How AirBnB is Affecting Real Estate

We all love the wonders that technology has bestowed upon us. Truly, it has changed our lives in some fascinating ways. We have instant access to virtually all of the world’s knowledge, we can communicate with almost anyone in the world, instantaneously, and we are making significant advancements in a variety of industries, like healthcare and finance. That being said, although technology has been a major boon for us as a society, it has also been a bit of a nuisance to others. Technology has a knack for “disrupting” longstanding traditions and industries. And almost every industry has been disrupted in some form or another. For those unaware of the term disruption in this context, it can be quickly summed up like this: disruption occurs when a new technology or method of completing a task, objective or service displaces longstanding traditions and methods.

 

And while disruption tends to move our society forward in a positive direction, it can pose challenges to our pre-existing industries. A great example of this can be seen in the sharing economy. Services like Uber and Lyft, where ordinary citizens can become overnight chauffeurs, are giving the taxi industry a run for its money. But I want to focus on another sharing economy service: AirBnB.

 

AirBnB takes the concept of Uber and Lyft and applies it to the hospitality industry. Homeowners and landlords can post a room or building on the service and host visitors, travelers or anyone else. You simply sign up with AirBnB and, essentially, turn your house into a hotel. And while this may sound like a novel idea, it poses a potential threat to the real estate industry.

 

According to recent reports, the wildly popular sharing economy company is looking into getting into long-term real estate. Currently, AirBnB focuses primarily on short-term leases. Most AirBnB hosts rent rooms out for a few days, but now, because of the company’s growth, they may be expanding into more lengthy leases.

 

Industry professionals are unphased, claiming that AirBnB could not make the necessary impact on the industry to make any real impact. However, with the company’s massive growth and popularity, they could certainly hurt other real estate developers and investors. Many of the hosts that use AirBnB purchase multiple properties for the sole purpose of using AirBnB.

 

These are still just rumors, but if they come to fruition, then multiple real estate developers and investors could wind up competing with one of the largest growing hospitality services in the country.

3 Reasons You Should Be Investing In Real Estate

After the economic recession of 2008, many people avoided investing in real estate. This was because this era was often linked with the housing bubble and subprime mortgages. But the truth is, real estate is a smart asset class to invest in. When you invest in real estate, you are purchasing a future income stream from property. It is in reality quite unfair that real estate investment is given a bad reputation. Here are a few reasons to invest in real estate:

  1. You can diversify your portfolio.

Investing in real estate can give you incredible potential to diversify your portfolio. The correlation between real estate and other major asset classes is low, and in some cases, negative. This means that if you add real estate to your portfolio of diversified assets, the portfolio can decrease in volatility. This can also provide higher return per unit of risk.

2) The income return is attractive and stable.

One big upside to real estate investment is the sizeable proportion of total return, accruing from rental income over the long term. Between 1977 and 2007, about 80 percent of total U.S. real estate return came from income flows. This leads to a decrease in volatility. Investments that rely more heavily on income return have a tendency to be less volatile than those that rely more heavily on capital value return. In addition, real estate is more attractive than more traditional sources of income return. The asset class usually trades at a yield that is premium to U.S. Treasuries. It is especially attractive in an environment with low Treasury rates.

3) It has competitive risk-adjusted returns.

Data from the National Council of Real Estate Investment Fiduciaries (NCREIF) shows that over the 10-year period from 2000 to 2010, private market commercial real estate returned 8.4 percent on average. This has a lot to do with low volatility relative to equities and bonds. Many critics feel the the reason real estate has a low volatility is that real estate transactions have not been frequent. As a result, property values are often determined using third-party appraisals, which often cause the market to lag. As a result of infrequent transactions and appraisals, there is a smoothing of returns. In an upturn, reported property values tend to underestimate market values. In a downturn, they tend to overestimate market values.

Real estate volatility should be adjusted upward, but real time markets could undergo sudden shocks at any moment. One example of this occurred during the “Flash Crash” of May 2010. In just 15 minutes, $1 trillion in stock market value was erased. When market volatility is an issue and the dynamics of algorithmic trading are murky, real estate is an attractive investment due to its more stable pricing.

While many people will tell you that investing in real estate is a bad idea, this is in many ways a myth. With a stable income return and the potential to diversify your portfolio, real estate is a worthwhile investment.

Top Things You Should Do When Selling Your Home

One of the hardest things you to do on your own while your house is on the market is figuring out how to make your home more appealing to potential buyers. If your house is currently on the market or you’re considering putting your house on the market, consider following the tips listed below to assist you with having an effortless home sale process.

Find a Realtor

Realtors can help with placing your house on multiple listing services (MLS). This can be most helpful when it comes to screening potential buyers before who wish to visit your home. This saves you the time of having to separate the real buyers from the fake ones.

Working with a realtor can also help to make your home sale process safer. Realtors have access to electronic lock boxes that are used to allow other Realtors entry to your home with their buyer’s without you having to be present. This lock box has the ability to track who accessed your home and when.  

Depersonalize and Declutter

Removing the most personal items from your home, such as family portraits, is extremely helpful when trying to sell your home. Doing so, takes out the pieces of the home that are unique to you and helps buyers see the property from a fresh point of view.

Similar to putting away personal items, decluttering your home is a good way to reel in potential buyers. Decluttering will look more spacious to potential buyers if there are less items inside of it. Buyers want to be able to imagine themselves living in the home before they purchase it. Eliminating the distractions of personal items can help them accomplish that.

Tips To Help You Get Your Mortgage

It’s no secret that there are many obstacles that often arise when trying to get a mortgage. Among those obstacles are poor credit scores, not enough money in the bank, or no knowledge of the process.

Here are some helpful tips to assist you in improving the your chances of landing the mortgage loan of your dreams.

Boost Your Credit Score

Your credit score has a significant effect on the type of loan you will be able to receive. You typically need a credit score of 620 or above to be considered  for a standard mortgage. You will also need to have a score of at least 740 or higher to be qualified for the best rates.

The best way to enhance your credit score is to:

Make payments on time

Utilize websites like credit.com and creditkarma.com to check the status of your credit, debt, and payment history.

It is common for lenders to check and then re-check your credit report during your mortgage application process. Missing a payment during this process has the ability to lower your credit score and as a result may have a negative effect on your loan.

“If you miss a payment during the loan application process — particularly a mortgage payment — and the lender re-checks your credit report, it could result in a much lower credit score and could derail the loan application,” said Anastos.

Remember, your credit score can keep you for getting a mortgage or affect your mortgage rate (more on that below).

Pay down your debts

Lenders are more often than not willing to lend money to individuals who do not need it. Therefore, the less debt you have, the more likely it is that you will be approved for your loan.

Make sure your paperwork is organized

The amount of items necessary to apply for a mortgage loan is pretty extensive. Try your best to have any and everything you need before you begin the process.

Items you will need to have include:

 

  • W-2 forms for the past two years
  • Paycheck stubs from the past few months
  • Proof of previous mortgage or rent payments for the past year
  • A list of all your debts ( credit cards, student loans, car loans, etc.)
  • A list of all your assets ( bank statements, auto titles, real estate, investment accounts, etc.)