortgage insurance does not cover investment properties, so investors may have to make a larger down payment as a result.

2. Your Mortgage Rate Will Likely Be Higher

In a low interest rate environment, the interest rate on a mortgage for a rental property is still relatively low. For most borrowers, the rate will be about three-quarters of a percentage point higher for an investment property than it would be for a primary home, or about the mid-3% range currently.

3. You May Have to Pay Off the Mortgage Sooner

In some cases, the loan may have a shorter term than the typical 30-year term offered on the purchase of a primary home. Like with other types of mortgages, a rental property loan can either be fixed or variable, depending on the loan and the borrower’s relationship with the lender. So, what are the different types of rental mortgages?

Is now a good time?

Even if it requires extra paperwork and documentation, getting a mortgage for an income-producing rental property may be a good idea, especially at the moment.  Low mortgage rates help make purchasing real estate more affordable, while economic uncertainty may make it appealing to have a passive income stream available through a rental property. Low rates are driving interest from a wide variety of real estate investors, but rental properties are one of the safer bets.  Investing in a real estate property for a short-term purpose, such as a fix and flip, would likely be far riskier in the current real estate environment. There is likely to be an influx of real estate supply through foreclosures which could depress prices and have a negative impact on real estate speculation in 2021. This may be offset by the large demand seen in the past several months for real estate, but nevertheless remains a risk.

Bottom Line

If the coming months result in a wave of foreclosures—particularly after the government’s Covid related foreclosure moratorium ends—that will likely result in an increase of new applicants for rental properties, which will be a boom for rental property owners. For investors who are able to qualify for a rental property mortgage and are willing to handle or outsource property management tasks, now could be the right time to make an investment that will pay off for many years to come.

February 12, 2021

Truthfully, every new investor has their own idea of what makes a real estate mogul. However, in general, a realty mogul can be defined as a high net-worth entrepreneur who has accumulated the majority of their wealth through investing in real estate. With that in mind, if you dream of building your own real estate empire someday, keep reading. Below is a step-by-step guide to growing your real estate portfolio into a thriving business that will help you achieve financial freedom.

 Clarify your financial goals and investment strategy

If you’re reading this article, chances are, you do dream about becoming a successful real estate investor. That said, if you’re serious about making it happen, it’s important to realize dreaming is not enough. In this case, you need to start thinking like an entrepreneur, which means that you need to clearly define your goals and the steps that you intend to take to achieve them.  To do this, start by thinking about your goals in a more specific way. For example, rather than just saying you’d like to earn extra income by investing in real estate, think about what being a successful real estate investor looks like to you. What would you eventually like your net worth to be? The more specific you can be here, the better.

Once you’ve taken some time to define your goals, it’s time to turn your attention to your investment strategy. In short, your investment strategy is the specific method you intend to use to achieve those goals. For instance, you could follow a buy and hold strategy where you purchase a rental property and rent it out to a long-term tenant, or you could choose a fix and flip strategy where you purchase a distressed property, fix it up, and resell it for a profit.

Create your real estate investment business plan

After you’ve taken some time to really think about your goals and to zero in on the investment strategy that’s the best fit for you, the next step is to create your real estate business plan. It can be helpful to think about your business plan as the roadmap that you intend to follow on the way to achieving your goals. It will include the specific methods and strategies you intend to use to build your portfolio.

While this may seem like a lot of work to do before you ever even look at an investment property, it’s a crucial step to building your real estate business. Having a business plan will help you be more strategic when it comes to identifying the right investment opportunities, deciding how you’re going to manage your cash flow, and knowing when it’s time to employ your exit strategy. Additionally, if you’re planning on bringing business partners into the mix, having a cohesive business plan will make you look more professional, especially if you don’t have much of a proven track record.

Keep in mind that while it’s important for your business plan to make sense, it doesn’t have to be perfect from the get-go. A real estate business plan is not a static thing. It should grow and change with you as you continue to grow in your role as an entrepreneur. Try not to get so caught up in making it so perfect that you prevent yourself from moving forward.

Buy your first investment property

Once you have a outlined business plan, it will be time to buy your first investment property. However, before you do so, it’s important to take the time to educate yourself on your local real estate market. In this case, you should be sure to familiarize yourself with the going interest rates in your area and the neighborhoods that are most likely to offer investment opportunities that match your particular strategy.

Once you’ve found a few properties that meet your criteria, it’s time to do a property analysis. At its core, a real estate property analysis helps you analyze metrics to figure out whether or not a specific property meets your bottom line and is likely to give you sufficient returns.

Continue to build and diversify your real estate portfolio

No matter what type of investment strategy you followed up until this point, eventually it will be time to continue to grow your portfolio. The nice thing about investing in real estate is that you can often leverage equity in order to help you grow.  If you followed a buy-and-hold strategy, you’ll have the option of using a home equity loan to supply the funds for the down payment on your next investment property. Likewise, if you’ve followed a fix-and-flip strategy, you can use the profits from the sale of your first investment property to buy another.

Once you’ve gotten comfortable growing within your existing real estate niche, it’s time to diversify your portfolio. This could mean a few different things to different investors. For example, if you focused on residential real estate so far in your career, you could move to investing in commercial real estate.  Ultimately, the method you choose to diversify your portfolio is up to you. However, if you do dream of becoming a mogul, it’s crucial that you eventually diversify. At the end of the day, diversification will always help minimize risk, which is one of the keys to building a sustainable real estate empire.

Break into high-end markets

Once you’ve had the chance to accumulate a decent amount of wealth and build a full portfolio, it’s time to break into high-end markets. These markets are often only attainable to those who would be considered accredited investors in regard to the stock market, meaning they already have a high net worth and are more experienced in the real estate business. Here, in exchange for the high up-front cost and tough competition that you’ll likely face when trying to buy properties, these markets often will give you the best returns.

The bottom line

Real estate investing is certainly not easy, let alone if you’re trying to become a real estate mogul. However, with a lot of hard work and due diligence on your part, it can be done. With that in mind, use this as your guide for how to get started building your real estate portfolio and eventual empire. Armed with this knowledge, you should have everything you need to create a roadmap for achieving your dream of financial freedom.

December 28, 2020

Whether you’re a first-time homebuyer or a long-time investor, it’s important to be strategic about how you spend your hard-earned money.  You have many different investment routes to choose from, which can sometimes be overwhelming and leave you with more questions than answers. What’s a better investment, multi-unit properties or single-family homes? Should you fix and flip or fix and hold? When should you live in a property first before renting it out?  Below we will discuss ways to reliably maximize the value of an investment property.

Purchase a multi-unit property and live in one

If you are just getting started in real estate investment, purchasing a multifamily property and living in one of the units can be a great idea.  Multifamily dwellings with up to four units are considered residential, not commercial, for financing purposes. This means you can purchase a multi-unit property with a residential loan and rent out the remaining units. You will be able to generate income as soon as you move in, helping you offset the cost of your mortgage and building a passive income stream.

This is a fantastic strategy for first-time homebuyers. If you want to begin building your real estate investment portfolio, but you don’t have much capital, start small. Instead of buying a single-family home in a suburban neighborhood, buy a duplex, triplex or quadplex in an urban market and generate ongoing income.

Purchase and renovate a multi-unit property you don’t live in. 

Consider expanding your real estate portfolio with a multifamily property that needs some renovation. Take a long-term, fix-and-hold approach, refurbishing one unit at a time and renting out the rest. You’ll be able to leverage your rental income to pay for construction expenses, spreading them out over several years instead of in one lump sum.  That said, renovating a multi-unit property is a big undertaking. Ask these questions before you commit to a project:

• Do you have any previous remodeling experience? Do you have a team of professionals you trust to help you with the work? Go in with eyes wide open about how much time and money each unit will require.
• What are the changes you need to make to the units? Are they standard cosmetic jobs, like replacing flooring, cabinets and appliances? Or do you have to make building-wide upgrades that will be more expensive and extensive? Steer clear of properties that have major structural problems that will prevent you from renting out units while doing construction.
• How much do you expect your property to appreciate after you renovate? Will your rental rates increase significantly? Do your homework, researching the rents of similar properties in the area.

Purchase a Duplex

Another smart way to maximize your real estate investment is to buy a duplex. You can choose to live in one unit and rent out the other, or rent out both for double the income. Ideally, if you choose to live in one of the units the rental income you make off of the other unit should either pay for or earn close to the total amount for the mortgage on the entire property.  Best of all, these types of properties will often appreciate at a higher rate than a typical single-family home.

No matter what your experience level is in real estate, you can take action to enhance the value of your properties. Whether you decide to purchase a multi-unit, single home or duplex property, renovate or live onsite, the above information can help guide you to a wise and informed decision that is right for your particular situation.  Hopefully the above strategies will help you to make the most of all of your investment opportunities.

December 1, 2020

There’s more to real estate investing than simply buying an investment property and calling it a day. Traditionally, there are four different types of real estate investors. As with any type of investing, each one has its own benefits and disadvantages. Below we will discuss all four types of investing, as well as the pros and cons for each investment type.

What is a real estate investor?

A real estate investor is any investor who purposefully adds a real estate asset to their portfolio. Truthfully, real estate investors come in many different shapes and sizes. While many people think of someone who buys and holds a rental property as the classic example of a real estate investor, that is just one type. It’s possible for real estate Investors to also put their money into a real estate investment trust (REIT), to follow a fix and flip investment strategy, or to be wholesalers.  Now that you know a little bit more about what a real estate investor is, the next step is to take a closer look at the different types of real estate investors.

REIT investor

Investing in a real estate investment trust (REIT) is the most passive form of real estate investing available. With this method, you’ll invest similarly to the way you’d invest in the stock market. Here, you’ll buy shares of a real estate investment company and receive dividends when the company pays out its profits. A publicly traded REIT will even have its shares listed and traded on major stock exchanges. However, a non-traded REIT may still be listed with the SEC, but it’s not publicly traded or it may be a private company.

The major benefit of investing in REITs is that, like stocks, anyone can do it. You don’t have to be an accredited investor or even have that much real estate experience. In this case, it’s as easy as buying and selling shares.  That said, the downside of investing in REITs is that you have very little control over what they invest in or how they’re managed. With that in mind, it’s important to do your research before investing in any particular REIT. Also, dividends from REITs are taxed as ordinary income, as opposed to a lower rate.

Buy-and-hold investor

Buy-and-hold investing is the classic example of real estate investing, where you buy up an investment property and rent it out for consistent monthly income. On the whole, this is a relatively active form of real estate investing. You do have to do the groundwork of marketing for a tenant, vetting all the potential applicants, and being on call to handle maintenance issues. It’s also meant to be a long-term strategy since investors tend to buy an investment property and keep it in their portfolio for multiple years.

The big benefit of following a buy-and-hold investment strategy is that you have the opportunity to achieve relatively stable returns. In this case, landlords can usually count on the same amount of rental income coming in every month. The major downside of this investment strategy is that it can be a lot of work for smaller returns than you might find with another method.

Fix-and-flip investor

In fix and flip investing, the investor will do their best to find a real estate deal that’s undervalued for the market. Then, they’ll fix it up and market it for resale at a much higher price. Once the buyer is found, the investor gets to keep the difference between the initial investment and the final sale price as profit.

The main benefit of this type of real estate investing is that, if you find the right investment opportunity, it has the potential for high returns. Also, it’s a short-term investment strategy, meaning you could see a return on your investment in just a few months.

That said, this is also a very active investment strategy. In this case, it’s up to you or your real estate agent to find the right real estate deal. Then, you have to figure out how to fix up the property. Here, you can often achieve better returns if you can do the work yourself. However, if you aren’t handy, you’ll have to plan to pay for labor costs in your budget. Finally, there’s also the risk that you could over improve the property and lose money on the deal when it’s time to sell.

Wholesaling

Real estate wholesalers will act as a middleman between a property owner and an end buyer. Here, the investment strategy is to find an underpriced real estate deal, quickly sell it for a higher price to an interested buyer without rehabbing it first, and keep the difference between the price you paid for the property and the price you sold it for as a profit.

In truth, this is a relatively passive investment strategy, and you have the potential to make a sizable profit. Typically, wholesalers will buy and sell a property the very same day in order to cut down on carrying costs. However, in order to make this work, you often need to have an established network of real estate contacts who can help you find interested buyers and distressed sellers.

Real estate investing can be a great way to diversify your portfolio. However, if you’re just getting started in this arena, it can be confusing to differentiate between the different types of real estate investors. In light of that, use this as your guide to your options. Armed with this knowledge, you should have a better idea of what type of real estate investing is right for you.

November 13, 2020

When many people think about investing in real estate, they often assume they should buy a single-family home. More and more investors, however, are looking towards multifamily commercial real estate like apartment complexes instead as an alternative to invest in new and lucrative real estate properties.  Below we will discuss a few key reasons why you should consider investing in multifamily commercial real estate.

Let us begin with discussing what is multifamily commercial real estate or MFCR. Essentially, multifamily commercial real estate (MFCR) is used to describe residential properties with more than five units.  Often, this term refers to apartment buildings but there are also quite a few different property types within MFCR such as mid- and high-rise apartment complexes and garden apartments.  Included in these types of properties are residential housing units such as assisted living facilities and student housing.  Regardless of what type of multifamily commercial property you decide upon, you’ll have the following asset classes to choose from as an investor.

Class A properties: which are essentially luxury buildings offering high end amenities like fitness centers and pools. These properties bring in the highest rents but require a larger investment.

Class B properties: still offer a good quality value and are in desired locations but they may have less amenities than class A properties.

Class C properties: tend to be more outdated but are the most affordable rent-wise for tenants on a tight budget.

Now that we have discussed the different types of multifamily commercial real estate and how they are classified, lets look at the benefits of investing in these types of properties.

The Benefits of Investing in Multifamily Properties

One of the best benefits of investing in multifamily units is that they are often easier to secure financing for than single family homes if you are intending to utilize them as a rental properties. This is because multifamily homes often come with less risk to the lender.  Since there is more than one tenant in a multifamily building, there will be less impact on the bottom line if something goes wrong, a tenant is unable to pay or the property is unable to be occupied for a period of time.  Additionally, since multifamily housing typically comes with shorter leases, there is more opportunity to adjust the rental rate to current market demands and for inflation.

How to Invest in Multifamily Housing

If you are interested in investing in multifamily housing it is critical to understand your financing options so you can get the best deal possible for your situation. There are several different financing options you should look into before moving forward, but in general there are three main ways to finance these properties we will discuss below.

Government backed multifamily mortgage loans: are typically the best fit for investors who intend to live in one unit and rent out the other units. These loans are typically easier to qualify for than conventional financing and have lower credit requirements.

Portfolio Loans: are worth looking into if you do not qualify for federally backed loans because financial institutions set the requirements to qualify.  Financial institutions also set the interest rates on a case by case basis and keep these loans on the books instead of selling them on the secondary market.

Short term multifamily financing: typically come in the form of a bridge or hard money loan.  These loans are often a good fit for fix and flip investors wanting to rehab a property.

Once you have researched and have an idea of the best type of financing for your situation, you should see what options are available in the particular area you are interested in and work with a real estate agent to zero in on the best possible multifamily property available.

Since multifamily buildings allow you to manage multiple tenants at once, they can be a great way for investors to diversify their portfolios and increase their cash flow. As with any investment, it’s important to understand the market and know what you are getting into ahead of time. Hopefully this article can be a useful guide in deciding if purchasing multifamily commercial real estate is right for you.