How to invest in real estate for beginners

How To Invest In Real Estate – Guide for Beginners

If you look around for the wealthy and super rich individuals and families across the country, you will find that majority of them have amassed huge wealth not from their jobs or businesses but from real estate investing. It is a method of creating asset and wealth that is not only safe and reliable but also easy if you know what to do and which mistakes to avoid. Here is a guide on real estate investing for beginners.

How To Invest In Real Estate

There are many ways to invest in real estate. But to be successful in this field, it is necessary to study the local housing market and the factors that affect the profitability of a real estate project.

Two of the most popular ways to invest in real estate are residential real estate and commercial real estate. Single family homes, town-homes, and condos come in the category of residential real estate. You can buy and resell these properties to book a profit later. You can also purchase residential property to earn rental income from it.

Commercial real estate consists of condo buildings and multifamily apartments as well as shops and offices that are mainly intended for business purposes. You can buy such properties to either rent them out or lease out to your tenants. Any residential property containing more than 4 units is referred to as commercial real estate. This distinction is made by lenders who have different criterion for borrowers applying for a loan to buy these properties.

No matter which type of property you buy, you can benefit monetarily from it in different ways.

  • Income through renting
  • Income from appreciation in value
  • Depreciation benefits when filing tax returns
  • Benefits from deductions provided by government in interest repayment

You can choose from these different ways to invest in real estate. Different people have different skills and they choose the method of real estate investing according to their financial goals and their abilities. If you have small capital to begin with, you can even earn money by taking good deals to investors. This is referred to as wholesaling and you need to identify distressed properties available at less than their market value to earn commission for these deals.

If you are good at rehabbing, you can earn good money by buying a home, fixing it, and selling it later to book your profit. If you have enough money to put forward as down payment, multifamily apartment buildings might be a good idea for you.

Home Equity line of credit loan

Is a Home Equity Loan Right for You?

A home equity loan is something alluring for many people, especially when they have expenses to deal with. Sometimes, taking out a loan can only do worse, as you know that you’ll have to face the challenge of monthly installments. But if you’re a homeowner, you have the chance to take an equity loan, which is very tempting.

Home equity loans are like a second mortgage, and they can work amazingly as long as you’ve built enough equity. But is this really the right option for you? Are you wanting to know how to invest in real estate using a home equity loan?

It Has Lower Rates

One of the reasons why people are put off by other types of loans is represented by the high interest rates. Like it wasn’t already enough that you’ll be in debt for years to come, you’d also have to handle the interest rate.

This is what makes the home equity loan so convenient in this regard. Rates are much lower, so you would be able to afford them. Most times, these rates will be below those of payday loans, credit cards or anything of the sort.

It’s Flexible

The great thing when it comes to a home equity loan is its flexibility. Unlike other loans that are only offered to you for specific purposes, equity loans are different. They can be used for pretty much any purpose, so whether you want to go on a vacation or your house is in desperate need of reparations, the loan can help you out.

You Get Larger Funds

Home equity loans are offered depending on the equity you build. Of course, the market value of the house at that moment is also relevant, but you can help increase the amount if you know how. If you make big down payments, renovate your home or pay off more than you need to, you have great chances of increasing the home equity loan amount in case you’ll need it.

Mortgage refinance calculator pros and cons
Related Article: Mortgage Refinance Calculator | Pros & Cons of Refinancing Your Mortgage

You’ll Have an Additional Debt

Sure, the loan can help you big time, and you’ll be very happy to have some extra money. But the problem with home equity loans is the fact that you’ll have one additional debt to deal with. Although it has favorable interest rates, it doesn’t change the fact that it’s still debt, and it may interfere with your budget in the future.

You May Lose Your Home

If you are unable to pay off the loan, things can get worse. Basically, your house will serve as a collateral guarantee to the loan. This means that if you won’t be able to pay it off when required, or you fail to make a lot of payments, you can be left homeless. This is why you must be sure you’ll be able to handle the responsibility before you take out the loan.

Final Thoughts

Home equity loans can be great for those who really need them for various reasons, and if you’re able to afford it and deal with the payments, it’s not a problem. But if you think the debt will be hard to manage, then a home equity loan may not be right for you, as you’d take a lot of risks.

Mortgage refinance calculator pros and cons

Mortgage Refinance Calculator – Pros & Cons of Refinancing Your Mortgage

Pros & Cons of Refinancing Your Mortgage

Many people with mortgages are taking refinancing into consideration. Whether they’re out of money and need to find ways to decrease their debt, or simply want to get rid of it much earlier, mortgage refinancing is a concept that can make this possible.

Simply put, mortgage refinancing is a new loan that you take in order to replace the already existing one. You hear your neighbors and colleagues at work talking about the advantages it packs, but is it really that perfect, or does it have its flaws as well? There is nothing that is entirely perfect and, as you can imagine, there are downsides to mortgage refinancing as well.

So, let’s examine the pros and cons of this concept and determine whether you should consider it or not.

Pros of Refinancing Your Mortgage

  • Lower Monthly Payment

By refinancing your mortgage, you’re lengthening the term of your loan. Although this doesn’t sound dreamy, you’ll have more money to save each month, and less money to spend paying off installments. In other words, affordability will increase. It’s better to check a mortgage refinance calculator and see whether this option will work for you.

  • Lower Interest Rate

The interest rate is one of the main reasons why people consider refinancing their mortgage. When the loan repayment is already high enough for you, the last thing you want is to deal with a high interest rate too. Through refinancing, you have chances to lower not only the interest rate but also the actual mortgage payment.

  • You Might Get Cash Back through Equity

If you’re the happy owner of a home with lots of equity, then you are lucky. By refinancing your mortgage, you may even get back some of the money if the equity is enough. Therefore, you have the opportunity to use the money for reparations, improvements or paying other debt.

Cons of Refinancing Your Mortgage

  • Spending Too Much Time

If you want to refinance, you will need a lot of time, which can be difficult if you are someone with a busy schedule. You need to look for reliable lenders, choose a loan and sign closing documents. So, if you’re always busy, this might not work out for you.

  • Refinancing Costs

One of the many things that put people off when they check a mortgage refinance calculator is the cost of the refinancing process. It requires closing costs, which could sometimes be as much as 6% of the amount of the loan. Usually, these can be included in the loan balance, but you may also be required to pay on spot when closing.

  • Longer Term

Sometimes, the loan term may extend, leaving you to deal with the loan for much longer than you initially thought. It may end up being repaid 10 years later, and dealing with a loan for that long can be nerve-wracking.

Final Thoughts

Mortgage refinancing can be very useful for some people, but it also comes with its own set of drawbacks, as you were able to see. It’s better to use a mortgage refinance calculator before you apply, so you can determine if it’s the right course of action.

best rewards credit cards

Best Credit Cards Rewards – How Does Yours Compare?

Over the years, I’ve simplified my credit-card usage to just a few reward cards. My main goal was to rake up rewards as much as possible, without having to remember a complex algorithm to decide which card to use when.

Not that I’m too stingy and trying to collect changes, but I dislike leaving money on the table, especially when a couple of one-time habit-changes/steps can increase annual cash-flow by at least several hundred dollars, if not more. At the same time, neither I nor my family members (additional card-holders) are inclined to carry a lot of cards together with a mini-manual. I use cards heavily for over 80% of my total expenses (notable exceptions being the property tax and a few small recurring/annual payouts).

I wanted to share what I do and also get input from others as to what they follow:

  1. All gas purchases anywhere are with a card from penfed.org. 4.25% or more cash value depending on how one redeems
  2. All travel-related expenses and restaurant/dining-out are with Costco Citi Visa card): 3% cash-back
  3. [Under Consideration] Amazon Prime Visa card (5% cash-back), given our increased purchase from Amazon.com
  4. Fidelity Card for most everything else (including #3 at this moment): 2% cash-back

Notable choices made:

  • I used to have a Shell card for 5% cashback at gas stations, but discontinued it since this is available only at Shell gas-stations
  • The switch from AMEX to VISA has simplified this further as AMEX is still not accepted in a few merchants we use
  • Stopped using “rotating reward category” cards (e.g., Chase gives 5% on 3 category of expenses, but the categories change frequently).
  • I prefer getting cash or equivalent as reward than “in-kind”, due to the flexibility
  • I learnt that x% reward does not necessarily mean x% cash. The reward points may be diluted depending on what is being redeemed
  • I noticed that over the last few years, many online payments, including most utilities, are now accepting credit card auto-payments without any extra fee. Previously only a bank account was possible.
  • I’ve left the other cards as is, and use them sporadically if needed (e.g., foreign travel)

What do you think? Anything you’d like to share from your experience?

Financially Stable by Age 30 How To

How to be Financially Stable by Age 30

When it comes to money, nobody knows what they’re doing – at least not in their 20’s. Don’t worry – it’s not just you. Most individuals have no clue how to even begin planning for their financial future. But it’s time to start. With a little work, you could stop living paycheck to paycheck and subsisting on ramen by the time you hit 30. Here are six ways to help you move toward financial stability:

1) Pay off Your Debts

Astronomical student loan debts are one of the reasons our generation is having such a hard time getting any kind of financial traction. They’re downright brutal. But getting those in order will save you a lot of money in the long run.

If your student debts are low interest, worry about any high interest loans first. Auto or credit card debts are common snares for 20-somethings. They have high interest rates, so the longer you put off paying those, the worse it’ll be. Any loan with an interest rate over 7%, are the debts you should tackle first.

Bite the bullet and map out a plan for eliminating your debts over the next five years or so, so you can actually start saving for the future. The future – ugh…so ominous.

2) Budget and Spend Within Your Means

Go through your most recent bank statement and categorize all your expenses. Pick out what you can cut back on (did you really need that 3 a.m. Chinese food delivery)? Now comes the hard part: sticking to a monthly budget. Know what you’ll earn and how much you can spend on what and when. Keep track of every penny spent and keep your eye on the prize.

Spending well within your means is the first step towards having extra cash to save like a real grown-up! This personal budget planning spreadsheet is a particularly useful resource.

3) Set Short-Term Goals

This sounds like something vague you’d slap on a vision board or the like, but it’s an incredibly important habit to practice. Setting goals (and writing them down) truly does keep you on track.

Set career goals for yourself:

  • Where do I want to be in a year? Five years? Ten years?
  • How do I plan to get there?
  • How can I hone my skills and assets to make myself more valuable to employers?

Set financial goals:

  • I want to pay off my debt within two years.
  • I want to have a certain amount of money in my savings account by this time next year.
  • I want to be making a salary within a certain range by the time I’m 30.

Set personal goals:

  • I want to finish grad school with no debt.
  • I want to buy a house at 30.
  • I want to be able to start a family in the next ten years.

Whatever your goals, map out a plan to get there and you’ll most likely find yourself achieving them quicker than you expected.

4) Create an Emergency Fund

Rather than draining your savings account (which is a thing you should now have and be actively and consistently contributing to) when somebody rear-ends your car, you should start an emergency fund. Create an emergency account and regularly add money.

When you’re just starting out, it’s always a good idea to have about 3-6 months worth of your income stashed away for a rainy day is . There will be rainy days, and let’s be honest…you currently might not have auto or health insurance. Purchasing insurance is definitely a goal to consider if you want to be a true grown-up.

5) Start Saving for Retirement Now

Nothing says a quarter-life crisis like facing your own mortality! The absolute last thing on your mind is retirement. I recommend that you start putting away at least 5-10% of your earnings into a 401(k) or a Roth IRA.

If your employer matches contributions on a 401(k) plan, go with the maximum amount they’ll match, because that’s just free money, man.

Even if you still have debt, try to regularly contribute to the following:

  • Debt repayments
  • Emergency fund
  • Savings account
  • Retirement fund

It may seem like you’re getting nowhere fast, but that’s normal. As you start making more money, you’ll be able to add more money into each of the aforementioned categories until the debts are finally gone, your emergency fund is where it needs to be, and you’re able to set more long-term goals for your savings and retirement funds.

6) Grow Up

Now is the time in your life to give yourself a good hard kick. If you’re out of school, or will be soon, then it’s time to buckle down and be an adult. Jumping into a life without the structure of parental guidance or the education system can leave you feeling disoriented. However, you know it’s time to become financially independent, as well as financially stable.

Financial stability means planning for the future like a responsible human being, and not blowing all your money on a night out with your friends. Figuring out where you stand financially and where you’d like to be isn’t easy, but it has to be done.

Take a deep breath and set aside a day to do some planning. You’ve got this – you’re a grown-up now, even if you don’t quite feel like it. By the time you’re 30, you’ll feel like a financial ninja master. By 40, you’ll be a full-on money samurai. By retirement, you’ll be rolling in all the money you have worked so hard to save.