Looking Backward, Looking Forward - National Real Estate Investor | Real Estate Investing

Looking Backward, Looking Forward - National Real Estate Investor
Financial Frontlines® » Wealth Creation and Real Estate Investment
AssetAvenue | Real Estate 2.0 | TechZuluTechZulu
PE HUB » Lots of real estate sites attracting investors: VCJ

Looking Backward, Looking Forward - National Real Estate Investor

Posted: 07 Jul 2014 08:53 AM PDT

With the recent publication of my book, The Advisor's Guide to Commercial Real Estate Investing (Summit Media 2014), I am reminded in vivid detail how far commercial real estate has evolved as a major asset class. The book highlights in high relief the sophistication and depth of the commercial real estate asset class. It's amazing, looking back 20 years, how commercial real estate has evolved and become such a widely held investment class. Twenty years ago, the commercial real ...

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Financial Frontlines® » Wealth Creation and Real Estate Investment

Posted: 10 Jul 2014 07:25 AM PDT

There are three ways to build wealth:

Investing in the markets
Starting a business
Owning real estate

For many of us, numbers 1 & 3 are the most likely ways for us to achieve our financial dreams of freedom. For military personnel, we can invest in TSP (which is a good, tax deferred way to save or post-tax way to save). Personally, I recommend any investment portfolio include the use of a financial professional to ensure proper diversification.

Owning real estate is a good option, especially to those who move frequently (as military do). Take this scenario, if a military member moves on average every 3 years (as was the case, when I was in and when my father was in), one could accumulate 5 houses in 15 years (assuming that for the first 5 years, the military member does not purchase a home). If the average home costs $150,000 (around $100,000 in the beginning and up to $300,000 in the end of a career), it is possible to control $750,000 of real estate after a 20 year career in the military.

Why is property ownership such a good thing? First of all, there is the tax advantage. There are ways to pay capital tax rates (0-15%)[1], whereas TSP earnings are subject to ordinary income upon withdrawal from the TSP account (with a tax deferred account) or taxed at ordinary rates (10-39.6%) upon contribution to a Roth-style TSP account. The second advantage, regardless of the crashes which have taken place (2008 and late 1980s for example), the real estate market has grown over the long run.[2] While there are many short term loss possibilities, over the long term, real estate tends to hold its value, in the aggregate. Third, real estate taxes are deductible, whereas only certain taxes are deductible on investments. Fourth, it is easier to obtain financing for real estate vice investments. Have you ever gone to the bank and said that you wanted to borrow money to buy stock on the open market. Give it a try and let me know how it goes!

Owning property is good, but what about renting property out? The first thing on your mind is likely "I don't want to deal with the hassle!" Setting this aside for a moment, let's look at the benefits of renting out real estate.

When renting out property, you move the property from an investment property to a "production of income" property. What is "production of income?" It is like running a business, but is treated under the IRS codes differently. For the sake of simplicity, treat it as running a business (unless I state otherwise). In this case, you can take deductions against your rental income, which you receive, which are "ordinary and necessary."[3] Permitted expenses include:

- Real estate taxes
- Interest payments (on the home loan or equity loan)
- Management fees[4]
- Other ordinary and necessary expenses (cleaning, repairs, advertisement, etc).[5]
- Depreciation[6]

Someone else is paying off your mortgage in your other home, while you still retain ownership! This is provided you can rent out the home for at or more than the interest and escrow costs of your home. Why interest and escrow costs? Principal is more about paying yourself (which acts like a savings account over time). This is why even if you are not able to rent out for more than your payment, you might still make out profitable because of the amount of principal and the tax advantage of owning the home.
If you own a vacation home and use it for less than 14 days[7] out of the year (or 10% of the days rented out if rented out for less than 140 days[8]), it still counts as 100% rented out for the year. Imagine owning a nice home in North Carolina (or Oregon for those on the West Coast) near the beach and vacationing there for a week each year. If it is rented out for more than 140 days, you can treat it as 100% rented out for the year (but personal expenses directly attributable to the time you use it are not deductible, for example cleaning or food expenses)
Home values (generally) go up over time.[9] While the increase is not equal to that of the stock market, real estate is an investment, which tends to hold its value. When including the amount of rent received, minus the cost of maintenance and adding the tax advantage, if can be a good investment.

This is something to consider along with a balanced portfolio. In order to achieve the balanced portfolio, it is recommended you discuss your financial plans with a certified financial planner (CFP®), CPA or EA. In future blogs, I will discuss in further detail how this works with dealing with the IRS and state tax agencies.

[1] §1221 of the IRC

[2] http://www.census.gov/hhes/www/housing/census/historic/values.html

[3] §212

[4] §212-1(h)

[5] IRS Schedule E

[6] §167(a)(2)

[7] §280A(d)(1)(A)

[8] §280A(d)(1)(B)

[9] http://www.census.gov/hhes/www/housing/census/historic/values.html

AssetAvenue | Real Estate 2.0 | TechZuluTechZulu

Posted: 11 Jul 2014 11:41 AM PDT

AssetAvenue recently released an online real estate platform in April and taking crowdfunding into a new direction; commercial real estate. Instead of having high minimums for investing in commercial real estate, minimum starts at a much more manageable $10,000. The minimum still boasts a high figure for many, but it's to insure other investors are committed into the same risks and surrounded with experienced real estate investors.

"AssetAvenue has a simple program that lets you enjoy being a part of the huge investment team stationed within AssetAvenue's walls. Joining the program is the first step, but unfortunately as of now you have to be an accredited investor before you can participate. Once in the program, investors can see the pros and cons of both the operating side and AssetAvenue's side of the investment," says David Manshoory, Founder & CEO of AssetAvenue. "Investing at least $10,000 will allow you to join the group who are also invested in the same investment. If the limit reaches before the deadline, the deal will happen sooner. If it doesn't reach its goal, then there is no deal."

The team ensures deals are profitable and investment-worthy for others to take their time and (especially) money into partaking in a specific deal. AssetAvenue accepts very few opportunities – which may limit on how much property users can choose from for now – to ensure investors each deal is worth every penny. Even with the limited amount of deals, more opportunities will arise from each successful investment story. AssetAvenue is looking for maximum returns with very little risks for its new and current investors.

Crowdfunding has grown to new heights, thanks to platforms such as Kickstarter and Indiegogo. And speaking of Indiegogo, AssetAvenue acquired one of the biggest names in the crowdfunding industry, Adam Chapnick. His expertise will only help solidify AssetAvenue's business model and provide growth and insight in the crowdfunding industry.

"I've been in the real estate industry for 10 years now. And I've been a financial analyst in real estate. I've also been an investor and I've also raised money from other investors to participate in my own real estate investments. I've participated in every part of the food chain in terms of real estate investment opportunities," says David Manshoory. "Because I've experienced raising capital for my own real estate deals the traditional way, I intimately understand the pain points of what it takes to raise money for an investment opportunity – as a real estate professional. Also as an investor, I know the challenges investors face to find good investment opportunities to diversify their money into."

AssetAvenue's success all started with a successful investment deal at Trump Palace. The success helped crowdfunding commercial real estate investments a possibility and showed some promise to other future investors whom may be interested. Crowdfunding a commercial real estate property may sound alien and risky, but the low minimum investment and a team of investors with $10 billion worth of real estate experience combined, does place new investors with reliable and experienced investors. The number of investors teaming up with AssetAvenue may not all come rushing in all at once, but they are definitely peering through the windows to see what the future holds for both AssetAvenue and its investors.

"One of the things that I really appreciate about what we're are doing at AssetAvenue is that, we're really a real estate company that's using technology to take an age-old industry and make it more efficient and transparent," says David Manshoory. "Real estate crowdfunding – in a sense – is nothing new. You're doing what's been done offline and bringing it online to increase access and transparency to deals. As a real estate company, we have a large group of real estate professionals who've been in the industry for a long time. We have experience at over $10 billion of real estate across the group – internally. Because of our real estate expertise, we have the skillset and the knowledge to filter through a lot of investment opportunities that show up to our office and we screen out the deals that don't fit our underwriting guidelines or our parameters for investment. One of the benefits of many, the investor, they get access to deal flow that's been pre-vetted and curated."

Crowdfunding allows new business sectors to expand and move away from the traditional business models. As David mentioned earlier, AssetAvenue delivers a new platform for investors and allows many to keep track of new and current investment opportunities. Real estate just got an online upgrade it needed.

Alex Bae

A University of California, Santa Barbara graduate. Has a love relationship with photography, technology, and writing. Always looking forward to new creative innovations and writing.

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PE HUB » Lots of real estate sites attracting investors: VCJ

Posted: 07 Jul 2014 09:00 AM PDT

In real estate, location is not everything. Timing is also important, whether you're a buyer, a seller or an investor in an online real estate startup.

For those investors, the time is now.

Venture backers have recently funded a spate of online real estate startups:

ApartmentList has raised $15 million, in a Series A financing late last year led by Matrix Partners, to take on Craigslist in the apartment-rental space.
Rental search engine Zumper has landed $6.5 million led by Kleiner Perkins Caufield & Byers.
42Floors, a site that lists office and commercial space, has raised $17.4 million led by Thrive Capital (the venture arm of New York real estate moguls Jared and Joshua Kushner).
Honest Buildings—which operates as a LinkedIn for the real estate industry where developers and landlords connect with engineers, architects and designers—has secured $5.5 million in Series A funding from investors RockPort Capital and The Westly Group, and $7.5 million overall.
Floored attracted $5.3 million in Series A funding from RRE Ventures and Greycroft Partners for technology that lets real-estate professionals and architects create videogame-like 3D models of structures and interior spaces.

"Part of the attraction from the venture side is that real estate is a trillion-dollar industry, yet it hasn't seen disruption in many years," said Graham Brooks, a principal at .406 Ventures, which has backed property-listing site Urban Compass.

The immense size of the real estate market is certainly intriguing. According to Zillow, there are roughly 132,935,000 housing units nationwide. And the combined value of these homes is about $25.7 trillion, which is more than the combined GDP of the entire European Union ($16.6 trillion).

Other factors are fueling investor interest in online real estate companies. For one, property is again a booming market, with values soaring nationwide.

Two, exits are available: Trulia and Zillow showed that online real estate plays can go public to the tune of billions—and those companies themselves now offer an exit path, as potential acquirers with deep pockets.

And three, real estate still exists in a largely pre-technological world of flyers and open houses, which makes it ripe for disruption by new entrants.

"We love to help build technology companies that go after old-fashioned industries and enable existing players in that industry," said Krishna Gupta, a managing partner at Romulus Capital, which led the $5.5 million Series A round for real estate marketing platform Placester. "Real estate is a very complex, very large market, so obviously there are many opportunities when you take it online."

Placester, which has raised $8 million, builds and hosts websites for real estate agents and crunches data to help them market their properties to high-potential buyers. Placester charges $49 a month for the sites.

One sector with room for expansion is the rental market. Demand for apartments is surging, along with rents. And the vast majority of transactions between landlords and tenants still depend on archaic tools.

Cozy intends to bring those transactions into the digital era. It's a platform that makes it quicker, safer and easier for apartment owners to deal with apartment renters, allowing landlords to screen tenants, run credit checks and collect rent online. It also enables tenants to fill out applications and pay their rent online.

"Landlords still live in a pre-technology era," said Neil Sequeira, a managing director at General Catalyst Partners, which recently led a new $5 million round in Cozy. "Much of their work is done with paper and checks and phone calls. It's not an automated process. With technology you can make those processes much more efficient."

General Catalyst Partners has also invested in RealtyShares, a real estate investing platform that enables people to raise money for projects. For example, a contractor who buys, renovates and sells homes can use RealtyShares to attract financing. It's crowdfunding for house-flipping.

This story first appeared in Reuters Venture Capital Journal. Subscribers can read the original story here. To subscribe to VCJ and other venture-related research products, click here for the Marketplace.

Photo illustration of home on keyboard from Shutterstock.

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Friday, 11 July 2014