Sandy Kikerpill - Real Estate Investor/Investing
According to CoreLogic, a real-estate data firm, institutional real-estate investors have dominated the real-estate investment market, by buying up foreclosures, since the start of the Great Recession in 2008. However, recent figures show that the foreclosure inventory had declined to less than 35 percent of the housing market by the start of 2015. That translates into individual investors now having opportunities at securing lower-priced homes ripe for flipping or renting. Sandy Kikerpill, a real estate agent and investor in Orange County, says those thinking of entering into the real-estate investment market have two basic options: either buying properties to fix up and sell or rent out; or purchasing shares in a real-estate investment trust.
Buying, Selling and Renting
Directly owning real estate is not a passive investment. Many people mistakenly think being a landlord is easy money, and that renters always pay on time and that roofs never leak. However, the reality is owning rental properties is a lot of work and can sometimes require large amounts of capital for maintenance and repairs. Perhaps the most important concern for first-time landlords is not to just assume that current rental rates will always equal future positive cash flow.
Many investors enter the real-estate market by buying small multi-unit buildings, but don’t often take the time to do their homework to determine if the property will be a good long-term investment with a positive cash flow, or a money pit that will require extensive repairs. Sandy Kikerpill advises not to take real-estate investment guidance from a real-estate agent, as too many agents think every property is a good investment, because the agent only wins when they make a sale.
Real estate investors should also not assume that their personal experience as a homeowner will translate into managing rentals property. New real-estate investors almost always underestimate the number of issues that will crop up. From complying with fair-housing regulations to making certain the property conforms to codes and guidelines, managing rental properties will dominate both time and money.
A great way for ‘wannabe’ real-estate investors to test the waters, and their patience and aptitude for being a landlord, is to purchase a duplex or triplex with the intention of living in one apartment and renting out the other unit(s). This scenario has the potential to both stretch down-payment dollars and reduce the first-time landlord learning curve, with the renters paying off the mortgage while the homeowner lives rent free.
When flipping houses that math must also work out. Before buying a house for resale investors must be sure to work up a complete balance sheet, to be sure all rehab expense and carrying costs are accounted for and there will be enough profit left over to make the work worthwhile.
Real Estate Investment Trusts
A real estate investment trust, commonly referred to as a REIT, involves purchasing shares in a real-estate portfolio holding several properties. Sandy Kikerpill explains that buying into a REIT is a more passive style of investment, and very different from directly owning real estate.
Buying shares in a REIT is very similar to purchasing stock. There are three levels, or “layers,” of value with a real estate trust: the value of the real estate; the cash flow, or income, which supports the REIT; and the fund of the trust itself. Adding shares of a REIT to an investment portfolio can complement stocks and bonds, but investors must be certain they understand how the specific trust is designed and how the REIT’s managers will extract the value from the trust’s holdings. The performance of the REIT is typically based on both gains from the occasional selling of properties as well as the regular cash flow of the trust’s long-term holdings.
Buying, Selling and Renting
Directly owning real estate is not a passive investment. Many people mistakenly think being a landlord is easy money, and that renters always pay on time and that roofs never leak. However, the reality is owning rental properties is a lot of work and can sometimes require large amounts of capital for maintenance and repairs. Perhaps the most important concern for first-time landlords is not to just assume that current rental rates will always equal future positive cash flow.
Many investors enter the real-estate market by buying small multi-unit buildings, but don’t often take the time to do their homework to determine if the property will be a good long-term investment with a positive cash flow, or a money pit that will require extensive repairs. Sandy Kikerpill advises not to take real-estate investment guidance from a real-estate agent, as too many agents think every property is a good investment, because the agent only wins when they make a sale.
Real estate investors should also not assume that their personal experience as a homeowner will translate into managing rentals property. New real-estate investors almost always underestimate the number of issues that will crop up. From complying with fair-housing regulations to making certain the property conforms to codes and guidelines, managing rental properties will dominate both time and money.
A great way for ‘wannabe’ real-estate investors to test the waters, and their patience and aptitude for being a landlord, is to purchase a duplex or triplex with the intention of living in one apartment and renting out the other unit(s). This scenario has the potential to both stretch down-payment dollars and reduce the first-time landlord learning curve, with the renters paying off the mortgage while the homeowner lives rent free.
When flipping houses that math must also work out. Before buying a house for resale investors must be sure to work up a complete balance sheet, to be sure all rehab expense and carrying costs are accounted for and there will be enough profit left over to make the work worthwhile.
Real Estate Investment Trusts
A real estate investment trust, commonly referred to as a REIT, involves purchasing shares in a real-estate portfolio holding several properties. Sandy Kikerpill explains that buying into a REIT is a more passive style of investment, and very different from directly owning real estate.
Buying shares in a REIT is very similar to purchasing stock. There are three levels, or “layers,” of value with a real estate trust: the value of the real estate; the cash flow, or income, which supports the REIT; and the fund of the trust itself. Adding shares of a REIT to an investment portfolio can complement stocks and bonds, but investors must be certain they understand how the specific trust is designed and how the REIT’s managers will extract the value from the trust’s holdings. The performance of the REIT is typically based on both gains from the occasional selling of properties as well as the regular cash flow of the trust’s long-term holdings.