And on that note, Frazier is seeing an increase in beverage centers, which encompasses every drink throughout the day, from breakfast to cocktail hour. “In the past a beverage center was maybe just a coffee bar or a cocktail bar, but now people want them to be multipurposeful, a place where they can make their morning coffee or tea, make a smoothie bowl after a workout or pour a beverage after work.” Most of these areas include a beverage fridge or fridge drawers, a built-in pullout trash can, a wine fridge, a sink, and cabinets for blenders, coffee pots or tea kettles. “It depends on the person, of course, but they are designed for how they want it to function,” she says.

Trend: Cozy spaces

“The light airy home has had its moment,” says designer Kara Adam. “People now want a cozier environment rich in color.”(Michael Hunter)
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Homes built in the last decade mostly feature open-concept floor plans, which usually include an open family room, kitchen and breakfast nook. But Adam is hoping to design cozier spaces in the next year. “No one wants to relax in their family room when they are sitting on the sofa and behind them is the kitchen,” she says. Dirty dishes, a pot of soup on the stove or clutter on the countertops does not create for a relaxing space. “Creating separation is good for your mental health,” she says. “You can step away from it and go back and clean it up later.” Plus, when a space is large and open, there is no breaking point for a designer to do something playful and fun on the walls or molding. “When it’s one huge space, it’s a lot harder to upholster or lacquer a wall,” she explains.

Her clients are also asking for game rooms. “We can’t do enough of them,” she says. “We are redoing spaces so that people can have a mahjong room. In our home we have a table built for mahjong, but when it’s not set up for that, we always have a puzzle out, too. Work on a puzzle for 20 minutes and it’s good for your brain and it slows things down. Then you can go back to running around or going to carpool,” she says.

Trend: Textured and printed wallpaper

Patterns, textures and fabrics are big in wall coverings this year. Brian Yates, principal designer with Yates Desygn, covered this bedroom in Ever Atelier x Yates Desygn “In-Site” patterned wallpaper.(Michael Wiltbank)
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Wallpaper has been trending for some years now, and it’s still holding strong in 2024, especially selections that boast texture, bold patterns and fabric. “In 2023, we launched our first wallpaper collection with Ever Atelier, Ever X Yates, and it led us to experiment with wall coverings in new ways. For example, new construction ceilings are typically much taller nowadays, and implementing wallpaper can help weigh it down and feel more proportional,” says Bryan Yates, principal designer of Yates Desygn. “In addition, we are currently framing three panels of a de Gournay print to work as a 9-foot-by-9-foot piece of art and create a more significant moment in a client’s dining space rather than using traditional panels as a series.”

Adam notes that adding the right wallpaper to a space helps to evoke a mood, too. “People are wanting texture as opposed to a super flat, quiet space. For instance, when you’re having a dinner party in a dining room covered in cool silk wallpaper, it makes people want to stay. We want our clients to have dinner parties that go on all night,” she says.

Related Stories

Source: dallasnews.com

Apache is functioning normally

(Bloomberg) — A gauge of pending US existing-home sales rebounded sharply in December to a five-month high, suggesting the recent drop in mortgage rates is helping to stabilize the resale market.

Most Read from Bloomberg

The National Association of Realtors’ index of contract signings increased 8.3% to 77.3 after holding at a record low a month earlier, according to data out Friday. Last month’s advance — the largest since mid-2020 — exceeded all estimates in a Bloomberg survey of economists.

“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices,” Lawrence Yun, NAR’s chief economist, said in a statement. “Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand.”

While 30-year fixed mortgage rates remain below 7%, a sustained decline is needed to encourage more homeowners to list homes that are financed at much lower levels. Until that develops, a limited inventory of previously owned homes will make it difficult for the resale market to rapidly gain traction.

A lack of listings have also worked to keep existing-home prices elevated. At the same time, builders have been filling the void with new construction. The number of new houses for sale at the end of 2023 rose to a more than one-year high, helping push those prices down.

The pending-home sales report is a leading indicator of existing-home sales given houses typically go under contract a month or two before they’re sold. Those sales are expected to increase 13% this year, according to NAR’s economic outlook. They slumped 18.7% in 2023.

The NAR’s report showed the index of contract signings for existing homes jumped nearly 12% in the South, the biggest US housing market. That was the largest advance since June 2020. Pending sales also surged 14% in the West and climbed 5.6% in the Midwest.

–With assistance from Kristy Scheuble.

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©2024 Bloomberg L.P.

Source: finance.yahoo.com

Apache is functioning normally

Broker, Credit Report Fee, Flip and Bridge Products; TPO News

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Broker, Credit Report Fee, Flip and Bridge Products; TPO News

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Fri, Jan 19 2024, 11:02 AM

If you’re in Chicago, the newest attraction is “the rat hole.” Here in Denver, besides the cat I saw in the airport yesterday being walked on a leash, one attraction is the National Ice Core Lab, where, you guessed it, ice sample cores from all over the world are kept for research purposes at temperatures even colder than those outside. It is around this time of year when plenty of people think about vacations or moving to warmer places… Like Phuket in Thailand. In 2023 it saw 6.24 million airport arrivals, up 88 percent from 2022, and the real estate market is booming. The island has 26 beaches and a population of 420,000. Phuket is trying to move away from over-reliance on tourism by simply selling to wealthy outsiders, often Russians: 27,000 Russians have moved to Phuket in the past 12 to 18 months, fueling a development boom. Follow the money, right? Today’s podcast can be found here, and this week’s is brought to you by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products (nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics) unite the people, systems, and stages of the mortgage process. Today’s features an interview with Polunsky Beitel Green’s Marty Green on mortgage spreads, why 2024 is a year of transition in the mortgage industry, and potential ramifications of NAR lawsuits.

Lender and Broker Services, Products, and Software

Anchor Loans Launches TPO Broker Channel for Flip, Bridge, New Construction and Rental Investment Financing! With so many banks and private lenders scaling back on fix and flip and construction lending, house flippers and builders are turning to mortgage brokers and other intermediaries to help identify reliable sources of capital. National private lending leader Anchor Loans has stepped up to launch a new Third-Party Originator (TPO) Broker Channel to serve loan brokers and other third-party originators whose clients are the real estate investors and developers building and refurbishing homes for America’s buyers and renters. With 25+ years in business, $14B+ in loans funded to date and expert teams lending in 48 U.S. states, Anchor offers flexible loan programs, experience-based pricing, $100k to $10MM loan amounts, fast funding, and a speedy draw process. Mortgage brokers and loan originators can learn more here.

Lenders across the country are still looking for ways to cut costs without sacrificing revenue. Start off easy with collecting credit report fees upfront. Fee Chaser by LenderLogix makes it as easy as clicking a button… literally.

Rocket Pro TPO’s recent IGNITE Live showcased a powerful line up of new product & technology solutions designed to help broker partners exceed expectations with clients and outpace its competition. If you missed it, check it out here. Mike Fawaz, Rocket Pro TPO’s EVP reminded the audience of the benefits of the lender’s free credit report offer. He also featured Product Compare, an innovative new tool available from Pathfinder by Rocket. This platform enables partners to quickly and easily identify the ideal mortgage products for every client scenario. Also, the lender introduced a special discount for partners using Mobility Market Intelligence (MMI): a leading real estate and transaction database that will immediately impact broker’s business strategies. Be sure to review the IGNITE Live video for many other updates and special offerings. Interested in learning more about a Broker or Non-Delegated Correspondent partnership? Contact Rocket Pro TPO to learn more.

Wholesale and Correspondent News

A&D Mortgage launched its innovative ITIN Mortgage Program, designed to extend homeownership opportunities to a broader community. This groundbreaking initiative offers mortgage solutions to individuals who possess an Individual Taxpayer Identification Number (ITIN) but do not have a Social Security number, thereby catering to a previously underserved market. Tailored to meet the diverse needs of borrowers, ranging from first-time homebuyers to those seeking to invest in property, there are several attractive features such as eligibility for borrowers with minimum FICO score of 660 for Super Prime loans. A DSCR (Debt Service Coverage Ratio) option is available for applicants with a minimum FICO score of 700.

Discover more information about the ITIN Mortgage Program and other services offered by A&D Mortgage.

United Wholesale Mortgage (UWM) announced that it will sunset the name of its consumer-facing website, FindAMortgageBroker.com, and replace it with Mortgage Matchup. “Mortgage Matchup will continue to be a consumer-facing website geared toward homebuyers and real estate agents and will offer both educational material around the homebuying and refinancing processes, along with a searchable database of independent mortgage brokers near them. The goal is to connect this audience with a local mortgage broker in their area and they understand the vast array of loan options available to them based on their specific financial situation.”

According to IHDA, nearly 10 percent of all first-time homebuyers use IHDA Mortgage products to help receive the additional leverage needed to bridge the gap of homeownership. An IHDAccess Forgivable loan is for both first-time and repeat homebuyers and offers a very competitive interest rate to help keep costs down over the length of the mortgage. IHDAccess Forgivable highlights include 4 percent of the purchase price up to $6,000 in assistance for down payment and closing costs, forgiven monthly over 10 years and does not have to be repaid. 30-year, fixed rate mortgage with an affordable interest rate. Available to first-time and repeat homebuyers statewide. Interested homeowners can learn more about IHDAccess Forgivable and eligibility requirements by contacting any INB mortgage lender.

Rocket Pro TPO, the wholesale arm of Rocket Mortgage, has just announced updates to its ONE+ program aimed at making it easier for prospective homeowners to obtain a low-down-payment conventional mortgage. ONE+ allows buyers to make a down payment of as little as 1 percent of the home’s purchase price. The program now includes Freddie Mac’s Loan Product Advisor. Use of the automated underwriting system could increase buyer eligibility by 16 percent, Rocket Pro TPO executive vice president Mike Fawaz said in a recorded statement.

Angel Oak Mortgage Solutions DSCR Loan (Investor Cash Flow) program has been enhanced to accommodate an impressive 85 percent Loan-to-Value (LTV). Loan highlights include Purchase Only, Minimum DSCR 1.00. SFR, PUD, Condo, Multifamily 2 – 4 units. ​Minimum loan amount $150,000, Maximum loan amount $1 million, and minimum FICO 720.

Plaza Home Mortgage® is kicking off the New Year with improved updates to its Solutions Non-QM, DSCR, Jumbo AUS 1 and Jumbo Champion loan programs. Details are available in the updated Solutions Non-QM Program Guidelines, DSCR Investor Solutions Program Guidelines, Jumbo AUS 1 Program Guidelines, and Jumbo Champion Program Guidelines.

Citizens Correspondent National Bulletin 2024-01 includes information on Conventional Conforming Products- FNMA- Income Calculator, FNMA- Restricted Stock Income Units, Non-Taxable Income-DU, LPA Cash-Out Occupancy and Condo Eligibility, VVOE Alternatives – DU and LPA, FHA and VA Loan Limits- AUS update, USDA Product Update, Secondary Marketing Contact Info and Disaster Tax Filing Relief. See the bulletin for additional information and all lock, delivery, and purchase by dates, if required.

The average annual number of business applications rose to 4.9 million between 2020-2022. This is an 89 percent increase compared to 2005-2016. This strong and steady market of non-traditional, high-quality borrowers presents a clear opportunity for Non-QM program options. How to capitalize on this growing segment of borrowers? Angel Oak Mortgage Solutions range of products for self-employed borrowers can help you unlock this market. Bank Statement Mortgage, 12- or 24-months business or personal bank statements, Profit and Loss (P&L) statements are a valid form of income verification, non-permanent residents allowed, ​​​Closed End Second Mortgage, Borrowers receive a lump-sum payment, no restrictions on how borrowers can use the funds. Owner-occupied, second homes, and non-owner occupied.

Capital Markets

Economic data yesterday held some good news for U.S. consumers, with signs of improvement in the job market and some relief on mortgage rates. Initial jobless claims (187k) fell to the lowest level in over a year, a bigger drop than any forecaster expected. After two weeks of increases, mortgage rates fell to the lowest level in eight months, per the latest Freddie Mac Primary Mortgage Market Survey. For the week ending January 18, the 30-year and 15-year mortgage rates fell 6 basis points and 11 basis points to 6.60 percent and 5.76 percent, respectively. Both rates have fallen more than 100 basis points from the October highs. (Unfortunately, the more timely data already shows rates moving quickly higher – MND)

LOs looking for an increase in inventory in homes for sale aren’t seeing much help from builders. The overall direction of economic data recently has given Fed officials some cover to maintain their “hawkish” rhetoric. That is of little comfort to homebuilders, evidenced by housing starts falling in December for the first time since August. Housing starts showed a smaller than expected decrease in December (actual 1.460 million, expected 1.417 million).

There’s historically been theory that “an enemy of my enemy is my friend.” We’ll see. Something to keep an eye on is an expanding conflict in the Middle East. Pakistan’s military carried out targeted strikes against militant hideouts in Iran on Thursday, responding to an attack by Tehran a day earlier. Historically strife around the world leads to a flight to quality and the buying of U.S. fixed income securities. Now, not so much.

Today’s economic calendar sees some key data later this morning with existing home sales for December, a preliminary January look at Michigan sentiment, November TIC data from the U.S. Treasury, and remarks from Fed Vice Chair of Supervision Barr and San Francisco Fed President Daly. We begin the day with Agency MBS prices roughly unchanged from Thursday’s close and the 10-year yielding 4.12 after closing yesterday at 4.14 percent on little financial news.

Employment

Logan Finance Welcomes Paul Jones as SVP, Business Development! Logan Finance is happy to announce that Paul Jones has joined the organization as SVP, Business Development. “Paul is an industry giant with an uncanny ability to identify and develop winning strategies and educate the industry on the benefits and opportunities within Non-QM. We’re thrilled to have Paul join the team”, said Logan’s Chief Revenue Officer, Aaron Samples. Paul Jones has spent 30 years in Operations and Sales and he’s developed a methodology for parlaying the many aspects of Non-QM into a cohesive strategy for Account Executives and Originators. This strategy is instrumental in scaling Non-QM production, expanding referral sources, and refining customer outreach. “The spotlight is on the world of Non-QM right now, and I’m ready to help focus that spotlight on Logan,” Paul said. “We have a lot of things in play for 2024, and I’m looking forward to contributing to Logan’s exciting future.”

“Primis Mortgage was born out of a belief that we, as an industry, can do better. We decided that to do this, we needed to act like an Independent Mortgage Bank, but leverage the stability and resources of a traditional bank. And the results speak for themselves. We saw a 107 percent increase in funded loans from 2022 to 2023, and while most companies were cutting back, we decided to step up: increasing our sales staff by 160 percent in that same time period. Primis Mortgage is a place where proven all-stars come to win. Our in-house support staff averages just 22 days from ITP to Docs Out, and leadership constantly motivates and educates our loan officers to strive for continued growth. If you’re a highly-successful loan officer ready to take your career to the next level, reach out to Chris Blevins, National Sales Director.”

Last week, Sales and Operations leadership from both the Lower and Thrive Mortgage teams got together in Columbus, OH to collaborate and discuss the way forward. Not just for the merger between the two entities, but what they see for the industry. After two days together, the response was clear… this is a powerful move for both companies. The game-planning, engagement with new colleagues, and enthusiasm continues to grow as each side returned to share what they’d learned. Above all else, the most commonly referenced statement was, “It felt like we’ve known each other for years.” Ready to find out what the insiders already know? Let’s talk about how you can Thrive with Lower.

A well-capitalized IMB, based in the NJ/PA tri- state market, is seeking Loan Officers, Sales Teams, or possible acquisition opportunities of small to midsize IMBs in NJ, NY, CT, FL, PA, while expanding in MD, DC, VA, NC and SC. The IMB’s focus is a highly personable and high touch experience for LOs and Realtors. Organizationally lean, very competitive pricing, a wide array of products, and much higher LO Comp than what is offered by other larger IMBs. The focus is to attract serious loan officers who want an unparalleled service, where your voice matters and you have a seat at the table in growth. If interested, message Chrisman LLC’s Anjelica Nixt for a confidential discussion.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

“The best news is for buyers who will see more options to choose from, increased negotiating power and reduced time pressure.”

Fran Lisner
Real estate agent at Daniel Gale Sotheby’s

For most of 2023, the housing market was stuck in neutral. Rising mortgage rates weighed on both supply and demand, causing home sales to plummet.

And for a while, it seemed like mortgage rates could climb indefinitely. But mortgage rates started to reverse course in November, and suddenly, the outlook for the 2024 housing market was striking a more positive tone. 

While lower mortgage rates won’t entirely crack the ceiling of what’s still a historically unaffordable housing market, 2024 is expected to be more balanced, with the potential for higher inventory and slightly lower home prices, according to Fran Lisner, real estate agent with Daniel Gale Sotheby’s. “The best news is for buyers who will see more options to choose from, increased negotiating power and reduced time pressure,” Lisner said. 

As we kick off the year, prospective homebuyers are wondering what’s in store for them. We talked to several experts about their housing market predictions and top tips for today’s homebuyers. Here’s what they had to say. 

Read more: Mortgage Predictions: Could 2024 Be a Better Year for Homebuyers?

10 expert tips for buying a home in 2024

While experts are cautiously optimistic about the direction of the housing market in 2024, buying a home (especially if it’s your first time) is rarely a pain-free process. From tracking market conditions to the actual process of getting a mortgage, there are a lot of moving parts.

1. Follow what housing market experts are saying

Housing market trends are dynamic and, oftentimes, hard to understand, especially when it comes to all the factors that affect mortgage rates (the list is longer than you think). 

That’s why housing market experts and economists are constantly tracking economic data to better understand where things are headed. Keeping an eye on what those experts are saying, whether by reading newsletters or listening to podcasts, can help you become a more informed buyer without getting too deep into the macroeconomic weeds.

Here are some of the podcasts I listen to that help me stay in the loop. 

2. Monitor mortgage rates regularly

In 2023, mortgage rates kept climbing until they passed 8% in early fall. But soon after, rates started to trend down for the first time in months. As inflation slows and the Federal Reserve initiates interest rate cuts, experts predict mortgage rates will eventually reach 6% by the end of 2024. 

“Rates are down over 1% since peaking in October, and with the Fed done with their rate hikes, we expect rates to keep falling for the next few months at least,” said Greg Heym, chief economist at Brown Harris Stevens.

But mortgage interest rates are volatile, making them difficult to predict. And while tracking mortgage rate movement isn’t the most exciting thing to do, there’s a reason experts recommend it: It can save you a lot of money and free up some room in your homebuying budget. 

Your interest rate doesn’t only affect your monthly mortgage payments. It also affects the total interest you’ll pay over the course of your loan. Securing a lower rate from the beginning, even if by a few tenths of a percentage point, can save you tens of thousands of dollars over time.

Read more: Compare Current Mortgage Rates

3. Create a homebuying budget

If you haven’t already, start budgeting for your down payment and other costs associated with a home purchase, like closing costs. 

The minimum down payment required by most lenders is 3% for conventional loans. But experts often recommend making a down payment closer to 20% of the property’s asking price. That way, you can take out a smaller loan and avoid having to pay private mortgage insurance.

Many lenders will approve you for a loan larger than what you need or can comfortably afford. But that means taking on more debt. “Shift from asking, ‘How much could I borrow?’ to ‘How much should I borrow?’” said Matt Vernon, head of consumer lending at Bank of America.

When creating a budget, you want to make sure you can cover your future monthly mortgage payments as well as any other debt you have, like student loans or credit card debt. At CNET, we recommend the 28/36 rule: Allocate no more than 28% of your pre-tax monthly income toward housing-related expenses and keep your total monthly household debt below 36% of your gross income. 

CNET’s mortgage calculator can give you a good idea of what your future mortgage payments might look like based on a few specifics, like your credit score, projected down payment and interest rate. 

Read more: How Much House Can I Afford?

4. Be flexible about location

Between 2020 and 2022, home prices saw double-digit growth. In 2023, the pace of growth slowed but prices were still up around 3% on an annual basis. Forecasts from Redfin and Realtor.com show home prices easing in the second half of 2024, but not dramatically — between 1% and 1.7%. 

“I don’t predict many bargains out there because you don’t go from zero inventory to an overflow of available homes on the market, which is when you would see a substantial price drop,” said Dottie Herman, vice-chair at Douglas Elliman Real Estate. That means we won’t see any major home price declines in 2024, according to Herman.

But what real estate is doing on a national level might not reflect what’s happening in your neck of the woods. Home prices and housing supply vary by city and state, so it’s always worth looking at less expensive markets. In markets where inventory is especially tight, like New York, prices are expected to increase by 3% in 2024. Meanwhile, prices in the Austin, Texas, metro area are projected to fall by around 12%. 

5. Get ahead of the competition

Many prospective buyers are sitting on the sidelines as they wait for mortgage rates to fall and affordability to improve. As mortgage rates inch lower over the course of 2024, experts expect that pent-up homebuying demand will lead to increased competition. 

“If 2024 becomes a turnaround year for housing, my suggestion would be to get all of your financing straightened out and in shape, and then start looking right away before the weather changes and you are joined by competition,” said Herman. “That’s when bidding wars start, so you want to be ahead of them.”

Buying sooner rather than later, if you have the option, could grant you more negotiating power while the pace of home sales is still slow, according to Afifa Saburi, capital markets analyst at Veterans United Home Loans.

6. Consider new-home construction 

Limited housing inventory is directly related to the lack of home sales: Because the majority of current homeowners have mortgage rates below 5%, they haven’t been eager to list their homes and give up their bargain interest rates for today’s higher rates. 

While experts are split on how much the inventory of existing homes will increase in 2024, there is a silver lining: New construction. “Single-family construction has offered relief from scarce existing inventory conditions over the last year,” said Hannah Jones, senior economic research analyst at Realtor.com.

If supply is limited in your area, consider what new-home construction is (or will be) available this year. Buying a newly constructed home comes with a few benefits. For starters, a new home will be move-in ready and likely more energy-efficient than an older home. 

Brand-new homes can often be more affordable. As a way to incentivize buyers, many home builders have been offering discounts and rate-buydowns — when you (or a seller) pay money upfront to a lender in exchange for a lower interest rate. Experts say those incentives will continue into 2024. 

7. Interview multiple real estate agents

The right real estate agent can make a big difference in your homebuying journey. You want someone with good communication skills, connections and experience, but the most important thing is an agent with in-depth knowledge of your market who can help you develop the right approach, said Joseph Castillo of Compass Real Estate. 

An agent familiar with your area can tell you how realistic your budget is or even point you to more affordable neighboring areas. Start by contacting several local real estate agents to discuss your needs and concerns before settling on one.

8. Explore your loan options

If cost continues to be a barrier, see if you qualify for government-backed loans or down payment assistance programs. 

“While increased demand is pushing up home prices, there are loan options and grant programs for those who may be able to afford monthly mortgage payments but struggle with the upfront costs,” said Vernon. 

FHA loans, VA loans and USDA loans tend to offer lower credit score and down payment requirements than conventional loans. States also provide different types of housing assistance, either through grants or interest-free loans. Check with your state or local housing authority, real estate agent or lender to find out what you may qualify for. 

Read more: These 8 First-Time Homebuyer Programs Can Save You Money on Your Mortgage

9. Shop around for mortgage lenders

No matter what’s happening in the market, one step you should never skip is shopping around for mortgage lenders. Researching and comparing offers from multiple lenders will help you find someone aligned with your financial picture and save you a lot of money on your mortgage. 

Mortgage interest rates and fees vary widely across lenders. That’s why experts recommend getting at least three loan estimate forms from different lenders to compare the cost of borrowing and potentially negotiate a lower mortgage rate or better loan terms. 

10. Prepare to wait

If 2024 isn’t your year to buy a home, that’s OK. You can do plenty of things while you wait to put yourself in a better position when you’re ready to buy.  

Improve your credit score. Your credit score is one of the main factors lenders consider when determining whether you qualify for a mortgage and at what interest rate. The minimum credit score for conventional loans is 620, but to qualify for the lowest rates, you’ll want to aim for closer to 740. Paying your credit cards on time (ideally, in full) and staying below your credit limit are great places to start.

Pay down debt. Lenders also take into account your debt-to-income ratio, or DTI. Paying down debt will lower your DTI, which means you’ll be able to borrow more — and at a better rate. As an added (and significant) bonus, it will also relieve a major financial burden and give you more room to save for long-term goals, like your down payment. 

Save for a down payment. It can take a long time to save up enough cash for a down payment, but you can start small with weekly or monthly savings goals. Consider stowing your cash in a high-yield savings account or certificate of deposit (if you don’t plan to buy in the immediate future) to take advantage of compounding interest.

Is it worth buying a home in 2024?

Experts are optimistic that a combination of falling mortgage rates and slightly lower home prices will give homebuyers more options than last year. But a variety of other issues — like low inventory — are weighing on affordability. Ideally, the affordability crisis will ease and the housing market will stabilize, but that is unlikely to happen in just one year. Though 2024 might not seem like the best year to buy a house, the perfect time should be determined by your financial circumstances and long-term goals.

“Buyers often ask me if it’s the right time to make a purchase. It is, but only if you’re prepared,” said Castillo.

Source: cnet.com

Apache is functioning normally

Mortgage rates continued their descent this week to mark their lowest level since May 2023, welcome news for homebuyers who have been waiting on the sidelines for rates to drop. 

The 30-year fixed-rate mortgage averaged 6.6% as of Jan. 11, a decrease from last week’s 6.66%, according to Freddie Mac‘s Primary Mortgage Market Survey released on Thursday. 

The 15-year fixed-rate mortgage averaged 5.76% this week, down from 5.87% the prior week. HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate on conventional loans at 6.709% on Thursday, up from 6.66% recorded at the same time last week.

“This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability. However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale,” said Sam Khater, Freddie Mac’s chief economist. 

Housing starts declined 9% in 2023, an indication that homebuyers looking to purchase a new construction home may continue to struggle with the lack of inventory this year.

With mortgage rates continuing their downward trend last week with softer inflation readings  – the so-called core consumer price index that excludes volatile food and energy prices – pulling them lower, mortgage demand was up in the week ending Jan. 12 compared to a week earlier.

“Mortgage applications jumped more than 10% as a result, with solid increases for both refinances and home purchases. The continuing decline in mortgage rates is promising for households looking to buy a home in the coming months,” said Bob Broeksmit, Mortgage Bankers Association’s (MBA’s) president and CEO.

Purchase apps increased by 9% from one week earlier on a seasonally adjusted basis, and refis were up 11% in the same period.

This week, December’s retail sales report showed strong consumer spending even after adjusting for holiday spending and inflation as policy makers mull rate cuts. 

Eyes on the Fed’s rate cut timeline

After the Federal Reserve began its restrictive monetary policy in March 2022, officials anticipated at least three rate cuts in 2024 at their December meeting. The Fed next meets on Jan. 30-31.

According to projections from central bank officials, rates would be slashed to a median 4.6% by the end of 2024 from the current federal funds rate range of 5.25%-5.5%.

More than 57% of investors have priced in at least a quarter-point cut in March, according to the CME Group’s FedWatch tool. That is down from 67% last week and roughly 71% about a month ago. 

Fed Governor Christopher Waller advocated moving carefully with lowering interest rates while acknowledging that cuts are likely this year. 

“When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully,” Waller said in prepared remarks at the Brookings Institution on Tuesday. 

“In many previous cycles … the FOMC cut rates reactively and did so quickly and often by large amounts. This cycle, however, … I see no reason to move as quickly or cut as rapidly as in the past,” he added.

Source: housingwire.com

Apache is functioning normally

Philadelphia is a modern, glittering, cosmopolitan city on the east coast. Settled between massive New York and powerful Washington, D.C., Philly is a keystone of the Northeast Corridor as its state’s nickname suggests.

So as a representative major northeastern city, you would expect it as an expensive place to live. Well, not so fast. While Philadelphia stands as the nation’s sixth-biggest city by population, it’s just the 41st most expensive city in the U.S. among the top 270 largest. The cost of living in Philadelphia is pretty affordable for all you get. In fact, the city’s COL Index is a realistic 111.7, meaning it’s just 11.7 percent more expensive than the national average.

The cost of living in Philadelphia involves a number of expense factors. These include budget items such as housing, utilities, transportation, food and more.

The individual indexes range from nearly 20 percent over the national average for groceries to just 0.4 percent for health care. But regardless of category, including average rent in Philadelphia, the City of Brotherly Love is an affordable place to live.

Housing costs in Philadelphia

With about 30 percent of a household budget going towards housing, paying for where you live will be your single highest expense no matter where that is. But how is the affordability of the literal cost of living in Philadelphia? The answer is simple — not bad.

Despite its size as the sixth most populous city in America, housing in Philadelphia is 16.8 percent more expensive than average.

In fact, the cost of living in Philadelphia for housing is only the 46th most expensive in the nation. That makes it cheaper to live than such cities as Baltimore, Stockton, Flagstaff, Denver and Portland, Maine. Compare that to New York City. Manhattan is just 70 miles from Center City, but its Housing Index is a whopping 442.3.

The average rent in Philadelphia for a one-bedroom apartment is $2,142 a month. That’s just over $500 a month above the national average of about $1,600. The cost of that average Philly one-bedroom rose just 2.52 percent from the same period last year.

Philadelphia’s least and most expensive neighborhoods

Considering there are over 300,000 rental units in Philadelphia, the average one-bedroom figure varies widely depending on where in the city you wish to live. The top four least expensive neighborhoods in Philly sit in Near Northeast Philadelphia.

Melrose Park Garden, Pennypack Woods, East Oak Lane and Burholme all rent one-bedrooms for under $1,175 on average, with Melrose Park Garden the only district in the city under a grand a month. East Falls, a popular residential neighborhood for young professionals just south of Manayunk, is the fifth least expensive at $1,226.

On the flip side, the majority of the most expensive neighborhoods surround the city’s downtown. Washington Square West, Logan Square, Avenue of the Arts South and greater Center City itself all rent a lone bedroom for over $2,300 a month.

Washington Square West, home of the Gayborhood district, is the only region in town where rents top $3,000 monthly. Graduate Hospital, just across Broad Street, saw the highest year-to-year increase in the city at nearly 55 percent.

Home values in Philadelphia

If your life path has moved you from renting to homeownership, Philadelphia is an affordable place to buy as well. The average home — a new construction house with 2,400 square feet of living area for the purposes of this survey — is priced at $426,000.

While that is $115,500 above the nationwide average, Philly ranks an impressive 50th among cities with the most expensive new homes.

Mortgage rates, which by their nature fluctuate wildly, tend to hover around 3 percent.

Food costs in Philadelphia

Compared to other large cities, the price of food in Philadelphia is reasonable but not cheap. Philly’s Food Index is just under 20 percent above the national average. The city falls 16th among all cities, cheaper than some smaller locales like Seattle, Wilmington and suburban DC.

If you know anything about Philadelphians, they are big fans of party foods, backyard barbecues and sandwiches (particularly local faves hoagies, roast pork and cheesesteaks). And as incredible as the restaurant scene is in Philly, locals love to eat at home both in the dining room and on the patio. That means residents buy a lot of family and snack food.

Unfortunately, several of these common grocery items are pricey. For example, the city is among the top five most expensive for popular party items including potato chips, pork sausage and Coca-Cola, and a loaf of whole wheat bread ranks eleventh.

Not only is Philadelphia high nationally, but it’s unsurprisingly more expensive for food than other major cities in Pennsylvania.

For nearly every food item surveyed, Philadelphia is priciest compared to Pittsburgh, Allentown, Scranton and Wilkes-Barre. For example, frozen meal prices are over 30 percent higher than the average of all of the state’s population centers. A dozen eggs are nearly 30 percent higher as well and a head of lettuce is a 14.5 percent increase.

Looking for grocery bargains? They do exist. Shampoo is 5.6 percent cheaper than the state average. And both a bag of potatoes and can of peaches are 3 percent under, with the latter the cheapest in the state. While a bottle of table wine is steep at $12.11, ranked 14th and over $3 above the national average, beer is cheap.

In the town known for the “Citywide Special,” a six-pack runs 58 cents below the national average — the 64th cheapest city for beer in the U.S.

Dining out in Philadelphia

But not all food fun in Philly comes from the kitchen. Philadelphia is known as one of America’s top restaurant cities. No wonder, considering it’s home to the nation’s best pizza, best coffee shop, best chef and America’s best restaurant.

Philly folks love dining out. City households spend on average 45.7 percent of their yearly food budget on restaurants, delivery or take out. That’s 5.6 percent of the entire household budget and translates to slightly over $4,000 a year. Comparatively, that number is just under $2,500 on average statewide and $2,700 nationwide.

Is eating out affordable in Philadelphia? On average, a meal at a cheap restaurant runs about $15. That’s the same as the national price. A three-course meal for two at a mid-range restaurant will leave you with a $55 check, five bucks below the national average. Even a combo meal at Mcdonald’s is the same as the rest of the country at about $8.

Transportation costs in Philadelphia

It’s no secret that commuting in Philadelphia is tough if you’re driving your own car. The city is known as the second-worst for traffic congestion, behind only New York City in the number of hours spent in the car to and from work.

But at least the cost of commuting in Philly isn’t horrifically pricey. The city has a Transportation Index of 13.5 percent, good enough for just the 29th most expensive in America.

Like in many major east coast cities, it’s expensive to own a car. Thankfully, the price of a gallon of gas (unleaded regular including all taxes) in Philly averages $2.43, just 28 cents above average. That last part is key, as Pennsylvania has one of the highest gasoline taxes — currently 58 cents per gallon.

One of the biggest auto expenses in the city is parking. In Philadelphia, monthly parking averages $275 a month. The cheapest lots, in outlying areas, run about $140 a month while lots and garages near or in Center City can run as much as $500.

And while there are no toll roads within the Philly city limits, the Pennsylvania Turnpike runs east/west just north of town. On average, the PA Turnpike charges 13 cents a mile if you pay with EZPass (and about double that without).

However, the city features four toll bridges that run to and from New Jersey: the Walt Whitman, Betsy Ross, Ben Franklin and Tacony Palmyra Bridges. All are free from Philly into Jersey but carry a toll of five dollars to return (except the Tacony Palmyra which is three).

Public transit in Philadelphia

Thankfully, Philadelphia has a robust public transportation system. The city’s transit authority SEPTA offers four subway and elevated train lines, 13 regional rail lines and dozens of bus and trolley routes. Nearly a quarter of Philadelphia workers commute via public transit. The city’s transit score is 68.

All city rapid transit, which includes trolleys, buses and trolley buses, costs $2.50 for a single trip regardless of distance or time of day. That goes down to two dollars when using the city’s new smart card program, SEPTA Key. Those are the same prices for Philly’s rapid rail lines as well, which includes the Broad Street, Market Frankford, Ridge Spur and Norristown High Speed lines subways and elevated trains. A transfer is a dollar, with the first one free.

As with most systems, prices are cheaper when purchased in bulk in advance. A weekly transit pass in Philly runs $25.50 and $96 for a monthly ride pass. Overall, this is one of the lowest prices of any city in its category (when calculated as a percent of income).

SEPTA’s commuter rail network is known as Regional Rail and operates within the city and to the suburbs as well as New Jersey and Delaware. Trains depart any of the 150 stations across the region about once an hour on average. All of its 13 lines pass through the city’s three Center City stations: Suburban, Jefferson and 30th Street (also home of the city’s Amtrak hub).

Prices for regional rail vary depending on distance and day traveling. For travel entirely within the city, a one-way ticket runs $5.25 during the week and $4.25 on the weekend and holidays.

For travel to and from the suburbs, tickets cost up to $6.75 on weekdays and $5.25 on the weekend depending on to and from which “zone” you are traveling. Pricing is higher if purchased on board with cash rather than in advance or with a smart card. Seniors and children riding with adults ride free on any mode while riders with disabilities travel at half price.

Walking and biking in Philadelphia

Philadelphia is also an eminently commutable city without requiring power transport. The gorgeous city streets are highly walkable, with an excellent walk score of 84.

As well, Philly is a haven for bikers with designated bike lanes and bike paths throughout the city and a bike score of 76.

The city also provides a convenient bicycle ride share program called Indego. The program offers over 1,000 bikes at 125 stations throughout the city. Pricing varies from four dollars for an individual half-hour to $17 a month for unlimited hour-long rides.

Healthcare costs in Philadelphia

Pennsylvania Hospital, founded in 1751 by Benjamin Franklin, is the oldest hospital in the U.S. Today there are over a dozen major hospitals in Philadelphia, along with a slew of smaller ones, a number of children’s hospitals and several cancer specialty centers. Philly is a hotbed for quality healthcare.

The Philly healthcare scene’s excellence balances by the breadth of available service. This has kept healthcare prices in the city stunningly low. The cost of living in Philadelphia for healthcare is 0.4 percent above the national average and the 111th most expensive in America.

A visit to a doctor (specifically a general practitioner) is $133 on average. This is good enough to rank 51st nationwide. Need your teeth checked? An appointment with a dentist for a cleaning is just the 141st priciest in the country, nearly 70 cents below average.

The best value in health care in Philly? Prescriptions within the survey are $88 below the national average, the 14th cheapest of all cities.

However, if your furry roommate needs attention, you might be paying a bit more. A veterinary visit (for an annual exam) is the 17th most costly in the nation.

While these numbers are promising, it is difficult to determine an average cost of healthcare overall as needs vary depending on your individual health.

Goods and services costs in Philadelphia

Most everything else that isn’t included above falls as goods and services. Goods covers everything you buy that’s not consumable or isn’t a tangible item. This could be anything from paper clips to potting soil to concert tickets. Services include most visits with professionals that don’t involve health care or your car. This is any personal business trade from dog grooming to plumbing repair, yoga instruction to landscaping.

As far as a goods and service economy, Philadelphia is incredibly affordable for its size. In fact, the cost of living in Philadelphia for goods and services is 5.6 percent above the national average. Despite its ranking as the sixth-largest city in the nation, its goods and services rank is 61st.

There are a number of items that are inexpensive in Philly. For example, a newspaper subscription averages just $14, just the 60th priciest in the nation. An average movie ticket for a first-run film ranks 61st at just $12.

Think it is expensive to get your hair done in a cosmopolitan east coast city? It’s not cheap, but a visit to a salon will run you $61, that’s just the 20th most expensive in the nation. In fact, it’s comparable to a visit to a stylist in Manhattan or Queens, about $23.50 above the national average.

Taxes in Philadelphia

The full sales tax rate in Philadelphia is 8 percent. This represents 6 percent from the state and the remaining 2 percent from Philadelphia County. The county is conterminous with the city, which has no sales tax of its own.

In general, non-sales-taxed items in the state include food (both grocery and dining), medicine and drug store items and most clothing. If you purchase $1,000 of taxable items in Philadelphia, you’ll be paying $80 in sales tax.

The city also charges a sugary drink tax. The 1.5 cents per ounce tax applies to sodas and any non-alcoholic beverage that lists sugar or any sweetener as an ingredient. The proceeds primarily benefit city education and recreation programs.

Philadelphia’s current property tax rate hovers around 1.4 percent. City income wage tax sits just under 3.9 percent. The wage tax applies to all Philadelphia residents regardless of where they work and all Philadelphia-based employees regardless of where they live.

How much do I need to earn to live in Philadelphia

The monthly rent in Philadelphia is $2,152 on average for a one-bedroom apartment. That represents a 2.56 percent increase in similar units year to year.

Experts suggest spending no more than 30 percent of your annual income on housing. Multiplying the rent on average for a one-bedroom by 12, you determine the average yearly rent is $25,824. This means you should have an annual household income of at least $86,080.

However, according to Payscale.com, the average salary in Philadelphia is $69,000. That means that a resident earning the average salaried wage would be budgeted to spend $21,000 a year or $1,750 a month on rent. That’s over $400 less than the average one-bedroom apartment.

Check out our rent calculator to see how much you can afford each month.

Living in Philadelphia

There are a number of factors to consider when moving to, within or around Philadelphia. But regardless of the category, the cost of living in Philadelphia is moderate compared to many cities its size. It’s a budget-friendly city especially when it comes to health care, housing and other channels.

No matter your budget, there’s a perfect Philly neighborhood and comfortable home waiting for you. Check out the great places to lay your head at night in the Philadelphia apartment rental listings or for homes to buy.

Cost of living information comes from The Council for Community and Economic Research.
Rent prices are based on a rolling weighted average from Apartment Guide and Rent.’s multifamily rental property inventory of one-bedroom apartments in April 2021. Our team uses a weighted average formula that more accurately represents price availability for each individual unit type and reduces the influence of seasonality on rent prices in specific markets.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.

Source: rent.com

Apache is functioning normally

This week’s Afford Anything blog post is a well-balanced diet:

  • Robert Kiyosaki predicts a massive crash — [philosophical]
  • Sobering stats about the housing market — [analytical]
  • Secret strategies to save on seasonal shopping — [practical]

The Robert Who Cried Wolf

Famed investor Robert Kiyosaki, author of Rich Dad, Poor Dad, recently caused an internet stir by predicting “the start of the biggest crash in history.”

Of course he did.

Kiyosaki is constantly crying wolf. It’s good for (his) business.

Bad news travels faster than good news.

People who prioritize attention over truth will use that to their advantage. Kiyosaki is a shrewd businessman. He understands the profit potential in strategic pessimism.

But that’s bad news for his followers. Per the law of large numbers, it’s reasonable that some people have kept their cash on the sidelines, rather than investing in the markets, after heeding his warnings. And that has massive lifelong ramifications on their wealth and retirement.

Lesson: Beware of anyone who peddles *negativity bias* in order to stay relevant.

These economic fear-mongerers don’t hold accountability for their track record of wrong predictions.

Their followers are the ones who suffer.

This is why it’s critical to choose your mentors carefully — and it’s precisely why you should never blindly enroll in an online class that’s taught by some random person whose ideas you haven’t vetted.

If you’re curious how often Kiyosaki has made the wrong call, note that Stanford-trained data scientist Nick Maggiulli, our guest on Episode 375 of the Afford Anything podcast, shared this illustration on X:

Pessimism has a visceral appeal. It’s evolutionarily advantageous to be hyper-aware of threats.

Our ancestors didn’t survive the jungle or savanna by appreciating the beautiful flowers. They survived by staying hyper-vigiliant of danger. This explains why negativity bias is so innate, so intrinsic. It’s a survival mechanism.

But in the modern developed world, pessimism keeps us overly conservative. We choose the “safe” major. We take the “steady” job. We tilt too heavily into conservative investments when we’re young, and we panic when our 401k’s start to decline. We avoid real estate investing and starting side businesses because these seem too risky.

Pessimism stifles innovation, entrepreneurship, and creativity. It locks us into mundane careers and middling investments as we muddle through risk-averse lives. In the end, we haven’t endured huge losses, but neither have we *embraced a shot* of winning.

As Episode 284 podcast guest Morgan Housel eloquently said:

“Pessimists get to be right. Optimists get to be rich.”


No, The Fed Lowering Interest Rates by 25 Basis Points Is Not Going to Flood the Market with New Housing Inventory 🙄

A little history lesson:

Once upon a time, in 2008, there was a Great Recession. It scared many investors and homebuilders, and they stopped making new homes.

In the decade that followed the Great Recession, new construction reached its lowest point since the 1960’s.

By 2019, the housing shortage amounted to 3.8 million units. This means there were 3.8 million more families and individuals who wanted a place to live — either to rent or buy — than there were homes available.

Then the pandemic struck. The prices of copper, lumber and other construction items shot through the roof (no pun intended). Builders had to raise home sale prices due to higher materials costs. Prices soared.

In 2020 and 2021, people across the internet cried, “Why are they charging so much more than the home is worth?!” — not realizing that “worth” is a function of the cost of labor + the cost of materials + the premium of scarcity.

And when supply is curtailed — as it was by 3.8 million units as of 2019 — there’s an ample scarcity premium.

Then inflation climbed. The Federal Reserve raised interest rates 11 times during their 2022-2023 cycle, resulting in a rapid escalation of mortgage rates.

This created a “lock-in effect” among existing homeowners. Nobody wants to trade a mortgage with a 3 percent fixed interest rate for an alternate mortgage with a 7 percent rate.

Existing homeowners with a mortgage have a huge incentive to hold.

Sellers who *need* to get rid of their property — for example, because they’re moving to another country — list their homes on the market. But homeowners who simply *want* to upsize or downsize are, for the most part, staying put.

This has created even more housing supply pressure.

Meanwhile, homebuilders — who must borrow money to finance their operations — are seeing the cost of capital skyrocket. Many have curtailed new construction, putting further pressure on the supply pipeline.

So we have a long-running confluence of factors that, piece by piece, keep exacerbating the housing supply crunch.

And this leads to today’s takeaway:

No, this problem will not magically solve itself the moment that the Fed reduces interest rates.

The Fed is meeting today and tomorrow. They’re widely expected to hold rates steady. (They’ll make an official announcement at 2 pm on Wednesday.)

There’s rampant speculation that the Fed will lower interest rates in Q1 or Q2 of next year.

— And —

There seems to be a pervasive myth that once interest rates decline, those “locked-in” homeowners will rush to list their homes for sale, flooding the market with new inventory.

The supply-demand imbalance will tilt in the buyer’s favor, home prices will plummet, and housing will become affordable once again.

Yet that is pure fantasy, disconnected from the data.

Imagine 10 people. Nine of them have mortgage rates that are less than 6 percent. The stat is 91.8 percent of mortgaged homeowners, to be precise.

Wait.

Imagine those same 9 people, the 9 out of 10 who have a sub-6 percent interest rate. Here’s how they break down:

  • One has an interest rate between 5 to 6 percent.
  • Two have an interest rate between 4 to 5 percent.
  • Six have an interest rate below 4 percent. The exact stat is 62 percent.

Let me say that again:

Six out of 10 mortgaged homeowners have an interest rate that’s below 4 percent.

Meanwhile:

One-half of mortgaged homeowners (49 percent) say they’d consider listing their home only if interest rates fell below 4 percent, according to a Redfin survey conducted by Qualtrics.

So this myth that if the Fed lowers interest rates, the market will get flooded with new inventory? — That scenario isn’t likely to happen for a long, long, looooong time.

As of Dec 12, 2023, the current average 30-year fixed rate for a buyer with a 740-760 credit score is 7.4 percent. Multiple reductions in interest rates won’t begin to approach the sub-4 percent rates of yesteryear.

The “lock-in effect” will last for longer than you might expect.

Lesson: Don’t wait to buy a home based on speculation about the market. If you have both the money and desire to buy a home, DO IT NOW. Homes are likely going to get more expensive in the future, not less.


How to Not Flush AS MUCH Money Down the Toilet This Holiday Season

Yeah, I know.

The holiday season is custom-built for parting with your money. Every store is promoting sales, discounts, offers. Limited time only.

It’s scarcity on steroids.

Holiday deals tap into the part of our brain that says — “this deal is only available now; I should snag it while I still can.”

Our FOMO creates jobs and drives the economy.

Since holiday spending is human nature, let’s forgo the guilting, shaming and finger-wagging that’s so endemic to the personal finance and FIRE community.

It’s counterproductive. Guilt and shame over holiday spending doesn’t change human behavior, it merely robs the joy from it.

It’s like chowing down a piece of chocolate cake while simultaneously fretting about the sugar.

You’re eating the cake regardless. You may as well enjoy it.

Instead, let’s accept that some degree of holiday spending is normal, and let’s focus on how to find the best deal possible.

Here are four pointers. (If you have more to add, please share these with the Afford Anything community) —

#1: If you’re buying an item at a mid-size company’s website (i.e., a merchant that’s bigger than a mom-and-pop shop, but not a big box retailer like Target or Amazon) — move your cursor near the “back” arrow on the browser.

This is called “exit intent,” and it often triggers pop-ups with discount codes.

#2: For online purchases: Create an account, put an item in your cart, and then leave the website.

This is called “abandoned cart,” and often triggers an automation in which the company emails you a limited-time-offer discount code.

#3: If you’re buying something expensive (over $500 – $1,000 or more), track the price for a few weeks, especially around the holidays. On sites like Wayfair, I’ve seen prices fluctuate daily.

#4: The least useful savings tip: Googling discount / promo codes or pulling these codes from mass aggregator websites.

You may get lucky, but typically 9/10 are expired or don’t work; they just yield a bunch of extra open tabs on your browser.

There’s an enormous selection of third-party websites and browser extensions that claim to help with this, with varying degrees of efficacy.

I’m not going to recommend any specific tools; recommendations are both dynamic and better crowdsourced. Please share your experience with the community.

Source: affordanything.com

Apache is functioning normally

If you’re in the market for a home, you may have come across the term “single-family home” and wondered what it means and if that is what you are looking to buy.

Generally, a single-family home refers to a freestanding home set on its own piece of property. It can be occupied by a single individual or a large family, as long as it’s occupied by a single household.

Owning a single family home comes with a number of benefits, including more privacy and space than other types of residential properties. However, this type of home also tends to come with a higher price tag and more responsibility. Here’s a closer look at what single family homes are and the pros and cons of buying one.

What Is a Single-Family Home?

Generally speaking, the term single-family home refers to a home that is designed for, occupied by, and maintained by one person or household. When you buy a single-family home, you will own both the home and the property it sits on. This is in contrast to other types of properties, such as condominiums (condos), where you only own the interior of your unit and share ownership of common areas with other homeowners in the complex.

In most cases, a single-family home is defined as one that is freestanding and not attached to homes owned by other individuals. However, the government has a broader definition. According to the U.S. Census Bureau, a single-family home includes fully detached homes, as well as semi-detached row houses and townhouses. In the case of attached units, the units must be separated by a ground-to-roof wall in order to be classified as a single-family structure. Also, these units must not share heating/air-conditioning systems or utilities.

In some places, a single-family home is defined in part by how many kitchens it has. Depending on zoning laws, adding a second full kitchen to an in-law’s apartment, for example, can cause a house to be redefined as a multi-family building. If you’re planning on doing this type of renovation, be sure to check local zoning laws beforehand.

Whether a home is classified as a single-family or multi-family home can have an impact on the type of mortgages you qualify for. Both single-family homes and two- to four-unit properties fall under residential lending guidelines. (A property with five or more units is considered commercial property.) You can use a conventional mortgage to purchase a home with four or fewer units, whether it’s a single- or multi-family home. If you’re buying a multi-family home with five or more units, you must use a commercial mortgage. Commercial mortgages have different terms than residential mortgages do.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Pros and Cons of a Single-Family Home

As you shop for homes, it’s important to consider the various advantages and disadvantages of a single-family residence.

Some of the advantages are:

•   More space Single-family homes tend to offer more space than other types of housing, and it belongs to you alone. They may have large yards where children and dogs can play or where you can plant a vegetable garden. They may also have storage in attics, garages, or basements, which aren’t shared between multiple units.

•   Privacy Single-family units that don’t share walls with neighbors offer more privacy. You are less likely to hear neighbors’ activities, and they are less likely to be bothered by yours.

•   More design features Single-family homes may be available in a broader range of designs and layouts, from Cape Cods or colonials to ranch homes and contemporary designs. You can also make changes to the building or landscape design without input from neighbors with a shared interest in the space.

•   Room to grow Single-family homes may offer you more options for additions if you have a growing family or if aging parents may come to live with you. For example, single family detached homes with larger plots of land may allow additions that wouldn’t be possible in condo units.

•   May offer higher appreciation Single-family homes tend to appreciate in value more than condos and townhouses.

•   Option to rent As the sole owner of a single-family home, you have the option to rent out the house if you decide to move and wish to hang on to the property.

While these factors are attractive, it’s important to weigh potential disadvantages of buying a single-family home as well. Here are some to keep in mind:

•   More expensive Single-family homes tend to be more expensive than other types of homes. That can mean a larger down payment and higher closing costs, and your mortgage payments may be higher.

•   More maintenance Unless your single-family home is part of a homeowner association (HOA) that provides basic services, you’ll be in charge of all home maintenance like lawn mowing and roof repairs. You’ll either have to take the time to do it yourself or hire help.

•   Possible HOA fees Planned developments usually require HOA fees to cover the upkeep of common areas and shared structures.

•   Less income potential With multi-family homes, you have the option to live in one unit while renting out the others. This allows you to bring in regular income to cover the cost of the mortgage and maintenance expenses.

Finding a Single-Family Home

Before you start looking for a single-family home, you’ll want to first determine how much home you can afford. You might start by calculating mortgage costs and getting prequalified for a home loan; prequalification often only takes a few minutes and provides an estimate of how much you might be able to borrow and at what rate (without impacting your credit).

You’re probably already searching real estate listings online and noting the property types. You might also want to do some research on housing market trends, especially if you live in one of the nation’s real estate hot spots.

You may also want to engage a real estate agent. They have expertise in local housing and zoning laws, know whether a list price is fair or above or below average, and can help you negotiate the price of a home you’re interested in buying.

If there’s any question about how a house is zoned, you can often look up zoning information through a particular city’s website.

Recommended: First-Time Home Buyer’s Guide

Who Should Get a Single-Family Home?

Single-family homes are a good fit for people who can cover the higher price tag, want privacy and flexibility, and are willing to take on a lot of responsibility.

If you qualify as a first-time homebuyer, there may be help available to buy a single-family home in the form of down payment assistance and low- or no-interest loans.

If you’re looking for a more affordable home and don’t mind giving up some privacy, you might want to consider a condo or townhouse.

A condo is like an apartment but is available for purchase. These units share walls with neighboring units, but you generally won’t have to worry about maintaining the property.

A townhouse, on the other hand, has multiple stories and will share one or two walls with other units. Like condos, townhouses are typically less expensive than single-family homes. Unlike a condo, you’ll own the property that the townhouse sits on.

If you’re looking to invest in real estate, you might consider buying a multi-family home. While this will likely cost more than a single-family home, you may be able to recoup the added cost (and, over time, earn even more) by collecting rent from tenants.
💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

If You’re Thinking of Purchasing a Single-Family Home, SoFi Home Loans Can Help

Single-family homes are one of the most popular real estate options and often what people envision when they think about achieving the dream of home ownership.

This type of property typically sits on a parcel of private property and doesn’t share walls with neighbors, affording you a high level of privacy. You generally have more control over making enhancements to your home than you have with other types of properties, and usually have access to extra storage, including exterior storage space like a shed or garage.

However, don’t forget to consider the added responsibilities and costs when deciding on the right type of home for you and your family.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much does a single-family home cost?

The median price for an existing single-family home — one that’s already standing, not new construction — was $387,600 as of November 2023, according to the National Association of Realtors.

How much do I need to build a single-family home?

The cost of building a single-family home (not including land) can range anywhere from $42,000 to $900,000-plus depending on the home’s type and size and where you build. On average, the cost to build a house in the U.S. is about $329,000.

Can you get a loan to build a single-family home?

If you’re planning to build a single-family home from scratch, you can apply for a construction loan. With this type of loan, money is usually advanced incrementally during construction, as the home-building project progresses. Typically, you only pay interest during the construction period. Once the construction is over, the loan amount becomes due, and it is converted into a regular mortgage.


Photo credit: iStock/Dean Mitchell

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

Apache is functioning normally

Listen and learn how to crush it in a chaotic industry like real estate. Today’s guest, Kristen Beahm, structured her real estate business around systems, and she’s here to share how. Kristen covers team building, task tracking, and more. She even talks about her biggest takeaway from a recent Tom Ferry conference—tracking your input to control the output. Don’t miss it!

Listen to today’s show and learn:

  • About Kristen Beahm [1:41]
  • How Kristen got into real estate [2:18]
  • Experience vs. time in real estate [4:23]
  • Tips on building a real estate team [7:16]
  • Why you shouldn’t bring on an agent too early [8:01]
  • Templates and tools for automating real estate processes [9:36]
  • Download Kristen’s templates for FREE here [11:00]
  • How to get started with systems [12:02]
  • The biggest mistake new Realtors make [15:13]
  • What Asana and Notion are and how they can help you stay organized [16:40]
  • Other tech tools Kristen recommends [19:35]
  • Keeping communication simple with a small team [22:42]
  • Team members who help get real estate deals done [23:44]
  • Where to find your first few hires [26:07]
  • Where Kristen’s team gets real estate leads [27:27]
  • Times to touch contacts to stay top of mind [28:53]
  • What Kristen is working on in her business right now [32:16]
  • A different type of advice for new real estate agents [35:24]
  • A tip from last year’s Tom Ferry conference [39:16]
  • Where to find and follow Kristen Beahm [42:33]

Kristen Beahm

Kristen Beahm co-founded the KB Collective Real Estate team in 2018. Since then, she’s led her team to become the Top Producing Team at Worth Clark Realty every year (2018-2022). With over $145,000,000 sold and over 500 clients served, their team is one of the Top 50 Realtors® in the St. Louis area, and is proud of the small difference they’ve been able to make in the community with a donation with every hold sold to Angels’ Arms, an organization dedicated to supporting local foster kids and families.

Kristen serves residential clients expanding from first time home buyers, buy & hold investors, new construction clients, sellers, and luxury property owners primarily across St. Louis and St. Charles Counties. She is committed to providing every one of her clients an exceptional experience, regularly striving to simplify the process for the, ‘WOW’ them along the way, and raise the bar in the industry. Her latest accomplishment was being named as part of this year’s 30 Under 30 Class with the National Association of REALTORS.

Kristen grew up just outside of St. Louis, and studied Finance & Real Estate at the University of Missouri. Shortly after graduation, she purchased her first home, which is now leveraged as a cash-flowing rental property. She currently resides in Wildwood with her husband Christopher, daughter Dorothy, and dog Sake. You can often find them at the local CrossFit gym, outside at a local park or trail, or exploring St. Louis’s food and drink scene.

Related Links and Resources:

It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.

-Aaron Amuchastegui

Source: realestaterockstarsnetwork.com

Apache is functioning normally

Investing in real estate is some of the oldest and most reliable financial advice in the books. Few other assets can compete with real estate’s vast array of benefits. These benefits include tax advantages, appreciation, relative impunity to market shifts, and even the potential for passive income.

But even if you have every intention of investing in real estate, it can be challenging to get started. After all, even a modest home usually requires a substantial down payment. And it can take years to save up those five-figure sums. The term “real estate investor” may bring to mind a multi-millionaire who manages several properties, leaving you feeling overwhelmed enough to give up the ghost entirely.

Fortunately, it is possible to invest in real estate with little or no money, even if you aren’t swimming in discretionary income. For instance, with an Opportunity Fund or REIT (Real Estate Investment Trust) you can get your foot in the door even if you can’t afford to purchase an entire property. There are also a host of ways to leverage your own home. These include house hacking, renting vacation space on Airbnb, and more.

In this post, we’ll break down everything you need to know about how to invest in real estate. We’ll go over some of the most common types of real estate investing. We’ll also break down how they can help you make money. And we’ll explain how you can begin, no matter how much capital you have in hand.

Why Invest in Real Estate?

Before we dig into the meat of the post, let’s take a moment to backtrack. Why is real estate investing such a well-worn piece of financial advice?

You’ve probably heard that diversifying your portfolio of real estate investments is essential. But your “portfolio” doesn’t just have to live on the stock market! Real estate investing gives you, as the name suggests, a real, tangible asset. And it’s much less vulnerable to the capriciousness of the market.

Real estate investing can help you not only build home equity but also generate passive cash flow. Both through the process of appreciation and the more intentional, hands-on approaches we’ll study further below. And owning your own home can help you reap financial benefits while simultaneously providing for one of your most basic needs.

How to Invest in Real Estate with Little Money

When a down payment might cost as much as $60,000, it’s understandable that many first-time property shoppers feel overwhelmed. They say you have to spend money to make money. Yes, but that’s quite a hefty figure for the average American earner.

To be sure, some real estate investment strategies require a good deal of cash upfront to be workable. But there are other tactics that don’t necessitate such a large lump sum to begin with. This means you don’t have to be a real estate mogul to be a property owner. We’ll break down various strategies at both ends of the spectrum below.

Types of Real Estate Investing

Let’s get into the nitty-gritty. What types of real estate can you invest in?

There are three main types of investment properties available to real estate investors.

  • Residential properties are probably the ones you’re most familiar with. They are exactly what they sound like: buildings used by individuals and families as residential living spaces. These properties include single-family homes, duplexes, apartments, condominiums, and townhouses, and multi-family homes (so long as they’re being used residentially and don’t exceed four units).
  • Commercial real estate are properties used to conduct business. They may include offices, storefronts, retail spaces, farmland, and large multi-family houses or apartment buildings.
  • Industrial real estate are properties that serve industrial business purposes, such as factories, power plants, or storage and shipping warehouses.

Furthermore, there are both active and passive forms of real estate investing.

Active investing is, well, active. It requires a good deal of time, energy, and commitment from the investor. Active investing may become a part- or even full-time job for the investor. They usually share ownership with few (or no) other people and thus bears a lot of responsibility for the success of the investment.

Passive investing, on the other hand, allows the investor to reap the benefits of investing without taking on the pressure and responsibility of full ownership of a tangible property. In most cases, passive investing involves supplying capital to a larger investment pool. You earn capital gains on loan interest through dividends paid to shareholders.

We’ll go into it all of this in more detail, including specific ways you can invest in real estate, both active and passive.

How Real Estate Investing Can Help You Earn

Before we break down the specific ways you can get started investing in real estate, let’s talk about how it can help you make money. (After all, that’s the whole point!)

You can invest in real estate in several ways, depending on what type of investing you’re participating in.

Equity and appreciation

Purchasing real estate equips the owner with a “hard asset”; the tangible property or building. Owning this kind of asset confers equity, or value. It isn’t as vulnerable to the fluctuations of the market as stocks, bonds, and other securities. Furthermore, property has a longstanding history of increasing in value over time, or appreciating.

On the contrary, other types of purchases (like automobiles) depreciate, or lose value. Thus, purchasing a property may allow you to earn income passively simply through the process of appreciation. It more or less ensures that the cash value of your home is a safe and stable part of your overall net worth.

Rental income

Chances are, you’ve had to pay rent to a landlord at some point in your life. Well, if you become the landlord, someone’s paying you the rent. And as long as that rental price eclipses your total expenses, including your mortgage and maintenance costs, the rest is profit!

Aside from managing the investment property, you can also collect rental income by sharing your space on platforms like Airbnb or house hacking, which we’ll explain below.

Sale profit

This happens when you buy a home with the intention to fix it up and sell it down the line (also known as “house flipping”.) It’s the difference between your sale cost and your purchase cost (minus all the expenses put into maintenance and improvements) is pure profit.

Loan interest

The interest charged on home and property loans can increase the value of real estate investments made through REITs, investment platforms, and private equity firms.

Ways to Invest in Real Estate

Now we know a bit about the different types of properties available to investors and how those real estate investments stand to help you earn cash.

So, what are the specific ways to go about real estate investing? There are several in both the “active” and “passive” categories.

Active:

  • House flipping, or rehabbing, is when an investor purchases a property with the sole intent of fixing it up to sell it later on.
  • Wholesaling is similar to flipping houses, but less work intensive. Wholesaling occurs when an investor purchases a property they believe is underpriced, so they can quickly sell it to another investor at a profit.
  • Rental properties give investors a long-term way to draw profit from their investments, though they do require lots of hands-on management and maintenance over time.
  • Airbnb, Vrbo, and other vacation rentals can often be listed for substantial per-night prices. They can be especially lucrative in high-demand travel destinations.

Passive:

  • Private equity funds pool the assets of many investors, which creates a larger, more powerful investment fund. These funds are usually overseen and allocated by a dedicated manager. They may have high minimum investment thresholds and requirements to join.
  • Opportunity funds also pool investors’ assets, but with the specific purpose of making investments in qualified Opportunity Zones. These are low-income, up-and-coming communities that would benefit from private investments and economic development.
  • REITs are companies that invest in commercial properties. Private investors can purchase shares of the company and earn income on capital gains in the form of dividends.
  • Online REIT platforms can make real estate investing accessible to beginning investors, often carrying no net worth or accreditation restrictions. They may allow you to invest in specific properties or in pre-built, diversified portfolios of real estate.

We’re going to break down these different investment options in even more detail below. But first, let’s start a bit closer to home—literally.

Starting with Your Own Home

One of the most straightforward ways to invest in real estate is probably already on your financial to-do list, anyway: purchasing your own home.

Purchasing a home of your own allows you to kill two birds with one stone. You’re taking care of the basic need of shelter, while also leveraging the purchase to reap a host of financial benefits.

Here are just a few ways that owning a home can help you save and earn money.

  • Build equity: As discussed above, property ownership confers relatively immutable equity to the purchaser—that is, your home is a fairly safe, tangible asset to add to your overall investment portfolio.
  • Receive tax benefits: Certain homeowners’ expenses, including real estate taxes and home mortgage interest, are tax-deductible. And if you sell your home, you may exclude up to $250,000 of capital gains (or $500,000 if filing jointly) from your taxes.
  • Take advantage of appreciation: Even accounting for the 2008 crisis, the cost of homes and other properties have steadily increased over time for the past 50 years. So, the home you purchase today will likely be worth more than the price you paid for it in the future.
  • Stop paying rent: Although you’ll likely still have a mortgage payment and other expenses to cover as a homeowner, you won’t be paying rent to live in another person’s property. It’s a cost that is essentially entirely wasted, since you aren’t building home equity in the rental property.
  • Keep the value of your home improvements: When you own a home of your own, any improvements you make will add to the property’s total value, beefing up your asset as well as beautifying your living space.

House Hacking

Another way to make money by purchasing your own home is known as “house hacking“. It’s a real estate investment strategy wherein you leverage rental income from your primary residence to live there cost-free.

The term was originally coined by entrepreneur and author Brandon Turner, who wrote “The Book on Investing in Real Estate with No (and Low) Money Down” and “The Book on Rental Property Investing.”

House hacking may be done, for example, by purchasing a duplex. The investor rents out one unit at a price that covers the mortgage cost while living in the second unit. Some homeowners have also used space-share platforms like Airbnb to offset their housing costs in the same manner.

Real estate investors can use this strategy to pay off the property and even create a profit margin. This will eventually allow them to invest in more rental properties. Thus, house hacking is a great way to combine the personal financial benefits of homeownership with the long-term earning potential of other types of property investment.

Buying a Home Without a Huge Down Payment

Given the recent trends in the housing market, you may feel daunted by the prospect of becoming a homeowner. In 2023, the U.S. housing market experienced significant challenges, with home prices rising to near-record highs.

But there are many incentives and programs designed to make this large investment more feasible for first-time home buyers.

  • FHA (Federal Housing Administration) Loans may allow borrowers to purchase a home with a down payment as small as 3.5% of the purchase price and with credit scores as low as 580. (You may also be approved for an FHA loan with a lower credit score, but your minimum down payment may be higher.)
  • The USDA also offers low-cost loans to low- and moderate-income households purchasing homes in qualified rural areas.
  • Down Payment Assistance Programs offered by local governments and private firms can provide grants, loans, and educational materials to prospective home buyers

Many other financial institutions and organizations also have special incentives for those purchasing their first homes or low-income families in the housing market. Make sure you check with your local housing authority to learn more about what’s available in your area.

Active Investment Opportunities

Want to get hands-on? Here are the details on some of the most popular and accessible active real estate investment opportunities.

House Flipping

If you’ve ever watched more than thirty minutes of HGTV, chances are you’re at least passingly familiar with the idea of flipping houses. It’s basically where you purchase a home with the express intent of fixing it up and selling it (at a higher cost) later.

House flipping is a great way for investors to earn a significant profit. However, they do need to know how to complete the flip successfully without incurring too many costs. Expenses can quickly eat into the investment’s return.

Finding a Home to Flip

House flippers have to be able to recognize a home that may be slightly undervalued but would be able to sell well given the proper upgrades. This involves both an understanding of the area’s desirability and the types of improvements that generate increased home value.

House flippers are responsible for the entire cost of the home purchase. They must also pay for all the upgrades, which they may either do themselves or hire out to professionals.

Either way, flipping houses incurs a hefty up-front cost, and it does come at a risk. Even after you make all the improvements, it’s possible that the house will languish on the market.

This can mean racking up maintenance, taxes, and other expenses for the real estate investor. However, a properly executed, short-term flip can create a substantial profit margin in a relatively small period of time.

Wholesaling

Like house flippers, wholesalers purchase homes with the intent of selling them quickly. But, they aren’t planning to do any heavy lifting along the way.

Instead, wholesalers find properties that are undervalued for their market. They scoop them up and resell them to other investors at a price closer to their true value. Thus, earning the difference as a profit.

Rental Properties

While managing rental properties may seem like a straightforward and reliable way to earn income, it’s one of the most work-intensive approaches on this list. It does require enough up-front capital to purchase the property (or properties) in the first place. However, landlords do stand to see substantial and steady returns in exchange for the work and effort they put into their properties.

After purchasing a viable property, which needs to be well-maintained, in a desirable location, and well-advertised, landlords are responsible for filling that property with qualified tenants. This can involve a time-consuming and labor-intensive screening process.

After all, as a landlord, you’re giving your renters the keys to your investment—literally! It can be a very risky move if you don’t take the time to ensure your tenants are well-qualified.

Finding & Qualifying Tenants

Along with running a standard background check, landlords may also conduct interviews with and request credit reports from prospective renters, all of which takes time. And don’t forget: every month your rental property is unfilled is a waste of potential income.

Once you do find qualified tenants, you’ll be responsible for a host of obligations unless you hire a property management company. You’ll need to provide maintenance and repairs. You’ll also need to stay on top of rent collection and record-keeping. It can quickly become unwieldy once you have several properties.

You’ll also need to be sure you’re in compliance with all the renters’ rights that exist in your jurisdiction, including laws that regulate the eviction process. Of course, you’ll need to put in the work to find good renters and a well-maintained property in the first place. When done so, managing rentals can provide a smooth and steady source of income for relatively little active work.

Seller Financing

Want to buy an investment property with no money down? Look into seller financing or a land contract. This is where the seller acts as the bank. You make your mortgage payments, including interest, to the seller.

After a few years or so, you will have enough equity in the home to get a bank loan. You can then make a lump sum payment to the seller.

Private & Hard Money Lenders

Private money lenders generally charge between 6% to 12% on the money borrowed. Hard money lenders usually charge 10% to 18%. Hard money loans are not from banks. They are from individuals or businesses aimed at financing real estate investments for a return on their money.

Hard money loans are used by investors who don’t qualify for conventional financing. They are typically used to fund renovations. Once the house is finished or has some equity in it, the borrower then refinances to a conventional mortgage with a lower interest rate.

Airbnb, Vacation Rentals, and Space Sharing

Managing a traditional property, wherein renters sign a multi-month lease, is not the only way to make money from an investment property. Platforms like Airbnb have revolutionized the real estate market. They allow homeowners (and sometimes even renters) to make money by renting out their space on a temporary, per-night basis as a vacation rental.

What’s more, you don’t necessarily have to rent out an entire home or unit to participate. A private room, or even a couch in a shared living room, is acceptable for some travelers using these services.

Airbnb and other vacation rental platforms make it simple for a novice renter. You don’t need to have a huge amount of know-how to start earning money this way. In fact, you don’t even necessarily have to “invest” in any property at all. Some landlords may allow their renters to list their housing on Airbnb as a sublet.

Airbnb Laws

However, as this new form of investment property has expanded, it’s created housing crunches in some cities. It’s resulting in “Airbnb laws,” or short-term rental legislation. These laws may limit your ability to use your housing in this way.

Always check your local regulations before you list your space on Airbnb or another of these types of platforms. If you don’t own the space, ensure that short-term sublets are allowed. Check your lease or ask your landlord directly.

Real Estate Investing Groups and Passive Investing

You may have noticed that many of the active real estate investment opportunities listed above do require substantial upfront capital to get started. You can’t wholesale or flip a house if you can’t purchase the house in the first place!

Furthermore, these active strategies generally involve a high level of skill, effort, and responsibility. It may not be feasible for those committed to other full-time careers.

Fortunately, there are still other ways to get involved with real estate investing, even if you don’t want to own or manage tangible property. (Or if doing so is out of financial reach for you right now). These passive investment tactics can help you glean the benefits of real estate investing without taking on quite as much of a fiscal and physical burden.

Private Equity Funds

A private equity, or PE fund, pools contributions from various investors to make larger investments. They’re often limited liability partnerships. That means there are fixed periods during which investors do not have access to their holdings.

Instead, PE funds allow investors to earn gains on debt and equity assets passively, without putting in much active work or research. Asset allocation and investments are managed by a dedicated individual or group. They earn money through annual fees as well as profit sharing.

PE funds come in various types, including the following:

  • Core equity funds generally invest in established commercial properties. They don’t carry risks like needing major improvements or experiencing losses for lack of consumer demand. The core strategy is simultaneously the least risky among PE funds and, typically, the least gainful.
  • Core plus equity funds generally follow the core strategy, but take a few more risks on properties that may require minor upgrades. This leads to a higher risk-return ratio on average.
  • Value added equity funds may invest in commercial properties that require substantial upgrades or new management to operate at their full potential. They may also seek to sell the property after improvements are made to create an additional profit margin.
  • Opportunistic equity funds offer the highest potential rewards, along with the highest risk. Investment properties purchased via these funds may need new construction or even land acquisitions. The payoff of such a new business venture is all but guaranteed. Furthermore, these developments take time, which means your investment capital may be tied up for longer. However, when they pay off, opportunistic equity funds see some of the best returns of the bunch.

Although PE funds are powerful real estate investment engines, they do often have high minimum investment requirements, generally not less than $100,000. Some funds may also be limited to accredited or institutional investors who can demonstrate available means.

Opportunity Funds

Opportunity funds operate on a similar model to private equity funds but are specifically used to make investments in qualified Opportunity Zones. These are economically distressed areas designated by the state and certified by the Secretary of the U.S. Treasury. Opportunity funds are legally required to invest 90% of their assets into properties in these Opportunity Zones.

Because these areas tend to be up-and-coming (and because tax benefits can incentivize investors to support them), opportunity funds often see substantial capital gains for their investors. And taxes incurred on those gains can be deferred until December 26, 2026.

That means the longer the investment is held before that date, the lower your overall tax liability will be. And opportunity fund investments held for at least ten years prior can expect their capital returns to be permanently excluded from capital gains taxes.

Of course, this strategy requires parting with your investment capital for a significant period of time. It’s best for those who can afford to put down the money to play the long game. If you can, however, investing in one is a great way to see substantial returns for almost zero effort.

Real Estate Investment Trusts (REITs)

A real estate investment trust(REIT) is a company that invests in commercial properties. As an investor, you purchase shares of this company just as you would any other. You earn income through its debt and equity assets in the form of shareholder dividends.

REITs operate similarly to mutual funds. They provide an excellent way for the average earner to experience the benefits of real estate investing. You don’t have to have a huge amount of capital to get started, as minimum investment requirements may be quite low.

However, they may carry high investment fees, especially in the case of private REITs (i.e., those not publicly traded on the stock market). Fees at these companies may run as high as 15%. REITs may also be illiquid and keep your money locked up for longer periods of time.

Online Real Estate Investment Platforms

In this digital, all-sharing-all-the-time age, most of us have already heard of crowdfunding. Real estate investments are no exception to the rules of the new millennium.

Online real estate investment platforms have begun springing up. They can make real estate gains achievable for average investors who may not have the towering net worth or accreditation status necessary to buy into more formal funds. Depending on the specific company, you might be able to choose specific investment properties to fund or buy into a diversified portfolio of investments.

Fees and minimum investment requirements are relatively low on real estate crowdfunding platforms. For instance, Fundrise lets you get started with just $500. That is much less than you’d have to pay to get in on most types of active investments! Check out our full review of Fundrise here.

Ready to Get Started Investing in Real Estate?

As you can see, there are several ways to start investing without saving up a five- or six-figure sum. And if you do it right, your investments can actually help you reach those high savings goals. You can then fund other types of investment projects!

However, as with any financial objective, planning and strategizing is key. Saving up as much capital as possible will help you get the best return on your investment once you’re ready.

You can’t allocate your assets without first keeping track of them, and to achieve that, you need to create a budget. If you’re in debt, aggressively paying it off will free you of a weighty financial anchor, so check out these powerful debt relief options.

Finally, if you intend to purchase property either to live in or as an investment opportunity, your credit score matters. It’s as simple as that. If your credit score isn’t quite where you want it to be, take these steps to raise it. Doing so will allow you to get the best interest rate once you’re ready to make the big purchase.

Source: crediful.com