When you are out of budget or you simply can’t afford to buy a new property or you don’t have enough finances to start a business, you think of financial institutions immediately. Finding real estate finance is not difficult since many of them are offering and assisting financial help to individuals and as well as corporations. With all the different types of loan and financing products made available today, you should be aware and understand the drawbacks and benefits of each. In this way, you can choose the right and most appropriate financing institutions that best suit you.
Given today’s credit status quo, the definition of good deal is much important and has changed the perspective of finance from a lender and borrower’s view and it’s not only understanding the types of financing essential, it should be which type is most prevailing and affordable. There are different real estate financing options available that you can go with, below are some of them that can be interesting for you:
- Traditional financing – generally, the lender of this type of financing is the bank or government institution. This type of financing is very particular and strict and the requirement to qualify for such loan is based on the client’s existing finance situation and the capacity to pay that includes credit score, assets, income and debt. The benefits for this loan are that it has low interest rate, low loan cost and long duration of loan. The only drawback is that if you have bad credit score and your current financial score is low, you will be disqualified to this loan.
- Equity investment – it is also called a partner investment where the lender lends you 100% of total cash but also the borrower will work a 100% and the lender will just wait and do nothing. At the end of the investment, the financier and the pledger will divided the profit to 50/50 sharing. In this scenario, often the lender is a friend or relatives. There’s no need of any paper works and the lender will upfront all the money. The equity partner is privilege of having same profit or much higher even he or she is not present and do none of any work.
- Portfolio or investor lending – in this type of real estate finance, the bank or any financial institution will offer their own dough because some portfolio lender also has investment creditors. The team is expert in assessing the borrower’s capacity even if he defaults and he has no property to forfeit with as long as the borrower has good credit, has cash reserves that will compensate all his debt.
The above-mentioned details are just the basic types of real estate finance. Learning more about them can be done through research over the web.
Every individual wants to own a real estate where they can begin their lives without any disturbance from any parties. Most people identify real estate as a privately owned property. By definition, real estate is a property that consists of land, building and its natural resources. Generally, real estate is the physical property and the particular ownership and rights of that person’s property and anything can be done with it is called estate. Since estate encompasses the possession of real properties, there are different types of acquisition involving with it:
- Adverse possession – it is a technique of procuring title to real property by possession for a constitutional period under certain circumstances. Specific form of this possession is the squatter’s rights.
- Gift – it is the voluntary handover or transfer of property from the donor to the donee without full prized consideration. The donor must intentionally give the gift to the donee and the donee must receive the gift in order that the gift must be legally effective. Gift can be lifetime, deathbed, outright, onerous and remunerative gift.
- Deed – it is generally associated with transferring property title. It is also any legitimate mechanism in writing which affirms an interest, property and signed, delivered, attested and in some authority sealed.
- Right of conquest – the right was customarily acknowledged because the conquering force is much stronger than any legally enabled governance which it may have substituted, so the rights of conquest legitimises the victor towards that end.
- Discovery doctrine – during the age of discovery, colonial powers laid claim to the lands that belong to the sovereign indigenous nation. This doctrine was used to support pronouncements nullifying local possession of the land in favor of colonial government.
- Accession – it has variety of definitions depending on how it is used which include property law, commercial law and common law. In property law, it’s the process of obtaining property that includes accumulation of value through labor or new materials. Commercial law, the identity of the original goods is not lost even there are goods that are physically united with another goods. Lastly, common law is when the person who increases value to the owner’s particular property is a trespasser; the owner retains the title and may seek exchange damages for the value of the original resources plus additional damages.
- Treasure love – treasures seem old enough such as coin, gold, plate or hidden treasure and it is presumed that the owner is already dead and the heirs are undiscoverable; then the treasure is given to the person who finds it.
There are some types of acquisition mentioned above that are not applicable today for some reasons.
A real estate property owner can actually offer a loan to the buyer of the property; this is technically termed as owner financing. This type of financing actually helps in increasing the number of potential buyers for the property. Aside from that, it can also help buyers in qualifying for loans. You can start owner financing on a property with one of the following techniques.
Wrap financing is commonly employed when the property owner still has an existing mortgage on the property. With this financing technique, the buyer pays for the mortgage payment annually. The property owner will then have to pay lender until the mortgage payments are completed. It is very important to note that this type of technique may be very risky for the property buyer. This is primarily because he/she may have to depend on whether the property owner has been making the mortgage payment or not; which is why buyers must look for legit owners that will surely follow the terms of their real estate transaction.
Equity financing is a technique that is commonly used when the property owner still has a mortgage balance to the real estate. Thus, the property owner will only finance the equity balance of the property. The buyer will have to apply for a loan from various financial institutions in order to pay for the rest of the balance. This loan will be paid to the original mortgage balance on the property.
Free and Clear
If the property owner actually owns the house free and clear, he/she can create terms with the buyer. This is actually considered to be the simplest type of owner financing since it doesn’t involve other parties such as lending institutions or banks. The buyer is required to come up with money for down payment and make regular, scheduled payments to the property owner until everything is paid off.
Lease purchase agreement is an owner financing technique wherein the property owner agrees to lease the real estate property to the buyer for a specific amount of time as stated by the contract made by the parties involved. At the end of the lease term agreement, the renter of the property will have the chance to actually purchase the house or building from its owner. As soon as the purchase has been made, financing terms will be established which may involve regular, scheduled payments to the property owner.
Generating leads in the real estate market today can be very tough if you are still new in the industry. Luckily, the vast growth of the internet has made advertising a whole lot easier and the target market much wider. Note that most people prefer to look for real estate properties over the web primarily because they want a wide range of options without committing to any brokers. If one takes advantage of that fact, then getting leads would be easy.
Steps in Generating Real Estate Leads
- Create and build a website of your own that has a lead capture portion. Aside from your part of the company’s website, it is highly advisable that you have your own as well. The website must contain your company’s name; but it can be distinct from theirs. Note that you may need to get the approval of your broker first.
- Place an ad in a real estate magazine which is being distributed in your country. Placing an ad in a large magazine publication would help you generate wide lead targets and potential sales.
- Visit real owners who are currently selling their own properties. There are a lot of people nowadays who are being forced to place their properties on the market because of the economy. Most of them actually do not know the real value of their homes, as well as on how to market them. You may offer to help them to attract interested buyers; in return, you can ask them to refer you to other people who are also looking for properties but are not interested with their home.
- Join various community groups in your area. Having a wide range of connections will help you generate leads in the real estate. This is also a good venue to pass out business cards and ask them for referrals to family and friends.
Real estate marketing is not easy, no matter how they want you to think how simple it is. But the trick here is to know first what it is all about to get a better grasp and to understand how things work for you to become effective in it. However, to master it requires you to do it continuously. To help you get started, here are great tips that you can take note:
- Set up your goals – it is best for you to establish your goals and write down the things that you want to happen and then make a list on how you can make things work. Planning is the very first essential step in every successful future. You should think SMART (Specific, Measurable, Achievable, Realistic and Timely).
- Establish a marketing system – to achieve the goals, you need the right action for them. Create a system that can effectively work to help you reach your goals.
- Target market – you should choose the group of people that you want to target for your product or service. It can be young professionals, etc. If you do not have any idea yet about your target market, then you will not become strategic. Being tactical will help you in becoming more aggressive in reaching your goals.
- Segmenting markets – for you to effectively reach your potential customers, you will want to segment your market so that you get a better understanding as to how they behave. A market segment is a subgroup of individuals who shares most of the common characteristics within in your market and this makes them identifiable.
- Develop your Unique Selling Proposition or USP – this should be based in the strengths, talents, passions, and skills that you have such as identifying your target audience, what you can do for them, and the difference from what others offer and why such solutions would matter most to them.
- Provide useful information – educate your prospects with information that is beneficial for them when they go through the buying process.
- Use referrals – they are reliable whenever you go out looking for prospects.
- Meet deadlines – once you meet your deadline and close the sales, you will surely meet your goals and have more time to spend for other important things.
In real estate businesses venturing in subdivision projects, an interested buyer might need to purchase the land first before a house can be made. In fact there are real estates that only offer a parcel of land where the owner can build a house of his/her own according to the rules and regulations imposed by the owner of the property.
Buying a land in a subdivision can be pretty expensive. This is mainly because of the amenities these private subdivisions may offer to the residents; security and recreational activities. However, one can actually live there with the use of a loan called the “lot loan” or “land loan”.
What are Lot Loans?
Lot loans enable buyers to purchase a land in private subdivisions. More often than not, these buyers usually build a home as soon as they have purchased the land. A lot loan can be obtained from various financial resources such as banks and lending institutions. It is highly advisable that you loan money in institutions that specializes in home and land financing.
Benefits of a Lot Loan
The most obvious benefit one can get out of a lot loan is that they can purchase and secure the lot easily. As soon as they have purchased the land, buyers can immediately build on it. It is highly advisable that the buyer should wait until he/she has enough money to start home construction so that he won’t have any major difficulties in repaying the loans.
Considerations in Applying for a Lot Loan
There are many things that buyers need to take into consideration before applying for a lot loan. First, they have to determine what type of house they are going to build on the property and the time frame for its construction. This will help determine on which type of lot loan they need to apply to. Another is that they must take into consideration the fees and the penalties that come with the lot loan; in short, they must understand the terms. Note that the type of lot loan one will have to apply for largely depends on his intentions on the land for sale.
If you are new to the real estate world, you should consider the help of a real estate broker so that you will find it easy to learn about all the things that you need to know in real estate. Real estate brokers are very important in the business of real estate. As we observe today, acquiring a new real estate property is very difficult especially if you do not know the process and the laws involved in it. Brokers can help you understand and give you enough data for your property needs. These people are the frontlines of real estate market and have the task that involves showcasing homes or property to valuable clients and conveying transaction on behalf of their customer. These agents often work 100% commission base where their income depend on their ability to sell and close the deal with their clients.
In almost all countries, real estate agents must secure a license to become a legitimate broker and before they can render their duty as a broker. They must enrol and take a number of classes before taking licensing exam. Since every country has different laws, it is advised that when you buy a property, you need to have the service of a licensed real estate broker. Below are types of services that real estate brokers provide:
- Facilitating a Purchase – they will direct the buyer through the process.
- Facilitating a Sale – providing and guiding seller the though the selling method.
- Home selling kits – guides and monitors on how to advertise market and sell a property.
- Comparative Market Analysis – an approximation of the value of home compared with others. It is usually a competition of the subject property.
- Exposure – selling and marketing the real property to the prospect clients.
- Preparing contracts and leases.
As the real estate styles transform, these services are subject to change and brokers should be flexible about the new method.
Real estate investments can be a very rewarding business venture; however, it can be very expensive to start with. This is primarily the reason why there are financial institutions that actually offer various financial resources for real estate. Meanwhile, you can also look for someone whom you can tie up with or who can loan you some capital for the business. Having enough capital will surely go a long way in making your venture successful.
Having a partner or partners in real estate business can actually pave a way to various projects. If you do not have family or friends who are interested in this business niche, then it is advisable that you go and visit your local Real Estate Investors Association; you might be able to meet potential partners for your future business. Aside from projects, partners can also add up to your capital. It is important to note, however, that you should choose someone who has a good credit report for ease of access to loans and credit card applications.
Real estate investors may actually secure a mortgage on a property with various time frames. They can invest on a 15-year, 30-year, or 7-year mortgage if they want. Note that short term mortgages, like the 7-year mortgage, are also known as balloon mortgages. These types of mortgages are designed for those who can flip the property for the span of 7 years. Flipping a property is primarily the process of buying a property for discount and selling it to earn large incomes. There are also interest-only loans wherein the investors pay only market interest until short term mortgage note is completed.
There are real estate sellers that actually offer financing; this set up is generally termed as seller financing. This instance may be difficult to find but may be very helpful if you are having difficulties in your bank loan applications. It is important to note that prior to engaging in this type of financing, you must be able to investigate the records of the property first in order to make sure that the title is legitimate.
The simplest way to finance various real estate projects is through business credit cards. Credit cards can technically cover rehabbing costs on a property. Aside from that, you can also use it to pay for the maintenance and renovation costs. Note that if your credit card charges a very high interest rate, you should have a strategy in repaying the bank within a few billing cycles as possible to avoid overspending.
Real estate rental business can be a very rewarding venture; however, it involves a lot of risks. But, if you know real estate businesses really well, you wouldn’t have any problems in venturing into the industry. Before you start this business, you need to have your own property. Note that you need not only settle for just one property to rent out, you may rent out multiple properties as well.
Steps in Starting a Real Estate Rental Business
- Educate yourself about real estate. You may attend seminars or classes that are offered by credible institutions such as community colleges or real estate books. You can also get information from real estate books and other online articles.
- Devise a business plan. It is highly advisable that you do this with other professionals such as accountants or lawyers to ensure that what you are doing is actually right.
- Obtain registration for your business from appropriate government agencies in your state. Note that there are actually required fees that you need to pay to get your business up and going.
- Obtain the capital and assets that you need to start the business. Note that the amount of capital you need will actually vary depending on the type of property, as well as the location.
- If you do not have properties to rent out yet, look for properties that you can buy or rent as well. You can actually just buy a lot and build a building of your own to get some personalized touch.
- If necessary, do renovations and repairs for the property. You can actually charge higher rental fees if your property is well-maintained.
- Advertise the property you are going to rent out. You can do this by getting in touch with various realtors or you can place an ad on the internet or newspaper.
- It is very important to meet up with potential renters and let them see the property for their own eyes.
Luxurious real estate properties are properties that are most commonly targeted by those individuals who have very high income or network. More often than not, these individuals own multiple homes in various locations around the country and even across the world. These properties are usually found in luxurious subdivisions or those that are situated in a place that offers beautiful views; views such as overlooking the city and at the top of a cliff.
Characteristics of Luxury Properties
It is very important to note that the characteristics that primarily define luxury real estate actually vary from one country to another. However, what defines the value of the property is primarily attributed largely to its location. A property may be expensive and luxurious when it comes with a view and various amenities. These amenities include golf courses, beach/pool access, or school and downtown districts. In fact, a 750 square-foot beachfront property with a less than 1-acre lot may be more expensive than a 10-acre property with mansion.
In the US, luxury real estate properties are those with appraised value of over 1million USD depending on the location. Classifying these properties takes into consideration the presence of surrounding properties, amenities, beachfronts, low crime rates, unwanted commercialization, and even historical or architectural significance.
The Difference between Ordinary Real Estate and Luxury Real Estate
Agents who handle luxury real estate have greater duties and responsibilities than those who handle only ordinary real estate transactions. They are required to advertise properties that targets a wide audience; in other words, national advertising. This is done to attract non-local potential buyers. Meanwhile, ordinary real estate is only required to attract local buyers in the area. The legal responsibilities of luxury real estate agents, on the other hand, involve trusts, lawyers, and anonymity. More often than not, buyers in luxury real estate would inspect the property more than when buying ordinary properties.
Investing your money on something that has good returns is what all the investors want. There are different types of investments and one of which is the real estate. Here, you will need to purchase, own, manage, sales and/or rental of real estate for you to have income. Instead of buying a real estate for personal use, you will invest your money here to generate profit through appreciation of price. And the implications on tax in real estate investment are usually different if compared to residential real estate. To know more about it, below are facts that you will want to know:
- A form of asset that only has limited liquidity compared to other investments is the real estate.
- It is capital intensive, even if you get mortgage leverage, and very dependent on cash flow.
- It can be a very risky investment if you do not understand how things work and if you cannot manage it well.
- Investment becomes a failure whenever you will incur a negative cash flow for a certain amount of time that is not sustainable on your part anymore, which can force you to resell the property at a lower price or you become insolvent.
- Flipping is a practice which can lead to investment failure since it is usually associated with profit for a short period of time with only less effort.
- You can acquire properties through real estate agents or brokers, market listings, government entities, banks, real estate investors and wholesalers known as flipping, private sales, and public auction.
- This type of investment is more expensive compared to bonds or stocks.
- Not all investors pay the property in full cash since most of the purchase price are financed through a financial instrument or mortgage loan wherein the property itself is the collateral.
Now you have an idea about real property investment. It’s better to also get some basic info about the other types of investment that you can choose from to know which one fits your preference.
Every real estate financing company has different financing loans to offer. There are companies that finance for land acquisition and development that includes building of commercial and residential properties. These financial companies have commercial mortgages that are designed to meet the prerequisites of the pledger and the financier. These kinds of mortgages are subject to all-encompassing underwriting that will include loan proceeds or the loan amount, maturity or the interest rate, pre-payment flexibility and amortization schedule.
Commercial mortgage loan amount is determined based on (LTV) loan to value. Its commercial mortgage loan can be arranged as first liens or if larger value or amount is desired, subordinate financing may be obtained. The rates may be fixed-rate or floating and the interest rate of commercial is generally higher than those of residential mortgages. Application fee or deposit is required where the fees are used by the financier to cover underwriting expenditures.
Commercial loan is reserved on by distinct purpose entity such as corporation and the like that allows the financier to close out on the assets in the event when the borrower defaults. Below is a list of good commercial real estate deal that you will want to know:
- Map out a plan of action, setting parameters are important thing in commercial real estate deal where affordability is concerned and how much rental space is needed.
- Familiarization of commercial real estate metrics.
- Look for motivated sellers.
- Recognize a good deal. Discern how to evaluate risk and make certain that the property meets your financial objectives.
- Be adaptable when you will want to find good deals.
Finding and assessing commercial properties is not just getting a great prize, ensuring that more clients will come, or getting more returns. It is basically how you build relationship with the owner so that they will feel comfortable and both parties will talk about good deals and discounts.
Commercial real estate properties are one of the good investments in the business sectors today, especially if you have leased the property to a tenant who knows how to manage the property. To effectively manage these types of properties, you need to consider various factors; money, safety, and the real estate laws.
Tips in Commercial Property Management
- Join seminars that cover the basics about commercial real estate management if you are just a beginner in the real estate industry. There are also community colleges that offer online courses on how to effectively manage real estate properties. Joining either of the two will earn you more credentials and certificates as a real estate manager.
- Learn more about your areas current commercial rental rates. You can do this by checking various newspaper ads about commercial spaces for rent/lease. Aside from that, you should also learn about the zoning and permit regulations in your area, as well as the tenancy laws.
- Create and keep a record book that will help you track and note all the operational expenses and the service income you incurred. Operational expenses should also reflect the salaries of your employees (if there are any), and the monthly utility bills.
- Do maintenance on the commercial real estate property regularly; doing so will help keep both the interior and exterior of the property in good condition. Regular maintenance should basically include landscaping, exterior/interior building repairs, plumbing maintenance and repairs, heating system maintenance and repairs, as well as electricity repairs.
- Make sure that you are up-to-date with all the public safety codes and certificates that your property must be able to follow. These safety guidelines primarily include inspection of smoke detectors, sprinkler systems and fire extinguishers, and installation of fire exits as well.
- In order for you to be successful in the real estate industry, you need to be able to prevent accrual of income. That is, you need to make sure that your tenants are paying the correct amount on time. Aside from that, you should also ensure that they are satisfied with the services that you give them. That is, you should be able to resolve whatever complains they throw on your property.
- Assess and regularly check the work that is done on the property premises by various work crews. Make sure that they follow building codes in your area or state. Note that, managers are responsible for the changes in the property even though the tenants are the ones who hired the work crews.
- Contact the local chamber of commerce in your area. They will be able to help you determine what insurance you should get for the property.