Author: HappyNest

5 Real Estate Market Predictions For 2021

By HappyNest

As 2020 draws to a close, we share our real estate market predictions for the year ahead.

Well, we think everyone can agree that 2020 was full of surprises.

This year spared no industry from a barrage of audibles, the full impact of which remains to be seen. As the year draws to a close, it’s about that time of year to look back at trends that emerged and make predictions about what comes next.

Longstanding real estate market trends that had held steady for over a decade saw sharp reversals. But are these circumstantial blips on the radar, or harbingers of a societal restructuring?

We look for clues to forecast real estate market trends for 2021.

Rent in big cities will drop

Up until this year, rents across the nation had been climbing steadily higher quarter over quarter for almost ten years. 2020 interrupted that: Rental prices in some of the hottest housing markets cooled in the second half of the year..

There were two key catalysts for the drop. Firstly, a huge portion of the workforce went home. For the first time, employees were longer restricted to a radius close enough to the office for a daily commute. Secondly, interest rates dropping to zero made loans cheaper for prospective home buyers.

For the first time in their lives, Millennials will experience a renter’s market.

A renter’s market goes hand in hand with an investment property buyer’s market.

“In places like Manhattan, many buyers have been priced out over recent decades,” says Jesse Prince, Founder and CEO of HappyNest, a real-estate investing app.

“The impacts of COVID may present unique buying opportunities for those risk-tolerant operators willing to bet that effective vaccines are right around the corner, large corporations will begin to repopulate the urban core office markets in the near-term, and business will rapidly return to normal.”

Buyers who picked up rental investment properties during the housing market dip of 2008 enjoyed decade long gains. History might be repeating itself.

Office space will be converted to residential units

Big city landlords aren’t the only ones poised for a tough year. Urban flight could have consequences on commercial real estate owners too. Thousands of businesses went bankrupt this year; needless to say, they won’t be renewing their leases. Many companies that were better fortified to withstand the turbulence of 2020 announced that their employees can remote work permanently, including headcount heavyweights like Google, Shopify, and Nationwide.

Others welcomed the elimination of a recurring lease expense on their P&L – especially those who found their teams were just as productive at home.

Presumably, the combination of these three factors will leave a dent in the demand for office leases. The question is – how big of a dent?

“Whether or not the current trend of urban flight will reverse in the post-pandemic New World remains up in the air – a risk factor that shouldn’t be ignored by developers underwriting any new projects,” Prince says.

Even prior to the Work-From-Home Revolution, the transition from suit to sweats was well underway. According to a research report by GetApp, between 2010–2019, the number of remote employees surged 400%.

Landlords in the right municipal zoning might consider converting their buildings into mixed-use, work-loft properties to fill vacancies faster.

“Converting underutilized office space into mixed-use properties is by no means a new strategy, one that proved effective in several urban markets during the recovery from the Great Recession.” Prince says.

The months following widespread vaccination will be critical gauges on COVID’s impact on office space demand in the coming years. For opportunistic investors, it could also be a rare ‘buy the dip’ opportunity in the commercial office real estate market.

Increase in demand for flexible lease office spaces

Business owners in new or long-term leases found themselves stuck paying for offices they weren’t using for the lion’s share of the year.

As leases draw to an end, business owners across the country will be asking themselves: What value does a shared working environment bring my company and my employees?

In a survey done by Publicis Sapient, only 15% of respondents said they wanted to return to the office full time, 21% said they preferred to work remotely full time, while 64% said they’d prefer a hybrid model with some days in office and some days remote.

Some of those employees just might get their wish.

Workshare spaces are intuitive solutions for what many experts are calling the rise of the Hybrid Work Model. As such, they could stand to benefit as the economy emerges from lockdown – especially in the early phases of reopening.

Businesses, smaller ones in particular, will appreciate the savings on overhead expenses without passing up the benefits of strong team relationships and in-person collaboration.

Other companies endured major economic blows in 2020, and were forced to downsize as a result. A return to a half-full office might prove demoralizing and warrant a location change either way.

With uncertainty still ahead, they may opt for short-term, low-risk leases and smaller spaces until things stabilize.

All of these circumstances could translate into new demand for workshare spaces as a byproduct of the pandemic.

Industrial real estate are poised for double digit growth

2020 brought record growth in the e-commerce sector as stay-at-home orders and pandemic fears made doorstep deliveries the primary means of acquiring goods for large sects of the public.

Though the reopening of retail locations may trigger a pullback in e-commerce activity worldwide, it’s unlikely to fully recede to pre-pandemic levels. Its convenience and wide product availability is sure to have won over former holdouts.

Even prior to 2020, e-commerce was experiencing healthy growth year over year – the pandemic only gave it a boost on its trajectory.

All those orders need to be processed, filled, and shipped from somewhere. That’s why industrial real estate, fulfillment centers in particular, are slated to be big winners for years to come.

“It often pays to follow the money. Goldman Sachs, and other institutions, have started taking large positions in industrial assets,” Prince notes.

Unlike other types of real estate markets, the upside is all but guaranteed. Major retailers including Amazon, Home Depot, Chewy, and Lowe’s have already announced plans to open fulfillment centers.

That makes the industrial sector a highly attractive investment property option with low-risk tenants.

“Industrial services have proven themselves essential during the pandemic. From a cash flow perspective, the risk that your tenant won’t pay their rent is reduced significantly,” Prince adds.

Purchasing industrial real estate as an investment property is out of reach for many investors. But you can enjoy the upcoming gains with whatever capital commitment fits your budget through crowd investing apps like HappyNest, which has a fulfillment center currently leased by FedEx in its portfolio of properties.

Housing market will continue to gain value

Months-long lockdowns raised some big questions for city renters, who had mostly seen their apartments as places to sleep, change, and store things.

Prior to 2020, they willfully made concessions in square footage to be in the middle of the big city action.

But after just one month of sharing a 300-square-foot apartment in lockdown, ‘home’ began to feel like a prison cell. Suburbia and small town America never looked so good…and spacious.

Renters leaving the city for some peace and quiet is good news for the housing market. As demand for single-family homes increased in suburban areas, so too did housing prices. Some areas hit record highs.

“People are fleeing urban markets in search of more space for them and their families. It no longer makes sense to pay $5,000+ for a two-bedroom apartment during a lockdown,” Prince notes.

Interest rates are expected to remain low through Q1 of 2021, further stimulating the hot housing market. That will help prospective buyers offset the rising list prices of homes.

“Markets are super tight because building has slowed down while demand has increased. High demand coupled with low interest rates are a recipe for higher home values and top dollar for sellers.”

As such, it is one of HappyNest’s real estate market predictions that the housing market will continue it’s steady appreciation trend.

Real estate market predictions long view

With the pandemic yet to be fully behind us, these real estate market predictions are based on trends we already saw emerging in 2020.

The vaccine has the finish line in sight, and the post-pandemic world may finally arrive in 2021.

But if 2020 taught us anything, it’s to always keep our heads on a swivel.

 

Update: Check out HappyNest’s real estate outlook predictions for 2022.

 

Download HappyNest today on App Store or Google Play.

 

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Parents, It’s Your Responsibility to Teach Your Kids Financial Literacy

By HappyNest

Parents, it’s your responsibility to teach your kids financial literacy or they’ll have to learn the hard – and expensive – way

Parents want what’s best for their kids, especially in regards to their future.

What a shame then, that one of the most highly correlated predictors of success in adulthood is one of the least talked about topics in the world of parenting – financial literacy for kids.

Financial literacy is on the decline

Financial literacy in the U.S. has been on the decline for the better part of two decades. The consequences of that have been the stuff of headlines.

The problem is likely to get worse: A study released earlier this year by the TIAA found that only 16% of Millennials qualify as financially literate.

And it costs them dearly….literally. On average, millions over the course of their lifetime.

But where there is a problem, there is an opportunity. In this case, that opportunity is that a comprehensive financial education becomes a strategic advantage in life.

After all, who wouldn’t want to give their sons and daughters a leg up over 84% of the population?

We all know things aren’t getting any easier – let alone what the future holds.

Don’t rely on school to teach kids about financial literacy

Only 21 states in the U.S. require personal finance coursework in public schools. Believe it or not, that’s actually a significant improvement from just two years ago.

Still, most requirements are minimal. A majority of states have no curriculum in financial literacy at all.

Like it or not, the reality is that the responsibility of financial literacy for kids falls squarely on their parents.

Financial education in the school of hard knocks

Most people earn their financial education the hard way: A slow, painful process in the strict and unforgiving classroom of the real world.

Lessons here come at a hefty price: deflated credit scores that haunt for seven years, debt that seems to never go down despite monthly payments (that aren’t always easy to make, especially in early adulthood), and tricky ‘offers’ that are essentially financial booby traps.

But in the depths of the convoluted fine print, most of these ‘offers’ capitalize on money management blindspots.

In recent years, the world of finance has grown even more labyrinthian – predatory even. Many products are specifically designed to exploit (and profit) from widespread gaps in financial literacy.

It’s a cruel and costly learning curve.

But parents who understand the importance of financial literacy for kids can flatten that curve. They can introduce basics on how to manage money at an early age. Then they can build on that foundation with more sophisticated concepts over time.

Financial literacy during the Wonder Years

Explaining how indexed annuities work to a 2nd grader will unsurprisingly be met with blank stares. But there’s no reason we shouldn’t expect the same from a young adult who hasn’t learned foundational concepts like investing, compound interest, and the importance of taxation timing.

Of course, not all at once. But the earlier a financial education framework is introduced, the more time the investment will have to mature.

Elementary years

As with all things in life, the basics come first and early.

That aforementioned 2nd grader probably can grasp the Bank of Mom and Dad depositing an allowance into an account.

Over time, an allowance account offers many learning opportunities on managing money – from delayed gratification (‘you can get the NERF ball now, or wait another 2 weeks to get that bike we saw’) to basic principles of fixed income.

Early adolescence

Parents can share visibility into an investment account as children enter early adolescence, such as a college savings account. That way, their preteen can see first-hand how small investments can lead to big payoffs.

Calibrate your expectations: Though they might not seem especially interested at first, once that investment grows into real money, they’ll likely change their tune.

This is also a great time to start familiarizing them with things such as personal credit scores.

High school

By the time they’re in high school, they will have witnessed what Einstein called the ‘eighth wonder of the world’: The power of compound interest.

From there, it is only a small logical step to understanding how compound interest can work against them in the context of debt.

But nothing quite beats the real thing. High school is also a time where kids start wanting big-ticket items, such as a car or a trip with friends. These wish list items can serve as the basis for the mechanics and implications of debt.

Their financial education can mature in tandem with them.

Parents bridge the classroom and the real world

What makes early exposure to financial literacy for kids so vital is the bridge it creates between the math they learn in school and how it applies in the real world.

Consider compound interest – arguably one of the most important engines in finance – is taught in 7th grade. It is not easy to recall when they’re applying for a credit card or deciding how much to contribute to their 401k.

But with first-hand experience watching an investment account grow over time, they’re more inclined to make financially savvy choices while time is on their side.

The idea is to find teachable moments along the way – life is chock full of opportunities to deepen your child’s financial literacy skills.

Financial literacy isn’t just math, it’s mindset

Understanding the numbers and math that go into financial products on the market today is an integral part of financial education. The more elusive piece of the puzzle is often the psychology around money management and growing wealth.

Financial philosophies, such as “pay yourself first” and “being poor is expensive,” aren’t taught in schools, even those that offer personal finance coursework.

But mindset, attitude, and strategy all impact wealth accumulation outcomes. Parents can help their children to see money as a tool, not a master.

Early bird gets the worm

Parents who want to see their children succeed shouldn’t rely on the school to teach them financial literacy. Instead, they have to take a proactive approach in their child’s financial education.

Perhaps the most important role a parent can play in their child’s financial literacy is helping their children bridge the conceptual to real-world application.

As with most investments, time is a variable. But kids have the benefit of time on their sides.

Early investment in financial literacy for kids ensures that when the time comes for them to fly the nest, they’ll have a little more lift under their wings.

Reach Your Financial Goals With a Diversified Portfolio

By HappyNest

Diversification is a key part of any comprehensive investing strategy.

It’s fair to say that deciding where to start or what to do can feel overwhelming with all the investment options out there.

Just listen to CNBC, Fox Business, or Bloomberg any day of the week, and you’ll hear dozens of opinions about where to invest your money.

“Buy stocks,” “buy bonds,” “buy gold!” “sell Bitcoin!” “buy real estate” – the options feel endless.

On the surface, the advice can be confusing and, at times, contradictory. Ultimately, they are all hinting at one fundamental piece of advice: diversify your portfolio.

What exactly is diversification?

Simply put, it’s the process of spreading your investments across multiple industries and asset classes. You’ve probably heard the saying “don’t put all of your eggs in one basket.” As it turns out, this applies, quite literally, to your investment portfolio.

To better understand diversification’s benefits, you must first understand modern portfolio theory (MPT) and correlation. MPT argues that an investment should be evaluated on how it affects an overall portfolio’s risk and return. This is important because the risk and return profile of one investment can influence an entire portfolio. When you have a diversified portfolio, you will have assets with varying levels of risks, returns, variances, and correlations.

As for correlation, it’s the degree of a relationship between two assets. For example, if two assets are perfectly correlated (correlation equals 1), when one asset price goes up, the other increases as well.  Likewise, if one goes down, the other will too. A well-diversified portfolio includes assets with low correlation preventing the entire portfolio value from collapsing in bad times.

Integrating Diversification in your portfolio

So, what does a diversified portfolio look like? It includes a mix of real estate, stocks, bonds, treasuries and potentially other types of alternative investments. All these assets have varying risks, returns, and correlations with one another.

For example, Treasuries and bonds generally have lower returns than stocks and real estate. But they can be a good source of steady income. These are your portfolio’s lower-risk portfolio stabilizers. Real estate and stocks can provide more significant long-term returns but increase the overall portfolio risk. These assets are your portfolio’s growth engine.

According to PREA.org research, real estate and stocks have a low correlation of 0.07. Real estate has a -0.15 correlation with bonds. By investing in all three of these types of assets, your portfolio return is resilient from events that may affect real estate or stocks exclusively. A great example of why this is important is the 2008 Great Recession and the stock market drop in early 2020. Private market real estate did not necessarily lose its value even when stocks declined sharply. In fact, as bond values took a hit during this same period, private market real estate (multifamily, single-family, industrial, and logistics) increased in value. The private market real estate, in this case, stabilized the portfolio value for long enough to allow an investor to maintain their ownership in stocks, which of course, returned to near all-time highs as of the publishing of this article.

A diversified portfolio helps mitigate the effects of unfavorable market fluctuations while still allowing you to take advantage of the bull market runs. At the end of the day, it’s important to find the right balance of assets for your risk tolerance. Creating a well-diversified portfolio can help you hit your financial goals faster!

What you should know about the power of compound interest

By HappyNest
“Compound interest is the 8th wonder of the world.” – Albert Einstein
Many investors are flocking to real estate investment trusts (REITs) because they’re considered a relatively safe and high-yield investment. Some dividends can be 10% or higher and offer the potential for capital appreciation.
Approximately 89% of real estate investors indicate that they will make another investment soon. They also reported compound interest can help them achieve their financial goals faster.
Here’s what you need to know about compound interest and how it applies to REIT investing.

What is Compound Interest?

Compounding interest is the concept that your money makes you more money over time when the interest compounds on your original investment and interest earned. Compounding interest creates a snowball effect that can accelerate the value of your investment.
For example, if you invest $1,000 at an annual interest rate of 10%, you will have $1,100 at the end of year one. If you leave the interest earned ($100) and the original investment ($1,000) in your account and earn another 10% in year two, you will have $1,210 at the end of year two.
Fast forward 30 years, while continuing to earn 10% annually and not making a withdrawal on your account, you will have $17,449.4. Conversely, if you decided to withdraw the $100 interest earned every year for 30 years, you would have only received $3,000 in interest (30 years x $100) and still have just $1,000 in your account. In this scenario, the effect of compounding interest generated more than four times the amount of money compared to making annual withdrawals.

How Can You Use Compounding Interest to Your Advantage?

Compounding interest takes patience but is not difficult to use to your advantage. Most REITs and brokerage platforms offer a dividend reinvestment plan (DRIP). By enrolling in a DRIP, you are reinvesting your dividends back into the REIT or stock that you own. Over time, you will own more shares of the REIT or stock. The dividend payments will become greater (assuming consistent dividend payments over your investment period). When you redeem your shares in 5, 10, 15, or 30 years, you will see the fruitful effects of compounding interest.

Why Does It Matter?

If you don’t harness the power of compound interest, you may be cutting yourself short of your actual earning potential. Non-accredited and passive real estate investors are already generating a massive amount of wealth using the power of compounding interest by investing in REITs with DRIPs.
If you’re looking to maximize your investments’ value, compound interest can help accelerate your portfolio’s growth over time. To learn more about compound interest, speak with one of the professionals at a commercial real estate investment company. Ask them how you can reach your financial goals faster by harnessing the power of compound interest.

What Are Real Estate Investment Trusts (REITs) and Why Should You Care?

By HappyNest

Real Estate Investment Trust 101

Real estate investment trusts are a companies that owns, operates, or finances properties. The properties can range from homes to hotels, malls, offices, medical buildings, or any other real estate type.
Investing in REITs can be a great way to generate passive income and build wealth through real estate. Perhaps that is why nine out of 10 investors add real estate to their investment portfolio. If you want to diversify where you put your money to grow it steadily over time, you can buy shares of a REIT.
Of course, you might be thinking that your portfolio is already diverse, with a mix of stocks and bonds. Why add REITs into the mix? There are several reasons.

 

REITs Can Be Affordable Ways to Get Into Real Estate Investing

Let’s say you want to invest in real estate. That’s a great goal, but it might take a lot of capital to get started and purchase a property substantial enough to generate cash flow. After all, if you are only beginning your real estate investing career, you’re probably going to purchase just one property at a time.

Rather than wait until you have enough property to start seeing regular returns, you can use an app for investing in commercial real estate and jump right into the REIT world. No-fuss, no muss, and it’s economical, too.

REITs Can Generate Steady Income Streams

As you may have heard, real estate tends to outperform the stock market over the long-run. A real estate investment trust often provides dividend distributions, that can then be reinvested through dividend reinvestment plans (DRIPs). By reinvesting your dividends back into the REIT, you are purchasing more shares of the REIT. That increases you future potential dividend payouts.
When it comes time to start reaping the benefits of your investment, you could potentially realize a significant stream of income. And that’s good for your retirement years.

 

The Stock Market Has Less Effect on Public Non-Listed Real Estate Investment Trusts

Are you concerned about stock market volatility when it comes to distributing and managing your investment portfolio? Public non-traded REITs tend to fluctuate in value less than other publicly traded REITs and stocks when the market takes a tumble.
Although no investment is entirely immune to market swings, public non-traded REITs are more closely aligned with a pure-play real estate investment and can be less volatile. If your risk profile leans toward taking fewer chances, download one of the best investing apps and look into a public non-listed REIT.

 

Professional Management Teams Oversee the Commercial Real Estate

Let’s say your friend tells you he’s buying up tons of commercial property for sale in the area and wants you to be an investor.
Sounds good–in theory.
In practice, your arrangement could end up a nightmare, especially if your buddy isn’t a smart money or property manager.
Real estate professionals manage REITs. This means that they’ll treat your investment like you would, with care and diligence.

 

The SEC Has Oversight of All Types of REITs

If you choose to invest in a publicly traded or public non-traded REIT, you have the SEC overseeing financials of the REIT. In other words, you don’t have to wonder if the REITs are in compliance. They must legally follow SEC regulations. If they don’t, they risk losing their REIT status and could run into legal trouble. This provides you with security that you may not get investing in private equity or a private REIT.
Your desire to invest in real estate, even if you can only invest in real estate with $500 or less, makes sense. Over the past 20 years, Real estate investment trusts have proven to be the right fit for investors of all ages, from Generation Z to Baby Boomers. Download a real estate investing app today and have fun exploring the wide world of REITs.
For a more in-depth article on the details of real estate investment trusts, read more here.

How I Learned About Real Estate Investing

By HappyNest

By: Melissa Etezadi, HappyNest PR and Content Manager

Like many novice investors, I was told at a young age the only way to save money for retirement was to invest in your 401(k), open an IRA, and of course, invest in the stock market. Growing up, I remember watching my dad emotionally react to the twists and turns of the Dow. His mood would fluctuate as the market would swing from high to low. We knew as kids if the numbers on the tv are red, it’s not the time to ask for money.

 

It wasn’t until I graduated college with over $100,000 in student loan debt, and a mediocre first paying job, that I realized I needed to find new ways to diversify my portfolio and grow my nest egg. The real question, though, how? I decided to take to the internet – it’s here where I learned about investing in real estate.
So, what makes real estate worth investing in? Unlike traditional investments such as stocks and bonds, real estate is not tied to the stock market’s volatility and fluctuations. Real estate is a tangible asset, so it relies on the economics of a local market instead. There have been many situations where the stock market has been in a downturn, while real estate investments’ value was on the rise.

 

I learned that real estate is a less liquid asset, so it takes longer to convert to cash. This is one of the main reasons many financial experts stress the need for a balanced portfolio of real estate, stocks, alternative investments, and bonds. In the finance world, it’s called diversification.

 

My investment journey was slow. I did not invest in some fantastic stock that turned into millions overnight or purchase a $5M CVS Pharmacy or apartment building. I researched the subject and visited popular sites such as www.reit.com, www.investopedia.com, www.daveramsey.com, and www.myhappynest.com to help learn the terminology.

Real estate investing for beginners: REITs

After exploring all my options, I decided to buy shares of REITs. They seemed to be the best way to gain exposure to real estate investing without all the maintenance requirements.
I learned that REITS are a long-term investment and traditionally pay 3, 4, or even 5% dividends, helping me double my investment over time. My goal is to continue growing my wealth by maintaining a healthy portfolio of diversified investments. My goal is for me children to not have to see me go through the stress my father did.
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