August 19, 2017

REIT Sector Performance

Posted in Integrale Advisors LLC, Keith Knutsson, Real Estate tagged , , at 2:09 am by Keith Knutsson

On September 19th, 2016, the S&P Dow Jones indices put the shares of real-estate investment trusts into their own stock-market sector, thus creating the S&P 500 REIT. 

Since the sector began trading it has returned, with dividends reinvested, a total of 1.9%. The S&P 500 has returned 15.4% over the same period. In the year prior to the sector’s creation, S&P REIT’s beat the broader index by 5.9 percentage points.

The drawback of REIT’s is that they’re focused domestically at a time where economies outside the U.S., such as emerging markets have been picking up. In addition, the rising rate environment makes their dividend yields less attractive and an influx of new properties threaten to cut into firms’ ability to raise rent prices.

“The real estate industry had been pursuing its own market sector for years, and performance had been so good that the index making agreed to split them off from banks” said Keith Knutsson of Integrale Advisors.

The reluctance of real estate investment trusts to develop large projects has kept supply of commercial real estate under control, extending the sector’s recovery. During the recession of 2008, excessive development activity weakened REITs’ credit profiles, but they have been picking up since, with large growth spurred in 2014.

Within the REIT segments, office and retail REITs have seen much slower growth in construction compared with those that focus on residential and warehouse development. Project volumes from office REITs have been stifled due to slow employment growth in businesses that take up office leases.

Furthermore, there has been significantly more development in the multifamily and industrial real-estate sectors. In the residential segment, analysts are predicting that supply growth is currently exceeding and will continue to exceed demand in certain parts of the country.

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December 13, 2016

Should You Invest in Commercial or Residential Properties?

Posted in Integrale Advisors LLC, Keith Knutsson, Real Estate tagged , , , , , , , , , , , , , , , , at 12:12 am by Keith Knutsson

Real estate is a great place to invest. One of the first questions I, Keith Knutsson, get asked by potential investors is commercial or residential real estate? There are pros and cons to both ventures, so here are some tips to help you decide which one suits your personality, talents, and goals.

Commercial Real Estate

When most people think about investing in real estate, their minds immediately jump to residential. Commercial real estate has additional benefits however, that can really increase your net worth. The biggest benefits to discuss are more financing options, less competition, and a more favorable valuation.

  • More financing options. While there are plenty of traditional, hard-money lenders to get a mortgage payment from for residential loans, there aren’t a lot of other options for financing. With commercial real estate, there are plenty of other sources, like small private equity firms, joint venture partners, and even other commercial real estate investors you can partner with to raise the amount of capital needed. Access to more money means that you can get a higher rate of return. It’s the adage “spend more to make more”.
  • Not as much competition. For some reason, most people try to make a name for themselves in real estate through the residential route. That means that commercial real estate is an area of real estate with less competition from other investors. This is especially true if you are shopping for smaller commercial opportunities. Most big time commercial investors are going after properties worth more than $5 million, and anything less than that is out of reach for most residential investors. This is a great niche for someone with the work ethic to make a name for themselves.
  • A More Favorable Valuation. The main way that residential real estate is valued is by basing it off square footage, rooms, bathrooms, upgrades, lot size, etc. compared to other homes in the area. This method makes sense for this sector, but it can hurt your bottom line when the market isn’t performing well. With commercial buildings, the valuation is based off current leasing/renting income. In simple terms, the amount of money being generated from the property is how much it is worth. Small improvements and great marketing can increase the value of commercial property easily, unlike in the residential realm. Therefore, it’s easier to make more money from commercial properties.

This isn’t to say that commercial real estate is an easy, definite way to make millions of dollars. If it were that easy, everyone would do it. The main downfalls to investing in commercial real estate are more risks, high costs, and zoning laws.

  • More Risk. Commercial properties see a lot more traffic from customers or residents, parking lots, and possibly multiple businesses running out of one location. Insurance costs are much higher because of all the risks involved with safeguarding against accidents and injuries to any of these people or the property.
  • Higher Costs. While most investors know that the money upfront is going to be higher in commercial real estate than residential, the maintenance bills are also larger. It costs more to maintain professional looking businesses, and repairs have a higher price tag. Just a few examples could include a new roof, multiple furnaces break, one accident causes various damage in more than one apartment in the building. There are all kinds of costs that arise during commercial that are different and require a lot of money as the investor. All repairs must be done professionally too, so there aren’t quick do-it-yourself fixes for these problems. It also costs more to hold on to a vacant office space than a vacant house.
  • Zoning Laws. The government is very interested in maintaining zoning and regulations for commercial areas. Buying a building in the manufacturing area or an apartment building, all the uses you intend the building for is already decided. If you intend to lease the space out to another business, your pool of possible renters is limited. Depending on the city, it is possible to change some of the requirements in zoning, but it requires a lot of work and usually a legal team.

Residential Real Estate

Residential real estate is not a bad way to make money as an investor. There are definitely still benefits to going this route over the commercial arena. The biggest three benefits to going the residential path are more availability, the option to flip, and less money required to get started.

  • More Availability. There are more homes to choose from when you start looking for an investment property. Commercial real estate properties and buildings are not always available, especially if you’re looking in a certain part of town. Even when new residential neighborhoods start popping up, the homes in older neighborhoods are still desired. The turn-around time for houses are much faster, so if you’re looking to find a home in a certain area, one will show up if you wait long enough.
  • Option to Flip. If you want to make money flipping houses rather than holding and renting, you still have that option. You can flip a house, sell it, and be done with it much faster than other real estate ventures. While the money required to do repairs is an issue for some investors, it is usually recouped at selling time, plus a little more.
  • Less money required. A down payment is really all you need to start. While there are more financing options for commercial real estate, to start can be difficult. To buy the first residential investment, you need to qualify for the amount and have a down payment. The qualification process is usually easier because having a renter pay the mortgage payment each month isn’t too hard to find.

There are three fairly well known hardships to owning residential properties as an investor; dealing with bad renters, a variable market, and bringing in property managers.

  • Bad renters. While most people renting a home are going to treat it well, the fact is it isn’t their house. Some people see this as an opportunity to not have to take care of it, and in some cases, trash it. The costs can really add up to fix problems that bad renters can cause. If neighbors start getting bothered by renters, that causes an entire other set of problems.
  • Variable market. Ideally, most investors want to buy when the housing prices are down and then sell when they are highest. This is harder to do though since home prices change slower and less consistently. As a Real estate investor, and CEO of Integrale Advisors LLC, I, Keith Knutsson, see how there are predictable cycles for real estate, but times always vary on how long each cycle lasts. This makes investing trickier because it’s always changing.
  • Bringing in property managers. Managing multiple properties is hard for one person to do. It’s also difficult to be a great real estate investor when you don’t live around the properties and cann’t check on them often. The best way to handle both of these scenarios is to hire a property manager. While this makes life easier for you, it cuts into your profits and requires trusting a lot in someone else.

As you can see, investing in real estate is a great option whether you choose commercial or residential. Knowing your end goals and ability to handle different situations, you have two very different paths to take if you decide real estate investing is right for you.

October 23, 2016

Real Estate Terms Every Investor Should Know

Posted in Integrale Advisors LLC, Keith Knutsson, Real Estate tagged , , , , , , , at 11:38 pm by Keith Knutsson

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If you are interested in investing in real estate, there are several-key terms that you should have a complete knowledge of. These are necessary terms if you want to understand the ins and outs of the property you are looking at to purchase. Both real estate and investing are industries that come with their own specialized jargon. In order to make lucrative purchases, it is crucial to understand the basics related to the industry.

Keith Knutsson explains the key terms to help you make a successful transaction. This is a basic list that will help you get started and understand the bigger picture: Read the rest of this entry »

September 15, 2016

Keith Knutsson Discusses the Benefits of Investing in Real Estate

Posted in Integrale Advisors LLC, Keith Knutsson, Real Estate tagged , , , , at 2:05 am by Keith Knutsson

Keith Knutsson Real Estate Investments

There are a number of people out there who would like to put their hard-earned money into an investment, but are unsure what the best way to invest their money may be. Ask any savvy entrepreneur and they’ll tell you that there are several advantages in investing in real estate. Although being a real estate investor isn’t always glamorous, it is one of the best ways to build your wealth in the long run. Read the rest of this entry »

October 23, 2011

Tips for Investing in Undervalued Property

Posted in Uncategorized tagged , , , , , at 9:56 pm by Keith Knutsson

By Keith Knutsson Undervalued asset investment stands out as a lucrative and viable strategy for gaining maximum return on outlay. In order to do so correctly, one must take into consideration various important factors. Featured below are several tips for investing in undervalued properties with success. – Look for property in areas that are currently undesirable or are evolving. For this you must be willing to look past the negatives of certain locations, and take on a perspective of opportunity and possible growth. Suburbs present great possibilities in this sense because they can change quickly and evolve favorably. – A highly motivated seller is a great indication of an undervalued property; these homeowners are often willing to negotiate and drop property pricing. – Properties that need renovation or improvement also present great investment opportunities because they stand out as undesirable to the majority of buyers. – Short sales and foreclosed properties can prove to be a great find. Work with a real estate professional to identify homes that have been recently listed. About the Author: A specialist in investing in undervalued property, Keith Knutsson leads Integrale Advisors through strategic investments, providing major earnings for a wide range of clients. With extensive experience in both American and European real estate markets, Knutsson retains a unique perspective concerning this distinctive investment strategy. In his free time, he enjoys traveling and speaks fluent French and conversational Spanish, German, and Swedish.