Have the Economic Changes Affected The Built-For-Rent Business?
by admin | November 29, 2022 | Real Estate

Real estate has been a great investment option over the years, as it promises commensurate returns. That explains the over 19 million rental properties in the US, with about 70% owned by individual investors.

Consequently, the built-for-rent (BFR) business has been a buzzword in real estate circles, with everyone clamoring for a piece of that pie. However, there’s been a seismic shift in the economy, which could impact that market segment.  

There’s been a general economic decline. There are fears of a possible recession, playing to the soundtrack of doubled mortgage rates and home sales crashing while wages have stagnated. 

To some real estate observers, the built-for-rent business model is about to take a significant hit, but will this come to pass? This article investigates the truths and misconceptions about the impact of the changing economic climate on BFR. 

Economic Factors Affecting the Built-For-Rent Business

Economic changes affect rental prices and housing demand and can lead to extensive periods of vacancies. Some of these factors include:

Interest Rates 

Change in interest rates dramatically affects the cost of mortgage. For instance, in a period of high interest rates, the mortgage payment cost will rise, leading to a drop in the demand for home purchases. The knock-on effect is that since fewer people can afford homes, the only alternative is leasing, which increases the demand for rental housing. 

Economic Growth

A country’s income growth determines the demand for housing. People will spend more on houses as the economy grows and incomes rise, increasing demand and pushing up prices. 

Indeed, housing demand is income elastic (luxury goods), with rising incomes leading to a more significant percentage of income spent on houses.

Similarly, people can’t afford to buy in a downturn, and those who lose their jobs may fall behind on their mortgage payments and have their homes repossessed.

Affordability

Another economic factor that affects the rental market is the ratio of the house to price-earnings. From 2015 to 2022, house prices are higher than income growth by 36%, which means the number of people who can afford homes has reduced since 2015. 

Effects of Rent Control on BFR

With the various changes experienced in the economy leading to the steady rise in house rent, many states have come up with multiple strategies, such as enacting rent control. This program limits the amount you can demand from the house you lease.

While rent control benefits tenants, these programs directly affect the house markets, which would impact you as a real estate investor.

The research at Brookings University shows that although the effects of rent control will decrease rent prices for tenants in the short run, its long-term effects include:

  • Reduced affordability
  • Fuels gentrification
  • Creates negative consequences in the neighborhood  

Further research shows that 8% of owners of rent-controlled buildings are likely to convert their facilities to condos to avoid the effects of decreased market prices. That led to a 25% drop in the number of renters in rent-controlled rental units as the property owners replaced the existing units.

Rebound in Rental Market  

The pandemic period greatly affected real estate, but its market reignited in 2021, and the housing demand rose. According to the Census Bureau of Housing Vacancies and Homeownership, the number of rental households increased to 44 million during the post-pandemic period, leading to a decrease in rental vacancies by 5.8%. 

The strong demand for rental units also fueled the rise in the price of properties. In 2022 alone, the price of rental properties rose by 13.4% from 2021. Therefore, although mortgage rates rose, rental property acquisition has remained the same since property owners have access to rental income and can increase the rental price to match the mortgage repayments. 

Effects of Economic Changes on Rent Growth of Built-for-Rent Businesses

Over the past couple of years, rent prices have been escalating continuously at a rate of 15-20%. That means that the rent is unlikely to go any higher in the next subsequent years, likely dropping by a fraction of the rent rates experienced now. 

Since the income for most renters has risen over the last couple of years (and will probably continue to rise in the subsequent years), there’s a likelihood that most will experience rent growth at a steady pace in the middle of 2023 after going through a brief slowdown in the rent growth. 

Still, the increase in the rental income also means there is room for you, as the property owner, to raise the rent. Some of the indicators that show this is possible is the recent research by Real page, which showed that renters spent about 23% of their income on rent which is well below the affordability rate. 

How Economic Changes Affect the Rate of BFR Construction

Built-for-rent construction always follows demand. Although the US is experiencing an economic slowdown, this hasn’t affected the development of housing units. Although housing prices seem to have stagnated at such a high price, that isn’t because a lack of housing drives up demand and prices, as they would typically do. On the contrary, considering there’s a 2-5 million rental unit shortage, BFR constructors still have plenty of catching up.

However, this only applies to built-for-rent houses. Built-for-sale housing is likely to plunge for most of the year. 

Effects of the Economy on Renter Household Growth

The growth of rental apartments mostly stayed the same, even during the pandemic. Several factors explain why the rental estate is experiencing growth during these tough economic times. 

For one, young adults leaving their parents’ homes and looking to form new households usually make their first stop at rental properties as they settle down.

Secondly, there is limited availability of new houses as they are currently beyond the reach of the average home buyer. Further, although the price of almost goods has risen across the board, incomes have largely stagnated, only growing 17.5% between 1979 and 2020

Final Word

Although the negative economic changes signal doom for the real estate industry, the built-for-rent segment seems poised to grow in strength. Mortgage and housing prices are still out of reach for many, and incomes have stagnated, which bodes well for BFR.

To the keen eye, the benefits of investing in BFR far outweigh the potential risks, which makes it a viable investment option.

Gurpreet Singh Padda, MD, MBA, MHP

Surviving Crisis in Real Estate Business: Innovation and Creativity
by admin | November 24, 2022 | Real Estate

The current economic crisis forces real estate investors to innovate, be creative in their business models, and adapt to the changing market conditions. The economy contracted for two straight quarters, so to survive, you must find ways to cut costs, land clients, and increase efficiency. 

Businesses often overlook creativity in times of crisis. However, it is what makes businesses successful. Only real estate investors that think outside the box and look at things differently will thrive in these challenging times. Here’s how you can survive a crisis using innovation and creativity.

1. Understand the Crisis

The first step to being creative and innovative is understanding the economic downturn and how it will affect the real estate market. You need to understand what is happening at that moment and how things have changed over time. You won’t create something new if you don’t know where you stand.

2. Innovative Marketing

Here are some creative and innovative marketing ideas for real estate investors to survive and thrive during this time:

  • Lead Generation: This is the first step toward any successful marketing campaign. In the real estate industry, lead generation unearths potential buyers and sellers interested in buying or selling property. A good lead generation strategy ensures you contact the right people at the right time.
  • Social Media Marketing: It uses social networks to reach current and prospective clients. According to the National Association of Realtors (NAR), 74% of realtors use Facebook to market their businesses. Social media helps companies build relationships with their target audience.
  • Virtual Tours: These are a simulation of the property. They are excellent for showing prospective buyers what a property looks like inside and out. You can take photos of the interior and exterior of the house and then stitch them together to create a virtual tour. Alternatively, you could use videos. Listings with high-quality photos have a 44% higher chance of selling for the asking amount or more.

3. Devise Payment Plans

When there are economic downturns, most people face financial difficulties. Sure, the cost of housing is coming down in some cities, but the high mortgage rates mean a new home is beyond most people’s reach.

You could devise payment plans to attract property buyers and encourage new purchases. For example, you can allow clients to pay in installments, provide lease-to-own schemes, or lead them to lenders providing lower mortgage rates than prevailing industry rates.

4. Use Technology

One use of technology is leveraging data analysis for decision-making. You can use data to analyze past events and trends and use that information to help plan for the future.

Data collected from website visitors’ interaction is also great for gauging users’ experience. That should help you tailor the content and provide a better online experience for clients visiting your website.

Another way is to utilize technology to automate processes, making them more cost-effective. Software-as-a-service (SaaS) has enabled investors to optimize property management. You can use it to digitize tenant agreements, keep track of rental income, and send auto alerts for unpaid rent or lease expirations.

AI and augmented reality alter how potential clients engage with a physical environment. That enables you to provide virtual tours or virtual staging. 

On the other hand, an investor can use realtor websites and social media pages to find deals on properties. A recent boom in PropTech technologies has streamlined the home buying process. An investor can utilize the platform to optimally research, market, buy, and sell properties.

Additionally, there is real estate crowdfunding, an alternative to REITs. Here, investors can pool their resources with an even lower entry requirement.

5. Give Offers and Discounts

You could introduce discounts and offers to attract clients. A loyalty program can incentivize homebuyers to reserve a unit during a crisis by offering them a substantial rebate on the purchase price. Motivating homebuyers with referral bonuses is another fantastic option.

6. Repurpose Your Properties

In times of crisis, creativity often takes the shape of finding new uses for existing things. For instance, as the need for warehouse-style stores diminishes, you can convert the space into a self-storage facility.

With most people working at home, buildings that served as offices can house families as their occupants vacate. Alternatively, create innovative dining options by shifting the focus of a food establishment toward a take-out culture.

There has been a high demand for industrial space, so you can convert any of your feasible properties to suit this. The COVID-19 pandemic accelerated e-commerce, hence increasing the demand for industrial space.

Rentals are an excellent way to earn extra income. The constant need for stays in short-term rentals resulted in a 21% increase in demand in the second quarter of 2022. Their demand may likely increase as only a few people can afford new homes. 

If you have difficulty selling stock, you could list them on Airbnb or VRBO and charge guests a certain amount per night.

7. Innovative Building Materials

The push for carbon-neutral structures is inspiring innovative green construction methods and materials. New off-site construction management approaches give rise to novel models and ideas using cloud computing and remote collaboration tools. 

Opportunities for innovation among builders, property managers, and tech firms have opened up with the proliferation of 3D printing and prefabricated components, lowering the cost of construction.

8. Collaborations

You’re not alone if you’ve noticed a decline in sales or inquiries. The entire real estate community is currently facing financial difficulties. If it is possible to partner with other industry players, then do it. 

Offer to promote each other’s projects if a potential buyer is interested in a property, you do not have in your portfolio. That should increase your market reach and provide valuable insight into running your business.

Final Word

Every indication points to tough times ahead, so you must develop innovative and creative ideas to stay afloat. Some ways you can achieve this are to collaborate with other investors or real estate agents, use innovative technologies, repurposing properties, and provide payment plans.

By Gurpreet Singh Padda, MD, MBA

9 Lessons Real Estate Investors can Learn from Digital Health Entrepreneurship
by admin | November 21, 2022 | Real Estate

Healthcare entrepreneurship is one of the most dynamic fields to invest in. Digital health entrepreneurship has led to a raft of technological advances that improved health provision, such as telemedicine and telehealth.

Although digital health entrepreneurship seems far removed from real estate entrepreneurship, real estate business people might pick up a few tips from that industry. These are the top nine lessons a real estate investor can learn from digital health entrepreneurship:

1. Start with a Problem

It seems simple, but the first step to solving any problem is identifying what the problem is. When you identify a problem, you know exactly what type of customers you want to attract. For instance, digital health entrepreneurs realized pandemic lockdowns prevented patients from visiting healthcare facilities, so they came up with telemedicine.

The same goes for real estate. It’s not enough to identify what real estate niche you want to pursue; you must choose one that serves a need.

For example, lockdown measures prevented workers from going to the office during the pandemic. Meanwhile, online businesses flourished; hence the demand for storage facilities skyrocketed. It would have made little sense to invest in offices during that time because all the smart moves in real estate pointed toward warehouses.

2. Keep Client Data Safely

Most digital health entrepreneurship typically involves storing and transmitting sensitive patient information online, which increases the chances of hacking. Indeed, healthcare organizations have seen instances of ransomware attacks increase by 94% between 2021 and 2022.

In real estate, clients wholly depend on you to protect their data. You are also under a legal obligation to protect the data, and the law will hold you responsible if there is a breach. Therefore, secure your system by installing secure security software and encoding data.

3. Get Insurance

Considering mistakes happen in the medical industry, it pays to get insurance. It costs healthcare providers $1.9 billion yearly to cover the cost of medical practice insurance, but it costs $17-$29 billion to cover preventable medical errors. Insurance is vital as it covers the costs of liability claims that would otherwise come out of pocket.

Real estate investors will do well to get business insurance to cover costly legal claims. You might get sued for inadvertent mistakes such as failing to disclose a property defect, breach of duty, or giving tax or legal advice.

4. Be Patient

Building a successful digital health enterprise takes time. You can’t expect everything to work overnight. There are days when you will feel like giving up.

You may not be able to afford the best equipment or supplies when you first start. But if you stick with it, eventually, you’ll afford them. And once you’ve got the basics down, you’ll move on to more significant projects.

Similarly, it takes time to build a successful real estate brand. Keep working hard and stay focused on your goals.

5. Be Willing to Learn

Digital health entrepreneurship involves technology, and you probably know how fast that changes. Therefore, you need to keep abreast of the latest developments in the industry if you are to stay ahead of the pack.

The real estate industry is also highly dynamic, with housing prices often fluctuating during the past two years. Investors have had to keep a close eye on proceedings to avoid suffering losses.

6. Use Data to Improve the Business

It is vital to have essential healthcare data sources to be innovative. For example, the only way to determine the prevalence of a particular disease is to access its statistical information and use that for data analysis. Entrepreneurs will then estimate the potential reach and price of the solution.

Accurate data is vital to help you know what the housing market demands – the more data available, the less time and money it takes to bring solutions to the market.

Once you’ve identified the market needs and understood the user experience, you’ll have a clearer picture of what’s working and what isn’t. Armed with this information, you can make informed decisions about how to improve your product or service.

7. Set up an Accounting System

While digital health systems can incorporate accounting and tax capabilities into software, the responsibility to file accurate taxes lies with the entrepreneur. Therefore, a digital health user must set up a bookkeeping and accounting system that complies with the tax law.

Real estate entrepreneurs need to employ bookkeepers and accountants that know their way around the real estate industry to handle and file bookkeeping records professionally.

8. Prove the Importance of Your Product or Service

In the healthcare industry, it helps to find a course of action that fills a gap you have noticed. You will need to prove to healthcare institutions that you have innovated something they may need and help make their work more efficient.

Similarly, in the housing sector, your clients are people with problems they want to be solved. You need to understand their concerns to solve them effectively. If you don’t know how your customer feels about your real estate services and products, you’re missing out on a huge opportunity to sell more.

Consumers don’t care about your business; they care about themselves. To succeed, focus on helping people solve problems. That’s what will make your real estate brand stand out.

9. Involve Stakeholders

Stakeholders such as patients and medical professionals are crucial to creating digital health solutions. 

Stakeholders have a vested interest in the real estate industry. These are people involved in various aspects of the business, including buying, selling, leasing, financing, developing, managing, marketing, and advertising.

Involve them in research and data collection during the pilot stage to obtain valuable feedback to enhance the usability and utility of the solution you intend to provide.

Final Words

Digital health entrepreneurship is not just about technology. It is about people, processes, and culture. You must understand how these three components interact and influence each other to improve patients’ lives.

As a real estate agent, you must understand what clients want and consider how your offering will improve their lives. You can conquer the real estate industry by using lessons from digital health entrepreneurship, such as involving stakeholders, using data to improve the business, and keeping client data safe.

 

By Gurpreet Singh Padda, MD, MBA

Making a move From Medicine to Real Estate Entrepreneurship
by admin | November 18, 2022 | doctorReal Estate

Practicing medicine is a noble profession, but a grueling career as you will spend years training and serving patients. You will barely have time for yourself as the practice dictates you have no definitive working hours.

Consequently, incidences of burnout are rampant in the industry, partly explaining why up to 47% of healthcare workers in the United States intend to quit their jobs by 2025. Presumably, to try their hand at less stressful ways of making money.

As a medical professional intending to venture into entrepreneurship, the real estate industry looks like a great prospect. The global professionally managed real estate market was worth $11.4 trillion in 2021. Keep reading to learn how to move from medicine to real estate. 

Why Medical Professionals Might Want to Shift to Entrepreneurship

Some of the reasons a nurse or a doctor might want to get into entrepreneurship are:

  1. Shift career: Exposure to diseases and viruses for long hours daily is not everyone’s cup of tea.
  2. Better work-life balance: Working in healthcare for most practitioners means giving up your social life, which isn’t ideal if you want to start a family.
  3. Filling a gap: There might be a medical issue you feel you can only solve by being an entrepreneur.
  4. Explore new challenges: Even if you have a rewarding career, it might have become too monotonous, so you want to try something new.

Reasons Why Caregivers Could Become Successful Real Estate Entrepreneurs

Here are some of the reasons medical professionals can become successful real estate entrepreneurs:

  • Desire to make a difference: Medics know all about changing people’s lives for the better, which isn’t far removed from the goals of most entrepreneurs.
  • Strong interpersonal skills: In the business world, having the skills to connect with people from various walks of life, develop relationships, and communicate effectively with them will put you ahead. As a medic, you already have these skills as you interact with patients and their families daily.
  • Pattern recognition: Medical schools teach medics to think critically. They can stand back and examine a situation by focusing on the essential aspects and patterns. This critical thinking ability will stand you in good stead to develop creative solutions to issues in the real estate industry.
  • Commitment to continuous learning and growth professionally: Doctors and nurses constantly look for ways to improve their skills and stay abreast of the latest medical advances. It would be best if you retained this curiosity and drive, as it will help you learn and grow your real estate business.

How to Move from Medicine and Venture in Real Estate

Real estate is still one of many millionaires’ most preferred investment options. The best way to go about it includes the following:

1. Know your market and pick a niche

The first step towards becoming a successful real estate entrepreneur is knowing what market you want to serve. How will you know you’ve arrived at your destination if you don’t know where you want to go?

The real estate industry is vast, so it helps narrow your scope and focus all your attention on that single niche. These are some of the real estate niches you could try out:

  • Residential real estate
  • Property management
  • Commercial real estate
  • Resort and vacation homes

2. Market research

It helps to know who you are selling to and what they need to provide the right services for your target audience. That entails extensive market research on demographics and current trends.

The research should provide some pointers on how you can position your business in the chosen niche. Try to find some real-world experience and self-assess your skills to work out if you have the skills needed to fill the gap in the market.

3. Create a plan

Once you know your target market and have researched their wants and needs, you should create a business plan to meet those needs. A business plan will formulate a roadmap of how you will start and run the business. An ideal business plan should contain a detailed outline of the industry overview, research and analysis, marketing strategy, management, and finances.

4. Start with what you have

One look at a real estate website may put you off real estate entrepreneurship if you don’t have vast sums of cash. That doesn’t mean you can’t start small. There are plenty of investment opportunities, even for those without deep pockets, such as REITs.

5. Network

Networking is another great way to gain experience and learn about the industry. Attend events, conferences, and seminars related to your field. Ask people for advice and feedback. Don’t be afraid to ask someone for a reference or recommendation.

You can also join a network marketing company. It is one of the best ways to become successful in real estate entrepreneurship if you come from another profession. Network marketing companies offer their members a low entry cost, high earning potential, and a strong sense of community.

6. Be patient

Successful entrepreneurs understand that patience is a virtue. You won’t become a millionaire overnight, so don’t expect to make money immediately. Take baby steps and keep at it diligently.

7. Stay organized

Keeping organized is vital. Keep track of everything you do, especially expenses and income. Use spreadsheets, calendars, and notes to organize your thoughts and ideas and manage the day-to-day running of the business.

7. Build Relationships

Relationships are the foundation of any successful business. You can develop trust and loyalty by establishing relationships with customers, vendors, and employees. A strong relationship network allows you to widen your market reach, potentially increasing your bottom line.

8. Set Goals

Finally, you need to set realistic goals for your business. Setting goals gives you something to strive for and motivates you to keep going even when times get rough.

Final Words

As a medical professional, you already possess qualities that can make you succeed in real estate, such as strong interpersonal skills and a willingness to help people. If you feel like making the jump to real estate, some things you could do to improve your chances of success include creating a business plan, conducting thorough market research, and networking with other real estate industry stakeholders.

By Gurpreet Singh Padda, MD, MB

Bureaucrats insist there’s No recession, but That Doesn’t Change Reality!
by admin | November 14, 2022 | Real Estate

The National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee is the singular body in charge of calling a recession. It defines a recession as a severe fall in economic activity that people would feel throughout the economy and lasts for more than a few months. Some variables it tracks include actual consumer spending, real income less government transfers, and industrial production. There are no fast rules or thresholds set in stone, so they determine whether the country is in a recession after studying statistics from the government.

So far, they have not declared a recession because they have not seen a significant decline in economic activity. You can’t really blame them as this is their current view according to the latest data they have received from the government:

So, according to the NBER, the economy is fine; there’s nothing to see here. They argue that there is a strong labor market and corporate earnings. Besides, recessions are not standard fair, with the US only experiencing a recession 8% of the time over the past 30 years.

But how is the economy really performing across the board? That’s what we seek to examine by studying the cold statistics below.

So, is the US in a Recession?

According to the general definition, a recession occurs when there are two-consecutive recorded negative quarters in the gross domestic product. Using that metric alone, the US was in a downturn earlier in the year.

But the NBER insists that you must take a holistic approach to get a clearer picture of the state of the economy because a recession indicates a significant decline in economic activities spread across the economy.

Therefore, here is an examination of 14 key economic indicators. If most show that the economy is ok, that will prove the NBER right. The opposite would be true.

1. Gross Domestic Product (GDP)

In the most recent quarter, economic growth was 2.6%. After the first half of the year’s GDP contraction, this is good news, but it is not exactly something to celebrate. Given the Federal Reserve’s aggressive stance, the economy’s ability to expand through 2023 is still in question.  Keep in mind that we have been depleting the Strategic Petroleum Reserve aggressively, approximately 180 million barrels in 2022.  We have been simultaneously exporting oil out of the US, generating a significant part of our increase in GDP.

2. Consumer Price Index (CPI)

According to data from the Labor Department’s Consumer Price Index, which tracks changes in prices across various products and services sold within the United States, the annual inflation rate has decreased to 8.2% from 8.3% in August.

During its November 2022 meeting, the Federal Reserve announced its fourth consecutive 75 basis points federal funds rate raise.

The less volatile core inflation rate increased to 6.6% in September from 6.3% in August, rising by 0.6% month-over-month. That annual core rise is the highest of its kind Since August 1982.

3. ISM Manufacturing Index

According to a survey by the Institute of Supply Management (ISM) manufacturing reading for October was 50.2. Manufacturing output increased at its slowest rate in nearly 2.5 years, with total readings at their lowest level since Spring 2020, so manufacturing is not doing well.

4. Industrial Production

Industrial production increased by 0.4% in September, and the index rose by 5.3% compared to the same period a year ago. Industrial production is doing well.

5. Retail Sales

In September, retail sales remained unchanged after increasing by 0.4% in August. Consumers are beginning to limit spending as their savings dwindle and prices rise.

The Fed hopes that higher interest rates will have several impacts, one of which is a consumer demand decrease. With further rate hikes in the pipeline, it’s easy to predict that retail sales are not doing well.

6. Conference Board Leading Indicators

In September, the leading index dropped by 0.4%, adding to its recent decline and suggesting that the economy is declining. This worrying trend is among the best indicators that a recession will hit the economy in the new year.

7. Markets Data

The stock market is perhaps the hardest hit of all the sectors, with the S&P 500 falling 19.1% this year, and the Fed’s decision to hike interest rates by yet another 75 basis points added to investors’ woes. Nasdaq is down 30%, The Dow 10%, and The Russell 2000 down 17.5%.

The treasury yield curve does not provide great news either, with the short-term interest rate yield performing better than the longer-term rates, traditionally a good indicator of an impending recession.

8. Unemployment Rate

The September unemployment rate of 3.5% shows the labor market is probably the only steady aspect of the economy. The Federal Reserve’s dual role is to ensure full employment and stable pricing and can now focus on reducing inflation because of the robust labor market.

9. Initial jobless claims

The Labor Department releases the initial jobless claims data weekly, showing how many people have started applying for unemployment benefits that week. The week of October 27 recorded initial job claims of 217,000, while November 5 saw a reported 225,000 initial claims.

A rise in initial unemployment claims may indicate a wider spread of layoffs, which would be consistent with the Fed’s push to lower inflation.

10. Job Openings and Labor Turnover Survey (JOLTS)

By September 30th, the number of job openings jumped to 10.7 million. Overall separations dropped to 5.7 million, while hires dropped to 6.1 million. This is good for the economy.

11. University of Michigan Consumer Confidence Survey

According to the University of Michigan’s Monthly Survey of Consumers, consumers’ sentiments improved in October. That represents a 2% month-over-month increase.

At 59.8%, consumer sentiment might seem rock solid, but it has dropped by 17% since this time last year. That’s due to increased gas prices in recent weeks, rising inflation, and unaffordable housing.

12. NFIB Small Business Optimism Index

The NFIB’s monthly Small Business Optimism Index increased by 0.3 points in September to 92.1. However, the index has been lower than its 48-year average for the past nine months in a row.

13. Housing Starts

As a result of higher borrowing rates and high prices, home construction declined by 8.1% from August. Developers are understandably cautious about taking on too much work in light of these factors.

14. NAHB Home Builders Index

The October reading fell to 38 on the Home Builders Index, showing that most builders consider the housing market weak. That has led to higher mortgage rates and a drop in the number of new single-family homes under construction.

Final word

Even though the economy isn’t technically in a recession, things aren’t looking great. Most of the key indicators above show a worrying trend in the economy. Still, not all the data points provided above give equal weight in determining if the US is experiencing a recession. Low unemployment and many available but unfilled positions have made the labor market the economic engine of the country. At the same time, consumers are handling rising inflation better now than they were earlier in 2022. The real estate and stock markets are both performing abysmally.

 

By Gurpreet Singh Padda, MD, MB

Why You Should Be Thinking About Alternative Investments
by admin | November 11, 2022 | Real Estate

All you see in the news nowadays are rising gas prices, inflation, and high interest rates. The stock market isn’t faring any better: Nasdaq 100 has shed more than 33% so far, while the much-vaunted cryptocurrency, Bitcoin, has dropped more than 60% of its value.


In uncertain times, financial advisors often encourage investors to turn to low-risk, fixed-income investment options, such as CDs, money market funds, and high-yield savings accounts. They reason that these safe investments will preserve your assets as they provide positive returns. But do they?

Investing in the stock market and receiving a 60% loss is a no-no, so the financial advisors would rather you invest on a 10-year treasury yield, making 3.7%. While it may seem the investment is making you money, you have to consider that the annual inflation rate rose to 8.2% in September 2022. That means you are losing money (-4.5% annually).

While all investment options seem pointless at the moment, one criminally underutilized segment is viable during market downturns. Did you know you can make as much as 12% returns using alternative investing?

According to Prequin’s 2022 Global Alternatives Report, the alternatives AUM concluded at $13 trillion in 2021 and is projected to expand to 11.7% ($23 trillion) by 2026. This is a look at what alternative investing is all about.

What Are Alternative Investments?

Alternative investments have no basis on traditional financial products like stocks, bonds, or cash. Most alternative investments don’t receive as much regulation from the SEC and could be more illiquid.

Types of Alternative Investments

As more and more alternatives become available to retail or individual investors, it pays for investors to have a solid understanding of these options. The following are some examples of alternative investments:

1. Private Equity

Private equity is a term that describes investments in businesses not traded on a public market like the New York Stock Exchange or NASDAQ.

The goal of private equity firms is to generate returns for their investors by making strategic investments in private companies with the assumption that the value of those investments will increase by a certain time. You can further break private equity down into these categories:

  • Venture capital
  • Buyouts
  • Growth equity

These asset classes typically require long-term investments of substantial capital, so only institutions and wealthy individuals can participate.

2. Hedge Funds

A hedge fund is a type of pooled investment partnership that trades liquid assets using various investment strategies to generate a high rate of return for its investors. Entrepreneurs can invest in a wider variety of securities, as hedge funds are not subject to the same regulations as mutual funds.

Compared to other alternative investments, hedge funds are notable for their high liquidity ratio. Because they have a higher concentration of liquid securities, you can liquidate the funds in minutes. Due to the high costs and risks involved, only wealthy individuals and institutional investors, like pension funds, typically invest in hedge funds.

3. Structured Products

Structured products are a type of investment that involves pairing a debt instrument (such as a bond or CDs) with one or more derivative instruments tied to an underlying asset class or a collection of assets such as stocks, market indices, currencies, or interest rates.

Despite their complexity and potential for loss, structured products allow investors to create a uniquely tailored portfolio to their needs. Typically, investment banks produce them and offer them to institutional, corporate, and individual clients.

4. Private Debt

Private debt consists of loans from sources other than traditional banks. Businesses often use private debt for expansion, working capital increases, or real estate construction and development. 

Given the historically low returns on government bonds, direct lending to businesses can provide a sizable premium over the cash flows accessible from liquid fixed-income products. Private debt funds, the firms that provide the funding, make money through two main channels: interest payments and the eventual repayment of the loan.

A private debt fund may also focus on senior, junior, or mezzanine debt, among other strategies, such as direct lending, venture debt, and exceptional situations.

5. Real Estate

Many Americans already have a stake in this asset class because they are homeowners, making real estate the most viable alternative investment. Real estate investments can take the form of direct property ownership or indirect investments.

Properties like apartment buildings and shopping centers provide regular rental income to their owners, and they hope for price increases over time.

Investors who want a more hands-off approach might buy shares of private real estate investment trusts (REITs) through a broker. REITs that trade publicly do so through the stock market.

In addition to its diversification benefits, real estate offers investors a hedge against inflation and favorable tax advantages.

6. Commodities

Commodities are tradable items that have both direct and indirect economic uses. Examples of commonly traded commodities include gold, farm animals, precious metals, wool, oil, gas, wood, and uranium.

Given their relative immunity to fluctuations in the public equity market, investors often use commodities as a hedge against inflation. Commodity prices fluctuate based on supply and demand market forces; increased demand will lead to higher prices and greater returns for investors. You can invest in commodities in several ways, including:

  • Futures Contract
  • Stock
  • Physical commodities

7. Collectibles

When you invest in collectibles, you aim to generate a return on your money through long-term appreciation of the items you own. Some of the common types of collectibles include:

  • Books
  • Rare wine
  • Stamps
  • Antiques
  • Trading coins
  • Art
  • Coins
  • Baseball cards
  • Toys

To succeed in this alternative investment strategy, you need an extensive understanding of the sector and the patience to hold on to your investment for a long time. It is not easy to predict how much a work of art, or a collection will increase in value because both can decline in worth or get destroyed. 

Some collectors treat their collections as investments on par with their homes or cars, and their collections make up a significant portion of their net worth. Adding collectibles to a portfolio is a great way to diversify your investment base and spread your risk.

Final Word

Many investors are increasingly looking to alternative investments to diversify their portfolios, maximize their returns, and accomplish other financial objectives. That is why it is so important for investors to have a firm grasp of the options they have to adopt alternative investments into their portfolios successfully.

 

By Gurpreet Singh Padda, MD, MB

Why You Should Consider Buying Real Estate During A Recession
by admin | November 4, 2022 | Real Estate

The inflation rate as of November 2022 is 8.202%, well above the long-term average of 3.26%. Mortgage rates are still rising, exceeding 7.44%, and there’s a good chance the Fed will increase lending rates by 50 to75 basis points in the December 14-15 FOMC meeting, and an additional 25 to 50 basis points in the January 31-Feb 2 2023 FOMC meeting.  This could result in Mortgage rates close to 9% by February 2023.

All of these point to a intentional recession. If anything, TD securities think there’s a more than 50% chance the US will enter a recession within the next 18 months.

While a recession means people don’t have the money to purchase a home, it presents mouthwatering opportunities for a real estate buyer, as long as the buyer can maintain financial solvency through the 18 to 24 months of a recession. Keep reading to learn why buying real estate assets during a recession might be a good idea.

Advantages of Buying a Real Estate During a Recession

Purchasing Real Estate during a recession has some benefits, such as:

a) Lower Prices

House prices usually fall dramatically during economic downturns. Such an economic environment means people can barely afford the bare essentials, so splashing hundreds of thousands of dollars on a home is out of the question.  This has a trickle-down effect on the Multifamily real estate market and even other real estate asset classes.

A lack of interested purchasers can lead to prolonged selling times, so sellers may feel compelled to cut their asking prices to move the assets. Foreclosures also force homeowners to sell, increasing the supply of homes and further driving down prices.

While home prices have not dropped significantly as of August 2022, Moody’s Analytics forecasts that home prices in highly “overvalued” housing markets might fall by 15% to 20% should a recession hit, while nationwide home prices would decrease by roughly 5%.

b). Mortgage is Cheaper

During a typical recession, business stagnates, so the Fed’s go-to solution to spur the economy and get people to spend is lowering interest rates. That typically leads to more affordable mortgage rates, which is your cue to hit the market in search of a home.  This Fed pivot will not occur until we are firmly entrenched in a recession, and consumer confidence has severely been impacted, often seem as a reduction in the hyper liquid stock market open futures.

The National Bureau of Economic Research (NBER) still has not called this a recession despite two consecutive depressed financial quarters, which explains why the interest rates are still high.

If the economy does tip into a recession, expect mortgage rates to plummet, but only after the stock market capitulates and the average investor is running for the exits. That would be the perfect time to get a mortgage and grab a house.

c) Low Competition

In 2020 and 2021, homes were flying off the shelf, some site-unseen. Homes found buyers in as little as one week. A depressed economy, however, means people don’t have purchasing power, so expect little competition for home listings.

The high mortgage rates and exorbitant home prices also mean supply will increase, so you will have plenty of homes to pick from, if you can afford it.

Tips for Buying a Real Estate in a Recession

Here are some tips if you want to purchase a home during a recession:

1. Do Your Homework

Sure, property will generally be cheaper, but that doesn’t mean you can’t get a better deal. Scour the internet and visit local listings. You might net the bargain of the century and maximize profits if you decide to sell the home later.

2. Know When To Walk Away

Just because it’s your dream doesn’t mean you should compromise everything to get the deal over the line. If you find an asset that meets all your requirements but is too expensive, ask the seller to lower the price. If they can’t, walk away. There are plenty of gems like that waiting to be discovered. Take your time to negotiate.

3. Get Your Finances In Order

First, you need a budget, a limit of what you can afford to purchase any property. That will act as a guide whenever you’re conflicted about how much you should spend.

That also means ensuring you have a good credit score to secure a mortgage, pay all the taxes, and have enough savings to stump up the down payment.

4. Shop Around For A Mortgage Deal

Yes, mortgage rates are lower than usual, but you can still get a better deal than most people. Considering mortgages involve vast sums of money, you’d be surprised how much money a few changes in decimal numbers will save you.

Go around looking at the deals mortgage providers offer to find one that suits you best. That would also be a good time to enlist a mortgage broker as they know the best places you can land a mortgage deal after considering your financial circumstances.

5. Hire A Real Estate Agent

Hiring a real estate agent is a great way to expand your reach in the real estate market. Agents have access to more properties than you could find by yourself and know where to strike a deal. They can also provide valuable advice, offer guidance, and negotiate on your behalf.

6. Obtain Concessions

Due to the market downturn, you should take advantage of all the rebates and real estate deals that come your way. Owners are under pressure to sell their properties as quickly as possible due to the drop in prices. Consult with your real estate agent to request concessions from the seller, but keep in mind the agents goal is to generate a commission, their incentive is to generate a sale.

7. Avoid A Bidding War

One benefit of purchasing in a down market is obtaining a reasonable price. Don’t let your emotions get you into a bidding war, as that will mean spending more than you had anticipated. An excellent way to go about this is to set a budget and adhere to it.

8. Realign Your Investment Strategy

As you’ve probably noticed, it is a down market, so properties aren’t moving fast. Therefore, you should approach a purchase knowing that you may not offload for a long time. It would be best if you reassessed your investment strategy.

If your strategy is flipping property, that may not work in a down market, its akin to catching a falling knife. It would help if you thought of long-term strategies, such as renting the property. That entails gauging the viability of the property as a rental unit before deciding to purchase.

Therefore, don’t spend your last dollar on a property hoping to get instant returns. Since you’ll be holding onto the property for some time, you should also ensure you have the finances to take care of maintenance and taxes.

Final Words

For the right investor, purchasing real estate during a recession makes sense. While mortgage rates are forced up to control inflation and create unemployment, they typically fall during the recession; once unemployment skyrockets up and the stock market tanks. Further, there are a lot of listings to choose from as there’s little competition.

I recommend you use the stock market as an early indicator of economic duress, the housing market as a less volatile marker, and the multifamily market as a lagging indicator; unless of course, a black swan happens to swim by and we have major demographic changes.

If you have the financial liquidity, you can grab a once-in-a-lifetime deal, especially if you enlist the services of experienced guides who have navigated a few economic cycles. However, you may have to keep the asset for some time since it may be a prolonged down market.

 

By Gurpreet Singh Padda, MD, MBA

How Real Estate Investors can Prepare for Turbulent Economic Future
by admin | October 31, 2022 | Real Estate

Investing in the future is the smartest thing you can do now, considering the economy contracted for two consecutive quarters, the typical textbook definition of a recession. Although, the US is still not technically in a recession, as the National Bureau of Economic Research is the only body allowed to make that call (and they haven’t, yet…), the warning signs are there.

What can’t be ignored is that the economy is contracting while productivity is declining, so it’s best to prepare for the harsh economic days ahead. Because of the unpredictable economic behavior, this article will discuss how to invest in your future so you can ride through the hard times.

1. Create an Investment Plan

The first step to building a financially secure future is to create an investment plan. With such a volatile market, you need a guiding star to help you commit to the master plan and avoid panicked decisions. An investment plan lays down a strategy after gauging all the market variables. That way, you can recognize and weigh all the risks when investing, enabling you to fulfill all your obligations still. The plan should help you realize the best investment vehicles.

The key to creating a plan is to be realistic about what you can achieve. Note that creating an entire financial strategy for the future in one sitting isn’t going to work. Instead, break down each piece into smaller steps that are manageable and achievable. Once you’ve figured out the steps, write them down, so they’re easy to refer back to when needed.

2. Diversify your Investments

As is often said, never place all your eggs in one basket. Diversifying is an excellent way to get the most out of your money, even in the most troubling economic slumps. It means spreading the investments across different asset classes so that if one class tanks, another will likely thrive. Markets you can try your hand at include:

a) Invest in REITs

Real estate investment trusts (REITs) are a great way to invest in real estate without owning any property. They’re publicly traded on stock exchanges and often pay out dividends from their rental income. In a risk-off environment such as the current one, REITs are typically the oasis of hope, and it’s easy to see why. REITs offer relative inflation protection and high dividends but bear a low correlation to the stock market and have low transaction fees.

REITs are excellent investment vehicles for the long term, typically outperforming bonds and stocks in some periods. If anything, REIT’s average yield is over 3%, more than double what you would earn from S&P 500 stocks. What’s more, REITs are liquid, so you can get your cash as soon as the market opens.

b) Home Flipping 

You don’t have to own an entire rental property to reap the benefits of investing in properties. A neat trick to try is home flipping, which involves buying distressed properties at discounts, renovating them, and selling them for a profit.

c) Sandwich Lease

In this arrangement, you enter a rent-to-own agreement with a landlord, then lease it to a tenant. It’s one of the most cost-effective ways to enter into real estate, as the tenant will allow you to purchase the property after several years.

3. Concentrate on Marketing

Investing in your marketing strategy is one of the best ways to create a sustainable business. Marketing will boost sales and build your reputation, increase your relevance and demand, and cements your place among customers, creating a loyal customer base.

One of the most potent forms of marketing is digital marketing. The main way of doing this is through search engine optimization (SEO) using keywords. You target a range of words potential clients use when searching for real estate properties for Google to drive traffic to your online sites.

Digital marketing could take many forms, such as email marketing, blogging—which 56% of marketers say is effective, and social media. Posting content on social media is exceptionally effective considering 82% of Americans use social platforms.

Whichever form of marketing you settle on, you should try videos. According to Wyzowl’s research, 86% of marketers said videos helped increase traffic and generate leads, while 81% said they directly helped increase sales.

4. Automate your Savings

Automating savings is a great way to ensure you always have money available for whatever comes up. The best part is you won’t even have to think about it as it works in the background.

It’s also a great way to start investing in the future. You can set up automated transfers from checking to savings and then start saving with every dollar. It’s easy, painless, and will save you money in the long run. 

To automate your savings, use an app like Acorns or Qapital. These apps allow you to set up automatic savings plans, plan, and invest without making withdrawals at specific times as traditional banks do.

5. Start Investing in Yourself

Another great way to prepare for the future is by investing in yourself. There are many ways to invest in yourself, such as:

  • Go to class: There are many courses available online or at local community colleges that can help you learn more about real estate and expand your knowledge in readiness for the future. Most of these courses have classes on various aspects of real estate, including how to market yourself, use social media, and manage your finances.
  • Subscribe to emails from industry leaders: By signing up for newsletters from real estate professionals or companies, you’ll stay up-to-date on changes in the industry and what you can do to adjust. 
  • Listen to niche podcasts: Podcasts are another great way to learn about topics related to your industry—not just real estate. There’s a ton of valuable information on marketing, management skills, and more. 

The Bottom Line – Invest in your Future, No One Else has More of an Incentive

Just because the economy is tanking doesn’t mean you must sink with it. Since business is low, now is the best time to invest in the future and realign your business so you can reap big when the market turns hot again.

Some of the best tactics you can employ include concentrating on marketing, investing in your knowledge, diversifying your investment portfolio, and automating your savings. Before you set out, you must create an investment master plan to guide you through turbulent times.


By Gurpreet Singh Padda, MD, MBA

How to Master the Art of Multiple Offers in Real Estate
by admin | October 14, 2022 | Real Estate

Making multiple offers on properties might be a numbers game, but it takes time, research, and persistence to get good at it. Once you do, you’ll realize there’s a method to all the madness.

You can’t always score a deal by simply offering a client a deal that’s 70-80 cents to the dollar; you have to do more. You have to come up with really creative offers and provide a ton of options that prospects would find difficult to walk away from.

In a nutshell, find out what the prospect wants and lay out the game: you are willing to do any reasonable price deal as long as they are willing to wait. If they aren’t ready to wait, they will have to fork out more.

Similarly, they could lower their terms and get a property at that moment. If they decide to stick to their terms, they will have to either pay more or wait longer. Whatever their choice, you will have an option for them.

For that to happen, you must have the relevant experience to know how to value a property and hit your target numbers for contingencies, bargaining strategies, and counteroffers. This is how you can assess properties and make offers that a client can’t refuse.

1. Comparable Sales Method

This method, also known as the sales comparison approach, helps to determine the value of a property. It is one of the most common methods real estate appraisers use when dealing with residential and commercial properties.

Comparable sales are applicable in this method when the property under appraisal is similar to other properties recently sold in the area. When using this method, you must consider the following factors:

  • Features and amenities: The more feature-rich the property, such as a walk-in closet or hardwood floors, the more expensive it will be than comparable properties.
  • Location and neighborhood: Homes located in perceived safer areas or near popular attractions such as parks or shopping centers are likely to sell for more than those located further away from these areas.
  • Square footage: larger homes sell for more money than smaller ones because they offer more living space and amenities. However, doubling the cost of a 1000-square-foot home won’t determine the value of a 2,000-square-foot space because smaller homes are generally more expensive per square foot than larger ones. 
  • Age and condition of the property: The age of your home may also impact how much money it will fetch when selling on the open market. Older homes have more character but less modern amenities than newer ones. 
  • Recently sold listings: Provide a starting point for determining the current pricing for similarly specced properties in the same area.

2. Rent Multiplier Method

The rent multiplier method is a simple way to determine how much you should offer for a house. If you’re trying to get a property listed for, say, $200,000, you can offer up to $2,000 per month (the multiplier) over their asking price.

So, if you paid $100,000 for your property and it generates $3,000 in annual rent, your gross rental multiplier would be 33.3 ($3,000 / $100,000). If you want to sell your home at its current value of $100,000, an offer for $33,000 above the asking price would be about right.

3. The 70% Rule

The 70% rule is one of the most important concepts you should aim to understand before starting your real estate investing career, especially if you’re into house flipping. It’s simple:

Max Allowable Offer = (ARV * 70%) – (Repairs + Holding + Selling Costs)

Where ARV stands for “After Repair Value,” which is the amount you think a house will be worth after repairs. You can estimate this number by researching similar properties in your area and their sales prices, and the average of these prices is the after-repair value of the listing, even before you sell.

Repairs are what you think it will cost to make all necessary repairs to get the property ready for sale, including painting and new carpeting. The repair estimate should also include any costs associated with obtaining permits to make changes. You may have to pay extra for these permits or inspections, depending on what kind of work needs doing.  I typically calculate the Repair cost and add 20% as an additional buffer.

Let’s say you’re looking at a house listed for $100,000 with a repair list of $5,000, and you think you can sell it for $120,000. That means your maximum allowable offer would be $79,000: ($115,000 * 70%) – $5,000.

The 70% rule is a great way to value a home because repairs may end up higher than anticipated, or the market might dip into your profits. Note that in a hot market, you might have to pay more, and in a potential declining market you might be applying a lower percentage.

4. Sandwich Lease Option  

The sandwich lease option is a strategy where a property owner (landlord) leases their property to an investor (lessor), who then leases it to the end user (lessee). The lessee pays a higher rate than the lessor, allowing them to make a profit.

It is a good strategy for beginner real estate investors who don’t have the capital to start as you don’t need to make a down payment or obtain a mortgage. You can even enter a lease-to-own agreement with the landlord, a deal you can then pass on to the lessee if they are interested.

The sandwich lease option is an excellent choice during a seller’s market where potential first-time property owners can’t afford it because of punitive mortgage rates; hence they settle for leasing.

Final word

It would be best to be a little creative to survive in the current real estate environment—the old tactics of offering 70 or 80 cents to the dollar won’t cut it anymore. You have to provide a raft of options if you are to walk away with a deal.

Explain to clients that they could get a property for the price or terms they want if they are willing to wait. To ensure you hit favorable price points, even during an economic downturn, opt for the sandwich lease option, rent multiplier or comparable sales method, or the 70% rule.

I always attempt to define the true needs of the seller and “create” my offer based upon those needs, I want the seller and myself to be sitting on the same side of the table and negotiate with the Mr. Market on the other side.  This results in a collaboration rather than a competition.  Although the examples I am giving are for smaller properties, they apply even more to multimillion dollar commercial properties.

By Gurpreet Singh Padda, MD, MBA

Creating Cornerstone Content That Converts Leads Into Clients for Real Estate
by admin | October 13, 2022 | Real Estate

Real estate investors often get stuck in a rut of creating text ads, which, while effective at generating leads, rarely convert them into partners.

You should consider cornerstone content to build your brand and turn leads into partners.

Write cornerstone articles to make the potential customers’ decision-making easier. The cornerstone content should be the go-to resource for information about your industry and business that people can hold onto for reference and use as they look for more information about your services.

For instance, the return on investment (ROI) on commercial real estate is reportedly 9.5% per annum. Use cornerstone content to show how much experience you have in helping people purchase or sell such property at an even higher markup. So, here’s how you can use cornerstone content to convert leads into clients.

What is cornerstone content?

Cornerstone content is a post that provides in-depth and valuable information for your clients. It could be a series of your best articles that you intend to rank highest on search engines.

Since they provide exhaustive content that includes comprehensive information rather than sell products, they tend to be longer and more complex. It could be simple blog addition or a stand-on page.

Cornerstone content is vital because it’s ideal for building trust and credibility since the foundational content helps build traffic and brand awareness by establishing you as an authority in the industry. That is crucial to showing potential customers what you can do, making them interested in your services.

The goal of the cornerstone content is to create a positive first impression, making them more likely to convert into paying customers. For best results, create cornerstone content once or twice every month, depending on how often you publish new content on your site.

How to create valuable Cornerstone Content

Here are sure-fire tips for creating cornerstone content that will help your real estate agency grow:

1. Choose the Right Topic

It may seem mundane, but this is perhaps the most crucial step of the cornerstone content.

Before settling on the topic, you have to ask yourself a series of questions, chief among them is the major pain points or problems the target audience faces. Next, find out what hasn’t been answered sufficiently on other websites, then determine which issues you can answer competently.

It helps to ask members of your team if there are common questions they face. In addition, ask real customers too. That should allow you to formulate cornerstone content containing unique insight that addresses burning issues.

2. Keywords and SEO Optimization Strategies

It’s not just the real estate industry; the first page of Google is where all the action is. As 95% of web visitors rely on the first-page result, ensuring your website makes the cut and appears on the first page is essential.

One of the best ways to do that is through keyword optimization. It involves using words and phrases relevant to what you’re selling and what clients are searching for and answering the potential customers’ most pressing needs.

For example, if you’re selling a house in San Francisco, you might want to put “San Francisco” and “Bay Area” in your title tag and Meta description. You might also include those phrases in the body text of your page so that search engines will pick up on them.

Another strategy is ensuring your site is easily crawlable by search engines using proper coding standards and following web design best practices.

3. Be consistent with formatting and style

Your clients will recognize your brand more efficiently if your content follows a similar pattern and uses familiar language and branding. Engaging, high-quality, consistent content impacts a potential customer’s decision-making more than any other technique.

4. Internal linking

Send the most internal links to your cornerstone posts as this signals to search engines that they are the most important, allowing them to rank higher. It helps to use text links, that is, the keywords as the anchor text for links and then link within the text itself. Ensure you’re linking from pages with related content.

5. Call to Action

Considering you’re creating the cornerstone content aiming to convert them into clients, it helps to insert a call to action (CTA) at the end of the article. A CTA instructs the reader to take a course of action. You can do this by using call-to-action buttons at the end of your post.

CTA’s are highly effective, but the best performing is personalized, which HubSpot found to be 202% more effective than their basic equivalents. For instance, ContentVerve turned the phrasing in their CTA into the first-person point of view. Instead of writing “start your 30-day…,” they wrote “Start my 30-day…” and realized a 90% rise in the click-through rate (CTR). So, how do you ensure your call to action is clear and compelling?

  • Tell your readers exactly what you want them to do next: Make it clear what they need to do next. Use action-oriented writing instructing them to take action, such as clicking a link to another page on your site or even asking them to leave a comment with their thoughts. The key is to be specific, so there’s no room for confusion.
  • Ensure the CTA is visible and eye-catching: If your readers can’t see the button clearly, it won’t matter how good your copy is—they won’t click on it. Make sure that whatever design element you use for your CTA is highly visible, accessible, and super apparent where to find it. The goal of any call-to-action is getting people excited about taking action—and for that excitement to translate into clicks.

6. Promote the content

You can create the best cornerstone content, but it will be pointless if your target audience doesn’t read it. Since it takes time for new content to rank organically, make a splash by promoting the content in the meantime.

Email promotion is one of the most impressive ways of doing it, with 4 billion daily users. It’s telling that 59% of respondents said email marketing influenced their purchasing decision.

Social media is another potent outlet considering 72% of Americans use social media daily. Focus on platforms that work best for real estate, personalize text and images for each platform, and share more than once.

7. Maintenance

Finally, you must maintain the cornerstone content’s health to remain evergreen. Monitor the performance, update information regularly, improve loading speeds, and give it a style refresh every few years to keep it looking up-to-date.

Final Word

If you’re a real estate investor, cornerstone content might provide the tipping point of turning leads into clients. You can do that effectively by researching suitable topics, conducting keyword research, and creating content with plenty of internal links and a personalized call to action.

Ensure you maintain consistent messaging and branding across the cornerstone content, promote the posts, and keep updating the content to keep them evergreen.

 

By Gurpreet Singh Padda, MD, MBA

7 Real Estate Trends to Watch Out for in 2023
by admin | October 11, 2022 | Real Estate

We are just barely into the second half of the year 2022. Much of the economic news is doom and gloom; perhaps it’s best to look into the future if one wants to find an iota of good news. For that, a glimpse of the past could provide near-accurate future predictions.

Six months on, the Russia-Ukraine war is causing a considerable downturn in every sector of the economy, including the real estate market. The ongoing war has triggered fears of a global recession, with the World Bank dropping its growth prediction from 4.1% in January to 2.9%, causing supply chain disruptions, high commodity prices, inflation, and food insecurity.  

While COVID-19 might seem like a thing of the past for most Americans, pandemic lockdowns are still alive and kicking in the “world’s factory,” China. That translates to supply chain issues, which explains why there’s a push to bring some of those jobs back onto American shores. With that background, here are the top trends in real estate to watch out for in 2023.

1. Housing Prices Likely to Remain High

According to Zillow, the typical monthly mortgage payment increased 75% between June 2019 and today. The National Association of Realtors (NAR) also states that home sales dropped 5.4% from May to June, marking the fifth consecutive month of declining sales—but median prices reached a record high in June: $416,000, up 13.4% from a year ago.

Although incomes have risen over the same period, they haven’t kept up with inflation. Wage growth in June was 6.7%, below the 9.1% rise in inflation that month. Moreover, mortgage rates continue to stagnate, and there’s the ever-present threat of further interest rate hikes. The overheated markets of early 2022 will drop precipitously in the later half of 2022 and most of 2023. But that still means, even if home prices were to drop 20-35%, they probably would remain beyond the reach of most first-time homebuyers.

2. Expect an Uptick in Mortgage Defaulters

To fight rampant inflation, the Federal Reserve activated its nuclear option—hefty interest rate hikes. Inevitably, mortgage rates rose as well, with the national average mortgage rate hovering at 5.08% as of August 2022.

Considering the August inflation rate is in the upper 8%, higher than the long-term average of 3.26% and the Fed’s target rate of 2%, it’s inescapable that the Fed will announce further interest rate hikes.

That means higher mortgage rates, and since the wage growth in June was 6.7%, below the inflation rate. As the economy continues to contract, you should expect an uptick in mortgage defaulting that will likely stretch to 2023 and beyond, and more people are likely to choose adjustable-rate mortgages over fixed-interest mortgages.

3. Affordability of Homes Still a Problem

Affordability of homes is still a challenge for many Americans, but it’s not the only one. According to a recent survey by Pew Research Center, 46% of Americans say affordable houses are still a challenge.

That is exacerbated by the rising cost of rent, with New York recording an average of $3,500 in June 2022, an all-time record high. With the raging inflation and considering rent prices hardly drop significantly over time, it’s difficult to see how homes will become more affordable in the near future.

The only hope lies with the Fed cooling down inflation sufficiently, imposing more agreeable interest rates, and the cost of living dropping significantly to lower the price of everything, including real estate.

4. Suburb Living and Higher Prices in the Suburbs

With rental prices in major cities shooting past most people’s capabilities and mortgage prices continuing to lock people out of home buying, there’s a push towards moving to the suburbs to access affordable housing.

More employees are also pushing for more opportunities to work from home to save on the daily commute. That should see the prices of suburban houses rising to meet this new demand, which should persist into 2023.

5. Prevalence of Technology Usage

The trend of increasing use of technology in real estate is nothing new, but it has become more widespread in the last few years. For instance, the NAR states that 97% of all homebuyers used the internet to search for a new home.

That trend will continue, allowing homebuyers to access a broader home listing catalog. The same is true for realtors as it will enable them to advertise to get their listings before more prospects. The apps and websites also come with matching and software to make it easier for buyers to filter homes that fit their descriptions better.

Technology also comes in handy when showcasing a home. Instead of hosting an open day which may force prospects to travel great distances, a real estate agent can conduct virtual home tours. Virtual staging will save the agent a ton of money as they don’t have to spend time and money collecting and setting up furniture that matches a listing.

You’re also likely to see an increase in drone videos and photos to capture stunning overhead footage of properties and the surrounding amenities to enhance the desirability of the listing. Social media sites that use videos and photography, such as YouTube, Instagram, and TikTok, may also prove vital as independent platforms for showcasing real estate.

6. Emphasis on Amenities as a Selling Point of a Home

In the next few years, you will see a substantial shift in how people choose where to live. What was once a matter of location, price, and square footage will soon become a question of amenities.

As more people focus on their health and wellbeing, they’ll look for homes that offer more than just a place to rest their heads. They’ll want easy access to gyms and pools, dog-friendly apartments, and pet-sitting services—and they’ll even want walkable neighborhoods with local stores and restaurants. 

7. Luxury Homes

The need for luxury homes has steadily risen over the past few years. These refer to homes that go for $1 million in the smaller cities. In major cities, that starts at $4 million.

According to luxury home marketing, single-family luxury homes only spent 12 days in the market in 2022, compared to 38 days in 2020. At 41.6%, the growth in luxury home sales in 2021 outpaced other segments of the market, such as affordable homes at 7% and mid-priced homes at 5.9%. This trend will likely continue to 2023 and beyond as the trend for buyers looking for luxury homes seems to be going strong. 

Final Word

We can use historical patterns to chart a course for future trends, and what that teaches us is that housing prices will cool down but will likely remain higher than most people can typically afford. Additionally, we will likely experience in the real estate market are the continued high demand for luxury homes, emphasis on amenities for healthy living, the prevalence of technology usage, and the continued preference for suburban living.

How to Be a Successful, First-Time Homebuyer in 2022
by admin | October 7, 2022 | Real Estate

Mid-2022 is probably the worst time to buy a home. Median home prices hit an all-time high of $440,000 in July, and mortgage rates are at 5.5%, almost double what they were last year.

While buying a home now may seem a terrible idea, there are ways to bag yourself a good deal. So, these are some tactics you can employ to ensure your purchase doesn’t become a financial nightmare.

1. Do your Research

Before looking for a home, you must understand the market to know what’s within your budget. Sure, most home prices have skyrocketed over the past few months, but there are some places where it’s coming down.

For instance, according to Redfin, Salt Lake City, Boise, and Denver all witnessed at least 50% cuts in asking prices. Seven more cities, including Tampa and Sacramento, saw asking prices slashed by more than 44%.

So yes, you can still bag yourself a deal in the current environment, as long as you are willing to do the legwork and compromise on the places you wish to live in. 

2. Build your Credit History

It helps to build your credit history if you’re a first-time homebuyer. A poor credit score makes qualifying for a mortgage loan challenging or attracts high premium rates because financial institutions will view you as a risk.

If you have little or no credit history, you may need to take steps to build up your score. Here are some tips for doing so:

  • Pay all your bills in full and on time: Even if you don’t have any credit cards or loans yet, you should make sure that any bills you pay regularly (such as rent or utilities) are paid on time and in full. It will help establish your payment history and show lenders that you’re reliable with money.
  • Don’t open too many credit cards at once: If you decide to apply for a credit card, make sure that you only use one at a time so that it doesn’t hurt your credit score too much if the application gets denied (or approved but with a low limit).
  • Minimize utilization rate: Your balance-to-limit ratio (utilization rate) is just as important as payment history. It refers to the total balances racked up on all your credit cards divided by the total credit limit of all the credit cards. Aim to keep this figure below 30%. 

3. Make a Sizeable Down Payment

Making a sizable down payment toward buying your home is vital. The down payment is typically between 3% and 20% of the home’s purchase price.

You want to make a large down payment because it will lower your monthly mortgage payments, saving money in the long run. Additionally, making a large down payment means avoiding paying private mortgage insurance (PMI).

PMI is an additional fee that many lenders require as part of their mortgage loan package. It protects them if you default on your loan—but it can add hundreds or even thousands of dollars to your monthly mortgage payment.

You can avoid PMI by paying more than 20% of the home’s purchase price as a down payment. Alternatively, you can avoid a down payment by getting a piggyback or 80-10-10 loan, which covers 10% of the deposit while you deposit the other 10% from your savings.

4. Get Pre-approved for a Mortgage

When you’re a first-time homebuyer, getting pre-approved for a mortgage is one of the most important steps to ensure you find the right home.

Getting pre-approved means that a lender has reviewed your finances and determined that you can afford a home at a certain price range. Your agent will know how much house you can afford, so they don’t waste time showing you homes that are beyond your means.

5. Try Out for First-Time Home Buyer Grants and Programs 

First-time homebuyers have several financial assistance programs that will soften the sting of the hefty payments needed to purchase a home.

A first-time homebuyer’s grant refers to financial assistance you may receive to purchase your first home. It typically covers a percentage of the down payment and closing costs. Since it’s a grant, you may not have to repay the amount. Examples include:

  • Downpayment Toward Equity Act
  • Good Neighbor Next Door program
  • Bank of America’s Home Grant
  • Chase Bank Homebuyer Grant

On the other hand, first-time home buyer programs usually come from federal, local, or state governments and take the form of tax credits, forgivable mortgages and closing costs, and down payment assistance.

You may qualify for the Housing Choice Voucher if you face financial challenges due to a low income and receive minimum earnings as stipulated by your local public housing authority. A clever way to use the voucher is to fund a rent-to-own program.

Similarly, you can apply for an FHA loan. These are Federal Housing Administration-insured loans made by private lenders, usually featuring zero-interest loans and deferred payment loans. Moreover, they typically have lower down payments and require lower credit scores than most other mortgage loans. 

6. Use a Mortgage Broker and Agent

It pays to consult a mortgage broker in such a tight financial environment. They know the ins and outs of the mortgage industry, so they can find you a mortgage with lower fees, great rates, and financial perks and help you overcome borrowing challenges.

Similarly, procure the services of a real estate agent. Using an agent is one of the best ways to ensure a smooth process and a successful outcome. No wonder 87% of homebuyers used an agent in their home purchase.

Real estate agents or brokers know the market and can help you find your dream home at your price range. Ensure that the agent knows your unique needs so they can find the ideal property that fits your lifestyle.

7. Consider Variable-Rate Mortgage

A variable-rate mortgage can be a good choice at this point. You don’t want to go for a fixed-rate mortgage with fixed interest rate monthly payments throughout its lifespan, as the current mortgage rates are very high.

An adjustable-rate mortgage will have fluctuating mortgage rate payments, so you will pay lower fees when the interest rate is eventually lower. Further, an adjustable rate payment allows you to make higher monthly mortgage payments without penalty. That means there’s a chance you might pay much less than a fixed rate arrangement.

Additionally, variable-rate mortgages typically have lower initial interest rates than fixed-rate mortgages, which means they’re cheaper upfront. That could buy you some time until the interest rates finally dip.

Finally, you could refinance the variable-rate mortgage and exchange it with a fixed-rate mortgage when the interest rates eventually drop to reasonable levels and it makes financial sense to do so.

Final Word

Many potential first-time home buyers are postponing the purchase because of the hostile economic environment that has rendered homebuying virtually impossible.

Home prices have reached historical highs, and mortgage rates are double what they used to be in January 2022, with more hikes in the pipeline as the Fed is threatening more interest rate hikes.

If you must buy a home, try looking for one in states that have lowered their asking prices, utilize a mortgage broker and real estate agent to find deals for houses and mortgage rates, and build your credit history to score favorable loan terms.

Similarly, consider a variable-rate mortgage, make a sizable mortgage down payment to reduce your monthly mortgage payments, and try to secure a first-time home buyer grant or similar program.

 

By Gurpreet Singh Padda, MD, MBA