An investment property is real estate purchased with the intention of earning returns through rental income or profit at resale. Just over 70 percent of single-family rental properties are owned by individual investors, according to the latest Census data. If you’re looking to take the plunge and buy an investment property, here are some initial considerations to make.
Considerations when investing in rental property
Here are a few considerations to think through before you get serious about an investment or rental property.
Location matters
Remember, it’s easier to look in on a property across town rather than one that’s two or more hours away. True, you can always hire a local property manager to keep the home in tip-top shape, but that’ll eat into the passive income you hope to gain.
It’s also important to consider the location with an investor’s eye for what’ll net you the most return. When evaluating locations, it’s often best to avoid areas with lots of vacancies and instead look to neighborhoods close to amenities such as parks and shopping, as well as transit, says Trent Ellingford, an investor and co-founder of the Real Estate Knowledge Institute.
After researching promising neighborhoods, connect with a real estate agent experienced in the local rental property market.
“Don’t use just a real estate agent,” says Kathy Fettke, CEO of Real Wealth Network, host of “The Real Wealth Show” and “Real Estate News for Investors” podcasts and author of “Retire Rich with Rentals.” “It’s best to look for an agent who specializes in real estate investments. Ideally, look for someone who owns them nearby. Oftentimes, property managers have brokers in-office to help.”
Types of rental properties
The kind of property you buy is equally important. The three main types are:
Single-family homes: These are one-unit properties, typically for either long-term tenants or on a short-term basis through platforms like Airbnb or VRBO. If it appreciates in value, you might be able to make additional profit down the line when you sell. With a single-family home, your cash return will be lower than if you had purchased a rental property that can house multiple tenants. Compared to a condo, you’ll also be responsible for all the maintenance.
Condos: Condos are generally more affordable upfront than single-family homes, and you could be spared many maintenance hassles thanks to the presence of an HOA. Keep in mind, however, some condo associations significantly restrict what you can do with the property, including renting it out, and mortgage lenders will factor in the monthly HOA fee when determining what size loan to extend to you.
Multifamily homes: Multifamily homes include duplexes (two units), triplexes (three units) and properties with four units or more. These allow you to rent to more tenants, generating more income, but also cost more than a single-family home or condo. You might have many more responsibilities as far as being a landlord, as well.
“Single-family homes are the most popular,” says Bruce Ailion, an attorney and Realtor with RE/MAX Town and Country in Georgia. “Some areas have a tradition of two- to four-family homes, while others do not. Multifamily properties of less than 100 units tend to be owned by individual owners or owner groups. Apartments over 100 units tend to be owned by institutions and professional real estate investors, and retail office and warehouse spaces tend to attract higher-income and more sophisticated investors.”
Consider the full financial commitment
How much money do you have on hand to make a down payment, or potentially pay for the home in full? Calculate your approximate return on investment (ROI) before you purchase a property. Estimate how much income you’ll get from the property and what your expenses will be. Subtract your expenses from your income to find your net operating income. A rental property’s expenses generally include:
Rental property insurance: Varies based on location; about 25 percent higher than standard homeowners insurance
Rental property taxes: Varies based on location; the average nationally for a single-family home was $3,785 in 2021, according to ATTOM
Utilities: Includes electric, gas, heating and water, some of which tenants might pay, but you’ll be on the hook for during vacant periods
Home maintenance and repairs: Varies; the average nationally was $3,018 for maintenance and $2,321 for “emergency spending” in 2021, according to Angi
Advertising costs: Includes real estate agent commission, typically 5 percent to 6 percent of the property’s purchase price; or vacation rental site service fees, typically 3 percent to 5 percent based on rent amount
Property management and other fees: Includes property management setup, management and maintenance fees, as well as tenant screening, eviction or other expenses; property managers typically charge between 6 percent and 10 percent of the rent for ongoing service, says Ailion
HOA fees (if applicable): Averages several hundred dollars
Rental income taxes: “Income taxes must be paid for all money made on the property,” says Ellingford. “Of course, everyone thinks of the monthly rent; however, income also includes any other money you collect, such as late fees, pet fees or even work by the tenant in lieu of rent.”
Keep in mind, while you’ll need to report all of your rental income to the IRS, you can typically deduct most or all of your expenses, along with depreciation and mortgage interest. Review IRS Publication 527 or consult with a trusted tax professional for more specifics pertaining to your rental property situation.
Understand differences between investment properties and second homes
A second or vacation home is different in many ways from an investment or rental property, and not just because of how it’s used. For one, your mortgage interest rate will likely be higher for a rental property because it’s not your primary residence, meaning the lender is taking on more risk. With mortgage rates going up, it’ll cost even more than it would have say last year.
Know the laws
Do you know what to do when your tenants won’t pay up? For example, certain states require a grace period when your tenant is behind on rent. In other words, you can’t evict a tenant until the grace period is over, but you can still charge late fees. Know the laws in your state before you rent out your property, including what constitutes a compliant lease agreement (including security deposit requirements), discriminatory practices and tenants’ right to privacy.
Determine your vacancy plan
You’re not always going to be able to rent out your property. You might have trouble finding renters, have to rip up carpet and patch drywall or provide a rent-free place for a family member to temporarily stay. There could be any number of reasons why income from your rental property might dry up. How will that impact your financial situation, and how will you cope?
Financing your rental property
A mortgage for a rental property isn’t the same as a home loan for a primary residence, or even a second or vacation home. Keep the following in mind:
Make a sizable down payment: You’ll typically need to put down at least 20 percent for a rental property, but if you want to look more attractive to a mortgage lender, you might want to put down more than that.
Be a strong borrower: You’ll also need a credit score of at least 640 and a debt-to-income (DTI) ratio of no more than 45 percent, based on Fannie Mae standards. The DTI ratio is your monthly debt payments divided by gross monthly income. (Need to improve your credit score? Learn some tips.)
Go outside of big banks: Big banks might not readily loan to you compared to a small bank, or offer you as desirable of loan terms. Compare options from both big and small banks, including community lenders, to find the best combination of rate, fees and customer service. It might help if you already have a relationship with the bank or lender.
Ask for owner financing: Owner financing means that the seller agrees to accept payments directly from you instead of requiring you to get a mortgage. This can benefit both you and the seller, but there are risks involved, so tread carefully; this arrangement isn’t for everyone.
Bottom line
A rental property could be a sound investment, particularly if the rent you collect offers you some extra income. Weigh all the aspects of purchasing a rental home, including financial implications, taxes you’ll have to pay, laws involved and how much extra time you have on your hands.
Save more, spend smarter, and make your money go further
So far in our home buying series, we’ve covered some of the basics that you need to know if you want to buy a home. In Chapter 2, we went over important resources for first time home buyers. In this third chapter, we’ll go over the basics of how to save for a house.
Buying a home can be a long and arduous journey, but having a stable place to live that’s all yours will make it all worth it. But before you can make an offer on a house, you need to learn how to start saving for a house.
When you buy a home, you’re making an investment in yourself and your future. You’re building financial stability, equity, and experience. You have a place to call your own and you can customize the space just how you want. Yet, you might be wondering how to get to that point
This is why saving up is so important.
There are some upfront costs to owning a home—primarily making a down payment. Find out how much you should budget using a home loan affordability calculator and figure out how to save the amount you need. After all, the best way to save for a house is to formulate a budget that helps you work towards your saving goals step by step. Soon enough, you’ll be turning the key and stepping into a home you love.
Step 1: Calculate Your Down Payment and Timeline
When figuring out how to save for a house, you may already have a savings goal and deadline in mind. For instance, you may want to save 20 percent of your home jumbo loan cost by the end of the year. If you haven’t given this much thought, sit down and crunch the numbers. Ask yourself the following questions:
What is your ideal home cost?
What percentage would you like to contribute as a down payment?
What are your ideal monthly payments?
When would you like to purchase your home?
How long would you like your mortgage term to be?
Asking yourself these questions will reveal a realistic budget, timeline, and savings goal to work towards. For instance, say you want to buy a $250,000 house with a 20 percent down payment at a 30-year loan term length. You would need to save $50,000 as a down payment and, at a 3.5 percent interest rate, your monthly payments would come out to be $898.
How much you need to save also depends on the type of loan that you use to purchase your home. For example, conventional loans and FHA loans require you to make a down payment, but some government sponsored loans do not. Before you can buy a house, it’s important to educate yourself on the differences between FHA vs. conventional loans. FHA loan requirements are different from conventional loan requirements, so you need to figure out which is a better option for you.
Step 2: Budget for the Extra Expenses
Just like a new rental, your home will have fees, taxes, and utilities that need to be budgeted for. Homeowners insurance, closing costs, and property taxes are a few examples of cash expenses. Not to mention the cost of utilities, repairs, renovation work, and furniture. Here are a few more expenses you may have to save for:
Appraisal costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere from $312 to $405 for a single-family home.
Home inspection: A home inspection typically costs $279 to $399 for a single-family home. Prices vary depending on what you need inspected and how thorough you want the report to be. For instance, if you want an expert to look at your foundation, there will likely be an additional cost.
Realtor fees: In some states, the realtor fee is 5.45 percent of the home’s purchase price. Depending on the market, the seller might pay for your realtor fee. In other places, it might be more common to contract a lawyer to look over your purchase agreement, which is usually cheaper than a realtor.
Closing costs: Closing costs are typically about 3% to 6% of the house’s price. Some closing costs may be negotiable with the seller but others will fall solely on your shoulders as the buyer.
Step 3: Maximize Your Savings Contributions
Saving for a new home is easier said than done. To stay on track, consider creating a savings account that has a high yield if possible. Then, check in on your monthly savings goal to set up automatic contributions. By setting up automatic savings payments, you may treat this payment as a regular monthly expense.
In addition to saving more, spend less. Evaluate your budget to see what areas you could cut down or live without. For instance, creating your own workout studio at home could save you $200 a month on a gym class membership.
Step 4: Work Hard for a Raise
One of the simplest ways to boost your savings is to increase your earnings. If you already have a job you love, put in the extra time and effort to earn a raise. Learning new skills by attending in-person or virtual training seminars or learning a new language could increase your earning potential. Not only could you land a raise, but you could add these skills to your resume.
Sometimes, putting in the extra effort doesn’t always land you a raise, and that’s okay! When getting a raise is out of the question, consider looking at other opportunities. Figure out which industry suits you and your skillset and start applying. You may end up finding your dream job, along with your desired pay.
Step 5: Create More Streams of Income
Establishing different income streams could help your house savings budget. If one source of income unexpectedly goes dry, having other sources to cut the slack is helpful. You won’t have to worry about the sudden income change when paying your monthly mortgage.
For example, creating an online course as a passive income project may earn you only $5 this month. As traffic picks up, your monthly earnings from this project could surpass your regular monthly income. To create an abundant financial portfolio, there are a few different steps you can take:
Create an online course: Write about something you’re passionate about and share your skills online. Sell your digital products on Etsy or Shopify to earn supplemental income.
Grow a YouTube channel: Start a YouTube channel and share your skills to help others within your industry of expertise. For instance, “How to start a YouTube channel” could be its own hit.
Explore low-risk investments: From CD’s to money market funds, there are a few types of investments that could grow your cash with minimal risk.
Step 6: Pay Off Your Biggest Debts
Another way that you can start saving for a home is by paying off your debts. Before taking on more debt like a mortgage, it’s important to free up your credit usage. Credit utilization is the percentage of available credit you have open compared to what you have used. If you have $200 in debt, but $1,000 available on your credit card, you’re only using 20 percent of your credit utilization.
A higher credit utilization could potentially hinder your credit score over time. Not only can paying off debt feel satisfying, but it could also increase your credit score and prepare you for this next big purchase.
To pay off your debts, create an action plan. Write out all your debt accounts, how much you still owe, and their payment due dates. From there, consider increasing your payments on your smallest debt. Once you pay off your smallest debt in full, you may feel more motivated to pay off your next debt account.
Keep up with these good habits as you take on your mortgage account.
Another factor that mortgage lenders will look at when determining your eligibility for a loan is your debt-to-income ratio. Your debt-to-income ratio measures your gross monthly income compared to your total monthly debt payments. This number will affect how lenders determine how much house you can afford because it will tell them whether you have enough income to cover your new mortgage payments and any existing debts.
So before you consider buying a home, make sure you calculate your debt-to-income ratio.
In addition to your debt-to-income ratio, lenders will also look at your residential mortgage credit report, which is a comprehensive study of all your credit reports. You should look at your credit report before you apply for a mortgage so you can figure out if you need to increase your credit score.
Step 7: Don’t Be Afraid to Ask for Help
Whether you’re touring homes or want help adjusting your budget, don’t hesitate to ask for help. If you’re trying to figure out what your budget should look like, research budgeting apps like Mint to build a successful financial plan.
If you’re curious about additional mortgage expenses, your budget, or investment opportunities, reach out to a trusted professional or utilize government resources. Not only are they able to help you prepare for your next big step, but they could also help you and your finances in the long term.
Getting help, whether it’s from a realtor or a financial professional, can help you secure your dream home at a price you’re comfortable with. Realtors can help with everything from finding you a home to negotiating the price of the home, so don’t be afraid to ask for help. You probably need it more than you think.
Saving for a house can be an intimidating process, so you also shouldn’t be afraid to ask questions. There are many important questions to ask your mortgage lender, like the difference between pre-qualified and pre-approved or the credit score you need to buy a house. Asking the right questions could end up saving you thousands of dollars with your mortgage, so go ahead and ask away.
Step 8: Store Your Savings in a High Yield Saving Account
While you may have a perfect budget and a home savings goal, it’s time to make every dollar count. Before you add to your account, research different savings accounts and their monthly yields. The higher the yield, the more your savings could grow as long as your account is open.
Also consider the effects of inflation on home prices, home appreciation, and interest rates. As inflation rises, so do home prices. This means it’s even more important to have a sufficient amount of money saved up so you can manage a bigger down payment and pay less in interest over time.
In Summary: Set Your Goals and Get Started
When saving for a house, you may want to consider having a plan in place. By following the above tips for saving for a house, you can be more prepared to buy your dream home. To summarize, here are some of the key elements to remember when it comes to saving for a home:
First, set a savings goal to match your estimated down payment and mortgage monthly payments. Then consider adding your contributions to a high yield savings account to grow your money over time.
Don’t forget to budget for extra mortgage expenses like appraisal costs, home inspections, realtor fees, or closing costs. Keep in mind, your monthly utilities and fees may also be more expensive than your current living situation.
Prepare for the additional costs by increasing your earning potential and optimizing additional income stream opportunities.
Free up your credit utilization by paying off as much debt as possible before buying a house. Keep up these good habits throughout the length of your mortgage term.
When you purchase a home, you’re building a piggy bank for your future. Every month you pay your mortgage, you pay part of it to yourself because you own the home. Instead of paying rent to someone else, you reap your own investment when you sell. Most importantly, though, you’ll have a place that’s truly your own.
So now that we’ve covered various tips for saving for a house, you hopefully feel more prepared going into your home buying journey. In this series, we’ll be going over first time home buying resources, steps to buying a house, and more. If you’re interested in learning more about the home buying process, continue reading on to Chapter 4 in the series, which covers what credit score is needed to buy a house.
Save more, spend smarter, and make your money go further
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The No Limits Ladies have posted an article on how to flip cars — how to buy used cars for cheap and sell them again for a profit.
I find used vehicles for sale, often times through Cars.com, and I price them using KBB.com. When I find one that I know is in more demand, with a motivated seller at or below private party pricing, I go look at it and sometimes buy it. Then I drive it for a while for free, and sell it when I’m ready, for more than I bought it for. Then I roll that money into the next vehicle, or sometimes keep a bit for myself.
According to the article, the steps to flipping a car are:
Screen used car ads for in-demand cars priced below market.
Make a cash offer for below the asking price.
Make necessary repairs.
Get the car cleaned and detailed.
Have the title free and clear, ready to hand to the buyer.
Show the vehicle in a safe location.
Don’t negotiate — you don’t need to sell the vehicle, so wait for your price.
Accept only cash.
This doesn’t interest me — I’m not a car guy — but if you’re mechanically inclined, this could be a great way to make some extra cash.
[No Limits Ladies: More Money Mondays: Flipping Cars]
A checking account is a deposit account held at a financial institution that allows withdrawals and deposits. Its purpose is to provide an easily accessible avenue for frequent transactions such as paying bills. As a tool in your money management kit, understanding how much money you should keep in your checking account is crucial for optimal financial health.
Factors to Consider When Determining How Much Money to Keep in Your Checking Account
Monthly Expenses
Your checking account balance should reflect your exact living expenses, plus a little extra for safety. Monthly expenses vary for everyone. They can be divided into fixed expenses (like rent and utilities) and variable expenses (like groceries, entertainment, seasonal and occasional expenses).
Income Frequency and Stability
If you have a regular income and know exactly how much money you’re getting every pay period, you can plan to keep just enough to cover a couple months worth of expenses plus your extra safety net. If your income fluctuates, it might be prudent to keep a bit more.
Personal Comfort Level and Financial Goals
Everyone’s financial situation and goals are different. Some might feel comfortable with a larger buffer in their checking accounts, while others might prefer to invest or move their excess into savings accounts to earn interest.
Emergency Expenses and Financial Buffer
Life is unpredictable. Having an emergency fund in your checking account for unexpected expenses such as medical emergencies or urgent car repairs can save you from financial distress. A rule of thumb is to have 3–6 months’ worth of living expenses set aside in your emergency savings.
General Rules of Thumb for Checking Account Balances
Covering Monthly Bills
The balance in your checking account should always be able to cover your monthly bills without resorting to overdrafts. Overdraft fees can add up and end up being a significant drain on your finances.
Overdraft Protection
It’s wise to keep a buffer against unanticipated expenses. This isn’t just an ATM transaction that went over your available balance, but also potentially a check that was cashed later than expected. An overdraft protection plan can prevent an empty or overstuffed checking account.
Extra Cushion
Even with all your expenses accounted for and a buffer for emergencies, it can be prudent to maintain an additional cushion. This can help cover seasonal and occasional expenses without the risk of an overdrawn account.
Benefits and Risks of Keeping Large Balances in Your Checking Account
Benefits
There’s convenience and flexibility in having a robust checking account. It serves as overdraft protection and ensures you have enough money for just about anything. Moreover, having that much money at hand can feel comforting.
Risks
Having too much money in your checking account comes with risks, such as missed investment opportunities. Money in a checking account typically doesn’t earn interest, or if it does, the interest rates are often significantly lower than savings or money market accounts.
There’s also the risk of exposure to fraud and theft. While financial institutions do their best to protect your checking account numbers and other data, no system is completely foolproof.
Strategies to Optimize Checking Account Use
Regular Monitoring and Rebalancing
Understanding how much cash you’re spending and keeping track of your available checking account balance is key. It allows you to adjust your balance based on your spending habits and helps keep your checking account well-funded without being overstuffed.
Use of Budgeting Tools and Apps
Budgeting tools can help you understand your monthly spending better. They can automate the tracking process and give you a clear picture of how much money you need in your checking account each month.
Automatic Transfers
Setting up automatic transfers to your savings account or emergency fund can help you grow those funds consistently. Just ensure that this doesn’t leave your checking account underfunded.
Splitting Direct Deposits
You can opt to split your direct deposit into different accounts. This can be a valuable tool for maintaining an adequate balance in your checking account while also ensuring your savings accounts and investment accounts are consistently growing.
Regularly Reviewing and Adjusting Based on Changing Financial Situations
Life changes can significantly affect how much money you need in your checking account. Regular reviews of your finances can help you adjust to changes like new monthly bills, increased living expenses, or changes in your income.
Alternatives to Keeping Excess Money in a Checking Account
Savings Accounts
Savings accounts typically offer higher interest rates than checking accounts. Transferring excess money into a savings account can help you earn more over time, making it a safer bet for your surplus funds.
Investments
Investing can offer higher returns than deposit accounts that pay interest at a bank, though it comes with more risk. If you find you have too much cash in your checking account regularly, it might be worth speaking with a financial advisor about investment opportunities.
Money Market Accounts and High-Yield Checking Accounts
Money market accounts and high-yield checking accounts can provide higher annual percentage yield than regular checking and savings accounts. These accounts can be a good place to keep excess money that’s still relatively accessible.
Bottom Line
While the average checking account balance varies by individual, a rule of thumb is to keep enough to cover a month or two of expenses. In addition, keep a cushion for emergencies and any potential bank failures.
Maintaining a balance that is too high means your money isn’t working for you, and could be better used in a high yield savings account or investment. On the flip side, you don’t want to risk overdraft fees from an empty or overdrawn account.
Ultimately, the best way to determine how much money to keep in your checking account is to monitor your finances closely. Understand your monthly expenses and personal comfort level, and regularly review your situation.
The key is balance. An overstuffed checking account means missed opportunities elsewhere, but a checking account well funded enough to cover your bills, a buffer for emergencies, and a bit extra for unexpected expenses will keep your financial life running smoothly.
No matter what, it’s your money. Understanding the ins and outs of bank accounts, especially your checking account, is key to ensuring your money works best for you.
Frequently Asked Questions
Can my bank account balance affect my credit score?
No, the amount of money in your checking or savings account doesn’t directly impact your credit score. However, good money management habits like avoiding overdrafts, paying bills on time, and maintaining a healthy balance can indirectly contribute to your overall financial health.
Is my money safe in a checking account?
Yes, your money is typically safe in a checking account. Most checking accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to a limit of $250,000. However, always verify that your bank is FDIC-insured.
What if my checking account balance goes negative?
If your account balance goes negative, you’ll likely face overdraft fees. Some banks offer overdraft protection programs that link your checking account to a savings account or credit card to cover the shortfall. However, these services often come with fees, so it’s better to avoid overdrawing your account whenever possible.
Should I have multiple checking accounts?
Having multiple checking accounts can be beneficial for managing different financial objectives or expenses. However, keep in mind that each account may have its own set of fees and minimum balance requirements.
What happens to the money in my checking account when I use my debit card?
When you use your debit card, the amount of the transaction is subtracted from your balance. So, it’s crucial to ensure that you have enough money in your account to cover any purchases made with your debit card.
What happens if I don’t meet the minimum balance requirement for my checking account?
If you don’t meet the required minimum balance, your bank may charge you a monthly maintenance fee. The specifics can vary widely from bank to bank, so it’s best to check with your financial institution about their policies.
How can I avoid monthly maintenance fees on my checking account?
Some ways to avoid monthly fees include meeting balance requirements, setting up direct deposit, or using your debit card a certain number of times per month. Each bank has different policies, so it’s important to understand what your bank requires to waive these fees.
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As the old saying goes, “In real estate, location is everything.”
You may not know much about REITs, but you might want to consider one of them as a career. They’re great for people who like real estate, enjoy making money, and need consistent work hours.
Real estate investment trusts (REITs) are companies that were formed to make it easier for individuals to invest in real estate.
Want to know what the top paying jobs in Real Estate Investment Trusts are in 2022?
Well, take a look at this list of 25 best paying jobs for real estate investment trusts and see if you can find one that sounds perfect for you. In addition, each job features information about how much each job pays, what you can expect on the job, any job training needed, and other fun facts!
If you are looking for your next career, this article will give you plenty to think about as well as potential opportunities that may be available to you.
What are real estate investment trusts?
Real estate investment trusts, or REITs, have become an increasingly popular way for investors to get involved in the real estate market. REITs allow people to invest in large-scale real estate projects without having to purchase and manage the properties themselves.
In addition, REITs offer shareholders a wide range of benefits, making them a great choice for those looking to invest in this growing market.
How do real estate investment trusts work?
A REIT is a type of company that owns and operates various types of real estate, and because they are exempt from corporation tax on profits generated through rental income and the sale of rental properties; They are a very attractive option for high-earners.
They pile investors’ money together and invest in various commercial real estate, which increases returns over time. In addition, REITs are generally owned by the general public, and they invest in real estate assets.
Lastly, they make a profit through investments or leasing; a return on investment is typically received as a dividend. Real estate investment trusts are similar to mutual funds in that they hold investments, distribute dividends, and pay taxes.
Is a real estate investment career good?
Real estate investment companies are a great place to start a career in real estate.
Real estate investment trusts (REITs) are one of the most productive industries today. They provide steady and consistent growth, as well as good job opportunities with high salaries. Careers in real estate that can lead to better-paying jobs include appraisers and investment bankers.
Best paying jobs in real estate investment trusts
The market for REITs has grown rapidly in recent years, with the total value of REITs reaching almost $3.5 trillion by the end of 2021 (source).
There are many different jobs in the real estate investment trust industry that come with a variety of salaries. The best paying jobs are reserved for the C-level executives:
Chief Executive Officer: The CEO is the highest-ranking executive officer in a company and is responsible for making major decisions that affect the business. CEOs in the REIT industry earn an average salary of $468,000 per year.
Chief Financial Officer: The CFO is responsible for financial planning and reporting, as well as managing relationships with banks and other lenders. CFOs in the REIT industry earn an average salary of $341,000 per year.
Chief Operating Officer: The COO is responsible for overseeing all day-to-day operations of a company. COOs in the REIT industry earn an average salary of $325,000 per year.
Followed by the attorney, which is one of the highest-paying professionals in real estate investment trusts.
Now, we are going to list the most lucrative jobs in REITs. Then, you can decide… is real estate investment trusts a good career path for me.
The higher paid jobs will come with more education needed and years of experience.
1. Real Estate Attorney Jobs
Real estate attorneys are in high demand for their knowledge of transactional law and contractual issues. They work on a variety of deals involving the purchase, sale, or leasing of real estate. As such, they provide critical legal support to the real estate investment trust (REIT) industry.
Real estate attorneys license in their state to practice law. They can prepare contracts, advise clients on purchases and investments, review documents, represent mortgage lenders at closing, or simply provide legal counsel without the requirement of an attorney’s license.
Consequently, real estate attorney jobs are an excellent opportunity for those looking to work in the REIT industry.
Real Estate Attorney: well over 6 figures (average)
2. Real Estate Developer
Real estate developers are typically involved in the design, construction, and marketing of properties. They are also involved in land assembly and subdivision, zoning regulation, and the establishment of building codes.
Builders are involved in all aspects of the development process, from acquiring land to constructing buildings. Promoters are responsible for finding investors and marketing completed projects. In both cases, real estate developers may work either on their own or with a team of partners.
A developer obtains land and constructs assets for sale, while also selling them off when they become old enough to be sold again.
Real Estate Developer Salary: over 6 figures (average)
3. Director of Real Estate and Facilities
The Director of Real Estate and Facilities is responsible for a variety of tasks within the department. These tasks include, but are not limited to, the following:
Acquiring new properties
Negotiating leases
Overseeing property management
Maintaining the company’s physical infrastructure
Developing and implementing strategic plans
A director of real estate and facilities is a key role in any company that deals with real estate investment trusts (REITs). Therefore, this position often leads to advancement opportunities, making it an excellent career choice for those interested in this growing field.
Director of Real Estate and Facilities Salary: $130,000 a year (average)
4. Director of Acquisition
Directors of acquisitions in real estate investment trusts are responsible for finding new properties to invest in for the company.
Typically, they work with their analysts to conduct due diligence on potential investments and analyze the risks and rewards involved in order to provide a recommendation to their superiors.
The acquisition team is responsible for finding investment opportunities for the company, which can be traditional real estate assets or creative ideas that can become a business. They are constantly on the lookout for new and innovative opportunities that can help bolster the company’s growth.
Director of Acquisition Salary: $125,000 a year (average)
5. Real Estate Agent
As a licensed real estate agent, you would help clients buy, sell, and rent properties. In order to become a real estate agent, you must pass an exam that covers topics such as contracts, ethics, and state laws. You would be responsible for understanding the real estate market and helping your clients make informed decisions about their property transactions.
In the case of REITs, you must be a commercial real estate agent who are in charge of dealing with important financial data. They need to know about the internal rates of return, gross rent multipliers, and capitalization rates in order to do their job effectively. In order to become a commercial real estate agent, you will need some background in business and finance. This knowledge will help you understand your client’s needs and better serve them.
Unlike most professions, the more business deals you close as a real estate agent, the better your pay is. Furthermore, many agents work on commission-based pay, so it’s important to be knowledgeable about the market and have a strong sales skill set.
Agents who are successful can make much more than this amount; however, those who are just starting out may make less until they gain experience and build a client base.
Real Estate Agent Yearly Commission: $100,000 a year (average)
6. Investor Relations Manager
An Investor Relations Manager is responsible for managing the relationship between a company and its investors. They must be able to quickly understand complex financial information and communicate it in a clear and concise way. Additionally, they are responsible for communicating the company’s financial performance and strategy to investors.
They are also responsible for updating quarterly reports on the investor’s online dashboard. This can be a high-stress job because you must keep your investors happy especially during a market downtrend.
Investor Relations Manager Salary: $100,000 a year (average)
7. Project Manager
Project managers are responsible for ensuring that a project is completed on time and within budget.
They work in teams to make sure that all aspects of the project are completed. Thus, they must have strong organizational skills. They also typically have experience in leading and coordinating teams.
This is a highly lucrative job for those building new assets for a REIT. The highest-paid 10 percent earned more than $187,000, while the lowest-paid 10 percent earned less than $59,000.
Project Manager Salary: $90,000 a year (average)
8. Accounting Manager
They do this by preparing financial statements, maintaining accounting records, and overseeing the work of accountants and bookkeepers. In order to qualify for this position, you will need at least a bachelor’s degree in accounting or a related field, as well as several years of experience in accounting or bookkeeping.
However, with experience and expertise in the field, it is possible to earn much more than that. Those who work for real estate investment trusts (REITs) can expect to make even more money.
Accounting Manager Salary: $90,000 a year (average)
9. Asset Managers
Asset Management is a process that oversees the operational and financial work of a portfolio of assets. This includes tasks such as budgeting, forecasting, reporting, and analyzing data to make sure the asset is performing well.
As they are responsible for managing the portfolio assets in the real estate investment trust (REIT), they must expect a higher stress job. In addition, their job entails working with other departments in the company, such as accounting, acquisitions, development, and finance.
Asset Managers Salary: $89,000 a year (average)
10. Construction Supervisor
A construction supervisor oversees all aspects of a construction project, ensuring that it is completed on time, within budget, and to the required standard. This position requires a great deal of experience and knowledge in the field, as well as strong leadership skills.
They make sure that everything runs smoothly! Speficially, all the necessary equipment, materials, and supplies are ordered and on-site when they are needed. They also check the quality of the work as it is being done; making sure projects are constructed in accordance with contract documents, standards, codes, and policy.
In order to become a construction supervisor, you need only a high school diploma or GED. However, five years of experience in yard operations or equivalent education and experience is preferred.
Construction Supervisor Salary: $89,000 a year (average)
11. Investment Due Diligence Analyst
An investment due diligence analyst is responsible for conducting an extensive analysis of potential investments for a real estate investment trust. They work with the team to identify opportunities, underwrite deals, and make recommendations. The role is essential in helping the team make sound investment decisions that will benefit the company in the long run.
This job is a key player in the real estate investment trust (REIT) industry.
To be successful in this role, you’ll need experience with REITs or a national brokerage, as well as excellent quantitative skills including the ability to build real estate valuation models and distribution waterfalls.
Investment Due Diligence Analyst Salary: $80,000 a year (average)
12. Financial Analyst
The most common role of a financial analyst is assessing a company’s current and future financial health, which may include issuing stock recommendations, forecasting earnings, and providing risk analysis. Financial analysts may also work with investment bankers to identify new investment opportunities.
However, salaries can vary significantly depending on the size of the company, the city in which you work, and your level of experience.
Financial Analyst Salary: $80,000 a year (average)
13. Business Acquisition Analyst
An acquisitions analyst is responsible for reviewing potential investments and determining the risks and rewards associated with commercial property.
The analysis will include both macro-level information, such as the political and economic environment, as well as more fine-tuned data that is specific to the investment itself.
Many in this role have found a business degree to be well worth the cost.
Director of Acquisition Salary: $78,000 a year (average)
14. Commercial Property Manager
Property management is a growing field, as the demand for individuals who can manage both residential and commercial properties increases. The goal of property managers is to ensure assets are kept in good condition and are appealing to owners and tenants alike.
Real estate investment managers have a very important job, as they are responsible for meeting the needs of property owners, tenants, and investors.
Primarily, they oversee maintenance and repairs, collect rent, screen tenants and enforce lease agreements. They also may negotiate leases, recommend improvements to the property, and coordinate with contractors.
Commercial Property Manager Salary: $75,000 a year (average)
15. Real Estate Photography
Real Estate photography is a specialized field within the photography industry. As such, many photographers start their own businesses in this area.
In order to be successful, it’s important to have strong marketing and business skills. Your portfolio should showcase your best work and be tailored to the types of properties you will be photographing. Additionally, you may choose to offer additional services such as virtual tours or video production.
A real estate photographer would work closely with the marketing team.
Real Estate Photographer: $70,000 a year (average)
16. Marketing Coordinator
Marketing coordinators are responsible for developing and executing marketing campaigns.
They work with the advertising department to come up with ideas. Then, working with the rest of the company to make sure that those campaigns are executed properly. They create all marketing materials, track campaign results, liaise with outside vendors, and organize events.
Given the regulations around REITs, it is highly important that the marketing communications follow the investment directives from the SEC.
Marketing Coordinator Salary: $67,000 a year (average)
17. Maintenance Supervisor
A maintenance Supervisor is a position that requires managing and overseeing the work of others. Thus, ensuring work is completed in a timely, efficient and safe manner.
They are responsible for making sure all company policies and procedures are followed, as well as any legal requirements or safety regulations. Additionally, they manage budgets and expenses, as well as staff.
The ideal candidate will have experience in the property management or construction industries, as well as supervisory experience. A degree in engineering, architecture, or a related field may be beneficial.
Maintenance Supervisor Salary: $65,000 a year (average)
18. Property Appraiser
Appraisers are typically called in when there is a need to settle a dispute about the value of a piece of property, or when someone is buying or selling a home and needs to know how much it is worth.
Most states require that you be licensed in order to practice as an appraiser. The job outlook for appraisers is good; the Bureau of Labor Statistics predicts that employment will grow by 4% from 2020-2030 (source).
Property Appraiser Salary: $60,000 a year (average)
19. Leasing Consultants
Leasing consultants are responsible for meeting and greeting clients, touring potential tenants through a property, and helping them decide whether or not to lease it. They must be knowledgeable about the property they are showing, as well as about the local rental market.
Consequential, this is a good job for someone who is able to close deals, so being persuasive is important.
They should also be outgoing and comfortable working with people from all walks of life. A high level of professionalism is essential, as is attention to detail. Leasing consultants typically earn commissions based on the number of leases they sign, making this a commission-based job.
Leasing Consultant Salary: $50,000 a year (average)
20. Commerical Real Estate Intern
Commercial real estate internships are a great way to get started in the commercial real estate industry. Many internships will give you the opportunity to work with the CEO/COO and learn about all aspects of the business.
In most internships, you will gain vast knowledge while working with every department within the company.
Consequently, interns often have the chance to work with different teams and learn about all aspects of commercial real estate. This is a great way to gain experience in the field. Plus you will get a well-rounded working experience and the opportunity to build your network.
You must be a college student who is detail-oriented, self-starter, creative and strategic thinker in order to be considered for any real estate internship.
Commercial Real Estate Intern Salary: unpaid to $20 an hour
(Source for All Salary Information: Glassdoor.com)
Bonus = Real Estate Investors
Real estate investors use a variety of strategies to make money in the real estate market. Some invest a minimal amount of money, while others take on high-risk ventures.
In order to be successful, investors must be well-versed in real estate investment strategy and have extensive knowledge of the market.
This is why REITs are so popular with most investors. It allows a hands-off approach to real estate investing. Yet, still profit in the real estate appreciation and rental income.
Real Estate Investors Salary: varies on the amount of money invested but most want at least a 6-10% return
What real estate investment jobs are entry level?
Real estate investment is one of the best paying jobs in the world. The job offers a lot of opportunities for growth and allows you to work with different types of people.
It also has a relatively low barrier to entry, making it a great option for those who are starting their careers.
Most people in real estate started at the bottom and worked their way up the corporate ladder with hard work and persistence.
What are the minimum requirements for entry level real estate jobs?
The industry is growing rapidly and there are many different opportunities for those looking to enter the field. However, it’s important to note that entry-level jobs in this field come with specific skill sets and education requirements.
Most require at least a college degree if not at least 5 years of hands-on experience. One of the best places to start without any qualifications and education is as a leasing consultant
If you want to progress quickly in your career in real estate, consider taking a chance on one of the best paying jobs in REITs listed here. In fact, there are many jobs available in real estate investment trusts.
REITs – Which real estate investing job looks appealing to you?
The REIT industry is constantly growing, and with that comes new opportunities for a lucrative career path.
Many of the roles in a REIT are highly challenging, pay well, and are respected by investors. Many people work together as a team to build new projects, manage existing projects as well as work to finance them.
There are plenty of benefits of spending time researching this industry and finding the job for you.
In fact, it is an exciting and rewarding career!
Know someone else that needs this, too? Then, please share!!
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Do you enjoy spending your hours at work in the office, or do you like to be outside? Do you find it fun and exciting when a deal is done, or are deals just more busy work for your day?
If any of those questions have got stuck on repeat in your head, then these real estate investment trusts might be a good career path for you.
The short answer: Real estate investment opportunities are plentiful and they come with varying degrees of risk and reward depending on what you’re looking for.
I know from experience that real estate investment trusts can be a good career path.
So if real estate investing sounds like something that might be right up your alley, keep reading!
What are Real Estate Investment Trusts?
Real Estate Investment Trusts, or REITs, are a type of investment that receive tax concessions from the government. This is because they are designed to promote the development and growth of the real estate industry.
Investors can put their money into diverse projects, such as hospitals, schools, warehouses, and hotels.
In addition, REITs are publicly traded companies that buy, sell, and operate cash flow-producing commercial real estate. There are some privately traded REITs as well.
Why REITs as an Investment?
REITs have many investors who make up their stock portfolio. These can be individuals such as retail investors like you and me or other businesses.
What’s more, is that REITs are trusts similar to mutual funds which offer stability for both short-term and long-term investments in property assets.
Finally, REITs offer investors a reasonable return on investment.
What are the different types of real estate investment trusts (REITs)?
Real estate investment trusts, or REITs, are a type of security that allows people to invest in real estate without actually having to own any property. They are similar to mutual funds, with the exception of their working procedure.
There are two major types of REIT: equity and mortgage. Each type has its own specific benefits and drawbacks.
Equity REITs
Equity REITs are the most common type of REIT and they generate their revenue primarily through rents, not by reselling properties. This makes them a relatively stable investment option and they are often used as a way to diversify an investor’s portfolio.
Mortgage REITs
Mortgage REITs are a type of real estate investment trust (REIT) that invests in mortgage-backed securities. They are similar to other types of REITs, but they tend to have a higher yield as they earn their income from the interest margin on the mortgages they own.
This makes them potentially sensitive to interest rate increases as it could reduce the spread between what they earn on loans and what they pay out in funding costs.
Hybrid REITs
Hybrid REITs use a combination of the two strategies. They own properties like equity REITS and use the money from investors to purchase mortgages like mortgage REITs.
How to Buy Real Estate Investment Trust
Real estate investment trusts, or REITs, are a type of security that allows investors to purchase shares in a company that owns and manages income-producing real estate.
There are three types of REITs: publicly traded, public non-traded, and private.
Publicly traded REITs are the most common and are listed on major stock exchanges. They offer liquidity and transparency but also come with higher risk.
Public non-traded REITs are not listed on exchanges but offer more liquidity than private REITs.
Private REITs are not available to the general public and have less liquidity than both publicly traded and public non-traded REITs. Private REITs can be sold only to institutional or accredited investors.
Pros and Cons of Investing in Real Estate Investment Trusts
When it comes to making money, real estate is always a sound investment. And with the popularity of real estate investment trusts (REITs), you no longer have to be a landlord or developer to invest in properties.
REITs are becoming increasingly popular because they offer investors diversification and liquidity- two key features that any good investment should have.
But like anything else, there are pros and cons to investing in REITs. Here are some things you should consider before you put your money into this type of trust:
Pros of REITs:
1) Diversification: Real estate is a very diverse asset class, and by investing in a REIT, you’re automatically spreading your risk across many different properties. This helps reduce the volatility associated with stock market fluctuations.
2) Liquidity: A key advantage of REITs is that they’re highly liquid- meaning you can sell your shares at any time without penalty. This gives you the freedom to take profits when the market is doing well or reinvest them when prices are down.
3) Professional Management: When you invest in a REIT, you’re essentially hiring professional property developers and managers to do all the hard work for you. This takes away the hassle of dealing with tenants, repairs, and other day-to-day tasks associated with owning property.
Cons on REITs:
1) No Say in Management: Unlike directly owning property, you have no say in how the REIT is managed. If you don’t agree with the way the managers are running things, there’s not much you can do about it.
2) Taxation: The tax laws surrounding REITs are a bit complicated, so make sure you consult an accountant before investing. In general, taxation is much easier than owning the property yourself, but it’s still something to keep in mind.
3) Fluctuating Values: Just like stocks, real estate prices can go up and down quickly. So if you’re looking for a stable investment that will always give you a return on your money, REITs might not be right for you.
How successful are real estate investors?
Real estate investment is a popular way to make money, but it’s not without its risks.
Those who are successful in this field often have a lot of money or access to money (private money, hard money, bank financing, self-directed IRA).
It can be a career if you’re willing to put in the work, but it’s important to think carefully before making that decision.
Real Estate Career Path
Many different real estate jobs offer high salaries and great opportunities for career growth. Plus you can match your experience to find the best real estate career path.
These jobs offer a variety of opportunities and allow you to work in a wide range of settings.
What are the Requirements of Managing a REITs?
Real estate investment trusts, or REITs, are a type of mutual fund that allow both big and small investors to pool their money together and invest in real estate. REITs offer a variety of benefits to investors, including an opportunity for capital appreciation as well as a strong income stream.
In order to qualify as a REIT, they must be registered with the SEC and meet certain other requirements.
1. Managed by Board of Directors or Trustees
In order to be a REIT, the company has to appoint a board of directors or trustees. The board is responsible for making sure the REITs comply with the regulations set by law and also exercise their fiduciary duties. Furthermore, the board approves important decisions such as changes in investment strategies, acquisitions, and dispositions.
2. Taxable Income Paid to Investors
One of the key requirements for managing a REITs is paying out at least 90% of its taxable income to the investors. This leaves limited room for the manager to use the REITs’ income for their own benefit and also minimizes taxes. As a result, it is crucial that a REITs manager has a strong understanding of tax laws and can effectively communicate with the investors.
3. Gross Income Generated from Real Estate Investments
In order to be a REIT, an organization’s income must come from at least 75% of its total assets in real estate. The other 25% may be invested in cash, securities, and other assets. This allows the company to grow without having to worry about being classified as a security corporation.
4. Number of Shareholders or Investors
Another requirement for managing a REIT is that there must be at least 100 investors and shareholders. In addition, no one shareholder can hold more than 50% of the shares (at least). This protects the interest of all shareholders and ensures that no one person or entity can control the REIT.
How to get started in the real estate investment trusts industry
There are many different ways to get started in the real estate investment trusts industry.
There is no one-size-fits-all answer when it comes to starting a career in this field. Every individual has their own strengths and weaknesses that they need to take into account.
One way is to start as an intern or apprentice and then work your way up the ladder.
You could get your business degree and find a career in REITs.
Another option is to become a real estate agent and specialize in commercial real estate.
There are many online courses and programs that can teach you about the industry, and there are also many books on the subject.
Whatever route you decide to take, remember that it’s important to do your research and learn as much as you can about the real estate investment trusts industry before jumping in headfirst.
How to Get Started as an Investor in the Real Estate Investment Trust industry
Real estate investment trusts, or REITs, can be a great way to invest in property and achieve your financial goals. However, in order to be successful, you will need cash to be able to invest in the REIT.
In addition, the cash must not be needed in the recent timeframe.
My favorite REIT platforms are:
What skills do you need to be successful in real estate investment trusts?
This section is specifically for those wanting to know… is real estate investment trusts a good career path?
First and foremost, you will need to have a degree in finance or another relevant discipline. This qualification will give you the basic analytical skills required for success.
In addition, experience in real estate is essential; it is one of the most complex and fast-paced industries around.
You will also need strong marketing skills. REITs are all about generating income through rent or capital gains, so you need to know how to market properties effectively.
Finally, good communication and people skills are important too; after all, you’ll be dealing with clients and tenants on a regular basis.
If you possess these skills, then real estate investment trusts could be the perfect career path for you!
In fact, if you keep using these good excuses to miss work, then a job change is probably needed.
The future of the real estate investment trusts industry
The real estate investment trusts (REITs) industry is rapidly growing and changing. In fact, REITS account for 2.9 million direct jobs (source).
As the world progresses, so does this industry, with new opportunities and challenges arising constantly. REITs offer a unique career path for those who are passionate about real estate and interested in making money.
Money should not be an issue in this sector, as REITs offer a rewarding career path for those who are willing to invest in it.
Check out the best paying jobs in real estate investment trusts.
Career Options within REITs
REITs offer the opportunity to be paid as an investor or career within the industry. Pay can vary depending on the company and its structure; however, most companies within this sector pay well.
If you work for a REIT, you can learn about investing in the real estate industry by being a part of it–an invaluable experience if you’re looking to invest personally into real estate yourself one day.
As the industry grows, so does the need for new people to enter it; companies are constantly looking for new people. In fact, they typically add 555,000 jobs per month (source).
Within the real estate investment trusts industry, there are various career paths that one can take.
Acquisitions
One common job within the REIT industry is acquisitions; which involves buying or selling real estate assets. This position requires a good understanding of the market and the ability to make quick decisions.
Analysts
In the real estate investment trusts (REITs) industry, analysts typically start out earning a salary of around $80,000 per year. With experience, they can move up to a management or executive role and earn a six-figure salary. Additionally, there are many opportunities for career growth in the REITs industry as it continues to grow.
Property Developer
In the real estate investment trusts (REITs) industry, the developers are the team responsible for building new projects from scratch. They identify potential investments, obtain the necessary permits and funding, and manage construction until completion.
This is an important role in the REITs industry as it drives expansion and innovation.
Property Managers
Property managers are famous for getting things done, and they are essential members of any REIT team.
There is no standard education background necessary for becoming a property manager; however, you need skills in project management and construction management.
Real Estate Agents
Agents typically earn more in commissions than their peers working in traditional real estate brokerages, making this a lucrative career path to consider.
Which real estate career makes the most money?
Real estate is a great way to invest and grow your money.
There are a variety of different ways to get involved in real estate, but one of the most popular ways is through real estate investment trusts (REITs).
REITs allow you to invest in a portfolio of properties without having to go out and find them yourself. This can be a great way to get started in real estate investing and build your wealth over time without day-to-day management.
Turn to Real Estate Career Pathway
Real estate investment trusts (REITs) are a good career pathway if you want to come up with better investment strategies. They can provide opportunities to learn about the market, make contacts and develop skills. However, it is important that you reflect on what skills you have, your resources, and where you align before entering this field.
There is a lot to consider when making the decision whether or not to pursue a career in real estate.
It is important to do your research, reach out to people in the industry, and reflect on what you’ve learned. Only then can you make an informed decision about your future.
It ultimately comes down to what you want and what you’re willing to do.
If real estate is your passion, then go for it!
But make sure you do your research and understand the risks involved. There’s no right or wrong answer, but be sure to weigh all of your options before making a decision.
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When you’ve finally decided it’s time to buy a home, a lot of things can start moving quickly. However, if you aren’t prepared, the VA loan application process and take much longer than you would like.
VA loans already close slightly slower than most other loan programs, but the wait is well worth it. They’re usually the best loan program available for those who are eligible, due to their low mortgage rates and 100% financing.
To make sure that the VA application process goes smoothly, there are a few steps you’ll want to take to prepare. These won’t take much time, and they can save you from plenty of stress down the road.
Click to begin the VA application process.
Check your eligibility
Before you start the application process, double check to make sure that you’re eligible. A full list of requirements can be found on the VA page, but generally speaking, the VA loan is available to veterans, current service members and surviving spouses.
Next, you’ll need to apply for a Certificate of Eligibility (COE). You need a COE so your lender can verify that you’re eligible for the program. You can get your COE online to save your lender (and yourself) some time.
Check your credit score
Technically, there is no minimum credit score required to be approved for a VA loan. However, lenders will want to see a score of 620 or higher in most cases.
One thing to note is that the higher your credit score is, the better the mortgage rate you’ll get. This means lower monthly payments throughout the life of the loan.
You can check your credit score through sites like Experian, Equifax and Transunion, giving you a better idea of what your score is. Keep in mind that other sites don’t always have an accurate representation of your score.
After finding your credit score, it’s smart to make moves to bump your score higher. This might mean paying off debts, holding off on opening new credit cards, etc. You want your credit as high as possible before you apply.
Check current VA mortgage rates.
Make sure you have enough saved
You won’t need to pay a downpayment for a VA loan, but that doesn’t mean that you don’t need money. Upfront costs will be needed at closing, and those can range in the thousands.
Also, you’ll need to budget to pay your monthly payments. You’ll also be in charge of your own repairs and replacements, costs that renters don’t need to cover. If your new home will have a yard, you’ll need to buy a lawnmower. If you’re getting more rooms, you’ll need to buy furniture.
There’s no set amount that you should save before buying a home, but going through and calculating how much money you think you’ll spend will give a better idea of how much you should store before applying.
Get your documents together
Once you’re ready to apply for a VA loan, you’ll be getting in touch with your lender. But before they can pre-approve you, they’ll need some of your information.
To save them the hassle of looking it up themselves or to prevent having to schedule a second meeting in the future, make sure that you have the following documents with you when you apply:
Certificate of eligibility
Credit report
Proof of income/employment history (W-2)
Bankruptcy information (if applicable)
Personal information (name, address, SSN, etc.)
If you’ve prepared well enough, you’re going to make this process a lot easier for your lender.
Getting started
Before anything, you can begin the pre-qualification process. This is just a quick process to help you find out how much home you can afford.
While pre-qualification is fast and easy, it’s also the first step in buying a home with any loan program.
On the surface, financial technology (fintech) specialist SoFi Technologies (NASDAQ:SOFI) seemingly should rise on the facilitation of next-generation banking solutions. However, faced with the unprecedented COVID-19 crisis, management began pivoting heavily toward personal loans. Though the process kept the lights on, the decision could end up imposing a long-term liability. Therefore, I am bearish on SOFI stock.
Recently, TipRanks reporter Vince Condarcuri mentioned that Wedbush’s David Chiaverini changed his rating on SOFI stock to Sell from Hold. In addition, he assigned a price target of $2.50 a share. At writing, this forecast represents a downside risk of more than 50%.
In particular, the analyst stated that fee income from loan applications and sales could soon crumble. Since the company isn’t profitable, Condarcuri writes, “this decline in income could delay profitability just enough to where capital will need to be raised at unfavorable terms.”
However, another major headwind affecting SOFI stock centers on the significant rise and allocation of the fintech’s service portfolio to personal loans. If SoFi does find itself needing capital at less-than-ideal terms, its personal loan exposure could hurt its share value.
Personal Loans Skyrocket
While an analyst downgrade certainly didn’t help SOFI stock, that wasn’t the only headwind stymieing its forward progress. On May 15, when shares tumbled, JPMorgan Chase (NYSE:JPM) analyst Reggie Smith explained that the fintech’s dramatic rise in personal loan obligations may be a sign of future losses.
Writing for TipRanks last year, I pointed out multiple times that the acceleration of personal loans presents a significant concern. In the second quarter of 2022, personal loan originations almost doubled to $2.47 billion on a year-over-year basis. In Q3 of last year, personal loans represented nearly 81% of total loan originations.
According to SoFi’s presentation for Q1 2023, total loan originations amounted to nearly $3.57 billion. Of this amount, $2.95 billion, or 82.7%, stemmed from personal loans. In sharp contrast, student loans only make up 14.7%, while home loans sit at a forlorn 2.52%.
What’s more, in the year-ago quarter, personal loans accounted for just under 61% of total loan originations. Further, student loans came in at 29.6%, while home loans landed at 9.4%. To be fair, the COVID-19 disruption sparked SoFi’s pivot toward personal loans. However, the allocation is now intensely imbalanced, posing longer-term risks for SOFI stock.
A Double-Edged Sword for SOFI Stock
On the positive end of the scale, SoFi personal loan borrowers must meet minimum qualification requirements. Available data indicates that the average SoFi borrower has a credit score of at least 700. Further, the reasons for the loans most commonly center on credit card consolidation, home repairs, and emergencies. Plus, management kept the lights on with these lending products. However, the framework may become a double-edged sword.
Fundamentally, personal loans are unsecured. Therefore, if a borrower can’t pay back the loan, there’s not much that the bank can do. On the other hand, for home mortgages, the underlying financial institution can foreclose on the property. With any luck, the home value might rise, thus mitigating the impact on the lender.
However, it’s difficult to say the same about personal loans because the underlying catalyst has often been consumed. In other words, a bank can’t foreclose on a home repair or an emergency ride in an ambulance.
In addition, if economic circumstances worsen – such as a deflationary condition brought on by higher interest rates – this dynamic could hurt borrowers’ ability to pay back their debt. True, the interest rate should be locked in. However, rising rates may spark undesirable events such as mass layoffs.
Under a recessionary ecosystem, the fintech firm’s exposure to personal loans would be problematic. Therefore, SOFI stock presents significant risks to prospective investors.
Is SOFI Stock a Buy, According to Analysts?
Turning to Wall Street, SOFI stock has a Moderate Buy consensus rating based on nine Buys, four Holds, and zero Sell ratings. The average SOFI stock price target is $7.65, implying 50.9% upside potential.
The Takeaway: SOFI Stock Plays with Fire
Understandably, facing an unprecedented pandemic and business disruption, SoFi – like any other enterprise – did what had to be done to keep operations alive. In a way, then, management bought time by pivoting so heavily to personal loans.
At the same time, the threat to SOFI stock centers on the longer-term framework. If economic conditions continue to worsen, borrowers – even if they have good credit scores now – may have trouble paying back their loans. And with personal loans hitting the $2.95 billion mark, that’s a massive risk profile that no one should ignore.
Multi-family homes can be a great way for novice real estate investors to get started buying properties that will generate passive income. However, these properties, which contain multiple units for more than one household, have some challenges that single-family homes don’t have. If you’re considering buying a multi-family home, here’s what you need to know before jumping in.
What is a multi-family home?
A multi-family home is a single building that’s divided to accommodate more than one family living separately. They can range from a duplex, which has two dwellings within a single building, to homes or small apartment buildings with up to four individual units. (Buildings with more than four units are typically considered commercial properties.)
The owner of a multi-family home can either live in one of the units and rent out the others, or live elsewhere and rent them all out. The rules for financing a multi-family property are different depending on whether the owner will live there or not: If you don’t plan to live in your property, you’re considered an investor. You may be able to use the projected rental income from the property to help you qualify for a mortgage, and you may also qualify for a higher loan amount.
“When you’re looking at a single-family home, you’re thinking about your own needs only,” says Charlotte Winckowski, a Realtor with iKey Realty in Toledo, Ohio. “When you’re looking at a multi-family home, you have to think of it more as a business: What will the needs of your tenants be? What kinds of income will it produce, and what will your expenses be?”
Multi-family vs. single-family homes
While you can rent out some or all of a single-family home, multi-family homes have other distinct characteristics. Some started out as large single-family homes that an owner or developer decided to divide into multiple units. Each unit in a multi-family home has its own address, its own kitchen and bathrooms and typically its own entrance. However, those living in multi-family homes may have less privacy than those living in single-family homes because of shared walls.
Types of multi-family homes
There are various kinds of multi-family homes to consider, with different offerings in terms of layout and living space. Each type of house has its own pros and cons, as well.
Duplex/Triplex
The term duplex refers to two units or homes that are connected either via a common wall, ceiling or floor. A triplex has three. Each home in a duplex or triplex has its own entrance. The units may also have separate yards and garages.
Condo
A condo is typically an individually owned unit within a community or building made up of other individually owned units. In most cases, condo owners are required to pay monthly fees to a homeowners association. These fees cover the costs of upkeep for any amenities that may be included, and in some cases they cover insurance for the building or community, as well.
Townhome
Similar to duplexes, townhouses or townhomes are homes that are attached to one another via a common wall. Typically they have two or three stories. They are more spacious than apartments and generally involve far less maintenance and upkeep than a single-family home.
Semi-detached house
Like townhomes, semi-detached homes include a shared wall with another home. However, semi-detached houses are typically bigger than townhomes. These types of homes can be more affordable than a freestanding single-family home. They may also offer less costly maintenance, as the owners of semi-detached homes may share upkeep expenses.
Pros and cons of multi-family homes
Pros
The rental income a multi-family property earns can help offset the cost of your mortgage and other expenses, providing you with an income stream. “For some owners, the rent is enough that they don’t have a house payment at all,” says Paul Wyman, managing broker of the Wyman Group in Kokomo, Indiana. “They’re able to use income from other units to cover their mortgage and insurance, and that frees them up to use their cash for other things.”
You’ll be able to tackle repairs and maintenance more easily. If you live in or close to your rental property, you are less likely to miss major issues and will be able to respond faster when problems arise.
You can write off much of your home maintenance as a business expense and prorate part of your mortgage interest payments.
These properties can be an ideal option for multi-generational families who want to be close but retain their privacy. (They also help you keep such options open in the future.)
If you start out living in one unit but ultimately move out, you can still keep it as an income-producing investment, earning even more once you start renting it out.
Cons
Since you’re buying more than one unit, it may cost more upfront to purchase a multi-family home than it would to buy a single-family home.
Being a landlord is a time commitment, and living in the immediate vicinity of your tenants means you may get knocks on your door at any time. You’ll also need to be comfortable negotiating lease terms and screening your tenants, not to mention dealing with them in a business-like way when the rent is overdue, there are issues with noise or there’s damage to the property.
If your units go vacant or a tenant is late with the rent, you’re still responsible for paying your mortgage. You also have to cover the cost of (quickly) repairing problems, like a leaky roof or clogged toilet. “Even if you don’t have a housing payment every month, there is still financial risk in multi-family homes,” Wyman says.
You’ll need a substantial emergency fund. The more units you have, the less impact an individual unit will have on your overall cash flow, but landlords should have plenty of money set aside to cover unexpected repairs and rent on vacant units.
It can be complicated to sell a multi-family property that has tenants in place, since you’ll need to coordinate showings and appraisals — and keep the tenants apprised of the process.
Maximizing returns on a multi-family home
In most cases, a multi-family home will also serve as an investment property for the owner. In order to maximize your investment, it’s important to understand the costs associated with the property, including not only your mortgage, property taxes and homeowners insurance, but also other expenses, such as utilities, real estate agent fees, advertising (to attract tenants) and legal fees.
“An evaluation of the property should include an inspection by a licensed inspector and market research to include a market lease-rate analysis along with current market rental conditions,” Wyman says.
Who are multi-family homes best for?
Purchasing multi-family real estate is best for those who are interested in getting into real estate investing to generate wealth and are comfortable with the added responsibility and time commitment that comes with being a landlord. These types of homes can allow you to live rent free, if you occupy one of the units and the rent from the other units generates enough income to cover your monthly expenses. Once the mortgage is covered, the rent from multi-family homes can become a passive stream of income.
They can also be a smart choice for multi-generational families interested in buying a property together while having their own dedicated space. Typically including anywhere from two to four units, multi-family homes allow extended families to live under the same roof while still enjoying the benefits of having the privacy of individual units.
How to find a multi-family home
Like single-family homes, multi-family properties are listed for sale on real estate search websites, where you can typically filter the results of your search based on the type of property you’re seeking.
A real estate agent, either with a residential or commercial specialty, may be able to help you find investment opportunities in your area, as well, and could even know of some opportunities that have not been advertised online.
As with any house hunt, do your homework to see what multi-family home prices are like in your market and what you might expect to pay.
Find other housing types
Apartment
Apartments are suited for anyone looking to stay in a prime location for a cheaper price near shopping, restaurant and entertainment centers, often at a more affordable cost than buying a condo or single-family home.
Condominium
Condos appeal to those looking for a lower-maintenance living, home with a sense of security, opportunities to be social with neighbors, among other factors.
Townhouse
Townhouses are a particularly good option or first-time homebuyers or other budget-minded home buyers who want more space than typically afforded in a condo.
Modular home
Modular homes are enticing to empty-nesters looking to downsize, couples looking for backyard units like tiny homes or families looking to upgrade their dated properties in nice but expensive neighborhoods.
Single-family home
Single-family homes are best for families who prefer a huge yard and plenty of room to spread out. Others still prefer a low-maintenance condo or townhome that includes benefits like landscaping, snow removal and exterior maintenance.
Multi-family home
Multi-family homes are best for those who are interested in getting into real estate investing and are comfortable with the added responsibility and time commitment that comes with being a landlord.
Bungalow home
At between 1,000 and 2,000 square feet, bungalows are a great option for young families looking for a starter home or retirees hoping to downsize in a home without stairs, or single homeowners who want the single-family home lifestyle without managing a huge property.
Co-op
Co-ops are most often found in major cities, and they can be good for those looking for security or neighbors who largely adhere to the building’s rules and policies.
Patio home
Typically capped at one-and-a-half stories and part of a larger association, patio homes are best for homeowners who don’t want to deal with stairs or maintenance.
Ranch home
Ranch homes are ideal for anyone who prefers single-story living. Singles, couples and families with children can find something to love about a ranch home.