What are REO Properties?  

REO—or Real Estate-Owned—properties occur when a lender, bank, or investor takes ownership of a foreclosed property that fails to sell either on the market or during an auction. There are 3 common instances where ownership transfers to the bank when the original owner either defaults their mortgage into foreclosure, transfers ownership to pay off their loan through auction, or after death if their heirs can’t or won’t buy the property. As REO properties are typically sold “as-is” on the market, these homes frequently remain unsold under the lender’s control.  

Benefits of Buying REO Properties 

Despite these homes being passed between owners, there are numerous financial benefits to purchasing REO properties outside of the standard real estate market for both buyers and investors. Here are a few key benefits to expect when purchasing an REO property:  

1. Low Prices 

One of the biggest benefits of buying REO properties is that lenders seek the most immediate value out of these failed sales to prevent continued profit losses and liability claims. As a result, most banks will list REO properties at a discount or have more a negotiable price to guarantee the quickest sale. With initial bids going at least 20% below current market price, these lower prices come as a relief to new homeowners with the median market price at $428,000. Thus, REO properties offer a bargain to potential buyers and investors with limited capital.  

2. No Outstanding Costs 

Most REO properties guarantee have no taxes or title liens to deter buyers. After claiming the REO property, banks will remove all title liens as well as pay all taxes on the property. As such, investors don’t need to worry about the value or price of the REO property, thus saving them time and money. Nevertheless, buyers should hire a title company to conduct a property title search for any hidden legal issues about ownership or property bills.  

3. Major Property Returns 

Real estate investors can significantly benefit from investing in REO properties as either a landlord or house flipper. Landlord investors can turn REO properties into rentals, thereby generating additional income and potentially sell the REO property later for a higher value than bought after appreciation. Likewise, investors looking for quick profit can buy an REO property at a discount to provide better remodeling to sell onto the real estate market. No matter the method, investors can earn tremendous profits by investing in REO properties. Since REO properties tend to be distressed and in disrepair, though, a home inspection is crucial before final closing.  

Entrust REO Properties to Millennial Title 

Whatever the real estate service you provide—mortgage broker, bank lender, attorney or another title company—let Millennial Title secure closings for your REO properties. Flexible and experienced in handling various title transactions, we at Millennial Title provide support for all properties in your portfolio through these following services:  

National  

With Millennial Title’s National Services Division, our experienced team help to streamline workflow around your process using advanced integration and automation technology for an efficient and hassle-free closing. By offering investors the chance to increase revenue, unlimited access to notaries and underwriter partnerships across the United States, we at Millennial Title ensure the best value for REO properties wherever you buy.  

Commercial 

At Perpetual Title, we also offer complete commercial title services to manage clients’ legal and title transactions from our experienced, trusted attorneys and team members. Investors will most benefit from owning or co-owning REO properties through commercial investments, as they are among the few types of real estate investments that easily recover from market instability. Meaning investors can buy REO properties wholesale without prior capital or experience.   

Overall, REO properties present great financial investments for both real estate homebuyers and investors. Although investment opportunities for REO properties are limited, Perpetual Title can help broaden those chances through our national and commercial title services. Regardless of whether you’re buying a home, selling, or investing in property, rely on Perpetual Title’s team of reliable real estate professionals to help manage the REO properties in your portfolio. To learn more about our commercial and national title services, contact us today. 

The post 3 Reasons to Invest in REO Properties first appeared on Perpetual Title.

What is Inflation?

Inflation is the rise in prices, meaning a consumer cannot purchase the same product(s) for the same price. The rate of inflation is often measured by the consumer price index. This calculates the average change over time in the prices consumers pay for products and services. Inflation has greatly impacted numerous industries, but the real estate market has been permanently altered due to this economic stress. The real estate industry has experienced rising prices throughout the years, with every decade being more expensive than the previous. Due to inflation and other economic factors, home prices have grown a dramatic 326.1 % since the 1950s.

Real Estate vs. Inflation

Inflation is a time-sensitive situation and long-term investments are exceptionally important during these times. Commercial real estate is among the few investments that remain protected from the uneasy market and starts on the path of recovery much sooner. These quicker recovery times are a significant factor why investors make a beeline for commercial real estate assets.

A way to fight inflation is through an inflation hedge. This investment protects the decreased purchasing power of a currency that follows from the loss of its value due to rising costs. This process involves investing in an asset that is predicted to maintain or increase its value over a designated period. On the other hand, the hedge could involve taking a higher position in assets, this may decrease in value less rapidly than the currency’s value.

Hedging can help protect the investment’s value. Certain investments might seem to provide a decent return, but with inflation, they can be sold at a loss. Assets that are considered to be part of an inflation hedge can be self-fulfilling; which keeps their values high even though the intrinsic value may be lower.

Real Estate Investment Options

Fractional Ownership

This option allows diversification of the portfolio, and the individual can choose without limitation the assets they would like to invest in.

Unimproved Property

Unimproved property is land with nothing on it including buildings, paths, and crops. Investing in unimproved property is a unique opportunity for investors to diversify their portfolios and tends to be cheaper than purchasing developed land or other types of property.

Commercial Real Estate (CRE)

This option allows the individual to own or co-own commercial property. This is a great option if you have knowledge of the market you are investing in and can handle the formalities involved in the ownership process. Individuals can also choose to purchase wholesale commercial properties. This is a great way to enter begin investing in commercial real estate with little capital or experience, to get started check out these tips.

Real Estate Investment Trusts (REITs)

REITs are companies that work with the purchase, management, or financing of real estate. They allow diversification and remove the unnecessary stress of excessive formalities present when purchasing real estate. Similar to a mutual fund, an individual can choose the REITs, but not the assets it is invested in.

Investors can use a REIT to generate income without having direct ownership responsibilities. | Photo: Reits Market

How Can Commercial Real Estate Protect Investors?

Commercial real estate as an inflation hedge has proven time and time again to be a successful strategy. It’s an asset class that generates predictable returns among other benefits, here are three:

Increasing Rental Income

Property rental prices can be attributed to rising inflation. This can cause an increase in net operating income, which will appreciate the property’s value further. If the property’s value is more than the inflation rate, the investment will not be hampered if they are holding commercial real estate.

The Lease Factor

Lease agreements for commercial real estate are structured in a way that increases the rent at regular intervals throughout the leasing period. Based on the property and demand of the market, the clause for different assets will be different. If these regular increases outpace the rate, the relative return will stay positive.

Property Scarcity

Space will always keep decreasing. Houses, apartments, and other buildings are created to increase the market’s supply. However, this increase in supply causes scarcity of space. In dense real estate markets, high demand and limited supply contribute to the appreciation of prices for real estate, which is positive for investors.

Ready to Fight Inflation? Invest in Property Today!

Using commercial real estate as an inflation hedge is a great strategy to preserve your finances and prevent current and future losses. There are a few money-making options you can pursue, but it is always best to examine all your options and choose the best fit for you, including choosing the right partners. Perpetual Title provides commercial real estate title services across the United States. With in-house attorneys and a team of knowledgeable real estate professionals, we have the experience and expertise to manage your next commercial real estate transaction. To learn more about our commercial title insurance and escrow services or to schedule your closing, contact us today.

The post Using Commercial Real Estate as an Inflation Hedge first appeared on Perpetual Title.

What is Wholesale Real Estate?  

The term wholesaling is often associated with the retail industry as wholesale companies sell a high volume of goods to retailers who then sell to consumers at a higher price. Wholesale companies can sell their products at a lower price due to the high quantity of goods sold. While the name may suggest that real estate wholesaling follows the same pattern, this is not the case.

In wholesale real estate, a wholesaler will sell a property on behalf of the owner for a profit. The wholesaler and owner enter into an agreement in which the wholesaler will sell to another buyer. The wholesaler never purchases the property but the contract they originally entered into with the owner allows them to sell the property and keep the profit for themselves.

Wholesale real estate properties are often properties that are distressed and off-market. The original owners may be facing foreclosure, no longer want the home, or may just be avoiding the time and resources required for a traditional sale. This allows wholesalers to enter into a contract with the owner to take it off of their hands.

The basics of real estate wholesaling are simple as illustrated by Visual Real Estate.

Benefits of Wholesale Real Estate

Little Capital Necessary

• Compared to other types of real estate investments, wholesaling does not require investors to purchase the property and is great for beginner investors since it requires little capital to get started.

Gain Insight About the Market

• For new investors, wholesale real estate is a great way to break into the industry. Wholesaling requires an understanding of the current market, location, and provides opportunities to network with others.

Potential Large Profits in Short Period

• Wholesale real estate deals typically do not take more than a few months and could result in substantial profit for the investor. In some instances, deals can be closed in 45 days or less.

Potential Risks with Wholesaling

Income is Unpredictable

• The housing market is unpredictable and there is no guaranteed income when investing in wholesale properties. Investors may lose out on a deal if they don’t sell a home or may face difficulties finding properties in the first place.

Lower Profit Margin

• While less investment is required upfront, real estate wholesaling often has lower profit margins than other types of property investments. However, this lower profit margin is coupled with lower risk and less capital required on the part of wholesalers.

Difficulty Identifying Buyers and Sellers

• In order to earn profits, you need property owners who are willing to sell and others who are willing to purchase the property. For beginners, this can be difficult to assess when first entering the market.

Networking online with real estate professionals and other investors can open the door to opportunities.

Advice to Get Started

Getting started with wholesale real estate is not as complicated as you may think. To begin, check out these tips:

Research Your Area’s Market

Understanding your local market and what is available to you is the first step in the process. Once you find a property, you should also understand comparable home sales within the neighborhood; this allows you to assess whether homes are prices under-market value. One way to access this type of data is by partnering with a local real estate agent who has access to the MLS.

Create a Buyer and Client List

Once you have a grasp of what your local market offers, the next step is to generate leads of buyers and sellers interested in wholesaling. While the quantity of leads is great, having a smaller, more dedicated list of clients is even better. Networking on social media, real estate investment groups, or chatting with agents, title professionals, tax advisors, and attorneys can help you identify potential opportunities.

Identify Resources for Properties

While networking does a great job of building a buyer’s list, there are also resources available:

• Subscribe to Wholesaler’s Buyer Email Lists in Your City
• U.S. Department of Housing and Urban Development (HUD) lists foreclosed properties that were financed by an FHA-backed mortgage.
• Craigslist has hundreds of properties for sale and for rent in any city, these could be a potential source for a future deal.
• Realtor.com provides listings for over 800 MLS databases and allows users to search for foreclosures and sign up for email notifications.
• Auction.com allows investors to attend auctions online for numerous types of properties including real estate owned, short sales, and foreclosures.
• Realtytrac.com focuses on foreclosures locally and across the country.

Keep all Parties Involved

Serving as the middleman, it is the wholesaler’s responsibility to keep everyone involved until closing is completed. Taking the time to keep the seller and buyer informed is not only great for customer service, but also builds stronger relationships with both parties.

Follow up Post-Closing

Once the closing is completed, your job isn’t over just yet. Every deal gives you a chance to grow your network, so afterward be sure to follow up and make sure everyone is happy. This also keeps your name on their mind and can lead to future business.

Is Wholesale Real Estate the Investment Strategy for You?

Wholesale real estate is a great opportunity for new investors to enter the real estate market. Like other forms of real estate investments, there is risk associated but it can be worth it if you have the passion to pursue it and partners to help you along the way. At Perpetual Title, we help investors make sound financial decisions and protect their investments from any title defects. Interested in learning more about our national title and escrow services? Contact our team!

The post What is Wholesale Real Estate? 5 Tips for New Investors first appeared on Perpetual Title.

What is a 1031 Exchange?

Section 1031 of the Internal Revenue Code allows investors to avoid paying capital gains taxes when they sell and reinvest the earnings of the sale into a property or multiple properties of like kind and equal or greater value. By reinvesting, investors will defer the capital gains tax from the sale.

For example, an investor purchases a property in 2015 for $200,000, then by 2020, the property appreciated to $500,000 and the investor decides to sell. The sale will have a capital gain tax of $300,000 and the tax will need to be paid on that gain. However, if the investor decides instead to utilize a 1031 exchange, they can invest the $300,000 they earned into another property and defer the capital gains tax on that sale.

Benefits of 1031 Exchange: Why Should Investors Use it?

While a 1031 exchange may look like a tax loophole, it is a perfectly legal process that allows investors the opportunity to reinvest, build their portfolios, and more. Here are 5 benefits of 1031 exchange transactions:

Reset Depreciation

When declaring taxes from rental income, investors can claim depreciation as an expense toward their deductions. Typically, when selling your rental property, you would have to calculate its depreciation and pay the taxes associated. With a 1031 exchange, the depreciation is carried over into the replacement property and is deferred until the new property is sold.

Increase Cash Flow and Free up Capital

Between tax savings and building wealth through capital appreciation, owning property that produces positive cash flow will grow your assets quickly. You can leverage your assets to get a more expensive replacement property by using your proceeds of the exchange toward a down payment or even consider exchanging for a commercial or rental property to earn a monthly income.

Utilizing a 1031 exchange allows investors to avoid capital gains tax by reinvesting the money earned from the sale.

Diversify Portfolio

By purchasing properties through a 1031 exchange, you can diversify your portfolio by branching out into different markets or types of properties. Owning a single asset or several of the same type exposes you to more risk in the event that the market crashes.

Consolidate Properties

On the other hand, for some investors, owning multiple properties can be costly and time-consuming, especially if the ROI isn’t high enough. Investors can utilize the 1031 exchange to swap these properties for something that is less maintenance and easier to manage.

Transfer Assets and Profits to Beneficiaries Tax-Free

In the event of death, the property and profits associated will be transferred to the designated beneficiaries tax-free.

Perpetual Title Protects Your Investment

As your partner, Perpetual Title recognizes the importance of profitable investment strategies. At Perpetual Title, we understand every aspect of real estate investing as well as its potential risks and rewards. From completing your title work and issuing policies, the team at Perpetual Title is here to ensure your investments remain protected now and in the future. To learn more about title and escrow services, contact us today.

The post Investing in Real Estate? 5 Benefits of 1031 Exchange first appeared on Perpetual Title.