<b>Real Estate Investment</b> - Wendy Patton - Lease Option Investing <b>...</b> | Real Estate Investing |
| <b>Real Estate Investment</b> - Wendy Patton - Lease Option Investing <b>...</b> Posted: 13 Nov 2014 09:03 AM PST When you start thinking about making a real estate investment, you need to take time to think about the risks that you will be taking. The risk and pay-off between speculating on development of a subdivision or becoming a first time landlord are enormous. Either also requires significantly different levels of capitalization. Your goal needs to be minimizing risk while maximizing profit or cash flow. Real Estate Investment Cash-On-Cash ReturnWhen it comes to a real estate investment, many investors want to leverage their money. Borrow to use other people's money to make a profit from it. Still, you need to invest some of your own money. That's the cash that's counted when you calculate a cash-on-cash return for your real estate investment. When you buy a $40,000 house, put in $4,000 of your own money, and take a loan for the balance, you need to calculate how much you are earning on your own money after subtracting what it costs for the money you borrow. The amount of interest you pay on the loan will become lower each month as you pay down the loan. However, a $36,000 loan at 5% will cost you $1,973 in interest the first year. If you rent the house for $500 per month, you'll have $6,000 in cash flow. Of course, there are other costs of ownership. The two required costs are property taxes and insurance. Let's assume the property tax is $550 and the insurance is $625. The cash-on-cash equation goes like this - $6,000 (income) - $1973 (interest) - $550 (property tax) - $625 (insurance) = $2,852. The $2,852 is your profit on your $4,000 investment. Your annual cash-on-cash return is 71.3%. That's the power of leveraging your real estate investment. Managing Your Real Estate InvestmentOnce you realize how much you can earn by leveraging your real estate investment, it becomes time to consider how much time and work you'll need to put into managing your real estate investment. Almost certainly, you'll do the bookkeeping for your first real estate investment. Probably less than an hour of work each month. But that's for a low risk rental house that you easily place a quality tenant in and he or she stays for several years. Consider some other more risky real estate investments such as a vacation home, college student rental, or a low income rental with a high turnover rate. These high risk real estate investments will take much more of your time and work. The work includes cleaning and repairs after every vacation family leaves, at the end of every college year, and when any tenant moves out. After cleaning and repairs, you have to advertise and show it to the next perspective tenant. Finding the right real estate investment is about much more than only finding a good deal with great cash flow. You also want to find an easy to manage property that doesn't take too much of your time. If you want to work directly with me on finding the right real estate investment for you or any of my other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle. Besides reading this article about real estate investment basics, you'll want to read this other useful information that I offer free. Please take advantage of it today. Rent to Own Houses - A Buyer's Guide Investment Property Financing Options House Flipping is Steady and Growing Buying a House - The Time is Now Several times each week, I make the most current real estate investing information available to readers. This time, it's about real estate investment basics but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals. By Wendy Patton What did you think of this article? Please leave a comment below. For more exclusive content, please subscribe to my RSS Feed and YouTube Channel. .  |
| How Crowdfunding is Changing the Face of Commercial <b>Real Estate</b> Posted: 12 Nov 2014 07:20 AM PST The idea of crowdfunding isn't particularly new. In fact, it may be one of the oldest concepts in civilization. Think of crowdfunding a little like taxes, where individuals pay into a large managed pot for use towards the common good of the collective group. While crowdfunding is voluntary and taxes are compulsory, the concept is at least simple to understand. . Applying the practice of crowdfunding to a post-2012 JOBS Act world and you can see why crowfunding and peer-to-peer lending are taking in commercial real estate. The commercial property business model meets all the criteria of an industry ripe for disruption. It's one of the oldest industries in the world, it's run in a way that hasn't been significantly updated or altered in a century and it's bloated with fees and large players who are too big to adapt to shifting trends in technology. It was only natural that commercial real estate would become the next big industry that needed disintermediation, similar to the way Uber tackled transportation and Airbnb shook up hospitality. Here are three of the biggest ways crowdfunding is changing the face of commercial real estate. 1. Options: Basic supply and demand dictates that when there is market demand for something but not enough supply, an opportunity exists for someone to step in to fill the void. The demand for commercial real estate loans is steadily increasing, yet in a post-Great Recession financial world, traditional lending companies are less inclined to lend money and are moving at a glacial pace to deploy capital to borrowers still in need of funds. Faced with a slow, unresponsive market, borrowers are forced towards a small range of lenders available to them. However with the emergence of crowdfunding platforms, borrowers suddenly have access to more options. 2. Access: Commercial real estate loans offer investors an opportunity to put their money into a fixed income vehicle backed by a hard asset. This is an asset class that the wealthy love and traditionally only a few select members of the investing world were able to access. With commercial real estate crowdfunding that access to fixed income assets is growing for the retail investor. While accreditation standards for individuals remain high, crowdfunding platforms are still able to offer these traditionally "small" investors more access to senior level deals because of the bulk and quality of deals their platforms are able to underwrite. 3. Savings: Old industries have outdated fee models are ripe for innovation. When industries remain unchallenged for decades and even centuries, massive inefficiencies build-up, creating higher overhead for financial institutions, who then have to pass those costs on to their clients in the form of higher and often confusing feed. As commercial real estate platforms scale, they're able to leverage technology not only to reduce their own overhead but also to largely disintermediate the traditional chain of touch points in the lending process. Due to that reduced overhead and fewer unnecessary touch points, online crowdfunding platforms and peer-to-peer lending platforms are able to offer their investors unprecedented transparency and a significantly lower fee structure. Despite its relatively new entrance into the commercial real estate industry, peer-to-peer lending platforms and crowdfunding platforms are poised to create a major disruption in the traditional financing and investing markets. Adam Chapnick is Chief Strategic Officer with Asset Avenue. Chapnick was a principal at Indiegogo, which he helped build into the world's largest crowdfunding platform, with over 200,000 campaigns in over 175 countries. He also founded Distribber, the flat-fee film distribution service. He has invested in real estate since 2005. |
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