Why and When Living in Rented Accommodation Can Make a Lot of Sense

Owning your house does give one a sense of achievement, it is true. There is also something to be said about the emotions of pride and joy of living in a home that one owns. However, when one thinks logically, this doesn’t have to be the only outcome of owning a home. In a lot of cases, it can actually make much more sense to live in rented accommodation while renting out one's own property to someone else. The correct choice ideally should depend upon where you live vis-à-vis where you own property.

When it makes sense to live in a rented home.

For people who live in San Francisco, Los Angeles, San Diego, New York and so on, where property prices are really high, renting can make a lot of sense. While property prices in these areas are very high, rents are low relative to these valuations. So it may not be affordable or even advisable to buy property here, but it could make a lot of sense to rent property in these areas.
You could say that rent of around $5000 a month is high, and you would be right. However, it is high only in absolute terms. That amount is actually really low when you factor in the fact that it’s what you're paying to live in a $2.7 million home! So if you're living in these areas with high property prices and low rents, it simply makes sense to live in rented accommodation.

You can still be a property owner.

In places like Atlanta you could still buy and live in your own home, but this could make a lot less financial sense in other places. It can make sense to own property in one place while living in rented accommodation in another place. You can still have the joy and the sense of achievement and ownership that comes from buying a house. You can own it, but not necessarily live in it.
There was a time when I was living abroad and the parents of my new wife came to visit us. We were living in a rented home – it was a beautiful home but it was rented. My mother-in-law’s first reaction was to say – oh if only you owned it! She knew that I owned dozens of homes in the US, but she still said this. It merely echoes the mindset that living in the property you own is somehow better than living in rental accommodation. If you can get past the mindset that wants you to live in the home that you own, you could find that you're actually making a wise financial decision. If you can overcome emotion and think logically, you would find that my point of view makes a lot of sense. Check out this video for more details.
I'm going to be speaking more about this in my next quarterly event – about the possibility of living in a rented property while still being a property owner yourself. I will be touching on the best places to rent and the best places to buy property right now. 

…And Where You Should Buy Instead

I live and work in the San Francisco Bay Area. So it follows that I would recommend investing in real estate in the area, right? Wrong! When people ask me about investing in real estate here, I advise them against it – for a couple of reasons. Would you believe, I lived in rental accommodation myself for 20 years precisely for those reasons? Read on to know more about my experiences with real estate in the SF bay area and why I advise clients the way I do.

Why San Francisco Bay Area is not the best bet for investors.

Here’s a fact that really amazes a lot of people: I lived in a rented property in Marin County for close to 20 years. So the guy who buys and sells all this property, who owns hundreds of homes and helps others buy thousands more, lives in rented accommodation? It does sound strange. But it was the logical, financially sensible choice to make. For one, the numbers didn’t make sense if I were to buy. Secondly, the laws are not really in favor of the investors.
Now I usually advise people to buy homes in large metropolitan areas where we have a lot of economic activity and job diversity, because this is where people are looking to rent homes. This is where they are willing to shell out top dollar to rent quality homes. I typically recommend buying in the Sunbelt states. While the San Francisco Bay Area ticks all of these boxes, the ratio between property prices and rents does not make sense. At one point I was living in a million-dollar home, but I was paying just about $3000 in rent. And now that same home would fetch maybe four million dollars but the rent in relation to that valuation is still peanuts!
Further, the laws governing rental accommodation tend to favor the tenant in California. So I would much rather be a tenant than a landlord here. This is the other reason why I would still advise investors not to invest in property in the San Francisco Bay Area.

Rent, don’t buy in the San Francisco Bay Area.

Back in the day, we were buying a lot of homes in Phoenix. This was a hot market for people looking to invest in real estate. At the time, we could buy good quality single-family homes for just about $150,000. This same home would then fetch rent in the area of $1100. This is the sort of rent that would help to generate positive cash flows for the investor. The ratio of value of the home to rent is favorable for the landlord. Now, even Phoenix is not a great idea, the reasons for which I’ve shared in previous videos and podcasts.
So to summarize, San Francisco Bay Area doesn’t make sense for investors because real estate is really expensive in the area. It is out of reach for a great many people looking to invest. Also important is the fact that homes there do not fetch rents that are commensurate with the value of the homes. If a four-million-dollar home only fetches about $7000 in rent, that is not great. While 7K is a lot in absolute terms, it is peanuts relative to the property value.
So, where should you invest if the San Francisco Bay Area is not advisable? We are here to tell you precisely that. Check out my videos or reach out to us and know more about our Remote Control Retirement Riches formula.

Why Your Cash Flow Will Increase Even When Cost of Living Rises

 

Our clients are familiar with our Remote Control Retirement Riches formula. This is among the best and more reliable ways to create wealth for yourself and your family, and to secure your financial future. Real estate is, in a sense, an investment that pays for itself. When you take out a loan and buy a house, you then rent it out. The rental income generated then helps you repay the mortgage. Over time it generates a profit. So what is the right way to use these cash inflows?

Two ways to use your cash inflows.

If your investment is not generating a profit for you right now, it will do so in the future. This is because as the cost of living goes up, rental incomes do the same. However, your mortgage payment amounts will remain the same over the years because you're going to have the benefit of the 30-year fixed-rate loan. So you will have surplus cash. What do I do with this cash flow, my clients and people on social media sometimes ask me.
Well, one option is to create an emergency fund for expenses that may crop up for you as a landlord: maintenance, breakage, repairs, replacements etc. So you can put aside some money for this. On the other hand, you can accumulate your cash inflows and invest in more houses. You can buy more homes and further secure your financial future.

How I used my cash inflows.

There was a time when I was also putting money away for emergencies and contingencies. I would do this because I felt that as a landlord, I should have a way to defray expenses such as house maintenance, repairs and so on.  I soon realized, however, that this was not helping me meet my goal – which was to buy as many homes as possible. I was not making the best use of my liquid assets by parking them in a contingency fund.
The better option was to use the money and accumulate my cash flows to buy more homes, and then generate higher incomes. And what about the times when those expenses cropped up? I found that it made sense to open up a line of credit with the bank – to be used as and when needed. This is also what I would advise investors to do with the cash flow that their investments generate.
It makes sense to create wealth, for a more secure, prosperous future. For this to happen, you cannot afford to let your cash flows stagnate. You have to put them to the best use possible. If you would like to know more about our investment strategies, visit us at icgre.com. To get more real estate investing tips, check out my podcasts and videos.

Inflation Means Higher Interest Rates – But This Need Not Impact Your Investment

“Now that interest rates have gone up by 3% relatively quickly, home prices are up significantly from a couple of years ago. So, is buying single family rental homes still worth it?” This is a top-of-the-mind question for a lot of investors right now. This is something that I get asked on social media, by people reaching out to us at icgre.com or people who attend our quarterly online expo events. And to these people I have one simple, straight answer – Yes! It is worth it. Investing in real estate using the formula we have perfected at ICG Real Estate is always worth it. I have also explained this at some length in this article.

Inflation is rising, but this is not necessarily a bad thing.

I have been shouting from the rooftops about the inflation that is going to come, and come it has! Everything is more expensive right now and your hard earned dollar is simply not going as far as it used to. Rising inflation inevitably means that interest rates are going to go up, and that is what we have seen as well. Where, until recently loans were available at the lowest ever interest rates – as low as 2% in cases – all that has changed. Rates were between 2% and 4% and now that figure has climbed to about 7%. This has alarmed a lot of people and made them wonder whether or not to invest in real estate.
So here’s the thing: if interest rates are at 7%, they are still lower than the inflation rate, which is hovering in the region of 8.5%. And when I look back at my long investing career, that 7% is still an astoundingly low rate. Investors – and myself, I must add – have grown very wealthy with the help of investments made in times when those rates were a lot higher. In fact, when I first started to buy property back in the 1980s, interest rates were as high as 14%. And I still was able to create positive cash flows and keep buying more and more houses.

Why you don’t have to worry about 7% interest.

I get calls and emails from investors who are happily wealthy, having invested maybe fifteen years ago when interest rates were 7% or 8%. These investors went on to buy multiple homes. They did this by first generating a positive cash flow from rental income and then buying more homes. And then some years down the line, when there were still some years left on the loans, they sold off a couple of the homes. They then paid capital gains and repaid the remaining loans, and now enjoy their investments, free and clear!
So, don’t worry about the 7% interest rate. Your real trump card is the 30-year fixed-rate loan – which Warren Buffet also recommends. With this loan, inflation is your best friend! With inflation, cost of living will rise, and hence your rental income will increase as well.  However, with the 30-year loan, your mortgage repayment is never going to change. And that amount is going to look smaller and smaller as the years go by while your rental income will continue to rise.
I have a lot of stories about successful investors who were buying real estate when interest rates were much higher than they are right now. I will be sharing some of these stories in the upcoming expo and will also go into the details of rising interest rates. To know more, you can check out this article or watch this video.

What To Do When Tenants Cause Damage – We Have You Covered

What happens when it turns out that your tenant is not the best sort of tenant? What if they cause damage to your property? What if they break rules and contravene the terms of the lease agreement? A lot of real estate investors worry about bad tenants. It is not unreasonable to do this. However, you can rest assured that things will get looked after when you’ve opted for the Remote Control Retirement Riches formula that so many other investors have used.

A bad tenant is not your headache.

So you have a tenant who breaks things or makes alterations they aren't supposed to or causes some other type of damage. What do you, as a landlord do? Well, you do nothing. This is because you’ve done the smart thing by engaging a property management agency to look after the property, deal with the tenant, documentation etc. It is the job of the property management firm to take care of the wayward tenant. The property manager will deal with the tenant and ensure that your loss is made good.
The options available to a tenant would depend upon the state laws within whose jurisdiction the property is. Most states have very fair and balanced laws that equally favor the landlord and the tenant. I'm not talking about New York and California, but then we don’t advise you to invest in these states anyway.
So there are laws in place to protect the rights and interests of property owners. The owner is entitled to make good any loss or damage using the amount of security deposit paid by the tenant. If this is insufficient and the damage is more extensive, there is the option to approach the small claims court for compensation. Garnishing of wages may be another possibility.

The Remote Control Retirement Riches formula.

All this sounds like a lot of work, a headache really! But here’s the best part, this is not your headache as a landlord. It is the job of the property manager to deal with the tenant, to recover the damages, to deal with the attorney and the court and so on. Property management firms typically have attorneys who deal with this sort of thing, so that it isn't your headache.
And that is why we call it the Remote Control Retirement Riches formula. You as an investor could be in any part of the country – even the world, and your real estate investment is looked after for you. You don’t have to deal with the issues that typically crop up between a landlord and a tenant because you have competent people to do this for you. At ICG Real Estate we have devised a formula that requires you, as an investor, to do nothing!
If you would like to know more about securing your future and the future of your family, reach out to us at icgre.com. We have helped thousands of investors create not just financial security but wealth for themselves with the help of real estate investments. Sign up for our updates or attend one of our Online Expo events. You have nothing to lose and a lot to gain!

There Are Many Reasons To Hire A Real Estate Agent – And No Reason Not To!

Oftentimes, people think that a real estate agent is an unnecessary indulgence. You are just buying property after all; it’s not rocket science! For my money however, I would go with a real estate agent every time – and as someone who has decades of experience and hundreds of properties as investment, I’d say I know what I'm talking about!

There are 5 reasons why involving a real estate agent is a great idea.

  1. Expertise – In the real estate space, market insight counts for a lot. It tells you where to buy property, when to buy, the sort of documentation required. A real estate agent is basically someone to show you the ropes so that you don’t end up making some very expensive newbie mistakes. This is very important when you're buying a home as an investment; something that you hope will increase in value over the years. The agent is aware of current market trends, whether a particular region is growing or stagnating, and will be able to make educated predictions.
  2. Contacts – They work in the area and in the real estate space so they have all the right contacts with the builders, with property managers, and so on. This can ease a lot of processes for you; smoothen your path so to speak. The personal equation a real estate agent has with these people could even get you a better deal in some cases.
  3. Local knowledge – This one is especially important if you're living in one corner of the country and investing in a whole other corner thousands of miles away. Now you definitely need someone with insight and contacts, who will guide you about local regulations and so on. If you're looking to have your property start to generate a passive income in the form of rent, this local knowledge comes in very handy.
  4. Experience – As a professional you're surely good at your job. This is because you have training and knowledge, and you have done it for a while. In the real estate space as well, on-the-job experience is invaluable. Wise counsel from a seasoned, experienced real estate professional could make the difference between a great investment and a dud.
  5. It is free – Also, what reason could you possibly have not to hire a real estate agent? You're not going out of pocket on this; you pay nothing. It is the seller who will be paying, so there is really no reason not to involve a real estate agent in the process.
Finally of course, it is your call whether you want to use the services of a real estate agent or not. For my money, I would absolutely use the services of such an expert. Not only would I save myself a lot of headaches, I even stand a chance of getting better deals because of the collective bargaining power some of these guys have! Reach out to us to know more about our expo events or services, or if you have any questions. 

How To Buy More Homes to Reach Your Financial Goals

For a lot of people, it is a bit of a leap of faith to commit to real estate investment, even though they know that this is their best chance to create future wealth for themselves and their families. This is a question I often get from people who may be hesitant about taking the plunge into real estate investing: “Is real estate investing easier if I already own property?” There is the idea that once I take the plunge, things will get easier. This is only partly true.

Does it get easier?

If you’ve bought property before – to live in, to make an office or to run a business, or as an investment, you know the nuts and bolts of it all. Buying property involves getting a loan, signing documents, and generally going through the closing process. Basically one knows what the whole exercise entails.
So yes, you do have the comfort of being familiar with the process and the next time around will be less intimidating and more familiar. However, beyond the psychological edge over a complete newbie, there are no major benefits. There are other factors that will decide how easy or difficult it is for you to get a loan, and how many loans you will be able to obtain.

Other factors that influence investing

The number of loans you can take out as an individual is limited, which is up to ten Fannie Mae loans per person. As I often joke with my clients, not even Warren Buffet gets more than ten loans! However if you're married, you can, as a couple, take out up to 20 loans, thereby increasing your chances of wealth creation for your family.
Lenders look at a potential borrower's income, type of employment, and credit history, as well as tax returns to decide whether or not to grant loans. A lot of lenders will prefer to lend to people who have already taken out loans to buy homes as investment over those that have not. This is because those who have already invested may already be generating a rental income for themselves. This makes them a more attractive type of borrower in the eyes of the lender. So if you're financially sound, you may be able to get up to ten, and as a couple, up to 20 home loans.
More details on this here. 
If you have questions about buying homes to create retirement riches for yourself, we at ICG Real Estate are happy to answer them for you. We can help you take that plunge! If you like you can attend one of our quarterly real estate investment events before you decide. 

Why Direct Real Estate Investments Win Out Over REITs

I often get questions about REITs (Real Estate Investment Trusts), and whether investing in these is a better idea than actually buying homes as an investment. In my experience, REITs are a good option and may be a good way to figuratively dip one’s toes into the real estate space. However, I would recommend direct real estate investments over REITs for several reasons. You can click here to learn why I say so.

What are REITs and how do they work?

Investing in REITs is a little like investing in the share market or investing in gold in dematerialized form. You don’t actually own X piece of land or Y address. You, along with others, own a share of what are usually huge commercial properties. The fund managers usually raise tens of millions, even billions via REITs, and make massive investments.
However, this does not give you the benefit of the 30-year fixed-rate loan; something that I am always waxing eloquent about – and with good reason! This is a gift that keeps giving in a sense over the entire duration of repayment. The amount never increases – rather it keeps getting easier and easier to repay as the years go by, as inflation rises and everything around becomes more expensive. This is something that Warren Buffet himself recommended when speaking with me. Read more about it in this Entrepreneur Magazine article.

Why invest in single family homes?

And then there is another reason why I believe direct purchase of single family homes is the best kind of investment – and that is rental incomes. When you buy homes in some of the larger metropolitan areas in the Sunbelt states, you are creating a source of passive income for yourself by way of rental income. While the rent income will follow inflation and keep increasing over the years, the repayment amount of your 30-year loan remains the same.
In just about ten years, you would find that your loan balance is just about a quarter of the value of the home you own. This makes it possible for you to repay the loan early, even to buy several homes as investment. Owning several homes can help you create valuable assets for yourself while at the same time generating a passive rental income for you for life.
So, for all of these reasons, direct purchase of real estate is a better option than REITs investments for those who want to create wealth and achieve their financial goals. You can listen to my latest episode about this, and if you have any questions, feel free to contact us at ICGRE. 
How A Few Months' Waiting Doesn’t Impact Your Property Investment Prospect
 
There are a lot of questions that come my way during or soon after our lively, exciting ICGRE Events – our quarterly real estate expos. Where do I invest? What market is good for me to buy in right now? What markets should I avoid? And then I get this question from all the impatient people – what to do if I get on a waitlist for buying property? So here’s what I tell them about waiting lists...

 

Waiting lists are not a bad thing.

 

Yes I know waiting can be frustrating. First you go and make that all important decision to invest in real estate – congratulations! This is probably the smartest decision you’ve taken for your future financial security. Then you go ahead and do your due diligence and you research the property market to see where you should invest. The research seems to point in a particular direction. The trade pundits also seem to indicate that X or Y market is a great investment opportunity because it is poised to grow in times to come. So you make up your mind.
Then when you want to take the plunge, someone tells you to wait – they put you on a waiting list. Frustrating? Maybe. A problem? Not necessarily. So, first ask yourself: why are there waiting lists in the first place? This means that it is a good market to buy real estate and a lot of people are seeing the sense of investing in this particular market. This probably means that you're making a wise choice.

 

Look at the bigger picture.

 

What is the aim of your investment? It is that you should be able to secure your financial future, right? Maybe you're looking to finance the education of your grandkids or create the sort of retirement riches that help maintain a great lifestyle even in your later years? Whatever your aim is, the fact is that with real estate you're investing for the long term. You're looking at returns 10, 15, maybe 20 years down the line.
So when you take that long view, a few months here or there doesn’t really matter. My advice is that if you're really interested in a particular property market, you shouldn’t let yourself be dissuaded by some waitlist. Just wait for a while and do absolutely nothing. And remember, even after you’ve bought your property, you need to do absolutely nothing! At ICGRE we take care of all the nitty gritty for you. 
Check out this episode to know why wait lists don’t really matter; and why you shouldn’t worry about waiting a few months to make the right real estate investment. If you like, you can also check out some of our Investor Stories to know how we literally work to put cash in your pocket. 
Simple Reasons Why Foreclosure Investments Are a Bad Idea
There are some people who are convinced that investing in foreclosures is the way to go; that this is the way they are going to make the millions that they dream of. I would gently disabuse people of this mistaken notion. Foreclosure investments are neither as common nor as simple as people believe them to be. For a number of reasons foreclosure investments are not advisable. In this economic climate, the idea of making big money off of foreclosures is going to remain a pipe dream mostly. I explain why here.
 

What are foreclosures and when do they happen?

Simply put, foreclosures happen when a person is unable to make payments on a property loan they have taken. In such a situation, the bank or financial institution, who is the lender /mortgagee in this case, will ‘foreclose’ the property. They will auction off the property to recover their dues. Theoretically, it makes sense to invest in such foreclosures because banks and other lenders basically want to sell off and get the property off their hands. They don’t want to be stuck with a non-liquid asset that they cannot lend or otherwise monetize, so you can buy cheap.
But think about it – when does a foreclosure actually happen? Well, first the borrower or mortgagor defaults on their payments. Then the lender sends notices and then proceeds with the foreclosure – a process that will typically take months. In the meanwhile the property owner has other options – especially now when it is more or less a seller’s market. Our recent experience has been that in a lot of markets, people receive multiple, excellent offers as soon as they put a property up for sale.
So why would any homeowner let it get to the foreclosure stage when they have other, better options? In the past, when times were tough, banks were foreclosing thousands of properties. So during the 2008 recession and for years after that, this would have made sense. However, it doesn’t anymore, particularly now in these COVID times as I explain in this short video. And that is why I say that right now foreclosure investments remain a bit of a pipe dream.

 

Still thinking about foreclosure investments? You must be brave!

Why brave? Because buying foreclosures is a lot more complicated than it seems. If you decide to bid for a property that is undergoing foreclosure or intervene in a suit, there is a lot you would have to check – are the property titles clear? Is there some other lien or pledge on the property or IRS issue? Foreclosure investments need significant expertise and experience. Plus in my experience, parties sometimes collude with each other as well. I have seen people being financially destroyed as a result of this.
For all of these and other reasons, I advise people against investing in foreclosures. There are other sounder, better investment opportunities out there for you. Get in touch with us to know more.
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