Are you looking to invest in real estate in Washington DC? If so, you may be eligible for special programs that can help you purchase a home or other property. The Home Purchase Assistance Program (HPAP) provides interest-free loans and closing cost assistance to applicants who qualify to purchase single-family homes. Government employees may also be eligible for a First Trust Mortgage at a reduced interest rate, with or without the option of three percent down payment assistance with a zero percent deferred subordinated loan. The Mortgage Credit Certificate (MCC) provides an additional incentive for first-time homebuyers to buy a home in the District of Columbia, offering qualified borrowers the ability to apply for a federal tax credit of 20 percent of mortgage interest paid during each calendar year.
Not only are investors renovating historic properties for rent, but new condominiums, apartments, and developments are emerging all over the city. Investors (and renters) can choose between beautiful renovated homes or new construction ready to move in, creating a dynamic market. When it comes to investing in real estate investment trusts (REITs), you can invest in companies individually, through an exchange traded fund, or with a mutual fund. There are many types of REITs available, with approximately 24% of REIT investments going to malls and independent retail stores. When considering an investment in retail real estate, it's important to examine the retail industry itself.
Are you financially healthy today and what are the prospects for the future? It's important to remember that retail REITs make money from the rent they charge tenants. If retailers have cash flow problems due to low sales, they may delay or even fail to pay those monthly payments and eventually be forced to file for bankruptcy. At that point, you need to find a new tenant, which is never easy. Therefore, it's crucial that you invest in REITs with the strongest possible anchor tenants - such as grocery stores and home improvement stores. Once you've done your industry assessment, you should focus on the REITs themselves.
Like any investment, it's important that they have good profits, solid balance sheets, and as little debt as possible (especially short-term debt). In a poor economy, retail REITs with significant cash positions will have the opportunity to buy good real estate at low prices. The best-managed companies will benefit from this. That said, there are long-term concerns about the retail REIT space, as shopping is increasingly moving from the mall model to online shopping. Space owners have continued to innovate to fill their spaces with offices and other tenants not oriented to retail, but the subsector is under pressure. Multi-family rental apartment buildings and prefabricated housing are also popular investments for real estate investors.
When looking to invest in this type of REIT, several factors must be considered before launching. For example, the best apartment markets are often those where housing affordability is low relative to the rest of the country. In places like New York and Los Angeles, the high cost of individual housing forces more people to rent, raising the price that landlords can charge each month. As a result, larger residential REITs tend to focus on large urban centers. Within a specific market, investors must seek population growth and employment.
In general, when there is a net influx of people to a city, it's because there are jobs available and the economy is growing. The drop in the vacancy rate along with rising rents is a sign that demand is improving. As long as the supply of apartments in a particular market remains low and demand continues to rise, residential REITs should work well. As is the case with all companies, those with the strongest balance sheets and the most available capital usually perform better. Healthcare REITs will be an interesting subsector to consider as Americans age and health care costs continue to rise.
Healthcare REITs invest in real estate for hospitals, medical centers, nursing facilities, and nursing homes. The success of this real estate sector is directly related to the health system. Most of the operators of these facilities rely on occupancy rates, Medicare and Medicaid reimbursements, as well as private payments. While healthcare funding is a question mark, so are health REITs. The things to look for in a healthcare REIT include a diversified group of customers, as well as investments in several different types of properties.
Concentration is good to some extent, but so is distributing risk. In general, an increase in demand for health services (which should happen with an aging population) is good for the health real estate sector. So, in addition to diversifying customers and property types, look for companies whose health care experience is significant, whose balance sheets are strong, and whose access to low-cost capital is high. Office REITs invest in office buildings. They receive rental income from tenants who have generally signed long-term leases.
Four questions come to mind for anyone interested in investing in an office REIT: Try to find REITs that invest in economic strengths; it's better to have a bunch of average buildings in Washington DC than premium office space in Detroit; approximately 10% of REIT investments go into mortgages; and finally - just because this type of REIT invests in mortgages instead of stocks doesn't mean it's risk-free. An increase in interest rates would result in a decrease in the book values of the mortgage REIT which would lower stock prices. In addition mortgage REITs must manage their leverage carefully as too much debt can lead them into trouble if interest rates rise too quickly. In conclusion there are many special programs available for investors looking into purchasing real estate in Washington DC - from HPAP loans and closing cost assistance for single family homes; First Trust Mortgages at reduced interest rates; Mortgage Credit Certificates; and various types of Real Estate Investment Trusts (REITs). It's important for investors to do their research before investing - examining both industry trends and individual company performance - so they can make informed decisions about their investments.
