Thursday, May 25, 2017
Wednesday, May 24, 2017
Real estate — also real property or realty — refers to the land in question as well as any immovable fixtures on the surface such as roads, buildings, trees and shrubs, and walls. It also refers to the air space of the property as well as underground additions like the sewers and utilities. The owner of the real property, along with the title, will usually hold the air rights, mineral rights, and surface rights as well.
Now, when you think of real estate, you’re likely thinking in terms of homeownership or buying a property, but if you break it down further, there are four different subsets of “real estate” that break down the broad definition into more specific purposes and structures. Let’s take a look at the four different types of real estate: residential, commercial, industrial, and land.
Residential Real Estate:
- Residential real estate is property that has been designated for living spaces. When we think of residential real estate, houses are the first thing that come to mind, but there are actually 5 different types of residential real estate:
- AKA condos, this type of real estate typically denotes single units that together form a large building. There are many positive benefits of living in a condo: maintenance costs are shared among everyone, condos often have pools or gyms available for residents, and the ground floors of condos will house businesses or restaurants. However, since you’re living in such close quarters with other people, you’re usually very restricted with what you’re allowed to do with your unit: Homeowners’ Associations (HOAs) — which come with monthly or yearly dues — regularly monitor changes throughout the community, and since they generally like cohesion with appearance, so you won’t be able to personalize this space as much as you may like. Also, since units are conjoined, you also won’t have as much privacy.
- Think of townhouses as a mix between a condominium and a single-family home. Residents each have their own space, typically larger than what you might find in a condo, but like a condo, the units generally have a shared wall or two. However, since you aren’t living in such close quarters, townhouses offer more privacy than a condo might. You’re also more likely to have access to amenities like a deck or a grill here than you would at a condo.
- Cooperatives, or co-ops, are a lot like condos but without the hefty price tag. In a condo, every unit is owned by an individual, but in a co-op, the residents all own the building together. This can be a good and a bad thing: since everything is run as a group instead of by individuals, any HOA dues tend to be cheaper, but since everything is run together, any one person dropping the ball on their payments means the whole thing can come crumbling down.
- Single-Family Homes (SFH)
- Although these properties require a lot of upkeep and maintenance for the homeowner, owning a single family home comes with a lot of perks. Since you own the property, you can have a lot more liberties with how everything is run and how you can express yourself.
- Multi-Family Homes (MFH)
- Multi-family homes, for the most part, exist as rental properties. They’re one home that has been split into two units and, unlike a condo, there’s generally one owner for the whole building instead of each unit being owned by a different individual. These properties can offer some unique living situations that many others may not: owners can live in one unit and rent out the other, rent out both units and use it as a rental property, or simply choose to keep the property to themselves. If you’re renting a MFH, the burden of maintenance costs often falls entirely on the owner, which is a pro; however, if you own the building, like a SFH all of the maintenance comes down on you.
Commercial Real Estate:
- Commercial real estate covers any property that is nonresidential (see above) and is used for the purpose of generating profits. In the category of “commercial real estate” there are 4 different classifications: leisure/retail, office, healthcare, and multifamily.
- Leisure / Retail
- Leisure real estate encompasses all of the entertainment aspects, more or less, of real estate. Leisure is where you’ll find businesses like restaurants, movie theatres, cafes, hotels, and other establishments that provide you with leisure. Retail real estate includes the shops, stores, and malls in which you shop. When it comes to commercial real estate, the value of a property/business is measured by profitability per square foot. The best retail spaces are ones that are highly visible and easily accessible.
- Another form of commercial real estate, office buildings fall into their own category. Office buildings can generate a lot of long-term business for the owner as the tenants tend to sign much longer leases than is typical for other renters. On the plus side, this means that owners will have a steady stream of revenue while the space is being leased; on the down side, these spaces take longer to fill meaning that the owner could be covering the cost of the building while it’s not in use.
- Another form of real estate that only truly fits in the ‘commercial’ category is healthcare. This includes hospitals, clinics, outpatient offices, and general practitioner offices, dentist offices, orthodontists, etc. — basically places where you go when you’re in need of medical care.
- Apartments/Multi-Family Housing
- MFHs can sometimes fall in both the residential and the commercial aspects of real estate. Apartment buildings, for example, fall under commercial real estate as owners do not usually reside within their own buildings, meaning they’re purely for profit.
Industrial Real Estate:
- Industrial real estate encompasses the “other” forms of real estate that do not technically fall under either commercial or residential estate and is usually the largest form of real estate. There are a vast number of divisions within the industrial real estate classification, many highly specialised, but here are a few examples of what’s covered under the umbrella of ‘industrial’: R&D buildings, cold storage buildings, manufacturing plants, warehouses, and more.
- Selling and managing vacant land is very different from buying or selling a commercial, residential, or industrial real estate property. Essentially, you’re dealing with raw, undeveloped land, which can include farms and ranches as well. Vacant land can be broken down further based on the stage of development: undeveloped land, reuse land or early stages of development, subdivision (when larger plots of land are broken down into smaller ones for resale), and site assembly.
Thursday, May 18, 2017
There are many ways to appraise a commercial real estate property. Some are more common and most realtors or property owners will use them; others aren’t as common and only a select few will use them. It all depends on the end goal of why you are appraising a property. Are you looking to buy the property? Are you looking to sell the property? Or are you trying to figure out how much you should charge for rent? These all factor into which method is best for you to use for the appraisal process.
Before you begin the appraisal process it is important to determine a property’s value. The value of a property should not be confused with the price or cost of the property. There are some factors that weigh into what a property is valued at.
The main factors that weigh into what a property is valued at are: demand, utility, scarcity, and transferability. Value is contingent on how many people want to buy the property, if the future owner is going to be satisfied with the property, are there a limited amount of properties in the area, and how easily the ownership rights can be transferred between owners.
Understanding the market value helps appraisers come to a conclusion on what their opinion or estimate of the property’s value will be. The two best and most common ways to appraise a property are the sales comparison/market approach and the income approach.
This approach is focused around comparing local properties to one another to see what they have in common. Seeing what they have in common can help appraisers come to an agreement of the value of the property’s features. This means that they will look at features like, how many cars can fit in the property’s garage, if they have a fireplace or not, and so forth.
This method will also take a look at the market and determine how similar properties in the area are being appraised. The appraisers will take these values into consideration when they are appraising the property in question.
As the title of this approach might suggest, income is the main factor that is weighed in appraising a property using this method. Generally, the investor or appraiser will look at how much income is generated from the property and analyze that number against the current market conditions.
The amount of income that is generated is broken down into what is called the direct capitalization approach. This approach will estimate the gross income that is generated and then deduct all of the expenses and potential losses that the property may have. This will help determine whether or not the investor will be able to turn a profit if they did decide to purchase the property and give its true value.
Appraising a commercial property is done in a number of different ways. Outlined here are two of the most common ways investors will appraise properties; using resources on the Internet can help you determine which method is best for you.
Monday, May 8, 2017
Whether you’re working your very first job or you’re a seasoned industry veteran, one of the most important characteristics you can develop is professionalism. Even now, when younger workspaces are pushing towards more relaxed and open atmospheres, professionalism is still an important trait to possess. It helps you best display yourself and your abilities while putting your best foot forward, and can extend to the work you do as well. Here are just a few of the reasons why professionalism is important, especially in the workplace.
- It will help your reputation and the reputation of your company.
- No matter where you’re employed, you’re a representative of the company you work for, whether you’re dealing directly with clients or simply discussing the company at a bar. The way that you represent the business is how people will perceive it; if you address your occupation professionally, people will see you as a professional and, by extension, see the professional quality of individuals who work for the company. It’s a win for everyone’s reputation.
- It will promote an atmosphere of accountability.
- When something goes wrong or a mistake happens, one of the least professional behaviors you can demonstrate is playing the blame game and pointing fingers. The mistake has already been made, so trying to shift the blame only makes you look bad. However, if everyone steps up and takes accountability for his or her own actions, the focus is shifted from who’s to blame to how the mistake can be rectified.
- It will help you advance your career.
- People who don’t take their work seriously and are unprofessional in their behavior are not people who get promoted because they are not people who work towards promotions. Professionalism, on top of a great work ethic and dedication, is what will help drive you to the top, by demonstrating that you care about the job and will do it well and with tact.
- It will encourage a professional environment overall.
- In 1982, James Wilson and George Kelling introduced the Broken Window Theory: in essence, houses with broken windows are more likely to attract future vandalism and criminals because there is damage already present. To put this in workplace terms, if one person acts blatantly unprofessionally, others will be more likely to follow suit until no one is acting professionally. However, if you promote the idea of professionalism from the start and keep it ingrained as a company value, people will be more likely to maintain a professional environment.
Wednesday, April 19, 2017
When it comes to growing your wealth, investing your money, especially in real estate, is one of the best and safest ways to increase your money. However, being one of the safest methods doesn’t mean that doing so is inherently risk free. There are many ways that you can be duped or scammed into losing money, but there are also risks you could bring upon yourself. With everything that goes into investing, protect yourself against loss by being aware of some of the easiest ways that you can get burned in a real estate investment deal and preparing yourself against them.
- Never, ever hand over unsecured money.
- One of the easiest ways to lose your money is to plain old hand it over to someone. Say you stumble upon a once-in-a-lifetime bargain on your dream house, and in your haste to secure the property you hand over money without any real assurance or security on your end. Suddenly, the seller has vanished, you find out the property was never even actually listed by the owners, and now you’re out thousands of dollars on top of everything. Before you ever let any money leave your hands (or your account) have some sort of security so you know you won’t get burned.
- Do your own research.
- Before you start looking to invest in a property, find an area whose real estate will be lucrative and have a good potential of yielding high returns without too expensive of an investment. You also want to make sure that you have third party appraisers and home inspectors on hand for every step of the process. Although it might be easier to have the seller handle all of these things, especially if they offer, you want to have an unbiased person who will make sure that you’re both being treated fairly and receiving the best deal.
- Be realistic about the repairs.
- When you see a property that’s a good bargain, it can be easy to see the potential profit at your fingertips and gloss right over the expected repair costs. Before you even consider purchasing a property, make sure you have an understanding of approximately how much it will cost to get the property “up and running,” so to speak. While unexpected expenses are a part of every property renovation, having an accurate estimation of what the repairs will cost helps you make sure you don’t run out of money halfway through your project.
Wednesday, April 12, 2017
It’s no secret that investing in real estate can be a great way to increase your wealth and keep your nest egg safe. However, owning real estate, especially a rental property, comes with a lot of work. Whether or not you have tenants, you’re going to need to stay on top of repairs and maintenance and figure out a way to make your mortgage payments if you aren’t collecting rent. Suddenly, your side investment to earn you extra cash is a full-time job that could end up costing you money in the long run. If you don’t have time to take care of all of the aspects of your investment by yourself, chances are that you could benefit from the services of a property management company. Here are just a few of the reasons why property managers can take the stress out of handling a rental property.
- You have someone keeping an eye on your investment.
- If real estate investing isn’t your day job — which it likely isn’t — then you’re going to need some help taking care of the day to day aspects of owning a rental property. Property managers will handle routine inspections, deal with maintenance requests, collect the monthly rent, and field any emergency phone calls from tenants that would otherwise come to you. They’re responsible for inspecting the property after each tenant moves out and readying it for the next one. Basically, they will oversee most aspects of your rental and handle any problems that may arise.
- You’ll fill empty properties faster.
- Aside from taking care of your property and managing your tenants, property managers are also responsible for advertising your rental and finding someone to fill the vacancy. Why is it important to fill vacancies as soon as possible? Every month your property goes unrented is a month that you’re responsible for paying the cost of owning the property and netting negative dollars. Filling the property promptly will minimize any payments that you’ll be responsible for each month.
- You’ll have someone to screen your potential tenants.
- One of the riskiest and potentially most costly aspects of owning a rental property is opening yourself to the possibility of legal setbacks when dealing with particularly unsavory tenants. A good property manager will know what to look for to avoid any potential scams and will be able to sport tenant red flags, helping you find only responsible, reliable tenants who will take care of your investment and pay their rent on time.
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