San Francisco is a great place to live in as most people living here will tell you. But it is not a good place to invest in real estate! It never has been, as I explain categorically to people who come to me for advice. In fact in this short episode I explain why it has never really been a good real estate investment destination, for several reasons.
Think about rental incomes relative to property value.
Property prices in the SF area have appreciated over the decades. However, this is not the only criterion for wise real estate investments. Rental income is an important factor as well. Now it is true that rents are fairly high in San Francisco if we speak in absolute terms. However, the rent is not high relative to the value of the property here.(In this short video I explain and illustrate with some numbers. In order for your real estate investment to make sense, your rental income has to be commensurate with the value of the property you buy. Otherwise it doesn’t make sense for you as an investor.
Keep local laws in mind.
Another thing to keep in mind is state laws and rental regulations. California laws tend to be fairly anti-landlord. In my experience, a recalcitrant tenant who doesn’t pay and also refuses to vacate can turn into a very big headache for a long time. This is another reason it doesn’t make sense to invest in real estate in San Francisco. In this regard, the Sun Belt states are a lot more investment friendly.
In this short videoI explain how one of our investors recently closed a very favorable property deal. You too can learn how to make savvy real estate investments to secure your financial future! Check outupcoming events to learn more about creating retirement riches for you and your family.
One of the questions that often come up in the investment expos I address is that of where to buy property in a way that offers the best ROI(return on investment). Is Austin a good place to invest in, they ask me. Elon Musk was spotted there, so it must be cool or hip, they tell me. They are very wrong. Let me explain.
Austin is a sellers’ market right now.
In the past, I have invested in Austin and helped people do the same. In fact Austin was one of my favorite markets and investing there was a good option then. Past tense! Right now, the Austin real estate market is among the craziest in the country. Property owners here should be looking to sell or to hold – not buy. There may be a lot of buzz, and thanks to the pandemic, there is even more turmoil in the market, but Austin is not where you want to buy real estate right now.
Your purchase criteria.
There are a few things you need to keep in mind when you're investing in real estate. You have to choose the type of property you buy. For instance – a single family home or a condo? What makes more sense in this scenario of the COVID pandemic when people are scared of shared spaces? There you have your answer.
You also have to choose carefully when to make the investment. Austin is not good right now, but there are areas that have loads of growth potential. So where and when you buy also matters greatly. Another aspect you want to look at carefully is rental incomes. A buyer’s market doesn’t necessarily mean that rental incomes are good in the area.
All this market insight isn't simple or straightforward. Luckily for you, our quarterly real estate investment expos can help. These events are designed to guide you to make purchases based on several criteria such as type of property, location, future appreciation, current rental prices and so on. Check out this short video(under 3 minutes) where I explain how this works.
When is too early to start investing in my future? Am I really ready to start investing in real estate? Do I have the time and the experience to do it? What if I make a mistake?
These are some of the questions I am asked all the time by potential clients. There are some who are hesitant about taking the plunge, so to speak, while others have a spouse or a family member who is averse to the idea. So how do you get around that? When should you start investing and how to know if you are truly ready for it? Find out here.
Investing doesn’t need you to be an expert.
Much of the hesitancy comes from diffidence and a simple lack of experience. People believe that one has to be really clued into the real estate scene to make informed choices and decisions. They also – erroneously – believe that as a homeowner they have to be hands on and that this will take up a lot of time. Fortunately, these are all misconceptions. You don’t need to be an expert and nor do you need to invest a lot of time and effort into your real estate investment. Check out this short video where I crunch a few numbers and explain the Fannie Mae rules among other things.
At ICG we offer expert guidance for you – whether you want to buy one or one hundred homes. We put you in touch with developers, reliable property managers and guide you through the loan process. At no extra cost to you, you have access to our carefully cultivated network of professionals who will save you time and help to safeguard your investment. So really, when you think about it, investing in real estate is not at all the daunting proposition that many think of it as.
You are never too young to start investing in your future.
For those who think they are too young to start investing for their retirement, let me disabuse them of the notion. The fact is, one is never too young to start investing in one’s future and financial security. It is also never too late! I have had people in their 20s and 30s approach me for real estate investments, and I have also had people start investing in their 60s and 70s!
Still have doubts? Are you wondering if you are financially ready to make the commitment? Or perhaps you are sure and a spouse or other family member is the one that needs some convincing? Well this is also something that I frequently help people out with. Check out this short episodewhere I answer some of the questions I am frequently asked. I explain how to take the next step towards your future financial security, and how you can ensure that you make the best choices for yourself and your family.
Peter believes that when he started investing in real estate at age 65, ICG helped save him from a life of poverty. Derek is so satisfied with his financial future that he makes it a point to gift my book to people he meets. Niva Lev has the peace of mind that when she is no longer able to work as a physiotherapist, the properties ICG helped her invest in will take care of her. These are just a few of the stories of the ICG Advantage – which comes at no extra cost. I explain more here.
The history of ICG.
It all began when I was a young engineer in Silicon Valley back in the early 80s. I would look at my clever, hard working colleagues – with not a lot to show for their hard work and talent in terms of finances. I decided I wanted more! That was the time when I invested in homes in the Las Vegas area. To begin with, those colleagues laughed at me. But soon they joined me, and before long I was heading a consortium of investors buying homes in the region.
This is when I realized the power of the concept. It isn't just the fact that real estate is probably the one genuinely recession-proof investment there is. It is also the fact that there is power in numbers. And that is why ICG has the power to really help change lives.
Get the ICG Advantage for you.
You may buy just one home – or you may decide to buy dozens. However, you can still avail the ICG advantage. It is simple – you have access to the same developers, property managers and financial resources that I use when I invest in real estate. When you come through ICG, you have the clout that comes from belonging to a large group. We at ICG are people with industry experience so the developers and managers are happy to sweeten the deal for you. They are eager to please me, and by extension, they want to please you!
Know more about the ICG advantage and about securing your retirement riches today(no matter how young you think you are, it is never too early to start planning for your future). Find out how you can secure your future at zero extra cost to yourself. And since there are professionals in charge of everything, you don’t have to take time out of your busy life either. Check out this short video to start planning for your financial future and creating a passive income for you today!
Recessions are terrible for property owners, right? This is when people go out of business or lose their jobs, stock markets crash and property prices plummet! The media would have us believe that there is only doom and gloom everywhere. However there is a silver lining to this situation as well, as I have found over the decades of personally investing in real estate and helping thousands of others do the same. So here’s how I answer when they ask me, what do I do if there is a recession?
The seen and unseen impacts of recession.
Let’s talk about the terrible recession of 2008 which went on for a few years. Just previous to that recession, there had been a couple of years of boom time. This was when property prices had appreciated significantly. So in the years from say 2004 to about 2006 or so, property values in areas such as Phoenix were nearly doubling in just two to three years! During recession, however, those valuations were seen to plummet. So those were the seen and distressing aspects of recession.(Check out this short episodewhere I crunch some numbers and explain what I mean).
However, recession is also the time when property rentals go up. This is a time when people are unsure about their jobs and future earnings. They don’t want to buy property and run the risk of being unable to pay for it. So they play it safe and opt to continue to rent. This is the hidden benefit of recession for property owners.
Why you must learn the art of doing nothing.
So as I always tell my clients, you have to learn to do that most difficult of things during the recession: do nothing! When valuations plummet, one can feel a lot of pressure to just sell and cut one’s losses. I have seen this in new investors, this tendency to panic-sell. If you ride out the recession, you will see the valuations of your homes going up again.
I created a video to explain the importance of doing nothing. I also outline the basics to keep in mind about investing in real estate and why this is the one truly recession-proof investment you can make. Check out this short video now– it will be the best return you can get on a five-minute investment today!
Real Estate Investments - When to Do Something and When to Do Nothing
If you're someone who wants to secure their future, especially the retirement years, let me tell you two simple facts: there is a time to do something and there is a time to do absolutely nothing! This is what I have learned over the decades since I first facilitated real estate investments in Las Vegas for a group of Silicon Valley engineers back in 1983. There are some mistakes one simply cannot afford to make in real estate investments, and yet those are the mistakes I see repeated most often. Find out what they are.
Where to buy.
This is one of the widely believed myths in real estate: that you have to be close to the property you're buying. There is somehow this misconception that landlords have to be within easy driving distance of the properties they invest in. Somehow investors feel – mistakenly – that they will have to be at the beck and call of their renters for every leaky faucet and broken door hinge. So many Silicon Valley investors, for instance, will insist upon buying, say in Sacramento, even though cheaper properties with better future returns are available elsewhere in the country.
So, the number one mistake that people make – and which you as an investor should avoid – is to insist on buying close to where they are. Let me tell you – a big proportion of my investors actually live overseas! They aren't even in the country! Why worry about finding renters, and managing the upkeep and repairs of your investment when there are experienced, well-equipped professionals to do this for you?
When to do nothing and when to do something.
Once you’ve bought the house and have your renters in place, this is when you do nothing! When you have experienced professionals and a well-connected network of developers, realtors, property managers and lending sources to assist you, why would you want to exert yourself and risk making expensive mistakes? Masterly inactivity! That is the only thing required of you.
So when do you have to do something? Well this is something that I will explain in this short video where I speak about another common real estate investment mistake that so many people make. I share one of my common experiences of two friends who approach me for their investment needs – one takes the right action at the right time and the other doesn’t. Ten years down the line, the two end up in very different places, financially speaking.
Listen in – this may be the most lucrative five minutes you spend all day!
15-Year Loan Or 30-Year Loan? There Can Be Only One Answer - And It's Simple
One of the questions I am asked most often – by clients and people who attend my seminars is this: should we opt for a 15-year loan or a 30-year loan? My answer is simple – the 30-year loan every single time! And what about if the rates are lower with a 15-year loan? The 30-year loan is still your best choice. If there is a 40- or 50-year loan, choose that! Here’s why.
Choose the longest possible loan repayment plan.
Make this a rule. A rule written in stone. Consider this – what does an avocado cost today? Say about $2.25, right? What will it cost in about 14 years? It will cost more in the region of $4, you reckon? So $2.25 today will be worth about the same as $4 in 14 years. People who argue that longer loans entail a higher amount of interest payments to the bank forget to consider the true value of money and how it changes over time due to inflation. What might be a substantial monthly outflow now will look like a joke in 15 years, perhaps just enough for a fancy meal for two!
The 30-year loan is also the most flexible kind of loan. You can, of course, repay earlier if you can and you want to. You can repay in 15 years or even 10 years. But you don’t have to! With a 15-year loan you don’t have the 30-year option. What if something goes wrong and you have some unforeseen expenses, or if, god forbid, there are retrenchments where you work? The 15-year option would be difficult but the 30-year option is much easier! You can even pay more for a while and then revert to the lower repayment option. And when you have a lower monthly payment, you can afford to buy more homes; invest in more real estate!
In other words, you cannot afford not to take the gift that is the 30-year fixed rate loan. Check out this video to know more reasons why this is the only savvy option. I will also explain why inflation is your best friend when you have taken the 30-year loan. Go ahead and spend a few minutes watching this video – those few minutes may end up saving/making you a lot of money!
Why Inflation Is Your Best Friend When It Comes To Real Estate Investments
In the mid-19th century, life expectancy was about 40 years. In 1950, that rose to about 65 years. Today, that life expectancy has grown to about 81 years, and it continues to go up. We are having longer retirements than ever before in history. Medical science progressing at the rate that it is, those retirement years are going to stretch even further! We are living longer, healthier lives than ever before, so shouldn’t your financial health reflect this? Here’s how you can ensure it.
It is never too late to invest in real estate.
I have in the past connected with Warren Buffet, and we have communicated now and then since. Now this financial whizz isn't known to be a big investor in homes, but even he saw the wisdom of buying single family homes in the aftermath of the 2012 recession.
If you think that this is something you should have started when you were younger, let me tell you, you can start to invest in real estate at any age. We have had people that have started the process well into their 70s or even later. There is the story of Mindy, a school teacher who bought a rental home in her 50s. She finished paying for her 30-year fixed rate loan in 16 years, so now at 70 she has free and clear ownership of a property that earns her a steady passive income from rent. There is also the story of Brad who lives in the San Francisco bay area. He started investing in the 1990s, ended with 16 homes in the Phoenix area and retired early!
Invest in the Sun Belt states.
About 35% of the US population is renting – that is over 110 million people! A massive potential for passive income right there! For a number of reasons the sun-belt states suggest themselves as the places with the best growth potential right now. In these areas, the larger metropolitan areas with a lot of commercial activity are great choices.
This is where young professionals and their families are coming to work, where they are looking to rent properties, live, study. So if you want to make the wise decision to invest in real estate, I always recommend single family homes in good areas rather than apartments or condos. You are setting up your present as well as your future.
Let inflation be your friend.
Usually inflation is a bad word, but not when it comes to real estate investments. Firstly, I recommend the 30-year fixed rate loan – and that you make the lowest down payment possible. While your outgoing seems high right now, after some years it will be roughly the same as a nice dinner out somewhere. While your loan repayment amounts remain the same, your rental incomes go up over the years because the cost of living(with inflation levels) goes up!
So, what size of home should you buy? New or pre-owned? What type of property is going to fetch you the best rental incomes and what will appreciate over the long term? Who will manage properties so far from where you live? I have the answers to all those questions and more. Check out this video where I answer some of these vexing questions – and more.
The government directives regarding Fannie Mae or qualified mortgages is seen as bad news by investors. They are scared because this could well mean scarcity of QM loans in the market. But here’s the solution: non qualifying mortgage loans! These are the loans that are going to tide you over and secure those retirement riches for you. Watch as I explain how.
Non-Qualifying Mortgage – your secret for success.
As I always say, it is the loan duration and the amount of down payment(should be the lowest possible for most circumstances) that are the key to a successful investment and rich returns. This is more important than whether it’s a non-qualifying mortgage or a Fannie Mae loan.
Right now, the idea of non-QM loans may seem intimidating, but they are a smart choice for investors who cannot get QM loans, and in the long run, they aren't that much different. Right now rates are low and this is what makes now the perfect time for you to pick this option instead of doing nothing, as I explain in this video.
Initial negative cash flows? No problem!
And yes, even if you're looking at negative cash flows to begin with, I would still tell you to go ahead and invest in property and buy as many homes as you possibly can(assuming you can sustain the slight negatives). Whatever your negative cash flow is right now, in the future it may be about the same as one dinner in a fancy restaurant(after, say, fifteen years or so)! While your PI payments will remain fixed, the rising cost of living will ensure that your rent amounts keep increasing.
Check out this short episode where I speak about non-qualifying mortgages as well as Fannie Mae loans and the pros and cons of each. Also find out more about my early experiences with real estate investments in the Vegas areas back in the 80s. You probably will not believe the sort of prices at which I acquired homes at the time-- why I was able to buy so many and why I would buy a hundred more if I could go back in time. Check it out right now – you can thank me later!
I am often asked this question by people interested in building a sound real estate investment portfolio: should they invest in single family homes or multiple unit properties? The popular idea is that one is supposed to start with single family homes and then‘graduate’ to duplexes and perhaps fourplexes(and later, to larger apartment complexes). This is where the cash flow is, they’ve been told. I have something different to tell you. With my decades of experience in real estate, I have helped create wealth for a lot of people, so you may want to watch this to know more.
I recommend not graduating.
Think about it – which neighborhoods would you consider are the best ones? Are they the ones with apartment complexes or the ones that have individual homes with some space for kids to play? Let me put it another way: would you like to live in a place where you share a wall with a potentially noisy neighbor, or somewhere you have to share spaces with others and risk an infection in pandemic times?
I think the answer is evident: you would pick a picturesque neighborhood with a good quality of life and nice neighbors. And if this is the choice you would make, there is no reason to presume that people are looking to rent some other type of home! So for me, and all investors I advise, it is the single family home every time if you're looking to make a prudent investment. There are several excellent reasons for this, as I explain in this video.
The IRR(Internal Rate of Return) is important.
This cash flow myth is just that, a myth. The cash flow isn't necessarily better with investments in apartments, duplexes and so on-- particularly when you consider all the numbers and calculate the internal rate of return for the entire life of the investment. For you to secure your financial future and to ensure that you have access to the kind of retirement riches that you can truly depend upon later in life, there is no more prudent investment than single family homes! There is an exception if you purchase duplexes in good areas(some of our broker teams have convinced builders to build duplexes in the same quality areas as single family homes. That would make duplexes attractive enough for us to buy. Remember also that once you exceed five units in a single property(i.e. apartment complexes), the magical 30-year fixed rate loan is no longer available, and you need to get much harsher commercial loans, with onerous pre-payment penalties. Buy single family homes(or duplexes in quality areas). Not one, not two, but as many as possible! Yes, it is possible and I will tell you how – check out this video for all the answers!
ICG uses single-family home investments, bought in advantageous locations and the best U.S. markets. We enable you to enjoy the clout that comes from purchasing a multitude of houses, even if you only buy one.
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