Academy Mortgage recently celebrated its 30th anniversary, having been founded back in 1988.
It began as a humble family-owned company opened by Duane Shaw, and remains one today with his son-in-law Adam Kessler in charge, serving as CEO.
With three decades under its belt, it’s clear Academy is a mature player in the mortgage space, which now includes all types of fintech-focused newcomers like Better Mortgage and Movement Mortgage.
It’s a very competitive business, so those who are able to stick out it for so long have proven staying power if nothing else. They must be doing something right, right? Let’s find out.
Academy Mortgage Prides Itself on Doing Everything In-House
They are an independent direct mortgage lender based in Utah
That only operates via the retail direct-to-consumer channel
Licensed to do business in 49 states and DC (not licensed in NY)
Have over 260+ branch offices nationwide
The Draper, Utah-based company’s claim to fame is that it’s a direct lender “100% focused on retail mortgage banking.”
What it means is they only work with borrowers directly, instead of dabbling in the correspondent or wholesale channels. So they’re laser-focused on the customer.
Perhaps this is how they were able to navigate through the mortgage crisis that occurred in the early 2000s, only to grow bigger and stronger since then.
Additionally, they do all the loan underwriting, processing, and funding in-house, instead of having a fragmented sales and operations team offsite.
Everything is carried out in one of their 260 branch offices throughout the country. Speaking of, they’re licensed to do business in 49 states and Washington D.C.
Some of those branches were the result of their acquisition of Republic Mortgage back in 2014, which allowed them to grow to 200 branches and 2,100 employees.
In 2017, they also acquired Oklahoma-based First Mortgage Co., which operated many branches in the Southwestern United States and Texas.
They also pride themselves on quick turn times, and refer to themselves as the “Gold Standard” in loan origination.
So it’s obvious that customer satisfaction reigns supreme with the company.
Getting a Home Loan with Academy Mortgage
The company employs hundreds of loan officers nationwide
You can call them directly to get paired up with an employee
Or visit their website and use their online directory to choose someone specific
It’s also possible to visit one of their many branches if you prefer face-to-face interaction
The company employs thousands of individuals, including a large fleet of mortgage loan officers throughout the country.
If and when you apply for a home loan with Academy, you can call them directly or choose a specific loan officer to work with.
They have a loan officer directory on their website that allows you to search by zip code, by name, and by branch (city and state location).
I imagine many of the loan officers are referred to clients, either by a real estate agent, or by a former customer who had a good experience with the company.
You can also visit a branch if face-to-face is your thing, though these days folks seem more interested in using a smartphone to make contact.
The one downside here is it appears that you can’t apply for a mortgage online.
Academy Mortgage a Top-40 Mortgage Lender
They’re a top-40 mortgage lender nationwide
The company closed more than 35,000 mortgages in 2019
The majority of those loans were for home purchases (about 70%)
With the remainder tied to home refinance transactions and HELOCs
Based on the latest HMDA data, Academy Mortgage was the 37th largest mortgage lender overall in the nation based on total loan volume in 2019.
The company closed 35,000 residential mortgages throughout the year on nearly $9.5 billion in total loan volume.
While that’s fairly big, it pales in comparison to Quicken Loans, which mustered over $81 billion during the same time period. However, it shows they’re no slouch either.
For home purchase loans, they tend to rank in the top 20 nationally since a large share of their mortgages are for that purpose.
For home refinance loans, they rank quite a bit lower due to lower volumes, but they’ve still got plenty of options for borrowers either way.
But it is clear that the independent home loan lender focuses heavily on home purchases as opposed to refinances, likely partnering up with local real estate agents to generate business.
Academy Mortgage Interest Rates
They don’t disclose their mortgage rates on their website
So it’s impossible to know where they stand without getting a quote first
My guess is their rates are average relative to other mortgage lenders
If super low they’d probably openly advertise them to draw in business
Unfortunately, the company doesn’t advertise their mortgage interest rates anywhere online. So it’s impossible to know how competitive they are pricing-wise.
If we consider the fact that most of their loan volume comes from purchases as opposed to refinances, we could guess that their mortgage rates probably aren’t super competitive.
Or at least not necessarily lower than the competition. After all, if they had the lowest price out there they’d probably want to advertise it, or at minimum make it known somewhere.
My guess is their rates are run-of-the-mill, but again, that’s just speculation.
If you do include Academy in your mortgage loan search, be sure to compare rates and closing costs to other lenders to see where they stand.
What Academy Mortgage Offers
The company offers a variety of home purchase and refinance solutions
Including conventional, jumbo, FHA, VA, and USDA options
You can get any number of fixed or adjustable-rate products
And even a zero down home loan via their exclusive GSFA Platinum Program
The company calls itself a “top-tier lender” when it comes to purchase loans, FHA loans, and builder loans.
This includes home purchase loans, refinance loans, renovation loans, and streamline refinance options.
You can get the basic Fannie Mae and Freddie Mac-backed conventional loans that allow for down payment as low as 3%.
They come in a variety of fixed-rate options, including 30-year, 25-year, 20-year, 15-year, and 10-year terms. That’s typically more choices than most lenders offer.
Academy also offers the usual adjustable-rate mortgage options, including a 10/1 ARM, 7/1 ARM, 5/1 ARM, and 3/1 ARM.
If you’re interested in a government home loan, they offer all the usual suspects including FHA loans, VA loans, and USDA loans, including FHA 203k renovation loans and FHA Energy-Efficient Mortgages.
It’s also possible to get a zero down home loan if you’re a first-time home buyer via their so-called exclusive GSFA Platinum Program, which includes a grant for up to 5% of the loan amount to cover down payment and closing costs.
The grant funds, which are provided by the Golden State Finance Authority, aren’t required to be paid back if certain conditions are met.
Lastly, they offer jumbo home loans up to $1.5 million loan amounts, with down payment requirements as low as 10%.
You may also be able to avoid PMI even when putting just 10% down!
Academy Mortgage Also Offers Commercial Loans
While they only operate a retail channel for residential mortgages
They do have a commercial lending division as well
It offers a very wide range of commercial and small business loans for commercial and multi-family properties
It should be pointed out that the company also offers commercial loans via a separate lending division.
Their offerings range from life insurance company loan programs to Fannie Mae and Freddie Mac programs for apartment buyers.
They also offer conduit loans and conventional loan programs for those wishing to purchase a commercial property.
Additionally, they offer multi-family loan programs, including those backed by the FHA/HUD, along with construction and bridge loans.
Lastly, you can get your hands on a variety of Small Business Administration (SBA) loans, including the SBA 7(a) Program and the SBA 504 Program.
So the appear to have you well covered if you need a commercial loan for just about any purpose.
The Verdict on Academy Mortgage
What they appear to lack in technology might be more than made up for by their excellent customer service
They have a near-five star rating on Zillow (4.96 out of 5 at last glance)
Which is even more impressive based on the many reviews completed (nearly 25,000!)
So if you want a great home loan experience they might be a great fit
While they seem to be a good lender on paper, with both high marks on customer service and awards for being a great place to work, we don’t know much about their rates and fees.
For those interested in securing the lowest-cost mortgage, some more digging and comparing will be necessary to see if they’re the right choice.
Academy doesn’t highlight any technology either, which seems to be a major factor these days for a lot of consumers.
There’s no mention of a digital or paperless process, a smartphone app, or anything really on that front. That’s not to say it doesn’t exist, but chances are if it did, it’d be emphasized.
But they’re a top-20 home purchase loan lender, which that says something, especially since they don’t seem to advertise very much.
Perhaps the service speaks for itself, and they receive a lot of referrals from past customers and real estate agents.
They have an excellent rating on Zillow, with 4.96 stars out of 5 on nearly 25,000 reviews at last glance.
Fears over turbulence in commercial real estate is creating opportunities for well-capitalized investors, according to Blackstone Inc. co-head of global real estate Kathleen McCarthy.
“When sentiment gets really negative, prices decouple from fundamental value,” she said in a Bloomberg Television interview with Francine Lacqua. “We have a practice of trying to quiet that noise and look at the information in front of us.”
High vacancy rates in U.S. office markets and the impact of rising interest rates on property values in Europe have prompted a brutal selloff in publicly traded real estate stocks and bonds. The depth of the downturn implies investors are expecting prices to collapse, though a standoff between buyers and sellers means the pain has yet to fully filter through to asset values.
Blackstone has deployed about €3.5 billion ($3.8 billion) in Europe so far this year, sticking mostly to properties where it sees the best potential for rents to rise and offset higher borrowing costs, like warehouses, student housing and lab space, McCarthy said.
“We have more data than any other investor on the planet,” she said. “That informs where we transact.” Blackstone is being very selective but is still prepared to “lean in to where we see strength in the short term and over the long term,” she added.
The volume of German commercial real estate deals in the first half of the year was about two-thirds below the long-term average. But pressure is building on landlords that need to sell assets in order to reduce their relative indebtedness, which is rising as asset values fall.
“It takes a period of time for sellers to recognize that it is maybe time to move on or settle in to new pricing,” McCarthy said.
Federal regulators say banks should include short-term accommodations in their toolkits for dealing with distressed commercial real estate loans.
The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and National Credit Union Administration issued a joint statement on commercial real estate accommodations and workouts on Thursday. The missive updatesguidance first released by the regulators in 2009, amid a rash of bank failures driven by — among other things — bad real estate loans.
The statement notes that banks should step in to address distressed loans before lenders default or have to go through a so-called “workout” process, which can entail renewing or extending loan terms, extending additional credit or restructuring credit with or without concessions. The agencies noted that short-term modifications — which suspend, extend or defer repayment terms — can be an effective way to address issues before more significant accommodations are needed.
“These actions can mitigate long-term adverse effects on borrowers by allowing them to address the issues affecting repayment ability and are often in the best interest of financial institutions and their borrowers,” the statement reads.
The new policy statement also updates the 2009 guidance to incorporate accounting changes that have taken place during the intervening years, including requirements that banks estimate current expected credit losses for all their assets.
It also gives examples for how loans should be classified and accounted for once they have entered a workout process.
The inclusion of guidance around short-term accommodations and accounting best practices was the result of public commentary fielded by regulators since proposing rule changes last August. In total, the agencies received 22 comments from banking organizations and credit unions, state and national trade associations and individuals.
Otherwise, the finalized guidelines are largely similar to the policy proposed more than a decade ago. The statement urges banks to engage with troubled commercial real estate borrowers early and have policies in place for dealing with accommodations in a safe and sound manner.
Regulators also note that examiners won’t punish banks for working with borrowers in this way. Similarly, borrowers will not be criticized for engaging in these types of pre-workout remedies.
The guidelines for handling distressed commercial real estate loans have been in the works for years, but they have taken on a renewed importance in the current market, as rising interest rates and falling occupancy rates squeeze some commercial property owners — especially for offices in central business districts. Last summer, the FDIC said it would more thoroughly scrutinize banks’ commercial real estate loans.
The issue is acute for smaller and midsize banks, which tend to have higher concentrations of commercial real estate debt on their balance sheets. Analysis by the property advisory firm CBRE suggests that more than 300 banks in these size categories have enough commercial real estate loan exposure to wipe out their tier 1 capital.
Large banks also have significant commercial real estate exposures, albeit not as concentrated. In its annual stress test report, released this week, the Federal Reserve noted that the 23 large banks examined in this year’s test hold roughly 20% of office and downtown retail debt in the country. Under the Fed’s severe stress scenario, the banks were projected to lose $65 billion on their commercial real estate loans, or 8.8% of average balances.
“The large projected decline in commercial real estate prices, combined with the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis,” the Fed wrote in a statement accompanying the stress-test results.
Despite the forecasted losses, all the banks examined passed this year’s stress test. Still, the scenario demonstrated the magnitude of distress banks could face.
A few weeks back, Méka Brunel, CEO of Gecina, announced an unpredicented balance sheet considering France and the world are in the grip of a major recession. Gecina, for those unfamiliar, is the largest residential and commercial property owner in France, and the second biggest in Europe. Brunel’s company is a great example of how a massive business entity can be nimble and fast on its feet as well.
The company showed a very solid first-quarter performance by generating rental income in excess of €168 million euros. Brunel attributed the positive figures to strategic decisions of the past. The two time Pierres d’Or Awards Professional of the Year Pierres d’Or honoree put it this way:
“Gecina is demonstrating its resilience, thanks to the strategic choices made in the last few years to realign operations around the Paris Region’s most central sectors, as well as the affirmation of our ambition in the residential sector and the proactive and cautious management of our balance sheet.”
Ms. Brunel also made an announcement that one quarter’s rents would be canceled for small businesses hit hard by the coronavirus pandemic. In addition, the Gecina CEO asked the board of directors to reduce her fixed compensation for 2020 by two months’ salary as a solidarity measure in the uncertainty of the pandemic. In addition, she donated an equivalent amount to the Gecina Foundation to support charities working to fight against Covid-19 consequences. In the interview with Fifth Wall Co-founder Co-Founder Brendan Wallace, Brunel discusses how Gecina prioritizes sustainability and innovation even in the most challenging times.
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Gecina only recently changed board chairmen when Bernard Carayon stepped down so that Jérôme Brunel could assume the helm of the group. Just three weeks ago the group announced the creation of a dedicated residential subsidiary, along with a call for partners to invest in a new €3 billion euro Paris portfolio. Gecina’s current portfolio consists of more than 6,000 apartments made up of 409,000 sqm of space.
The company specializes in Paris residential, and owns, manages and develops property holdings worth more than €20 billion euros. Gecina SA (GFC.PA) stocks are holding steady compared to many across Europe. Their ticker is climbing back after a big hit back in March when every company on the planet lost value. Last Summer, Simply Wall Street hinted that Gecina’s real share value was €151.42, and advised investors to hold off for a better deal on the extremely stable shares. Interestingly, the pandemic has caused shares to stabilize at €112.
Starting today, France is lifting many of its lockdown restrictions imposed on account of the spread of COVID-19. France 24 reported yesterday that hospitalizations are continuing to fall and that there have been fewer than 100 deaths from the dreaded disease in recent days.
There’s still a lot of uncertainty over the economic picture in the world in the aftermath of the pandemic, but Brunel seems ready to make the proactive moves necessary to assist her company’s most exposed clients and this shows the whole industry what winning leadership looks like.
Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
If you have a mortgage, you may be unknowingly participating in a mortgage-backed security (MBS). That is, your humble home loan may be part of a pool of mortgages that has been packaged and sold to income-oriented investors on the secondary market.
Being part of an MBS won’t change much (if anything) about how you repay your home loan, but it’s helpful to understand how these investment products work and how they impact the mortgage and housing industries.
Key takeaways
A mortgage-backed security is an investment product that consists of thousands of individual mortgages.
Investors can purchase MBSs on the secondary market from the banks that issued the loans.
When MBS prices fall, residential mortgage rates tend to rise – and vice versa.
What is a mortgage-backed security?
A mortgage-backed security (MBS) is a type of financial asset, somewhat like a bond (or a bond fund). It’s created out of a portfolio, or collection, of residential mortgages.
When a company or government issues a traditional bond, they are essentially borrowing money from investors (the people buying the bond). As with any loan, interest payments are made and then principal is paid back at maturity. However, with a mortgage-backed security, interest payments to investors come from the thousands of mortgages that underlie the bond — specifically, the repayments in interest and principal the mortgage-holders make each month.
Mortgage-backed securities offer key benefits to the players in the mortgage market, including banks, investors and even mortgage borrowers themselves. However, investing in an MBS has pros and cons.
How do mortgage-backed securities work?
While we all grew up with the idea that banks make loans and then hold those loans until they mature, the reality is that there’s a high chance that your lender is selling the loan into what’s known as the secondary mortgage market. Here, aggregators buy and sell mortgages, finding the right kind of mortgages for the security they want to create and sell on to investors. This is the most common reason a borrower’s mortgage loan servicer changes after securing a mortgage loan.
Mortgage-backed securities consist of a group of mortgages that have been organized and securitized to pay out interest like a bond. MBSs are created by companies called aggregators, including government-sponsored entities such as Fannie Mae or Freddie Mac. They buy loans from lenders, including big banks, and structure them into a mortgage-backed security.
Think of a mortgage-backed security like a giant pie with thousands of mortgages thrown into it. The creators of the MBS may cut this pie into potentially millions of slices — each perhaps with a little piece of each mortgage — to give investors the kind of return and risk they demand. Mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages underlying them.
Types of mortgage-backed securities
Mortgage-backed securities may have many features depending on what the market demands. The creators of MBSs think of their pool of mortgages as streams of cash flow that might run for 10, 15 or 30 years — the typical length of mortgages. But the bond’s underlying loans may be refinanced, and investors are repaid their principal and lose the cash flow over time.
By thinking of the characteristics of the mortgage as a stream of risks and cash flows, the aggregators can create bonds that have certain levels of risks or other characteristics. These securities can be based on both home mortgages (residential mortgage-backed securities) or on loans to businesses on commercial property (commercial mortgage-backed securities).
There are different types of mortgage-backed securities based on their structure and complexity:
Pass-through securities: In this type of mortgage-backed security, a trust holds many mortgages and allocates mortgage payments to its various investors depending on what share of the securities they own. This structure is relatively straightforward.
Collateralized mortgage obligation (CMO): This type of MBS is a legal structure backed by the mortgages it owns, but it has a twist. From a given pool of mortgages, a CMO can create different classes of securities that have different risks and returns (like different size slices, if we use our pie metaphor again). For example, it can create a “safer” class of bonds that are paid before other classes of bonds. The last and riskiest class is paid out only if all the other classes receive their payments.
Stripped mortgage-backed securities (SMBS): This kind of security basically splits the mortgage payment into two parts, the principal repayment and the interest payment. Investors can then buy either the security paying the principal (which pays out less at the start but grows) or the one paying interest (which pays out more but declines over time). These structures allow investors to invest in mortgage-backed securities with certain risks and rewards. For example, an investor could buy a relatively safe slice of a CMO and have a high chance of being repaid, but at the cost of a lower overall return.
How do mortgage-backed securities affect mortgage rates?
The cost of mortgage-backed securities has a direct impact on residential mortgage rates. This is because mortgage companies lose money when they issue loans while the market is down.
When the prices of mortgage-backed securities drop, mortgage providers generally increase interest rates. Conversely, mortgage providers lower interest rates when the price of MBSs goes up.
So, what causes mortgage-backed securities to rise or fall? Everything from stock market gains to higher energy prices and even unemployment numbers have the ability to influence the prices. A variety of factors that affect the course of mortgage-backed securities, and lenders are constantly monitoring it.
Mortgage-backed securities and the housing market
Why do mortgage-backed securities make sense for the players in the mortgage industry? Mortgage-backed securities actually make the industry more efficient, meaning it’s cheaper for each party to access the market and get its benefits:
Lenders: By selling their mortgages, lenders save on maintenance costs, and receive money they can then loan out to other borrowers, allowing them to more efficiently use their capital. They often require borrowers to meet conforming loan standards so that they can sell mortgages to aggregators. They can also sell the loans they might not want to keep, while retaining those they prefer.
Aggregators: Aggregators package mortgages into MBSs and earn fees for doing so. They may give mortgage-backed securities features that appeal to certain investors. A steady supply of conforming loans allows aggregators to structure MBSs cheaply.
Borrowers: Because aggregators demand so many conforming loans, they increase the supply of these loans and push down mortgage rates. So, borrowers may be able to enjoy greater access to capital and lower mortgage rates than they otherwise would.
Of course, easier access to financing is beneficial for the housing construction industry: Developers can build and sell more houses to consumers who are able to borrow more cheaply.
Investors like mortgage-backed securities, too, because these bonds may offer certain kinds of risk exposure that the investors, mainly big institutional players, want to have. Even the banks themselves may invest in MBSs, diversifying their portfolios.
While the lender may sell the loan, it may also retain the right to service the mortgage, meaning it earns a small fee for collecting the monthly payment and generally managing the account. So, you may continue to pay your lender each month for your mortgage, but the real owner of your mortgage may be the investors who hold the mortgage-backed security containing your loan.
Pros and cons of investing in MBSs
No investment is without risk. MBS have their advantages and disadvantages.
For instance, mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages behind the securities. But, unlike a typical bond where you receive interest payments over the bond’s life and then receive your principal when it matures, an MBS may often pay both principal and interest over the life of the security, so there won’t be a lump-sum payment at the end of the MBS’ life.
Here are some of the other advantages and disadvantages of investing in MBSs.
Pros
Pay a fixed interest rate
Typically have higher yields than U.S. Treasuries
Less correlated to stocks than other higher-yielding fixed income securities, such as corporate bonds
Cons
If a borrower defaults on their mortgage, the investor will ultimately lose money
The borrower may refinance or pay down their loan faster than expected, which can have a negative impact on returns
Higher interest rate risk because the cost of MBSs can drop as soon as interest rates increase
History of mortgage-backed securities
The first modern-day mortgage-backed security was issued in 1970 by the Government National Mortgage Association, better known as Ginnie Mae. These mortgage-backed securities were actually backed by the U.S. government and were enticing because of their guaranteed income stream.
Ginnie Mae began providing mortgage-backed securities in an effort to bring in extra funds, which were then used to purchase more home loans and expand affordable housing. Shortly after, government-sponsored enterprises Fannie Mae and Freddie Mac also began offering their version of MBSs.
The first private MBS was not issued until 1977, when Lew Ranieri of the now-defunct investment group Salomon Brothers developed the first residential MBS that was backed by mortgage providers, rather than a federal agency. Ranieri’s MBSs were offered in 5- and 10-year bonds, which was attractive to investors who could see returns more quickly.
Over the years, mortgage-backed securities have evolved and grown significantly. As of May 2023, financial institutions have issued $493.9 billion in mortgage-backed securities.
Mortgage-backed securities today
While mortgage-backed securities were notoriously at the center of the global financial crisis in 2008 and 2009, they continue to be an important part of the economy today because they serve real needs and provide tangible benefits to players across the mortgage and housing industries.
Not only does securitization of mortgages provide increased liquidity for investors, lenders and borrowers, it also offers a way to support the housing market, which is one of the largest engines of economic growth in the U.S. A strong housing market often bolsters a strong economy and helps employ many workers.
Mortgage Market
Bankrate insights
As of 2021, 65% of total home mortgage debt was securitized into mortgage-backed securities.
Bottom line on mortgage backed securities
While you might not deal with a mortgage-backed security in your daily life, your mortgage may be part of one. And if so, it’s a cog in the machinery that keeps the financial system running and helps borrowers access capital more cheaply. It can be useful to understand that the MBS market ultimately has a powerful influence over qualifications for mortgages, resulting in who gets a loan — and for how much.
In Best Low-Risk Investments for 2023, I provided a comprehensive list of low-risk investments with predictable returns. But it’s precisely because those returns are low-risk that they also provide relatively low returns.
In this article, we’re going to look at high-yield investments, many of which involve a higher degree of risk but are also likely to provide higher returns.
True enough, low-risk investments are the right investment solution for anyone who’s looking to preserve capital and still earn some income.
But if you’re more interested in the income side of an investment, accepting a bit of risk can produce significantly higher returns. And at the same time, these investments will generally be less risky than growth stocks and other high-risk/high-reward investments.
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Determine How Much Risk You’re Willing to Take On
The risk we’re talking about with these high-yield investments is the potential for you to lose money. As is true when investing in any asset, you need to begin by determining how much you’re willing to risk in the pursuit of higher returns.
Chasing “high-yield returns” will make you broke if you don’t have clear financial goals you’re working towards.
I’m going to present a large number of high-yield investments, each with its own degree of risk. The purpose is to help you evaluate the risk/reward potential of these investments when selecting the ones that will be right for you.
If you’re looking for investments that are completely safe, you should favor one or more of the highly liquid, low-yield vehicles covered in Best Low-Risk Investments for 2023. In this article, we’re going to be going for something a little bit different. As such, please note that this is not in any way a blanket recommendation of any particular investment.
Best High-Yield Investments for 2023
Table of Contents
Below is my list of the 18 best high-yield investments for 2023. They’re not ranked or listed in order of importance. That’s because each is a unique investment class that you will need to carefully evaluate for suitability within your own portfolio.
Be sure that any investment you do choose will be likely to provide the return you expect at an acceptable risk level for your own personal risk tolerance.
1. Treasury Inflation-Protected Securities (TIPS)
Let’s start with this one, if only because it’s on just about every list of high-yield investments, especially in the current environment of rising inflation. It may not actually be the best high-yield investment, but it does have its virtues and shouldn’t be overlooked.
Basically, TIPS are securities issued by the U.S. Treasury that are designed to accommodate inflation. They do pay regular interest, though it’s typically lower than the rate paid on ordinary Treasury securities of similar terms. The bonds are available with a minimum investment of $100, in terms of five, 10, and 30 years. And since they’re fully backed by the U.S. government, you are assured of receiving the full principal value if you hold a security until maturity.
But the real benefit—and the primary advantage—of these securities is the inflation principal additions. Each year, the Treasury will add an amount to the bond principal that’s commensurate with changes in the Consumer Price Index (CPI).
Fortunately, while the principal will be added when the CPI rises (as it nearly always does), none will be deducted if the index goes negative.
You can purchase TIPS through the U.S. Treasury’s investment portal, Treasury Direct. You can also hold the securities as well as redeem them on the same platform. There are no commissions or fees when buying securities.
On the downside, TIPS are purely a play on inflation since the base rates are fairly low. And while the principal additions will keep you even with inflation, you should know that they are taxable in the year received.
Still, TIPS are an excellent low-risk, high-yield investment during times of rising inflation—like now.
2. I Bonds
If you’re looking for a true low-risk, high-yield investment, look no further than Series I bonds. With the current surge in inflation, these bonds have become incredibly popular, though they are limited.
I bonds are currently paying 6.89%. They can be purchased electronically in denominations as little as $25. However, you are limited to purchasing no more than $10,000 in I bonds per calendar year. Since they are issued by the U.S. Treasury, they’re fully protected by the U.S. government. You can purchase them through the Treasury Department’s investment portal, TreasuryDirect.gov.
“The cash in my savings account is on fire,” groans Scott Lieberman, Founder of Touchdown Money. “Inflation has my money in flames, each month incinerating more and more. To defend against this, I purchased an I bond. When I decide to get my money back, the I bond will have been protected against inflation by being worth more than what I bought it for. I highly recommend getting yourself a super safe Series I bond with money you can stash away for at least one year.”
You may not be able to put your entire bond portfolio into Series I bonds. But just a small investment, at nearly 10%, can increase the overall return on your bond allocation.
3. Corporate Bonds
The average rate of return on a bank savings account is 0.33%. The average rate on a money market account is 0.09%, and 0.25% on a 12-month CD.
Now, there are some banks paying higher rates, but generally only in the 1%-plus range.
If you want higher returns on your fixed income portfolio, and you’re willing to accept a moderate level of risk, you can invest in corporate bonds. Not only do they pay higher rates than banks, but you can lock in those higher rates for many years.
For example, the average current yield on a AAA-rated corporate bond is 4.55%. Now that’s the rate for AAA bonds, which are the highest-rated securities. You can get even higher rates on bonds with lower ratings, which we will cover in the next section.
Corporate bonds sell in face amounts of $1,000, though the price may be higher or lower depending on where interest rates are. If you choose to buy individual corporate bonds, expect to buy them in lots of ten. That means you’ll likely need to invest $10,000 in a single issue. Brokers will typically charge a small per-bond fee on purchase and sale.
An alternative may be to take advantage of corporate bond funds. That will give you an opportunity to invest in a portfolio of bonds for as little as the price of one share of an ETF. And because they are ETFs, they can usually be bought and sold commission free.
You can typically purchase corporate bonds and bond funds through popular stock brokers, like Zacks Trade, TD Ameritrade.
Corporate Bond Risk
Be aware that the value of corporate bonds, particularly those with maturities greater than 10 years, can fall if interest rates rise. Conversely, the value of the bonds can rise if interest rates fall.
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4. High-Yield Bonds
In the previous section we talked about how interest rates on corporate bonds vary based on each bond issue’s rating. A AAA bond, being the safest, has the lowest yield. But a riskier bond, such as one rated BBB, will provide a higher rate of return.
If you’re looking to earn higher interest than you can with investment-grade corporate bonds, you can get those returns with so-called high-yield bonds. Because they have a lower rating, they pay higher interest, sometimes much higher.
The average yield on high-yield bonds is 8.29%. But that’s just an average. The yield on a bond rated B will be higher than one rated BB.
You should also be aware that, in addition to potential market value declines due to rising interest rates, high-yield bonds are more likely to default than investment-grade bonds. That’s why they pay higher interest rates. (They used to call these bonds “junk bonds,” but that kind of description is a marketing disaster.) Because of those twin risks, junk bonds should occupy only a small corner of your fixed-income portfolio.
High Yield Bond Risk
In a rapidly rising interest rate environment, high-yield bonds are more likely to default.
High-yield bonds can be purchased under similar terms and in the same places where you can trade corporate bonds. There are also ETFs that specialize in high-yield bonds and will be a better choice for most investors, since they will include diversification across many different bond issues.
5. Municipal Bonds
Just as corporations and the U.S. Treasury issue bonds, so do state and local governments. These are referred to as municipal bonds. They work much like other bond types, particularly corporates. They can be purchased in similar denominations through online brokers.
The main advantage enjoyed by municipal bonds is their tax-exempt status for federal income tax purposes. And if you purchase a municipal bond issued by your home state, or a municipality within that state, the interest will also be tax-exempt for state income tax purposes.
That makes municipal bonds an excellent source of tax-exempt income in a nonretirement account. (Because retirement accounts are tax-sheltered, it makes little sense to include municipal bonds in those accounts.)
Municipal bond rates are currently hovering just above 3% for AAA-rated bonds. And while that’s an impressive return by itself, it masks an even higher yield.
Because of their tax-exempt status, the effective yield on municipal bonds will be higher than the note rate. For example, if your combined federal and state marginal income tax rates are 25%, the effective yield on a municipal bond paying 3% will be 4%. That gives an effective rate comparable with AAA-rated corporate bonds.
Municipal bonds, like other bonds, are subject to market value fluctuations due to interest rate changes. And while it’s rare, there have been occasional defaults on these bonds.
Like corporate bonds, municipal bonds carry ratings that affect the interest rates they pay. You can investigate bond ratings through sources like Standard & Poor’s, Moody’s, and Fitch.
Fund
Symbol
Type
Current Yield
5 Average Annual Return
Vanguard Inflation-Protected Securities Fund
VIPSX
TIPS
0.06%
3.02%
SPDR® Portfolio Interm Term Corp Bond ETF
SPIB
Corporate
4.38%
1.44%
iShares Interest Rate Hedged High Yield Bond ETF
HYGH
High-Yield
5.19%
2.02%
Invesco VRDO Tax-Free ETF (PVI)
PVI
Municipal
0.53%
0.56%
6. Longer Term Certificates of Deposit (CDs)
This is another investment that falls under the low risk/relatively high return classification. As interest rates have risen in recent months, rates have crept up on certificates of deposit. Unlike just one year ago, CDs now merit consideration.
But the key is to invest in certificates with longer terms.
“Another lower-risk option is to consider a Certificate of Deposit (CD),” advises Lance C. Steiner, CFP at Buckingham Advisors. “Banks, credit unions, and many other financial institutions offer CDs with maturities ranging from 6 months to 60 months. Currently, a 6-month CD may pay between 0.75% and 1.25% where a 24-month CD may pay between 2.20% and 3.00%. We suggest considering a short-term ladder since interest rates are expected to continue rising.” (Stated interest rates for the high-yield savings and CDs were obtained at bankrate.com.)
Most banks offer certificates of deposit with terms as long as five years. Those typically have the highest yields.
But the longer term does involve at least a moderate level of risk. If you invest in a CD for five years that’s currently paying 3%, the risk is that interest rates will continue rising. If they do, you’ll miss out on the higher returns available on newer certificates. But the risk is still low overall since the bank guarantees to repay 100% of your principle upon certificate maturity.
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7. Peer-to-Peer (P2P) Lending
Do you know how banks borrow from you—at 1% interest—then loan the same money to your neighbor at rates sometimes as high as 20%? It’s quite a racket, and a profitable one at that.
But do you also know that you have the same opportunity as a bank? It’s an investing process known as peer-to-peer lending, or P2P for short.
P2P lending essentially eliminates the bank. As an investor, you’ll provide the funds for borrowers on a P2P platform. Most of these loans will be in the form of personal loans for a variety of purposes. But some can also be business loans, medical loans, and for other more specific purposes.
As an investor/lender, you get to keep more of the interest rate return on those loans. You can invest easily through online P2P platforms.
One popular example is Prosper. They offer primarily personal loans in amounts ranging between $2,000 and $40,000. You can invest in small slivers of these loans, referred to as “notes.” Notes can be purchased for as little as $25.
That small denomination will make it possible to diversify your investment across many different loans. You can even choose the loans you will invest in based on borrower credit scores, income, loan terms, and purposes.
Prosper, which has managed $20 billion in P2P loans since 2005, claims a historical average return of 5.7%. That’s a high rate of return on what is essentially a fixed-income investment. But that’s because there exists the possibility of loss due to borrower default.
However, you can minimize the likelihood of default by carefully choosing borrower loan quality. That means focusing on borrowers with higher credit scores, incomes, and more conservative loan purposes (like debt consolidation).
8. Real Estate Investment Trusts (REITs)
REITs are an excellent way to participate in real estate investment, and the return it provides, without large amounts of capital or the need to manage properties. They’re publicly traded, closed-end investment funds that can be bought and sold on major stock exchanges. They invest primarily in commercial real estate, like office buildings, retail space, and large apartment complexes.
If you’re planning to invest in a REIT, you should be aware that there are three different types.
“Equity REITs purchase commercial, industrial, or residential real estate properties,” reports Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University and co-author of several books, including The Tools and Techniques Of Investment Planning, Strategic Value Investing and Investment Banking for Dummies. “Income is derived primarily from the rental on the properties, as well as from the sale of properties that have increased in value. Mortgage REITs invest in property mortgages. The income is primarily from the interest they earn on the mortgage loans. Hybrid REITs invest both directly in property and in mortgages on properties.”
Johnson also cautions:
“Investors should understand that equity REITs are more like stocks and mortgage REITs are more like bonds. Hybrid REITs are like a mix of stocks and bonds.”
Mortgage REITs, in particular, are an excellent way to earn steady dividend income without being closely tied to the stock market.
Examples of specific REITs are listed in the table below (source: Kiplinger):
REIT
Equity or Mortgage
Property Type
Dividend Yield
12 Month Return
Rexford Industrial Realty
REXR
Industrial warehouse space
2.02%
2.21%
Sun Communities
SUI
Manufactured housing, RVs, resorts, marinas
2.19%
-14.71%
American Tower
AMT
Multi-tenant cell towers
2.13%
-9.00%
Prologis
PLD
Industrial real estate
2.49%
-0.77%
Camden Property Trust
CPT
Apartment complexes
2.77%
-7.74%
Alexandria Real Estate Equities
ARE
Research Properties
3.14%
-23.72%
Digital Realty Trust
DLR
Data centers
3.83%
-17.72%
9. Real Estate Crowdfunding
If you prefer direct investment in a property of your choice, rather than a portfolio, you can invest in real estate crowdfunding. You invest your money, but management of the property will be handled by professionals. With real estate crowdfunding, you can pick out individual properties, or invest in nonpublic REITs that invest in very specific portfolios.
One of the best examples of real estate crowdfunding is Fundrise. That’s because you can invest with as little as $500 or create a customized portfolio with no more than $1,000. Not only does Fundrise charge low fees, but they also have multiple investment options. You can start small in managed investments, and eventually trade up to investing in individual deals.
One thing to be aware of with real estate crowdfunding is that many require accredited investor status. That means being high income, high net worth, or both. If you are an accredited investor, you’ll have many more choices in the real estate crowdfunding space.
If you are not an accredited investor, that doesn’t mean you’ll be prevented from investing in this asset class. Part of the reason why Fundrise is so popular is that they don’t require accredited investor status. There are other real estate crowdfunding platforms that do the same.
Just be careful if you want to invest in real estate through real estate crowdfunding platforms. You will be expected to tie your money up for several years, and early redemption is often not possible. And like most investments, there is the possibility of losing some or all your investment principal.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
10. Physical Real Estate
We’ve talked about investing in real estate through REITs and real estate crowdfunding. But you can also invest directly in physical property, including residential property or even commercial.
Owning real estate outright means you have complete control over the investment. And since real estate is a large-dollar investment, the potential returns are also large.
For starters, average annual returns on real estate are impressive. They’re even comparable to stocks. Residential real estate has generated average returns of 10.6%, while commercial property has returned an average of 9.5%.
Next, real estate has the potential to generate income from two directions, from rental income and capital gains. But because of high property values in many markets around the country, it will be difficult to purchase real estate that will produce a positive cash flow, at least in the first few years.
Generally speaking, capital gains are where the richest returns come from. Property purchased today could double or even triple in 20 years, creating a huge windfall. And this will be a long-term capital gain, to get the benefit of a lower tax bite.
Finally, there’s the leverage factor. You can typically purchase an investment property with a 20% down payment. That means you can purchase a $500,000 property with $100,000 out-of-pocket.
By calculating your capital gains on your upfront investment, the returns are truly staggering. If the $500,000 property doubles to $1 million in 20 years, the $500,000 profit generated will produce a 500% gain on your $100,000 investment.
On the negative side, real estate is certainly a very long-term investment. It also comes with high transaction fees, often as high as 10% of the sale price. And not only will it require a large down payment up front, but also substantial investment of time managing the property.
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11. High Dividend Stocks
“The best high-yield investment is dividend stocks,” declares Harry Turner, Founder at The Sovereign Investor. “While there is no guaranteed return with stocks, over the long term stocks have outperformed other investments such as bonds and real estate. Among stocks, dividend-paying stocks have outperformed non-dividend paying stocks by more than 2 percentage points per year on average over the last century. In addition, dividend stocks tend to be less volatile than non-dividend paying stocks, meaning they are less likely to lose value in downturns.”
You can certainly invest in individual stocks that pay high dividends. But a less risky way to do it, and one that will avoid individual stock selection, is to invest through a fund.
One of the most popular is the ProShares S&P 500 Dividend Aristocrat ETF (NOBL). It has provided a return of 1.67% in the 12 months ending May 31, and an average of 12.33% per year since the fund began in October 2013. The fund currently has a 1.92% dividend yield.
The so-called Dividend Aristocrats are popular because they represent 60+ S&P 500 companies, with a history of increasing their dividends for at least the past 25 years.
“Dividend Stocks are an excellent way to earn some quality yield on your investments while simultaneously keeping inflation at bay,” advises Lyle Solomon, Principal Attorney at Oak View Law Group, one of the largest law firms in America. “Dividends are usually paid out by well-established and successful companies that no longer need to reinvest all of the profits back into the business.”
It gets better. “These companies and their stocks are safer to invest in owing to their stature, large customer base, and hold over the markets,” adds Solomon. “The best part about dividend stocks is that many of these companies increase dividends year on year.”
The table below shows some popular dividend-paying stocks. Each is a so-called “Dividend Aristocrat”, which means it’s part of the S&P 500 and has increased its dividend in each of at least the past 25 years.
Company
Symbol
Dividend
Dividend Yield
AbbVie
ABBV
$5.64
3.80%
Armcor PLC
AMCR
$0.48
3.81%
Chevron
CVX
$5.68
3.94%
ExxonMobil
XOM
$3.52
4.04%
IBM
IBM
$6.60
5.15%
Realty Income Corp
O
$2.97
4.16%
Walgreen Boots Alliance
WBA
$1.92
4.97%
12. Preferred Stocks
Preferred stocks are a very specific type of dividend stock. Just like common stock, preferred stock represents an interest in a publicly traded company. They’re often thought of as something of a hybrid between stocks and bonds because they contain elements of both.
Though common stocks can pay dividends, they don’t always. Preferred stocks on the other hand, always pay dividends. Those dividends can be either a fixed amount or based on a variable dividend formula. For example, a company can base the dividend payout on a recognized index, like the LIBOR (London Inter-Bank Offered Rate). The percentage of dividend payout will then change as the index rate does.
Preferred stocks have two major advantages over common stock. First, as “preferred” securities, they have a priority on dividend payments. A company is required to pay their preferred shareholders dividends ahead of common stockholders. Second, preferred stocks have higher dividend yields than common stocks in the same company.
You can purchase preferred stock through online brokers, some of which are listed under “Growth Stocks” below.
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Preferred Stock Caveats
The disadvantage of preferred stocks is that they don’t entitle the holder to vote in corporate elections. But some preferred stocks offer a conversion option. You can exchange your preferred shares for a specific number of common stock shares in the company. Since the conversion will likely be exercised when the price of the common shares takes a big jump, there’s the potential for large capital gains—in addition to the higher dividend.
Be aware that preferred stocks can also be callable. That means the company can authorize the repurchase of the stock at its discretion. Most will likely do that at a time when interest rates are falling, and they no longer want to pay a higher dividend on the preferred stock.
Preferred stock may also have a maturity date, which is typically 30–40 years after its original issuance. The company will typically redeem the shares at the original issue price, eliminating the possibility of capital gains.
Not all companies issue preferred stock. If you choose this investment, be sure it’s with a company that’s well-established and has strong financials. You should also pay close attention to the details of the issuance, including and especially any callability provisions, dividend formulas, and maturity dates.
13. Growth Stocks
This sector is likely the highest risk investment on this list. But it also may be the one with the highest yield, at least over the long term. That’s why we’re including it on this list.
Based on the S&P 500 index, stocks have returned an average of 10% per year for the past 50 years. But it is important to realize that’s only an average. The market may rise 40% one year, then fall 20% the next. To be successful with this investment, you must be committed for the long haul, up to and including several decades.
And because of the potential wide swings, growth stocks are not recommended for funds that will be needed within the next few years. In general, growth stocks work best for retirement plans. That’s where they’ll have the necessary decades to build and compound.
Since most of the return on growth stocks is from capital gains, you’ll get the benefit of lower long-term capital gains tax rates, at least with securities held in a taxable account. (The better news is capital gains on investments held in retirement accounts are tax-deferred until retirement.)
You can choose to invest in individual stocks, but that’s a fairly high-maintenance undertaking. A better way may be to simply invest in ETFs tied to popular indexes. For example, ETFs based on the S&P 500 are very popular among investors.
You can purchase growth stocks and growth stock ETFs commission free with brokers like M1 Finance, Zacks Trade, Wealthsimple.
14. Annuities
Annuities are something like creating your own private pension. It’s an investment contract you take with an insurance company, in which you invest a certain amount of money in exchange for a specific income stream. They can be an excellent source of high yields because the return is locked in by the contract.
Annuities come in many different varieties. Two major classifications are immediate and deferred annuities. As the name implies, immediate annuities begin paying an income stream shortly after the contract begins.
Deferred annuities work something like retirement plans. You may deposit a fixed amount of money with the insurance company upfront or make regular installments. In either case, income payments will begin at a specified point in the future.
With deferred annuities, the income earned within the plan is tax-deferred and paid upon withdrawal. But unlike retirement accounts, annuity contributions are not tax-deductible. Investment returns can either be fixed-rate or variable-rate, depending on the specific annuity setup.
While annuities are an excellent idea and concept, the wide variety of plans as well as the many insurance companies and agents offering them, make them a potential minefield. For example, many annuities are riddled with high fees and are subject to limited withdrawal options.
Because they contain so many moving parts, any annuity contracts you plan to enter into should be carefully reviewed. Pay close attention to all the details, including the small ones. It is, after all, a contract, and therefore legally binding. For that reason, you may want to have a potential annuity reviewed by an attorney before finalizing the deal.
15. Alternative Investments
Alternative investments cover a lot of territory. Examples include precious metals, commodities, private equity, art and collectibles, and digital assets. These fall more in the category of high risk/potential high reward, and you should proceed very carefully and with only the smallest slice of your portfolio.
To simplify the process of selecting alternative assets, you can invest through platforms such as Yieldstreet. With a single cash investment, you can invest in multiple alternatives.
“Investors can purchase real estate directly on Yieldstreet, through fractionalized investments in single deals,” offers Milind Mehere, Founder & Chief Executive Officer at Yieldstreet. “Investors can access private equity and private credit at high minimums by investing in a private market fund (think Blackstone or KKR, for instance). On Yieldstreet, they can have access to third-party funds at a fraction of the previously required minimums. Yieldstreet also offers venture capital (fractionalized) exposure directly. Buying a piece of blue-chip art can be expensive, and prohibitive for most investors, which is why Yieldstreet offers fractionalized assets to diversified art portfolios.”
Yieldstreet also provides access to digital asset investments, with the benefit of allocating to established professional funds, such as Pantera or Osprey Fund. The platform does not currently offer commodities but plans to do so in the future.
Access to wide array of alternative asset classes
Access to ultra-wealthy investments
Can invest for income or growth
Learn More Now
Alternative investments largely require thinking out-of-the-box. Some of the best investment opportunities are also the most unusual.
“The price of meat continues to rise, while agriculture remains a recession-proof investment as consumer demand for food is largely inelastic,” reports Chris Rawley, CEO of Harvest Returns, a platform for investing in private agriculture companies. “Consequently, investors are seeing solid returns from high-yield, grass-fed cattle notes.”
16. Interest Bearing Crypto Accounts
Though the primary appeal of investing in cryptocurrency has been the meteoric rises in price, now that the trend seems to be in reverse, the better play may be in interest-bearing crypto accounts. A select group of crypto exchanges pays high interest on your crypto balance.
One example is Gemini. Not only do they provide an opportunity to buy, sell, and store more than 100 cryptocurrencies—plus non-fungible tokens (NFTs)—but they are currently paying 8.05% APY on your crypto balance through Gemini Earn.
In another variation of being able to earn money on crypto, Crypto.com pays rewards of up to 14.5% on crypto held on the platform. That’s the maximum rate, as rewards vary by crypto. For example, rewards on Bitcoin and Ethereum are paid at 6%, while stablecoins can earn 8.5%.
It’s important to be aware that when investing in cryptocurrency, you will not enjoy the benefit of FDIC insurance. That means you can lose money on your investment. But that’s why crypto exchanges pay such high rates of return, whether it’s in the form of interest or rewards.
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17. Crypto Staking
Another way to play cryptocurrency is a process known as crypto staking. This is where the crypto exchange pays you a certain percentage as compensation or rewards for monitoring a specific cryptocurrency. This is not like crypto mining, which brings crypto into existence. Instead, you’ll participate in writing that particular blockchain and monitoring its security.
“Crypto staking is a concept wherein you can buy and lock a cryptocurrency in a protocol, and you will earn rewards for the amount and time you have locked the cryptocurrency,” reports Oak View Law Group’s Lyle Solomon.
“The big downside to staking crypto is the value of cryptocurrencies, in general, is extremely volatile, and the value of your staked crypto may reduce drastically,” Solomon continues, “However, you can stake stable currencies like USDC, which have their value pegged to the U.S. dollar, and would imply you earn staked rewards without a massive decrease in the value of your investment.”
Much like earning interest and rewards on crypto, staking takes place on crypto exchanges. Two exchanges that feature staking include Coinbase and Kraken. These are two of the largest crypto exchanges in the industry, and they provide a wide range of crypto opportunities, in addition to staking.
Invest in Startup Businesses and Companies
Have you ever heard the term “angel investor”? That’s a private investor, usually, a high net worth individual, who provides capital to small businesses, often startups. That capital is in the form of equity. The angel investor invests money in a small business, becomes a part owner of the company, and is entitled to a share of the company’s earnings.
In most cases, the angel investor acts as a silent partner. That means he or she receives dividend distributions on the equity invested but doesn’t actually get involved in the management of the company.
It’s a potentially lucrative investment opportunity because small businesses have a way of becoming big businesses. As they grow, both your equity and your income from the business also grow. And if the business ever goes public, you could be looking at a life-changing windfall!
Easy Ways to Invest in Startup Businesses
Mainvest is a simple, easy way to invest in small businesses. It’s an online investment platform where you can get access to returns as high as 25%, with an investment of just $100. Mainvest offers vetted businesses (the acceptance rate is just 5% of business that apply) for you to invest in.
It collects revenue, which will be paid to you quarterly. And because the minimum required investment is so small, you can invest in several small businesses at the same time. One of the big advantages with Mainvest is that you are not required to be an accredited investor.
Still another opportunity is through Fundrise Innovation Fund. I’ve already covered how Fundrise is an excellent real estate crowdfunding platform. But through their recently launched Innovaton Fund, you’ll have opportunity to invest in high-growth private technology companies. As a fund, you’ll invest in a portfolio of late-stage tech companies, as well as some public equities.
The purpose of the fund is to provide high growth, and the fund is currently offering shares with a net asset value of $10. These are long-term investments, so you should expect to remain invested for at least five years. But you may receive dividends in the meantime.
Like Mainvest, the Fundrise Innovation Fund does not require you to be an accredited investor.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
Final Thoughts on High Yield Investing
Notice that I’ve included a mix of investments based on a combination of risk and return. The greater the risk associated with the investment, the higher the stated or expected return will be.
It’s important when choosing any of these investments that you thoroughly assess the risk involved with each, and not focus primarily on return. These are not 100% safe investments, like short-term CDs, short-term Treasury securities, savings accounts, or bank money market accounts.
Because there is risk associated with each, most are not suitable as short-term investments. They make most sense for long-term investment accounts, particularly retirement accounts.
For example, growth stocks—and most stocks, for that matter—should generally be in a retirement account. While there will be years when you will suffer losses in your position, you’ll have enough years to offset those losses between now and retirement.
Also, if you don’t understand any of the above investments, it will be best to avoid making them. And for more complicated investments, like annuities, you should consult with a professional to evaluate the suitability and all the provisions it contains.
FAQ’s on High Yield Investment Options
What investment has the highest yield?
The investment with the highest yield will vary depending on a number of factors, including current market conditions and the amount of risk an investor is willing to take on. Generally speaking, investments with the potential for high yields also come with a higher level of risk, so it’s important for investors to carefully consider their options and choose investments that align with their financial goals and risk tolerance.
Some examples of high-yield investments include:
1. Stocks: Some stocks may offer high dividend yields, which is the annual dividend payment a company makes to its shareholders, expressed as a percentage of the stock’s current market price.
2. Real estate: Investing in real estate, either directly by purchasing property or indirectly through a real estate investment trust (REIT), can potentially generate high returns in the form of rental income and appreciation of the property value.
3. High-yield bonds: High-yield bonds, also known as junk bonds, are bonds that are issued by companies with lower credit ratings and thus offer higher yields to compensate for the added risk.
4. Private lending: Investing in private loans, such as through peer-to-peer lending platforms, can potentially offer high yields, but it also carries a higher level of risk.
5. Commodities: Investing in commodities, such as precious metals or oil, can potentially generate high returns if the prices of those commodities rise. However, the prices of commodities can also be volatile and subject to market fluctuations.
It’s important to note that these are just examples and not recommendations. As with any investment, it’s crucial to carefully research and consider all the potential risks and rewards before making a decision.
Where can I invest my money to get high returns?
There are a number of places you can invest your money to get high returns. One option is to invest in stocks, which typically offer higher returns than other investment options. Another option is to invest in bonds, which are considered a relatively safe investment option.
You could also invest in real estate, which has the potential to provide high returns if done correctly. Finally, you could also invest in commodities, such as gold or silver, which can be a risky investment but can also offer high returns.
What investments can I make a 10% return?
It’s difficult to predict exactly what investments will generate a 10% return, as investment returns can vary depending on a number of factors, including market conditions and the performance of the specific investment. Some investments, such as stocks and real estate, have the potential to generate returns in excess of 10%, but they also come with a higher level of risk. It’s important to remember that past performance is not necessarily indicative of future results, and that all investments carry some degree of risk
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As the old saying goes, “In real estate, location is everything.”
You may not know much about REITs, but you might want to consider one of them as a career. They’re great for people who like real estate, enjoy making money, and need consistent work hours.
Real estate investment trusts (REITs) are companies that were formed to make it easier for individuals to invest in real estate.
Want to know what the top paying jobs in Real Estate Investment Trusts are in 2022?
Well, take a look at this list of 25 best paying jobs for real estate investment trusts and see if you can find one that sounds perfect for you. In addition, each job features information about how much each job pays, what you can expect on the job, any job training needed, and other fun facts!
If you are looking for your next career, this article will give you plenty to think about as well as potential opportunities that may be available to you.
What are real estate investment trusts?
Real estate investment trusts, or REITs, have become an increasingly popular way for investors to get involved in the real estate market. REITs allow people to invest in large-scale real estate projects without having to purchase and manage the properties themselves.
In addition, REITs offer shareholders a wide range of benefits, making them a great choice for those looking to invest in this growing market.
How do real estate investment trusts work?
A REIT is a type of company that owns and operates various types of real estate, and because they are exempt from corporation tax on profits generated through rental income and the sale of rental properties; They are a very attractive option for high-earners.
They pile investors’ money together and invest in various commercial real estate, which increases returns over time. In addition, REITs are generally owned by the general public, and they invest in real estate assets.
Lastly, they make a profit through investments or leasing; a return on investment is typically received as a dividend. Real estate investment trusts are similar to mutual funds in that they hold investments, distribute dividends, and pay taxes.
Is a real estate investment career good?
Real estate investment companies are a great place to start a career in real estate.
Real estate investment trusts (REITs) are one of the most productive industries today. They provide steady and consistent growth, as well as good job opportunities with high salaries. Careers in real estate that can lead to better-paying jobs include appraisers and investment bankers.
Best paying jobs in real estate investment trusts
The market for REITs has grown rapidly in recent years, with the total value of REITs reaching almost $3.5 trillion by the end of 2021 (source).
There are many different jobs in the real estate investment trust industry that come with a variety of salaries. The best paying jobs are reserved for the C-level executives:
Chief Executive Officer: The CEO is the highest-ranking executive officer in a company and is responsible for making major decisions that affect the business. CEOs in the REIT industry earn an average salary of $468,000 per year.
Chief Financial Officer: The CFO is responsible for financial planning and reporting, as well as managing relationships with banks and other lenders. CFOs in the REIT industry earn an average salary of $341,000 per year.
Chief Operating Officer: The COO is responsible for overseeing all day-to-day operations of a company. COOs in the REIT industry earn an average salary of $325,000 per year.
Followed by the attorney, which is one of the highest-paying professionals in real estate investment trusts.
Now, we are going to list the most lucrative jobs in REITs. Then, you can decide… is real estate investment trusts a good career path for me.
The higher paid jobs will come with more education needed and years of experience.
1. Real Estate Attorney Jobs
Real estate attorneys are in high demand for their knowledge of transactional law and contractual issues. They work on a variety of deals involving the purchase, sale, or leasing of real estate. As such, they provide critical legal support to the real estate investment trust (REIT) industry.
Real estate attorneys license in their state to practice law. They can prepare contracts, advise clients on purchases and investments, review documents, represent mortgage lenders at closing, or simply provide legal counsel without the requirement of an attorney’s license.
Consequently, real estate attorney jobs are an excellent opportunity for those looking to work in the REIT industry.
Real Estate Attorney: well over 6 figures (average)
2. Real Estate Developer
Real estate developers are typically involved in the design, construction, and marketing of properties. They are also involved in land assembly and subdivision, zoning regulation, and the establishment of building codes.
Builders are involved in all aspects of the development process, from acquiring land to constructing buildings. Promoters are responsible for finding investors and marketing completed projects. In both cases, real estate developers may work either on their own or with a team of partners.
A developer obtains land and constructs assets for sale, while also selling them off when they become old enough to be sold again.
Real Estate Developer Salary: over 6 figures (average)
3. Director of Real Estate and Facilities
The Director of Real Estate and Facilities is responsible for a variety of tasks within the department. These tasks include, but are not limited to, the following:
Acquiring new properties
Negotiating leases
Overseeing property management
Maintaining the company’s physical infrastructure
Developing and implementing strategic plans
A director of real estate and facilities is a key role in any company that deals with real estate investment trusts (REITs). Therefore, this position often leads to advancement opportunities, making it an excellent career choice for those interested in this growing field.
Director of Real Estate and Facilities Salary: $130,000 a year (average)
4. Director of Acquisition
Directors of acquisitions in real estate investment trusts are responsible for finding new properties to invest in for the company.
Typically, they work with their analysts to conduct due diligence on potential investments and analyze the risks and rewards involved in order to provide a recommendation to their superiors.
The acquisition team is responsible for finding investment opportunities for the company, which can be traditional real estate assets or creative ideas that can become a business. They are constantly on the lookout for new and innovative opportunities that can help bolster the company’s growth.
Director of Acquisition Salary: $125,000 a year (average)
5. Real Estate Agent
As a licensed real estate agent, you would help clients buy, sell, and rent properties. In order to become a real estate agent, you must pass an exam that covers topics such as contracts, ethics, and state laws. You would be responsible for understanding the real estate market and helping your clients make informed decisions about their property transactions.
In the case of REITs, you must be a commercial real estate agent who are in charge of dealing with important financial data. They need to know about the internal rates of return, gross rent multipliers, and capitalization rates in order to do their job effectively. In order to become a commercial real estate agent, you will need some background in business and finance. This knowledge will help you understand your client’s needs and better serve them.
Unlike most professions, the more business deals you close as a real estate agent, the better your pay is. Furthermore, many agents work on commission-based pay, so it’s important to be knowledgeable about the market and have a strong sales skill set.
Agents who are successful can make much more than this amount; however, those who are just starting out may make less until they gain experience and build a client base.
Real Estate Agent Yearly Commission: $100,000 a year (average)
6. Investor Relations Manager
An Investor Relations Manager is responsible for managing the relationship between a company and its investors. They must be able to quickly understand complex financial information and communicate it in a clear and concise way. Additionally, they are responsible for communicating the company’s financial performance and strategy to investors.
They are also responsible for updating quarterly reports on the investor’s online dashboard. This can be a high-stress job because you must keep your investors happy especially during a market downtrend.
Investor Relations Manager Salary: $100,000 a year (average)
7. Project Manager
Project managers are responsible for ensuring that a project is completed on time and within budget.
They work in teams to make sure that all aspects of the project are completed. Thus, they must have strong organizational skills. They also typically have experience in leading and coordinating teams.
This is a highly lucrative job for those building new assets for a REIT. The highest-paid 10 percent earned more than $187,000, while the lowest-paid 10 percent earned less than $59,000.
Project Manager Salary: $90,000 a year (average)
8. Accounting Manager
They do this by preparing financial statements, maintaining accounting records, and overseeing the work of accountants and bookkeepers. In order to qualify for this position, you will need at least a bachelor’s degree in accounting or a related field, as well as several years of experience in accounting or bookkeeping.
However, with experience and expertise in the field, it is possible to earn much more than that. Those who work for real estate investment trusts (REITs) can expect to make even more money.
Accounting Manager Salary: $90,000 a year (average)
9. Asset Managers
Asset Management is a process that oversees the operational and financial work of a portfolio of assets. This includes tasks such as budgeting, forecasting, reporting, and analyzing data to make sure the asset is performing well.
As they are responsible for managing the portfolio assets in the real estate investment trust (REIT), they must expect a higher stress job. In addition, their job entails working with other departments in the company, such as accounting, acquisitions, development, and finance.
Asset Managers Salary: $89,000 a year (average)
10. Construction Supervisor
A construction supervisor oversees all aspects of a construction project, ensuring that it is completed on time, within budget, and to the required standard. This position requires a great deal of experience and knowledge in the field, as well as strong leadership skills.
They make sure that everything runs smoothly! Speficially, all the necessary equipment, materials, and supplies are ordered and on-site when they are needed. They also check the quality of the work as it is being done; making sure projects are constructed in accordance with contract documents, standards, codes, and policy.
In order to become a construction supervisor, you need only a high school diploma or GED. However, five years of experience in yard operations or equivalent education and experience is preferred.
Construction Supervisor Salary: $89,000 a year (average)
11. Investment Due Diligence Analyst
An investment due diligence analyst is responsible for conducting an extensive analysis of potential investments for a real estate investment trust. They work with the team to identify opportunities, underwrite deals, and make recommendations. The role is essential in helping the team make sound investment decisions that will benefit the company in the long run.
This job is a key player in the real estate investment trust (REIT) industry.
To be successful in this role, you’ll need experience with REITs or a national brokerage, as well as excellent quantitative skills including the ability to build real estate valuation models and distribution waterfalls.
Investment Due Diligence Analyst Salary: $80,000 a year (average)
12. Financial Analyst
The most common role of a financial analyst is assessing a company’s current and future financial health, which may include issuing stock recommendations, forecasting earnings, and providing risk analysis. Financial analysts may also work with investment bankers to identify new investment opportunities.
However, salaries can vary significantly depending on the size of the company, the city in which you work, and your level of experience.
Financial Analyst Salary: $80,000 a year (average)
13. Business Acquisition Analyst
An acquisitions analyst is responsible for reviewing potential investments and determining the risks and rewards associated with commercial property.
The analysis will include both macro-level information, such as the political and economic environment, as well as more fine-tuned data that is specific to the investment itself.
Many in this role have found a business degree to be well worth the cost.
Director of Acquisition Salary: $78,000 a year (average)
14. Commercial Property Manager
Property management is a growing field, as the demand for individuals who can manage both residential and commercial properties increases. The goal of property managers is to ensure assets are kept in good condition and are appealing to owners and tenants alike.
Real estate investment managers have a very important job, as they are responsible for meeting the needs of property owners, tenants, and investors.
Primarily, they oversee maintenance and repairs, collect rent, screen tenants and enforce lease agreements. They also may negotiate leases, recommend improvements to the property, and coordinate with contractors.
Commercial Property Manager Salary: $75,000 a year (average)
15. Real Estate Photography
Real Estate photography is a specialized field within the photography industry. As such, many photographers start their own businesses in this area.
In order to be successful, it’s important to have strong marketing and business skills. Your portfolio should showcase your best work and be tailored to the types of properties you will be photographing. Additionally, you may choose to offer additional services such as virtual tours or video production.
A real estate photographer would work closely with the marketing team.
Real Estate Photographer: $70,000 a year (average)
16. Marketing Coordinator
Marketing coordinators are responsible for developing and executing marketing campaigns.
They work with the advertising department to come up with ideas. Then, working with the rest of the company to make sure that those campaigns are executed properly. They create all marketing materials, track campaign results, liaise with outside vendors, and organize events.
Given the regulations around REITs, it is highly important that the marketing communications follow the investment directives from the SEC.
Marketing Coordinator Salary: $67,000 a year (average)
17. Maintenance Supervisor
A maintenance Supervisor is a position that requires managing and overseeing the work of others. Thus, ensuring work is completed in a timely, efficient and safe manner.
They are responsible for making sure all company policies and procedures are followed, as well as any legal requirements or safety regulations. Additionally, they manage budgets and expenses, as well as staff.
The ideal candidate will have experience in the property management or construction industries, as well as supervisory experience. A degree in engineering, architecture, or a related field may be beneficial.
Maintenance Supervisor Salary: $65,000 a year (average)
18. Property Appraiser
Appraisers are typically called in when there is a need to settle a dispute about the value of a piece of property, or when someone is buying or selling a home and needs to know how much it is worth.
Most states require that you be licensed in order to practice as an appraiser. The job outlook for appraisers is good; the Bureau of Labor Statistics predicts that employment will grow by 4% from 2020-2030 (source).
Property Appraiser Salary: $60,000 a year (average)
19. Leasing Consultants
Leasing consultants are responsible for meeting and greeting clients, touring potential tenants through a property, and helping them decide whether or not to lease it. They must be knowledgeable about the property they are showing, as well as about the local rental market.
Consequential, this is a good job for someone who is able to close deals, so being persuasive is important.
They should also be outgoing and comfortable working with people from all walks of life. A high level of professionalism is essential, as is attention to detail. Leasing consultants typically earn commissions based on the number of leases they sign, making this a commission-based job.
Leasing Consultant Salary: $50,000 a year (average)
20. Commerical Real Estate Intern
Commercial real estate internships are a great way to get started in the commercial real estate industry. Many internships will give you the opportunity to work with the CEO/COO and learn about all aspects of the business.
In most internships, you will gain vast knowledge while working with every department within the company.
Consequently, interns often have the chance to work with different teams and learn about all aspects of commercial real estate. This is a great way to gain experience in the field. Plus you will get a well-rounded working experience and the opportunity to build your network.
You must be a college student who is detail-oriented, self-starter, creative and strategic thinker in order to be considered for any real estate internship.
Commercial Real Estate Intern Salary: unpaid to $20 an hour
(Source for All Salary Information: Glassdoor.com)
Bonus = Real Estate Investors
Real estate investors use a variety of strategies to make money in the real estate market. Some invest a minimal amount of money, while others take on high-risk ventures.
In order to be successful, investors must be well-versed in real estate investment strategy and have extensive knowledge of the market.
This is why REITs are so popular with most investors. It allows a hands-off approach to real estate investing. Yet, still profit in the real estate appreciation and rental income.
Real Estate Investors Salary: varies on the amount of money invested but most want at least a 6-10% return
What real estate investment jobs are entry level?
Real estate investment is one of the best paying jobs in the world. The job offers a lot of opportunities for growth and allows you to work with different types of people.
It also has a relatively low barrier to entry, making it a great option for those who are starting their careers.
Most people in real estate started at the bottom and worked their way up the corporate ladder with hard work and persistence.
What are the minimum requirements for entry level real estate jobs?
The industry is growing rapidly and there are many different opportunities for those looking to enter the field. However, it’s important to note that entry-level jobs in this field come with specific skill sets and education requirements.
Most require at least a college degree if not at least 5 years of hands-on experience. One of the best places to start without any qualifications and education is as a leasing consultant
If you want to progress quickly in your career in real estate, consider taking a chance on one of the best paying jobs in REITs listed here. In fact, there are many jobs available in real estate investment trusts.
REITs – Which real estate investing job looks appealing to you?
The REIT industry is constantly growing, and with that comes new opportunities for a lucrative career path.
Many of the roles in a REIT are highly challenging, pay well, and are respected by investors. Many people work together as a team to build new projects, manage existing projects as well as work to finance them.
There are plenty of benefits of spending time researching this industry and finding the job for you.
In fact, it is an exciting and rewarding career!
Know someone else that needs this, too? Then, please share!!
Appraisal, HELOC, Internal Audit, Correspondent Products; The U.S. Economy: Strong Like Bull?
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Appraisal, HELOC, Internal Audit, Correspondent Products; The U.S. Economy: Strong Like Bull?
By: Rob Chrisman
Wed, May 17 2023, 10:47 AM
I head to Connecticut early today for the CMBA conference, but on another personal note, congratulations to Robbie Chrisman, host of the daily mortgage podcast based on this Commentary, who recently rode his single-speed bicycle from Manhattan, across the Appalachians, to Chicago, working when not pedaling. (In terms of physical prowess, I feel fortunate not cramping up putting my socks on in the morning.) The weather seems to have improved in most places, the Northeast included, and we’re approaching travel season. Here’s an interesting list of tourist scams to avoid during all seasons. (I’ve never had a baby thrown my way.) Perhaps the improving weather influenced homebuilder sentiment, as have falling lumber prices: sentiment has improved in May according to the NAHB off the lows of 2022. People need a place to live, but perhaps not one to work. “The ‘return to the office’ won’t save the office: More people are going to offices more of the time. Offices are still in trouble.” U.S. lenders, including banks who own those loans, are being warned that commercial property is “next shoe to drop.” Executives and investors fret about the impact of rising rates and empty buildings on the $5.6 trillion market. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades, helping transform the mortgage business. Interview with Richey May’s Nathan Lee on the best ways for lenders to leverage data, benchmark, and analyze various metrics to achieve profitability.)
Lender and Broker Products, Software, and Services
Servicers of all types and sizes trust their portfolios to MSP®, Black Knight’s loan servicing system. Just ask 7 Servicing, a credit union service organization that recently chose Black Knight’s integrated solutions. In addition to MSP, which supports all aspects of servicing, from loan boarding to default, 7 Servicing will use Servicing Digital to give its members a convenient, self-service application. Accessible via a mobile app or the web, Servicing Digital gives homeowners easy access to personalized and timely information about their mortgage and home. What’s more, organizations like 7 Servicing that use Servicing Digital can build deeper relationships and engagement with their members. This can lead to higher member satisfaction and increased retention. Learn how Servicing Digital can help you improve the customer experience at your organization in the blog post ”5 Ways to Retain More Servicing Customers Through Communication.”
“Rain just after you wash your car. Being late and hitting every red light. Some things in life happen just like clockwork. You know what you can also count on? Working with a consistent team of processors when you pass your processing operations to wemlo®. Our processing pod set-up means you’ll have a go-to processor, dedicated backup processor, and manager you can count on for every loan submitted. We know you don’t want a bunch of random processors in your files or working with your hard-earned clients – that’s why we’ve designed a workflow centered around business continuity. Ready for dependable third-party processing support? Learn more about wemlo’s consistent third-party processing services today.“
Best execution on a loan plus reduced repurchase risk at no additional upfront cost? A no brainer, right? Work with your hedge advisory firm and Plaza National Correspondent Lending for a “last look.” If Plaza Home Mortgage can match the pricing, you’ll get the best price plus Plaza’s Certified Loan Program that protects you from buybacks due to manufacturing defects. Reach out to Plaza for more information or see Plaza at MBA Secondary in NYC, May 21-24.
Still on the fence about DPA? Here what Click n’ Close client Steve Shelton, Managing Principal at First Choice Lending Services, has to say: “Click n’ Close’s proprietary DPA product has helped us tremendously grow our purchase money business and close more deals, especially when our borrowers don’t qualify for other programs because of income limits, or where seller-paid concessions weren’t available or in multiple offer situations. From management to account executives, inside reps and underwriters, everyone at Click n’ Close comes together to figure out how to make loans work and close them efficiently, truly a boutique style of service rarely seen in today’s wholesale marketplace.” Contact Adam Rieke or Kerry Webb (wholesale) or Julas Hollie (correspondent) to get started today. P.S. Don’t miss Michael Lima’s DPA session at the MBA Secondary Conference on Tuesday, May 23 at 11 am, or drop him a line to meet in person.
What’s an internal audit anyway and do you need one? An internal audit acts as a third line of defense for your mortgage operation. It provides comprehensive assurance based on the highest level of independence and objectivity to evaluate the effectiveness of management’s internal controls. This function should advise your mortgage operation on plans to achieve the company’s strategic, operational, financial and compliance goals. An effective internal audit should go far beyond just checking a compliance box; it should be an integral part of protecting your company. If you want to ensure you’re adhering to regulatory requirements and demonstrating good faith business practices, a Richey May internal audit is a good fit. If you’re looking to be Fannie Mae approved in the future or want to maintain your approved status, it’s required. If you’re unsure whether you need an internal audit, ask one of Richey May’s experts today or learn more here.
There are over 200 different species of chameleons in the world, each optimized for their own environment. Their ability to adapt and change color in their surroundings is key to their survival. In a rapidly evolving mortgage industry, lenders need to be able to adapt just as quickly. As home equity increases HELOCs present lenders with new opportunities, and innovative technology can help lenders offset the risks involved in home equity lending. In a Q&A with the National Association of Federally Insured Credit Unions (NAFCU), Wolters Kluwer’s Mark Mackey explored the effects of the shifting industry and the growing importance of Home Equity, particularly in regard to credit unions. He also examines the risks and benefits of HELOCs. Learn more about the importance of HELOCs in the shifting industry by reading the Q&A today.
You do everything to create a perfect origination experience, yet you send a link to some random AMCs your borrowers never heard of where they’re expected to share personal information and a credit card. For lenders with less than 50 loans per month, is it likely your AMC will create a dedicated page featuring your brand? Not likely. Well, enter Jaro. Not an AMC, but technology that empowers AMCs. This technology creates a branded landing page for your appraisal orders. Additionally, Jaro offers a suite of products to provide more predictability with your borrower’s values. On Tuesday, May 23rd at 2 pm ET/11 am PT, National Mortgage Professional, we’ll deep-dive into the appraisal process, identify its flaws, and discuss potential remedies made possible by Jaro, all without switching your AMC. This session will feature Jaro’s Managing Director, Gareth Borcherds. To be a part of this enlightening discussion, register here.
Capital Markets
Mortgage rates rose to the highest level in nearly two months yesterday as prices on the front-end of the yield curve were weighed down by better-than-expected data and long-end yields were pushed up due to Pfizer’s $31 billion duration-heavy, multi-tranche, fourth largest ever offering of bonds. There were also FDIC sales, $12.5 billion over Monday and yesterday in total, which contributed to the widening of MBS spreads to roughly 315 basis points. Retail sales, which factor into GDP, rose in April despite still-high inflation and borrowing costs as slow unemployment and steady wage growth continued to support demand. The 0.4 percent month-over-month advance in sales would normally be good but follows larger declines in February and March (-0.7 percent) and doesn’t take into account price changes, meaning that on an inflation-adjusted basis retail sales are actually down. Declining sales will eventually be a headwind to economic growth this year.
The National Association of Home Builders Housing Market Index rose to 50 in May, meaning an equal number of builders have as positive a view of the market as a negative view of the market. Though the figure beat both expectations and April’s reading, the index has been trending under 50 since last August and fell a record twelve months in a row over the entirety of last year.
The housing boom over the past couple of years was mostly in home prices, not in home building, and this report dampens expectations for much new home building leading up to and continuing during the spring season. This report, and the lack of home building in general, suggests that the dire shortage of new home construction is not set to change anytime soon, which is quite a head scratcher considering the extreme dearth of home inventory for sale.
As every lender knows, the inventory of homes for sale has dried up. So, where have the spring home selling seasonals gone? Ask the millions of American homeowners paying 4 percent or less on their mortgages who are deciding to stay put rather than trade up. One-third of housing inventory hitting the market is new construction, compared to historical norms of a little more than 10 percent. The annual rate of home building currently resides at 980k, less than half its 2.3 million average since 2000. Existing home sales are due out tomorrow morning and are expected to drop to a 4.3 million annualized rate, or down 3.2 percent compared to March, which in turn was down 2.4 percent compared to February. It’s rough out there.
After mortgage rates increased last week (even as Treasury yields were essentially flat), mortgage applications decreased 5.7 percent from one week earlier, according to data from MBA. We’ve also received housing starts and building permits for April (). Markets were looking for 1.44 million and 1.46 million compared with 1.42 million and 1.43 million previously. Later today brings a Treasury auction of $15 billion 20-year bonds. We begin the day with the 2-year back up to 4.07, Agency MBS prices better by a few 32nds, and the 10-year yielding 3.52 after closing yesterday at 3.55 percent.
I, and an estimated couple thousand industry execs, head up Manhattan soon. Adam Quinones, Founder of dataQollab and former Head of Mortgages at Refinitiv, has some advice for anyone going to New York for the MBA’s National Secondary. (Part 3 of 5.) “Be careful crossing the street: the yellow cars don’t stop. If you’re hailing a cab, look for yellow tops with their numbers lit up. That means the driver wants a fare. Once you’re in the cab, give the driver a cross street, not an address. “9th and 57th” for example. If you give them an address, they will know you’re a tourist and will be more likely to take you on a joy ride.”
Employment and Transitions
Evergreen Home Loans™ is passionate about changing the world one relationship at a time through homeownership. That passion has established Evergreen as one of the Western states’ leading residential mortgage lenders for over 36 years. Consistently named one of the best workplaces in America, Evergreen is known as a people-powered local lender with big advantages, committed to providing high-touch service that’s complimented by a robust portfolio of products that meets the needs of today’s buyers and real estate agents and an exclusive technology platform that brings mobility and convenience to mortgage origination. “When it comes to tools of the trade, our loan officers are armed for success. Modern technology helps us super serve customers and streamline the process for everybody,” said Todd Miles, executive vice president, loan production, at Evergreen. If you’re passionate about impacting lives through homeownership, visit the careers page and discover what’s possible with Evergreen.
“In an ever-changing industry, it’s more important than ever for a mortgage company to be able to pivot, adapt, and grow. Homestead Funding has been assisting borrowers with their home financing needs for nearly 30 years, and we continue to expand our programs, enhance our technology stack, and grow our sales team. Aletha of North Carolina joined our team for two main reasons: Homestead’s resilience in the mortgage industry, and the confidence in knowing there are colleagues, support staff, and senior management behind her. Dave from New York signed on for our focus on superior service for our borrowers and emphasis on partners’ experience. To learn more about why Loan Originators choose Homestead Funding, watch our video here. For more career information and confidential talk, contact Michele Teague today: (518)-368-1494.”
You’re obviously the kind of mortgage professional who stays in the know. Why else would you be reading the Chrisman Newsletter? If we have you pegged, you’ll love this: we tracked down 4 surprising mortgage stats that will change the rest of 2023. Just click here for the free infographic. Stat-savvy and looking for your next business move? Motto Mortgage brokerages are hiring talented loan originators in: AK, AZ, CA, CO, CT, FL, GA, ID, IL, IN, KS, KY, MA, MI, MO, NC, NJ, NM, NV, OH, OK, OR, PA, SC, TN, TX, VA, and WA. Get all the info here.
“Are you a proven, high-performing Non-QM Account Executive? We’re looking to add YOU to our roster. Join the team of elite Account Executives who have access to uncapped commissions allowing you to earn what you’re worth, dedicated Scenarios Desk with HERO Broker Portal assistance, and exclusive loan products outside of what traditional Non-QM lenders offer including CDFI financing. Borrowers are leaving the 9-5 model and need solutions. Fill their financing needs & grow your own book of business while making an impact for diverse and underserved markets. Ready to change your jersey and dominate the Non-QM market? Reach out to Angela Castillo, VP of Talent Acquisitions, today for a confidential interview at 602.848.2967 or click here.”
Opus Capital Markets Consultants is excited to announce the addition of Pete Thomas to the company, to focus on creating new opportunities for the organization. “Pete has a tremendous industry background, particularly in Capital Markets, having been with Clayton/Covius, PHH, Freedom, and Bear Stearns, with deep relationships across the country,” said Pete Butler, EVP Strategy and Growth at Opus.
Dovenmuehle has appointed Ron Malik as SVP of default servicing to oversee Dovenmuehle’s special servicing initiatives and maintain a high level of compliance and service satisfaction in all areas of default servicing,
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Ever wonder how much that real estate agent you constantly see on bus benches and your grocery store receipts makes?
Well, the National Association of Realtors (NAR) released some interesting data regarding just that. And it’s not really good news (surprisingly).
The study, titled “2017 National Association of Realtors Member Profile,” covers the approximately 1.22 million active real estate agents in the United States.
It found that the median income for a “Realtor” was $42,500, up from $39,200 in 2015. That’s a healthy 8.4% year-over-year increase, thanks to a fairly robust housing market (despite limited inventory).
For NAR members in the game just two years or less, the median income was a paltry $8,930, while of those in the real estate business 16 years or more earned a median $78,850.
Very Few Real Estate Agents Earn Six Figures
There seem to be really big winners and equally big losers
In the residential real estate business
Top producers capable of bringing in $100k+, while many others do $10k or less
The typical agent closed 12 transactions throughout the year
But it’s not all bad. Of the real estate agents with 16+ years of experience, 38% earned more than $100,000 in 2016. Unfortunately, the average real estate agent only has 10 years of experience.
Then you’ve got the 56% of members with less than two years of experience who earned under $10,000 throughout the year, which kind of highlights the wide range of possible salaries based on the entrepreneurial nature of the job.
Essentially, you’ve got a large group of real estate agents who don’t close many if any transactions in a given year, then the heavy hitters who close the lion’s share of sales year after year.
That’s evidenced by their work rate, which ranges from 20 hours per week to some throwing down 60 hours per week or more. These top producers are the ones making a life in real estate.
The others might just be dipping their toes in the pool – we also have to consider the individuals who get licensed simply to close their own home, or to help a friend or family member.
This could explain the relatively low 12 transactions per year on average, which is just one per month.
Do Realtors Practice What They Preach?
Some 82% of Realtors own their primary residence
Which means they practice what they preach
This number has fallen in recent years
As a result of the massive housing crisis that took place
Largely, yes. Apparently 82% of Realtors are homeowners, and many others own an investment property, or at least one vacation home.
Additionally, a small percentage own at least one commercial property. So they’re aren’t just out there selling real estate, they’re buying real estate as well.
Oh, and the median gross household income for a Realtor was $111,400, which is well above the national median, so I suppose they marry well too!
For the record, 2017 wasn’t a particularly great year in the real estate world, so the numbers could be skewed somewhat. But then again, real estate is cyclical, so bad years are expected (and should be calculated) along with the good over time.
Investing in real estate with commercial or residential properties can be a great way to grow your money. Commercial and residential real estate investments are very different and it takes time to learn the ins and outs of each. Commercial real estate may be a great investment for some, but I think residential real estate is an easier investment to understand. But if an investor is well versed in commercial and willing to work hard, you can make a lot of money with commercial real estate. I invest in residential properties and commercial properties.
What kind of rentals did I start investing in?
I have 20 long-term rental properties, and they have been great investments with great cash flow. Not only do my rental properties provide over $100,000 a year in cash flow, but they also have increased my net worth by $600,000 in the last 3.5 years. My first 16 rentals were residential properties, but I switched to commercial for my last purchases.
One reason I like residential rental properties is I am a real estate agent who specializes in residential properties. Because I deal with residential properties all day long, I know residential rentals better than I know commercial rentals. I know how to buy residential properties below market value and I know my rental market very well. I also invest in residential properties because in my area residential rental properties tend to give better returns than commercial rental properties.
Here is a video I put together on commercial versus residential rentals
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Is commercial or residential easier to invest in?
Buying a residential rental property is pretty simple once you learn your sales and rental markets. You need to know how much the house costs, what it will cost to repair, what it will be worth and what it will rent for. Even though residential rental properties can be simple, it still takes time to learn how to invest in them and make money.
Commercial properties, on the other hand, are much more complicated than residential rental properties. With commercial rental properties you need to know the same things as you do with residential rental properties, but figuring out those numbers is much more difficult. Factors that affect rent and value are the type of tenant that best suits your building, how long a lease is, how solid your tenant is and the future desirability of your building. All of this is important with residential, but much more so with commercial. The reason these factors are more important with commercial is they have a huge impact on the value of the property where a single-family residential property is valued off the demand of owner-occupied buyers.
How are commercial properties valued differently than residential?
Valuing a residential property is done by determining what other similar properties are selling for. Many more residential properties sell than commercial properties, and it is usually pretty easy to find sold residential properties that are similar to a house you own or are looking to buy. Valuing residential properties based on the sales of other residential properties is called the sales comparison approach.
Commercial properties are rarely valued using the comparison approach because there are much fewer commercial properties and it is hard to find similar properties that have sold recently. Most commercial properties are valued using the income approach, which is much more complicated than the sales comparison approach.
What is the income approach when valuing commercial properties?
The income approach uses the income a property generates to value a property. Most commercial properties are valued this way as well as some multifamily residential properties.
The income approach takes the profit a property makes per year and multiplies it by a cap rate to come up with the property’s value. I wrote a much more detailed article on cap rates here. The cap rate is not a set figure but varies in different parts of the country and for different types of properties. When you are buying commercial properties, it is very important to know the market cap rates.
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What is a CAP rate?
If you have a 20,000 square foot warehouse leased for 10 years to a tenant with almost no risk of default, that cap rate will be different from an office building that is half vacant with mediocre tenants in the other half.
The cap rate will be lower for the property with the stable tenant because that tenant has a better chance of paying rent through his lease term and the lease is longer. The office building will have a higher cap rate because there is much more risk involved and it will take work to rent the vacant spaces. Cap rates will vary based on the type of tenant, the length of the lease, the credit rating of the tenant, the condition of the property and market conditions.
Why are commercial properties hard to value?
As you can see, valuing commercial rental properties can be very difficult. You must know the market cap rates for a building, a tenant, and your market. These cap rates are not always easy to figure if you are not very experienced in the commercial real estate market. If you overpay for a commercial building, it could be very hard to ever sell or refinance if needed. Properties that look like an awesome deal may be priced low due to a bad tenant or an uncertain future.
The other problem with valuing properties off the income approach is you are using information from the current owners for expenses and income. If the owner fudges his numbers or forgets a few expenses, the property will look much more valuable than it really is.
What is the most stable investment?
Everybody needs a place to live, but not everyone needs a store or wants to own a commercial investment property. Another reason residential properties are safer than commercial properties is there will always be a larger buyer pool for residential properties. Even when the market is bad people will buy houses or rent houses because they need a place to live.
In the commercial market, people may close their shops, work at home or get another job if the market turns bad. Commercial real estate investors may have trouble getting a commercial loan and will not buy in a down market. This means that it may be incredibly difficult to sell a commercial property in a down market; especially if it is vacant. In a down market, you may have to rent or sell a residential property for less money, but you may not be able to sell or rent a commercial property at all.
How are the leases different?
Longer leases can be a good thing for investors, but there is a reason commercial leases are longer. Commercial properties typically take longer to rent and are harder to rent than residential properties. Landlords want a longer lease in place on commercial properties, because of the difficulty in leasing commercial. When a commercial property goes vacant, it can stay vacant for months or even years. This is also why the cap rate varies so much with commercial. An investor has to consider how long the current lease is and how stable the current tenant is. A ten-year lease is great, but even ten-year tenants can go bankrupt and you are left with a vacant building. Since commercial buildings are usually very specific to the tenant, it could take a long time to lease or a lot of work to retrofit a building for a new tenant.
A commercial lease is not a straight one year lease with the tenant paying utilities and no pets. A commercial tenant has many lease options; a gross lease, triple net, double net, modified gross, etc. The explanations for the different types of leases can be found here. The cap rates will change again based on the types of lease and what costs the tenant is paying.
How is financing different?
It can be difficult financing residential properties, but there are many lenders who will loan on them. Typically you can get 15-year or 30-year loan on residential rental properties. With commercial properties, the loan amortization is going to be lower than 30 years and most commercial loans will have a balloon payment. A balloon payment means the entire balance of the loan will come due after a certain amount of time like 5 or 10 years. The investor must pay off the loan when the balloon payment comes due, which is not always easy. Many commercial investors count on being able to refinance their loans when a balloon payment is coming due, but that is not always possible. If the lending market becomes tighter, an investor’s financials change or the commercial market changes, it may not be possible to refinance.
How are commercial rentals a good investment?
Even though commercial real estate can be a very tricky business to be in, there is an opportunity to make a lot of money. There is no black and white valuations of commercial properties because there are so many factors to consider with cap rates. That means the people who really know what they are doing can spot good deals or a way to increase the cap rates on properties. If you have a property that is worth $200,000 based on a 10% cap rate, that means it is generating $20,000 a year in income. If you can create a more stable lease or rent to more attractive tenants that could lower the cap rate, that makes the property more valuable. If the property was generating $20,000 a year income and had an 8 percent cap rate it would be worth $250,000.
An investor could also find a better use for a commercial building, which may increase the income or lower the cap rate. A warehouse may not have a good cap rate in a certain market, because there are vacant warehouses all over. That warehouse could be turned into self-storage, which is in short supply increasing the income and lowering the cap rate. Increasing the value of a commercial property could be as simple as taking a vacant building and finding a good tenant on a long-term lease.
You can see a video of one of my commercial rentals here:
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Conclusion
For most investors, residential properties are much simpler and easier to understand than commercial properties. It takes a lot of time and experience to understand the commercial world and how it works in the market you want to buy in. I currently stay away from commercial properties, but I won’t rule out investing in them in the future. The most attractive part of commercial investing to me would be increasing the value of properties and quickly turning them like my residential fix and flips. There are so many unknowns with long-term commercial properties because lending can change, financing terms are different and the vacancies can last a long time.
When I wrote this article I had not bought any commercial properties. I have bought multiple properties in the last year. Commercial real estate is very complicated, but I have learned a ton over the last couple of years.