Have You Considered Investing in Real Estate?

Have you ever considered investing in real estate outside of your primary residence? It's time to stop sitting on the fence and really dig into the possibility in 2017.
 

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We've seen that a lot of people have a New Year's resolution to finally make an investment in real estate.

Adding a property as an investment only is a great way to diversify your portfolio, whether it's a small condo, a townhouse, a single-family home, a multi-family property, or anything else. If it's something you've considered, I encourage you to reach out to me. It can be a scary process.

I'm here to tell you that you can, in fact, find the right property and you can go through the process pain-free. I do it myself, and I constantly work with investors to find really great deals that they can use as long-term builders of wealth. Just recently, a client of mine closed on a six-unit apartment building. The property yielded a 17% IRR (internal rate of return), an 8.9% year one cash-on-cash return, and a 7.69% cap rate.

I do it myself, and I constantly work with investors to find really great deals.

Now, you might not yet understand what some of those terms mean, and that's what I'm here for. This example is a very solid investment, particularly in the Washington D.C. market.

This is something most people should look for, especially if you're primarily invested in stocks or bonds. I know this market extremely well and I know which neighborhoods that are transitioning that present an appreciation potential, and most importantly, what rents are doing in and around the city.

At the very least, ask a real estate professional like myself about it. I'd be more than happy to give you a free real estate investment consultation.

Improvements with the Best Return on Investment

If you’re a seller with $40,000 to spend on home renovations, there are many other home improvements you should consider making besides a kitchen or bathroom renovation.
 

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How do you get the best return on your investment for home improvements? What should you really be spending your money on?

The best improvements you can make from a purely ROI perspective are minor kitchen and bathroom improvements. These typically return over 100%. There are other repairs, too, that will usually return over 80%, including windows, roofs, and HVAC systems.

If you’re a seller and have $30,000 or $40,000 you plan to spend on a kitchen or bathroom renovation, though, stop and consider the items that you really need to be spending your money on. Imagine what a buyer is going to look at when they look at your home. When I go through homes today, I see too many properties where owners have renovated the kitchens and bathrooms but have neglected more obvious repairs that should have been made instead.

For example, if you have a double layer of shingles on your roof, then that roof probably needs to be replaced. If your gutter system is draining into the foundation, you should consider getting a new system, adding extensions to your leaders, and installing a sump pump into your basement so it doesn’t get musty.

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Consider the items you really need to be spending your money on.

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You could also have single-pane windows that are leaking. These are upgrades that are not only great for resale, but they improve your finances by both eliminating future deferred maintenance and reducing your electric bill by increasing your home’s energy efficiency.

The worst-case scenario for me is having to see buyers “spend good money after bad,” meaning they’ve bought a house that’s been recently renovated with bottom-line products and materials. With Home Depot and other home improvement companies having their own websites, it’s not hard for people in today’s market to distinguish between what’s quality and what’s not quality. They get stuck, then, having to make improvements to something they’re already paying a premium for because the seller considered their materials to be top-quality before they sold. 

If you’ve recently purchased a house or are thinking about selling yours, please feel free to reach out to me so that I can provide you with a consultation on what’s really going to give you the most bang for your buck. Just give me a call or send me an email, and I’d be happy to help.

What You Need to Know Before Investing

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 Washington DC Real Estate: Are you interested in property investment?

A lot of people in Washington D.C. want to invest in real estate because it’s one of the greatest ways to build long-term wealth and a steady stream of passive income. But why invest in today’s market?

The stock market is extremely volatile and is actually down on the year. Also, a lot of people have money sitting in a savings account that’s earning nothing or even in some cases, earning them negative rates.

As for property investing, you can choose commercial, which includes buildings like offices and retail. Then there’s multi-family housing, which is defined as having two or more units in a single building. A lot of first time investors like a one-off unit; which would be a single-family home, townhouse or condo that they see as a long-term cash flow stream.

Many people come to me saying they want to invest for the appreciation. That’s the last thing you want to do. There’s no guarantees in property appreciation. You should invest in the cash flow stream; which is how every investor values a property. They do so on certain criteria:

1. Cash on cash return (or COC): This is your actual investment. If you invest $100,000 and you want a 10% COC return, your net operating income should be $10,000 after all of your expenses out of the property. It’s important to know your threshold for what you’re comfortable with investing to get that COC return.
2. Net present value (or NPV): This probably gives you the most accurate indication of the liability of value of an investment by factoring in interest rate risk into an annual five- or 10-year return of what that investment will produce in cash flow, and it gives you a present value of what those cash flow streams are worth.
3. Internal rate of return (or IRR): This gives you an overall return for not only the cash flow streams, but the sale of the property at a later date, rolled into the overall investment, and what that return would be. This is a good benchmark, but not as accurate as the previous two options.
4. Return on investment (or ROI): This is simply whether it’s a leveraged or unleveraged investment, what that return is going to be based off of how you structure the deal. 

Hopefully this gives you a good basis for property investing. If you have any questions I can certainly explain your options in more detail, just give me a call or send me an email. I’d love to work with you!