Real Estate Investing
Essentials For Understanding & Practicing Real Estate Investing.
For new or inexperienced real estate investors, the questions of how and when can stop people before they even begin their journey. But the right information and the right investment opportunities may be closer than you realize. Before you invest, investigate. Let your real estate journey start with the right tools, opportunities, and community—with knowledge and resources from experienced investors.
Discovering the Benefits of Real Estate Investing.
Passive income
Passive income, according to the IRS, is unearned income. It is most often associated with rental property and impacts tax liability for investors.
Debt reduction
A debt reduction in real estate investing refers to the principal reduction of the amount owed on a mortgage. Sometimes lenders grant principal reductions to a borrower instead of foreclosure.
Asset ownership
Asset ownership (also known as “interest document”) is a legal document that serves as evidence of your ownership over a property or an asset.
Tax Benefits
Shifting and increased tax liabilities within investment property should be weighed against the many nuances in tax benefits and opportunities. The more diligent you are with your taxes in your real estate investments, the more you’ll be able to leverage real estate’s benefits against your tax responsibilities.
Appreciation
Appreciation refers to the increase in value of an asset or property. Appreciation is often attributed to interest rate changes, industry conditions, and supply/demand variations.
What’s Possible With Real Estate Investing.
Real estate investing is gaining momentum among a new population and generation of investors. What was once reserved for elite or seasoned investors is opening up to an entirely new community. Fewer roadblocks, lower financial barriers to entry, and more tools and resources for training and education have brought about changes in people’s potential. It just takes connecting with the right team.
5 Primary Ways to Invest in Real Estate
Real Estate Investment Trust (REIT)
A real estate investment trust (REIT) is a real estate company that owns, operates, and sometimes finances income-generating real estate. They’re modeled after mutual funds, where investors do not personally buy, manage, or finance properties and where they earn dividends based on the company’s assets.
Fix & Flips
Just like the name implies, fix & flip investments, also known as house flipping, is the process of purchasing a residential property that needs repair at a discounted or reduced price. The home is then renovated and sold within a relatively short amount of time.
Multi-Family
Multi-family, residential properties involve duplexes, triplexes, fourplexes, townhomes, apartment buildings, and other residential spaces.
Join a Syndicate
One reasonable and useful method for finding and acquiring investment property is through joining a syndicate. A syndicate is a temporary agreement between investment professionals for major purchases. It allows for the pooling of resources, the sharing of functional and logistical responsibilities of a real estate transaction, and the disbursement of risk among investors. Real estate investors leverage a syndicate when the investment property they’re interested in is outside of their budget or their capacity to manage.
Commercial
Commercial property is a real estate investment intended to generate a profit, either from capital gains or rent.
Finding Opportunities with Real Estate Investing.
Finding the right investment property is everything. The most accomplished real estate investors found success by finding the right investment opportunities. Whether it was discovered by a broker, by a colleague, or by happenstance, successful real estate investing always comes down to finding the right real estate deal at the right time. On your real estate investing journey, you will be able to make the right decisions about investments when you can find the right investment properties. And that takes a team.
5 Pathways to Finding the Right Real Estate Investment
Working with a Commercial Real Estate Agent
When shopping for investment opportunities, you’re better off expanding your reach by engaging professionals to work on your behalf. If you do choose to work with a real estate agent, make sure the broker or agent you choose is experienced in finding, valuing, and facilitating investment property acquisitions. These investments are unique and require a different level of management from traditional real estate transactions.
Commercial Real Estate Searches Listed on the MLS
When new properties are listed for sale, they’ll most often be listed on the MLS. It’s important that you automate the listings you receive whenever possible. This process for property search is most useful in conjunction with other search methods, as working solely with MLS listings can limit your ability to legitimately compete for an investment opportunity, especially when you’re up against experienced investors.
Online Auctions for Real Estate
If you’re able to stay actively engaged with real estate auctions in the geographical areas and types of properties you’re interested in for investing, you may have legitimate investment opportunities come your way. It’s essential in this context, however, that you adequately perform necessary valuations on the properties you’re considering pursuing through an auction.
Real Estate Networking
The age-old adage of “It’s not what you know. It’s who.” plays a significant role in your ability to make moves in real estate investments. Spend time investing in people and relationships to be in conversations that matter when it comes to properties coming on the market. Talk to other investors, businesses, area chambers of commerce, and local leaders.
Community Awareness
Sometimes awareness of the market and property becoming available comes from the time you spend in the community. Whether it’s by driving around business districts or by exploring new areas, many successful real estate investors have found success simply by finding an opportunity when driving by a property.
Understanding the Numbers of Real Estate Investing.
Real estate investing is a numbers move; not an emotional one. When buying a home or a vacation property, most people consider the financial implications and feelings about the property. Can they picture themselves living there, enjoying life, and connecting with family and friends? But the most successful real estate investors have discovered that real estate investing is altogether a numbers decision. And those numbers don’t lie.
The Numbers that Matter in Real Estate Investing
Net Operating Income
Net operating income measures the incoming production and profitability of an investment property. The NOI is calculated by subtracting the property’s operating expenses from the generated revenue.
Capitalization Rate
An investment property’s capitalization rate is determined by dividing a property’s operating income against market valuation. It’s an estimate of the investor’s return and provides clarity in determining the viability of a real estate investment.
Internal Rate Of Return
The Internal Rate of Return (IRR) is a property’s annual rate of growth that an investment property is expected to generate.
Cash Flow
Cash flow refers to the movement of money in and out of a company. It’s the simplest way to assess a company’s use of cash over a period of time.
Cash-on-Cash Return
A cash-on-cash return is most simply understood as the rate of return in a real estate transaction against the payments made toward the mortgage in a given year.
Gross Rent Multiplier
The Gross Rent Multiplier measures the sale price of a property against that property’s potential for rental income. Generally speaking, the higher the GRM, the more overpriced the property. Usually, investors want the GRM to fall between 4 and 7%.
LTV
The loan-to-value (LTV) ratio measures the amount of the mortgage compared to the appraised value of that property.
Occupancy Rates
The Occupancy Rate of a property is essentially the amount of usable space as compared to the total amount of space within the property. The occupancy rate is most often attributed to residential properties (like senior living or rental properties) and hospitality businesses like hotels or bed & breakfasts.
Begin Your Real Estate Investment Journey.
At Aour Capital, we’re making legitimate real estate investment opportunities available to anyone by giving non-accredited investors the chance to experience the benefits and rewards of real estate investing. Our non-traditional approach provides the frameworks necessary for optimal performance in real estate investing. With the training, the resources, the industry experience, and the community that equips even the most inexperienced or intimidated investors, we’re what’s needed for a lifetime of active, engaged real estate investing.