29
Aug
By First Rate Financial Group
Real Estate

Join Or Create A Real Estate Investors’ Pool For Fun And Profit

Join Or Create A Real Estate Investors' Pool For Fun And ProfitMany baby boomers are reaching retirement age. If they set up their financial planning well, while younger, they should have accumulated enough wealth to have some discretionary money available for making investments.

Others, who may be just starting out, have some investment capital but not necessarily enough to buy a piece of commercial real estate on their own. These investors might enjoy a real estate investment pool, also called an investors’ club.

Pooling Resources

One way to get some investment participation in real estate is to pool investment funds needed to have enough for the down payment on a piece of real estate.

For example, if the down payment for acquiring a single-family rental home is $40,000 and four investors chip in, this means the contribution by each one will be $10,000. Each investor will own 25% of the deal. Many can come up with $10,000 for investment but it may not be as easy to find a spare $40,000.

Real Estate Investment Clubs

An investment club is where people get together to review the summary of a real estate deal to discuss its merits as a group investment.

To find a local group there is a nice system called Meetup online, which is a good resource. If there is no real estate investment club in a particular local area, consider forming a new one through that system.

Legal Structure

For real estate purchased by an investors’ pool, the best legal structure is to acquire the property by a newly-formed limited liability company (LLC). An LLC is very easy to create online. The LLC structure limits the liability of its owners (members) to the amount they each invest in the LLC.

It is best to set up a new LLC for each closing of a real estate acquisition. In this way, the owners can be different and to separate the deal from the successes or losses in other deals. Investors in an LLC buy units of the LLC, not shares.

When an LLC starts, it is authorized to issue a certain number of units. Each investment gets a proportional percentage ownership share of the LLC. The investor gets the number of units that represents the percentage value of the investment compared to the total investment.

Work with a real estate agent to help find deals. Use competent legal counsel and a professional accounting firm to set up and manage the LLC properly.

Summary

Investment clubs can be very fun. There may be considerable discussion and disagreement about each potential deal. This is a welcome thing. It is excellent practice to learn how to conduct proper due diligence.

Investors who are just learning about what to look for in a real estate deal gain insights from more experienced investors. Experienced investors stay active and get a chance to pass on their knowledge to the less-experienced ones. Everyone enjoys socializing together and that is a nice extra reward.

28
Aug
By First Rate Financial Group
Market Outlook

Case-Shiller: June Home Prices Grew at Slowest Pace in 12 Years

Case-Shiller June Home Prices Grew at Slowest Pace in 12 YearsHome price growth continued to slow in June according to Case-Shiller’s 20-City Home Price Index. 17 cities reported higher home prices in June, but three cities reported lower home prices month-to-month. Seattle, Washington was the only city to report lower home prices year-over-year in June.

Phoenix, Arizona Home Price Growth Highest in June

Phoenix, Arizona toppled Last Vegas, Nevada’s hold on first place for home price growth in June. According to Case-Shiller’s 20-City Home Price Index, home prices in Phoenix rose by 5.80 percent year-over-year in June. Las Vegas, Nevada followed closely with year-over-year home price growth of 5.50 percent. Tampa, Florida had the third highest rate of home price growth with a year-over-year reading of 4.70 percent.

Home prices also slowed nationally; Case-Shiller reported 3.10 percent growth as compared to May’s year-over-year pace of 3.30 percent growth in home prices.

Home Buyers Leaving High-Cost West Coast

Analysts pointed out that recent slowing in home price growth followed a long period of rapidly rising home prices and higher mortgage rates. This sidelined many buyers as cash buyers and investors competed for fewer available homes. First-time and moderate income buyers could not afford rapidly rising prices and mortgages. Stricter mortgage loan requirements put in place after the Great Recession made qualifying for home loans more difficult.

Homeowners may not be seeing top pricing, buyer competition and offers higher than their asking prices, but after the long and fast increase in home prices, many sellers stand to realize significant profits after years of gains. At the height of the housing recovery, cities on the west coast saw steep rises in home prices. Seattle, Washington, Portland, Oregon and San Francisco, California enjoyed rapid home price growth as buyers paid cash and outbid each other, but lagging home price growth suggests that sky-high home prices have peaked in the West.

Seattle, Washington was the first city to show a year-over-year drop in home prices. Low mortgage rates may encourage formerly sidelined home buyers to enter the housing market. Analysts said that the only obstacle to increasing home sales might be homeowners unwilling to sell as home prices ease. Consumer concerns over the economic impact of trade tariffs may delay decisions to buy a home as consumer costs continue to rise. Home builders share these concerns as the cost of imported building materials increases.

 

20
Aug
By First Rate Financial Group
Real Estate

Boom Or Bubble? – Home Prices Hit Record Highs Across America

Boom Or Bubble? - Home Prices Hit Record Highs Across AmericaThe rapidly rising home prices currently found in many parts of the United States make it seem like the Great Recession of 2008 never happened. It took approximately eight years for home prices to recover the values that were equivalent to those they had before the recession.

After reaching this point of recovery, since around 2016, real estate prices have been going up very quickly in many cities.

The Best Recovered Housing Markets

Here are the fully-recovered housing markets analyzed by ATTOM data service for the second quarter of 2019 that have exceeded the peak valuations from before the recession.

This list of winners shows the percentage that they are now above their pre-2008 peaks:

  • Greeley, Colorado (87% up)
  • Shreveport, Louisiana (81% up)
  • Denver, Colorado (80% up)
  • Austin, Texas (77% up)
  • Fort Collins, Colorado (76% up)
  • Dallas-Fort Worth, Texas (72% up)
  • Nashville, Tennessee (71% up)
  • San Antonio, Texas (58% up)
  • Houston, Texas (54% up)
  • San Jose, California (54% up)

It took quite a while for homes to have this much appreciation in value, which in most cases meant that the homes, first, had to increase significantly to overcome the lowered values from pre-recession peaks.

Homeowners Waiting Longer To Sell

Homeowners, who were wise and able, waited for this to occur. This accounts for the median of eight years that homeowners waited before selling now. Before the Great Recession, the median holding period for selling a home was only four years after purchase.

Homeowners who were able to hang on to their homes after the Great Recession hit, and then ride it out until now, are, in general, being rewarded for waiting to sell.

The Hottest Markets For American Cities

Most American cities are hot real estate markets. The appreciation rate for annual increases is up 89% of all the metro market areas.

Cities showing the greatest annual appreciation rates are:

  • Atlantic City, New Jersey (16% increase)
  • Boise City, Idaho (14% increase)
  • Chattanooga, Tennessee (13% increase)
  • Mobile, Alabama (11% increase)
  • Madison, Wisconsin (11% increase)
  • Milwaukee, Wisconsin (9% increase)
  • Boston, Massachusetts (9% increase)
  • Salt Lake City, Utah (9 % increase)
  • Columbus, Ohio (8 % increase)
  • Birmingham, Alabama (6% increase)

Summary

Whether this a continuing boom or an early indication of another real estate bubble that might eventually burst is anyone’s guess. It is a decent time to sell if selling a home is in the plans. It is a more challenging time for home buyers. However, the one thing the Great Recession taught us all is that housing prices do not always go up.

If you are in the market for a new home or interested in refinancing your current property, please consult with your trusted home mortgage professional.