Norada Real Estate Investments

Colorado Springs Housing Market Prices & Forecasts 2023

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The Colorado Springs housing market, located in El Paso County, Colorado, has experienced significant changes in the past year. The market has seen a decrease in new and sold listings, as well as an increase in the inventory of homes for sale and the time it takes to sell a home. Additionally, the median sales price has decreased slightly while the average sales price has increased.

These trends suggest that the Colorado Springs housing market may be shifting toward a more balanced market, where buyers have more options and bargaining power. El Paso County is a significant housing market in Colorado, with a population of over 700,000 people. The county covers an area of 2,130 square miles and is home to the city of Colorado Springs, the second-largest city in Colorado.

According to the data released by the Colorado Association of REALTORS® in January 2023, the El Paso County housing market was experiencing a slowdown. The number of new listings and sold listings was down significantly from the previous year, indicating a decrease in demand for homes. The median sales price for single-family homes was down 1.1% from last year, while the average sales price was up 2.4%.

Days on the market until the sale had increased by 257.1%, indicating that it took longer to sell a home in January 2023 than in the previous year. The inventory of homes for sale had also increased by 113.0%, indicating an oversupply of homes on the market. The monthly supply of inventory was 1.4 months, which was higher than the same time last year (0.5 months).

Months of supply is a good indicator of whether a particular housing market is favoring buyers or sellers. Typically, a market that favors sellers has less than 6 months of supply, while more than 6 months of supply indicates an excess of homes for sale that favors buyers. Overall, the El Paso County housing market was experiencing a slowdown in January 2023, with a decrease in demand and an increase in supply. This trend is likely to continue until there is a significant shift in the market's supply and demand dynamics.

Here's what housing data looked like in January 2023, which was released by the Colorado Association of REALTORS®. The sales data is for Single Family Homes in El Paso County, CO.

  • The median sales price was $445,000, down 1.1% from last year.
  • The average sales price was $519,861, up 2.4% from last year.
  • New Listings were down 24.2% from last year.
  • Sold Listings were down 28.4% from last year.
  • Percent of List Price Received = 98.3%, down -3.2%.
  • Days on Market Until Sale were 50, up +257.1%.
  • The inventory of Homes for Sale was up +113.0%.
  • Months Supply of Inventory was 1.4, an increase from Jan 2022 (0.5 months).

Colorado Springs Housing Market Trends

Analyzing real estate data on a month-to-month basis gives you a much broader perspective of the direction in which a market is moving. We shall now discuss some of the most recent housing trends in the Colorado Springs area. We shall mainly discuss median home prices, inventory, and growth, which will help you understand the way the local real estate market moves in this region.

Colorado Springs is a city in Colorado that consists of 69 neighborhoods. It was a buyer's market in January 2023, which means that the supply of homes is greater than the demand for homes. According to Realtor.com, the median listing home price in Colorado Springs, CO was $439.9K, trending up 2.9% year-over-year. The median listing home price per square foot was $212, and the median home sold price was $335K.

Some of the best neighborhoods in or around Colorado Springs, Colorado are Village Seven, Stetson Hills, and Wolf Ranch. These neighborhoods are popular due to their good schools, newer homes, and affordable prices. Overall, Colorado Springs offers a range of affordable housing options, good schools, and plenty of amenities for residents to enjoy. The city's housing market is currently a buyer's market, which may make it an attractive option for those looking to purchase a home.

Colorado Springs Real Estate Market Forecast 2023

What are the Colorado Springs real estate market predictions for 2023? Let us look at the price trends recorded by Zillow over the past few years. The Colorado Springs housing market has experienced a modest increase in home values over the past year. According to Zillow's Home Value Index, the average home value in Colorado Springs is $441,645, up 1.6% from the previous year. This suggests that the local real estate market is stable and has seen steady growth in recent years.

In terms of the market forecast, Zillow's data suggests that the market will remain stable over the next year. This indicates that home values are expected to remain relatively consistent, and there are not likely to be significant changes in the near future. The median sale-to-list ratio in December 2022 was 22.0%, suggesting that homes in Colorado Springs are selling for slightly below their listed price. However, it is worth noting that nearly half (49.3%) of all home sales were sold over their list price, indicating that there is still demand for properties in the area.

The median days to pending, as of January 2023, is 38 days, which is a relatively short amount of time. This suggests that the local real estate market is active, with buyers quickly making offers on desirable properties. In terms of neighborhoods, Zillow provides median ZHVI values for various areas in Colorado Springs. This can be useful for home buyers who are interested in specific neighborhoods and want to understand the typical home values in those areas.

The housing market forecast for Colorado Springs, based on Zillow's data, suggests a slight decline in the short term but a recovery in the long term. According to the Zillow Home Value Index, the Colorado Springs metro area is expected to experience a decrease of -0.4% in home values by the end of February 2023. This decline is projected to continue through April 2023, with a further decrease of -0.7%. However, the housing market is expected to improve by January 2024, with a slight decrease of 0.5%.

Overall, this data suggests that the Colorado Springs housing market may experience some short-term challenges, but the long-term outlook is positive. As with any forecast, these predictions are subject to change based on various economic factors such as interest rates, job growth, and supply and demand dynamics in the housing market.

Colorado Springs Real Estate Market Forecast
Credits: Zillow

Colorado Springs Real Estate Investment: Should You Invest?

Is Colorado Springs a Good Place For Real Estate Investment? Many real estate investors have asked themselves if buying a property in Colorado Springs is a good investment. You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2023. Let’s talk a bit about the Colorado Springs area before we discuss what lies ahead for investors and homebuyers. The Colorado Springs real estate market gets overlooked in favor of bigger markets like Denver.

However, Colorado Springs has several things in its favor for residents and real estate investors alike. Colorado Springs sits on the eastern side of the Rocky Mountains. Colorado Springs contains nearly half a million people. The Colorado Springs metropolitan area is home to around seven hundred thousand people. The Colorado Springs area is seeing continual, rather fast growth. Colorado Springs real estate has continued to appreciate faster than most of the markets in the US.

Conditions in the Colorado Springs real estate market seem to be in a sustainable, upward direction and show no signs of slowing down. Inventory is low and prices are increasing at a steady pace. The local economy is strong and mortgage rates remain low. Colorado Springs's real estate appreciation rate in the latest quarter was around 3.02%, which equates to an annual appreciation rate of 12.63%. You can either choose to invest in your future or market your home to potential buyers.

If you are looking to make a profit, you don’t want to buy the most expensive property on the Colorado Springs real estate market and expect to make a good profit on rents. Perhaps you are looking for a slightly different hold-over, an investment property in Colorado Springs that you might move into or sell at retirement in the future. Either way, knowing your profit potential and purpose is the first thing to consider. Let’s take a look at the number of positive things going on in the Colorado Springs real estate market which can help investors who are keen to buy an investment property in this city.

Colorado Springs is a Rental Market

Many people know that the Air Force Academy is located in Colorado Springs. However, the student market in Colorado Springs is both larger and more diversified than the military student population. The University of Colorado Springs hosts over twelve thousand students. Colorado College, Colorado Technical College, Remington College, Colorado Christian University, and the University of the Rockies are also located here. This provides a large, diverse student market that rents properties across the Colorado Springs real estate market.

U.S. News and World Report magazine discusses the large retiree community in Colorado Springs. The area’s abundant recreational opportunities and proximity to military services like commissaries and VA facilities explain why more than 10% of the population is retired – many of them military veterans and their families. Peterson Air Force Base sits on the eastern edge of town.

For Airbnb's attractability and business building, there are two huge military bases with Air Force, Naval Academy. Fort Carson, an Army base, is located within the city limits. The infamous Cheyenne Mountain is located just to the west of town. A side benefit of this diverse military market is that the Colorado Springs real estate market enjoys a large, permanent population of renters but without the wild swings that come with the rise and fall of a single military base’s fortunes.

Latest Rental Trends: As of February 19, 2023, the average rent for an apartment in Colorado Springs, CO is $1,200 which is a 12% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Colorado Springs increased by 1% to $1,005. The average rent for a 1-bedroom apartment increased by 2% to $1,200, and the average rent for a 2-bedroom apartment increased by 2% to $1,550.

  • Two-bedroom apartments in Colorado Springs rent for $1,550 a month on average (an 11% increase from last year).
  • Three-bedroom apartment rents average $2,175 (a 5% increase from last year).
  • Four-bedroom apartment rents average $2,475 (a 3% increase from last year).

According to RENTCafe, 36% of the households in Colorado Springs, CO are renter-occupied. The average size for a Colorado Springs, CO apartment is 837 square feet with studio apartments being the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage. 48% of the apartment can be rented in the price range of $1,001-$1,500 while 36% fall in the price range of $701-$1,000.

The most expensive Colorado Springs neighborhoods to rent apartments in are Briargate, Northgate, and Central Colorado City. The cheapest Colorado Springs neighborhoods to rent apartments in are East Colorado Springs, Southeast Colorado Springs, and Northeast Colorado Springs.

The Landlord Friendly Market Compared to the Rest of the West

Colorado is almost as landlord-friendly as Arizona and Texas, but it is far more landlord-friendly than Nebraska, Kansas, or any West Coast state. Colorado allows you to quickly evict tenants who don’t pay their rent. Once you give them a demand for compliance, they have 72 hours to either pay up or move out. If that 3 day period expires and you go to court, the courts typically side with the landlord. After that ruling, the tenants have 48 hours to leave, and then local law enforcement will enforce the eviction order. Another major point in its favor is that you’re not required to get tenants a 24-hour notice before you visit the property.

Short-Term Rental Investment Opportunities

A city that’s within a stone’s throw of Pike’s Peak and the rest of the Rocky Mountains is going to attract tourists. Garden of the Gods is a very famous public park located in Colorado Springs. It was designated as a National Natural Landmark in 1971. It features stunning geological formations, rock climbing, nature trails, and the Garden of the Gods Visitor & Nature Center. Another major attraction is the US Olympic Training Center, located in Colorado Springs. Colorado Springs allows properties to be rented out on a short-term basis, but you must have a short-term rental permit and collect the appropriate taxes.

Colorado Springs’ regulations on short-term rentals are not as stringent, though, as those in nearby “tourist” towns like Breckenridge. Colorado Springs is a very Airbnb-friendly city. You can convert your property into an Airbnb vacation rental and rent it out to vacationers and tourists on a short-term rental basis. Owning a house near the Gardens of the Gods Park can prove to be a goldmine in building up your Airbnb rental business. For setting up an Airbnb business, there are lots of outdoor attractions, 3 hospitals, the Broadmoor hotel (historic hotel on a lake), 2 cute downtown streets with restaurants (downtown and colorado city), 90mins from Denver, and 2 hours from skiing in Breckenridge.

Their airport offers direct flights to many cities via Frontier & United. You can also co-host clients in Colorado Springs through profit sharing with landlords. You can charge landlords a start-up fee and 20% commission for co-hosting (finding clients and getting the property Airbnb ready). The controversial Airbnb ordinance was passed in November 2018 by the Colorado Springs City Council. Under the ordinance, property owners must apply for a license, pay taxes, and obey neighborhood rules. This came into effect on January 1st, 2019.

Colorado Springs' Strong Job Growth & Demographics Momentum

The Colorado Springs area boasted an unemployment rate of around 3% in 2018, more than a full percentage point less than the national average. People move here for work and the lower cost of living compared to more expensive Front Range cities. Industry sectors hiring people include hospitality and professional and technical services. The latter category is driven by defense contractors in the area.

Despite the very large population over the age of 65, Colorado Springs managed to have a median age of 34, several years below the national average. The tight labor market is drawing people to the area and keeping college graduates in the vicinity. This guarantees demographic momentum as young people stay here to buy homes and raise their own families, fueling demand for the Colorado Springs real estate market.

Colorado prides itself on cultivating high-tech jobs like California without the over-crowding or insane housing prices. Yet this has made the Denver housing market unaffordable for many people who work there. One solution for many is living in Colorado Springs and commuting an hour or more each way to work. Another solution that’s more readily available in Colorado than elsewhere is telecommuting.

Realtors in the Colorado Springs housing market are finding people buying houses even on the south side so they can find a property they can afford, then driving in one or two days a week to Denver. Conversely, the high price of a property in Denver is driving many businesses to move or expand south into the Front Range, bringing Denver’s jobs closer to the Colorado Springs housing market.

Steady Property Appreciation Forecast

Population growth in Colorado Springs has been just ahead of new home construction; housing permits in the Colorado Springs real estate market, for example, are not yet back at 2005 levels. This helps to explain why home prices have risen more than 40% in the past five years, though it is one of the most active housing markets in the country. This is partial because Millennials are the biggest group buying houses today, and the Colorado Springs real estate market is already loaded with them.

Millennials prioritize homes in walkable areas with access to public transit, but they value practical, usable homes oversize. This means well-designed condos and duplexes in the right areas are as attractive to them as a large house in the suburbs. However, the limited supply of homes on the market in Colorado Springs is keeping prices increasing faster than the rate of inflation. Ironically, the near-total lack of homes with negative equity in the Colorado Springs housing market has been considered one reason why prices are going up so fast.

Colorado Real Estate Investment Opportunities

Maybe you have done a bit of real estate investing in Colorado but want to take things further and make it into more than a hobby on the side. The Colorado Springs real estate market contains several large populations of renters, many practical reasons for people to move here from the surrounding area and across the country, and long-term factors that will drive growth for years to come. Forget the Mile High City and invest in the Colorado Springs real estate market.

Good cash flow from Colorado Springs investment properties means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good Colorado Springs real estate investment opportunity would be key to your success.

The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Colorado Springs investment real estate and you should be able to flip it for a lump sum profit.

The neighborhoods in Colorado Springs must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. As with any real estate purchase, act wisely. Evaluate the specifics of the Colorado Springs housing market at the time you intend to purchase.

Some of the popular neighborhoods in Colorado Springs are Broadmoor, Old Farm, Colorado Centre, Kissing Camels, Downtown Colorado Springs, Falcon Heights, Cordera, Wolf Ranch, Rockrimmon, Old Colorado City, Fountain Valley, Old North End, Pikes Peak Park, Briargate and Flying Horse Ranch.

Here are the ten neighborhoods in Colorado Springs having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. Fort Carson Southwest
  2. Fort Carson
  3. Fort Carson South
  4. Fort Carson West
  5. Fort Carson Northwest
  6. Spring Creek
  7. Old Colorado City
  8. Lowell
  9. Patty Jewett South
  10. Southeast Colorado Springs

Apart from the Colorado Springs housing market, you can also invest in Denver. Of greater importance to real estate investors in Denver is that the area is growing in population. The jobs are increasing and so are the number of renters. It is the largest and capital city of Colorado, home to roughly 700,000 people. The Denver metropolitan area is home to around 2.7 million people. The population has increased by 1.33% from 2019. The Denver-Aurora, Colorado statistical area is home to about three and a half million people.

It has a low unemployment rate of 2.3% as of Dec 2019, according to the U.S. Bureau of Labor Statistics. A third of the population of the Denver metro area rents. All these are excellent signs of investors looking to buy a rental property in Denver. Despite the recent cooling off, there are several reasons to consider a long-term investment in the Denver real estate market. Shortage of housing for a growing population, a strong economy & increasing jobs have been fueling the demand in the Denver housing market for the past many years.

The Boulder real estate market also puts you in reach of a great job market. The colleges foster high-tech startups. That keeps many college grads here after they finish school while attracting students in the first place. However, it is the offices of Big Tech firms like Google and Microsoft that are more attractive.

The Boulder housing market has also been bolstered by the presence of multiple government agencies like the National Center for Atmospheric Research and the National Institute of Standards and Technology. This makes Boulder a good place to start a scientific or technical career, especially if your goal is research. It also creates high-tech jobs almost immune to the state of the economy. And that's aside from the strong job market in Denver down the highway.

The Fort Collins area is another great market to invest in real estate. The area is growing both as an outer suburb of Denver and for its reasons, making it the fourth-largest city in the state. The city offers an ideal mix of jobs, affordable living, and a decent quality of life that will keep it strong for years to come. Fort Collins and several other cities on the Front Range hit the top ten list due to factors like relatively low cost of real estate in the Fort Collins housing market, high education levels, low taxes, and strong business incentives.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Colorado Springs, Colorado.

Consult with one of the investment counselors who can help build you a custom portfolio of Colorado Springs turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Colorado Springs.

Not just limited to Colorado Springs or Colorado but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Colorado Springs turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Let us know which real estate markets in the United States you consider best for real estate investing! 

Please do not make any real estate or financial decisions based solely on the information found within this article. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. This article aimed to educate investors who are keen to invest in Colorado Springs real estate. Purchasing an investment property requires a lot of study, planning, and budgeting. Not all deals are solid investments. We always recommend doing your research and taking the help of a real estate investment counselor.

REFERENCES

Market Prices, Trends & Forecasts
https://www.coloradorealtors.com/
https://www.coloradorealtors.com/market-trends/regional-and-statewide-statistics/
https://www.zillow.com/ColoradoSprings-co/home-values
https://www.neighborhoodscout.com/co/colorado-springs/real-estate/
https://www.realtor.com/research/hottest-zip-codes-2021/
https://www.realtor.com/realestateandhomes-search/Colorado-Springs_CO/overview
https://greatcoloradohomes.com/colorado-springs-real-estate-market-statistics.php
https://www.propertymanagementincoloradosprings.com/colorado-springs-local-market-statistics

Rental Statistics
https://www.rentcafe.com/blog/renting/states-best-worst-laws-renters
https://morrisinvest.com/blog/2016/12/21/5-most-landlord-friendly-states
http://www.landlordstation.com/blog/top-landlord-friendly-states
https://www.zumper.com/rent-research/colorado-springs-co

Reasons to Invest in Colorado Springs
https://www.uccs.edu
https://en.wikipedia.org/wiki/Colorado_Springs,_Colorado
https://realestate.usnews.com/places/colorado/colorado-springs
https://www.military.com/base-guide/colorado-springs-military-bases
https://www.zeonamcintyre.com/blog/2018/1/26/airbnb-investing-trip-colorado-springs-edition
https://www.krdo.com/news/top-stories/airbnb-ordinance-passes-2nd-vote-by-colorado-springs-city-council/862178044
https://www.avalara.com/mylodgetax/en/blog/2018/10/colorado-springs-passes-new-airbnb-rules.html
http://www.cpr.org/news/story/move-over-denver-colorado-springs-might-have-the-hottest-housing-market

How to Pay Property Taxes Online?

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How to Pay Property Taxes Online?

Understanding Property Taxes

Property taxes can be a major expense for investors, but understanding how this tax works could save you thousands of dollars in the long run. The first thing to learn about property tax is that property is divided into two categories: real and personal. Real property includes land, buildings, and permanent property attached to land— such as a well.

Personal property is everything else, including clothes, books, electronics, furniture, and financial holdings. Personal property is further divided into either tangible property or intangible property. Tangible property is anything you can touch, such as a sofa or a blender, and the intangible property includes abstract possessions like stocks, bonds, and patents.

Methods for calculating property tax vary from city to city. Smaller cities send an appraiser from house to house every one to five years and this appraiser calculates the property’s value. Larger cities use an automated valuation method. Whichever method is used, you should look over your property’s valuation for mistakes or miscalculations. Property owners generally have a small amount of time to appeal the assessed value of their property and mistakes do occur, especially in automated processes.

Knowing the correct value of your property is important not only for paying property taxes but also for purchasing insurance. To ensure your property and possessions against damage or theft, first, check for cheap insurance quotes online. Cheap insurance is readily available: There is no need for you to leave your property vulnerable.

If there is an obvious flaw in your property’s valuation, you should register your complaint with the city immediately. The city can repossess your property if you simply choose not to pay your property taxes without first registering a complaint. In contesting the valuation of your property, it is important to do research and have hard evidence as to why you think a mistake has been made.

Realtors can provide you with figures on recent sales of comparable properties and professional appraisal firms are available to evaluate the value of your possessions. These services cost up to $500 but they can catch mistakes in your city’s valuation process that could cost you much more in taxes over the years.

Property taxes are an unfortunate fact of life, but reducing its burden on your wallet is sometimes possible, even without a master's in taxation. Diligently reviewing the paperwork on your property’s valuation, knowing the value of items in your house, and keeping receipts and records to prove these values can save you from overpaying on property taxes. Part of being a responsible property owner is keeping up to date with all of your taxes, along with properly insuring your property and possessions.

Finally, make sure that the money you’re paying on property taxes isn’t wasted in the event of a burglary, fire, or flood by shopping for cheap insurance quotes to cover your valuables and possessions. With so many types of cheap insurance available today, leaving your property uninsured is foolish when you’ve already paid for debt service and taxes on it.

How to Pay Property Taxes Online?

Paying property taxes is an important responsibility for homeowners, and it's essential to know how to do it conveniently and efficiently. Luckily, paying property taxes online is becoming increasingly popular and convenient for many homeowners. There are several ways to pay property taxes online, including using a credit or debit card, electronic check payment (eCheck), and online portals. To pay property taxes online, the first step is to visit your local county tax website or portal.

Once on the website, you will need to register and log in with your credentials. Next, select the property tax option and provide the necessary information such as property type, assessment year, and other relevant details. After that, select your preferred payment method and complete your payment. If you choose to pay by credit or debit card, you may need to pay a service fee that is usually a percentage of the transaction amount. It is essential to note that some transactions may have limits on the amount you can pay per transaction.

Property tax payments can be made online through various methods. Here are some options available:

  1. Online using a credit or debit card: Many local government websites allow you to pay your property taxes online using a credit or debit card. You may need to pay a convenience fee for this service.
  2. Electronic check payment (eCheck): Some online payment platforms allow you to pay property taxes using an electronic check, which can be done by entering your routing and account number.
  3. Pay directly on county websites: Many counties and municipalities have websites that allow property owners to pay their taxes online. You can typically find your local tax office website through an online search.
  4. Using credit or debit cards: Some counties and municipalities accept payments using major credit or debit cards. A service fee may be applied to each transaction.
  5. Multiple payment methods: Property tax payments can be made online through multiple methods, including credit cards and e-checks. Partial payments are usually accepted and can help to reduce the amount of penalty and interest owed.

It is important to note that the payment methods available may vary depending on your county and state. Make sure to check with your local tax office for specific instructions on how to pay your property taxes online.

FAQs on Online Payment of Property Taxes

Yes, it is generally safe to pay property taxes online. However, it is important to make sure that you are using a secure website and that your personal information is protected. Look for the "https" at the beginning of the website address to ensure that the website is secure.

Yes, many local governments allow you to pay your property taxes online using a credit card. However, a service fee may be applied to each transaction.

Each credit/debit card transaction is typically limited to a certain amount, which can vary depending on the county or state. Additionally, some banks may have daily limits or may automatically decline large internet payments for security purposes.

An eCheck is an electronic payment made using your bank account and routing number. Some online payment platforms allow you to pay property taxes using an eCheck.

If you miss the property tax payment deadline, you may be subject to penalty and interest fees. These fees can add up quickly, so it is important to pay your taxes on time. If you are unable to pay your taxes in full, you may be able to make partial payments to reduce the amount owed.

The frequency of property tax payments varies depending on the county and state. In general, property taxes are due once a year, but some counties may allow for semi-annual or quarterly payments.

How To Become A Real Estate Mogul or Multi-Millionaire?

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Becoming a real estate mogul is every investor's dream. If you’ve been in the business of real estate investing, you must have had that burning desire inside your heart to know, “how to become a real estate mogul.” What is a real estate mogul and how to become one? A real estate mogul is an entrepreneur who has built a massive real estate empire by actively or passively investing in real estate. It is no surprise that real estate moguls are among the richest billionaires in the world who own hundreds of commercial & residential properties.

The big benefits of real estate investing are passive income, stable cash flow, tax advantages, diversification, and leverage. Passive income is the income you can continue to survive on, even if your other investments go south. How do real estate moguls make so much money? You must have read a zillion times that “real estate is a classic wealth-building technique.” We associate a property with wealth so much that the term “real estate” means real property, and an estate originally referred to the land/property held by someone.

Physical possessions like furniture and money were secondary to productive farmland and rental property someone owned. More importantly, real estate remains a wealth-building tool for the majority of moguls. An estimated ninety percent of millionaires were created through real estate investing. Any billionaire in the U.S. or anywhere around the globe that you know of has invested in real estate in some form or the other. An average real estate investor can also become a mogul by acquiring the required skills and learning how to craft a successful investment strategy.

Those who invest in real estate believe the only option they have is to either sell a house or rent one out. The real estate market has diversified in recent years, opening up a whole slew of intriguing opportunities to invest. You can flip houses, invest in exotic real estate options, and even diversify into purchasing turnkey rental properties or invest in other passive investments.

Having a crystal clear concept can turn a strategy into reality, especially for first-time buyers who want to start investing in rental property. It may take you a decade or so but the efforts are worthwhile, and it’s every real estate investor's dream. These steps will guide you in setting up a visionary plan to become a real estate mogul, which is an elusive thought for many budding investors.

Real Estate Mogul

8 Tips On How To Become A Real Estate Mogul or Millionaire

Strategy is essential in the world of real estate investment. Every item needs to have a purpose, regardless of its location, budget, or type of property. Here’s how to become a real estate magnate through step-by-step planning and execution.

1. Have a Good Business Plan

A good business plan is the first step to becoming a real estate mogul. Writing a solid business plan begins by defining your mission and vision statement. It is difficult to move forward successfully without any concrete planning, and the same is true in the case of becoming a successful real estate entrepreneur. Don’t start by buying fixer-uppers and ripping out the walls. You need a solid, long-term business plan. This is true whether you want to get wealthy via fix and flip, traditional real estate development, or a buy and hold strategy.

It is not enough to determine how you’ll find and afford to buy properties. How much does it cost to perform various renovations, and how will you keep costs down without sacrificing quality? How will you market them? How will you sell them or find paying renters fast enough to maximize your profits? Know your exit plan before you buy anything. Be honest about your abilities and interests. Chalk out your strengths and weaknesses. Don’t build a business plan that relies on you working for free to renovate properties. You need to hire people for that and learn to oversee the affairs.

2. Find Sustainable Real Estate Markets

A good business plan for becoming a real estate mogul will fail if you’re dealing in declining real estate markets. For example, take Detroit. You might be able to find cheap houses there. You may even be able to rehabilitate them to the point they’re legal to rent out. But you cannot turn a working-class home into a luxury property and charge several thousand dollars a month for it.

A real estate market that’s experiencing a bubble is a poor place for real estate investing. What are the characteristics of sustainable and growing real estate markets?

  • It has a balanced supply of housing relative to demand.
  • Housing demand is certain to increase due to a strong local economy.
  • A good way to find sustainable housing markets is to find locations with a growing population and home prices that are growing at or just above that rate.

Do your research regarding real estate markets. Then choose one in which you can repeatedly implement your business plan. This allows you to build up your network faster since you’re relying on the same lenders, real estate agents, property managers, contractors, and other real estate professionals.

3. Narrow Down Your Scope

They say that location is the most important thing in real estate. If you want to become a real estate mogul, it isn’t enough to find a great real estate market, whether you’re looking at a general metropolitan area or a specific suburb. You’ll want to find the best neighborhoods for investing, whether you’re buying and holding rental real estate, buying and developing land, or fixing and flipping.

A good way to determine which neighborhoods are a good fit is by calculating the housing affordability index. If most residents can’t afford to buy a new home, you can be certain that there is a large population. Nor would that change dramatically if someone built a new apartment building or suburban subdivision.

Do your research regarding the local rules applied to rental properties.

  • Do you need to get a rental license from the city?
  • Will you have to arrange annual inspections of multi-family housing?
  • Are short-term rentals restricted or prohibited?
  • Does the city or state impose rent control?
  • This can prevent you from earning a profit if interest rates spike.
  • Are there areas you’d want to avoid because of the applicable regulations?
  • For example, entire neighborhoods may be a developer’s nightmare because of rules intended to maintain a historic aesthetic.

This is one reason why you want to focus on a particular area in your journey of becoming a real estate mogul. The investment in the time and effort you spend doing this research will be recouped once you’ve bought several properties. And you should invest the effort upfront because you will be dealing with these rules over the long term. Remember that real estate investing should be slow, if you want to mitigate risk and maximize your returns.

4. Build Your Real Estate Team

Another reason you want to focus on a specific area is that you can work with the same professionals again and again. This eliminates the need to vet building contractors and investors before any deal, and it results in smoother transactions as you get to know each other. Every potential real estate mogul needs to have a vetted network of real estate agents, real estate attorneys, property managers, building contractors, and financial service providers before they get to work.

Know who you would likely use to secure a property and manage it before you tour the property. You should start with list of recommended service providers before you buy your first investment property. Expect to narrow down the list as you gain experience. For example, you may strike a contractor off your list when they stop in the middle of your renovation to work on a higher-paying project. You might drop a realtor who doesn’t put the effort into moving a property.

5. Acquire Your First Investment Real Estate

Every journey begins with a first step. So does wealth building through real estate investment. You need to begin with one real estate asset at a time. Don’t worry about buying ten properties in ten months.

  • Do your due diligence.
  • Line up your potential team members.
  • Then find your first investment property.
  • Arrange the real estate financing.
  • Buy the property.
  • Make any necessary repairs, or build what you were planning on building.
  • Either find renters or list them on the market so you can sell them for a profit.

Complete the process according to your business plan, which you have charted out for becoming a real estate mogul. This is essential to your success because the goal is to have a known, repeatable process from start to finish. For example, it doesn’t matter if you can buy and renovate ten homes in ten months if you can’t figure out how to sell them for a profit. A side benefit of starting slowly is that you minimize the risk and the potential losses if you make a mistake.

6. Step Back and Evaluate Your Investments

Suppose you’ve bought, renovated, and flipped the first investment property. Did you clear a profit? It is great if you did, but it can still be considered a valuable learning experience if you didn’t.

  • Why did you go over budget on the initial acquisition or the property renovations?
  • Be honest when evaluating your mistakes.
  • Did you fall in love with property instead of evaluating it from a business perspective?
  • Did you make the mistake of getting into a bidding war, wiping out your profits?
  • Did you over-build?

This mistake could take the form of building a luxury home in a middle-class neighborhood or putting amenities in a working-class neighborhood that buyers can’t or won’t pay for.

If you are barely making a profit, determine what you could do to improve the cash flow.

  • Is the rental rate too low?
  • Are you not vetting your tenants for their willingness or ability to pay rent?

Once you’ve identified your mistakes, adjust your process. Then test the process by buying your second investment property. Run through the process from purchase to sale or handing the rental property over to a property management firm. See if you can buy it for less, renovate it faster, and find a qualified tenant faster.

7. Step Back and Wait

Becoming a real estate mogul is a long journey that spanned many years. Give yourself a rest for a couple of months. Analyze your business operations, wealth accumulation, cash flow, and debt.

  • Verify that your property managers are keeping the renters happy before you add to their workload.
  • Save the money you are receiving in rent for property taxes, insurance premiums, and other upcoming bills.
  • At a minimum, save up enough money to avoid hard money loans used to repair your next investment property.
  • Verify that there are no newly discovered problems in the investment properties you’ve purchased.

This gives you the information you need, whether you need to add additional items to your standard inspection or must find another building inspector.

  • Make certain you can handle the regular bills like property insurance premiums and property taxes.
  • Line up your tax advisors, if you didn’t already have one.
  • Learn if your tenants are good ones.

This is the time to learn how to evict someone, rather than waiting until you have two non-paying renters. Once you’ve made certain you have the administrative affairs in order, repeat your refined business process of becoming a real estate mogul. Build up your real estate portfolio. If you’re reluctant to make more acquisitions, use the money to pay down your loans. Your profit margins will increase if you eliminate the associated loan payments.

8. Consider Upgrading or Diversifying Your Real Estate Portfolio

There are several ways you can upgrade or diversify your real estate portfolio. You could take advantage of a 1031 property exchange, selling several houses to buy an apartment building. Multi-family housing requires a shift in your business plan, but it offers a more stable rental income. About 90% of the real estate moguls own multiple apartment buildings to better withstand occasional vacancies.

The multiple income streams from apartments can provide the cash flows necessary to pay down the mortgage. Buying a big apartment complex quickly builds up your real estate portfolio. However, it takes time to sell your apartment complex.  You can’t simply turn your investment into cash overnight without risking a potential loss.

Your profit potential is directly related to the amount of rehab needed and the purchase price. Therefore, you need accurate numbers for NOI (Net Operation Income) and a cap rate that makes sense. Only then you should move ahead with the purchase price.

  • Suppose your complex has 1,000 units and the average annual NOI per unit is $10,000.
  • Then your annual net operating income would approximately be $1,000,000.
  • Any unexpected expenses or unplanned vacancies will decrease this number. The U.S. average vacancy rate is 8 to 10 percent.
  • Therefore, it’s prudent to assume you’ll earn just 90% of the expected income.
  • In this case, that’s $900,000 per year from one apartment complex.

Another option of diversifying your real estate portfolio is to use the 1031 property exchange rules to sell one or two under-performing single-family homes and try your hand at luxury real estate.

A third option could be expanding into a new area, whether it is another suburb or a different neighborhood. You may need to make a change simply to shift your investments from a declining neighborhood to an up-and-coming one.

Another option is selling the properties that have appreciated the most, paying the capital gains, and using that money to live on.

Summary 

We’ve just outlined a proven method for building wealth through real estate. You won’t get rich or become a real estate mogul overnight. It can take years to create a multi-million dollar real estate portfolio that generates enough income to provide the lifestyle you want. On the other hand, we’ve outlined a process that can be repeated as often as required and minimizes both the work required on your part and the risk to your finances. Investing in rental properties & building a growing portfolio is a great way to build wealth, but it’s still relatively slow.

To achieve bigger goals of becoming a “real estate mogul,” “building massive wealth,” and “achieving true financial freedom” in less than a decade, you must build a strong foolproof business. That business would help you to build legacy wealth for you and your family, and many moguls have achieved that through real estate. So, tap into your current wealth of knowledge and get started this year.

References:

  • Intro stats
    https://thecollegeinvestor.com/11300/90-percent-worlds-millionaires-do-this/
  • Have a good business plan
    https://medium.com/better-marketing/10-skills-to-becoming-a-millionaire-in-5-years-or-less-e16b8b20500c
    https://www.cnbc.com/2018/05/30/self-made-millionaire-how-to-get-into-real-estate-on-a-40000-salary.html
  • Build your team
    https://www.forbes.com/sites/forbesrealestatecouncil/2019/10/02/avoid-these-eight-common-real-estate-investing-mistakes/#316b43d352a2
  • Repeat the process
    https://www.biggerpockets.com/blog/wealth-through-rentals
    https://www.fool.com/millionacres/real-estate-basics/investing-basics/how-become-millionaire-real-estate/
  • Step back and wait
    https://www.mashvisor.com/blog/how-to-get-rich-in-real-estate-strategies/
  • Consider Upgrading or Diversifying Your Real Estate Portfolio
    https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx
    https://www.forbes.com/sites/brandonturner/2016/10/18/4-things-you-need-to-become-a-millionaire-through-real-estate-investing/#134c33f5247a

How To Make Money In Real Estate And Get Rich in 2023?

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There is no quick way to make money or get rich in real estate, but you can grow wealth gradually and consistently by investing correctly. You are probably aware that there are numerous ways to accumulate wealth, but real estate is one of the most effective. Having said that, making money in real estate or profitable investing requires sound guidance, methods, and determination. While investing in real estate is a proven and true method of earning money, it, like any other business, comes with inherent dangers.

If done correctly, real estate can be an excellent vehicle for wealth accumulation if you take the time to educate yourself about the process and the best strategies for maximizing profits. If you have cash (a 20% down payment), getting started in real estate investing is substantially easier. However, the reality is that many entrepreneurs – including those in real estate investing – start their firms with very little money every day. Many of them begin by dreaming big and putting in a great deal of effort.

This blog is intended for novices who are interested in learning how to earn money in real estate. Today, investors have a plethora of possibilities for investing in real estate; there is no one-size-fits-all solution. Learning how to produce income through real estate is an excellent approach to diversifying your portfolio. If you have a large sum of money, you may, for instance, purchase an undervalued real estate property, repair it, and sell it to an investor. After the work is completed, you profit from selling of the property for a significantly higher price than you paid for it.

You can also consider buying a long-term rental property or a second home where you vacation and rent out to others when it's not in use if you'd rather leverage your investment by using a mortgage to invest in a tenant-ready property. With the right steps, you can increase your wealth, hedge against inflation, and profit from a rising market. There are so many advantages to owning real estate like leverage, appreciation, and tax benefits, that just getting a “good deal” can make for a great long-term investment.

We'll show you how to make money in real estate, and avoid the most common mistakes. The most popular way is to buy an investment property and slowly build up your portfolio. Generally, there are two primary ways to make money from real estate assets — appreciation, which is an increase in property value over a period of time, and rental income collected by renting out the property to tenants. The majority of the money & wealth you build through real estate comes from appreciation but cash flow is important because it helps in reducing your risk.

Buying a rental property that loses money every month in hopes of future appreciation is a bad investment. The positive cash flow doesn't only enable you to pay off the property but it also contributes to saving for another down payment to buy your next investment property sooner. The more properties you buy, the more you can save, and the faster you can achieve your money-making goals through real estate investing.

But we shall discuss some more “well-known” ways to make money in real estate which include both active and passive investing. Remember, knowledge is the key to using real estate as a vehicle for wealth building. Smart investors always know what drives markets, how to time market cycles, and whether to invest in a local market or to invest out of state.

10 Ways To Make Money In Real Estate And Get Rich

How To Make Money In Real Estate

Adding real estate to your investment portfolio might help you diversify your portfolio of investments. We will discuss how to generate money in real estate through a variety of various methods in this article. Are you looking forward to it? When it comes to real estate, there are a variety of options for starting to build your wealth. Take the first step toward being a successful real estate investor and discover how you, too, can achieve your goals.

1. Making Money in Real Estate by Renting Out Property

This is the classic way of making money in real estate and getting rich. In this type of investment, you make money by leveraging long-term buy-and-hold residential rentals. People will always require a place to live. Lords and nobles fought over titles that let them collect rent from those living, farming, and otherwise working the land. A few entrepreneurial types drained swamps and built businesses so that they could make more from the land than they would if they merely leased it out to farmers and ranchers.

We’ve come a long way in the intervening ways, providing many options for those who want to know how to make money in real estate. You may buy land, build a home, and then rent it out. You could find distressed properties, rehabilitate them, and then rent them out. Turnkey properties were purchased by someone else who rehabilitated them before finding a tenant. Regardless of how you acquire the property, it is a buy-and-holds strategy.

You can own residential, commercial, and industrial real estate property. One of the biggest benefits of owning rental real estate is the steady cash flow it generates. It is the best form of owning investment real estate for earning a passive income. The downside of this approach is that you’re putting all your eggs in relatively few baskets. If there are issues with the apartment complex you own, the rental income from it suffers as people leave or the repair costs eat into your profits.

This strategy is probably the one most likely to let you generate a steady income that is large enough to live off of once you own multiple rental properties. You may be able to utilize this strategy if you cash out money from a retirement account or equity in your home. If you want to know how to get rich in real estate, understand that this is one of the most secure routes to doing so as long as you manage expenses and the properties themselves well. Dallas is a very good real estate market for buying rental properties.

Know the rules for evicting tenants and raising rental rates if you’ll be managing an apartment building. Understand the local building code, community norms for properties in the price range you’ll be buying, and cost-effective upgrades if you’ll be buying and flipping properties.

You can’t afford to lose money turning a middle-class home into the only luxury property on the block. All of this requires money to buy the properties. We’d recommend saving up or tapping into funds you have to put down the first down payments on single-family homes or small multi-family housing units. This may come from your savings, equity in your primary residence, or a retirement account.

We’d recommend against borrowing against your 401K since the money has to be paid back within a few weeks of losing your job or else you have to pay taxes and a penalty on it. You’d almost be better off pulling money out of an IRA. You have more control over the fees and taxes you’d pay. Set aside thousands of dollars in an emergency fund to cover unplanned repair bills, surprise legal fees, and other costs you haven’t properly taken into account.

Then you don’t end up cutting into your cash flow with high-interest hard money loans to pay for the little repairs needed to legally rent out the unit or hit your credit cards to pay contractors. Buy a single property with your cash down payment, a mortgage, and your business plan. Set the goal of renting out the unit for 1 percent of its total value per month.

For example, a 100,000-dollar house should rent for around a thousand dollars a month. Then apply your strategy. Sell the fixer-upper or collect the first few months of rent from your new tenant. Rebuild your emergency fund, since you may need thousands of dollars to fix a broken water heater or hole in the roof. Save up enough money for your next renovation or down payment.

Then seek a mortgage to buy that next property and repeat the pattern. Don’t rush out to buy a bunch of properties. Debt multiplies risk, and you don’t want to end up with a million dollars of outstanding unsecured debt because you tried to manage ten rental properties without any experience as a landlord. Nor can you afford to make a mistake with a property management company. Don’t try to fix and flip several properties at once. Grow slowly so that you have the margin to absorb the cost of mistakes.

This is why you should be buying one to three rental properties a year, not the ten some property investment programs recommend. Buy and flip one property at a time, no matter how long that takes, until you have the expertise or expert contractor on your team to handle several such renovations at once. Buy a small apartment building and learn how to manage it or find a good property manager to do the work for you.

Remember that every month results in increased equity in the property, and that’s aside from the income you’re earning. You could dramatically improve the cash flow if you aggressively pay down the outstanding mortgage on a property. For example, you go from earning 300 dollars to 1000 dollars per month per single-family rental home.

What is a property that turns out to need far more work than you expected? What if the apartment building isn’t working out as expected? Sell it, pay off the debt, and then start over with the cash you have left over. You will eventually be making millions in real estate as you build up your real estate portfolio, and you could see a million-dollar net worth in less than five years.

If you own dozens of rental homes, consider selling them to buy professionally managed multi-family housing. When you’re ready to earn truly passive income, that is one route. Selling the properties to other investors and investing in real estate investment trusts or shares of a property managed by others is another.

2. Interest-Based Income Through Investing in Mortgage Notes

Mortgage notes can be a good real estate investment for people seeking passive income. When you buy a mortgage note, you receive monthly payments that include both interest and principal. It is a steady stream of income like you’d receive from a rental property, but there is no need to maintain the property like a landlord. It is far easier to invest in real estate located around the country because you don’t have to deal with local rules regarding real estate licensing or taxes. The mortgage note spells out the loan duration. You know how long you’ll receive loan payments, and it may be 10 to 30 years.

You may be able to increase the value of the mortgage note by buying from a distressed noteholder. For example, you may find a farm or family property sold via owner financing. The person sold their home, but now they have to manage the loan. They may need the money, whether it is to allow them to buy a new home or simply get cash to fund their retirement. In these cases, you might offer 80,000 dollars to buy a 100,000-dollar note. If they accept, you receive the interest and principal on a 100,000 dollar loan but only paid 20,000 dollars for it.

Another class of desperate sellers is the private lender with a slow or non-paying borrower. They’re not getting the income they expected. They may be reluctant to foreclose on a slow-paying family member. Or they may not want the property back. You can buy these notes for far less than their face value. However, you’re going to either need to ramp up collection efforts or foreclose on the property. Only buy notes like this if you have a plan for how to monetize the property, whether you rent it out, sell it to someone else or redevelop the property.

3. Getting Rich By Flipping Real Estate

This is another proven way to make quick money in real estate to get rich. Fix and Flip is a specific form of real estate investing. The investor buys a home, pays for repairs and renovations, and then sells the property for a profit. This type of real estate investing is the subject of numerous reality shows. The reality is that this form of real estate investing is high-risk. If you’ve underestimated rehabilitation costs, you could lose money.

If you put too much money into the investment property because you don’t understand your target market and buyer expectations, you’ve probably wiped out your real estate profit margins. Whether there are problems with the selling price, the real estate agent, the neighborhood, or how the property looks, every month the house sits on the market subtracts the property’s carrying costs from your profit margin.

If you try to do the repairs yourself to save money, the theoretical savings on labor costs are offset by the delays in getting the property to market. If you’re not already a skilled building contractor, there is a risk that DIY repairs don’t meet the code or potential buyers’ expectations. Then you may lose everything on the deal because you have to pay for someone else to redo what you thought was done. The ideal fix and flip is a property that only needs cosmetic repairs, but these are truly rare.

4. Making Money Through Real Estate Investment Trusts

Real Estate Investment Trusts or REITs allow you to invest in real estate without having to buy and manage a property. REITs may be invested in mortgages, properties, or a mix of both. You can diversify your holdings in real estate by buying REITS invested in particular market niches. Because REITs are publicly listed, you can buy and sell shares on the open market, making your money more liquid and allowing you to diversify your investments. One of the benefits of REITs is their non-correlation with other types of equities.

This means that the value of REITs depends on the real estate market, not the stock market. REITs are available in publicly traded and non-traded forms. The Securities and Exchange Commission recommends against non-traded REITs due to their high fees, the challenge of liquidating them, and the risk they may become worthless. Publicly traded REITs are as liquid as stocks and bonds. REITs stand out for their regular payment of dividends, something that a decreasing share of stocks offers anymore. Clearly, this also shows a way to make money in real estate and get rich.

5. Making Money Through Real Estate ETFs and Mutual Funds

You can buy exchange-traded funds (ETFs) and mutual funds that are broadly diversified or targeted to a particular sector. And you can buy ETFs and mutual funds that are themselves invested in real estate. For example, it is possible to buy ETFs that invest in real estate stocks such as publicly-traded home builders. Some ETFs invest in REITs, as well. There are mutual funds that invest in real estate developers and property management firms. Both investments are handled by a fund manager (ETFs are passively managed, and mutual funds are actively managed).

ETFs are less expensive than mutual funds, and you can trade them like stocks at any time during market hours. The benefits of investing in ETFs and mutual funds include high liquidity and low costs. Forget cashing out your 401K or 403B plan to buy rental real estate, since this strategy allows you to invest in real estate within tax-advantaged retirement accounts. You don’t need a lot of money upfront to start investing this way. Conversely, you may not receive dividends. You may not receive any returns until you sell the appreciated shares.

6. Using Private Lending To Making Money in Real Estate

Hard money lenders loan money to those utilizing the fix-and-flip strategy. They may lend money to those buying a property to renovate and then rent out; the property investor, in this case, would secure a traditional mortgage after they have an attractive property bank that will now consider as collateral. Acting as a bank to property buyers yields a higher rate of return than you’d see if you left money sitting in the bank. You have to do your due diligence since mistakes could mean you don’t have a valid lien against the property.

For those not yet ready to invest a large sum into a single project, crowdfunding is an option. You can loan money to someone who wants to buy a rental property or secure a down payment on their own home. In either case, the loans are high-risk and illiquid. Another issue is that hard money lending of more than modest means that SEC rules apply. If you don’t meet the income and net worth requirements set by the SEC, you may not be allowed to loan money to real estate investors unless it is in token amounts through a crowdsourcing site.

7. Increase In Wealth Through Real Estate Appreciation

When the value of a property increases, we call this “appreciation.” While appreciation is not always guaranteed but historically real estate prices have appreciated over the long term. So, again, appreciation alone is not likely going to make you a millionaire but real estate has always increased in the US, averaging 3% per year over the past century. For example, if you purchased a property for $250,000 2 years ago, and today that property is worth $350,000, the appreciation made you $100,000 richer or in other words, your assets grew by $100,000.

Another type of appreciation that can come into play is known as “forced appreciation,” the concept of increasing the value by physically upgrading the property through renovation. Any form of appreciation makes you money in real estate and you become richer. Click on the link to find out how investing in Kansas City real estate can help you gain wealth.

8. Opting For 1031 Exchange in Real Estate

As a real estate investor, you can use this tax code called 1031 Exchange to sell an investment real estate and use the profit to buy a new one that is of equal or greater value. In this way, you can defer paying taxes until that next property is sold or you can opt for another 1031 Exchange.  When you choose to sell your property, you are required to pay taxes for your capital gains. With the help of section 1031 of the Internal Revenue Code, you are permitted to postpone paying taxes when you reinvest those gains in another property. IRS considers that you are exchanging your old property for another real estate property.

9. Loan Pay Down

When you purchase a rental property with a mortgage, each month you make a payment to the lender. That payment includes two parts: principal and interest. Interest is the profit for the lender, but the principal is the money you are paying down the loan with. Over time, your tenant is essentially paying the loan down for you, helping you build wealth automatically. For example, if you purchased a house five years ago for $100,000 and obtained an $80,000 mortgage (we’ll say it was a 30-year mortgage with a 5 percent fixed rate), today you would owe only $74,000.

Ten years from now, you would owe only $65,000. This means that every year your equity increases. You'd gain value, as long as the property value didn't drop. And if it made $0 in cash flow or broke even and never climbed in value, still after the mortgage is paid off, you’ll now have a property worth $100,000 or more that you didn’t save for. Your tenant paid it off due to the “loan pay-down.” This can't happen if you pay all your cash or savings for the property and don't go for the mortgage options. This is the smartest strategy for making money in real estate to get rich.

10. Refinancing Your Mortgage For Better Cash Flow

You can also opt for refinancing your mortgage. The number one benefit of refinancing your mortgage is to obtain a loan at a lower rate of interest and also to decrease the monthly mortgage payment amount. One of the benefits of refinancing your mortgage is also that refinancing provides the borrower with fresh money at lower interest rates due to which the homeowner can lower his/her monthly payment amount. Another advantage of refinancing your mortgage is that the decrease in the interest rates allows homeowners to replace an existing loan with another with an added benefit of a shorter loan term and no change in the payment amount.

Is Real Estate The Best Way To Make Money or Build Wealth?

how to get rich in real estate

While making money in real estate you can minimize the risks and get a high return on your investment but it comes with proper education and experience. You may be fixing and flipping properties. You may be buying fixer-uppers, repairing them, and renting them out. Or you might be buying existing rental properties with tenants, knowing you can improve the cash flow by getting rid of non-paying tenants and adding amenities that allow you to up the rental rates.

It doesn’t matter which strategy you use as long as you pick one and master it. You need to learn a lot of things and also understand the risks involved before buying your first investment property. Location is your priority for a successful real estate investment. It would enhance your chances of selling the property further.

Real estate is one of the best investments available to make a lot of money, assuming you buy properties that have good fundamentals in their favor. It is one of the few businesses where banks are almost eager to loan you money, whereas banks reject roughly half of all business loans. Real estate almost always appreciates at a rate higher than the rate of inflation. Property appreciation rates have averaged 3 to 5 percent annually for the past thirty years.

It takes a dramatic downturn like the Great Depression or the Great Recession of 2007-2012 to hurt property values across the board. Know that real estate is ultimately local, so individual real estate markets can collapse due to lack of demand or dramatic over-building though the national market is steadily growing. One of the points in favor of real estate is that you’re holding a real asset. A company could go bankrupt and wipe out the value of its shares. They could be hit with a massive lawsuit, and the dividends they were paying disappears.

When you own quality real estate, the value won’t go down unless the area as a whole becomes undesirable. As long as you don’t have to sell it in a hurry, you can get your money back. That’s why private mortgage insurance is canceled once you hit 20 percent equity in the property. All of this explains why real estate investing is safer than stock market investing. It is possible to buy real estate for capital gains. Buying condos in the hope of flipping them for a profit is one such case.

Buying land to eventually sell to developers is another. However, real estate offers significant cash flow. You can rent out apartments, condos, single-family houses, and commercial spaces. This generates monthly cash flow for the owner. The cash flow is offset by tax-deductible expenses like maintenance, property taxes, and insurance. There are a variety of ways to calculate the return on investment for rental real estate. If you use the cap rate equation, a good ROI is 10 percent, while 12 percent is considered excellent.

The cap rate is generally used because the equation is straightforward. (NOI / purchase price x 100 percent). Note that these returns are based on the income you see with every rent check. Appreciation of the property is a capital gain you don’t realize unless you sell the property. When you invest in real estate, you could achieve a million-dollar or greater net worth simply because the properties you own and manage have gone up in value over the years.

Few of us have the cash on hand to buy the property outright. This is why many put a down payment on a property before repairing it. They may then rent it out or flip it. Renting it out generates steady income that has significant legal protection since you can generally evict non-paying tenants. The cash on cash returns take the mortgage on a property into account, and you can easily see a double-digit ROI using this equation.

Flipping the property or selling it after you’ve purchased it and repaired it will generate a profit. However, this approach is riskier than renting out real estate. You lose money every month you hold the property and pay carrying costs like the mortgage. If you sell the property for less than it is worth, you could lose tens of thousands of dollars. On the other hand, if you buy real estate and rent it out, you’ll get more for the property from investors because it comes with an income stream, the existing tenant.

References

REITs | Fix and flip
https://thecollegeinvestor.com/10414/ways-to-invest-in-real-estate
https://www.forbes.com/sites/jrose/2018/04/18/real-estate-investing-without-buying-property/#7b1b9b511496

Crowdfunding and Hard Money Lending
https://www.usatoday.com/story/money/personalfinance/2017/08/23/diversified-portfolio-5-ways-invest-real-estate/588610001

Appreciation
https://www.zillow.com/research/zillow-home-value-appreciation-5235

PMI
https://www.foxbusiness.com/features/how-to-dump-pmi-asap

ROI
https://www.mashvisor.com/blog/rate-of-return-on-a-rental-property
https://www.biggerpockets.com/blog/rental-investing-earn-2000-month

Strategy to make money
https://www.businessinsider.com/secret-to-wealth-real-estate-2015-4
https://www.biggerpockets.com/blog/rental-investing-earn-2000-month
https://www.biggerpockets.com/blog/plan-to-make-a-million

Loan Pay Down
https://www.forbes.com/sites/brandonturner/2016/10/18/4-things-you-need-to-become-a-millionaire-through-real-estate-investing/#3c402999247a

Business loans rejected
https://www.biz2credit.com/blog/2019/05/13/6-reasons-small-businesses-get-rejected-for-loans/

Benefits of Investing in a Real Estate Syndicate

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A real estate syndicate is a group of investors who pool their funds to buy, manage, and operate real estate. The group is typically led by one or more experienced real estate investors who serve as general partners and are in charge of managing the investment's day-to-day operations. The group's investors serve as limited partners, providing capital for the investment.

The syndication process is simply the aggregation of capital from a group of investors to acquire property. Real estate syndications are seeing new popularity as real estate is increasingly viewed as a fourth asset class in addition to stocks, bonds, and cash. Real estate investment trusts (REITs), many of which have dividend returns of 6 percent or more, are an attractive way to invest in real estate but their publicly traded shares are subject to a significant degree of price volatility that many investors seek to avoid.

By contrast, shares in a private syndicate, typically a real estate limited partnership (RELP) or limited liability company (LLC), are not priced to market daily and in addition, offer the possibility of higher returns than publicly managed REITs. Finally, private real estate syndications offer some tax savings unavailable when investing in a public company.

A real estate syndicate can take different forms, it can be a private or public company, a limited partnership, or a limited liability company, and each of them has its own set of advantages and disadvantages. The main advantage of a real estate syndicate is that it allows individual investors to participate in larger and more expensive real estate deals that they otherwise would not be able to afford.

By pooling their funds, investors can gain access to a diverse portfolio of properties while reducing risk by spreading it across multiple properties. Furthermore, general partners frequently have more experience and resources than limited partners, which can result in better decision-making and higher returns.

Real Estate Syndication Vs REIT

Real estate syndication and REIT (Real Estate Investment Trust) are both ways for investors to invest in real estate, but they have some key differences. A real estate syndicate is a group of investors who pool their money together to purchase, manage, and operate a real estate investment. The group is typically led by one or more experienced real estate investors who act as the general partners and are responsible for managing the day-to-day operations of the investment. The investors in the group act as limited partners and provide the capital for the investment.

On the other hand, a REIT is a publicly traded company that owns and manages a portfolio of real estate properties. REITs allow investors to purchase shares in the company, which gives them ownership of the underlying properties. REITs are required to distribute at least 90% of their taxable income to shareholders in the form of dividends.

One of the main differences between the two is the level of control and involvement that investors have. In a real estate syndicate, the investors are typically limited partners who provide capital and have little control over the day-to-day operations of the investment. In a REIT, investors are shareholders and have no control over the properties, but they receive regular dividends and may have the ability to vote on certain matters related to the company.

Another difference is the level of liquidity, REITs are publicly traded on the stock exchange, which means the shares can be bought and sold on a daily basis. While in the case of a real estate syndicate, investors usually have to wait until the property is sold before they can receive their share of the profits. Both, Real estate Syndication and REIT have their own set of advantages and disadvantages, it's important to carefully evaluate the investment and consider the risk-reward balance, before making a decision.

Advantages of Investing in a Real Estate Syndicate

While investing in a real estate syndicate has certain disadvantages as compared to direct ownership of the real estate, syndicates do offer significant benefits. These include the following:

  • Access to real estate skills. The most obvious advantage of a syndicate is that the knowledge and skills of a real estate professional are available to nonprofessional investors. Real estate investment is a far more complicated process than might appear at first, requiring skills in determining real estate values, negotiating purchase agreements, financing a purchase, negotiating leases, and managing the property.
  • Increased savings. By pooling the funds of several investors, even a small real estate syndicate can achieve cost savings as compared to an individual investor. A well-capitalized syndicate can make a substantial down payment on one or more properties while still retaining necessary cash reserves. In addition, other things being equal, larger properties tend to be more cost-efficient than smaller ones, since many expenses are lower on a per-unit or square-foot basis.
  • Diversification. A major advantage of syndication is that it enables an individual investor with limited funds to diversify among several different properties. Diversification may well be the most important way to protect against significant losses in real estate.
  • Tailor-Made Investment Positions. Finally, a syndicate can be structured to offer a variety of “investment positions” that differ concerning the priority of return, risk of loss, and tax benefits. Thus, an investor can choose the balance of risk and return that best suits their wishes.
  • Cash Reserves. The need for cash reserves is often overlooked when inexperienced investors buy real estate. Syndication can assure that sufficient capital is available to give the investment staying power, and the ability to withstand economic downturns or temporary shortfalls.

Beginning the Syndication Process

A major consideration to be addressed at the beginning of the planning process is the number of investors the sponsor intends to solicit. In most cases, a syndicate will consist of 10 to 50 investors, often known personally by the sponsor, who may be a real estate broker, attorney, accountant, or someone fully involved in real estate operations. In these cases, no elaborate marketing plan needs to be implemented. In addition, federal securities laws may not apply if the offering is within a single state or otherwise meets the requirements for an exemption. State securities laws may or may not be applicable. Professional counsel should be sought to assure compliance.

Multi-Class Syndications

In a typical real estate syndicate, the investors constitute a single class, each receiving a pro-rated ownership interest in the syndicate. In some cases, however, to broaden the market for syndicate shares, the sponsor may create a multi-class syndicate or paired syndicate. This permits the creation of different classes of investors, each class entitled to a different type of return, just as corporate investors can choose among bonds, common stock, and preferred stock.

Three different approaches to the multi-class syndicate are (1) different classes of interests within the same syndicate; (2) fee/leasehold split in separate syndicates; and (3) equity/loan split in separate syndicates.

In the fee/leasehold approach, separate legal interests in the property are created – fee ownership and a long-term leasehold. Two syndicates are formed. The syndicate owning the fee interest in income property will be attractive to investors wishing to receive a secure cash flow in the form of rent from the leasehold syndicate. The syndicate owning the leasehold then operates the property directly or enters into a net lease with a high-credit tenant. Since no land investment is required, higher returns can be generated but more risk is assumed since the ground rent must be paid in all events.

In the equity/loan approach, instead of a division of ownership between two syndicates, one syndicate (for conservative investors) makes a mortgage loan to a second syndicate (of the equity investors) that owns the property. The lending syndicate receives interest on its loan, which can include some form of participation in future income, while the equity syndicate keeps the balance of income from the property and possible amortization payments as well.

Multi-class syndication is complex and must be expertly handled for economic, legal, and tax consequences. When two syndicates are created, as discussed above, the sponsors must be sure that applicable federal or state exemptions will not be defeated because the offerings are deemed to be integrated.

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