The Difference Between Investing in Real Estate Instead of Wall Street

Investing in real estate is a much more secure option than investing in stocks, and today I’ll explain why.
As you’re likely already aware, the economy can change dramatically in just a few years. 

For instance, while the value of the American dollar remained fairly static between 2000 and 2009, money invested into the S&P 500 during that decade would equate to a significantly lower sum, thanks to the high fees and inflation. These factors could easily erode a $100,000 investment into about $70,000 worth of value. 

"It’s clear to see that real estate is the superior option for growing long-term wealth."

Over that same decade, the median home price in Los Angeles County rose from $227,000 in 2000 to $400,000 in 2009. This means that while money invested in the S&P 500 brought a negative return, money invested in real estate saw growth of more than 7.6% each year—or roughly 38% leveraged annual return on your initial 20% down payment. 

Most people probably aren’t aware of the stark comparison between these two investment paths, largely thanks to Wall Street’s advertising engine, but it’s clear to see that real estate is the superior option for growing long-term wealth.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

What’s Happening With Rates in the SoCal Market?

Interest rates have come back down from where they were earlier this year. Here are some of the latest numbers you should know.

In my recent email about the state of the market, I mentioned that we are shifting to a buyer’s market, where homes are sitting longer on the market. 

When the Federal Reserve increased the federal discount rate, the interest rate moved up to nearly 5%. Recently, we’ve heard talk of the Fed decreasing this rate by 0.5% and the market has reacted pretty well. Mortgage rates are down 1% since and now sit at around 4% on average. The jumbo rate is around 3.6% too.

What does this mean for you if you’re on the fence about selling your home? Well, it might not be a better time for a while. Inventory is still low and sellers can still get a great price without having to discount your home.

"Don’t get discouraged if you’re a buyer. This is good news."

What does this mean if you’re a buyer? Don’t get discouraged. This is good news. With lower interest rates, you can afford 20% more of a home and with increased inventory, you have more to choose from. If you’re a first-time homebuyer, you should know that a mortgage credit certificate is a good idea and pretty easy to qualify for. This is also a useful tool for those looking to refinance.

With this mortgage credit certificate, you can deduce up to 20% of the interest you pay annually against your tax liability. Let’s say that you have an annual interest payment of $16,000. This gives you $3,200 you can use to write off on your tax liability.

If you have any questions for me about the market, the mortgage credit certificate, or anything else related to real estate, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.

How Has the Southern California Market changed in a Year?

The latest statistics are in for the Southern California market.

Here’s what we’ve been keeping an eye on.

Today I’ve got the latest numbers from our Southern California real estate market and I want to bring
that data to you. Our market is defined from Monterrey Park and Pasadena to the west, Rancho
Cucamonga to Eastvale on the east, and along the 60 and 210 freeways.

In summary, our real estate market is very healthy. Here are a few reasons why. For starters, our
unit sales have decreased by 4.75% in 2018 from what we saw from January to July in 2017. In
addition to that, the average price has increased by 6.43% from last year.

Last year in July, the average home sold for $633,000. Today, the average home is selling for
$665,000. That’s an 8.1% price increase in the summer market alone. This is partially a result
of increased demand. The average days on market has played a big role as well. We saw it drop
from 26 days last year to 18 days this year.

Another thing I wanted to bring up is our inventory levels. Our inventory is a measure of how long it
would take to sell all the homes on the market if no new homes were listed. This year, our inventory
has dropped from 2.87 months to 2.8 months.

That’s my real estate report in a nutshell. If you have any questions for me or want to know more
about the numbers for rental properties or the numbers in your specific area, I’d be happy to assist
you. I look forward to hearing from you soon.

Where Can You Find Alternative Financing for Investment Properties?

If you need to obtain alternative financing for an investment property, I have a tool on my website that can help you.

The key to investing in real estate is to find the right property and the right financing. What if you

have the right property but need to find alternative financing, though?

For example, most of the properties that I have right now are so-called "good deals,” meaning they

are more or less scratched and dented. Let’s say you have a property with a single-family home in

front and a duplex in the back. The single-family home is in pretty good shape and you can pretty

much rent it out right away. The duplex in the back, however, is in a state of disrepair.

You can have good credit, good income, and a good down payment, but conventional lenders

like Freddie Mac and Fannie Mae won’t give you a loan because of the condition of that duplex. If

the kitchen is worn out or some essential appliances are missing from it, a conventional appraiser will

require that those deficiencies be fixed before closing.

However, in a situation like this, you cannot fix the place before you close. If you do that, you’re at risk because if it doesn’t close, you’ve wasted a lot

of money. Secondly, the seller wouldn’t allow you do to that because it would take time to fix that

property. There are also liability issues that could arise.

This is when you need to find alternative lending. How can you find alternative lending?

My website has an “Alternative Loan Search” tool on the left-hand side of the front page which

can direct you to the right type of financing for the property you’re seeking to invest in.  

For example, I recently had a friend ask me about obtaining financing for a vacant piece of land. If

you used my website to search for this type of financing, it would probably yield around 10 to 12

results for lenders who could help you and compare the pricing for building a home on that land. Later

on, you can always refinance on a conventional loan and use it for a few months or a few years.

This resource is similar to my “Finance Tools” link at the bottom of my website that allows you monitor

whether interest rates are going up or down for conventional loans so you can lock in the

best rate possible.

As always, if you have any questions about this topic or you’re thinking of buying or selling a home,

don’t hesitate to reach out to me. I’d be happy to help you. In the meantime, stay safe and stay happy.

What’s the Key to Identifying a Great Investment Property?

The key to identifying a great investment property is determining if the 1% rule applies to it.

How do you locate and identify a good investment property?

First, there are a few terms brokers use when it comes to real estate investment that you need to know about.

The first is cap rate (or capitalization rate). This is taking the net operating income the property is expected to generate over the property’s purchase price. Your net operating income is defined as your gross income minus the vacancy minus any type of fee you have to pay before the mortgage debt payment. The cap rate NOI is like a company’s EBITDA.

The second term is cash on cash. This is how much cash will be generated from your investment. This is the net of your income minus the debt payment (or principal interest that you pay the bank).

The last term is return on investment. Every year, you pay back 1.5% of your principal and add that onto your equity.

So, how do you identify a good investment property to purchase?

Let me give you an example. If a property is valued at $500,000 and is generating $5,000 in monthly income, then the 1% rule applies, and that makes that property a very good investment. With a 1% property, you’d have an 8% cap rate, a 12% cash flow, and 16% for your return on investment.

A $4,000 monthly income from that property would still be a great deal because you can still improve the property and raise the rent. At a 0.8% monthly rate, you’d still have a 6.2% cap rate, a 5% cash flow, and 8.9% for your return on investment.

Look for a property where the 1% rule applies.

Those numbers from each scenario are based on an interest rate of 5%, so they’re not unrealistic. The point is, you should look for a 1% property. Even if you find a 0.8% property, I can help you turn it into a 1% property.

If you want to know more about identifying a good investment property, don’t hesitate to reach out to me. I’d be happy to help you.

How Can the Rule of 72 Help Your Next Southern California Investment Endeavor?

Buying a SoCal Home? Search all Homes for Sale

Selling a SoCal Home? Check out our FREE Home Value Report

Today, I want to share an important rule when it comes to real estate investing. This is the rule of 72. 

This rule states that if you divide the interest rate you get on an investment by 72, you will find out how many years it will take to double the rate of your investment. Additionally, if you divide the number of years by 72, you will find what type of rate of return will double your investment.

Right now, many people in Southern California think real estate is much too expensive. However, the average rate of return on real estate investments is around 5.5%-6.5%! In fact, if you leverage your money right, using the rule of 72, you can double your investment in less than three years.

If you have any questions about investment opportunities in the area, don't hesitate to reach out to me. I'm always available to help.

How Can You Sell for Top Dollar in Southern California?

You can't hope to sell your home for a lot of money simply by pricing it high. In fact, when you price your home higher, you're more likely to get less money for it - if your home even sells at all.

Buying a SoCal Home? Search all Homes for Sale

Selling a SoCal Home? Check out our FREE Home Value Report

When you go to sell your home, you cannot hope to put a large price tag on it and for it to sell well. Buyers simply do not respond to overpriced homes, and you need a much more complex strategy that will price your home at an attractive and fair market value. 

In the last seven years that I've been doing business, my list price to sale price ratio has been 103%, which means that I get people 3% more money for their homes, and this can add up to thousands of extra dollars in their pocket. 

One way that we accomplish this is by doing a comparative market analysis on your home to find what similar properties are selling for. We take into account many different aspects of your home, and we then decide what an appropriate price may be for your home.

The sweet spot when pricing is to price just below the market value, and then to have that attractive price bring buyers in and have them fight over your property. The end result is a bidding war where hopefully your home sells for much more than the original asking price. 

Pricing a home attractively takes a deep knowledge of a local market, and I have been in Southern California for quite some time now. I know the ins and outs of this market.

You can count on me to price your home so that it sells for top dollar! If you have any questions about how this can be accomplished, then please don't hesitate to ask me.