Investing, Markets, Money

Five Ways To Invest In Real-Estate

We're Not In 2008 Anymore, Dorothy

 

There are basically five easy ways to invest and win with real estate, and none of them involve swinging a hammer.

 

The concept of investing is simply elegant: Don’t work for money. Make money work for you. Give those dead presidents something to do; they’re fat and lazy from sitting in low-interest CDs and fee-heavy mutual funds. Real estate investing can get you somewhere in the range of 8-12% AROI; and the deals are simple, straitforward, and if done right, a win for everyone. 

 

But Stephen, didn’t real estate investing kinda get a bad rap in the crisis of 2005-2009?

 

Recently, I sat down with a friend who told me about buying a $1 million condominium on the coast of Alabama in 2005, nanoseconds before the crash began, only to see his ‘two year flip’ turn into a ten-year ongoing financial headache. ‘It’s like a pet now,’ he said gloomily. 

 

During the residential housing market collapse, the nation got a very hard lesson in the wrong ways to invest in real-estate.  As a young person trying to make his way in the world, my first exposure to real estate investing was in 2008: Negative Equity, CDOs and sub-prime mortgage lending.  People who had purchased speculative properties in the hopes of flipping them for a profit a couple years later found themselves stuck with an expensive-to-maintain home that was massively overvalued, saddled with loans they couldn’t afford.  It was a nightmare that sapped the public of trillions of dollars of equity and savings.  

 

‘Never again’ we all swore like hungover drunks draped over a friend’s old sofa.  The government clamped down on lending.  Banks wrote down massive losses.  People hunkered down and did their best to make ends meet.  The markets contracted and bled for nearly four years, and the words ‘real-estate investing’ became like the name of Sauron from Lord of The Rings, not to be spoken in good company.

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A Better Way To Invest

But what I didn’t know then, and I know now, is that the problem centered on a lack of knowledge. But from the pain of a hard lesson comes the wisdom of a better way, and so much more with real estate. The value of real property didn’t really lose intrensic value during the crisis; the real estate bubble met it’s end like a bird striking a window. But beneath real estate is real land, with infinite purpose and constant demand, and as the country mended its wounds and surged forward, values rose from the ashes. 


At the time of this writing, the real estate market in Atlanta is near it’s 2008 peak, with an expanding, tech-fueled economy bringing new people to the metro area every day. Inventory is so low, people will call on just about anything, and people say ‘well does that mean we’re going to crash again soon?’ Sure. It could totally do that. But the indicators are strong in ways they never were in the early 2000s.  Inventory is extremely low because land intown is too expensive for the under-$400k homebuilders to make much money; the under-$400k buyers are younger and numerous, with good jobs and more savings, and interest rates are still historically low.

 

Though low interest rates are great and all, the real force driving buyers to buy houses is prosperity. With its many manufacturing, educational and commecial centers, Atlanta is a healthy metroplex, with a constant influx of new people streaming into the forgotten burroughs surrounding downtown Atlanta.

 

Millenials interested in walkable communities that are closer to their jobs are driving high demand for nicely renovated properties. The healthiest range to sell into lies between $200k-$500k, as that section of the market is underserved by new construction; at least in the intown areas. And that’s where we come in.

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Massive Dynamic has over 10 years of experience in Design. We take pride in delivering Intelligent Designs and Engaging Experiences for clients all over the World.

You Must Invest With The Best

 

Part of winning in real estate is investing with companies who really know their markets and their business. With the builders focused on higher-dollar markets, residential redevelopers like Light Box Homes are the only companies serving the under-$500k market segment, making it very lucrative. There is plenty of demand in this segment, and buyers want homes that are functionally new and nicely renovated. 

 

Nicely Renovated is our middle name. People love our home designs, because at Light Box Homes, we find the right balance between conserving the character of an old home while modernizing its finishes and aminities. At left you can see an example of what sells fast in East Atlanta: 2074 Cloverdale Drive. This noble little 1400sf 3/2 sold recently for more than $350,000 after a complete renovation. CLICK HERE to see the full before & after video!

 

Every single family home we’ve sold has been above list price and on market no longer than a day or two. This is not true with every residential redevelopment company. Many people continue to get into the business thinking it’s 2005 all over again and anything with a door and lightbulb will sell at the top of the market.

 

Tragically for these people, that isn’t true. It’s not 2005. The market is up, but mostly due to low inventory, not easy credit; and yes, buyers will fight for a house, but we see plenty of poorly-renovated homes sit on the market. It’s because the buyers are actually buying to live in the home, not sit on it until the tax burden falls away and flip.

 

If you don’t buy right, you can’t renovate right, and if you don’t renovate right, you won’t sell for what you originally thought you might. 

 

In today’s market, some neighborhoods are going up dramatically, some are rising more modestly, and others are even going down. The playing field can change the minute you walk from one side of a street to another. There is not a flood of money making all boats rise. If you want your ship to sail, it better be made right from the start. 

 

Mold & Cat Pee Smell Like Money

“But hang on, I don’t know the first thing about what you’re doing,” you’ll say. “Isn’t that what people were doing leading up to the crisis? Flipping houses?” 

 

Yes and no. They were flipping houses irresponsibly. They weren’t running a business, they were running with the lemmings off a cliff. I can’t say that for Light Box Homes. We know our path, and we understand the fundamentals that underpin every successful project. We have accurate deal analytics software plus business and contracting systems in place to make sure every deal is a winner from day one, with enough margin to cushion the blow from another crisis, whether it be global, national or local. Our goal is to make every deal a win for everyone; buyer, seller and investor, and that starts with you: Person with an IRA wasting away in some bank with a weird name. 

 


“Okay, okay, you’ve got game. But how does it work? How exactly am I protected if I just go and drop $150,000 into an old-n-moldy bungalow somewhere in East Atlanta?”


First of all, no shade to East Atlanta. East Atlanta is one of the hottest markets in town. The EAV veritibly sits next door to the Beltline, with the unique character and vitality of the East Atlanta Village at it’s center plus proximity to downtown tech corridor. East Atlanta is a great place to live. Oh, but to answer your question:


Before you invest in a project with Light Box Homes, we present you with a private lending synopsis that breaks the deal down for you: From closing to closing, we carefully explain the work we’re going to perform, how long the project will take, and show the comparable properties that support our projected sales price. If you decide to participate in the deal, we have our attorney draft a lien for you and file it with the local municipality, so if we get abducted by aliens, you can foreclose on the property and get your money back. It’s that easy. You can’t do that with stocks. Stocks are just words on paper.

 

For us, that old and moldy house smells like money because we know we can buy it at 50% of it’s fully-renovated value. We begin improving our real estate from the first day after closing. Should you have to foreclose, you’ll more than likely get more than the money you put in because we’ve been improving the property. Once again, this can’t be said for the stock market. When that company goes south, you take a bath no matter what. With real estate you’re better protected.


Following closing, we handle the entire project from start to finish, from tearing out that moldy drywall to final clean and check, and we’re experts in what we do. Just check out these amazing before and after slideshows of recent properties (CLICK HERE). Unlike many other residential redevelopers, we swing for the fences with every project. We replace everything: Drywall, HVAC, plumbing, electrical and the roof, open the layout and then install gleaming new kitchens and baths. Our properties are hot, and it’s rare for us to even have to do an open house, because our renovations fly off the listing sheet. 

 

And on the day that we close with our happy buyers, the closing attorney cuts you a check for principal plus interest. Basically, your money comes back with a whole lot of friends.

 

“You’ve got my attention, but where do I find $150,000? Is it legal to just give you a check for $150,000? Don’t I need to be a bank or something?” 

 

First of all, it’s perfectly legal to lend money as an individual. It’s your money, after all. You’ll have to pay taxes on the return, but when you’re earning 10-12%, this is just the price of winning. The important things are to protect yourself with a lien on the property and partner with a high-performance residential redeveloper like Light Box Homes.  Secondly, there are a wide variety of accounts that you can pull money from to invest. Below I outline five of the most common. 

Your Savings

It’s not sexy or flashy, but a simple savings account is a tremendous source of funds available for investing. Many people sock money away every month without giving it a second thought, but they don’t realize that their money is actually losing value sitting in that CD or savings account.

 

Like a toddler in a candy shop, inflation nibbles away at your money every minute of every day. Even top-performing short term CDs barely keep up with inflation. And savings accounts? That money is literally losing value right now even as you read this sentence.

 
If you have a savings account with $100,000 in it, you might as well take $2000 of it and light it on fire every year. That’s how bad savings accounts perform. Money from a savings account will give you the best return on your investment, and since you’re not using it, shouldn’t it be working and growing?

 

We challenge you to look below at how compounding interest can turn that frumpy old savings account into a lean, mean, money-making machine. Let’s say you start with $100,000 compounded annually at our standard 10% rate of return.

 

YEAR 1 – $110,000

YEAR 2 – $121,000

YEAR 3 – $133,100

YEAR 4 – $146,410

YEAR 5 – $161,051

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Massive Dynamic has over 10 years of experience in Design. We take pride in delivering Intelligent Designs and Engaging Experiences for clients all over the World.

Your Home Equity

Just about everybody knows what this is: The Home Equity Line of Credit. Basically, it’s a line of credit against your personal property that you can treat like cash, complete with a check book and debit card. The amount of the HELOC is determined by how much equity you have in your personal property.

 
As a general rule, most banks will loan up to 80% of the appraised value of your house; so if you’ve been in your home longer than five years, you’ve probably got tens of thousands of dollars of equity that you can pull out of your house and put to work. 


HELOCs are variable-rate loans that tend to float between 4-6% depending your credit and home equity, but when you’re making 10-12% in our real estate projects, this equates to a 6-8% average return on your money! 


Most people pull money out of a HELOC to renovate their personal home; update their kitchen or replace their roof. That’s all well and good, but that just adds to your personal debt load. Translation: You working for your money instead of your money working for you. 


You could pay for that kitchen renovation with cash after just a couple years investing your HELOC in our real estate projects. Imagine: If you invest $100,000 HELOC at 5% for a year at a 12% return, you’ll pocket $7000. Hello! A few years of that and you can have just about any kitchen you want, without the debt, and all that cash is added to the equity in your home!

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Massive Dynamic has over 10 years of experience in Design. We take pride in delivering Intelligent Designs and Engaging Experiences for clients all over the World.

Your Stock Portfolio

The margin loan is like a HELOC on your stock portfolio. The last ten years have seen the stockmarket more than double in value, sending portfolios soaring.  How can you make even more money on the money you’ve made? Borrow it and lend it on one of our real estate projects! 


Yes, it’s that simple. In most cases, you can borrow up to 50% of your portfolio’s value, at reasonable interest rates and terms. Although the investment banking industry would prefer you to sink that money into more stocks, mutual funds and bonds, there is nothing holding you back from putting it to work instead renovating houses, and the diversification could serve your well in the future, too.  


Margin loans are very attractive because you can treat them like a line of credit. Furthermore, interest rates are competitive, though they do float against prime, and can range between 5-8% depending on your relationship with your investment banker. Furthermore, the interest you earn on this money is ‘qualified investment interest’ and thus tax-deductible, offsetting your net taxable investment income. Lastly, the repayment schedule is flexibly, allowing you to pay interest-only while the money is working. 


In deference to that last point, if you use a margin loan to lend on one of our projects, we can certainly pay you principal plus interest monthly so you can make your own interest payments on the margin loan. That’s flexibility you need to reach your investing goals. 


You can read more on this exciting subject BY CLICKING HERE.

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Massive Dynamic has over 10 years of experience in Design. We take pride in delivering Intelligent Designs and Engaging Experiences for clients all over the World.

Your Retirement Account

Leveraging the funds in your retirement account is one of the smartest things you can do with money.  Even the most aggressive traditional retirement vehicles are mutual funds with high fees, invested in stodgy blue chip companies that return modest dividends and roughly follow the overall market. Sure, you might be winning, but you could also be leaving money on the table, and you’re at the mercy of the global financial system, an entity not well-known for being merciful.

 

Diversity is the key to investment success, and with the Atlanta real-estate market marching steadily forward, why would you settle for 4-6% returns in stocks and bonds when you could get 10-12%  bringing old neighborhoods back to life? Your savings for old age could help build homes for young people just getting their start! So how exactly does one take money out of a retirement account? Isn’t that a ‘draw?’ 

 
Nope. It’s a loan you make to you, with a promissory note made out to the retirement account at whatever interest rate you choose. That’s right, you are your best investment banker, with your own investment vehicle; and with a bonus: You’ve got the best chauffer in the business: Light Box Homes! We’ll take your money where you want it to go in a jiffy. 


And that 10-12% you’re making investing in our real estate projects goes back into your retirement account either tax-free or tax-deferred, depending on the type of retirement account.  Imagine that: Steady 10-12% returns when you were only getting 2-6% before.  

 

With as important as diversity is to a successful portfolio, why would you not diversify yours with real estate investments in Light Box Homes renovation projects?   

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Massive Dynamic has over 10 years of experience in Design. We take pride in delivering Intelligent Designs and Engaging Experiences for clients all over the World.

Your Credit Card

Say WHAT?!? Are you for real?!?

 
You heard right. This particular strategy is geared towards people who are still building their financial house; people who are too young to have much money in a retirement account, or people who don’t have much savings. For those of you who lost everything in the 2008 crisis, this could mean sweet revenge against the big banks! But how does it work?

 
Whenever I mention this strategy to strangers, they think I’m referring to the ‘cash advance’ feature of their credit card, a horrible product that charges upwards of 30% interest. Not that. Only a fool would do that. Brush that devil off your shoulder. No, I’m referring to what is more commonly called a ‘balance transfer.’ 


Remember when you opened that shiny new 0% interest rate credit card and they sent you some checks to transfer balances from other credit cards? Those. You can put that money into a real estate deal without penalty. At zero percent interest, it’s basically free money if you can pay it off before the end of the year-long promotional period.  And since most of our renovation projects last no longer than 8 months, this could be an excellent way to make money at the expense of the credit card companies. Imagine that!

 

So the next time you get an application for a zero-percent interest credit card, realize that you’re looking at the birth of what might be your first successful real estate investment.

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Massive Dynamic has over 10 years of experience in Design. We take pride in delivering Intelligent Designs and Engaging Experiences for clients all over the World.

So there you have it: Five easy ways to invest in real estate. Your brain got bigger today; shouldn’t your wallet? If you’re interested in learning more on this topic, please contact us today by calling 770.674.8001. We’d love to partner with you on our real estate projects and help you grow your portfolio, your retirement fund, or your savings. And always remember that every Light Box investor is also an insider. We’ll teach you how we do what we do; how we find the properties, how we buy, renovate and sell them, and all because we want you to be 100% confident that your investment dollars are getting the workout they deserve!


Cheers!


Stephen

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    Light Box Homes is a residential redevelopment and real estate investment company based in Atlanta, Georgia. We buy, sell, list and invest in Atlanta real estate.