In these unique economic times, I would say cognitive dissonance has hit the real estate market as passive income investors simultaneously love real estate and hate REITs. Physical real estate properties are presently selling for all-time highs while the REITs that own them are selling (especially commercial) quite low. I won’t spend time discussing this in detail as our focus here is SFR and Small MF. In this article, I want to discuss the value of being a virtual real estate investor and why you are smart to avoid REITs.
Investing and/or being a private lender on individual houses can offer several advantages over Real Estate Investment Trusts (REITs). Firstly, individual houses provide greater control and flexibility as investors have direct greater decision-making authority. We can choose the location, make improvements, and adjust rental rates according to market conditions, maximizing their returns. Secondly, individual houses usually benefit from appreciation potential, allowing investors to capitalize on rising property values. In contrast, REITs often have a more diversified portfolio, diluting the potential gains from a specific property. Lastly, individual houses can offer tax advantages such as deductions for mortgage interest, property taxes, and depreciation, which aren’t as readily available with REIT investments. Overall, investing in individual houses provides both active and passive income investors with greater control, potential for higher returns, and tax benefits, making it a compelling option for those of us seeking a more hands-on approach to our virtual real estate investing.
What’s up with appraisal values?
There is no exact price for any home. If you asked 10 appraisers for their opinion, there would be variation between the low and high opinions. Plus, there are Lease Option buyers in the market who lock their price in 24-36 months ago. This in itself can lead to variations in price which could be 30% in difference if the house is in a X-Urban area and/or there are few comparable sales. Plus, there is the opinion, many home sellers see real estate agents as a commodity. This perception suggests that all agents will evaluate a home equally or very close as compared to an appraiser. Based on my experience, many real estate agents, especially newbies need more skill or judgment to properly value a home.
Further, many experienced appraisers can be way off from the ultimate selling price. Every home seller and certainly we as investors would be wise to take the time to gather more than one opinion of value and invest time in learning the InvestorComps valuation first approach to interpret and understand why an appraiser came to their conclusion. We want to have that feeling of confidence and complete sense of control we are going to make a profit of eerie new deal we do.
Within the VIP+ Community, we have avoided such over or under-pricing in our investing. Additionally, using the award-winning real estate valuation data within InvestorComps it is much easier to swiftly determine market area values which are much more challenging to access from individual appraisers and cost less time and money.
We need to get together
Later this summer the VIP+ Community as well as newcomers are celebrating Foreclosures as a community. One, we will gather in Salt Lake City. Second, since we are virtual real estate investors, the “10th Annual InvestorComps Foreclosure University” will be live and streaming.
Join the vibrant and growing VIP+ Community as we unite to exchange and collaborate on the latest concepts and strategies in virtual real estate investing on October 27th. Don’t miss out on this exclusive VIP+ event, where you can gain invaluable insights and resources to confidently invest in real estate from anywhere, at any time. Take charge of your financial future and become a part of our thriving community today!
I welcome you to be a part of the growing InvestorComps VIP+ Community. I and the members look forward to seeing you at the Foreclosure University. The best part of membership, your admission is completely complimentary.