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Innovative Investing & Business Building

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(This sketch is by Joe Mercadante)

Around this time last year, I wrote an article highlighting ideas for paying for your child's college education. One of the best strategies to pay for college is to actually investing in rental real estate. This will be an update including the steps we’ve used ourselves.
1. When our daughters were very young, we decided to buy rental properties in order to fund their monthly college savings plans. We bought these homes with mortgages and our goal was to create $250 a month of positive cashflow for each of them after paying taxes, insurance, and the mortgage payment. This $250 a month would be invested into a brokerage account for their future college expenses. We followed this plan for years and over time their college savings compounded slowly. During this time the savings account for my oldest daughter grew to a little under $60,000. This included the $250 monthly contributions and the increase in market value of the various investments.

$250 invested per month turned into $60,000 in 16 years.

2. Last year, when my oldest daughter was a sophomore in high school, we used $40,000 of her college savings to buy a single-family rental home for cash. This home is within 2 miles from our home. It was a foreclosure and we needed to invest another $5,000 to make repairs, paint, and install new flooring. After completing the renovations, she was left with around $15,000 in her college savings account… read more

Source: Compounding in Action | Innovative Investing & Business Building Ideas

10 hottest neighborhoods for home flipping

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Dan Terry-house flippingDan Terry-Renters Warehouse

Last year was the strongest year yet for home flipping, with gains on flips in 2015 hitting $102,400 per flip on average, up from $98,500 in 2014 and significantly higher than the peak of $90,900 during the last housing boom, according to a report from real estate brokerage Redfin.

Unlike flipping, what if you purchased the same home with the intentions of holding onto it as a long term rental? People always need a place to live and why not have a steady flow of income, a nice tax write off and equity that someone else is creating (tenants paying down the mortgage).

To make this as passive as possible you should have a property manager take care of all your rentals. If you're already a landlord please ask for a FREE Rental Analysis.

This list of the top 10 neighborhoods for home flippers has a lot do with that lofty rise.

Source: Here are the 10 hottest neighborhoods for home flipping | 2016-03-11 | HousingWire

Rental Property Income Finance Retirement

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According to Robert Berger of U.S. News and World Report, rental properties can provide a meaningful source of consistent income as part of your retirement planning and portfolio. He claims, “Buying a property or two could provide enough income to allow you to retire sooner.” However, you’ll need to ensure your investment properties will provide steady, positive cash flow throughout your retired life. You don’t want a rental property to become a drain on your retirement resources! Here are some things to consider before diversifying your retirement portfolio with investment properties:

Explore your Financing Options. In a post-financial crisis world, those with good credit and a steady work history can purchase rental properties through a variety of finance vehicles. One should consider the use of a portfolio lender (like Colony American Finance). These lenders have greater flexibility and can act outside the terms imposed by Fannie Mae or Freddie Mac. That being said, lending requirements are understandably stricter than they have been in the past. Lenders are now requiring increased down payments (25% or more) and more stringent credit and liquidity profiles.

Get Familiar with the Tax Implications. Rental properties offer some valuable tax benefits. To name a few, you can claim depreciation on rental properties (but not the land), reducing your tax burden year by year. Depreciation, along with the interest expense on a mortgage, may enable you to minimize taxes for some time. Keep in mind, however, that you’ll have to deal with depreciation recapture down the road If and when you sell the rental. In many cases, rental properties operate at a tax loss. One of the hidden benefits of being a landlord is that these “losses” can be deducted on your tax returns (up to $25,000 a year). There are some requirements that must be met, so be sure you understand the rules. The tax implications of owning rental properties can be beneficial, but are also complex. Seek out the help and advice of a tax professional before you delve into the world of residential rental investments…read more

Source: Rental Property Income Finance Retirement via @ProLandlord

San Francisco’s Rentals-Beds For $1800 A Month

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Dan Terry - San Francisco's

Can’t afford an apartment in San Francisco? So-called “co-creative housing” is offering a bunkbed and lots of company. But is it legal? “It’s decorated nicely, looks clean,” she said.

Other pluses: a communal kitchen, well stocked. And three bathrooms per floor, though Heidi found them not always spotless.

“You still have those typical roommate issues but times that times 30, because there’s 30 people sharing a house,” Heidi said.

The minuses: Small bedrooms.

“So the four-person bunk room is pretty tight. I mean its small, the bunk beds are backed up to each other,” Heidi said.

Even her two-person bunk room she says was tight. “It’s not like I would sit in my room and hang out. There’s a bunk bed and a desk, you know? And it’s small,” Heidi said.

Heidi told us most of the residents are in their 20s, from out of town, many from out of the country.

“I think it is just one of those, I need to get to the city and this is going to be the first stop. And then I’ll find something else,” she said.

The tenants seemed happy. But is it legal? Chief housing inspector Rosemary Bosque said bedrooms have to be 170 square feet to accommodate four adults.

Bosque says her inspectors can’t go in to measure unless there’s a complaint from inside. And so far there hasn’t been. “Whenever we do an inspection, it’s a consensual inspection,” she said.

As for using the building for what appears to be a hostel? “That is really a policy matter that I would leave then to the board and to the Planning Department,” she said.

“We do have a complaint, an active complaint on that property which we are investigating,” said Scott Sanchez with the Planning Department.

..read more

Source: Inside San Francisco’s Newest Rentals, Bunk Beds For $1,800 A Month « CBS San Francisco

Millennials have some competition in the rental market-older renters

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Look out Millennials, you've got growing competition in the rental market.

Renters are looking a little older these days.

Rental applicants tend to conjure up images of recent college grads looking to start their life in the real world. But Millennials are facing increased competition from people who have already spent decades in adulthood, and may have better credit and higher income.

Source: Millennials have some competition in the rental market: older renters – Jan. 14, 2016

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