Technological, social, and economic challenges of the future will change the way people live, work, and shop. These changes can significantly impact today’s climate, not just in residential, but in the commercial real estate sector as well and its portion of the value chain. The ultimate question is who will profit and who will lose money in the future world of commercial real estate.
What can we expect?
The present evolution of technologies towards digitization and automation will cause massive changes within the industry. The job profiles that exist today will change, along with the clients’ demands on how the job is executed. There will be an increase of redundant low-skilled, blue-collar workers while, white-collar jobs will be more driven by data, performed remotely, which will impact the need for office spaces, as well as functional office design and furnishings. These developments promise to reshape the commercial real estate environment.
The future is mobile
With autonomous cars just around the corner, we can expect major changes to the ways cities are built and developed. Property managers will have to evaluate how they use space. The decreased need for parking spaces both on and off the street will free up large areas for development. In some cities, landlords are converting parking space into commercial real estate, taking advantage of the premium location and street-level access. The new space requirements will include re-configured parking solutions for driverless cars and warehouses for automated loading machines.
Tenant health and wellness
As global environmental concerns are gaining momentum, people are more concerned about the impact of commercial spaces on their health and wellness. A global 2016 survey by Deloitte that targeted the Millennial population showed that young professionals consider employee well-being as one of the most important qualities of a workplace. To meet these demands, companies are considering how to improve the health and well-being of their commercial tenants and residents. The overall prediction is that commercial properties that don’t meet the needs of modern tenants won’t see modern tenants. The survey analysis recommends that real estate companies should include tenants in decision-making, so they can better understand design elements that cater to health and wellness.
Rise of smart energy products
With the UN predictions that the world population will reach 9.7 billion in 2050, over 66% will live and work in cities. As a consequence, commercial places will have to become increasingly urbanized with unprecedented integration of smart technologies, drones, autonomous vehicles, and automated services. The modern urban architecture will rely heavily on smart energy products like industrial lighting solutions shown here, as well as on data and technology to make life more comfortable. As a result, the cost of both commercial and residential real estate is expected to rise in those districts.
3D printing
We won’t have to wait long before builders are able to print entire floors with immense time savings. In China and Dubai, there are already low-rise commercial properties being developed with 3D printing, and the builders are reporting construction time reduced by 70% and cost by 80%. With its huge implications for construction, 3D printing is both a threat to traditional warehousing, as less space will be required, but also an opportunity for retailers to respond on-demand.
Event-driven shopping
The rapid increase of online shopping will further reduce demand for retail real estate assets, with more demand for just-in-time logistics. Amazon is already experimenting with drone delivery service, claiming it’s much safer and faster than going through couriers or postal service. This way, logistics centers could be located at the periphery, freeing more space in the city center. Upper-end high street miles will still exist, primarily through the leisure PR function, but smaller retail businesses in decentralized regions will suffer the heaviest blow. To meet the demands of new customers and build interest, shopping malls will need to resort to more event-driven concepts that emphasize on experience rather than shopping.
Fading relevance of real estate brokers
As individual market players in the real estate arena, real estate brokers will become increasingly redundant due to market transparency policies and automated rental negotiations between owners and lessees. Real estate transactions will be based on technologies like blockchain, which eliminates the need for the middle-man. On the other hand, the government won’t miss an opportunity to benefit from new developments through new tax models, such as a tax for automation. Part of this income will be much needed for mitigating social problems due to increased unemployment, which is a result of automated processes. Although the future banks will certainly take advantage of the high degree of debt financing for real estate projects, crowdfunding platforms will take their share as strong competitors to traditional banking.
The word ‘smart’ has changed slightly in meaning over the last decade, as new technologies granted us even more features that help us manage our lives. The increasing automation of running the business will bring profound changes in the commercial real estate sector, that go far beyond smart buildings and shared workspaces.
Every year in the USA, there are millions of existing homes that are bought and sold. These homes come in all shapes and sizes, as well as in various conditions. While some people want a move-in ready home, others might want a fixer upper.
When many people buy a fixer upper home, they are doing it so they can quickly fix and flip the home. Fixing and flipping a home is buying it for a cheap price, fixing it up quickly and relatively affordably, and then selling it for a profit.
However, fixing and flipping isn’t the only use for a fixer upper. The costs can add up, a lot of work is involved and the time it can take to sell the home can be plentiful. With that in mind, this article is going to look at a few other ways to put your fixer upper to good use.
As an Airbnb
When people used to visit or stay in a new city, they would almost always stay in a hotel. However, in recent years, that has begun to change. A big reason for this is Airbnb. Airbnb allows anyone to rent out their home by night, similar to how a hotel will rent out a room. This often gives customers more bang for their buck, and allows homeowners to make money without doing a thing.
Sure, you will have to keep the place clean, stock it with items and perform a bit of customer service, but that is a small price to pay for what you can make. You will need to fix up your fixer upper to a point where it is livable, but renting it out nightly through Airbnb is significantly less work than completely renovating it and selling it.
As a Vacation Rental
While this will depend largely on where you live, you could also rent your home out as a vacation rental. For example, millions of people travel to California every single year, and they need a place to stay. If your fixer upper home has a good location, it could be perfect as a vacation rental.
You could rent it out weekly or monthly to interested parties, and potentially make thousands of dollars. You will need to update it and ensure it functions well and looks nice, but think of this as an investment than a cost. Sure, selling a house from ISoldMyHouse.com can be a good idea and can net you a lot of money, but be sure to consider putting the home up as a vacation rental as well. This could allow you to make a good amount of money, without actually having to lose the asset.
As a Standard Rental Property
Another option instead of fixing up and selling your fixer upper is to fix it out and then rent it out. Being a landlord is indeed some work, but can be incredibly fruitful financially. Depending on the size, location and look of the home, it can be rented out to families, couples, university students or anyone.
Oftentimes, you will essentially be able to get your mortgage paid for if you rent out the home. In some cases, you may even be able to charge more in rent than your mortgage if you include utilities or internet. While you will essentially be breaking even for a little, once the mortgage is paid off, the rent you collect will be nothing but pure profit.
In conclusion, there are many different things you can use a fixer upper for, in addition to simply fixing and flipping it.
Bad mortgage advice could cost you tons of money and time.
Are you thinking about buying or refinancing a home in the near future? If so, chances are you’re getting all kinds of advice from well-intentioned friends and family.
Just remember to keep this important piece of advice in mind: Don’t listen to everything you hear. According to industry professionals, some words of wisdom are not wise at all.
To help you separate the bad advice from the good, check out five common statements that should cause you to cover your ears immediately.
Bad Advice No. 1: “A 30-year fixed-rate mortgage is best for everyone.”
The common perception is that a 30-year fixed-rate mortgage is always the best option, because it typically offers lower monthly payments than other shorter-term mortgages. But the kicker is that interest payments over the course of the loan can be quite substantial when compared to mortgages with shorter terms and lower interest rates.
Consider this example based on rates from Freddie Mac, as of March 20, 2014:
A 30-year loan on a $200,000 property with a 4.32 percent interest rate has a monthly payment of $992 and interest payments totaling $157,153 over the life of the loan. On the other hand, a 15-year loan for the same property with a 3.32 percent rate has monthly payments of $1,412 and yields $54,187 in total interest paid. So by opting for the shorter mortgage, you could save more than $100,000 in interest, which is worth it if you can meet those higher monthly payments.
Whether or not a 30-year fixed mortgage is the right choice depends on the borrower’s goals and financial situation, says Houtan Hormozian, vice president of Crestico Funding, a Los Angeles-based mortgage brokerage firm.
For example, if you have cash saved up for job, family, or medical emergencies and you already have college and retirement funds set up, then a 15-year mortgage might be a better option. Without money saved up, losing a job or an expensive surgery could deal a hard blow to someone’s finances, including their ability to make mortgage payments.
Bad Advice No. 2: “Stay away from adjustable-rate mortgages.”
An adjustable-rate mortgage (ARM) is a loan with an interest rate that is fixed for a period of time then adjusts, causing the ARM payments to increase or decrease.
ARMs get a bad rap, because they’re seen as risky products that contributed to the housing bubble, easy credit, and ultimately, the subprime mortgage crisis.
“The 30-year fixed-rate mortgage is the most popular type, because everyone is afraid of adjustable [rates],” Hormozian says.
In fact, only 3 percent of homebuyers chose adjustable-rate mortgages in the first half of 2013, reports Freddie Mac. With that low figure it’s easy to get scared off, too. But the fear associated with ARMs is somewhat unjustified, according to Hormozian.
“Depending on the consumer, circumstances, and knowledge of their economic situation, there could be an ARM that fits them,” says Frank Percival, board president of the Washington Association of Mortgage Professionals.
One major benefit of an ARM is that it typically will have a lower interest rate than fixed-rate mortgages at the outset. For example, a 5/1 ARM will have an initial fixed rate for the first five years then adjusts afterward.
This is a great option for homeowners who plan on moving out of their house before the rate adjusts. However, this does carry some risk, since personal finances and the condition of the housing market may make moving difficult in a set amount of time.
So choosing an ARM may come down to your financial situation and your aversion to risk. Percival explains that if a homebuyer with a 5/1 ARM saves $200 a month in interest compared to a 30-year fixed mortgage, it may make sense to choose that type of loan. However, if someone wants to err on the side of caution, given the risks discussed, a 30-year fixed mortgage might be the more sensible choice.
Bad Advice No. 3: “If your home is underwater, consider a short sale.”
“When the housing market was bad a year or a year and a half ago and the values of homes were low, people were encouraged from realtors [and] buddies at work to walk away from their home,” says Percival. He calls this “one of the worst pieces of advice in recent history.”
If desperate homeowners took that advice, they would usually do a short sale on their home. What exactly is that? It’s a real estate transaction in which a lender agrees to let the borrower sell his or her property for less than – or “short” of – what is owed on the mortgage.
Even if your home is underwater, it’s a bad idea, asserts Percival. If homeowners can still afford to make their mortgage payments, then they shouldn’t do a short sale.
“People who didn’t have medical emergencies or lose their jobs were dropping their keys and leaving their homes,” Percival says. This is a dumb choice, he adds, since it’s possible that their home value could go have gone up.
Plus, if you do a short sale, you may have to wait several years to qualify for a home again, says Percival. The reason? Because a short sale usually lowers your credit score just as a foreclosure would, according to myFICO, the consumer division of FICO. Shortsellers may be able to qualify for a mortgage in as little as two years, but this may depend on a variety of factors, like how much you are able to put down.
Beyond your own finances, short sales have a far-reaching effect, according to Percival.
“Every short sale or foreclosure reduces the value of every home in the neighborhood,” he says. “If folks would have waited for the recovery to kick in and housing prices to go up, they could have sold it at a profit. People just wanted to walk away from debt.”
Bad Advice No. 4: “An FHA loan is your only option.”
First-time homebuyers are particularly susceptible to bad advice. For example, homeowners who can’t afford a large down payment may hear that a government-backed FHA loan is their only option, since the down payment requirement can be as low as 3.5 percent of a house’s purchase price. But that’s not necessarily the case.
Some homeowners might be surprised that getting a conventional loan might be better suited – and easier – for them than an FHA loan, says Aaron Vantrojen, president of the Arizona Association of Mortgage Professionals, says.
The standards to qualify for an FHA loan have tightened, says Vantrojen. Plus, the FHA loan has become more expensive in recent years due to its rising mortgage insurance premium (MIP).
According to the U.S. Department of Housing and Urban Development, the mortgage insurance on an FHA loan must be carried for the life of the loan. On the other hand, the private mortgage insurance (PMI) on conventional home loans can be dropped when equity in the home reaches 20 percent, Vantrojen says.
As a result of dropping the insurance premium, homeowners can save thousands of dollars in the long run. “The annual mortgage insurance for FHA loans is so high, we are trying to get people into conventional loans if they qualify,” Vantrojen says.
The biggest advantage FHA loans have over conventional loans is the low down payment requirement. But conventional loans, with a 5 percent down-payment required, might be a better deal when you factor in the mortgage insurance payments, says Vantrojen.
“I will always look at options for conventional loans [for homebuyers],” says Vantrojen, president of Geneva Financial, a mortgage banking firm based in Tempe, Arizona. “The guidelines for conventional loans are changing, and a person who couldn’t qualify for one a month ago might be able to qualify now.”
Bad Advice No. 5: “Trust me, I know what I’m talking about.”
If you’re in the market for purchasing a home loan and in need of a little guidance, you might want to think twice about listening to someone who tells you: “Trust me, I know what I’m talking about.”
“One of the most common mistakes is not getting advice from a mortgage investment advisor,” says Hormozian. “Any time you don’t seek advice from a professional, you could be in trouble.”
But not all mortgage professionals are created equal, which is why Hormozian says homebuyers should make an effort to consult and get the opinions of established mortgage advisors, licensed mortgage companies, and reputable professionals when they are ready to purchase a loan.
“At the end of the day, my job is to make sure my client will have a comfortable life and a sound investment,” Hormozian says. “If I feel they are going to have a hard time making a payment or living up to that liability, I have to advise against it.”
For example, if someone tells you it’s a great idea to buy investment property as a source of instant income, you better consider the source. Instead of talking to real estate agents, homebuyers should talk to unbiased resources, who could help them avoid potential mortgage heartaches, says Vantrojen.
“Do your due diligence, talk to industry professionals – people who have been real estate investors and [who] can tell you the highs and lows of owning real estate,” he explains.
If owning a new home for you and your family is a main objective, Percival says it might be a good idea to check whether you are dealing with licensed mortgage professionals. He suggests verifying mortgage loan originators (MLOs) and their MLO license numbers through the National Mortgage Licensing System (NMLS), which performs this service for free.
https://homes.yahoo.com/news/the-worst-mortgage-advice-002419375.html
