Apartment Demands Paces Elevated Construction

Rusty Tweed

Rusty Tweed

In a recent study, there has been shown a tremendous growth in demand for people who are looking for apartment units. As a result, more real estate companies and property industries have been trying to fill in the need, through construction and improved marketing strategies.

Property development of apartments remains at an all-time high, especially for Class B and C types of units. As investors try to leverage this trend, more of them are trying diversified real estate portfolios to maximize their profits.

Why is apartment demand on the rise?

The increase in demand for apartments is for several reasons. Since properties tend to appreciate over time, more and more people are looking for practical means to invest in a home. Apartments are a great way to reduce cost and are more affordable than paying the mortgage for a large house which may even be double or triple the price.

Due to this increased need, more investors are looking into building apartment units that people can rent. This gives an opportunity to create passive income in real estate, especially when the investor owns several apartment units for rent.

Additionally, apartments are also practical since most of the maintenance needed within and outside the unit are covered by the owner, and people only resolve to pay monthly rental bills as well as utility expenses. For an individual or a family who is trying to make ends meet, this can prove to be more cost-effective than going through the hoops of finding a loan approval for a home, paying steep mortgage fees, and utility or maintenance bills.

Benefits of investing in apartments

There are many benefits of investing in apartments. If you are in the real estate industry, you may very well be aware of some of them:

  • Provides an opportunity for passive income – passive income through apartment rentals is possible. A lot of individuals and families are looking for apartments where they can stay for short-term or long-term. Other ways to build passive income through apartment rentals is through vacation lodging websites such as Airbnb.
  • Cheaper than a home – to purchase an actual home, you would have to have an excellent credit score to secure a good loan. With apartments, the entry level is low, especially if you are only purchasing a single unit.
  • More opportunities for clients – since there is a reported increased market demand for apartments, you are sure to find clients who are interested in purchasing or renting out your units.

Strategies for real estate apartment investments

Given its wonderful benefits, here are some ways to help you maximize your apartment investments:

1. Invest in apartments in progressive cities

As a basic principle of real estate, investing in apartments is also about location. Location is a primary factor in finding opportunities to invest in apartments. If you are hoping to rent out the units after your purchase, you may want to consider if there is a potential that someone could live there because there are job opportunities, people want to start their families, or there are other nearby commercial establishments.

2. Buying empty lots vs. established units

Another thing to consider is if you want to buy an empty lot to make your apartment units, or if you want to purchase a second-hand established building. The great thing about purchasing a lot would be the possible lower prices of construction.

Since there is an increased demand and construction productivity over the recent months in apartment real estate, you can be confident that you can build your unit from scratch without overspending. However, it may also be a good deal if you plan to purchase a pre-made unit under repossession. All you have to make sure is that every part of your purchase is in top quality, and if there will be repairs, it would only be minimal.

3. Buy and sell vs. renting out

Apartments can also be a tricky business but are profitable when done right. Before investing, it may be important to think of the way you want to approach your apartment purchase. Do you want to flip apartments through buy and sell tactics, or do you want to maintain your unit for rent?

With buy and sell, you are able to gain a profit from a single purchase, but there is no recurring income. With renting out properties, you can have recurring income but you have to deal with renter issues and other maintenance problems.

The increase in demand for apartment units is good news for all real estate investors. If you haven’t diversified your portfolio yet to include apartments, now is the time to take it into consideration. With the right strategy, proper location, and marketing strategy, you are sure to pool in clients who are interested in your real estate properties.

 

The US Economy is Fine Now, But Watch Out for 2020

Rusty Tweed

Rusty Tweed

According to Paul Ashworth, who serves in the Capital Economics as the chief U.S economist and also the winner of March Forecaster of the Month award, he mentioned that the current status of the U.S economy is doing well, but as the next few years comes by, the stimulus is going to start fading away.

Mr. Ashworth added that his team was optimistic about America’s stability, and they assumed for such a long time that Washington’s United Republican government would bring about a good amount of stimulus, which happened and they were right. The move to cut taxes and end the spending restraint has given the economy of the U.S a great boost to survive the next two years.

What is in store for the U.S economy 2019 and 2020

After the next two years, what is going to happen? Ashworth stated,” There is a growing concern that the fiscal stimulus is fading, and this is bringing about a major concern.” For 2019 and 2020, Ashworth is expecting these years to be weaker because the Federal Reserve is expected to cut the country’s interest rates in 2020.

According to Ashworth and his team, they see that the economic projections of the Federal Reserve are optimistic at growing way above the trend up to the year 2020. This projection seems to be too far-fetched if you ask Micheal Pearce who is a senior U.S economist. He continued to share his sentiments on how the fiscal stimulus will send a boost to spending and incomes for one final time, unless the economy finds a new source of supply capacity to grow the economy; otherwise, growth will start to drop.

What is expected to happen after 2020

According to economists, they expect a modest downturn in the economy which should be reversed quickly after 2020, because the expansion will take some time to end. But by the time the downturn will be ending, the U.S economy will have undergone the longest expansion in its history.

Ashworth advises that people should think about what is going to happen in the next downturn. Although they expect it to stay for a relatively short time, it won’t be as damaging as the great recession that occurred in the year 2008-2009.

Some of the reasons that might cause the economic downturn

There is a premise that Ashworth does not accept. The premise involves how the Republican fiscal plan revolves around the supply-side economics that assumes businesses have for the longest time been holding back on investing in new supply because of high taxes and regulations.

Ashworth’s argument is related to how countries that had low corporate tax never see an economic boom in their investment afterward. He added that the U.S is known to raise its capital spending because supply is starting to hinder growth, and not because companies have been set free.

There is also the issue of the trade war that is going on between the U.S and China. This kind of talk is great for politics but is bad for economics. But will be seen in the next few months is the U.S government accepting some small concessions and reign supreme on the trade wars; the same way South Korea’s case was handled and is also expected to happen with NAFTA negotiations.

The Future of the U.S Economy for the years to come

Since the Trump Administration took power, he created a positive economic sentiment that was also taken by the Republican majorities. Trump’s administration pledged that they would pursue the reform, tax cuts and policy trifecta of deregulation.

What is known is that sentiment usually goes both ways. Just like the pro-business way that Trump is using can boost the confidence of the economy, the perception of leader who is not-for-business can bring down the confidence. Since sentiments influence the behavior of people, their impact is far-reaching. But the sentiment is not a great way to measure the actual economic prospects and development.

So far, when you look at the market’s reaction to Trump’s victory, there has seen a rise in stocks to multiple highs, but that has not been the case on “hard data.” Economic forecasters have only made some modest increase in their projections.

If the confidence in the US economy does not trickle down to hard data, expectations that are not met on corporate earnings and economic growth could cause the sentiment of the financial market to slow down, which will fuel market volatility and shoot down asset prices. This scenario will sputter the US engine to cause the global economy to slow down, especially if these scenarios cause the Trump administration to come up with protectionist measures.

Looming “Debt Hangover” Will Crush The Economy

Rusty Tweed

Rusty Tweed

A time will come when the U.S will inevitably have a debt hangover, it may not be the coming week or next month, but it will soon come. The continued effects of continued lowering of the tax-revenue, government spending, always-increasing interest payments, and increasing compulsory welfare payments will soon be felt, and that is a feeling that will not be a pleasant one.

How we got here

The current national U.S debt that is publicly held is 75% of the GDP. Although that number can be shocking to the average citizen, to economists, they see this number as a good figure. Before the recession of 2008, the national public debt in the U.S was at 35% of the GDP. Over the last decade, the debt has grown by 40%. Why is that the case?

The answer lies in government spending. The U.S government decided that the only way to get out of the recession was to spend. This was championed by the Federal Reserve and a handful of economists who encouraged monetary and fiscal authorities to continue deficit spending and issue more debt to institutions and individuals or borrow in order to spend. That decision worked, but some people argue that there was not enough money that has been spent.

The impact of debt hangover in the U.S economy

Currently, the U.S is undergoing low unemployment rates and a long period of growth that has never been seen in the history of the country. According to the Congressional Budget Office, it was highlighted that by the year 2047, while maintaining the same trend of fiscal policy, the U.S debt ratio will linger around 150% of the GDP. Imagine what is happening between Italy and Greece happening in the U.S; that is how bad the situation can get for the U.S.

The World Bank has put up estimates that every percentage point that goes above the debt to GDP ratio of 77% would lead to a decline in the annual growth by 17 basis points. This can translate to a loss of 12% of the growth of GDP in the next 30 years. Looking at it in another perspective, it would mean that the U.S economy will have stopped growing for over four years.

If you think that is the only consequence of the existing fiscal policy, you are wrong. The flexibility that Congress has on implementing expansionary fiscal policy in economic downturns will be less. Investors will be in need of higher rates of interest to be able to invest in an economy that is increasingly becoming volatile.

When the cycle of net interest payment increases and higher interest rates are resent, the result will be a net interest payment that will eclipse other major spending programs by 2047. If we decide to look at Medicare and Social Security, it will require large investments to keep the short-term solvency.

What the economists say

There are economists who argue that if the economy could be spurred faster than the compounding interest payments, and it ignores entitlement programs, then things would be okay. But spending is not the issue; the problem rests on the revenue and the GOP tax plans which do not help.

The GOP tax plan economics is not hard. When you talk to the Keynesian economists, they would argue that the tax cuts spur economic growth and stimulate the economy. But most of the economists are not supporting the tax plan and the basis behind it, especially when you look at the current economic status. Cutting taxes is not something that is needed at this time.

Most economists believe that the lack of tax revenue will increase the chances of a financial crisis. Estimates by the Dynamic CBO propose that the growth of the GDP due to tax cuts will be dismal and will be below the required levels that are to mitigate the impact of an increased portion of the U.S national debt to GDP.

At the moment, the U.S government is not armed with the right tools to deal with the debt hangover that is looming. Within the next decade, the economy will still maintain the healthy standards. The U.S will not be bothered by the impacts of the existing fiscal policy until the time when it is too late.

The GOP tax plan consequences should not be understated, and it was not only the tax plan that placed the U.S in this state. There needs to be an implementation of reforms that will alleviate the impending consequences of the existing fiscal policy. But sadly, the changes in policy that are needed do not appeal politically.

Revenue needs to be raised by the Congress, and spending should be cut without impacting Medicare and Social Security. There are a number of options that the CBO provides, and they are 115 in total. These options are meant to control discretionary and mandatory spending and stimulate revenue.

How Demographics Will Be The Biggest Driver Of Financial Markets

The world where the financial markets are vastly used by professionals of older age is long gone. In the midst of the workforce getting younger almost daily, one can now witness anything from a retirement account to highly-complex investments being made by people in their twenties. Not to forget that it has been over 70 years since the first Baby Boomers came to the world. With that entire generation growing older, their input in the financial market is thinning and most principles of investing conservatism are slowly getting replaced with high-risk individuals who are not afraid to make unlikely purchases.

Age is an Important Factor

Throughout history, the trend of people who would achieve the level of financial freedom that enables them to make humongous investment used to be no less than 40. That is because the working industry was set up in a manner that requires someone to dedicate at least a decade and a half to collect enough promotions and bonuses to have any noticeable capital. Well, by analyzing the markets in the present, one can easily recognize countless popular individuals who achieved stardom through financial success while only in their twenties. This is something that did not happen with many generations in the 20th century as the world was battling innumerable issues that had to be prioritized. Just considering the fact that World War I, World War II, Cold War, and much more happened in the 1900s makes it perfectly logical that there was no time for young entrepreneurs to test their luck in the investing waters. Consequently, this reverse aging is making the financial markets more approachable. The long-lived stigmas and stereotypes of people who are deemed under the expected age to invest are no longer around. Meaning, one’s decisions and willingness to indulge their financial passions will be judged solely on merit, not on various external factors like age.

Globalization

One of the most important trends that are taking place is known as the globalization. The term covers everything from people migrating across the planet to economies spreading around different countries without interruption. For example, investors would seldom have opportunities to engage in trades with other countries during the 19th or even the 20th century. With so much international conflict and almost non-existent technology for personal use, reaching foreign industries was unimaginable. That has permanently been altered by the inventions that facilitated globalization. For example, someone looking to place their funds into an opportunity that appears successful does no longer have to worry about locations. Those thinking that companies doing IPOs in the United Kingdom will be profitable? They can easily buy stocks in those businesses through a few simple clicks. Such simplicity was not even deemed possible when people used to get their stock certificates mailed to them back in the 1900s. Luckily, the globalized world is opening financial markets to forever-changing demographics. This gives birth to a diversified body of investors from all over the globe.

Breaking the Glass Ceiling

Sadly, the history has imparted many glass ceilings on members of the protected groups. For instance, women were not exactly welcome to many men-operated industries in the past. This same concept applied to other demographics that were sabotaged by racially-motivated prejudices. In 2018, however, things like sexism and racism have been addressed through many political and social campaigns. Although there is a lot more room for improvement, reading about topics that cover female CEOs, per se, is no longer uncommon. This helps every industry evolve as the opportunities have been widened by ever-spreading concepts of open mind. Going back to the idea of people being evaluated based on merits, the fact that gender, race, or ethnicity are no longer used to quantify someone’s knowledge is certainly a great step forward.

Modernization

Having a statistical battle between Baby Boomers and Millennials who have a college degree is a fight that will be easily won by the Millennials. Thus, the knowledge-based demographics are also an important factor in the evolving industry of investing, trading, or leading successful entrepreneurship endeavors. People nowadays have to go through rigorous education that implies learning about things like taxes, advanced levels of math, and much more. This is not something that was available to older generations who used to run the financial markets for the past 50 years. As one glances on the upcoming century, it seems that the workforce with many tangible credentials will lead to a modernized and educated manner of operating.

2018 Housing Market Forecast

When the housing market was growing out of proportion during the years leading up to the economic crisis of 2008, the rapid growth created something that became known as the “housing bubble”. As predicted by many experts yet not enough average citizens, the entire market soon came crashing down and destroyed the short-term economy of the country. This resulted in many issues for the financial industry that was closely tied to the housing endeavors and many people were pushed into foreclosures. Now, a decade after the unfortunate downturn, the housing market seems to be showing a much healthier growth.

First, one of the reasons that the crash was inevitable was due to the growth that largely exceeded the capacity of the demand and supply. In turn, the natural equilibrium was non-existent and the only way to retrieve it was to push the “restart” button which, in this particular case, was the aforementioned crash. Nowadays, however, the housing market has been growing at much more reasonable rates that have not topped a 5-percent yearly increase in construction projects. This enables the buyers and sellers to slowly increase their operations and ease into the broad change that affects pricing models. Thus, it seems that the proper forecast for the housing market must be depicted in form of a very positive picture.

What contributes to the current growth patterns is the fact that the markets are also witnessing an increasing number of high-income rentals. Given that the most common alternative to purchasing a home is to rent one, lenders who are increasing their prices are certainly contributing to people’s decisions to obtain a mortgage. This simply showcases a case of complement goods. Meaning, when the price of one of the assets in question goes up, the relatively “low” price of the other becomes more attractive. Hence why lenders who are deciding to spike up their leasing charges are giving rise to people becoming more curious about the prospects of just buying a property for themselves.

Lastly, the long-lived streak of mortgage rates that were below 4 percent made it possible for countless would-be homeowners to actually become one. As a byproduct of the recovering economy, the banks and nonconventional lenders had their mortgage interest rates set below 4 percent for a record-shattering 26 weeks. With such a rate, those interested in a high-end liability in form of a loan were invited to obtain one as the cost-benefit ratio outweighed their prospects of continuing to pay rent every month. Ultimately, if this trend continues, it would not be surprising to see the housing market reach its heights again. This time, however, the risk of a crash would be minimal as the growth is occurring naturally.