Rehab Projects Are Often Great Investment Opportunities – Why Can They Become Huge Disasters?

A rehab project is easily seen as a great investment opportunity. You are able to purchase the project at a fraction of the replacement cost. After all the cash is invested, the total cost per square foot is far below the competition. You can see an easy path to much greater cash flow after the vacancy is filled and after the rents are increased. Unfortunately, there are a ton of issues that can throw the plan off of the expected course.

A rehab project did not get in the current condition because the owners wanted a run down dilapidated apartment complex. While the situation can be and often is the result of extended neglect, the buyer must consider that neighborhoods change, crime problems develop, basic infrastructure issues become insurmountable.

Where to begin?

First, is the property in a rentable location? Spend time understanding the schools that service the property. Look at access to employment and shopping. Find out what the crime issues are on the apartment complex. Determine what crime in the surrounding area is. Check out the demographics of the area and check with local merchants, consumer, and other sources about the reputation of the area. If too many red flags begin to develop, then you may have identified a project that could resist your best efforts to rehabilitate.

Next, if the property demonstrates solid performance, look at the physical issues with the project. Are the kitchens unable to meet expectations for today’s consumers? Is the foot print to small? What changes are required to meet utility cost expectations? Does the project require central AC? Is parking inadequate? Do the units require washers and dryers in the market and for the demographic the project will serve. What about dishwashers? Are the amenities inadequate? Are the floor plans positioned wrong for demand in the market?

In the case of infrastructure issues like those suggested for review above, the right rehab plan may well be able to resolve the issues. The key considerations are putting together a detailed rehabilitation plan that resolves the issues thoroughly for rentability. If the costs begin to rise to high for the project to be viable, you will know to abandon this prospective project. However, if you can meet the project well below your affordability considerations you have identified a potentially strong performing asset.

While the considerations above can protect against a bad decision because a rehabilitation requires repositioning the project the risk is much greater because rentup may not occur as expected. Renting costs can be too great. Rehab costs may over run. Rent rates may be weaker than expected. Management issues may be greater than anticipated. In all cases, the project can become continually more challenging and lead into failure.

Home Based Business Using Computer – Is This Possible?!

If you’re a homemaker looking for a way to earn some money by the use of your computer, then searching online would be the right place. Finding a home based business using computer that can produce profitable income for you must be a lot easier now, especially with today’s digital development. Just about everything could be done on the Internet or by the use of a computer. In fact, you can even contact friends, sell stuff, and manage your banking right at the comforts of your home. Without a doubt, computers have made life extremely easier!

Your Computer: A Money Making Machine!

Nowadays, you can even use computers to add to your household income. How is this possible? By having a home based business using computer of course! Given the countless online opportunities that you could try out, producing a little more dollar each day via the Internet is incredibly possible.

One way for you to have a home based business using computer is through MLM, which means multi level marketing. If you’re not familiar what MLM is, it is basically an earning online opportunity which gives you the ability to take pleasure in residual income for a time in the future.

In this home based business using computer, all you would have to do is invest a fine percentage of your energy and time to the present business and you’ll certainly you’re your rewards in the future. There are a lot of multi level marketing opportunities at present. And so far, it’s the easiest method to make big bucks whilst surfing around the Internet. Experts say that this works simply because of the system’s structure, which is where you would be investing the majority of your resources.

MLM In Detail

If multi level marketing is still a vague process for you, then you should know that it is the method of promoting a service or a product and recruiting other people to earn. There are two ways in which you can earn through this method. The majority of MLM companies bear some kind of product or service, which are the things you’re placed to promote. If a regular person can get the product for $50 in the market, you on the other hand can get it only for only $40 or even lower, directly from the multi level marketing company that is distributing the products. So, for each sale that you make, you basically add $10 into your pocket.

However, the mentioned process is termed to be hard selling. Most people do not like selling anything, whether by face-to-face or online. If you’re one of those people who do not like selling in any way, that’s okay since you could still earn through the other way, which is recruiting other people to join under you. Comparing the two, recruiting is considered to be the easier way to from MLM programs. Simply because all you’ll need to do is to invite people and you’re done. The good thing here is you can also get a cut from their earning too!

This is just a glimpse of the wonders of MLM. So, if you’re looking for a home based business using computer that is really effective and profitable, then why not try out multi level marketing for a change? For sure this is a decision that you wouldn’t regret!

Where to Invest for 2014

What asset classes were the leaders in 2013? Small cap stocks as represented by the Russell 2000 Index led the way with gains of 38.8%. Growth stocks did well posting gains of 34.2% as represented by the Russell 3000 Index. International stocks also reported double-digit gains (represented by MSCI EAFE NR USD Index), while bonds experienced net losses for the first time in a decade.

What are the expected winners for 2014? Probably not the winners of 2013.

That is why diversification in a portfolio among different asset classes is important. And this is why rebalancing your portfolio periodically is critical. Small cap is a higher risk asset class than large cap or bonds. The rush up in small cap in 2013 may have also increased your risk exposure. Rebalancing helps manage that risk.
Think of it as selling high – trimming gains off the best performers. And buying low – repositioning into assets that did not perform as well.

So what about Bonds?

Interest rates have been flat to non-existent for several years. Rates are expected to rise over the next few years.

Interest rates will rise as the Federal Reserve Bank continues to taper – or buy fewer treasuries each month. The Feds have a delicate balance to strike. Taper to fast and the constriction could slow the economy. Taper too slow and rates rise and we see increases in inflation.

While the Feds are doing their balancing act, the investor in bonds will have their own balancing act. Interest rates and bond prices have an inverse relationship. Bonds received the benefit as the interest rates were dropping, their bond prices were increasing. Now we will experience the reverse. As interest rates increase, bond prices will drop.

If you own individual bonds, selling your bond in an increasing interest rate environment will see a drop in your bond value. However, holding the bond until maturity and you will get the face amount of the bond. Holding steady may be your best course of action.

In a bond mutual fund, rarely are bonds held to full maturity. Money managers are moving bonds in and out of the portfolio. As interests rate rise, bonds are purchased with a higher coupon rate. In a bond mutual fund, your value will bounce around on rising interest rates, and hopefully your interest payment will increase.

However, in 2013, bonds experienced a year where loss in value was not completely offset with dividend/interest payments. This picture is not likely to change much in the next few years.

What does an investor do? This past year has seen an exodus from bonds to stocks. Do you hold bond funds or not? It depends. Much depends on your risk tolerance, age, and cash flow needs.

Bonds with shorter durations will have less value fluctuation with interest rate changes. The opposite is also true – bonds with longer maturity will see more price volatility with interest rate changes.

Lower credit quality bonds pay higher interest, as they have more risk of defaulting on payments. Since they have a higher interest rate, they will do better weathering rate changes.

Floating Rate Loans Funds have come into existence in the last decade, providing short term loans for corporations. They pay a little more than a money market account, but they also come with more credit risk.

Short duration bond funds have seen an influx of monies. These funds tend to have less credit risk and short durations. They are positioned to quickly respond to interest rate changes.

High yield bonds have weathered the impending interest rate changes better than most bond categories. They tend to have longer durations over 4 years. They pay a ‘high yield’ compared to other bonds because there is greater risk of defaulting on payments.

With the city of Detroit’s bankruptcy in the news, many investors are staying away from municipal bonds. Yet the default rate on municipals has declined over the last 3 years. If you are in a high tax bracket, you may want to consider this option as interest on municipal bonds is federally tax free.

Regardless of where new opportunities are to be found in 2014, investors should stay within their risk temperament. The pain of investment loss lives longer in our memories than the reward of investment gains. There is value in being able to sleep soundly at night.