Is the housing boom already over? Did home prices peak before summer?
Well, a new report from Redfin revealed that competition among home buyers eased in May, which may be an ominous early sign of what’s to come.
The company noted that 69.5% of Redfin real estate agents that wrote an offer last month faced competition from another agent, which while high, was down from 73.3% in April and well below the 2013 high of 79%.
Additionally, the percentage of homes that received multiple offers was nearly at year-ago levels again, when the number was 69.3%.
Meanwhile, 49% of Redfin’s winning offers were above the original asking price, down from 51.9% in April.
Why Is the Housing Market Cooling Again?
If this report was for June, as opposed to May, one could look to the higher mortgage rates as a potential housing market buzz killer.
But these are the May numbers, when mortgage rates were still relatively low for a decent chunk of the month. So the obvious issue is an increase in inventory.
Housing inventory always rises in spring as it’s the start of the traditional home buying/selling season, and that’s exactly what happened this year.
In April, the number of homes for sale increased 6.4% month-over-month, the largest monthly increase since March 2010, when the homebuyer tax credit was phasing out.
At the same time, inventory was down 26% compared to April 2012. Home buyer demand was also down, with home tours and written offers slightly lower in May, per Redfin.
Of course, housing demand is definitely local, with Los Angeles and San Francisco still red-hot in terms of competition, while San Diego and Orange County saw significant month-over-month declines in interest.
And not every major market is seeing home prices go for well above the asking price, despite all the rosy media reports.
While that was the case in a staggering 96.8% of properties in San Francisco, which on average sold for 9.7% above list, just 19% of winning offers went above ask in Chicago.
In some major metros, including Baltimore, Chicago, Los Angeles, and Washington D.C., the average difference between offer price and asking price was actually negative.
Now we’ve got the prospect of even more homes coming to market, coupled with significantly higher mortgage rates.
As I’ve noted in the past week or so, mortgage rates are about 1% higher than they were a month ago, so there’s definitely going to be some kind of effect, though it’s too early to tell what that may be.
Plenty of pundits think housing can recover in the face of higher mortgage rates, even with rates in the 5-6% range.
But others are questioning the entire rally now that rates have begun to tick up, calling the recovery nothing more than a weak attempt to keep home prices inflated.
In any case, competition will remain elevated, even if not at levels seen earlier this year.
Characteristics of a Winning Bid
Wondering what it takes to get your offer accepted? Wonder no longer. Below are the most common attributes of a winning offer in May, per Redfin:
– 68.3% were conventional loans, up from 61.7% in April – 29.4% had a cover letter, up from 28% in April – 11% waived the inspection contingency, up from 8.3% in April – 8.9% waived the financing contingency, up from 7.1% in April
As you can see, government loans have fallen out of favor with prospective home buyers, most likely because of the recent increase in annual FHA mortgage insurance premiums.
Additionally, many FHA loans now require insurance for the life of the loan, which clearly isn’t economical, let alone feasible for many would-be borrowers.
Both FHA and VA loan volume decreased from April to May, accounting for just 8.5% and 6.6% of winning offers, respectively.
Meanwhile, all-cash offers grabbed a 5.5% share of the market, up from 5.1% in April – 16.1% of offers were all-cash in Orange County last month, up from 9.7% a month earlier.
What this all means is that if you’re a seller, you better get on it, as things appear to be trending down. And if you’re a prospective buyer, you might be able to bide your time, though you’ll have to contend with the prospect of rising rates.
Read more: Slowing mortgage market could lead to looser lending.
A good credit score will make your life a lot easier; it will help you qualify for loans, apartments and even jobs. But you’re not born with a credit history. Much like you have to spend money to make money, you need to borrow money to prove you’re good at borrowing (and paying back your debts). In fact, according to Nationwide, credit scores help insurance companies predict future losses. So, how can you start your credit-building journey? Here are ways new cardholders can build credit.
Understanding Credit Score Perks
Your credit score is woven into almost every area of your life. “Crummy credit can cost you a fortune throughout your life,” explains Matt Schulz, chief credit analyst at LendingTree. “It’s as simple as that. It’ll lead to higher interest rates and fees on mortgages, credit cards and loans. It can keep you from getting the apartment you want. It can lead to higher insurance premiums. It’s a big, big deal.”
There are two main types of credit scores: your FICO Score and your VantageScore. Most lenders review your FICO Score when making a financing decision. It ranges from 300 to 850, with a “good” score starting in the high 600s. It’s calculated based on a variety of factors, including payment history, credit usage, the length of your credit history, and more. The VantageScore follows similar metrics but focuses less on payment history, allowing scores to be generated faster than FICO. Regardless of the type of score, a proven record of responsible borrowing shows lenders that you’re more likely to pay back your debt, and then they can offer you lower interest rates and charge fewer fees.
Related Read: 7 Unexpected Benefits of a Good Credit Score
New to Credit? Here’s How to Build Your Score Quickly
Get a secured credit card. A secured credit card is a great way to build credit from scratch. It works just like an unsecured card, except that you make a security deposit that is equal to the amount of the credit limit. For example, if you deposit $500, your credit limit is also $500. “Consumers love these cards because they’re easy to get and their low credit limits mean there’s no danger of going too wild on a spending spree,” says Schulz. “Banks love them because there’s no risk. If someone doesn’t pay their bill, the bank simply takes the security deposit. It’s a win for everyone involved.” Before applying for a secured card, make sure the lender reports your usage to the three credit bureaus–Equifax, Experian and TransUnion. If it doesn’t, you won’t build credit. Also, check to see if the lender offers an upgrade to an unsecured card.
Make timely payments. Once you have your first credit card–be it secured or unsecured– focus on paying your bill in full on time, every time. Payment history is a big component of your credit score. Each month you pay your full balance on time, you’re proving your creditworthiness. “Think about it like borrowing the car keys from your parents,” explains Schulz. “The first time you do it, they’re not going to let you do much. Once you’ve shown you can handle a little responsibility, they’ll give you more, though. Eventually, they’ll hand over the keys without thinking much of it.”
Use your card often. The more you use your card, the better. The key, though, is to use it smartly. Pick up the check when you’re out to dinner with friends, knowing they’ll reimburse you for their meals. Use it for everyday expenses like groceries and gas. You can even use your card to pay rent, though there will usually be processing fees added on by your landlord. Just remember: Pay the bill in full, every month. You should also never max out your card. Your credit utilization ratio–how much credit you’re using compared to the total credit available to you–is another aspect of your credit score.
Become an authorized user. If you can’t open a credit card yourself yet, become an authorized user on someone else’s account. Ultimately, they will be responsible for the charges on the account, so you need to have a good relationship with this person. Becoming an authorized user allows you to link to this person’s good credit and thus build yours with steady payments.
Apply for a credit-builder loan. A unique way to build credit is to apply for a credit-builder loan. With these loans, you make monthly payments to the lender for a set period of time. The deposits are kept in a savings account or a certificate of deposit. Once the payment period ends, you get the money back, sans fees or interest charged.
Be determined. Building credit can be daunting, but don’t give up. With each passing month, your timely payments will boost your score. Use texts or autopay features to make sure you’re paying your bills on time. Do whatever you need to do to keep at it. Different apps and some credit cards offer estimates of your credit score, but know that you’re entitled to one free credit report every year from AnnualCreditReport.com. Get in the habit of checking your report every year to make sure there are no lingering issues that are hampering your credit-building endeavors.
About the Author
Chris O’Shea is a freelance writer whose work has appeared in GQ, NerdWallet, Esquire, New York Magazine, and more.
But depending on how a lender interprets the guidelines, the client could have gotten his application rejected for not having consistent employment for a two-year period without interruptions, explained Gastelum.
“It really comes down to interpretation of the guideline. One lender could have said, ‘Oh, he was out a week, so it’s interrupted and therefore, the second employment doesn’t work.’ The problem is, a mortgage credit reject (MCR) is kind of like your scarlet letter, to be completely honest,” Gastelum said.
When a lender rejects an FHA application, it discourages the next lender from even reviewing the application because of the extra work the underwriters have to do to override that MCR, mortgage pros told HousingWire.
All FHA mortgage lenders use a system by the U.S. Department of Housing and Urban Development (HUD) called FHA Connection, a database used to insure and generate FHA case numbers associated with the borrower’s home loan application. When the borrower is denied for an FHA mortgage loan, an MCR report had to be created for that denial. That changed on September 11.
The FHA’s announcement in early September to waive a requirement that FHA-approved lenders flag rejected loans in the FHA Connection system is a step in the right direction since declined borrowers don’t have to overcome a stigma, loan officers said.
In a rate-rising environment where it has become more difficult for first-time buyers to get into the market, borrowers won’t have to deal with a file that has an MCR for six months. Even after the six-month period is over, the borrower’s case number would still be attached to his/her social security number.
Demand for FHA loans have risen over the past year to comprise 23.8% of mortgage applications in August 2023, up from 17% from the same period a year ago, according to the Mortgage Bankers Association.
The FHA/VA share in Q2 2023 stood at 22.9% of the entire mortgage origination volume, up from 18% in Q2 2022, according to data compiled by Inside Mortgage Finance and Urban Institute.
Loan officers said that the FHA’s waiver will give borrowers a fairer shot at obtaining financing. Borrowers won’t be subject to lenders’ different underwriting interpretations that could lead to a rejection of their mortgage applications.
“That (MCR) is a subjective stigma based on credit risk tolerance of the particular lender that you went to initially. “This is an underwriting technicality that is unfair and it is a good move to create more fairness,” Billy Taylor, CEO of Hometown Lenders, said.
“We are really happy about this change because it’s going to provide more opportunity for loan officers and is going to provide more opportunity for buyers to get a second chance,”Michael Borodinsky, VP and branch manager at Caliber Home Loans, said.
Overcoming overlays
The FHA credit requirements are strict, but borrowers can get an FHA loan with no credit score. In fact, HUD forbids lenders from declining a borrower’s FHA loan application simply because they lack a credit history.
In such a case, lenders will ask for documentation, including a letter from the landlord documenting on-time rent payments, payment history of utility companies and cell phone or internet provider.
Lenders, however, have overlays – rules on top of the federal rules that were published as lenders need to sell those loans to investors who do not want to buy high-risk loans.
“Those overlays – it could be higher standards, it could be lower debt-to-income (DTI) ratios – still exist on a subjective basis on a lender-by-lender basis. So a borrower not knowing that they could qualify for a loan where their credit score is below 640 or 620 could be subject to a denial and then not realize that they could be approved somewhere else,” Borodinsky said.
Generally, the FHA requires a minimum 580 credit score with a down payment of 3.5% to qualify for a FHA loan. Under FHA guidelines, borrowers with credit scores between 500 and 579 must make a down payment of at least 10%. But they may also face tighter requirements. Lenders may require a lower loan-to-value (LTV) ratio or ask that the borrower make a larger down payment.
Reasons for a MCR vary, said Ted Tozer, non-resident fellow at the Urban Institute‘s Housing Finance Policy Center (HFPC) and the former head of Ginnie Mae.
“It could be low credit scores, or it could be geographics too – maybe they’re in a market that it’s a soft market where they’re looking at home prices that could be falling. Lenders don’t want to tilt their portfolio to one where these 3.5% down payments could very well become over 100% LTV just because home prices fall,” Tozer noted.
Industry personnel frequently complained that FHA Connection often didn’t provide sufficient information about mortgage credit rejects to determine why the applicant was rejected, said Peter Idziak, senior associate attorney at Polunsky Beitel Green.
“It could be the lender’s own standards could be higher or different, or in addition to just the FHA qualifications,” Idziak said.
For a prospective homebuyer, the new waiver should avoid a possible misrepresentation of their actual creditworthiness, JR Younathan, SVP and California state mortgage production manager at California Bank & Trust, said
“The given waiver doesn’t necessarily open new paths to compete as they could have done that previously. It would only open a new path in the instance that the other lender wasn’t willing to investigate the reasons the denial was registered, and instead rejected the loan file/borrower on the fact it existed at all, thus eliminating that ability to compete,” Younathan noted.
Regardless of whether the applicant is walking in to the lender for the first or second time, the lender should be armed with enough financial information to assess the credit risk.
“The lender should be confident enough to know what questions to ask, how to analyze their income, how to analyze all the other risk profiles, it really shouldn’t make that much difference, because they should be in a situation where they should be asking the right questions to really understand,” Tozer said.
Beggars can’t be choosers
Though loan officers are unanimous that the waiver will make FHA loans more accessible for borrowers, LOs interviewed by HousingWire don’t expect it to increase their production volume.
In a highly competitive environment, lenders had already taken that extra effort to approve loans that would’ve been rejected or already rejected from another lender.
“We’re more likely to underwrite a 500 credit score than a big bank who’s saying ‘I don’t want that risky loan in my portfolio. I don’t want I don’t even want to underwrite it, because I don’t want a 500 or 520 or 560 borrower in my portfolio,’” Taylor, of Hometown Lenders, said.
Hometown Lenders would perform a manual underwriting for an applicant with a lower credit score to try to get an approval rather than simply rejecting a lower credit score borrower, he said.
The FHA loan program requires lenders to seek manual underwriting review when a borrower has a credit score lower than 620 and a DTI greater than 43%. According to HUD, borrowers could qualify with a 580 credit score and a DTI of 50%.
“That (loan origination) is the only way we make income. I don’t think it (the new waiver) would affect us at all, we would have looked at that borrower whether there’s an MCR on there or not,” Taylor noted.
To override an existing MCR would require a level two underwrite – meaning two underwriters would have to underwrite the file as they have the authorization to override the MCR in the FHA Connection system.
Because the mortgage credit reject is going to be eliminated, we’re no longer going to have to deal with a second underwrite, Gastelum said.
“It’s not going to be more business. If anything it’s going to bring some of the borrowers that got declined at other companies back to the marketplace sooner,” Gastelum said.
FHA loan limits rose to a maximum of more than $1 million and mortgage insurance premiums for FHA loans were cut by 30 bps this year in line with home price inflation and to provide relief from the steep rise in mortgage rates.
Some loan officers noted that while the FHA’s decision to cut MIPs was a step in the right direction, the upfront mortgage premium (UFMIP), which amounts to 1.75% of the base loan amount, as well as a monthly premium for the life of the loan, could still be a burden for borrowers compared to those with a conventional loan.
However, affordability will still remain challenging for borrowers as wages would need to rise and home prices would need to fall to tackle that issue, Taylor noted.
“You’re not going to change affordability — which is the real reason people don’t have access to housing — by taking MCR off,” said Taylor.
But any little bit helps, Borodinsky said, citing a tough mortgage origination market that he’s never seen before.
“I welcome anything that moves the needle even fractionally. Because in this market, beggars can’t be choosers. This market is unlike any market we’ve seen in over 30 years in terms of there being no inventory, high interest rates and a real problem compounded with what’s called the lock-in effect,” Borodinsky said.
MILWAUKEE, Sept. 14, 2023 /PRNewswire/ — Northwestern Mutual, a leading financial security company, announced today that Anne F. Ackerley and Andrew J. Harmening have been appointed to serve on its Board of Trustees. As a mutual company with a responsibility to policyowners, Northwestern Mutual has a Board of Trustees elected by its policyowners with responsibility … [Read more…]
Looking to build wealth with the best income-generating assets? As you set out on the path to financial freedom, understanding the different types of income-generating assets can truly change your life. This is because you can invest in assets that will generate you income, earning you more passive income. Today’s article will introduce you to…
Looking to build wealth with the best income-generating assets?
As you set out on the path to financial freedom, understanding the different types of income-generating assets can truly change your life.
This is because you can invest in assets that will generate you income, earning you more passive income.
Today’s article will introduce you to a range of assets that reliably bring in cash, giving you peace of mind and the freedom to live life on your own terms.
From traditional investments like stocks and bonds to more creative options like peer-to-peer lending or real estate, income-generating assets give you the power to diversify your portfolio and build wealth over time.
Related content:
What are income generating assets?
Before we begin, I want to talk about the basics on income-generating assets, in case you are new to the subject or if you want a background first.
Income-generating assets are investments that, as the name suggests, generate income for you. These are assets that provide you with a steady cash flow, allowing you to earn passive income and build your wealth over time.
Examples include rental real estate and dividend-paying stocks (we will go over 17 different types of income-generating assets below in more detail).
There are several benefits of the best income-generating assets such as:
Passive income: You earn money without actively working, and this can provide financial freedom and the ability to focus on other things in life. You can earn money in your sleep, while on vacation, making dinner, and more.
Diversification: You can diversify your investments so that all of your income is not coming from just one source.
Wealth building: Earning income and generating a steady cash flow can help you build your wealth over time.
Note: Please keep in mind that there is no one-size-fits-all approach when investing in any of these income-producing assets. Everyone is different and while one asset may work great for someone, it may not be the right asset for you. I recommend doing as much research as you can if you are interested in one of the asset investments I talk about below.
Types Of Income Generating Assets
There are many types of income-generating assets. Some may be more traditional such as dividend-paying stocks, and others may be more alternative income-generating assets, such as selling stock photos, and even renting out your driveway.
Today, I will talk about 17 different types of income-generating assets, but this is not a full list of the best income-producing assets. There are many, many more!
The different types of income-generating assets that I will talk about today include:
1. Dividend-paying stocks
One of the best assets to invest in are dividend-paying stocks.
Dividends are simply a payment in cash or stock that public companies distribute to their shareholders.
The amount of a dividend is determined by a company’s board of directors, and they are given as a way to reward those who have stock in their company. Both private and public companies pay dividends, but not all companies pay dividends.
How do dividends work? If you own shares of a dividend-paying stock, then a dividend is paid per share of that stock. So, if you have 10 shares in Company ABC, and they pay $5 in cash dividends each year, then you will get $50 in dividends that year. While dividends can be paid on a monthly, quarterly, or yearly basis, they are most commonly paid out quarterly — so, four times a year. In this example, the $5 in cash dividends the company pays each year will most likely be distributed as $1.25 per quarter for each share of stock.
The most common type of dividends are cash dividends. Shareholders may choose to get this deposited right into their brokerage account. Stock dividends are another common type of dividend. In this case, shareholders get extra shares of stock instead of cash.
Both cash dividends and stock dividends are great income-generating assets that will earn more money for you.
As a shareholder, you can earn income when companies distribute profits to their shareholders. Look for stocks with a history of consistent dividend payouts and a high dividend yield. Keep in mind that dividend stocks are still subject to market fluctuations, and just because a company has paid a dividend in the past does not mean that they always will in the future.
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2. High-yield savings accounts and CDs
High-yield savings accounts and CDs are a great way to grow your savings, but most people have their money in accounts with low rates. Unfortunately, that means many of you are losing out on some easy money.
Savings accounts at brick-and-mortar banks are known for having really low interest rates. That’s because they have a much higher overhead — paying for the building, paying the tellers to help you in person at the bank, etc.
High-yield savings accounts offer an easy option for earning interest on your cash. Online banks often offer higher interest rates than traditional banks. As of the writing of this blog post, you can easily find high-yield savings accounts that can earn you above 4.00%.
Certificates of Deposit (CDs), another form of income-generating assets, are FDIC insured and provide a guaranteed interest rate over a specific term. Remember that access to your money is limited during the term of the CD. You will agree upon the term before putting your money in the CD. The terms typically vary in length from around 3 months to 5 years.
Money market accounts are also offered by banks and often with a higher yield than other types of savings accounts.
3. Real estate
Real estate is one of the most common income-generating assets that people think of.
Investing in rental properties is a popular way to generate steady cash flow. You can earn rental income from tenants, and properties typically appreciate in value over time.
Location and property management are important factors that can impact your return on investment.
By investing in real estate, you may be investing in residential properties, commercial real estate, short-term rentals, REITs, and more.
Recommended reading: How This Woman In Her 30s Owns 7 Rental Homes
4. Real estate investment trusts (REITs)
An REIT is a company that owns and manages income-producing real estate. They then sell shares to investors like stock.
By investing in REITs, you can make money in the real estate market without actually owning real estate.
So, if you don’t want to be a landlord, then this may be something for you to look into. This makes it much more passive than actually owning real estate and having to manage it.
You can even diversify your income stream with REITs by investing in different property types, such as residential homes, commercial office space, industrial, and retail store properties.
5. Bonds
Bonds are fixed-income investments that are issued by governments and companies. If you own a bond, you receive interest payments from borrowers on a regular basis.
An easy way to explain this is: When you buy a bond, you are giving someone a loan and they are agreeing to pay you back with interest.
Bonds with higher credit ratings are generally a safer investment but may offer lower interest rates.
6. Mutual funds
Mutual funds gather funds from investors to invest in stocks, bonds, or other securities. Basically, the funds are pooled together and there’s a fund manager who chooses the best investments.
Income-generating assets like this have multiple types of mutual funds available for multiple types of investors. Some of these fund types include bond funds, stock funds, balanced funds, and index funds.
Mutual funds typically have higher fees because they have fund managers who are actively trying to beat the market.
With a mutual fund, you get diversification because the fund manager mixes the assets in it.
7. Index funds and exchange-traded funds (ETFs)
ETFs and index funds are popular options for those who are looking to diversify their portfolio of income-generating assets.
This is because index funds and ETFs track a specific market index and invest in a wide range of stocks or other assets, instead of picking and choosing stocks in an attempt to beat the market. This is what makes them different from mutual funds.
They often have lower fees and higher diversification compared to actively managed funds.
8. Annuities
Annuities are long-term investments offered by insurance companies that give you a guaranteed income stream to build wealth. In exchange for a lump-sum payment or periodic contributions (such as monthly or annually), you’ll receive steady payments in the future.
The way it works is you pay premiums into the annuity for a set amount of time. Later, you stop paying premiums, and the annuity starts sending regular payments to you. Some are even set up to pay you back with a lump sum.
Annuities can be fixed or variable. A fixed annuity offers a guaranteed payment amount — which means a predictable income for you. As for a variable annuity, the payment amount does vary, depending on how the market is doing.
9. Websites and blogs
Starting a website can generate income through the money-making assets of advertising, affiliate marketing, or the sale of products and services.
Since I started Making Sense of Cents, I have earned over $5,000,000 from my blog through affiliate marketing, sponsored partnerships, display advertising, and online courses. These income-generating assets make sense for building wealth.
Blogging allows me to travel as much as I want, have a flexible schedule — and I earn a great income doing it.
Now, it’s not entirely passive, but I do earn semi-passive income from my blog.
You can learn how to start a blog in my How To Start a Blog FREE Course.
Here’s a quick outline of what you will learn:
Day 1: Why you should start a blog
Day 2: How to decide what to write about (your blog niche!)
Day 3: How to create your blog (in this lesson, you will learn how to start a blog on WordPress)
Day 4: The different ways to make money with your blog
Day 5: My advice for making passive income with your blog
Day 6: How to get pageviews
Day 7: Other blogging tips to help you see success
Recommended reading: The 25 Most-Asked Blogging Questions To Get You Started Today
10. Royalties and intellectual property
Intellectual property, such as patents, copyrights, and trademarks, can generate income through licensing fees or royalties. This particular option is good for creative professionals, such as authors, musicians, and inventors, who are looking for income-generating assets.
Royalties are a way to earn income from your creative work or intellectual property. By granting others permission to use or distribute your intellectual property, you can receive ongoing payments known as royalties.
Whether you’re a musician, author, inventor, or artist, royalties offer a passive income stream as your creations continue to generate revenue over time.
Royalties can be paid out periodically or as a lump sum on these passive income assets, depending on your agreement with the licensee.
11. Stock photos
If you have a talent for photography, you can monetize your skills by selling stock photos on platforms such as Shutterstock or Adobe Stock. The more high-quality images you upload, the more potential passive income you can generate.
With stock photography, you simply upload photos that you have taken to a platform such as DepositPhotos, turning your pictures into income-generating assets. Then, you will receive a commission whenever someone buys one of your stock photos.
Stock photos are used for all sorts of reasons by websites, companies, blogs, and more. Businesses need stock photos because they are not usually in the business of taking photos of everything that they need. Instead, they can use stock photos to make their content, website, or business more visually appealing.
Some examples of stock photography include pictures of:
Travel, vacations, landmarks, outdoor adventures
Family members, such as parents, children, family gatherings
Food and drink
Cars, boats, RVs
Businesses, pictures of people in meetings, in an office.
Sports, professional events
Animals, such as household pets or wildlife
The photo possibilities are almost endless for this type of income-generating asset.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
12. Crowdfunding and peer-to-peer lending
Crowdfunding platforms enable you to invest in real estate deals with a smaller amount of money than buying real estate up front, giving you a passive income through rental income or even a property increasing in value.
Peer-to-peer lending platforms allow you to lend money directly to borrowers. Typically you can earn higher returns than traditional savings accounts, though there’s always the risk of a borrower not paying you back.
Both of these types of assets — crowdfunding and peer-to-peer lending — use technology to connect investors with those looking for funding.
13. Renting out storage space
If you own unused land or unused space in your home, renting it out for storage can be a simple way to generate passive income.
You can offer storage solutions for vehicles or boats. If you have a smaller space, then offer it to store personal belongings. You can rent out your driveway, closet, basement, attic, and more. You can even rent out a shelf.
A website where you can list your storage space is Neighbor. You can earn $100 to $400+ each month on this platform. This depends on the demand in your area and the type of income-generating assets you are renting out. And, you can choose who, what, and when — who to rent to, what things are stored, and when it will happen.
You can learn more at Neighbor Review: Make Money Renting Your Storage Space.
14. Short-term rentals
Short-term rentals can be a lucrative income-generating asset if you own properties in popular tourist destinations or business hubs.
Websites like Airbnb provide a platform to rent out your property to travelers for short periods, potentially generating higher returns than traditional long-term leases.
Furnished Finder is another website for short-term rentals. This is a way to connect with travel nurses in need of short-term housing.
Keep in mind that rental income can be affected by local regulations, potential vacancies, or seasonal fluctuations.
15. Car rentals
Car rental platforms like Turo allow you to rent out your car when you’re not using it. Assets that generate cash flow include your own wheels, and that means no significant initial investment besides the cost of the car you already own.
Be mindful of risks such as wear and tear, insurance, and potential damage caused by renters.
It’s an affordable alternative to traditional rental car companies for customers, and it’s a good way to make money if you’re already working from home and don’t need your car, or are a two-car household.
Turo is one of a few different places to rent out your car, turning your vehicle into one of your income-generating assets. Your car is covered by Turo with up to a $1 million insurance policy. You can also pick the dates for when your car is available and set your rates.
Turo says you can earn an average of $706 per month by listing your car on their site.
16. RV rentals
Similarly to car rentals, RV rentals can provide additional income by renting out your recreational vehicle when you’re not using it. Your RV could easily become one of your income-generating assets.
You may be able to earn $100 to $300 a day, or even more, by renting out your RV on RVShare.
If you have an RV that is just sitting there and not being used, then you may be able to earn an income with it by renting it out to others who are interested in RVing. Cash flow-generating assets like RVs are a win-win for both you and the renter who wants to experience life in a recreational vehicle.
You can learn more at How To Make Extra Money By Renting Out Your RV.
17. Vending machines
With a vending machine business, you can generate income by selling a variety of products, from food to fishing supplies, beauty products to baby items, and more.
You may be able to earn $1,000+ a month by running a vending machine business. That’s enough reason to take a closer look at income-producing assets like this.
You can learn more at How To Start A Vending Machine Business – How I Make $7,000 Monthly.
Questions about income generating assets
Here are common questions that you may have about income-generating assets:
How do I start passive income from nothing?
Starting passive income from nothing requires creativity and resourcefulness. You can begin by identifying skills you possess or interests that can be turned into income-generating opportunities.
What are the assets that generate income?
The assets I talked about above include:
Dividend-paying stocks and stock market investing
High-yield savings accounts and CDs
Real estate
Bonds
Mutual funds
Index funds and exchange-traded funds
Annuities
Websites and online businesses
Royalties and intellectual property
Stock photos
Crowdfunding and peer-to-peer lending
Renting out your storage space
Car rentals
RV rentals
Vending machines
How do I start buying income generating assets?
There are traditional investments or more creative options. Do as much research as you can before deciding which option fits you best.
What are good assets to buy?
After deciding if you want to purchase traditional investments or more creative options, choose an asset that you can afford and best fits your lifestyle.
What are the best assets to buy for beginners?
For beginners seeking income-generating assets, you may want to look into:
Dividend-paying stocks for your investment portfolio
Crowdfunded real estate investing: Platforms like Fundrise allow smaller investments with lower risk exposure.
ETFs and index funds: They provide diversification and passive income through dividends.
What is income generating real estate?
Income-generating real estate refers to properties that produce regular rental income, such as apartments, commercial properties, or short-term vacation rentals.
How do I start passive income in real estate?
There are a few ways that you can earn passive income from real estate, including:
Buying a property, such as an apartment building or duplex, and renting it out to tenants
Using real estate crowdfunding platforms
Investing in REITs
How to make passive income with real estate without owning property?
You don’t need to actually own property in order to make money with real estate. Instead, you can earn passive income from real estate by investing in REITs and using real estate crowdfunding platforms.
This is an option for those who want to be diversified with their income-generating assets but don’t want to spend all of their money or time on a single piece of real estate.
How to make $1,000 a day in passive income?
Making $1,000 a day in passive income with assets that produce income will not be easy. If it were easy, then everyone would be doing it, after all.
Making $1,000 a day in passive income may require a large amount of money up front, diversifying into different assets mentioned above, and lots of patience from you because it will take time to make that kind of money.
You may want to start off by focusing on building multiple income streams and reinvesting your profits as you earn them.
What to think about before investing in income producing assets?
There are many different things to think about when it comes to income-generating assets. You want to find the best assets to invest your money in that will also be the best fit for you.
Remember, as I said at the beginning of this article, not everything will be applicable to everyone. Everyone is different! You may prefer to create a stock photo portfolio and hate real estate, whereas someone else may really enjoy being a real estate investor — or it may even be the other way around.
Here are some of my tips if you are interested in income-generating assets:
Do your research and talk to experts —I recommend researching as much as you can on the asset you are interested in. And, if you still have questions, don’t be afraid to talk to an expert.
Diversify — One of the important parts of building a successful income-generating portfolio is finding ways to be diversified.
Think about the risks —When making money, there’s usually some sort of risk. I recommend evaluating the risks and seeing what you are comfortable with.
What are the best books on income generating assets?
Some highly recommended books on income-generating assets include:
The Simple Path to Wealth by JL Collins
The Millionaire Real Estate Investor by Gary Keller
The Little Book of Common Sense Investing by John C. Bogle
Income Generating Assets — Summary
I hope you enjoyed this article on the best income-generating assets. As you learned, there are many different types of assets that you can invest in so that you can earn an income.
The best income-producing assets, if they’re right for you, can truly change your life.
With these assets, you can build wealth through a reliable passive income, giving you peace of mind and freedom to live life on your own terms.
Are you looking to build income-generating assets? What are your favorite ways?
Lately, I probably haven’t been winning many friends with my somewhat pessimistic view on the real estate market.
A couple weeks back, I warned that affordability was set to take a major blow, as a result of higher home loan interest rates and surging home prices.
And just last week, I cautioned readers that the housing market might be cooling, at least in some parts of the country.
Interest Still High, Quality Perhaps Not
The issue I see materializing is a lack of qualified buyers, not necessarily a lack of interest from prospective home buyers.
In other words, properties that are listed at seemingly astronomical prices will continue to receive bids, but if the buyers aren’t actually able to obtain financing at those sky-high prices, it all means nothing.
There are a few different issues at hand. For one, there is the prospective buyer who got pre-qualified to buy a home two months ago, when both interest rates and home prices were significantly lower.
For this individual, they may find that they can no longer actually afford what they thought they could, once their lender says their mortgage rate is no longer 3.5%.
This is especially true for those who were just squeaking by in the affordability department, as many often are.
It’s simple math really. If a borrower’s DTI ratio is now too high, the lender won’t be able to offer them a loan. And with rates and prices higher, there’s no easy way around a higher monthly housing payment.
That is, unless you buy down your rate, or bring more money in at closing to reduce your loan amount.
[Watch Out for the Adjustable-Rate Mortgage Pitch!]
Down Payment Dilemmas
Unfortunately, that brings us to another issue. Most homeowners probably don’t have a surplus amount of cash to put down on a home, especially seeing that prices have risen dramatically nationwide.
For example, cash set aside for a 20% down payment may only go as far as 10% nowadays, or even less, based on markedly higher listing prices.
This creates an issue when making a big offer for several reasons. For one, it means you’ll need to find a lender willing to offer a loan with a LTV ratio greater than 80%, or secondary financing to arrange a combo loan. There’s also mortgage insurance to contend with.
In any case, financing can get chancy if the loan is no longer straight-up vanilla.
Secondly, those who are already putting down less than 20% will have few places to turn if (and when) the appraisal comes in low.
Let’s face it – some of these properties are listed for way too much these days, and without supporting comparable sales, lenders won’t be able to assign sufficient appraised values. So when the properties don’t appraise, these offers will fall through.
For the market to hold up, it will need sustained interest from qualified buyers, not just any old buyer. I’m talking a buyer with plenty of assets and income who can adapt when things go awry.
This will be especially important as investor interest wanes.
The alternative, of course, is looser underwriting guidelines, creative financing, inflated appraisals, and another housing crisis.
Building your dream home in Texas is an exciting journey, but it comes with its unique set of considerations, shaped by the state’s diverse landscapes and dynamic climate. In this Redfin article, seasoned Texas builders offer invaluable tips for both native Texans and newcomers. These insights will help you navigate the Lone Star State’s home construction landscape.
Essential pre-build tips for your Texas home
1. Figure out your budget and financing before getting started
Managing your finances is a critical aspect of building a house in Texas. Before starting construction, establish a realistic budget that includes all aspects of the project, from land acquisition to finishing touches.
Building a spacious, energy-efficient home in the Dallas area may cost between $200 to $300 per square foot, depending on various factors. Research the current costs of materials and labor specific to that region to create an accurate budget. Consult with local banks or financial institutions to explore financing options, such as construction loans, which can provide you with the necessary funds to complete your project without draining your savings.
Keep in mind that unexpected expenses can arise during construction, so having a financial buffer of at least 10% of your budget is advisable to ensure your project stays on track.
2. Create a realistic construction timeline
Texas’ weather can be unpredictable, which may impact your construction timeline. Work closely with your builder to create a realistic project schedule that takes into account potential weather delays.
For instance, if you’re building a home in San Antonio, where hot summers and occasional heavy rainstorms are common, your construction timeline should factor in weather-related disruptions. Effective project management is essential to keep the construction process on track.
3. Make sure you understand Texas building codes and regulations
Before embarking on your home construction project, it’s essential to familiarize yourself with Texas’ building codes and regulations. These codes can vary from one municipality to another, so it’s crucial to research the specific requirements in your area.
For example, if you’re planning to build a home in Austin, you should be aware of the city’s unique land codes and permitting processes. Multiple layers of review and inspections from various city departments are common in Austin. You can typically find information about local building codes on your local government’s website or by contacting the relevant permitting authorities.
4. Thoroughly research contractors and builders before selecting one
“Texas is known for its flexible contractor laws”, shares contractor review site Bad Texas Contractors. “Unlike many states, it does not require general contractors to be licensed. To safeguard your project, thoroughly research your contractor. Seek references and word-of-mouth recommendations from local homeowners. Visit ongoing construction sites to identify reputable builders. Ensure that the contractor’s claims are verified and that they have a solid track record.”
5. Make sure your builder has local experience
Local home builder Carty Custom Builders, LLC shares, “Building in Austin, TX, requires expertise due to the city’s complex land codes and permitting processes. Engage a builder experienced in Austin’s unique requirements, such as multiple layers of review and inspections from various city departments. Navigating these hurdles is crucial for a positive home-building experience in the city.”
6. Verify builder’s associations and certifications
According to local realtors DFWMoves, “Texas may not require general contractors to be licensed, but reputable builders often belong to the Texas Association of Home Builders or local affiliates. Look for builders with certifications like Graduate Master Builder from recognized industry associations. Request a list of all homebuyer clients from the past three years for a comprehensive view of the builder’s track record.”
7. Choose your location carefully
“Picking the right location and homesite is paramount when building in Texas,” says Republic Grand Ranch, a land company today offering newly developed acreage for sale near Houston. “Opt for larger lots, ideal for single-story ranch-style homes that are popular in the region. Ensure the site is elevated and not prone to flooding or other weather-related issues. Maintain natural tree coverage for shade and privacy.”
8. Consider offsite construction for your Texas home
“Offsite construction is an ideal solution for building homes in Texas,” states home builders Champion Homes. “Constructing houses in a controlled factory environment shields materials and labor from extreme weather conditions. Select materials suitable for the region, such as engineered wood siding, to withstand Texas’ harsh heat and sunlight.”
Tips for the construction and design phase of your Texas home
9. Use finger-jointed studs for strength and stability
“Texas experiences significant humidity variations between seasons,” informs local family owned business Brookson Builders. “Finger-jointed studs, engineered for strength and stability, combat twisting and bowing caused by humidity changes. Using these studs minimizes common issues like bowed walls or drywall blemishes in Texas homes.”
10. Blend functionality with local charm
“In Texas, it’s crucial to merge functionality with the region’s distinct charm when constructing a custom luxury home,” recommends custom home builder CRV Homes. “Tailor your design to the site’s specific topography and climate. Use locally sourced materials like Texas limestone and native plants for landscaping. Incorporate features like wide eaves, verandas, and energy-efficient windows to combat the intense Texan sunshine and reduce energy consumption.”
11. Don’t overlook landscaping
Texas’ outdoor spaces are an integral part of the lifestyle, so don’t overlook the importance of landscaping and outdoor design. Work with a landscape architect to create outdoor living areas that complement your home and the local environment. Native plants, irrigation systems, and outdoor lighting can enhance the beauty and functionality of your property. Additionally, consider factors like outdoor kitchens, patios, and pool installations if they align with your lifestyle and budget.
12.Incorporate energy-efficient features
Texas’ climate can be harsh, with scorching summers and high-energy demands. Consider incorporating energy-efficient and sustainable features into your home’s design. This includes options like solar panels, high-efficiency HVAC systems, and smart home technologies. Investing in energy-efficient solutions not only reduces your environmental footprint but also saves you money on long-term utility bills.
13. Secure homeowners insurance home insurance
Texas is prone to extreme weather events, including hurricanes, floods, and tornadoes. It’s crucial to consider the insurance aspects of your new home. Research and consult with insurance providers in Texas to understand the types of coverage you may need, such as windstorm insurance, flood insurance, and homeowners’ insurance. Ensuring that you have appropriate coverage can provide peace of mind and financial security in the face of unforeseen natural disasters.
Ready to build a home in Texas?
Building a house in Texas is a rewarding venture, but it requires careful planning and collaboration with experienced professionals who understand the intricacies of the state’s construction landscape. By following these insights from Texas builders, you’ll be better prepared to embark on your home construction journey and turn your dream home into a reality.
The Realtor survey was sent out in late July to 55,751 randomly-selected residential Realtors. NAR received 1,919 responses by the mid-August close date of the survey. The homebuyer survey was conducted by Morning Consult in June 2023. Of the 2,201 respondents, 587 were white, 560 were Hispanic/Latino(a), 533 identified as African-American/Black and 521 identified at Asian American or Pacific Islander (AAPI).
In the realtor survey, Millennials were the largest home buyer generation represented. Forty-two percent of agents reported that they were working with Millennials, followed by Gen X at 22%, Baby Boomers at 12%, Gen Z at 8% and Civics (those aged 78 and older) at 1%.
White homebuyers were the largest racial group represented at 58%, followed by Hispanic/Latino(a) at 11%, African-American/Black at 10% and Asian-American at 3%.
Over half of the Realtors (51%) reported they their buyers were first-time buyers. In the buyer survey, 71% of white respondents reported they currently own a home, while 67% of African-American/Black responses said they do not currently own a home. In addition, 89% of Hispanic/Latino(a) buyers, as well as African-American/Black buyers said they will be first-time buyers, compared to just 65% of white respondents.
When broken up by race or ethnicity, white buyers are more likely than other races to report not yet having a purchased a home mainly due to lack of availability in their budget, while Hispanic/Latino(a) buyers are more likely to be hampered mainly by the inability to save a sufficient down payment. AAPI buyers are most likely to be waiting for prices to drop and African-American/Black buyers are most likely to report trouble getting approved for a loan due to credit issues as the main reason they have not bought yet.
Generationally, Gen X (12%) and Baby Boomer (11%) buyers are more likely than other generations to be waiting for prices to drop (only 9% of Gen Z buyers and 6% of Millennial buyers are waiting for prices to drop). However, Baby Boomers are the least likely to be concerned about competing with all-cash buyers, with just 24% listing this as a concern compared to 34%-42% for the other generations.
Exploring finance options
According to the Realtor survey, 77% of their prospective buyers who have applied for a loan, have been approved, while 6% have applied but been denied. Of those who have been denied, 12% report it is due to low credit score and 9% report it was due to insufficient down payments.
Black/African-American buyers who have not been approved for a loan are more likely than other racial or ethnic groups to have been denied due to low credit scores, at 32% versus 17% or less for the other racial and ethnic groups.
Realtors reported that 68% of their buyers were considering a conventional loan, 38% were considering an FHA loan, 8% were considering a VA loan and 7% said their buyers did not need home loan financing. FHA loans more likely to be considered by African-American/Black and Hispanic/Latino(a) buyers than white and AAPI buyers, and white and AAPI buyers were most likely to not need financing, at 8% and 9% respectively, compared to 4% or less for other racial and ethnic groups. Broken down on generational lines, 25% of Baby Boomers report not needing financing, compared with just 8% or less for younger generations.
First time buyers (54%) are more than twice as likely as repeat buyers (22%) to consider an FHA loan. Divided among racial and ethnic groups, African-American/Black buyers (62%) and Hispanic/Latino(a) buyers (57%) are more likely to consider FHA loans than other groups (34% or less). Generationally, younger buyers are more likely to consider FHA loans with 57% of Gen Z buyers reporting they have considered an FHA loan, compared to 11% of Baby Boomers.
Among buyers who were eligible for FHA or VA loans, 20% of realtors said their buyer clients have not considered VA or FHA because they do not want to pay private mortgage insurance (PMI) (21%) or they are worried their offers will be less competitive with these options (19%).
According to the survey, 53% of realtors say that at least one issues is holding their latest buyer back from saving a competitive down payment, with 23% reporting current rent or mortgage payments holding buyers back, 17% reporting credit card balances or payments, 12% reporting student loan debt and 11% citing car loans.
First-time buyers are significantly more likely to struggle with these challenges than repeat buyers, with twice as many first-time buyers reporting that they are struggling with credit card payments (22% vs. 11%), and student loan debt (17% vs 7%). When broken down via race and ethnicity, AAPI (52%) and white buyers (52%) were more likely than African-American/Black buyers (31%) and Hispanic/Latino(a) buyers (36%) to report that nothing was holding them back from saving for a down payment. Along generational lines, younger buyers are more likely to be held back by student loan debt (20% of Gen Z, 15% of Millennials, and 8% or less for older generations), car loans (16% of Gen Z vs. 3% of Baby Boomers) and childcare expenses (12% of Gen Z, compared to 2% of Baby Boomers). Overall, the older the buyer the more likely that none of the above issues are holding them back from saving for a down payment, with 70% of Baby Boomers reporting that none of these issues are holding them back compared to 40% of Gen Z buyers.
Despite their challenges, only 23% of Realtors reported that their buyers dealing with these challenges have applied for down payment assistance programs, while 12% of consumers reported that they were unaware of these programs.
The number one reason, at 30%, Realtors cited as to why their buyers who were aware of down payment assistance programs did not apply was that their income was too high. This was followed by 19% who said their buyers didn’t know enough about the programs and 17% who were worried about the competitiveness of their offers in a multiple bid situation.
First time buyers were three times more likely to have applied for down payment assistance programs than repeat buyers at 30% compared to 10%. Similarly, the younger the buyer, the more likely they are to have applied for a program, with 36% of Gen Z buyers reporting they had applied versus 11% of Baby Boomers.
Among racial groups, AAPI buyers were the least likely to have applied to a down payment assistance program at 13% versus 22%-31% for other groups. In addition, they were the most likely to say they were unaware of the programs at 26% compared to 8%-13% for other racial groups.
Location, Location, Location
When determining the location of their future home, 71% of realtors reported that their buyers were determining the location of their next home base on the location of their job or the job of someone in their household. Of the remaining roughly 30%, 16% said their buyer work fully remote and 14% reported that they buyers are retired. They are typically looking for 30 minutes or less of driving time (consumers reported 25 minutes or less).
Baby Boomer were the most likely to be retired at 61% compared to 2%-9% of other generations, while Gen X buyers were the most likely to work fully remotely at 24% versus 9% to 14% for other generations. Millennials (84%) and Gen Z buyers (86%) are the most likely to determine the future location of their home based on the location of their job (28% to 67% for older generations), and similarly, first-time buyers (83%) are more likely than repeat buyers (57%) to determine location based on the location of their job.
Compared to other racial or ethnic group, Hispanic/Latino(a) buyers were most likely to determine the location of their future home based on the location of their jobs, at 82%, compared to 69% to 74% for other groups. White (16%) and African-American/Black buyers (12%) were the most likely to be retired or not workings (other groups ranged from 7% to 8%).
Nearly half (49%) of Realtors said their buyers have no preference between existing and new construction, however white buyers were significantly more likely than other racial groups to prefer existing homes at 46% compared to 27% to 35% for other groups.
The vast majority of Realtors (89%) said their buyer clients were buying a primary residence, while 6% reported they were buying an investment property and 5% said they were buying a vacation or rental home.
Discrimination remains under reported
Of the Realtors surveyed, 1% of Realtors reported that their buyer experienced discrimination during buying process, while 13% were unsure. Among the 14 Realtors who reported that their buyer experienced discrimination, the most common form of discrimination came in the form of loan products offered by the lender (43%) or that the buyer did not receive a call back from the lender (29%). Realtors who reported that their clients experience discrimination, said the most common reason was race (57%), followed by age (29%), and familial status (21%).
Other common sources of discrimination reported were color, religion and national origin (all at 14% each), as well as sex, disability and sexual orientation (all at 7% each).
Despite experiencing discrimination only 7% of the agents said their clients reported the discrimination to a government agency or legal aid organization.
In the consumer study, roughly one in six prospective buyers reported experiencing discrimination during their home buying process, with more than half of Black, Asian, and Hispanic buyers reporting that this was due to their race or ethnicity. White buyers are equally likely to report discrimination but are more likely than others to say this was based on factors other than race or ethnicity. NAR reported that based on both studies is believes that most of this discrimination goes unreported.
Consumers who experience discrimination reported that this most often manifested in their being steered towards or away from specific neighborhoods and in stricter requirements. Among successful buyers 50% of Hispanic/Latino(a) buyers experienced steering, compared to 29% of white buyers and 12% of African American/Black buyers, while 17% of AAPI buyers, 24% of White buyers and 12% of African American/Black buyers reported stricter requirements.
Northwestern Mutual doubles down on commitment in the fight against childhood cancer, reignites social media #LemonTopChallenge for Childhood Cancer Awareness Month Company announces additional major investments toward cancer research and scholarships and enacts local activations MILWAUKEE, Sept. 14, 2023 /PRNewswire/ — Every day, more than 1,000 children worldwide are diagnosed with childhood cancer. Today Northwestern … [Read more…]
The FHA announced Tuesday it was halting its risk-based pricing structure beginning October 1 in accordance with the new housing bill and raising its upfront mortgage insurance premiums.
Beginning October 1, FHA will charge an upfront premium of 1.75 percent for purchase money mortgages and full-credit qualifying refinances, 1.50 percent for streamline refinances, and 3.00 percent for FHASecure mortgages.
Annual premiums, paid monthly, will range between .50 percent and .55 percent for most loans.
The new fixed structure is up from the 1.5 percent and .50 percent that was being charged in the “one size fits all” approach before the FHA adopted risk-based pricing on July 14.
The risk-based system set premiums anywhere between 1.25 percent and 2.25 percent, with annual premiums up to .55 percent.
It is assumed this system will be back in place come October 1, 2009, when the moratorium outlined in the housing bill expires.
Mortgages with FHA case number assignments falling between July 14 and September 30, 2008 will maintain the risk-based premium structure for the life of the loan.
The elimination of seller-funded down payment assistance tied to FHA loans is also slated for October 1.
FHA Commissioner Brian D. Montgomery recently noted that seller-funded loans led to $4.6 billion in “unanticipated long-term losses,” claiming they went into foreclosure three times more frequently than loans in which borrowers supplied the down payment.