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Higher Rates Possible by The End of 2015

Janet Yellen, The Federal Reserve Chairwoman, said that if the economy is on track with job market improvement and inflation climbing closer to its target rate, the fed will start raising interest rates by the end of 2015. This is a move most have been expecting.

 

I presume rates will rise very gradually, and it will be a while before it translates to higher mortgage rates, but the process seems closer than its been in many years. Those of us who have been around real estate for a while know that the super-low rates we see today are not the norm. For most of real estate mortgages’ history, rates have been much higher than they are now.

 

Thus it seems quite likely that in the coming years we will see rates that could climb back into what we used to see in the past few couple of decades. Mortgages reaching 8%, anyone? It’s possible but will not happen quickly. Of course, some veterans remember mortgage rates being higher than that  – much higher. Assuming mortgage rates will indeed rise in the coming years, it only drives home the tried-and-true message even stronger: buy a good home in a decent area, finance it with a 30-year fixed-rate loan and you have put an excellent “stake in the ground” towards your financial future.

 

A 30-year fixed-rate loan has always been amazing. To foreigners they seem like an impossible miracle: how can the loan payments and remaining balance NOT be pegged to the cost of living? That seems like a fairy tale. How could everything else rise with inflation, on average, except for one and only one item: the mortgage rate on a fixed-rate loan?

 

Once people realize how absurd this is, it becomes crystal-clear:  it’s amazing for the BORROWER.

 

As a borrower – go ahead and get these incredible loans. You don’t have to wait 30 years for the loan to pay off. After some time – perhaps 10 years, perhaps 12, 15 or so – the loan, while still having time remaining on it, will likely look like a joke – VERY low payments and very low balance – as good as paid off in essence. (Down to almost a rounding error as the years advance.)

 

Inflation AND your tenant pay the loan off. Inflation makes it lower in real dollar value and the tenant makes the payments for you (and leaves extra for you in the form of cash flow which increases as the years go by since the loan payments are fixed, but rents are not).  This message is always true – regardless of what interest rates might be.

 

However when interest rates are so incredibly low as they are now – it behooves real estate investors to go out and buy homes, finance them with 30-year fixed-rate loans, rinse and repeat. This is a window in time that may not repeat itself for many decades. Take advantage of it.

 

In our ICG 1-Day Expo coming up NEXT SATURDAY 5/30/2015 near SFO, we will discuss this point and many others. There will be lender guests who will teach us about loans for people with over 10 loans in place, loans for foreigners, and other special loan types. There will be market teams for the best real estate markets in the nation. There will be special real estate deals and special houses that can start the process we discuss above for you.

 

As always, we will also have experts on insurance, credit, financial planning, and other topics, plus a lot of networking. Anyone mentioning this blog can attend free with two guests – please email us at info@icgre.com to register.
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Home Prices Rising and How You Benefit

In a Wall Street Journal article (front-page) by Laura Kusisto, May 12, 2015 titled “Home Prices Start to Heat Up” we learn that home prices rose year-over-year in 148 out of 174 metro areas in the United States, as measured in the first quarter of 2015. Fifty-one of these metro areas increased by double digits.

There is no doubt that most U.S. markets, including essentially all the markets real estate investors are investing in, are on an upwards trajectory. (If you are not a real estate investor… you may want to take advantage of as many opportunities as you can to learn about this market and determine what might work for you as an investment in your future.) The reasons are many, including low interest rates and loans becoming even easier to obtain over the past year (and this trend continues). Buyers (no doubt) know that the low rates will not be there forever, and feel compelled to jump in. And they are doing just that. A better employment picture also helps.

Needless to say, the phenomenon of price appreciation by itself can create upwards price pressure, as buyers prefer jumping in sooner rather than later, to get a better price. As I have always discussed and predicted, retiring baby boomers are starting to be a major force in some of the sunbelt states as they seek homes for retirement in warmer climates and friendly tax situations.

For the investor, new and seasoned, what is happening now is not strong enough not to invest. Learning how to take advantage of all of this is optimal at this time. It is a reminder that buying with a fixed-rate 30-year loan that never changes with inflation – and I cannot emphasize that enough – is one of the best financial moves one can make for their financial future! The tenant and inflation will bring the loan balance down as the years go by. Home prices AND rent are NOT fixed, only the mortgage payments are (the loan balance is also fixed and in fact is paid a bit off each month, even nominally due to the amortization).

I will discuss this in greater detail as well as many other factors critical to our real estate investing strategies, during our ICG quarterly 1-Day Expo near SFO airport on Saturday May 30, 2015. We will have market teams from the best markets in the U.S. at the Expo with vendors present for one-on-one discussions. Lenders will tell us about the new loans we can get, including new loans for foreign investors and U.S. investors with over 10 homes. We will also have experts on insurance, credit optimization and repair, and overall financial planning. For more detail on these experts, visit us at ICG Real Estate Investments and click on the button about our upcoming event. To register you may email us at info@icgre.com, and mention where you saw this blog, to attend for free with two guests. If you would rather register through Eventbrite, feel free (although ticket price applies).

See you soon; I look forward to learning from our experts right along with you.

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The Ideal Properties for Real Estate Investment for The Busy Professional

As a busy professional, it is likely that your income will be sufficient to qualify for loans on investment properties – especially Single Family Homes – in most of the U.S. markets.  A high percentage of busy professionals also have good credit scores, which bodes well for getting good financing.

I maintain that the ideal property for real estate investment for the busy professional is the Single Family Home (SFH). SFHs are almost a perfect property for the individual investor who also has a regular job or business. SFHs are still the “American Dream” for most people. They are also a relatively attainable dream in many large metropolitan areas in the U.S. where prices are quite affordable, even in 2016.

SFHs are essentially the “liquid” real estate since when it is time to sell your potential buyer pool is the largest – effectively all home-buyers in the marketplace.  These homes are the real estate investment on which you can get the most powerful loan in the real estate universe – the magical fixed-rate, 30-year loan. 

Technically this loan is available on 1 to 4 residential units so duplexes, triplexes, and four-plexes also qualify. However, SFHs are usually superior to 2-4 unit properties. In good areas, you will usually find only SFHs, while you may have to travel to another part of town to see the “plexes” and they will usually be surrounded by many other “plexes.”  The “plexes” are more likely to present management challenges, have more short-term tenants (statistically) and to top it off, may not necessarily provide as good an appreciation over the long term. 

One exception is new duplexes in white-collar areas, but overall the SFHs are superior. I have been buying homes for well over 30 years and helped people buy nearly 10,000 homes in dozens of markets. During these decades, I have witnessed many “plexes” and their performance as well as many thousands of SFHs. My experience and the experiences of thousands of investors leads me to favor the SFHs over the “plexes.”

Buying larger residential properties – apartment complexes – can be a good investment, but there are areas where the investor needs to be an expert. The optimal apartment complex size, based on the experience of most apartment complex investors, is between 100 and 300 (many say 150-300) units, so economies of scale can be utilized to improve cash flow. 

For example, you may need one full-time on-site manager and one full-time maintenance person for a 110-unit complex, but if you have a 60-unit complex, you may STILL need to use one full-time on-site manager and one full-time on-site maintenance person – but with 50 fewer rents coming in! That is NOT using economies of scale very well.  There is a lot to discuss on the subject of large apartment complexes, but for the scope of this article, they require deep expertise to run properly.  
They may take up much more time than a busy professional has available; they are NOT financed with the magical 30-year fixed rate loans, and they usually call for a large investment up front. For the busy professional, Single Family Homes presents a simple, effective, and very powerful investment, with outstanding financing that cannot be found anywhere else and a time commitment, which is relatively low. 
We will discuss this topic, as well as many other crucial topics for investors, at our Quarterly 1-Day Expo on Saturday, May 21st near SFO. We will have market teams present, including a new exciting market. We have also invited top-notch experts to speak on Property Management, 1031 Exchanges and Proper Insurance – the first and most important barrier in protecting your assets, including nationwide umbrellas. Everyone mentioning this blog is invited to attend free, with associates. Just email us at info@icgre.com to register, and in the subject line write: Saw your blog! See you there.
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The Sun Still Shines in Florida!

Florida has emerged as the “Go To” state in 2014.
 
While Arizona and Nevada are excellent; Texas, Oklahoma and a slew of other states, are relatively stable. It’s Florida that embodies the post-recession sweet spot.
 
The home prices in Florida markets are still way below the bare construction costs. Even though there is steady price appreciation, values are still very attractive relative to new homes. We have already touched upon the reason: the foreclosure process in the state of Florida is judicial and has been extremely slow. As a result, the flow of homes into the marketplace is more steady than in Trustee Sale markets.
 
Despite the great demand, this balancing out of the supply of homes has created a more tampered growth environment for the state of Florida. Many great markets will emerge after the recession effects wear off. For now, the sun shines on Florida!
 
Don’t forget to visit us at our incredible 1-Day Expo THIS SATURDAY, March 8th, near the San  Francisco Airport. Details are on our website: www.icgre.comWe will have rare speakers, tons of education, lots of Q&A and many experts present. In addition, some of the hottest markets in the nation will be represented. A day not to be missed!
 
Looking forward to seeing you on Saturday!
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Why Americans Are Heading Back to the Suburbs

The trend towards moving out to the suburbs seems to be increasing as people seek more room for kids to play, a bit more privacy, and the usual amenities associated with suburban living, says Neil Shah in an article from last week in the Wall Street Journal.
For us as investors, this is an interesting trend as we have focused on investing over the entire metropolitan area with an emphasis on the suburbs since homes in the suburbs usually mean a rental family, likely with kids, which translates to greater rental stability.

This movement plays right into our investment emphasis and is encouraging to see. We will discuss this trend and many more pertinent issues during our 1-Day Expo Saturday, June 14th near the San Francisco Airport (click here to register.) We will have expert lectures on asset preservation, general financial planning and non-recourse IRA loans for houses. Our ICG Real Estate Investors team from the top real estate markets in the nation will be present all day providing learning tools and networking opportunities.

Below is the entire Wall Street Journal article:
Signs of a Suburban Comeback
More Americans Returning to the Land of Lawns and Malls, Census Data Show
By Neil Shah
May 22, 2014 12:00 a.m. ET
 
America’s big cities have grown faster than their suburbs in recent years, due in part to a slow economy that froze people in place and stunted the suburban swell. Though, a new Census report suggests this trend is starting to reverse. WSJ’s Neil Shah joins MoneyBeat with the statistics and what they mean. 
 
The long tug of war between big cities and suburbs is tilting ever so slightly back to the land of lawns and malls. After two years of solid urban growth, more Americans are moving again to suburbs and beyond.

Fourteen of the nation’s 20 biggest cities saw their growth slow or their populations fall outright in 2012-2013 compared with 2011-2012, led by cities such as Detroit and Philadelphia, according to data released Thursday by the U.S. Census Bureau.

A housing subdivision outside of Chicago. Suburbs are seeing a recent increase in growth. Flickr Editorial/Getty Images

A housing subdivision outside of Chicago. Suburbs are seeing a recent increase in growth. Flickr Editorial/Getty Images

In some cases, fast-growing cities are slowing down: Austin’s growth rate decreased from 3.1% to 2.4%. In other instances, slower-growing cities grew at an even more diminished pace: New York’s rate decreased to 0.7% from 0.9%. A year earlier, 17 of the nation’s 20 largest cities showed faster population growth than the previous year. Suburbs and areas beyond suburbs within the same metro known as exurbs, meanwhile, are seeing an uptick in growth after expanding more slowly during the recession and its aftermath.
All told, just 18 of America’s 51 metropolitan areas with more than 1 million people had cities growing faster than their suburbs last year, down from 25 in 2012, according to an analysis of census data by William H. Frey, a demographer at the Brookings Institution.
“City growth may be bottoming out, as well as the downsizing of the outer suburbs,” Mr. Frey said. He said it remains unclear “whether the city slowdown signals a return to renewed suburban growth.”
Back to the 'Burbs
Natalie Dorr and her husband Jon are among those who made the shift to the suburbs last year. The couple wanted to sell their condominium in Chicago and move out of the city much earlier, but the sluggish economy delayed their plans. Ms. Dorr, 29 years old, was pregnant with their second child and the couple wanted more space. Yet they waited, hoping the selling price of their condo would increase.
In April last year, the couple rented out the condo and moved to Deerfield, a Chicago suburb. Having sold the condo a week ago, they plan to buy a home later this year. They got $14,000 more for the condo than they would have if they had sold earlier, Ms. Dorr said. “It made sense to wait,” she added.

Overall, cities are still growing slightly faster than the suburbs—a historical anomaly after decades of American migration to the burbs. Some of the growth has been fueled by younger Americans and retirees preferring city life, either for lifestyle reasons or to downsize their living arrangements.
Anything resembling the post-World War II trend of Americans streaming to the suburbs appears unlikely given the difficulties many debt-strapped young Americans face in buying a home. Still, the Census numbers show a cooling off in the growth rate of urban dwellers.
Cities in metro areas greater than 1 million people grew at a 1.02% annual rate in 2012-2013, down from 1.13% in 2011-12, according to Mr. Frey’s analysis. Suburban areas, by contrast, grew at a rate of 0.96%, roughly on par with the 0.95% the prior year, Mr. Frey’s analysis shows.
At the same time, exurbs are seeing an increase in growth. When taken together, suburbs and exurbs grew at a 1.04% annual rate in 2012-13, up from 0.99% in 2011-2012, according to a separate analysis by Mr. Frey. Urban core areas saw growth fall to 0.81% from 0.91%.
The slowing growth in these urban cores and the increasing gains in the suburbs may be the first indication of a return to more traditional patterns of city-suburban growth,” said Ken Johnson, a demographer at the University of New Hampshire.

Write to 
Neil Shah at neil.shah@wsj.com

 

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How to Create Multiple Income Steams to Secure a Strong Financial Future

Exploring this and other avenues for finding financial real estate success during our 1-Day Expo. 
As many of you know, we are holding our 1-Day Expo on Saturday, June 14th from 10:00-6:30 p.m. Even though we have been holding these events for over 20 years, I am always excited before we hold them. I know I will learn so much from the expert lecturers, the market teams who bring information straight “from the trenches” and from all of YOU who attend.
Just the Q&A sessions are so informative, I have yet to partake in one of our events and not learn a tremendous amount of valuable information during these sessions.
The networking is also so valuable, bringing new connections and new synergy.
This time we have three expert lecturers:
Attorney Brett Lytle on Asset Preservation & Protection. Brett always sees the smallest details, which stay hidden from most observers. He has led countless people to create a safer, more secure way to hold assets and will teach all of us how to do this.
Lucian Ioja uses his vast experience and knowledge to show us how we can create multiple streams of income and plan our financial life in a proactive, fruitful way. He also teaches us to utilize many different avenues to create these income streams; from using insurance in a sophisticated manner to real estate and other vehicles that we will explore.
Roger St. Pierre will teach us about getting non-recourse mortgages to buy real estate, with financing,  from our IRA accounts. A lot goes into this and that is why we invited Roger to instruct us.
There will be lenders with new types of investor (and homeowners) loans to tell us about.
We are bringing in three new markets with exciting deals at attractive price points, including brand new homes, as well as low-cost turn-key homes with tenants AND easy special financing even to investors who had been spurned by the banks.
Updates from the existing markets are always so fascinating. The work and preparation that goes into these refresher points from the markets always amaze me. There is so much to learn and so much to feel the pulse of what goes on nationally.
I’ve been asked to do something special for the blog readers, and we will give everyone who registers and mentions this blog, a free copy of my book Remote Controlled Real Estate Investing which goes into the details of buying properties far from home. So, register today to secure your spot and as an added bonus receive my book. For free.
Create Remote Controlled Real-Estate Riches - The Busy person's guide to real estate investing - Adiel Gorel
 
I am excited and very much looking forward to seeing you at our event. The 1-Day Expo will take place near the San Francisco Airport, at the South San Francisco Conference Center. We set the Expo time so people can fly in and fly out on the same day if they are not from the San Francisco Bay Area – the day starts at 10:00 AM and ends at 6:30 PM, providing attendees from Los Angeles, San Diego, Portland, Seattle, Phoenix and wherever it is that you call home to arrive and leave on the same day.
Of course, for Bay Area residents it is an easy drive and everyone appreciates the ample free parking at the conference center.
To register online through Eventbrite: http://bit.ly/1kk2she  and use the code: BLOGBOOK
 
or
 
Email us at info@icgre.com or call us at 415-927-7504 and mention you read about the expo on my blog.
 
 
 
Best,
Adiel

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