Foreign Investors See Value in U.S. Property Ownership

On May 8, 2012, in Investing, by Justin

While the down real estate market in the United States over the past few years has been a much-talked about subject, the market remains the source of desirable investments to international buyers. In fact, perhaps in part because of the decline in domestic property values, foreign investors over the past year were more active in […]

While the down real estate market in the United States over the past few years has been a much-talked about subject, the market remains the source of desirable investments to international buyers. In fact, perhaps in part because of the decline in domestic property values, foreign investors over the past year were more active in the U.S. market than any time in recent memory. Residential purchases by international buyers led by those in Florida, California, Texas and Arizona totaled more than $82 billion for the year ending in March, an increase of $16 billion from a year earlier, according to the National Association of Realtors 2011 Profile of International Home Buying Activity.

What sparked the rise in foreign investing?

Experts points to a number of reasons, many that have long made the U.S. a favored real estate investment region, and others that more recently have made domestic home ownership more attractive. Generally speaking, homes in the U.S. are more affordable than in other areas of the word. Homes here are also considered a safe, profitable investment with plenty of up-side, including ample rental opportunities. Other factors have more recently added to the appeal of domestic real estate investments. Families of international students studying in the U.S. see a great benefit in owning a home near campus. And foreign executives working in the states often prefer purchasing over renting if their employment figures to be long-term. Perhaps more than anything, though, is the psychology of home ownership inherent in many recent immigrants. Owning a home, particularly one in the United States, is perceived as a proud accomplishment, and with property values having dipped considerably, that dream has now become a more affordable reality for many. The NAR’s report also reveals that, as with most real estate investments, one of the leading factors that influences a buyer’s decision is location. Foreign investors tend to buy closer to their home country; as a result, European buyers are typically more drawn to the East Coast, Asian buyers are attracted to the West Coast, and Mexican investors look to markets in the Southwest. Climate and convenience to air travel also weigh heavily in investment decision making, so it’s with little surprise that purchases in Florida (31 percent), California (12 percent), Texas (9 percent) and Arizona (6 percent) represent more than half of all residential purchases made by foreign investors. Foreign investors purchasing residential real estate in the U.S. last year came from 70 countries around the globe, and once again, Canadians outnumbered all other buyers. Investors from China, Mexico, the United Kingdom and India rounded out the top five.

Justin Velthoen of Toucan Investing is a real estate professional. The content presented above should not be considered tax or legal advice, and is intended only to assist investors in finding general answers to their questions. Toucan Investing recommends that investors seek professional tax and legal advice from a licensed lawyer and/or CPA.

 

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On March 29, 2012, in Investing, by Justin

 

Residential Real Estate Investing Begins With A Plan

On June 1, 2011, in Investing, by Justin

Maybe you spotted a low-cost piece of real estate, perhaps a foreclosed home that is selling at an attractive price. Maybe it got you thinking, “With a little fixing up, that place will be worth twice that in five or 10 years.” Believe it or not, that’s how some residential real estate investing get its […]

Paint is a quick, inexpensive upgrade to prepare a property for the market.

Paint is a quick, inexpensive upgrade to prepare a property for the market.

Maybe you spotted a low-cost piece of real estate, perhaps a foreclosed home that is selling at an attractive price. Maybe it got you thinking, “With a little fixing up, that place will be worth twice that in five or 10 years.”

Believe it or not, that’s how some residential real estate investing get its start.

But before you go too far and invest your hard-earned savings, it’s critical that you have a plan. Are you going to rent the property? Fix it up and sell it? Those are crucial questions that will impact a number of factors along the way, including financing options and contractor costs. It’s been proven over and over again that residential real estate investing is an effective way to create a source of income and retirement savings – when it’s done wisely. Start with the basics.

Do I want to be a landlord?

If your plan is to purchase a home and rent it, letting tenants pay the bulk of your mortgage payment over a long period of time while your equity grows, consider a fixed-rate mortgage to avoid unexpected balloon payments later. If you’re able to find reliable tenants, particularly those who stay for a long period of time, renting can be a great way to build wealth long-term.

As with any plan, there are drawbacks, and wise investors are prepared. Some of the leading hassles that landlords deal with include unreliable tenants who don’t pay on time; tenants who stay only a few months, leaving you with having to re-market your property; and tenants who damage your property, leaving you with sometimes costly fix-it projects.

Do I want to “flip” a house?

On the other hand, if your plan is to purchase a home at a low cost, make improvements to increase its value, and sell it when the project is complete, consider a low-rate adjustable rate mortgage. Provided you finish the project on time, this allows you to pay only on the interest and pass along the principal to whomever buys it from you. For investors who are skilled at making home improvements, or those who are connected with a variety of contractors, this can be a great way to build wealth in the short-term.

Again, there are obstacles. Under-estimating the costs associated with an improvement project, or over-estimating the property’s value after improvements, can leave you with little or no financial gain after the project is done. When calculating the finances involved in a “flip” job, be realistic about what you’re capable of doing on your own, and how quickly you’ll be able to sell it down the road. Every month the home sits on the market unsold is another mortgage payment you’ll have to make.

Justin Velthoen of Toucan Investing is a real estate professional. The content presented above should not be considered tax or legal advice, and is intended only to assist investors in finding general answers to their residential real estate investing questions. Toucan Investing recommends that investors seek professional tax and legal advice from a licensed lawyer and/or custodian.

Where can you invest your self-directed IRA?

On April 20, 2011, in Investing, by Justin

Where can you invest your self-directed IRA? One of the greatest benefits of investing in a self-directed IRA over most 401(k) solutions is the freedom in investment options. Unlike 401(k) accounts, which limit you to investing only in stocks, bonds or mutual funds offered through your company’s 401(k) program, self-directed IRA accounts allow you to […]

investing in real estate with iraWhere can you invest your self-directed IRA?

One of the greatest benefits of investing in a self-directed IRA over most 401(k) solutions is the freedom in investment options. Unlike 401(k) accounts, which limit you to investing only in stocks, bonds or mutual funds offered through your company’s 401(k) program, self-directed IRA accounts allow you to expand your investment portfolio to include such things as precious metals and private stock. And real estate.

Real estate as an investment continues to be one of the surest ways to secure your financial well-being in the future, and while many IRA custodians limit investment options to traditional ventures such as stocks, bonds and mutual funds, custodians of self-directed IRAs often include real estate as an investment option. There are limits, whether imposed by the Internal Revenue Service or the custodian, and understanding those limits is important in building a diversified portfolio that includes real estate.

Playing by the rules

Laws do not permit IRA funds to be used to invest in certain items – most notably collectibles, even those of great value. Investors would be wise to consult an attorney or custodian to clarify any investment in question, but the list of common items considered collectible includes artwork, rugs, antiques, gems, stamps, and alcoholic beverages. Most metals, with the exception of certain kinds of bullion, and most coins, with the exception of certain coins minted by the U.S. Treasury, are also considered collectibles and therefore not eligible to be included in an IRA. When an IRA investment is deemed to be a collectible, the amount invested is considered distributed in the year the investment was made, and the account owner may be subject to a 10% additional tax for early distributions. For more information, visit the federal government website at http://www.irs.gov/retirement/article/0,,id=111413,00.html#invest.

Likewise, IRS restrictions also limit what types of properties meet IRA investment-qualifying standards. First and foremost, property purchases must be for investment purposes only, meaning the IRA owner cannot receive or provide any immediate gain from the investment. For example, the property cannot serve as an investor’s personal residence.

As with investing in collectibles, it’s important to understand how the IRS defines real estate investments. To assist you in learning more about real estate investing and the rules that govern it, contact Toucan Investing today. We can help you better understand IRS restrictions and position yourself to begin realizing the benefits of real estate investment.

Justin Velthoen of Toucan Investing is a real estate professional. The content presented above should not be considered tax or legal advice, and is intended only to assist investors in finding general answers to their questions. Toucan Investing recommends that investors seek professional tax and legal advice from a licensed lawyer and/or custodian.

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Using Self-Directed IRA To Control Your Retirement Investments

On April 20, 2011, in Investing, by Justin

Some people like the convenience of letting payroll deductions build a 401(k) retirement account. Depending on where you work, the potential to benefit from an employer matching contribution doesn’t hurt. But building a 401(k) account isn’t your only option, and if you prefer to play a more hands-on role with your money, consider the benefits […]

Self Directed IRASome people like the convenience of letting payroll deductions build a 401(k) retirement account. Depending on where you work, the potential to benefit from an employer matching contribution doesn’t hurt. But building a 401(k) account isn’t your only option, and if you prefer to play a more hands-on role with your money, consider the benefits of opening a self-directed IRA.

Self-directed IRA accounts aren’t limited by the investment options that restrict 401(k) accounts. Investors are free to work with a custodian to choose which stocks, bonds or mutual funds make the most financial sense for them. Plus, self-directed IRA accounts allow investors to include other important investment types, such as real estate, in their portfolios.

What is a custodian?

In short, a custodian is a licensed financial worker who serves as the liaison between you and the IRS. Typically, a custodian represents one of any number of financial institutions, including brokerages, banks, mutual fund companies, credit unions and insurance companies. Each tends to specialize in different types of investments, so choosing the right custodian to help manage your self directed IRA can be nearly as important as the investment choices you make.

If you’re planning to invest in a wide variety of investment types, choose a custodian with a broad selection of options. Are you interested in CDs, mutual funds, or stocks? Do you plan on investing in annuities or real estate? And keep in mind that different IRA custodians charge different fees for their services, whether an annual maintenance fee, commissions charged for trades, or sales fees on mutual funds. Perhaps most important, a custodian should be someone whose knowledge you trust, because while you are ultimately in control of a self-directed IRA, you ideally want someone who can offer investment advice.

How else can a custodian help?

Even savvy investors can get lost in the legalese governing investments, particularly when it concerns IRA tax implications that can have a very real effect on an investor’s life today. Whether you want to approach a relatively simple task of rolling over an existing 401(k) into an IRA, or delve into more complex investment issues such as deciding between a traditional IRA or a Roth IRA, a qualified custodian has answers. And because an IRA opens up investment options such as real estate and privately held companies, complexities can surface that require a professional.

To make sure that you’re complying with federal rules and regulations, custodians take care of paperwork that is filled with the IRS to show, among other things, that Employee Retirement Income Security Act provisions are satisfied, and that taxes on any distributions are being assessed. If you’re considering rolling your 401(k) account into an IRA, finding an IRA custodian should be your first move. To learn more about how broadening your investment portfolio to include real estate can benefit you in the long run, contact Toucan Investments today.

Justin Velthoen of Toucan Homes is a real estate professional. The content presented above should not be considered tax or legal advice, and is intended only to assist investors in finding general answers to their questions. Toucan Homes recommends that homeowners seek professional tax and legal advice from a licensed lawyer and/or CPA.


 

 

Buying a House With Owner Financing

On February 22, 2011, in Investing, by Justin

Possibly the most popular way to buy a property without bank financing is the use of what is called owner financing, or seller carryback. This is when the owner agrees to finance all, or part, of the purchase price of the home. Owner financing is a great strategy that can benefit both parties significantly. The […]

Possibly the most popular way to buy a property without bank financing is the use of what is called owner financing, or seller carryback. This is when the owner agrees to finance all, or part, of the purchase price of the home. Owner financing is a great strategy that can benefit both parties significantly. The buyer can avoid difficult bank processes, and the seller can create a monthly income stream which often comes with many tax advantages as well.

Each instance of a seller carryback loan can be custom fit to the buyer and the seller. The valuation of the loan, the payment terms, interest rate, can all be set in the purchasing contract. There are a surprising number of people who own their home free and clear, or have a large amount of equity, and would eagerly consider owner financing.

Seller carryback loans are a great opportunity to get creative! The buyer can arrange to make a single payment after a period of time (to give the opportunity to rehab the property), substitution of collateral, blanket mortgages, wrap-around mortgages, etc. In the current economic climate, it is becoming more and more difficult for a buyer to qualify for a loan, which is taking longer and longer to close. Seller carryback loans can resolve credit and time crunch issues to get homes sold in record time!

Both buyers and sellers should be aware of recent legislation that prohibits owner financing without a mortgage originator’s license. This doesn’t mean owner financing is impossible, but both parties should find a credible mortgage originator to mitigate the terms and conditions to keep the transaction legal.

When everyone is fighting in the same arena, take the opportunity to try something new to make yourself stand out. You might find yourself pleasantly surprised, with a new home!