The Real Deal Blog

Boise Real Estate Mortgage Market Update Video

Here is a Video posted by Bill Zimmerman, a mortgage broker, based in Eagle Idaho.  I like Bill's attention to Mortgage Rate activity and that he explains the what,why, and how of the weekly mortgage market.

See for your self:

The 5 Biggest Mistakes in Real Estate Investing

Welcome to The Real Deal! Join me in the KBOI studio as I inform and educate you about the real estate market. What are the 5 biggest real estate investment mistakes? How can you avoid making them? I can help you save time, money and heartache. Don’t let mistakes ruin your investing experience, learn from them. Listen now and become a smart investor.

Click here to listen now:

or click here to go directly to my podcast:

 

Mike Turner
Front Street Brokers
208-287-6589

 

Market Statistics - What Do They Mean?

Welcome to The Real Deal! Join me and Jared Cozby in the KBOI studio as we tackle the Boise Real Estate Market. We try to address your fears and concerns. We will also break down some recent articles and statistics about the state of the real estate market. Where is the market going? What do you need to know? We take your questions, give you our expert opinions, and let you know what is going both nationally and locally. Start listening now.

Click here to listen now:

or -----> here to go directly to my podcast:

 

Mike Turner
Front Street Brokers
208-287-6589

 

Investment Property Deals

I have picked out some great investment deals on the Boise Market.  If any of them interest you, I recommend that you contact us ASAP at 208-287-6589.

1. Multi Family 4+ units
2. Multi Family Duplexes
3. Newer SF Homes under 100k
4. Newer SF Homes under 150K

 

Call us if you are interested in one of these properties or any others you have seen around town.

 

Mike Turner
Front Street Brokers
208-287-6589

 

How to avoid the 3 biggest mistakes in real estate investing

By Mike Turner
FRONT STREET BROKERS


There are many mistakes investors make with real estate investing.  Many investors are aware of these important issues, yet they continue to make the same mistakes over and over again.

In my 10 years of experience investing in real estate, I can tell you I am no stranger to making mistakes.  I have made so many mistakes that it reminds me of what Danish Scientist Neils Bohr said, after winning the Nobel Prize: “An expert is a person who has made all the mistakes that can be made in a very narrow field.”  Well, I agree.  Making mistakes is a good thing, as long as we learn from them. 

Here are the biggest mistakes investors make and how to avoid them:

1.    Having no money to invest to begin with
This should be obvious, but it is not.  Investing in real estate without having any money to invest in the first place is the single biggest mistake I see investors make.  This theory of using entirely other people’s money to invest is really a sexy idea.  Any late night TV host selling a how-to course will tell you how profitable this concept can be for you and how easy it is to get started.

The problem is the first time you have a hiccup with your real estate investment, such as: vacancy, dead-beat tenant, unexpected maintenance issues, buyer backs out of a deal, your partner doesn’t pay you what is owed to you.  You get the idea.  S**T Happens, and if you don’t have money set aside or budgeted for this investment, you are  going up a creek without a paddle, and the stress of it will turn your hair gray.

The good news is that you can eliminate this stress by first budgeting for your investment ahead of time.  If you have $50,000 to invest in real estate, then you are off to a good start.  However, if you spend the entire $50,000 on purchasing the property, then you are going down a risky path.  Instead, leave yourself $10,000 or more (but considered already spent, and factored in your ROI) to be used solely as a  real estate contingency fund.  You can even set up this fund through your property manager or escrow company to use the funds if they are needed, so you can go about your life and not have to babysit your investments, nor have to find new funds to cover the expenses.  Follow this principle and you will start to enjoy real estate investing on a whole new level.

2.     Picking the wrong type of investment to fit your goals and risk tolerance
As Americans, we are accustomed to getting the things we want, Right Now.  We have lost the skill of patience.  We want the quick buck now, rather than waiting for a bigger paycheck later.  There is no shame in that, but it can lead to big problems when investing in real estate. 

Most new investors, for example, want to do Fix-n-Flip real estate investing.  This is the most risky type of real estate investing there is.  You have to put out a lot of time and money in hopes that you can pull off a quick sell.  This style of investing is dramatized on TV, which often makes it seem like a worthwhile venture.  Don’t be fooled, this is extremely dangerous, and has financially devastated many families over the years.  

I have a few clients that still do fix-n-flip, but they are extremely experienced and polished in their tactics, as they have been doing it a long time and know how to do it in every market.  They also have cash, and therefore avoid having to pay heavy loan fees and payments while the property is on the market.

I no longer recommend fix-n-flip investing to anyone, unless they are very experienced and have cash on hand to handle significant setbacks (and there will be setbacks if you do fix-n-flip investing).

What I do recommend is a longer term strategy.  Think about why you want to invest in real estate.  Is it for monthly cash flow, better tax treatment from the IRS, retirement planning, diversification, or all of the above?  If you can find a long term real estate investment that would pay you NET (after expenses) an 8% cash on cash return just from the monthly income the property produces, would you be happy?

You should be.  Think about this for a moment.  Why do smart investors invest in real estate to begin with? 

Because it has 3 ways to add to their wealth.

a.     Income: The monthly income on the property may produce a return higher than they can get from other investment options.
b.     Appreciation: The property will appreciate over time.  It is a tangible asset and there will always be demand for it as long as the population keeps increasing.  Most investment options (stock market, gold, raw land) work just on this one principle.  You hope the asset will increase in value over time as that is your sole method of increasing your wealth from these investment types.
c.    Tax Advantages: Investors have many ways to lower their tax bill through investing in real estate, that don’t exist with other investment vehicles.  The savings could be monumental. 

So going back to the example of getting a yearly 8% net return on the income you make for a property can actually prove to be a much more profitable endeavor once you factor in the long term effects of Appreciation and Tax Advantages. With that kind of return on just the income portion of the investment, it doesn’t matter if the property goes up or down. Which brings me to the all-time biggest mistake investors make in real estate.

3. Not considering real estate as part of their investment portfolio

Very few financial planners will advise their clients to invest part of their portfolio in real estate.  Yet almost every one of those planners will recommend diversifying your exposure to the market.  Most are not recommending real estate because they make their living managing your money.  They lose that control if you invest in real estate. 

Now, don’t get me wrong, I recommend everyone have a financial planner.  My financial planner has helped me tremendously, so make sure yours is open-minded to the idea. 

However, the biggest reason investors choose not to look at real estate even with all the benefits it could produce for them, is that a lot of folks don’t want the hassle of investing in real estate.  They would rather invest their money and not have to worry about managing or maintaining their investments, and I don’t blame them. 

The classic real estate investment is buying a property and renting it out.  That is fine, but it could be a big hassle for investors to manage and maintain that asset, which often leads to burn out.
Over the years I have learned new ways to avoid the usual hassles and risk with real estate. One of them, as mentioned earlier, is having a contingency fund so you don’t have stress over unexpected expense.  Also, utilizing a good property manager and/or escrow company to handle all of the day to day dealings and the accounting of the investment is essential.  A proper real estate investment, in my opinion, is one that you don’t need to spend more than 20 minutes a month on. 

Just budget those services and strategies from the beginning, and if the property still pencils well, then those with funds to invest should definitely be looking at real estate as part of their portfolio.
***
Mike Turner is a real estate investor and the owner of Front Street Brokers,  which specializes in creative real estate solutions with their primary focus on Luxury Home Sales and Investments.