Home and Away star Emily Weir has purchased a bargain investment property in Sydney’s Eastern Suburbs, buying a one-bedroom apartment in Rose Bay for $680,000.
Described as “generous-sized” and within walking distance to Sydney’s famous Bondi Beach, the modern one-bedder was sold at auction with Emily buying the apartment for less than half the median price for Rose Bay.
The apartment features a combined living and dining area and a bedroom with an ensuite bathroom and is expected to be rented out between $680-700 a week. Emily also owns and resides in a home in Sydney’s Northern Beaches.
The 46sq metre apartment had been guiding around the $600,000 mark before auction, and last sold in 2012 for $382,000.
The current median price for property in Rose Bay stands at $1,473,500.
RELATED:
Emily has starred as Mackenzie Booth on Home and Away since 2019, with her character arriving in Summer Bay as the new owner of the popular restaurant Salt.
SHOP:
Since rising to fame on the soap, Mackenzie has also starred in Seven’s Dancing With The Stars, something she credits to helping her “get her groove back” after suffering a period of anxiety and burnout post-COVID.
“The story of dance is about survival and leaning on your community to help you. I’ve used all those feelings to fuel this dance and it was worth it,” she said at the time.
She credits the shows to helping her maintain strong boundaries in her life.
“In the past five years, I’ve learnt to set boundaries and be kinder to myself. I’m grateful to be in Home and Away and DWTS is one of the best things I’ve ever done,” she said.
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Dear Big Move,
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My wife and I moved out of our former primary residence a year ago, and we have been renting it out for $4,000 a month. Our current tenant is moving out next month and we will need to find a new one.
The house is probably worth about $750,000 and we have a $450,000 mortgage on it, which we managed to refinance when mortgages were rock bottom at 2.5%.
Should we plan to sell the house in two years in order to get the capital gains tax exemption, and then use the proceeds to buy a new investment property?
Or would we be better off keeping the property, continue renting it and abandon the tax exemption in order to hold on to our low mortgage?
Looking for Opportunities
‘ The Big Move ’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Looking,
You have a 30-year mortgage at a rock-bottom rate of 2.5% that you will possibly never see again in your lifetime. Why are you in a rush to sell?
If you are trying to get ahead without paying taxes, you have time, but how much time is the question.
The biggest challenge with waiting to sell is that your home could appreciate significantly, and you may not qualify for the capital gains tax exemption of $500,000 when filing jointly with your spouse.
You don’t say how much you bought it for, but even if you had bought it for $500,000 and the home is $750,000, you’ve still got time before hitting that cap of $500,000. As long as you don’t exceed that, and the government does not change that number, your plan to wait and sell makes sense.
As you’re looking to buy a new investment property, consider doing a 1031 exchange. With a 1031 exchange, you can sell whenever you want, and defer paying taxes on the profit. The “catch” is you need to move that money into another investment property. Plus, you may have to take on a new mortgage.
Factor in the new rate and the potential rental income, and see if the math makes sense. If that other investment property you’re looking at doesn’t net you the same or similar profit as your current rental, then don’t sell.
The bottom line: Unless there’s a strong reason for you to sell independent of taxes — perhaps you need the extra money, or you are sick of dealing with tenants, for instance — it seems like the best move would be to hold on to the home, or try to swap it out for another.
And don’t just take it from me. “There is no hurry to sell,” Ed Fernandez, president and CEO of 1031 Crowdfunding , a company specializing in 1031 exchanges , also advises.
“You can always capture the gains any time after two years, but in this scenario, it looks like the cash flow you are receiving from the current mortgage might be better than any opportunity you would have to go out and buy in the current market environment,” he added.
That’s two opinions in favor of retaining your rental. The third opinion? That’s up to you.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties .
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A home equity line of credit (HELOC) on an investment property is a loan taken out against a piece of real estate that you use to earn income or a financial return. So, instead of taking out a HELOC on the property where you actually reside, a HELOC on an investment property leverages a place where you do not live as collateral to borrow money.
While many borrowers have been interested in HELOCs over the past two years, HELOCs on investment properties aren’t nearly as common — or as easy to get. The vast majority of HELOCs are taken out against primary residences; lenders are more comfortable with a loan against the actual roof over your head because they know you’ll prioritize repaying that loan.
However, some lenders do offer HELOCs on investment properties. Here’s how they work, and how to decide if they’re a good strategy for your financing needs.
How do you get a HELOC on an investment property?
Getting a HELOC is similar to getting a mortgage (in fact, HELOCs are a type of second mortgage). Here’s how the application process works.
1. Know your finances.
Before you apply for a home equity line of credit, you’re going to want to estimate how much equity you have. Property values have continued rising this year – albeit more slowly than they had been during the peak of the pandemic – so you’ll want to get a sense of what your property is worth versus how much, if any, you have left to pay on the first mortgage. The difference between how much you owe and the investment property’s fair market value equals, roughly, the amount of your equity stake. In ascertaining the value, you might want to consult a real estate professional who specializes in similar properties to issue a broker price opinion on yours.
2. Shop around to find the best deal.
Shopping around for a HELOC on an investment property is going to be more limited than for the regular, residence-based variety: There simply aren’t as many lenders that offer these lines of credit. Still, there are always choices, and it’s always important to compare. Try to find at least three lenders, and try to suss out how practiced they are in this sort of HELOC. Look at the APR that each lender offers, and be sure to scrutinize the fine print to understand whether there are additional fees such as a penalty for closing the line of credit early.
3. Apply.
When you’re ready to officially apply for a HELOC, be prepared for the kind of complete under-the-hood type of financial scrutiny you would receive with any type of request to borrow a sizable chunk of money. A lender will look at your credit score, your debt load, your cash flow, your cash reserves and every other detail about your finances to determine a) whether they will loan you the cash and b) how much they’re going to charge you to borrow it. The lender will also probably do an appraisal of your property, which sets the official value on it. In determining its worth, they’ll look at its condition and also the amount and sort of income it generates.
4. Close.
Closing on a HELOC is typically a much faster process than closing on a traditional mortgage. Some lenders will close in as little as three days, and you can access the cash within a week.
What are the pros and cons of getting a HELOC on an investment property?
Pros
- Cheaper than many other forms of borrowing: The interest rates on HELOCs are often lower compared to other forms of financing like credit cards and personal loans. (You’ll likely pay a bit more because it’s tied to an investment property, however — more on that below.) A HELOC might also be simpler and cheaper to obtain than a business or commercial property loan.
- Less risk for you: Taking out a HELOC on an investment property might feel a bit safer than a HELOC on your primary residence. If you default on the line of credit, at least the home you live in won’t be subject to foreclosure.
- A flexible way to access cash: You can continually draw from the HELOC during the initial draw period, so it’s often a good fit for fluctuating or longer-term expenses like renovation projects.
- Cheap initial payments: With most HELOCs, you only need to pay interest during the draw period. Paying back the principal starts during the repayment period.
Cons
- Limited availability: Not many lenders offer HELOCs on investment properties.
- Higher rates: An investment property is inherently riskier than a primary residence: You don’t live in it, which means you aren’t as impacted if you lose it. That means that lenders charge higher rates for any type of financing attached to one, including a HELOC. For example, at this writing,TD Bank’s lowest available APR on HELOCs for investment properties is more than 1 percentage point higher than a HELOC on a primary or secondary home.
- Extra fees: Most HELOCs come with an annual fee and an early cancellation or termination fee if you close the line within the first two or three years.
- Negative equity concerns: Real estate doesn’t always appreciate, and if your property loses value, you could wind up underwater (owing more on a property than it’s worth).
HELOC requirements for investment properties vs. primary residences
Investment properties | Primary residences | |
---|---|---|
Credit score minimum | Generally 700 | 650-680 |
Debt-to-income (DTI) maximum | 43% (can depend on anticipated rental income) | 43% to 50% |
Loan-to-value (LTV) maximum | 80% | 85% |
When is it a good idea to use a HELOC on an investment property?
Using a HELOC on an investment property can be an easy way to access cash that will generate a return. For example, you might use the funds from the HELOC to buy another property that can act as an additional investment, without depleting your savings. Or you might use the funds to upgrade or expand your property, making it more attractive to prospective tenants and enhancing its revenue stream. HELOCs are an especially good idea when you want to use the funds on the real estate itself — especially because there are tax benefits (see below).
Are you able to deduct a HELOC on your taxes?
Tax advantages are one of the pluses of HELOCs. You might be able to deduct the interest paid on a HELOC, including a HELOC on an investment property, so long as the funds were used to build, improve or repair the real estate backing the loan in some way. Remodeling the premises, upgrading the HVAC system, constructing a new wing, or even buying an adjacent lot could all count as tax-deductible improvements.
You can’t deduct all of the interest, however. With HELOCs, you can only deduct the interest actually accrued on withdrawn funds (not on your total line of credit). Depending on your filing status, overall you can deduct up to $750,000 (if married filing jointly) or $375,000 (single or filing separately) of interest on combined debt, including any mortgages on your primary residence. You must also itemize deductions on your tax return.
What are the alternatives to using a HELOC on an investment property?
- Cash-out refinance: With a cash-out refinance, you’ll refinance the loan on your investment property to a higher amount — provided you have enough equity — and take the difference in cash. Some savvy real estate investors use this method to continuously add new properties to their portfolio mix. However, this strategy might not work as well today, with mortgage interest rates having gone up.
- HELOC on your home: If you can’t find a lender willing to extend a line of credit on your investment property, you might want to consider taking out a HELOC on your primary residence. This means your home is on the line, however, if you can’t repay what you borrow. You might not be able to get as sizable a loan, however, and you won’t be able to deduct any interest (because the loan’s backed by your home, not the investment property).
- Personal loan: Depending on your debt load, you might be able to take out an unsecured personal loan as a lump sum. The interest rates on these can be much higher if your credit isn’t the best, however, and you’ll need to start repaying what you borrowed right away.
- Small business loan: If you have set up a company to own/operate your investment property, consider comparing small business loans or line of credit to access the funds you need. The interest rates on these loans will likely be higher than that of a personal HELOC, and you’ll have to start full repayments right away or make more frequent payments (in the case of the line of credit). But if you have a solid business plan you can show to a lender that documents your strategy for expanding your real estate investment portfolio, this can be another viable option.
The bottom line on using a HELOC on an investment property
Opening a HELOC on an investment property can be a savvy financial move, particularly if your need for funds is real estate–related. You can leverage the property to improve the property — and its income-generating or appreciation potential. Plus, you may be able to score some tax benefits.
However, a HELOC on an investment property isn’t all upside: Rates are higher than some other types of financing — including residential-property HELOCs — and you need to have pretty solid financials. Also, the availability is limited to a small number of lenders.
Absolute-Net Lease in Place and Produces Strong 16.5% Cap Rate over the Life of the Lease Term
SCOTTSDALE, AZ / ACCESSWIRE / January 22, 2024 / Zoned Properties®, Inc. (“Zoned Properties” or the “Company”) (OTCQB:ZDPY), a leading real estate development firm for emerging and highly regulated industries, including legalized cannabis, today announced that the Company has acquired an investment property in Chicago, Illinois (the “Investment Property”) and entered into a long-term, absolute-net lease agreement with Justice Cannabis Co.’s BLOC Dispensaries to operate a Retail Dispensary.
“This investment significantly enhances our property investment portfolio and rental revenue base, and diversifies our tenant roster. We have partnered with a best-in-class cannabis operator, which underscores the highest and best use of this premier retail location. Illinois is home to one of the most exciting, emerging cannabis markets in the nation with strong consumer brands and growing consumer demand. Driven by robust consumer brands and escalating demand, Illinois’ market has reached new heights with the Department of Financial and Professional Regulation (IDFPR) reporting a surge in retail activity, including the launch of 28 new dispensaries and total dispensary sales eclipsing the $1.5 billion mark in FY23. We are poised to play a pivotal role in the commercial real estate landscape of the cannabis sector and this partnership aligns with the Company’s mission to innovate within the real estate development sector, driving growth and delivering value to shareholders,” commented Bryan McLaren, Chief Executive Officer of Zoned Properties. “The collaboration with Justice Cannabis Co.’s BLOC Dispensaries is a testament to our strategic vision and we look forward to expanding our relationship with their executive team.”
Transaction Highlights
-
Zoned Properties has acquired a premier Investment Property in Chicago, Illinois that has been entitled and permitted as a cannabis retail dispensary.
-
The Investment Property was acquired for approximately $1.6 million, including all closing costs and fees. The transaction also includes a commitment from the tenant’s operating partner of up to $1 million for renovation and construction improvements.
-
The Investment Property is leased to Justice Cannabis Co.’s BLOC Dispensaries under a long-term, absolute-net lease agreement, which will produce an approximate 16.5% Cap Rate when straight-lined over the 15-year term of the lease agreement. The lease includes 3% annual increases in base rent over the life of the lease term, yielding approximately $265,000 in annual base rental revenue when straight-lined over the life of the lease term.
Market Highlights
-
Illinois’ cannabis market is becoming one of the strongest in the nation. In 2023, the state saw over $1.5 billion in overall dispensary sales and is expected to see continued growth in 2024.
-
Chicago, Illinois is in the BLS-5 Region for cannabis retail locations, one of the most in-demand market regions in Illinois.
-
The Investment Property is located in a prime retail area, situated approximately 1.5 miles from the iconic Chicago White Sox stadium and is surrounded by several major highways.
About Justice Cannabis Co. & BLOC Dispensaries
Justice Cannabis Co. (formerly known as Justice Grown), has been a steady force in the U.S. cannabis industry for over 7 years and has garnered attention for all the right reasons. They are a full-service, vertical cannabis business. They cultivate, manufacture and distribute high quality cannabis products to a variety of customers, and patients across the United States. Founded on the premise of ‘cannabis made good, that does good to make you feel good,’ the Justice team has a long-standing and impressive reputation for their social justice commitments, quality products, unique dispensaries and a modern approach to service. Through its retail brand, Bloc, Justice Cannabis Co. offers products and dispensary experiences thoughtfully developed to aid in the daily journey of feeling better. With an expertly curated collection, and an attainable price point, Justice Cannabis Co. continues to garner attention for its growing community of loyal customers.
Justice Cannabis Co. holds multiple licenses across 8 states: California, Illinois, Pennsylvania, Massachusetts, New Jersey, Michigan, Missouri, and Utah. With over 100 years of combined cannabis experience on the executive team, Justice Cannabis Co. is composed of experienced cannabis professionals and alumni from some of the cannabis industry’s most influential and impactful brands. For more information, visit www.justicecannabisco.com.
About Zoned Properties, Inc. (OTCQB: ZDPY):
Zoned Properties is a specialized real estate development firm for emerging and highly regulated industries, including regulated cannabis. The Company is redefining the approach to commercial real estate investment through its integrated growth services.
Headquartered in Scottsdale, Arizona, Zoned Properties has developed a full spectrum of integrated growth services to support its real estate development model; the Company’s Property Technology, Advisory Services, Commercial Brokerage, and Investment Portfolio collectively cross-pollinate within the model to drive project value associated with complex real estate projects. With national experience and a team of experts devoted to the emerging cannabis industry, Zoned Properties is addressing the specific needs of a modern market in highly regulated industries.
Zoned Properties does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended (the “CSA”). Zoned Properties’ corporate headquarters is located at 8360 E. Raintree Dr., Suite 230, Scottsdale, Arizona. For more information, call 877-360-8839 or visit www.ZonedProperties.com.
Twitter:@ZonedProperties
LinkedIn:@ZonedProperties
Safe Harbor Statement
This press release contains forward-looking statements. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company’s filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Investor Relations
Zoned Properties, Inc.
Bryan McLaren
Tel (877) 360-8839
Investors@zonedproperties.com
www.zonedproperties.com
SOURCE: Zoned Properties, Inc.
View the original press release on accesswire.com
Most homeowners planning to relocate for retirement sell their houses, downsize, and then put the profit toward their investments and lifestyle dreams. However, some seek to convert the property they already own into a new income source by turning it into a rental.
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There are arguments to be made for both, and neither scenario will suit everyone. Here’s what you need to consider.
First Things First — Can You Afford To Move Without the Lump Sum?
As with so many other things regarding retirement, money will make many of the big decisions for you. Will you have enough money to pull off the move if you don’t sell, and even if you can, will doing so leave you strapped and stressed?
“If you need the cash from the sale of your home to fund your retirement or to buy a new home in your new location, then selling may be the best option,” said Cam Dowski, an interior designer, Realtor and founder of WeBuyHousesChicago. “On the other hand, if you have the financial means to maintain and rent out your home, then renting may provide you with a steady stream of income during retirement.”
Is the Income Stream Worth the Headaches?
Rental properties generate income, but they also generate stress and a never-ending to-do list summarized in the dreaded “three Ts“: taxes, tenants and toilets.
“As someone who has spent most of his adult life as a landlord, I can tell you that the average person dramatically underestimates the headaches and overestimates the profits of being a small-time landlord,” said Brian Davis, real estate investor and founder of SparkRental.
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“Most retirees, especially those living long-distance, don’t want to hassle with chasing down delinquent tenants for rent, filing eviction and arranging for someone to show up in court on their behalf or cleaning out all the junk abandoned when they finally leave. For that matter, most retirees don’t want to hassle with the more mundane tasks of filling vacant units, screening renters, signing leases with all the necessary addenda and disclosures, documenting move-in and move-out walkthroughs, storing security deposits in accordance with state and local laws, repair complaint phone calls from tenants, and so forth.”
The Property Management Compromise
If you like the idea of steady rental income but recognize that being a landlord can be hard, frustrating and all-consuming work, there’s a way to make the income stream much more passive — for a fee.
“Renting out your home and having a property manager take care of everything is a great option,” said Kelly Sollinger, owner of the real estate investment firm Georgia Fair Offer.
According to All Property Management, management companies typically charge 8%-12%, so you’ll have to factor that expense into your budget. But, as Sollinger points out, the compromise “gives the retiree some mailbox money every month.”
If You Rent It, Keep Your Income Expectations in Line With Reality
The rule of 1% says that you have to charge 1% of the home’s value in monthly rent to generate positive cash flow. If your house is worth $500,000, that’s a cool $5,000 per month, right? Don’t bet on it.
According to Kiplinger, that formula doesn’t account for appreciation and mostly works for properties purchased specifically as investments.
If you’re near retirement and you’ve owned the home for a long time, your house has probably increased in value over the years. That would make most lived-in homes worth $500,000 terrible investment properties even if they’d be great homes to buy as primary residences.
The 50% Rule
If you wouldn’t buy your home as an investment property, don’t assume you’ll get 1% by renting it out. Even if you do, plan to kiss half of that monthly check goodbye.
“When it comes to cash flow on rental properties, there’s a rule of thumb in the industry called the 50% Rule,” said Davis. “You can expect around 50% of the rent to go to non-mortgage expenses. These include vacancy rates, repairs, maintenance, property taxes, property insurance, property management, accounting, and so on. So retirees should ask themselves a question: What kind of cash flow am I looking at if I cut the rent in half and then subtract the mortgage payment?”
How Far, Exactly, Are You Relocating?
Life as a landlord can be challenging, but life as an absentee landlord is often beyond the bounds of possibility for the average person — particularly one who’s getting on in age.
“If you are relocating at some distance from your property, I feel strongly that it is a much better idea to sell your house instead of renting it,” said Bridget Blonde, a Realtor with Nest Realty. “I have experience in these situations and several have not turned out well for elderly landlords. If your health changes and you can no longer make the trip to check on your property or deal with your tenants, you will need a trusted and effective property manager to do this for you. If you do not have a good property manager, over time you will lose touch with what is going on with and at your property and this can lead to numerous problems.”
A Sale Is Guaranteed Cash — Steady Rental Income Is Not
Once you sell your home, you’ll have a lump sum in the bank to spread out among any number of investments. But if you tie up all or most of your nest egg in a rental, your financial security becomes much more precarious — especially if you’re not an experienced veteran.
“It’s risky to fiddle in the investment property business as it requires expertise to make significant profits, mainly due to leveraging,” said Alyson Peck of Bridge The Gap Home Buyers. “Engaging in this field without proper knowledge can result in financial loss. Therefore, I advise against renting your home.”
On top of all that, owning a rental comes with a bevy of tax considerations that don’t apply to home sales, including the loss of the highly favorable 121 exclusion, which lets you write off up to $250,000 from the sale of your primary residence.
“Your home was never designed to be an investment,” said Davis. “Sell it, and then consider reinvesting the proceeds in passive real estate investments such as real estate crowdfunding or real estate syndications. In many cases, you get all the benefits of real estate ownership but none of the headaches.”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Should I Sell or Rent My House When I Relocate for Retirement?