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Today’s top stories…
REITs vs. Private Market Real Estate for ROI?
Fractional Real Estate Investing: Property ownership for just $100!
Millennials and Gen Z: Crypto or Real Estate?
💰 Deal of the Day!: 3 bd | 2 ba | Johns Island, SC 🔥
Today’s mortgage rate (30 Yr. Fixed): 7.06%
REITs vs. Private Market Real Estate: The Battle for Better Returns
In 2023, median home prices hit a record high of $389,800, and demand stayed strong despite rising mortgage rates. With rates expected to drop in 2024, the party's not over yet!
REITs 101:
Own, operate, or finance income-generating properties
Traded on stock exchanges for liquidity and diversification
Must distribute 90%+ of taxable income as dividends
$2.5 trillion in total assets across 575,000 properties
8.62% annualized returns over 25 years (vs. 8.08% for Russell 1000)
Private Market Real Estate:
Not actively traded on exchanges
92% of $21 trillion U.S. commercial real estate market
More control over property selection and management
Crowdfunding platforms making it accessible to retail investors
CrowdStreet: 17.9% realized IRR, 3.1-year median hold
RealtyMogul: 20.8% overall realized IRR (as of Dec. 31)
But watch out for liquidity risk! Private market investments can be harder to sell quickly, especially during downturns. And don't expect regular dividends – most payouts come from selling properties.
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⏰ Quick Tips
You asked. I answered.
What are the risks involved in real estate investing?
Risks in real estate investing include market fluctuations, vacancy periods, unexpected repairs, and problematic tenants. To mitigate these risks, conduct thorough due diligence on potential properties using tools like Rentometer or Mashvisor, maintain adequate insurance coverage (often times your normal home owners insurance won’t cover a rental), and create a contingency fund amounting to at least 1% of the property value for unexpected expenses. Diversifying your investment portfolio across different property types and locations can also help spread risk.
Fractional Real Estate Investing: Your $100 Ticket to Property Ownership
Feeling uneasy about the current market volatility? You're not the only one. Even heavyweight investors like Bill Gates are shifting their focus to real estate as a means of diversifying their portfolios. Gates, now the largest private landowner in the United States, isn't alone in this trend. Global corporations, pension funds, and crowdfunding platforms are also recognizing the wealth-building potential of real estate investments, particularly in farmland and other property types.
Last year, wealthy individuals and private firms poured an astonishing $455 billion into commercial real estate, making them the most active buyers in the sector for the first time. Institutional investors are also making moves in the residential property market, with projections indicating they'll control 40% of all U.S. single-family rental homes by 2030.
But what about the everyday investor? Owning and managing rental properties can be a costly and time-consuming endeavor. Individual investor landlords, who own an average of three rental homes, often spend between $4,600 and $5,400 per unit annually on repairs and management.
That's where fractional real estate investing comes into play. Platforms like Arrived Homes allow investors to own shares of single-family rentals and vacation properties for as little as $100. This approach enables individuals to earn passive income through rental dividends without the hassle of being a landlord. Fractional investors also benefit from potential property value appreciation during the holding period.
Portfolio managers may even implement capitalization projects to enhance property value, especially in growing markets where mismanaged properties haven't kept pace. By improving unit interiors, for example, they can justify higher rents and boost overall returns.
Fractional real estate investing breaks down the high financial barriers that often prevent average investors from participating in the real estate market. With platforms catering to both accredited and non-accredited investors, anyone can start building their real estate portfolio one share at a time.
It’s also a great way to get your foot in the door and learn about real estate investing for first time investors.
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Millennials and Gen Z: Crypto or Real Estate ?
The times, they are a-changin', and so are the investment strategies of younger generations. According to the 2024 Policygenius Financial Planning Survey, which polled around 4,000 Americans, millennials and Gen Z are just as likely to own cryptocurrency (21%) as they are to own real estate (20%). This is a stark contrast to baby boomers, who lead the pack in real estate investments, with 45% of them holding housing wealth in their portfolios.
But why the shift? Well, for starters, home affordability has hit rock bottom, thanks to high interest rates, stagnant wages, and a limited housing supply. It's no wonder younger generations are turning to alternative investments like crypto and NFTs, embracing a more speculative approach compared to their older counterparts.
But it's not just about what they're investing in – it's also about how they're getting their financial advice. A whopping 62% of millennials and Gen Z have tried at least one financial "hack" they discovered on social media, like the "no spend challenge" or extreme couponing. And when it comes to seeking financial guidance, 8% of younger Americans turn to social media first, compared to just 2% of Gen X and baby boomers.
On the flip side, only 14% of Gen Z and 18% of millennials said they'd consult a financial professional first, a far cry from the 27% of Gen X and 39% of baby boomers who prioritize professional advice.
So, what does this all mean? It's clear that younger generations are forging their own path when it comes to building wealth and making financial decisions. As an investor, it's crucial to stay informed about these shifting trends and adapt your strategies accordingly. Whether you're a millennial diving into crypto or a boomer holding tight to your real estate investments, one thing's for sure – the world of finance is evolving, and it's up to us to keep pace!
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💰 Deal of the Day!
Price: $735,000
Blending coastal chic with comfort, this updated Seabrook Island villa shines with its 3 bedrooms, 2 modern bathrooms, stunning kitchen with custom cabinetry and built-in wine cooler, and artful touches throughout. Featuring updated flooring, two outdoor decks offering golf views, and ample storage, it stands as an ideal choice for vacation living, a full-time residence, or an investment opportunity, all while providing easy access to the beach and club areas in a serene, tucked-away enclave.
Airdna data:
Estimated monthly payment: $$4,213/month (if financed)
Estimated monthly revenue: $5,266/month
Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.
Thanks and see you tomorrow!
✍️ Brett