Tag: investing guide

What You Need to Know About Investing in Out-of-State Real Estate Properties

(Disclaimer: The content of this article is not intended as financial or investment advice but rather information for educational purposes only.)

Sometimes, your best chance at finding a good property to invest in means venturing out beyond state lines. Doing so opens the door for opportunities for diversification and potentially higher returns. However, like any investment strategy, there are both advantages and challenges to consider before taking the leap into out-of-state real estate investment.

Pros of Investing in Real Estate Out of State

Diversification of Portfolio

One of the primary benefits of investing in real estate out of state is the opportunity to diversify your investment portfolio geographically. By spreading your investments across different markets, you can reduce the risk of local market fluctuations, like region-specific economic downturns or natural disasters.

Access to More Favorable Markets

Investing out of state allows you to capitalize on real estate markets offering better growth prospects or higher rental yields compared to your local area. Some regions may have lower property prices, higher demand for rental housing, or more favorable landlord-tenant laws, making them attractive destinations for investors seeking better returns.

Potential for Higher Returns

In some instances, investing in out-of-state real estate can generate higher returns compared to local investments. Investors may benefit from appreciating property values and increased rental income by targeting markets with strong economic fundamentals, population growth, and job opportunities. Additionally, investing in emerging markets or areas undergoing revitalization efforts can offer substantial returns over time.

Tax Benefits and Incentives

Depending on the location of your out-of-state investment property, you may be eligible for tax benefits and incentives unavailable in your home state. Some states offer tax breaks for real estate investors, such as property tax exemptions, depreciation deductions, or credits for investing in certain development projects. Investors can maximize their potential returns by researching the tax laws and incentives in different states.

Cons of Investing in Real Estate Out of State

Distance and Management Challenges

One of the most significant drawbacks of investing in out-of-state real estate is the logistical challenge of managing a property from a distance. Being physically distant from your investment property can make overseeing maintenance, handling tenant issues, and responding promptly to emergencies more difficult. Hiring a reliable property management company can alleviate some of these challenges, but it also adds another expense and requires careful vetting to ensure competence and reliability.

Limited Market Knowledge

Investing in a market that you are not intimately familiar with can be risky due to limited knowledge of local trends, regulations, and economic conditions. Without a detailed understanding of the local market dynamics, investors may find it difficult to accurately assess property values, rental demand, and potential risks. Conducting market research and building relationships with local real estate professionals can help mitigate this risk, but it often requires more time and effort than investing in-state.

Increased Risks of Fraud and Scams

Investing in out-of-state real estate exposes investors to a higher risk of falling victim to fraud or scams, particularly when conducting transactions remotely. Investors must be extra cautious and conduct thorough due diligence to avoid issues like fraudulent property listings, deceptive sellers, or unethical practices by property management companies. Verifying property ownership, conducting inspections, and obtaining professional advice can help safeguard against fraudulent schemes.

Legal and Regulatory Differences

Each state has its own set of laws, regulations, and landlord-tenant statutes governing real estate transactions and property management. Investing in out-of-state properties requires investors to familiarize themselves with these legal frameworks and ensure compliance with local regulations. Failure to understand and adhere to the legal requirements can result in costly fines, lawsuits, or even the loss of the investment property.

How to Effectively Invest in Real Estate Out of State

1. Conduct Thorough Market Research

Before investing in out-of-state real estate, thoroughly research the target market. Analyze key indicators such as population growth, job market stability, rental demand, vacancy rates, and property appreciation trends. Utilize online resources, market reports, and local real estate professionals to gather valuable insights into the market dynamics and investment opportunities.

2. Build a Reliable Network

Establishing a network of reliable real estate professionals in the target market is essential for successful out-of-state investing. Seek out reputable real estate agents, property managers, contractors, and legal professionals who have in-depth knowledge of the local market and can provide valuable assistance throughout the investment process. Building strong relationships with local experts can help mitigate risks and streamline property management operations.

3. Leverage Technology and Remote Management Tools

Embrace technology to facilitate remote property management and communication. Utilize property management software, online platforms, and virtual tours to streamline tasks such as rent collection, maintenance requests, and property inspections. Implementing robust communication channels with tenants and property managers can help address issues promptly and ensure efficient operations, even from a distance.

4. Visit the Property and Conduct Due Diligence

Whenever possible, visit the investment property in person to assess its condition, location, and surrounding neighborhood. Conduct thorough due diligence, including property inspections, title searches, and financial analysis, to verify the property’s viability as an investment. Engage with local inspectors, contractors, and real estate professionals to gain additional insights and identify any potential red flags or hidden costs.

5. Secure Financing and Consider Tax Implications

Explore financing options and evaluate the financial implications of investing in out-of-state real estate. Consider factors such as mortgage rates, loan terms, and down payment requirements when structuring your investment. Additionally, consult with a tax advisor to understand the tax implications of owning property in a different state, including potential deductions, exemptions, and compliance requirements.

Conclusion

Investing in real estate out of state can offer compelling opportunities for diversification and potentially higher returns, but it requires careful planning, due diligence, and effective management strategies. By conducting thorough market research, building a reliable network of local professionals, leveraging technology, and implementing sound investment practices, investors can successfully navigate the complexities of out-of-state real estate investing. With the right approach and diligent oversight, out-of-state real estate investments can become valuable additions to a diversified investment portfolio, contributing to long-term financial growth and wealth accumulation.

How Landlord Insurance Protects Your Investment Property’s ROI

(Disclaimer: The content of this article is not intended as financial or investment advice but rather information for educational purposes only.)

Property insurance serves as the unsung hero in real estate investment, actively reducing financial risk for investors. At its core, this risk mitigation strategy involves transferring potential losses to an insurance provider, creating a protective shield around the investor’s capital, and establishing a more resilient financial foundation. 

Navigating the Financial Fallout of Natural Disasters:

Certain real estate markets may carry increased risks for natural disasters like hurricanes, making the potential for significant property damage higher than in other markets.

The financial implications of a hurricane, including damages to structures and loss of rental income, can be devastating. Property insurance, with its capacity to cover these losses, not only provides investors with peace of mind but also becomes an integral component in maintaining a stable and sustainable real estate investment strategy.

By transferring the risk to insurance companies, investors can protect their capital and are emboldened to proactively engage in real estate opportunities, secure in the knowledge that their financial foundation is fortified against potential upheavals.

Confidence for Long-Term Strategies:

The benefits for comprehensive insurance coverage go beyond mitigating immediate risks to a property. Insurance also instills confidence in investors, allowing them to navigate through turbulent times with a sense of security. This confidence, in turn, empowers investors to pursue long-term strategies and capitalize on opportunities that may arise in the market, safeguarding against the potential erosion of capital due to unforeseen events.

Mitigating Legal and Liability Risks:

Legal and liability risks are inherent in real estate investment, presenting a significant financial threat to investors whether they come from tenants or third parties. These claims can compromise the overall ROI on an investment which means having sufficient liability coverage within a property insurance policy is paramount, shielding investors from the financial burdens associated with legal costs and potential damages awarded in lawsuits.

However, liability coverage can do more than just protect investors from the financial costs of lawsuits. It can also allow investors to: 

    • Allocate more efficiently

Proactively minimizing legal and liability risks through comprehensive insurance allows investors to allocate resources more efficiently, safeguarding their capital. This strategic allocation becomes instrumental in optimizing the overall investment portfolio.

    • Focus on Optimization:

Adequate liability coverage not only acts as a financial safety net but also enables investors to direct their focus toward optimizing their investment strategy. Without the constant threat of legal challenges, investors can make strategic decisions that positively contribute to their ROI.

    • Streamlined Approach to Investment:

With legal and liability risks effectively mitigated, investors can operate with greater confidence, leading to a more streamlined and effective approach to real estate investment. The assurance provided by comprehensive insurance coverage allows investors to concentrate on maximizing returns and achieving their investment objectives.

Matching Coverage to Investment Duration:

The duration of an investment is a critical factor that should inform insurance decisions. The intended hold period for an investment property significantly influences the structuring of insurance coverage. Properties held for a short duration warrant more basic, lower-cost policies focused on asset protection, avoiding unnecessary add-ons that won’t have time to provide ROI value.

For short-term flips, the strategy involves securing essential property and liability policies at appropriate limits. Avoid expensive add-ons that won’t have time to provide tangible ROI value. Additionally, keeping deductibles higher helps control costs, aligning with the short-term nature of the investment.

On the other hand, long-term, buy-and-hold assets require more robust protections. Considerations such as higher liability limits, flood/earthquake endorsements, and lost rent or business interruption coverages become crucial for enduring assets. Locking in features like guaranteed replacement cost and inflation guard coverage further contributes to maintaining proper coverage over the investment’s extended lifespan.

The ultimate goal is aligning the policy term with the investment horizon. This approach ensures that short-term flips are not over-insured, while lifelong assets receive sufficient coverage. It also allows for staged policy improvements over time as investment portfolios mature.

Conclusion:

In the dynamic realm of real estate investment, each decision and strategy contributes to the overall success or failure of an investment. That’s when property insurance emerges as a powerful tool when approached strategically. By actively managing risks, leveraging comprehensive coverage, and aligning insurance strategies with investment goals, investors not only protect their assets, but also optimize their returns. 

To find the insurance plan that’s right for you, check out IRA Title Pro’s preferred partner QUBIE, powered by SES Risk solutions.

 

How to Protect Yourself from Hidden Debts and Costs in Investment Properties

(Disclaimer: The content of this article is not intended as financial or investment advice but rather information for educational purposes only.)

Tread Carefully: Hidden Debts in Property Investments Can Cost You

Real estate investments have long been hailed as a dual-benefit venture, offering the immediate allure of cash flow and the promise of long-term wealth. Whether you’re delving into the world of fix-and-flips or banking on the steady income of a rental property, the potential returns from real estate can be truly transformative for investors. Yet, in the rush of excitement and the prospect of profits, some investors leap before they look, bypassing crucial due diligence steps that can be costly.

From overlooked tax bills to undisclosed liens, the landscape of property investment is riddled with potential pitfalls. Lured by the promise of quick gains, investors can unwittingly take on these hidden burdens, turning a promising venture into a financial sinkhole. While many assume that the standard closing process will uncover any latent liabilities, the reality is often more nuanced and requires a deeper dive.

Understanding Property Taxes as a Smart Investor

Property taxes, though often begrudgingly paid, play a pivotal role in supporting our communities. From fire departments to schools and local law enforcement, the funds gathered are channeled into vital public services. Essentially, these taxes strengthen our federal, state, and local governments, enabling a solid infrastructure with cultivated services that benefit every citizen. For those navigating the home buying process, property taxes might seem straightforward – a mere annual financial obligation; however, delving deeper reveals a myriad of local regulations that can muddy the waters.

The inception of property taxes can be traced back to approximately 3000 B.C. in ancient Egypt, where funds raised were funneled into iconic projects such as building the pyramids. Fast forward to ancient Greece and Rome, taxes fueled the construction of structures that still captivate us today. In America’s early colonial days, taxation practices varied, but it’s notable that some of these funds bolstered the fight for freedom during the Revolutionary War. The 18th century ushered in a significant shift, with states like Illinois, Missouri, and Tennessee pioneering a taxation approach based on property value – which marked the dawn of ad valorem taxing.

In contemporary society, property taxes predominantly serve local needs and improvements and are commonly collected at the municipal level, reflecting the localized nature of the services they finance. The extensive list of local taxing authorities encompasses cities, counties, school districts, community development districts (CDDs), special taxing districts, villages, townships, and other governing jurisdictions. The funds dispersed from these taxes bolster our education system, libraries, infrastructure, law enforcement, public transport, and an array of other community-centric services.

Today’s property tax calculations are more nuanced than their ancient counterparts and calculated with 3 methodologies:

1. Sales Evaluations: Determines a property’s market value by comparing it to similar recently sold properties, considering unique attributes and current market conditions.

2. Cost Method: Estimates the expense of rebuilding the property at today’s prices, subtracting any depreciation due to age or wear and tear.

3. Income Method: Used primarily for investment properties, this method gauges potential rental income, subtracting operational costs and considering the return on investment.

Diving into the realm of property taxes can be complex, but all taxes fall into 2 essential classifications:

1. Ad Valorem Taxes: These taxes are based directly on the value of a property or transaction.

Example: If a home is appraised at $300,000 in a county with a 1% ad valorem tax rate, the homeowner would owe $3,000 in taxes for that year.

2. Non-Ad Valorem Assessments: These are charges tied to specific services provided to the property, irrespective of its value.

Example: A flat $50 monthly fee imposed by a homeowners’ association for community landscaping and security, regardless of the home’s market value.

Understanding how property taxes are calculated and where they are applied is crucial for savvy investors to protect themselves from hidden costs and ensure a sound financial property investment.

Leveraging Tax Tactics for Protection

Taxes underpin the support systems of governments at the national, state, and local levels. When these remain unpaid, taxing authorities will act decisively to recover their dues. For investors, navigating this space requires an understanding of tax lien certificates, tax deeds, and the importance of tax certificates as they offer potential strategies to safeguard against hidden costs.

3 Tiers of Taxing Authorities:

1. Federal
2. State
3. Local

When property taxes go unpaid at any of these levels, authorities can put a lien against the property in question. The title might then be auctioned with its associated liens. If the situation escalates to a Tax Suit, it could result in structured repayments, bankruptcy, foreclosure, or a tax sale. Certain thresholds of debt on homesteaded property might see the tax collector directly issuing a certificate to the county, which can lead to a judicial sale, clearing all taxes, liens, or mortgages tied to the property.

Tax Lien and Tax Deed Certificates: How They Protect Investors

Understanding the difference between a tax lien certificate, a tax deed, and a tax certificate is crucial for investors aiming to protect their investments:

Tax Lien Certificate: Acquiring a tax lien certificate means buying the right to collect the unpaid taxes on a property, not the property itself. If the original property owner wants to reclaim their property, they must repay the owed amount, plus any interest, to the certificate holder. For investors, this represents a potential return on investment as the interest can be substantial. By holding a tax lien certificate, an investor safeguards their investment. If the property owner fails to settle their dues within the redemption period, the investor can move forward to acquire the property, often at a fraction of its market value, thus reducing hidden costs of direct property acquisition.

Tax Deed Certificate: Purchasing a tax deed is an indirect method of acquiring property. Instead of buying the property outright, an investor buys the unpaid taxes, which often comes at a much lower cost than the property’s market value. If the original owner fails to reimburse the investor (including the owed taxes and accrued interest), the investor becomes the property’s rightful owner. This strategy minimizes hidden costs because investors are essentially purchasing properties at significantly reduced prices.

Why You Need a Tax Certificate: Not to be confused with a Tax Lien or Tax Deed Certificate, a Tax Certificate is a comprehensive document that outlines the individual taxing authorities for a property and its history of taxes. It provides property assessment details, the current tax rate, and a summary of the amounts for the current tax year. Such a certificate will show any unpaid balance with local taxing authorities and any tax liens on the property. Obtaining a Tax Certificate is crucial for investors to determine what taxes they will pay, verify taxing districts, understand municipal utility providers paid through property taxes, uncover potential unrecorded debt, and ascertain any tax liens. For investors, acquiring a tax certificate is a pivotal strategy to uncover potential tax delinquencies that often go unnoticed in standard title searches.

By understanding and leveraging the mechanisms of tax lien and tax deed certificates, as well as a comprehensive tax certificate, investors can unlock invaluable strategic advantages. These tools not only present opportunities for profitable returns but also serve as shields against the pitfalls of hidden costs. While the path of property investment is riddled with complexities, with the right knowledge and approach, proper tax tactics can pave the way for more secure and informed decisions. As every state wields its unique set of rules and perimeters, investors can benefit significantly from seeking counsel with local tax professionals to maximize their protection and potential gains. In essence, when used judiciously, tax-based strategies can transform challenges into opportunities for the discerning investor.

Navigating HOAs and COAs for Investment Properties

When purchasing an investment property, it’s crucial to understand the role and reach of homeowners’ associations (HOAs) and condominium owners’ associations (COAs), which oversee around 53% of U.S homes. These organizations, while beneficial in maintaining property standards, come with guidelines and financial obligations.

If your purchased property falls under a HOA or COA, it may be beneficial to utilize either of these two tools to uncover potential fees and hidden costs:

Association Estoppel– known by various names depending on the state, this legal document highlights the property’s standing with the HOA or COA. An estoppel reveals any outstanding dues, violations, special assessments, and more, providing a transparent picture of any future costs or obligations.

Association Identification– An efficient service tailored for companies that prefer direct communication with associations or management firms but lack the bandwidth for extensive preliminary research. Identification can provide basic property information.

By leveraging these tools, investors can confidently navigate the intricate dynamics of HOAs and COAs, ensuring they make sound and well-informed property investment decisions.

Utilizing Best Title Practices & Post-Closing Procedures

In the real estate sector, title defects represent a discrepancy or irregularity in the ownership or description of a property; these issues can range from liens against the property to documentation errors. Recognizing these defects early is crucial, as they can lead to disputes and even litigation, which can be costly. Establishing open channels of communication between stakeholders, such as lenders, sellers, and buyers can preempt many of these issues.

These staggering statistics emphasize the importance of a thorough title inspection and a comprehensive post-closing process:

– 30% of land titles have defects, which means 1 in 3 closings will require curative work.

– 30% of title issues stem from survey or boundary issues.

– 10% of post-closing recordings have issues, many of which can result in title claims.

– 17% of all properties contained code issues.

– 18% of all properties had a building issue.

– 30% of all properties had overdue utility bills.

– 61% of researched properties have issues that could become the responsibility of an unaware buyer.

To initiate the best title practices and ensure a proper post-closing procedure, it’s critical to be vigilant at every step. Here are the most prudent actions you can take to ensure your title is clear and your closing is finalized without the possibilities of issues down the road:

1. Comprehensive Title Examination: Hire only highly experienced title examiners covered under Errors and Omissions Insurance to safeguard against potential title issues. Utilizing standardized procedures ensures consistent quality checks and minimizes the chance of oversights.

2. Inspect Records: Merely relying on indexes can be insufficient. Accessing documents directly from land records helps in unearthing any underlying discrepancies, ensuring a title free from potential county clerical errors.

3. Thorough Historical Review: For properties with long-standing histories, it’s crucial to search beyond the state’s standard timeframe. This ensures all title-related documents, even those from long ago, are accounted for, providing a clearer picture of the property’s title lineage.

4. Court Proceedings & Documentation: Titles can have legal complexities. By scrutinizing court proceedings related to title rights and meticulously reviewing schedule B and lender documents, potential defects in the title chain can be spotted and rectified early on.

5. Proactive Title Defect Solutions: Navigate the complexities of potential title defects with preparedness. For instance, to prevent issues from invalid tax sales, carefully review all associated notices. Also, confirming the marital status of sellers and borrowers is crucial in preempting any future spousal title claims.

6. Conduct Municipal Lien Searches: Not all liens are immediately visible in public records. A comprehensive municipal lien search brings to light unpaid utility bills, outstanding code violations, and building issues, offering a more transparent view of any potential encumbrances on the property.

7. Get a Land Survey– A survey provides a detailed and accurate representation of a parcel of land, depicting its boundaries, features, and other critical elements, preventing unforeseen disputes and costly rectifications later. While often perceived as an additional expense for buyers, a survey is a safeguard for investors, ensuring the integrity of a transaction and minimizing unexpected closing delays.

8. Guarding Against Mechanic’s Lien: Mitigate the risk of a mechanic’s lien filed during or after closing by acquiring property permit histories and securing lien waivers from owners or contractors.

9. Post-Closing Diligence: Despite advancements in digital record-keeping, the real estate and title industry often grapple with outdated methods prone to human errors. Simple mistakes, like number transpositions on a mortgage satisfaction document, can result in challenges for homeowners during resale. Be sure to track/verify all post-closing documents are accurate.

By prioritizing these practices, property investors can confidently secure their assets, ensuring long-term stability and minimizing unforeseen risks.

Knowledge & Due Diligence: Your Best Protection Against Hidden Fees and Costs

In the intricate world of property investments, due diligence is not just recommended, it’s imperative. The realms of title practices, property taxes, and homeowners’ associations conceal pitfalls that can quickly turn a promising investment sour. Understanding and navigating tax strategies, title defects, and HOA/COA obligations are pivotal to safeguarding one’s assets and financial interests.

Knowledge truly is power in the real estate domain, which is why investors need to be educated and equipped with the right tools to make informed, secure, and profitable decisions to ensure success with their property investments.

For a deeper dive into protecting yourself from hidden debts and costs in investment properties, download our comprehensive whitepaper.

Harnessing the Power of Real Estate through Equity Trust Self-Directed IRAs

(Disclaimer: The content of this article is not intended as financial or investment advice but rather information for educational purposes only.)

In the vast landscape of investment, real estate has continually emerged as a steadfast beacon for astute investors. This allure isn’t just due to its tangible nature, but also its historical stability and potential for impressive returns. For individuals fortunate enough to manage an Individual Retirement Account (IRA), there’s a potent, often underutilized avenue for amplifying their investment prowess—Equity Trust real estate investments. This comprehensive guide aims to shed light on this exciting confluence of IRA and real estate, opening doors to potentially transformative opportunities.

Decoding Equity Trust in the Universe of IRAs

At first glance, Equity Trust may appear as just another name in the vast financial sector. However, delve a bit deeper, and its monumental role in the IRA-based real estate investment domain becomes palpable. Equity Trust represents a seismic shift from the norms, advocating for a synergy that allows investors an opportunity to step outside the confines of conventional assets. Instead, they’re ushered into a world where the tangibility of real estate intersects with the benefits of an IRA.

Traditional vs. Roth IRAs: Navigating the Dual Powerhouses

Understanding the dual dynamics of IRAs is pivotal. Each offers unique advantages that can be tailored to individual financial objectives:

  • Traditional IRA: Rooted in the principles of tax-efficient investing, the Traditional IRA permits tax-deductible contributions. Furthermore, it defers tax implications until the time of withdrawal, acting as a strategic ally for those eyeing long-term real estate ventures.
  • Roth IRA: The Roth IRA stands apart, emphasizing post-tax contributions. Its crowning feature? The assurance that once your real estate assets bear profits and meet qualifying criteria, they’re inherently tax-free.

Weighing the merits and potential drawbacks of each, especially in the context of Equity Trust real estate investments, is vital. It not only influences your immediate financial strategy but also impacts long-term wealth accumulation and tax implications.

The Structured Path to Real Estate Mastery via Equity Trust IRA

Embracing the world of Equity Trust real estate investments necessitates a methodical approach. Here’s a step-by-step guide:

1. Initiate with the Right Custodian: Begin by engaging with a Self-Directed IRA Custodian, specialized in real estate. Their proficiency in Equity Trust transactions will be invaluable in your journey.

2. Transition Seamlessly: Migrate funds from your existing setup to the newly chosen self-directed IRA. It’s imperative these funds align with the stringent Equity Trust standards.

3. The Art of Property Selection: In real estate, the mantra ‘due diligence’ reigns supreme. It’s about immersing oneself into rigorous property valuations, meticulous inspections, and acquiring an in-depth understanding of property market dynamics.

4. Sealing the Transaction: One cardinal principle to remember during the acquisition phase is that the property title resides with the IRA. This mandates that every financial transaction—be it income or expenditure—related to the property flows through the IRA.

5. Guided Investment Management: The eventual profits from your real estate venture flow directly back to the IRA, ensuring the continuity of its preferred tax status.

Unraveling the Advantages of Equity Trust Real Estate Investments

The blending of IRAs with real estate under the Equity Trust banner offers investors a suite of compelling benefits:

  • Diversification Redefined: Real estate acts as a formidable hedge, shielding portfolios from the whims and caprices of market volatility.
  • A Dual Revenue Stream: Real estate stands out, thanks to the twofold income potential of capital appreciation and potential rental inflows.
  • Tax Leverage: Both the Traditional and Roth IRAs come equipped with distinct tax benefits, providing a significant boost to your overall returns.

Anticipating and Overcoming Challenges

Every investment avenue comes with its set of challenges. Here’s how you can prepare:

  • Liquidity Dynamics: Unlike the near-instantaneous liquidity of stocks, real estate requires strategic planning. A long-term vision can mitigate potential liquidity crunches.
  • Understanding UBIT: If leveraging borrowed funds via your IRA for property acquisition, be prepared to navigate the UBIT (Unrelated Business Income Tax) landscape.
  • Deciphering Fees: Given the specialized nature of Equity Trust real estate IRAs, fees might be slightly elevated. However, considering the potential benefits, these can often be viewed as a worthy investment.

Carving Your Niche in Real Estate with Equity Trust

The proposition of leveraging Equity Trust for real estate investments via an IRA is both tantalizing and promising. But success in this domain requires more than just enthusiasm; it mandates precision, expertise, and a keen market sense.

Enter IRA Title Pro. Here, we don’t merely offer services—we redefine them. Our commitment is reflected in our track record, enabling investors to finalize deals 11 days ahead of the industry norm. With a seasoned team that specializes in IRA real estate closings, we ensure each transaction resonates with efficiency, compliance, and rapidity.

Keen on catapulting your real estate endeavors to the next level? Let us be your trusted ally. For any questions, our experts are just an email away at Closing@IRATitlePro.com. In the world of real estate investment, let us be the compass that guides you to uncharted successes.

The Ultimate Guide to Property Management for Real Estate Investors

(Disclaimer: The content of this article is not intended as financial or investment advice but rather information for educational purposes only.)

This article is based on the episode of the Building Equity podcast “A Guide to Property Management for Real Estate Investors” with guest David Puskaric, property manager and real estate agent from Parkline Realty in Naples, Florida. Click here to watch the episode.

Investing in real estate is one of the smartest, quickest ways to grow your wealth. Whether it’s generating a steady source of cash flow, benefiting from tax breaks, or building equity, investing in real estate is the best strategy to create long-term profits. While investing in real estate is an exceptionally prudent tactic, it’s also a major financial decision that comes with significant responsibilities for an investment to be successful.

When it comes to operating a fruitful real estate venture, property management is paramount. For investors to maximize their investment’s potential and ensure the longevity of their property, it’s crucial for property management to be conducted efficiently. It’s easy for new investors to gloss over the necessity for scrupulous property management, and many times this neglected component can result in losses on their investments.

Top 3 Mistakes Investors Make When it Comes to Property Management

While the stress of owning real estate property can seem overwhelming at times, real estate investors need to understand the importance of adequate property management for the overall health of their investment. Let’s look at the 3 biggest mistakes investors make when it comes to managing their properties:

1. Being Too Nice- The adage goes, “People mistake kindness for weakness,” and that testament still reigns true today, especially when it comes to business. Many real estate investors who are too nice to their tenants often get taken advantage of: whether it’s allowing rent to be paid late or overlooking major red flags in a tenant’s application, being too nice can become a major setback for investors looking to maximize their investment potential. Benevolence with boundaries is the best approach when it comes to operating rental property to ensure investors aren’t losing money and their properties are generating steady revenue. Some people will look for opportunities to capitalize on the kindness of others, so it’s always great to be aware, making sure you’re not being cheated.

2. Trying to Manage on Their Own- Oftentimes, investors try to take on too much responsibility when it comes to managing their properties. It’s easy for investors to become too attached to their investments, where they can’t separate ownership from management, resulting in answering every single tenant complaint immediately, running to answer every single call and make even the most remedial of repairs. This type of managing can wear down an investor, especially if they own more than one property, making overseeing an almost impossible task to keep up with. It’s recommended to hire a team to handle your property management, especially if you’re new to investing in real estate, to ensure your investment(s) are getting the supervision needed without demanding too much of the investor. Putting a team together, working with a local agent, realtor, a property manager, and learning the local market is the most effective way to manage your property.

3. Not Properly Screening Applicants- Many investors are self-managing their properties, which leaves room for error with screening applicants. It’s crucial for investors to ensure they are maximizing the questions on their applications; confirm if your tenant has ever been convicted of a crime (misdemeanors or more severe charges) and verify credit scores and income; ensure your tenant can afford to live in the residence. If an investor isn’t asking the right questions on the application, there is a higher risk that a potentially problematic tenant could be selected, resulting in issues down the road that could lead to net losses.

It’s highly recommended that owners create a manual for tenants, outlining their maintenance responsibilities for living in the unit, such as switching out filters or cleaning vents. It’s also helpful to provide instructional videos to confirm each task is executed properly.

Protect Your Investment with a Property Management Company

While the throes of owning a real estate property may keep some investors up at night playing catch up, hiring a property management company is the smartest thing to do to protect your investment. Let’s look at the top reasons investors should utilize an accredited property management company:

1. Understanding Local and State Regulations- It’s not enough to just maintain a property, it’s also imperative that all rental properties abide by local and state regulations. Renting out a property in Ohio can be very different than a state like Florida based on the state regulations. Whether it’s registering the property to abide by local regulations, being ADA compliant, or aligning with the Fair Housing laws, not having a thorough understanding of these rules and regulations can be costly for an investor. A qualified property management will ensure your property is compliant with all regulations, mitigating investor risks.

2. Managing Security Deposits and Prepaid Rent- Another common issue with those self-managing their properties is improperly comingling tenant security deposits and prepaid rent; these need to be held separately as funds allocated for damage and the first couple of months’ rent. It’s easy for investors to misappropriate this money at some point, which can lead to legal issues. Hiring a property management company as a third party eliminates the investor liability while ensuring there are no conflicts with the usage of these funds.

3. Complete Organization and Oversight- While many investors may resort to taking mental notes or creating their own spreadsheets and documents, the chances of making accounting errors, overlooking red flags, and committing other omissions increases dramatically. Most accredited property management companies utilize streamlined software that handles all aspects of overseeing a property, from functioning as a repository for official documents/applications and complete expense reports, eliminating any tracking mistakes while providing complete clarity on the rental operation. A professional property management company will also guarantee you’re selecting the right tenant for your unit by making sure all the necessary questions and checks are being conducted during your screening process.

Working with a knowledgeable property management company not only makes managing rental properties easier, but it also minimizes risks and liabilities so investors can focus on other pressing matters while attaining peace of mind.

Increase Your Annual Percentage Yield by Using a Property Management Company

Whether it’s your first rental property or you’re a veteran in the real estate realm operating multiple properties for profit, it’s critical that property owners utilize a property management company to maximize the rate of return on their investment(s). Based on the latest data[1], investors that hire a property management company to oversee operations net a 7% annual yield differential, meaning investors stand to make more money by having the right property management company in place.

Efficacious property management is a crucial aspect to ensuring profitable real estate investments. If you’re looking to invest in real estate using your self-directed IRA, IRA Title Pro helps investors through the entire closing process, from start to finish. Whether it’s buying or selling, IRA Title Pro offers a plethora of helpful tools, resources, and guides for interested investors to gain insight and make it easier for investors to close on real estate properties, offering a quicker, seamless closing experience.

Start investing today and close 11 days faster than any other company by using IRA Title Pro: Click here

[1] Gettleman statistic on using a property management company

The Latest Real Estate Guide to Investing in the U.S. Housing Market

(Disclaimer: The content of this article is not intended as financial or investment advice but rather information for educational purposes only.)

This article is based on the episode of the Building Equity podcast “What’s ACTUALLY Happening in the US Housing Market | A New Real Estate Investors Guide in 2023” with guest Jason Hartman, CEO of Empowered Investor and Real Estate Tools, available on YouTube right now. Click here to watch the episode. Check out Jason Hartman’s work here.

Investing in real estate may be tough for some to consider with asset prices being so high. It can be extremely discouraging when potential investors see the costs associated with completing a real estate transaction, so much so that it may deter people and they miss out on an incredible opportunity to generate long-term profits.

It’s crucial to understand the metrics behind real estate investing when looking at both cash flow and asset prices versus other hard assets, like investing in gold and silver as well as notes and mortgages that are secured by real property investments in private businesses. It’s tough to grasp the worth of an asset without getting perspective on how valuable it actually is when compared to others.

Understanding the Current Economic Climate as it Relates to Real Estate Investing

Recent data suggests that we are on the cusp of a recession. While the Federal Reserve is trying the best they can to stop inflation for our centrally planned economy, had they raised interest rates sooner and at a more gradual pace, the idea of a soft landing might have been more plausible.

While inventory in the housing market is higher than it was before, it is still historically low. As of February 2023, there’s about 625,875 homes for sale in the United States. Experts suggest that a normal market would contain anywhere from 2 to 2.5 times that amount, leaving the current market with approximately 6 months left of inventory at current absorption rates. This isn’t the only deviation; we’re also seeing current property owners with incredibly cheap mortgage rates.

Many homeowners with mortgages have rates far below today’s level, and recent data reveals that 37% of all homes in the United States are paid off, meaning overall, people are not under financial duress with mortgage obligations. To technically have a “crash”, there should be both distressed owners and distressed sellers.

Note: At the time of this writing, we are seeing consumer credit card debt and subprime auto loan delinquencies surge. How this affects the 37% of homes that are free and clear we don’t know, but figured it worthwhile to include as it seems likely we are transitioning.

Based on current data and trends, it’s safe to assume that the rest of the country also has relatively low existing mortgage rates, so there is no evidence or indicators of an imminent crash as of right now.

The Biggest Mistake Investors Make

The first mistake that most investors make is that they don’t invest. People find all types of justifications and reasons to avoid investing in real estate, whether it’s overall hesitancy or attempting to time the market. However, as with any asset class, market timing has historically been proven to be an ineffective strategy. The most successful investors are those that make smart, value-oriented decisions, buying and holding their assets.

A perfect example of this is the great recession of 2008: this was an anomalous instance, an occurrence that happened once in seven decades, and as the economy rebounded, prices began to rise and people began to worry, thinking the metaphorical “bubble” was on the verge of bursting any minute. As many people anticipated this being the peak of the market, they waited for a cool off period, preserving their cash for a “right time” to invest, creating even more doubt and missed opportunities. Had people remembered that we are in a centrally planned economy, they would have had more confidence to capitalize.

As the central planners react to the market, it’s not just a matter of supply and demand or basic economic fundamentals. When things get bad, the Fed makes changes and specific adjustments while the government does the same. During the COVID-19 pandemic, when many chose not to invest or change their current investment strategy, some lost out on appreciation. And that’s the thing about investing, you actually need to invest if you want to reap the benefits.

Furthermore, research has shown if people hold onto their money without investing, it is guaranteed they will lose 9% a year just to inflation.

Using the Right Measuring Stick to Understanding Intrinsic Value

Many people may have trouble assessing value because they’re using the wrong measuring gauge; they compare the price and the value of real estate to one thing: the U.S. dollar. The U.S. dollar is a moving target, meaning it’s constantly being debased by inflation, which makes this metric a huge mistake in terms of determining value. It’s smarter to compare with other commodities and asset prices to understand the concept of intrinsic value.

In November 2022, the National Association of Realtors is claimed valuations could rise, year over year by 1%. Yet larger institutions like Morgan Stanley and Goldman Sachs  are predicting 5-10%, claiming over 2023, we’ll be seeing a 5-10% drop in valuations.

Looking at a country as large and diverse as the United States is, there are almost 400 MSAs (Metropolitan Statistical Areas). There are 50 states with over 3,100 counties and 9,000 cities, meaning lumping these all together is not the correct metric for an accurate assessment.

To get a more precise estimate, the Hartman Comparison Index (HCI) was created by Jason Hartman. This tool compares the price of real estate over the last 52 years to other commodities with intrinsic value that people need to live that are not attached to any one currency.

Commodities such as lumber, concrete, copper, and petroleum products all have intrinsic value, meaning it doesn’t matter what currency they’re being traded in because they’re traded worldwide. They’re needed by everybody.

Hartman Comparison Index (priced in gold)

This HCI example compares the prices of homes to gold. Billions of people consider gold to be money, and up until 1971, the United States operated on a gold standard. But let’s look back to 1970 for some insight when the median price house was $23,000 and gold was $35 an ounce. If you wanted to buy the median price house, you would need 654 ounces of gold. Just 10 years later, as we experienced inflation from the 80s, the median price house tripled to almost $63,000. The gold price went way up to $653, and it would only take 97 ounces of gold to buy the median price house.

Fast forward to 2010 as the country is coming out of the Great Recession; the median house price for a home is $171,000, and gold is almost at $1,100 an ounce. It would take 158 ounces of gold to buy the median price house. Today, the median price of a house is $390,000, and gold is about $1700 an ounce. It would take 227 ounces of gold to buy the median price house.

Priced in gold, housing is certainly not the cheapest it’s ever been, but it’s also not the most expensive it’s ever been either.

Hartman Comparison Index (priced in oil)

Looking at oil, arguably one of the world’s most important commodities, back in 1970, the $23,000 median price house priced in oil was at $4 a barrel, so it would’ve cost 6,400 barrels of oil to buy the median price house. Ten years later in 1980, the house prices almost tripled, and oil was up to $37 a barrel, meaning it would’ve taken 1700 barrels of oil to buy a house.

Looking at today, the median price of a house is $390,000, and oil is at approximately $94 a barrel, meaning it would require 4,100 barrels of oil to buy the median price house.

When assessing whether housing in oil is cheaper or more expensive, it’s clear that it’s not the cheapest it’s ever been but certainly not the most expensive either.

Hartman Comparison Index (priced in rice)

We can look at other popular commodities like rice, which is the food stock of more than half the world, and priced in rice, housing is rather cheap today. And we can keep going.

Hartman Comparison Index (priced in shares of S&P)

We can price it in shares of the S&P 500 index. Priced in the S&P, housing is relatively cheap; it’s only 98 shares of the S&P to buy the median price house. According to the chart, back in 1970, it cost 249 shares of the S&P to buy the median price house, and in 2010, it was 136 shares, meaning price in shares of the S&P for housing is rather cheap, not the cheapest it’s ever been but still affordable.

The best way to comprehend the measurement of what an asset is worth is by comparison/relation to other hard assets. Understandably, most people don’t denominate their lives in gold or oil or any other commodities in the Hartman Comparison Index, but they have a choice, a major one that involves their money and, essentially, their future wealth. When people get paid every two weeks or every month, they do something with their extra money; they either put it in the bank or in a savings account, or they buy stocks or commodities, and they decide on a way to store their wealth until they save enough for a down payment on a house. If people save it in dollars, they can expect that over time because of inflation, they will lose money. Based on these revelations and empirical data, it’s clearly smarter to have money invested in things rather than currency units to maximize their IRA potential.

For more information on the Hartman Comparison Index or any of Jason Hartman’s teachings/strategies, visit his YouTube channel(https://www.youtube.com/@JasonHartmanRealEstate), JasonHartman.com, or listen to his podcast Creating Wealth(https://www.jasonhartman.com/tag/creating-wealth-show/). Investors are also encouraged to check out his Empowered Investor Pro membership(link) and his formal coaching program(link) for further guidance.

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