Slightly Surreal: Strange Trends in Real Estate

For most people, the word “house” conjures certain images found in childhood drawings. If you have a building with mostly right angles, a single front door, a few chest-high windows, and a chimney, you’ve probably got a prototypical home. However, real estate is a changing field, and people are seeking unique housing options that don’t quite fit inside the box.

Tiny Houses

By all definitions, tiny houses possess most of the features of their more spacious counterparts, just in a much more condensed way. A favorite in both rural and urban areas, tiny houses are as much a choice in dwelling as a statement of one’s principles. While there is no presently agreed-upon size restriction before a domicile is no longer “tiny,” 500 square meters is an accepted point in some circles. Got a few too many boxes of t-shirts weighing you down? Tired of walking such great lengths to get to the light-switch before bed? Trying to keep your real estate tax down to a minimum? A tiny house might be for you.

Passive Houses

Not entirely in another world from tiny houses, passive houses are for those trying to reduce their environmental impact. Less a set of aesthetic rules and more an internal set of standards to maximize energy efficiency, this enterprising style is making considerable in-roads in the real estate market. Originating in Germany in the late 1980s, the style has slowly found a niche amongst people with a penchant for all things “green.”

Staples of these energy-efficient dwellings are superinsulation, airtightness, advanced window technology, solar techniques, and many others. Passive houses incorporate the entire system of real estate, so even the landscaping is efficient. For example, trees that shade parts of the dwelling appropriately and wind-reducing hedges can be a part of the design.

Treehouses

Perhaps living in trees will never constitute a substantial amount of the real estate world, but there is no question that they are gaining popularity. From increasing prevalence as an airbnb destination to a full-time paradise for more intrepid souls, life in a treehouse offers a lot of simple perks, as well as some drawbacks. Clearly for the more adventurous, many treehouses are entirely off the grid, and many of them are not quite up to code. Even a cursory internet search will reveal numerous forums on the subject of whether or not certain dwellings are legally allowed to be inhabited. Treehouse owners have to contend with being mindful of protected trees, wildlife protection acts, and other tight restrictions. If all of the criteria are met, however, the resulting home is something of a nature-lover’s paradise.

These alternative designs and ideas scratch the surface of present trends in housing. While they aren’t likely to replace conventional homes any time soon, they might be an indication of where things are headed.

Four Strategies to Buy Rentals With No Down Payment

This tends to be a pretty controversial subject, and for good reason. When I was getting started in the business, I was young and broke and had no credit to speak of. I was not qualified to borrow money, yet I figured out how to buy properties, and I bought a lot of them. It was not long before I became a full time real estate investor, and on paper, I was a millionaire long before my 30th birthday. I accomplished this with a lot of hard work, education and tolerance to take the risk.

With all this said, just because you don’t need money to buy houses, does not mean you should have no money. I am a big, big believer in this. You see, although I was a millionaire at a young age, I basically lost it all when the market shifted. I was too aggressive with my growth, and did not establish an appropriate amount of reserves. After starting over, I structured things differently and am in a good position to not only survive a down turn, but to thrive in it. In this article, I will briefly walk through 4 ways to buy rentals with nothing out of pocket, but want you to understand that this does not mean you should own rentals with no reserves.

Owner Finance: This could mean many things, but for the purposes of this article I am going to assume that the seller of the home is extremely motivated and is willing to basically sell the house just to get away from the mortgage payments. This is commonly referred to as a subject-to transaction because you, as the buyer, will take title subject-to any other liens that are in place. What this means is you get ownership of the house, but the seller is still on the hook for the loan. You as the buyer will agree to either pay off the loan or make payments on the loan on their behalf. If you don’t, the lender can foreclose and wipe you off of title.

The seller is taking a tremendous amount of risk with this type of transaction, so it is difficult to negotiate and they need to be extremely motivated. It works well for you because you don’t need down payments or to qualify for a loan. It works for them because they have someone else making the payments on their loan, which relieves them of the payment pressure, and potentially can improve their credit. As you become more experienced, this is a strategy you will want to look into. This allows you to purchase an unlimited number of cash flowing properties without ever needing to qualify or sign for a loan.

Lease Options: This is the strategy that really worked for me when I was just getting started. I like it a lot because it is easy to explain to the seller and it is not difficult to get them comfortable with it. They still need to be motivated to want to do this, but nothing like the subject-to transactions.

The way this works is you negotiate with a seller of a home to lease the property for a set period of time. I would typically negotiate 10 years on these, but it can be anything you are comfortable with. The rent amount will be set. From there you agree on a price to buy the property for sometime during the lease term. The price is typically locked in close to today’s value. You then sublease the property, hopefully for more than your rent payment, and wait for the value to increase. If the value does not increase, which has happened to me, you can either re-negotiate the deal or let the property go. You have no obligation to buy, so you are not taking the risk of market fluctuation. If and when the value does increase you have several options: You can sell your option, exercise your option and resell the house for your profit, or just exercise the option and keep the property in your portfolio.

Bridge Loans: The idea here is to find a property that needs a lot of work that will make a good rental. You need to negotiate a price were you can buy it, fix it, and roll in all closing costs, and still be at or below 70% of the after repaired value (ARV). This does not work well unless the property needs to be repaired. This is very different than the first two strategies discussed, and is commonly used with bank owned foreclosures. Although, anytime you can negotiate a great deal will work.

After you purchase the home, you want to get it repaired and get a tenant in place as quickly as possible. You then refinance the loan into your permanent rental property loan. There are some additional details for this to work that are beyond the scope of this article.

Partners: At the time the market was collapsing around me, there were tremendous buying opportunities everywhere. Using the Bridge loan strategy, I was able to pick up a handful of deals that I still have today. I did not qualify for loans, so I brought in a partner to sign on the debt for me, and I shared the deal with him 50/50. Neither one of us put money down, and the properties all cash flow, net of vacancies and maintenance, a minimum of $300 a month. There has also been a tremendous amount of appreciation over the years. The houses have more than doubled in value!

No matter what your strategy in real estate, partners can help you reach your potential. They can provide anything that you are lacking to get deals closed. I have a great deal of respect for partnerships because I think they are necessary, but I also think they can be the worst decision ever made.

Rookie Mistakes To Avoid When Investing In An Apartment Building

An apartment building can still be a good investment today. Why? For starters, there are still a lot of people who are still looking for homes to rent. In addition, the units of an apartment building do not just have to be spaces for residence or homes for families and individuals. By getting the right permits, units in an apartment building can be rented out as commercial spaces.

First-time buyers of apartment buildings will certainly have high expectations regarding this particular investment. This is mainly because they will invest a significant amount of money for this venture. As such, if you want to make sure you will own the right apartment building that can help you find success in the field of property rentals, make sure you avoid these common (and costly) rookie mistakes:

Not looking into the history and reputation of the apartment building’s builder or developer.

As a first-time owner of an apartment building, the last thing you want to happen is to stumble upon some structural problems or system failures. As such, it is important to check the background, capability, and reputation of the company that constructed the whole property. Going online and asking companies or individuals that have worked with the property developer is a good way to get some ideas about their competency. If the property developer has a good reputation and has stellar reviews about the properties they built, chances are, it is quite safe to buy a building that they constructed.

Buying a property that is located in an unpopular area.

When purchasing an apartment building, keep in mind that aside from your budget, an important factor you have to consider is its location. Real estate experts say that it is a good idea to buy a property in an area that is improving since buying in a declining location will simply result in high vacancies and rent drops.

Not having sufficient cash flow and reserves.

As a newbie investor, if you are not confident with your reserved funds, you have to get into deals that will create a quick cash flow only. Avoid going into deals that won’t provide a cash flow from day one even if that transaction promises a huge potential profit since you may be put at risk of being unable to pay the bills.

In addition, make sure you have enough cash reserves. Failure to do so can get you involved in different complicated situations. As a property owner, keep in mind that a lot of unexpected issues can happen. As such, you need to have a reserve fund that is adequate to pay for these emergencies.