This blog category is for investment property and commercial real estate investment information and news.

Stock Market Volatility Drives Need for Direct Investment in Real Estate

investment in real estate property worcester ma

The stock market rollercoaster of August 2015 has been a big wakeup call for individuals to seek more reliable investments. For many that means direct investment in real estate.

Over just two days of trading in August stocks lost over $2 trillion in value. Some individuals reportedly lost billions. Even gold and oil free fell. Experts warn that this was just a taste of what is likely to come. We’re all told to diversify broadly and look at the very long picture, but that doesn’t work for everyone’s timeline, if virtually all stocks are sinking, and if you pretty much get totally wiped out.

In contrast real estate can offer incredible security. For those seeking growth now the time is ripe to get into real estate too. Even when real estate markets fluctuate, which every type of asset class does, the income can keep flowing. For most this is the most important part. Whether you are intelligently letting passive income pay for your spending and living expenses while young, compounding investment returns by reinvesting yields, or are in retirement, cash flow is king.

The only thing that has held some back in the past is that although they appreciate the safety and return potential of real estate, they haven’t wanted to have to roll up their sleeves and do DIY work or deal with tenants as hands-on landlords. That’s fine, you don’t have to. There are vehicles which can help streamline and automate real estate investing for busy individuals. Just make sure to avoid those with stock like qualities such as publicly traded REITs. Turnkey real estate investments are one option, but so is getting together in small private partnerships or solo investing, and getting a good property management company to handle all of the day to day.

There are many types of real estate to invest in. And you can still diversify between the bastions of safety but low growth like Boston, and faster growing markets on the outskirts like Worcester County. Retail and mixed use properties can be great choices, but multifamily apartment buildings, and portfolios of single family rentals can be less reliant on the performance of the stock market. Everyone needs housing all the time, and rentals continue to grow in demand, and returns.

So how will you decrease your exposure to wild stock market swings, and ensure the income and wealth you need and desire?

How Early Should I Contact A Property Manager For A New Acquisition?

Property Manager

How soon should real estate investors contact a property manager when buying new property in Massachusetts?

Securing a property manager is often one of the last things that real estate investors get around to. If you are on your tenth rental property in close proximity in Mass. you might already have this down to a science. Yet, many who are still starting out, or who are buying their first investment properties in the northeast, or who may be expanding from expensive Boston, to more appetizing deals in Worcester County, MA this can be a critical factor. So do you wait until you’ve bought a property and an issue arises? Or do you get a professional local property management company in place long before you close and take control of the property?

Get the Real Scoop on the Property

Speaking to a local property management expert even before you ink a deal might be a smart move. Sellers will often notoriously oversell the appeal of the property. Sometimes they gloss over repairs, over exaggerate potential value and appreciation, and even misrepresent rents and renter performance. Talking to an independent local pros can help get a truer picture of value, potential income, occupancy rates, and maybe even unveil some property specific challenges or benefits. You might be kicking yourself pretty hard later if you don’t get this input upfront.

Seamless Transition & Optimizing Performance

Having a property management company on the job even before you take over a new rental home, apartment building, or commercial income property can make a huge difference. They can get in, accurately assess the situation, alert teams to upcoming vacancies and start lining up tenants, get crews ready for maintenance, and make sure the transition is smooth for existing tenants. If there is a lapse in management maintenance issues can grow out of control, and then costs money. Then there is the legal side. If heating and power isn’t performing, people get hurt, and there is no buffer, huge legal costs can mount fast. No one wants that.

Picking the Best Property Manager

If MA real estate investors wait until there is an issue to recruit a manager there is little time to make a good choice. A bad manager can make a delicate situation a lot worse. It’s smarter to take a little time to interview and screen different property management options so that you can choose the best in advance.

Real estate Investment Businesses Now Rock Best Success Rates

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According to new data real estate investment businesses are now among the most successful. Between this and new real estate statistics is shaping up to deliver a great windfall in wealth for property investment firms, with great sustainability for the long term.

As technology startups may be cooling, new research compiled by Statistics Brain shows that new real estate businesses are among the most likely to succeed and last. More specifically apartment building operators are ranked as having the 2nd best rate of survival and success after 5 years. So it’s a great time for a real estate startup or to expand real estate investing. The big question is where?

A new MBA reports shows that while commercial mortgage performance has been improving Fannie Mae’ commercial and multifamily property loans saw defaults double in the first three months of 2015. At the same time data compilers DistressedPro and RealtyTrac reveal a sharp rise in new foreclosures and delinquent residential mortgage loans. Some of these may be new defaults, many are probably the last of the legacy of the foreclosure crisis of the early 2000s. This means many potentially discounted properties coming to market, as well as many more individuals and families being poured into the rental market.

On the other end of the market Realtor.com reports a tremendous surge in home search activity. In fact, the listing portal says 35% to 50% more buyers are frequenting its site this year. Realtor.com used these figures along with statistics on those areas which are seeing homes sell the fastest to create a new list of the Hottest US Real Estate Markets in 2015. The Boston, MA region comes in, in the top 6. However, those looking for more value, less competition, and more inventory to choose from may look further west in Mass. to grab the deals they really want on multifamily properties.

In conclusion; the numbers certainly support this as being one of the best time to increase real estate investments in Massachusetts. It’s a great time to incorporate and scale real estate investment activities, especially in the multifamily apartment building sector. The deals are there, and so is the demand for units. Substantial spreads are available for those that act quickly to capitalize on the difference between distressed property sales and the new rising market, and who focus on serving others as they need to liquidate assets, and seeking rental housing.

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Real Estate Trends for Investors to Watch

What were the real estate and finance trends for real estate investors?

Overall capital flow and transaction volume was set new highs, but more significantly will be new, and recurring twists in the market which changes where the value and best returns are. This is likely be especially be seen in northeast markets like Massachusetts.

US Markets Switching Up Positions

While San Francisco, Miami, Austin, and even New York and Boston have bounced back, and are pushing highs, 2015 is likely to see not only the smart money, but many lower level investors and lenders embracing secondary markets in earnest. In Massachusetts this means markets like Worcester could see performance outpacing central Boston.

Foreign Real Estate Investors

While around 80% of global investors said they planned to expand their positions in US real estate, a new DLA Piper State of the Market Report suggests foreign investors will be the most active in the US real estate market in the year ahead. Expect major changes overseas to drive even larger and wealthier investors to America.

Commercial Mortgages

According to CCIM coverage the US is facing a 2 year “tsunami of loans” coming due. On one hand this brings concern to borrowers that took out commercial mortgage loans when underwriting was incredibly lax and LTVs were high. Of $350B in loans coming due, many won’t qualify to refinance, especially unless they can come up with sizable chunks of principal to pay down. On the reverse side of the coin this will create incredible opportunity for value investors to step in with solutions, or acquire Worcester, MA multifamily and retail properties at deep discounts.

Retail Takes the Lead

The PwC Real Estate Investor Survey in the 3rd quarter of 2014 should expectations are that retail will lead the commercial real estate world in 2015 and into 2016.

Condo Hotels Make a Comeback

In November 2014 the CCIM Institute reported that it believes the JOBS act has made condo hotels easier to sell, and together with improving fundamentals is becoming more profitable.

Rising Rents, But…

Rents on retail and multifamily properties are only expected to rise for the foreseeable future. However, some already hot markets could run into affordability issues, and eventually the need for rent controls of some form or another. This makes the case for investing in cheaper secondary and tertiary markets like Worcester even stronger.

Easier Borrowing, Maybe

Relaxed lending is reportedly on its way, facilitated by the government. Many argue borrowing is already significantly easier, though just how much easier it will become in the coming years, will have to be seen as the issue is so political.

Where To Find The Money For Rental Property Repairs & Improvements

Income rental property is in high demand, but where can real estate investors and apartment building owners find the leverage to maximize their portfolios and new opportunities?

Demand for income property, especially multifamily is booming. Billionaire investor, Sam Zell’s predictions that home ownership in the U.S. could drop another 10% to barely over 50% has only added more wood to the fire. This surge has led to a significant jump in new multifamily construction. Yet, savvy property investors are still finding much of the best bargains and returns in renovating existing buildings, and upgrading assets already in their portfolios. This is especially true in well-established regions of the country around strongholds like Boston, MA.

The big question is not should maintenance be tackled fast, or whether the increased cash flow and wealth is in value-add improvements, but how to intelligently leverage capital to make repairs and complete remodels.

Fortunately, there seems to be no shortage of capital eager to get into real estate investors’ hands, even if it isn’t flowing freely from yesterday’s big banks.

It’s virtually impossible to touch on real estate finance today without mentioning crowdfunding. Hard Rock’s recent foray into this form of fundraising for its Palm Springs resort hasn’t just brought crowdfunding mainstream, but established it as one of the preferred financing tools for both sides.

On May 18th, 2014 fund giant Blackstone revealed the sale of five major Boston, MA office buildings for $2.1B. This follows on from $8.9B in office liquidations by Blackstone last year as the largest private equity real estate investor restructures to flow capital through new arms like B2RFinance for rental property owners.

Innovative commercial mortgage lenders like Rental Home Financing are going even further in rolling out aggressive loan products for investors, with some $4B in capital to funnel through to the front lines.

In the case of Rental Home Financing, new loan programs specifically for investors offer refinancing for cash out, as well as expanding portfolios of income investment property. Just hitting the market now are loan options which include Stated Income features and non-resource borrowing for foreign nationals investing in the U.S.

Multifamily apartment building investors seeking distressed and under-market opportunities can also take their pick from mini-perm loans which provide funding for acquisitions on underperforming properties until they can be turned around.

In summary, access to working capital shouldn’t be a stumbling block for rental property investors looking to maximize property value and cash flow in 2017. It’s just a matter of connecting with the right lenders.

For Massachusetts Real Estate Investors Going Green Pays

Going Green helping investments

Going green is no longer for tree huggers. For commercial real estate investors in MA, it is increasingly clear that green properties and management means more green in the bank too…

According to Globe St. both Freddie Mac and Fannie Mae are working on marketing green-taqged or rated multifamily securities, and may have already been. Other investment firms like Skanska are also launching ‘green corporate bonds’ in the hundreds of millions of dollars range.

While it would be great if every firm, individual and commercial real estate investor was compelled to go green out of a desire to improve the environment, this isn’t a pre-requisite for engaging in more eco-friendly and sustainable investments.

Some of the many benefits of going green in multifamily, office and retail real estate include:

  • Adding value and increasing salability of buildings
  • Improving the ability to raise additional capital and attract partners
  • Attracting premium tenants and increasing the premium on rents
  • Creating healthier spaces which reduce liability and boost productivity
  • Keeping ahead of regulations which would otherwise require expensive tune ups
  • Potential to receive grants and other monetary incentives from federal and local gov.
  • Reduce ongoing costs to drive up income spreads and net returns

Fortunately there are many ways for today’s MA commercial real estate investors and landlords to go greener. In fact, virtually every step and process can be made greener, dramatically decreasing the impact on the environment, and improving the health of the bottom line at the same time.

Many investors are embracing new building due to low rates, low land prices and anticipated increases. These parties clearly have a clean slate when it comes to developing, with more and more working towards constructing buildings with neutral carbon footprints. Some smaller projects are going as far as engineering their own energy sources and at least generating and purifying some of their own clean water in order to reduce expenses and to become less reliant on government.

It may be harder to ‘buy green’ as an investor, especially in areas with a high density of existing older buildings. However, in turn these areas also offer office, retail and multifamily apartment building investors significant opportunities to renovate green and add a lot of value in equity and income potential.

Even the vendors commercial real estate investors work with and their own internal operations down to methods of rent collection and communication can simultaneously make a difference for the environment and the bottom line.

It’s become harder and harder to find excuses to go green.

Massachusetts Real Estate Investing Key to #Fightfor15 Solution

Massachusetts real estate remains a key cornerstone in #Fightfor15 minimum wage debate. And those who invest in MA property will play a pivotal role in finding a solution, while ensuring they never even have to work for as little as $15 an hour again.

It’s not easy getting by in Boston on minimum wage today. There is no denying that. Even at $50 an hour you’ll barely be able to afford to rent the median priced rental. Getting by on $9 an hour is a challenge to say the least. That gets dramatically harder as a guy trying to financially support multiple homes, or a single mom having to come up with cash for childcare to be able to get out to work. Even a two income earning household at $10 an hour each doesn’t bring in enough. And rents aren’t likely to get any cheaper in Boston any day soon.

Yes, there are many arguments about businesses not being able to support as many jobs, at a higher minimum wage. The ignorant and those that don’t have time for compassion can simply put down the $9 an hour worker to being lazy, unwilling to get educated, or lacking innovative thinking. There is nothing lazy about working 10 to 12 hours on your feet in a kitchen which can top 100 degrees, while being treated like dirt all day.

So we have an income issue and a housing price issue.

Real estate just happens to be the apex where these two meet. Real estate investing can also be the best solution for those earning surplus amounts each month and that need to invest capital. And for those needing to boost their earnings.

Those with capital to invest in Massachusetts real estate, will find it some of the most profitable income property in the world. Even to the extent that they can choose to offer more affordable, safer, and healthier rental housing. For some investors, the rewards of this will far exceed the monetary returns. Investors and landlords can even choose to pay people that work for them a little more. You don’t have to go as far as the CEO of Gravity Payments and give everyone a minimum of $70,000. But could there potentially be any perks of paying a little more in the long run?

Real estate investing can be a great solutions for those desperate to break the cycle that minimum wage creates too. Investing in real estate can dramatically boost earnings without having to go back to school and do four years to get a degree. You may still have to put in some hours, find a way to learn, and commute to other areas like Worcester, MA for affordable deals and opportunities. But is sure beats traveling two hours to work at Burger King for $9 an hour, before taxes, only to still end up short of diapers and baby formula for your two newborns. For those not ready to make the leap all at once; perhaps there are real estate industry jobs to be found to earn while you learn. Just don’t forget to help bring others up once you are on top.

For MA real estate investors coming from both of these angles property management will be key to success. Who is going to manage your income properties?

Trends Driving Direct Real Estate Investment Outside Boston

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While Massachusetts remains one of the world’s favorite property markets and commerce hubs, multiple trends are working together to drive direct investment in real estate outside of Boston.

Jobs Chasing Talent

According to the PWC Emerging Trends in Real Estate global report one of the major forces in the market is businesses chasing workers. Unfortunately; while Boston is a hot city that many talented workers would love to live and work in, it is simply becoming unaffordable. Recent coverage of America’s affordable housing crisis via the Mesocore blog shows that the salary needed to afford the median priced home in Boston has now topped $80,000. According to Zillow renting in Boston isn’t any cheaper either. In fact; a new Zillow infographic shows the minimum hourly wage needed to rent the median priced unit in Boston hitting $50 an hour. That’s twice the wage of Dallas and Las Vegas, and more than Seattle, New York, and Los Angeles. That makes it difficult for companies to hire the great talent they need, and stay competitive. More will move further out to places like Worcester, MA.

Oil & REITs

A new article from crowdfunding platform KC iFund, along with coverage from Forbes, and data from Google Finance shows publicly traded REITs taking a hit in the first quarter of 2015, while analysts fear too much exposure to oil, and current soft oil prices and loss of oil jobs will further hurt REIT performance. Unfortunately those investing through these vehicles have no control, and often little knowledge over where their funds are being invested. Those investors that want the best performing properties in their portfolios and want control over their investment performance are going to have to invest directly, or at least more selectively through smaller partnerships.

VCs Scare Tech Investors

Mark Cuban’s latest rant warning of an impending tech implosion that could be even worse than the last is sure to have sown some seeds of uncertainty. And if the past several bubbles have taught us anything it is that it is a quick and slippery slope once fear sets hold. This is only likely to add more dollars to the billions of dollars in capital pegged for investment in US property in 2015.

Increased Appetite for Expansion

Whether it is increased tolerance of risk in exchange for better yields and growth, or being tired of being too conservative investors want to expand their holdings in 2015. And real estate in this region, outside of Boston is very appealing to accomplish this without taking on unnecessary risk.

5 Types of Niche Housing for Massachusetts Property Investors to Capitalize On

Massachusetts Property Investors

As the Massachusetts property market grows and evolves real estate investors are finding premiums in focusing on developing and leasing niche multifamily housing projects. So what are some of these niches those looking for new acquisitions might find helps them best capitalize on the market

While it seems the only direction for rents and yields is up, there is still a substantial difference in the premiums and spreads achieved. A well-positioned property with a clearly identifiable niche certainly has its advantages in achieving leading yields. With this in mind; here are 5 options to consider…

1. Student Housing

Student housing has begun attracting smart money and investors that see the high available yields, opportunities for elevating this niche with luxury living and amenities, and the advantages of establishing branding earlier in the housing lifecycle. Providing landlords take advantage of professional property management to handle these assets and the sometimes more intensive daily management and maintenance requirements the net income can be far superior to other options.

2. Millennials

While many in the real estate industry are still debating and trying to figure out what it is that millennials really want from housing (versus what they are being told they should want), there are ways to cater to them with niche housing. Zillow predicts that 2015 is ripe for a housing boom as millennials grow into become first time home buyers. However, while they might be old enough, be forming families, and be experiencing rising incomes not all are ready to make the commitment, or can obtain mortgages. Cater to millennials’ needs in multifamily rentals and investors can find great returns, while grooming them to move up to their single family home investments, and graduate into investing with them.

3. Live-Work

It may be another seven years before live-work spaces are blazing hot with developers and amateur real estate investors again. However, this makes now the perfect time for forward thinking investors to establish themselves in this nice and see equity bloom, while income provides yields and steady cash flow. Both Gen. X and Y love this set up, and expect Generation Z to embrace this as the norm.

4. Senior Housing

Senior housing can take on many forms. However, while some might skip apartment renting, student housing, or live-work arrangements; the majority of individuals will end up in some form of senior housing at some point. And we are only living longer. Incredible spreads are being seen in providing luxury assisted living, while there is no question about the huge and urgent need for affordable assisted living too.

5. Multigenerational Housing

Many builders and MA property investors have already begun to neglect this extremely notable trend that emerged out of the crises. Considering the data from NAR, and current fundamentals behind the media fanfare perhaps more should be focusing on this niche. Multigenerational housing may be most obvious in terms of family homes being held on to, but with foreclosures still in the works, and multiple generations of families barred from buying and qualifying for mortgages rental homes which can accommodate them comfortably could be an extremely profitable niche. When you can fit 3 or more generations of even part-time income earners, and even couples into a unit there is great spread and premium potential as well as security. Those willing to brave going against the trend in micro-lofts and apartments might find this a great move.

Summary

There are many options for serious MA investors to boosting yields and property value even further if they choose a good niche. If you aren’t sure which is the best direction for your portfolio, or area, talk to a local property management expert that can lend you’re their expertise and data insights.

Massachusetts Income Property Investing: Have Rocketing Rents Hit the Roof?

US rent receipts rose by tens of billions of dollars over the last 12 months. So have rental rates in Mass. finally hit the ceiling? What do recent trends mean for MA investors and renters?

According to the latest data from Zillow gross rents have been soaring by billions thanks to falling homeownership rates, the fallout of the foreclosure crisis, and skyrocketing rental rates. The National Association of Realtors and other analysts anticipate rents will only continue to rise, even though Zillow proclaims renting is half as affordable as buying and owning a home today.

According to the Zillow Rent Index in order to afford the median priced rental in Boston tenants would need to make a minimum hourly wage of $50. While that might seem outrageous to most it is still better than the $103 minimum wage required to rent in Menlo Park, CA, or $234 on Miami’s Fisher Island. However, Boston’s wages needed to rent are markedly higher than in Chicago, Las Vegas, and even New York City.

Of course, if you make $50 an hour, you probably aren’t going to be too excited about renting one of the most modest apartments in the city, if they would even work for your transport and lifestyle needs. That means you may be plowing far in excess of 50% of your monthly income for a rental you’d actually be willing to live in, if you can find a landlord that will approve such high ratios.

Additional government intervention could be in the works. American cities are in the fight of their lives. Not just for financial survival, but to remain competitive. A huge part of this is being able to attract and retain talent, and keeping it affordable enough for businesses to keep the best workers, as well as keeping affordable workers for the public sector. A lack of affordable housing can be a hindrance to these efforts. Local governments may have to step in and curb rents in the hottest urban hubs.

For some real estate investors this may create great opportunities to collaborate and receive various breaks for providing affordable housing within reach of dense urban areas and business districts.

Still, the overriding trend demands that both renters and investors need to look outwards for affordable rents, capital growth, yield spreads, and security. If rents cap out it also caps income property values.

For many in Mass., and the Boston area this means moving out to Worcester. If you aren’t sure how local rents impact your investment goals consider reaching out to a reputable local property management company that can clue you in.