Anshu Arora LLM, MSc, PMP

Cell 604-828-7331 | info@anshuarora.com

Here are eight reasons why investing income producing real estate is an excellent choice for protecting and growing your wealth:

1. Positive cash flow.

One of the biggest benefits to income producing real estate investments is that leases generally secure the assets. This provides a regular income stream that is significantly higher than the typical stock dividend yields.

 

2. Using leverage to multiply asset value.

Another important characteristic of commercial real estate investing is the ability to place debt on the asset, which is several times the original equity. This allows you to buy more assets with less money and significantly multiply asset value and increase equity as the loans are paid down.

3. Low-cost debt leveraged to multiply cash flow.

Placing “positive leverage” on an asset allows for investors to effectively increase positive cash flow from operations by borrowing money at a lower cost than the property pays out. For example, if a property generating a 6 prcent cash-on-cash return were to have debt placed on it at 4 percent, the investors would be paid 6 percent on the equity portion and approximately 2 percent on the money borrowed, thereby leveraging debt.

4. Hedge on inflation.

For each dollar that is created, there is a corresponding liability. Real estate investments have historically shown the highest correlation to inflation when compared to other asset classes, such as the S&P 500, 10-year Treasury notes and corporate bonds. As countries around the world continue to print money to spur economic growth, it is important to recognize the benefits of owning income producing real estate as a hedge against inflation. Generally speaking, when inflation occurs, the price of real estate, particularly multi-tenant assets that have a high ratio of labor and replacement costs, will also rise.


5. Capitalize on the physical assets.

Income-producing real estate is one of the few investment classes that, as a hard asset, has meaningful value. The property’s land has value, as does the structure itself, and the income it produces has value to future investors. Income producing real estate investments do not have red and green days, as does the stock market.

 6. Maximizing tax benefits.

The US Tax Code benefits real estate owners in a number of ways, including unlimited mortgage interest deductions and depreciation accelerations that can shield a portion of the positive cash flow generated and paid out to investors.

7. Asset value appreciation.

Over time, more and more inflation has made it into the economy, drastically reducing purchasing power. However, income producing real estate investments have historically provided excellent appreciation in value that meet and exceed other investment types. Properties historically increase in value as the net operating income of the property improves through rent increases and more effective management of the asset.

8. Feeling the pride of ownership.

The right property in the right location with the right tenants and ownership mindset can produce a tremendous pride of ownership factor that is highest among all asset classes. Homeownership is out of reach for most people. Imagine owning thousands of multi-family housing units instead?

 

Thinking of Buying and Investing in Real Estate? I can help!

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1. Spooky myth: You need a 20 percent down payment to buy a home.
Truth: Not every lender requires such a large down payment from every buyer. It all depends on your financial situation, and often your credit worthiness. Buyers often pay a down payment of between 5 and 10 percent.  You'll want to explore all your options.

2. Spooky myth: You’ll never qualify for a mortgage if you have any outstanding debt.
Truth: Just like there are good witches and bad witches, there’s good debt and bad debt. Excessive debt and late payments can crush a credit score, which could mean trouble when it comes to qualifying for a home loan. However, good debt that you’ve dutifully been paying off bit by bit, like school and car loans, can actually help your chances by showing that you’ve been financially responsible. Another key factor is your debt-to-income ratio.


3. Spooky myth: The mortgage amount I qualify to borrow represents what I can afford.
Truth: This is wrong. Lenders who prequalify you for a home loan are not considering all the facets of your budget, such as child care costs, groceries and utilities. They look primarily at your gross income, your debt and your credit-worthiness. It's up to you to determine your price range based on the monthly payment you can afford to absorb when you consider your take-home pay and all of your monthly expenses. The number you're comfortable with may be lower than the amount the lender has authorized. And whether or not you can afford the monthly payment on the full qualifying amount, you don't have to borrow as much as the bank is willing to lend you.

Keep Halloween scary but take the spookiness out of buying a home. I can help melt your Home Buying fears.

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You’ve decided you’re ready to buy your own home­ – now what? Start with these initial steps:

 

1. Get your financial ducks in a row.
Calculate how much money you have in savings and assets, your total annual income and your expenses. Know how much of it you can allocate toward a downpayment and other expenses. Check your credit report and fix any errors. This will help you determine what type of loan you qualify for, and the price range of homes you want to look at.

 

2. Determine how much house you can afford.
A common rule is that your monthly mortgage payment should not exceed 28 percent of your pre-tax income. You can plug your information into an online mortgage calculator to get a starting idea of exactly how much you’ll pay each month with different interest rates and terms.

 

3. Do some initial research
Look online and check to see what houses are on the market and what they are listed for

 

4. Shop!
It’s important that you keep an open mind and look at a wide range of properties. Go to open houses. Cruise the Internet. Peruse different neighborhoods. I will also help by finding properties that match as many of your “wants” and “needs” as possible. When you fall in love with a house and are ready to make it official, your agent can help you navigate the process from putting in an offer to the closing table.

 

Whether you’re buying or selling, I can help!

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Monthly payments on an average-priced home – including property taxes, home insurance, private mortgage insurance, and assuming a 3 percent down payment – required 36.5 percent of the average wage nationwide in the first quarter. That's slightly down from 37.4 percent in the first quarter a year ago, but it marks the most affordable level since the first quarter of 2013 – when affordability was 33.5 percent, according to RealtyTrac’s analysis.

 

Housing affordability was highest in the last decade in the first quarter of 2012 – that’s when a monthly house payment required 32 percent of average wages. On the other hand, buying a home was the least affordable in the last decade in the second quarter of 2006. Monthly payments then required a whopping 70.7 percent of average wages, according to RealtyTrac’s analysis.

 

The average home price remains 12 percent below what it was in the second quarter of 2006 – the least affordable level in the last decade. During that same time period, the average wage nationwide has increased 34 percent and the average interest rate on a 30-year fixed-rate mortgage has dropped 44 percent during that time period. That has helped boost affordability by 48 percent, according to RealtyTrac’s analysis.


Now is the time to Buy your Dream House and I can help!

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Research has shown that buying or selling a home can be one of life’s most stressful events — right up there with filing for bankruptcy or getting a divorce. Preparation is the key to reducing anxiety. Here are a few tips:


1. Choose your agent carefully
An experienced pro will be prepared for every twist in the road, minimizing stress for you.


2. Home buyers: List before looking
Create and prioritize a list of “wants” and “needs” of home features before you begin touring properties. Waiting to think about what you’re truly looking for in a home until the showing will put you on the spot, creating anxiety.


3. Home buyers: Get mortgage preapproval
Having your finances ready eliminates white-knuckled waiting periods, or unpleasant surprises from lenders after you’ve found your dream home.


4. Don’t take things personally
It’s not you, it’s them. Or the market. Or the lender. Try not to take it personally if buyers value your home for less than what you’re asking, or if a seller rejects what you believe is a perfectly reasonable offer.


5. Keep things in perspective
Consider the worst-case scenario. Will you have to forage for food? Will you need to sell a kidney? Probably not. Other buyers will eventually materialize. Or you’ll find another home you love just as much as the one that got away.


6. Focus on something else
Give yourself a break and indulge in an activity that requires the undivided attention of your body and mind. Yoga lessons, anyone?


7. Find a four-legged friend
Petting and playing with animals is clinically proven to lower your blood pressure. And they won’t interrupt if you need to vent.


I can help with Buying or Selling your House and make the process go smoothly!


 

 

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