If you’re interested in real estate investing but the prospect of getting started seems overwhelming, why not try turnkey real estate? First-time and established investors find turnkey real estate investments offer a number of benefits when they’re short on time but what to start profiting from their investment.

You likely found brokers and companies offering turnkey real estate in your research. It is a niche part of the real estate industry. Let’s break down what you need to know about turnkeyreal estate investing and who might be interested in this income type.

What is a “turnkey” property?

“Turnkey property” is a term with many definitions, but most people in the real estate industry agree that it describes a home ready to be lived in immediately after the sale. This includes having appliances that work and no visible issues with the electrical or structural components of the house. In some cases, it may already be occupied by tenants. 

Even though turnkey properties aren’t fixer-uppers, they might still need some cosmetic upgrades or refreshing. They can be single-family or multi-family dwellings.

Why are turnkey properties advantageous?

Turnkey properties are not only convenient, but they can be a great way to turn a profit. Without major renovations, the home is move-in ready for its next renters. There’s no need to schedule home improvements, which delays when the property starts being occupied and generating revenue. For real estate investors, this means that there is less risk associated with the investment. Turnkey homes and properties often come equipped with all of the necessary amenities, making them a hassle-free option for those looking to Invest in real estate for the first time. 

Sometimes, the turnkey houses are already rented so investors can make an immediate profit with minimal effort.

Buying a recently renovated property helps keep repair costs low in the first few years of ownership. As a result, cash flow for turnkey real estate investments can be solid during this initial period. It could provide a great return on investment for many investors.

Not only do homeowners love recently renovated properties because they are move-in ready, but renters do as well. Tenants prefer houses and apartments that have been modernized with updated appliances and features. Since there is always a strong demand for well-kept and renovated rentals, you can be sure that your investment won’t sit vacant for long.

Overall, purchasing a turnkey rental property offers an ideal solution for those looking to invest in real estate without worrying about paying out of pocket upfront for significant renovations or repairs associated with traditional fixer-uppers.

Are there downsides to turnkey real estate investing?

Turnkey properties can be on the more expensive side when compared to other real estate investments. You’re not likely to find a move-in ready home below market value. The pricing accounts for the home improvement costs that made the property move-in ready. As a result, there may not be much additional equity to gain in the home beyond your down payment.

That’s why you must ensure the rental income exceeds the mortgage payment. Investors purchasing a turnkey home need to focus on areas with low vacancy rates to ensure a consistent income stream.

In addition, turnkey homes tend to appreciate more slowly than ones you fix up yourself. So while turnkey real estate investments are great for those looking for immediate returns with minimal effort and risk, remember that the long-term gains might not be as significant as those you get from buying undervalued fixer-uppers.

Part of the turnkey experience is using a property management company. Since they don’t have any personal investment in your success, you must be cautious about choosing your company. Ineffective property managers could ruin your chances of making a profit. A bad one that doesn’t maintain the home or makes harmful recommendations could lower how much potential renters are willing to spend and your net operating income.

What to know about buying turnkey real estate

Ensure success by taking several due diligence steps. First, choosing the right turnkey property is essential. Consider the property location, condition, and amenities before making any decisions. Talk to a local real estate agent about what tenants and homebuyers are looking for on the market and see if the property matches.

Additionally, work within your budget constraints when selecting turnkey properties. Some real estate investors believe renovating the property can keep the purchase price down while picking upgrades more appealing to home buyers. Others are short on time and don’t want the hassle of finding foreclosures, rehabbing, and marketing. However, a renovated home commands a higher price for which not everyone has the budget.

With the right knowledge and team in place, turnkey real estate investments can be an ideal solution for first-time investors or those looking to invest out of state.  When looking for turnkey properties, working with a qualified realtor and/or property manager is crucial. Their knowledge will help you purchase a property that meets your expectations and needs. 

Finally, managing turnkey investments requires careful planning and oversight. Close monitoring of all real estate investments is vital to ensure they remain profitable over time. This may include regular property inspections and keeping up with the necessary maintenance.

How do you find turnkey properties?

Investors have two pathways to buying a turnkey house: a) do their research into the housing market or b) hire a turnkey real estate company.

Self-sourced turnkey real estate

For those who prefer to source real estate themselves, various websites and real estate databases like Vantage Horizon Homes will be the resource for finding a turnkey property. To profit with a move-in ready home, find properties in areas that are about to experience growth or increase in value. Source properties with monthly mortgage payments below market rental rates.

It’s wise to enlist the help of a qualified home inspector to ensure that turnkey properties are in good condition and have no hidden underlying issues. Even though the property may look rent-ready on the surface, there could be more significant problems that you would only uncover with a separate inspection. This would decrease the home’s profit margins.

Turnkey real estate companies

Turnkey real estate companies guide investors through turnkey investments, from sourcing rental properties to due diligence to management. They prefer to find and rehab older homes, much like an individual house flipper.

These turnkey companies sometimes have two arms. The first arm focuses on buying, rehabbing, and selling properties. It purchases undervalued properties in high-demand areas at below-market prices. Then it completes the necessary upgrades to make them move-in-ready homes for renters or buyers. The fixed homes are sold to real estate investors. 

Turnkey companies then offer property management services, such as leasing and general year-to-year maintenance. Including a property management company from the get-go allows investors to enjoy a hands-off rental experience with the potential for passive income.

What to look for in a turnkey real estate company

Turnkey real estate companies can provide comprehensive services, such as assistance with the purchasing process, rehabs, tenant screening processes, and marketing.

choose a turnkey real estate company that understands your goals and objectives. The turnkey company should know the local markets, have the correct market intelligence data, and understand the ins and outs of real estate investing. 

Sub-par property rehabilitation will end up costing investors more in the long term. That’s why a home inspection is critical; those who provide one are usually higher-quality companies. Use a company with a good reputation among past clients and in the real estate industry. 

The property management division should have the right technology, processes, and procedures to make investments as stress-free as possible. Both the tenant and investor need to feel that their specific needs are met with professional service and prompt communication.

Always ask for references. If possible, visit the market just once to meet with them, see their operation, visit a few properties, and see firsthand their rehab and property management operations.

How do you finance turnkey real estate?

Financing for turnkey properties can be similar to traditional real estate investments. Investors not paying all-cash need down payments and a lender partner with flexible financing options. The loan you select will be based mainly on where you stand financially. Obtaining a mortgage pre-approval a before beginning your home search helps set your budget. It enables investors to make a more competitive offer to the seller.

Some turnkey companies offer financing packages that allow for more flexible repayment terms and lower interest rates. Others provide incentives for those who choose to invest in their properties, such as tax credits or discounts on closing costs.

Additionally, consider the tax implications of any investments made in turnkey properties, or any real estate for that matter. 

Ready to find turnkey investment properties?

Ultimately, purchasing a turnkey property can be a great way to enter the world of real estate investing while minimizing risk and ensuring you get move-in-ready rental properties with cash flow potential!

Do research before committing to turnkey investments to make informed decisions and maximize your return on investment. With careful planning and oversight, turnkey properties can provide rewarding returns on investment in record time. Start looking for turnkey homes today.

Before you take out a loan to finance your investment property, it’s important to know how the loan repayment process works. Amortization is a key piece of that process for most types of loans.

Key takeaways:

• Amortization is an accounting technique that lowers the value of a loan over a set period of time.
• The amortization schedule depends on the type of loan or mortgage you have on your home or rental property.
• There are three common types of amortization schedules: fully amortized, negative amortization, and positive amortization.
• Amortization differs from depreciation, but both are essential concepts for real estate investors to understand.

What is Amortization?

Investopedia defines amortization as “an accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time.”

In simple terms, it’s the process of front-loading loan payments so that earlier payments go toward paying off interest early, so the loan payment decreases over time.

 The most straightforward example of amortization in real estate is in loans with private mortgage insurance (PMI). Private mortgage insurance is a type of mortgage insurance that most lenders require when you make a down payment of less than 20%. In this scenario, the amortization schedule has larger payments upfront until the borrower reaches the 20% down payment amount and no longer needs PMI.

Here’s how it works.

Let’s say you purchase a home for $250,000 but can only put down 10% or $25,000. As a result, your lender requires PMI. Your mortgage payments will be higher until you meet the required $50,000 down payment amount. After then, your monthly loan payment will decrease.

10 amortization terms to know

1. Amortization schedule. An amortization schedule shows how the term of your loan progresses. When you review it, you’ll be able to see how a larger share of your payment goes toward paying down the loan principal until the loan amount is paid in full at the end of your term.
2. Intangible asset. An intangible asset is an asset with no physical form, such as intellectual property. It’s a long-term asset that accrues value year over year.
3. Interest rate. An interest rate is the amount a lender charges a borrower for the loan and is calculated as a percentage of the principal balance. Interest rates on loans are usually noted on an annual basis known as the annual percentage rate (APR).
4. Interest payments. Interest payments are the payments a borrower makes in addition to paying back the principal on a loan. They’re paid on a regular schedule, typically monthly, and at an annual interest rate established when the loan is initiated. 
5. Loan balance. This is the amount of debt owed at the beginning of the loan period. If you’re just starting your loan, this can be the loan’s original amount. If you’re already making payments, this is the amount carried over from the prior month.
6. Loan term. A loan term is the period of time, or duration, until the loan is paid off. This is typically 60 months, or five years, for an auto loan and a 30-year mortgage.
7. Principal balance or principal amount. This is the amount a lender loans a borrower. It’s what the borrower must pay back, plus any interest payments.
8. Principal payments. A principal payment is simply a payment made toward the original amount of a loan that is owed – the principal balance. Principal payments can be either partial amounts of the amount due or the full amount of the loan.
9. Tangible asset. A tangible asset is an asset that has a physical form. There are two types of tangible assets: inventory and fixed assets. Inventory is the assets produced by a company, including raw materials. Fixed assets are tangible assets the company holds to produce goods or provide services, like rental property, machinery, or vehicle.
10. Useful life. An asset’s useful life is an estimate of the average period, usually in years, an asset is considered useable before its value is fully depreciated.

3 types of amortization schedules

Lenders use different amortization methods to create a loan’s amortization or payment schedule. Below is an overview of the three most common types of amortization schedules.

Fully Amortized Loans

A fully amortized loan is where the borrower makes payments according to the original amortization schedule of the loan. As a result, the loan is paid in full at the end of the loan term.

Negative Amortization

With negative amortization, the borrower makes the required minimum payments, but the amount owed continuously increases because the minimum doesn’t cover the cost of interest. As a result, the borrower’s debt increases with each payment.

Positive Amortization

With positive amortization, lenders require borrowers to repay part of the principal balance with each loan payment. As a result, the loan balance decreases with each payment.

How does amortization work in real estate?

The answer to this question depends on the type of loan a homeowner or investor has on the property. Here’s a breakdown of the most common types of loans.

Fixed-Rate Mortgage

A fixed-rate-mortgage has a fixed interest rate throughout the life of the loan and predictable monthly payment. At the beginning of a fixed-rate mortgage, a higher portion of the monthly payment is applied to the interest. Over time, that changes, and more of the monthly payment is applied to the principal as the interest balance decreases.

Adjustable-Rate Mortgages (ARMs)

An adjustable-rate mortgage (ARM) is a home loan where the interest rate adjusts over time depending on market conditions. Most ARMs have an introductory period where the borrower pays a fixed interest rate. After the introductory period is over, the lender adjusts the interest rate to reflect market conditions. It may increase or decrease.

Interest-Only Mortgage

An interest-only mortgage is one where you only pay interest the first several years of the loan, usually an introductory 10 years for a 30-year mortgage. It makes your initial monthly payments lower, but they significantly increase after the introductory period when you make principal and interest payments for the remaining loan term.

Balloon Mortgage

A balloon mortgage is a home loan with a large, one-time payment due at the end of the mortgage term. Balloon mortgages can be structured in many ways. Some may start with interest-only payments, and others may require principal and interest monthly payments. However, in every balloon mortgage, the borrower will be required to pay a lump sum payment at the term of the loan.

How to calculate amortization

Bankrate has a great amortization calculator. Use it to get an idea of how amortization will affect your mortgage payments and a sample amortization table.

Amortization vs. Depreciation

As mentioned earlier, amortization is the accounting practice of spreading the cost of a loan or an intangible asset over its useful life. It’s a way to pay off the debt in equal installments that include varying amounts of interest and principal payments over the life of the loan. 

Depreciation is “an accounting method used to allocate the cost of a tangible or physical asset over its useful life,” according to Investopedia. It refers to the expensing of a fixed asset over its useful life. In real estate, depreciation is used to deduct the costs of buying and improving a rental property.

Closing thoughts

Amortization is an important concept to understand because, ultimately, it’ll help you determine the type of mortgage that works best for you. Use the information above to talk with your real estate agent and financial advisor.

Your morning cup of coffee has been costing more lately, as have groceries, household cleaning products, and meals out with friends after work. For those larger household and credit card bills, you can blame inflation. With US inflation rates rising to 9.1% last year,  a 40-year-high, prices of goods and services have continued to rise.

As a consumer and a real estate investor, it’s important to understand inflation rates and how they affect you. Inflation impacts every aspect of the economy, from your grocery bill to the interest rates you pay on a mortgage to the returns you can expect to see on your investment Especially during periods of high inflation, it becomes crucial to understand this impact so that you can better manage your finances and your investments.

In this article, we’ll talk about inflation rate—what it is, why it happens, how to calculate it, and how it can affect your personal finance decisions.

What is inflation rate?

As a concept, inflation refers to the idea that the costs of goods and services will increase over time, reducing the value of a currency. The inflation rate is the rate at which inflation increases over a specific period. Much like inflation, this rate is a relationship between the value of the currency and the cost of goods and services.

Inflation is important to understand because it impacts your purchasing power. If you wanted to buy a gallon of milk in 2021, it would have cost you $3.51. That same gallon of milk cost $4.43 in 2023. This means you can buy less with the same amount of money in the current year, and your purchasing power has decreased. Or, put another way, you need more money to purchase the same amount of goods.

The inflation rate reflects the decline in the value of a nation’s currency. It is typically expressed as a percentage. Inflation impacts the cost of living and the growth of an economy, with higher rates of inflation directly correlating to slower economic growth.

Why is the inflation rate important?

The Federal Reserve, which is in charge of maintaining a steady rate of inflation, likes to see an annual inflation rate of 2%. The growth of the inflation rate is important because rising prices indicate a healthy economy. Negative inflation, also called deflation, is considered harmful to the economy because falling prices can lead to higher consumer saving, which means lower consumer spending and, therefore, less economic growth. It results in companies having to slow down production and can lead to layoffs and salary reductions.

Where inflation becomes a problem is when the rate of inflation rises too high too quickly. When this happens, consumer purchasing power goes down, and since everything is now a lot more expensive, people stop buying as many goods and services. Borrowing, too, becomes more expensive, resulting in fewer purchases. If the average inflation rate reaches 100, the prices of goods and services have doubled.

And finally, high rates of inflation can impact your investment strategy. If the inflation rate stays high for long periods, it impacts how long retirement savings can last, and people prefer to invest in stocks over bonds since bonds may not keep up with the rate of inflation.

Why inflation happens

Inflation rates depend on market forces, and it is these market conditions that dictate the rate of inflation in any economy. The factors causing inflation can be classified into three categories:

Demand-pull inflation

This is the classic demand-and-supply inflation, which happens when there is more demand for goods and services than there is a supply. For example, if there is a regular demand for rice or grain in a particular year, but agricultural conditions have led to less production or import, that will lead to the cost of rice and grain increasing and becoming more expensive for the consumer.

Cost-push inflation

This happens when the cost of production goes up. If it costs more to produce goods and services, the price of those goods and services will also go up, leading, once again, to the consumer paying more for those goods and services than they did before.

Built-in inflation

This happens due to the first two types of inflation, that is, when inflation has already been high because of demand-pull or cost-push inflation. In this scenario, workers need higher salaries to maintain their living costs, given the low purchasing power of their dollar. When workers are paid more, this reflects on the cost of goods and services, raising the prices even further, causing additional inflation.

The Gross Domestic Product or GDP will look at the overall economy to see how much it grew or shrank over a given period.

Metrics for consumer inflation

There are two major measures of inflation in the U.S.: The Personal Consumption Expenditures Price Index (PCE) and the Consumer Price Index (CPI). Both have different ways of measuring inflation and tracking expenditures.

The Personal Consumption Expenditures Price Index (PCE)

The PCE is put together by the Bureau of Economic Analysis (BEA), which collects data for the calculation from businesses. This is different from the CPI index, which sources data from consumers. Many economists prefer the PCE calculation, as does the FED. However, it will consider other inflation data when setting monetary policy.

The Consumer Price Index (CPI)

The Consumer Price Index, or CPI, is the most common indicator of inflation and is completed by the U.S. Bureau of Labor Statistics (BLS) monthly. The CPI takes the average prices of everyday items in a basket of goods, such as milk, cereal, and coffee, as well as non-food items, including transportation expenses, housing, clothing, furniture, haircuts, and medical expenses. The prices per item are completed each month, and then the changes in prices are used to evaluate the changes in expenses associated with the cost of living. The CPI has a base year that it uses for comparison.

Also note: There are two different survey bases for calculating CPI. The Consumer Price Index for All Urban Consumers (CPI-U) covers about 93% of the U.S. population because most people live in cities.

How to calculate the inflation rate

The inflation rate formula is as follows:

Inflation Rate = ((B-A)/A) x 100

Where A is the starting cost of the good or service and B is the ending cost.

To use the formula, you’ll want to subtract the starting price from the ending price to arrive at the price change. Then divide that number by the starting price. To arrive at a percentage, multiply this number by 100.

You can also use the CPI Inflation Calculator on the U.S. Bureau of Labor Statistics website.

How does inflation affect real estate?

In addition to your grocery bill and living expenses, inflation also affects your real estate purchases and investments. Here’s what you can expect during periods of high inflation.

Increased cost of borrowing

When inflation and prices rise, so do the interest rates for borrowers and, as a result, the cost of your real estate investment. Banks will look to mitigate risk, which means fewer loans and more stringent credit checks.

That said, if you took out a mortgage before the inflationary period, you’d still owe the same dollar amount, but that money is worth less than when it was originally borrowed, which can work out in your favor.

Increased rental rates

While your costs will go up during inflationary periods, so will your income as a landlord. Rents tend to rise during periods of inflation, largely due to the higher demand for rental units. With mortgage interest rates rising, fewer people are able to buy property. There are also fewer constructions and new builds during high inflation, which means more renters are in the marketplace. With the supply of rental units remaining the same, the rental prices increase.

Vacation rentals, however, are unlikely to see a similar price increase. In periods of inflation, people cut back on travel and tourism, and, as a result, vacation rentals can see lower occupancy rates.

Appreciation in property value

With fewer properties being built and development plans potentially stalled during periods of high inflation, existing properties become more valuable as inventory levels dip. This often leads to higher appreciation of property values.

REITs grow in value

REIT or Real Estate Investment Trust tend to grow in value during inflationary periods because as real estate rents and values grow, so does the value of the REITs. In fact, REIT dividends have outplayed inflation as measured by the CPI in all but two of the last twenty years.

Closing thoughts on inflation

Rising rates of inflation will, no doubt, have an impact on your financial life. As a real estate investor, you may see a greater return on investments in the form of rental income, increased property values, and better dividends from your REITs. On the other hand, you’ll also see higher interest rates and significantly higher prices if you’re looking to purchase a property.

At Vantage Horizon, our long-term rental properties are structured as REITs. If you want to invest in real estate and hedge against inflation, we are here to help make the process easy. And you can do so with a low investment.

If you’re getting serious about saving for retirement, a 401(k) plan will be one of the first instruments of investment you’ll look at. This workplace retirement plan is a tax-advantaged retirement account allowing you to contribute towards retirement savings while saving on tax. Given the tax advantages of a 401(k), the government limits how much you can contribute to this account every year. Each year, the IRS will announce 401(k) contribution limit increases based on inflation cost-of-living adjustment, and other factors.

In this article, we’ll talk about the 401(k) contribution limits for 2023, how much of your salary you can and should put toward your 401(k), and what happens if you go over the contribution limits.

401(k) contribution limits in 2023

A traditional 401(k), which gives you a tax break on the dollars you’re putting into the account, and a Roth 401(k), which allows for a tax-free income in retirement, both have the same contribution limits. However, it’s important to remember that your total contributions must not exceed your annual compensation at the company that holds your plan.

The 401(k) annual contribution limit for 2023 is $22,500 for employee contributions and $66,000 for combined employee and employer contributions. If you’re 50 or older, you’ll have an additional $7,500 available as a catch-up contribution limit, meaning your total contribution limit will be $30,000.

If you have both a traditional and a Roth account, the total contribution across all your accounts must be less than the contribution limit. If you’ve contributed the maximum of $22,500 into your traditional 401(k), you cannot contribute to your Roth 401(k) and vice versa.

IRA contribution limits are separate, and how much you put into your 401(k) does not impact your IRA contributions.

The 401(k) employer match

The 401(k) is an exceptional tool for retirement savers because of the free money you can earn from an employer match. Many employers will offer matching contributions for your contribution amount; when you put money towards your 401(k), your employer will match a portion. This percentage will usually be agreed upon in advance, so the more you contribute towards your 401(k), the more your employer matches, and the more free money you can put towards your retirement.

The employer match doesn’t count toward your individual limit. There are combined limits to the 401(k), however, that your combined contributions must not go over. 2022 the limit was $61,000 for combined employee and employer contributions. In 2023, that limit was increased to $66,000.

Companies also have the option of nonelective contributions. A nonelective contribution is when a firm contributes to an employee’s 401(k) regardless of whether and how much the employee has contributed. While some companies offer these nonelective plan contributions instead of, or in addition to, matches, they’re pretty uncommon. These will count towards the maximum contribution limit as well.

Traditional vs. Roth 401(k)

The contribution limits for traditional, and Roth 401(k) accounts are the same. However, if you have multiple accounts, the combined contributions across all accounts must be less than the annual limit. Like traditional IRAs (Individual Retirement Accounts) and Roth IRAs, the main point of difference between a traditional 401(k) and a Roth 401(k) is in the way the money is taxed.

Traditional 401(k)

This 401(k) is a tax-deferred account with pre-tax contributions. That is, the money you put into the 401(k) is not taxed right now but when you withdraw during retirement. This can benefit people with a high tax rate now but expect that tax rate to be lower in retirement. For example, if a taxpayer is currently in a 35% tax bracket but expects that their income will place them in the 24% tax bracket in retirement, it may make more sense to pay taxes in retirement through a traditional 401(k).

Roth 401(k)

Like the Roth IRA, the Roth 401(k) takes after-tax contributions, allowing your money to grow tax-free. This is great for people who intend to put a lot of money into this retirement account and anticipate a high level of growth. You can withdraw contributions and earnings from a Roth 401(k) if you’re at least 59 1/2 and have owned the account for five years. You’ll also be required to take minimum distributions once you turn 72. You may want to talk to a financial advisor to see which option is right for you.

Can you contribute your entire salary to a 401(k)?

The 401(k) plan doesn’t limit how much of your salary you can contribute. However, since there is a contribution limit of $22,500 for the year 2023, you can contribute as much of your pay as you like until that point and an additional $7,500 if you’re 50 years or older. If your earnings are below $22,500, you can contribute your entire salary towards the 401(k).

Contributions for highly compensated employees

There is typically no income limit on 401(k) contributions. However, the Internal Revenue Service (IRS) can, in some instances, impose contribution limits on highly compensated employees, defined as:

• An individual who either owned more than 5% of the interest in a business at any time during the year or the preceding year, no matter how much they were paid.
• An individual who received over $135,000 from the business in the preceding year in 2022, or $150,000 in 2023, and, if the employer ranks employees by compensation, was in the top 20%.

For employers who sponsor 401(k) plans, the IRS has a test to see if there are disproportionate contribution levels among workers. That being the case, the employee contribution level for highly compensated employees can be lowered.

What percent should you contribute to a 401(k)?

Financial experts set several benchmarks to see how well you’re doing in retirement planning and how much more you need to contribute to meet specific age-specific retirement goals. For example, some experts recommend putting between 10 and 15 percent of your gross income towards retirement in your 20s and 30s and, if you’re behind during your later years, anywhere from 15 to 25 percent.

According to a Fidelity model of retirement savings benchmark:

• By the time you’re 30, you should have saved 1x your annual salary.
• By the time you’re 40, you should have saved 3x of your annual salary.
• By the time you’re 50, you should have saved 6x of your annual salary.
• By the time you’re 60, you should have saved 8x of your annual salary.
• And by the time you’re 67, you should have saved 10x your annual salary.

Depending on how old you are, how much you’ve already saved, and how much you can afford to spare from your current income, you can calculate the percentage that makes sense for your financial situation and personal finance goals.

What happens if you exceed the contribution limit?

If you’ve accidentally exceeded the contribution limit on your 401(k), you could incur costly penalties—a 10% fine plus any unpaid income taxes on the excess contributions. While there are typically systems that prevent this, over-contributions can happen if you switch jobs midyear and do a 401(k) rollover or have multiple 401(k) plans.

If you notice that this has happened, you must notify your company’s HR or payroll department immediately. The plan administrator will adjust your W-2 to include the excess contributions as part of your taxable income. Excess contributions can be reported on Form 1099R when filing your taxes.

The bottom line

The 401(k) is an excellent vehicle for retirement savings, regardless of whether you opt for a traditional 401(k) or the Roth 401(k). Plus, with the employer match offering free money, there’s no reason not to make the maximum contribution possible.

If you’re looking for an additional investment vehicle that will grow your money in the long term while also giving you short-term cash flow. Vantage Horizon can help. At Vantage Horizon, our mission is to provide financial freedom for everybody, and we do this by allowing you to purchase shares in profitable rental properties. Through our platform, you can buy shares of rental properties, start building a portfolio—and a rental income—today.

Each rental home and vacation rental property funded on Vantage Horizon is  qualified with the U.S. Securities and Exchange Commission. But why do we go through the process to ensure that every offering on Vantage Horizon is qualified?

What is the SEC?

As the Great Depression wreaked havoc on Americans’ confidence in the U.S. markets, Congress passed the Securities Act of 1933, also known as the “Truth in Securities” law, which had two primary objectives.

• Require that investors receive financial and other significant information concerning securities being offered for public sale
• Prohibit deceit, misrepresentations, and other fraud in the sale of securities

The following year, Congress passed the Securities Exchange Act 1934? which created the U.S. Securities and Exchange Commission, or “SEC” for short. The SEC has a three part mission. 

1. Protect investors
2. Maintain fair, orderly, and efficient markets
3. Facilitate capital formation

Why Does Vantage Horizon Qualify its Offerings with the SEC?

There were two primary reasons behind Vantage Horizon’s decision to go through the process of qualifying its offerings with the SEC:

1. Anyone can invest: By qualifying its offerings with the SEC, Vantage Horizon can allow anyone over the age of 18, accredited. or non-accredited, to participate in its offerings.
2. Investor protection: Qualifying offerings with the SEC means filling out long-form document disclosures for each property, filing financial statements on a semi-annual basis and auditing those statements on an annual basis. All of this provides adequate disclosure to investors so that they understand what they’re investing in and the performance of each asset.

Why Should You Care?

As the real estate investing space has grown, numerous startups have come to market with different approaches toward their offerings. One such approach is by utilizing the blockchain to tokenize properties. So, what’s the difference between securities and tokens?

Securities

What is a security? Investopedia explains it perfectly with the following definition: 

The term “security” refers to a  fungible, negotiable financial instrument that holds some type of monetary value. A security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or a corporation represented by owning that entity’s bond; or rights to ownership as represented by an option.

Simply put, a security is a secure, tradable financial asset. And, this may go without saying, but, securities are regulated by the SEC.

Token

What is tokenized real estate?

The tokenization of real estate refers to the process of fragmenting an asset into digital tokens that represent the underlying property with all its rights and obligations. Smart contracts are used to define contractual specifics. The algorithm encoded in the digital contract activates the events stated in the code if a predefined contract condition is satisfied.

The Big Difference

Tokens may sound very similar to securities. Still, the big difference is that they are not registered or qualified with any regulatory body like the SEC.

Downsides to SEC-Qualification

While  the positives far outweigh the negatives, there are, in fact, some challenges when it comes  to registering and qualifying properties with the SEC.

• Time: The most notable downside of working with the SEC is the time required to complete the necessary filings for a property to be fully registered and fully qualified. And due to the nature of qualification, we often can’t pinpoint the exact date and time an offering will be available to investors to fund.
• Resources: To complete the aforementioned filings and respond to any SEC inquiries, Vantage Horizon has to maintain  a finance and legal team dedicated to supporting the process.

Closing Thoughts

While working with the SEC can add complexity and make our process longer, we at Vantage Horizon think it’s necessary. The only way to democratize access to the real estate market is to allow anyone to invest, and the best way to do it is to do it in a way that provides maximum protection for those investors.

Investing in Real Estate is not an easy thing to do, especially if you don’t have the money required for a down payment or the experience in navigating the process.

As of the writing of this article, housing prices are at all time highs, competition to purchase them has never been tougher, and it seems impossible for millions of people that they’ll ever get out of the “renting” phase.

Buying a house isn’t just an achievement you’re trying to unlock like a video game, the reason buying Real Estate is so important is because it is the #1 wealth building tool that anyone has access to (or at least that they should have access to). By buying Real Estate, you’re essentially opening a savings account with a high rate of return (appreciation) that you can take advantage of over the course of the rest of your life. The earlier someone buys a house and the longer they own it, the higher their net worth is more likely to be.

So what are you supposed to do if you can’t afford one?

That’s where Fractional Investment comes in. Fractional investment is a relatively new avenue of investing in Real Estate due to changes in what is allowed by the SEC. These changes give anyone the ability to purchase Real Estate in small pieces from platforms like Vantage Horizon in order to give everyone access to the same returns as Hedge Funds and Investment Banks that buy and operate Real Estate for a return.

In this case you won’t be able to live inside the property, but you’ll still receive cash dividends and the appreciation value of the property. These advantages can help you grow wealth faster than you’d otherwise be able to, and can help grow your savings into a down payment of your own.

A Real Estate Investment Trust (REIT) is a type of investment vehicle that allows individuals to invest in large-scale, income-producing real estate. REITs are publicly traded companies that own, operate, and manage a diverse portfolio of real estate assets, including commercial properties like office buildings, shopping centers, and apartment buildings.

One of the main advantages of investing in a REIT is that it offers investors access to a diverse portfolio of real estate assets, without the need for them to directly own and manage individual properties. This allows investors to diversify their portfolio and reduce their risk, while still enjoying the potential benefits of real estate investing.

In addition to diversification, REITs also offer several other benefits to investors. These include:

• Professional management: REITs are managed by professional teams who are experienced in the real estate industry. This means that investors can benefit from their expertise, without having to manage the properties themselves.
• High liquidity: REITs are publicly traded, which means that investors can easily buy and sell shares on the stock market. This makes them a highly liquid investment, allowing investors to easily access their money if needed.
• Regular income: One of the main reasons that people invest in real estate is for the potential income it can generate. REITs offer investors a regular stream of income, in the form of dividends, which are paid out on a quarterly basis.
• Tax benefits: REITs are subject to special tax treatment, which can provide investors with some tax benefits. For example, REITs are not required to pay corporate income tax on their earnings, as long as they distribute at least 90% of their income to shareholders.

Overall, investing in a REIT can be a great way for individuals to access the potential benefits of real estate investing, without the need to directly own and manage properties. By offering diversification, professional management, liquidity, regular income, and potential tax benefits, REITs can be a valuable addition to any investment portfolio

Decorating an Airbnb property can be a fun and rewarding project, as it allows you to put your personal touch on a space and make it more appealing to guests. However, it’s important to keep in mind that you are decorating a vacation rental, not a permanent residence, so you need to strike a balance between personal style and practicality.

Here are a few tips to help you decorate an Airbnb property:

1. Keep it simple: When it comes to decorating an Airbnb property, less is often more. You don’t want to overcrowd the space with too much furniture or decorative items, as it can make the space feel cluttered and overwhelming. Instead, focus on a few key pieces and use them to create a cohesive and stylish look.
2. Consider the style of the property: Take into account the style of the property when choosing your decorations. If the property has a rustic cabin vibe, for example, you might opt for natural materials and earthy tones. On the other hand, if the property has a modern, minimalist aesthetic, you might choose sleek, minimalist furnishings and decor.
3. Make it functional: Keep in mind that your guests will be using the space, so it’s important to make sure that the property is functional and practical. This means including plenty of storage space, as well as functional and comfortable furniture.
4. Pay attention to details: The little things can make a big difference when it comes to decorating an Airbnb property. Adding small touches like throw pillows, artwork, and plants can help to make the space feel welcoming and homey.
5. Keep it clean: Above all, it’s important to keep the property clean and well-maintained. This means regularly cleaning and replacing items like linens, towels, and appliances, as well as keeping the space free of clutter.

By following these tips, you can create a stylish and functional Airbnb property that will appeal to guests and help you maximize your rental income.

Short-term rental properties, also known as Airbnb properties, represent a relatively new investment opportunity for individual investors. Based on our experience, we have summarized some of the most common mistakes made by novice investors.

1. Neglecting Pre-Investment Renovations and Decorations In the world of short-term rentals, appearance is crucial. The initial soft furnishings and decorations represent the highest return on investment. Purchasing attractive wall art and faux plants can elevate the taste of a property without costing a lot of money. Additionally, it is best to avoid expensive furniture and choose practical and clean-looking items that are more suitable for short-term rentals. Even if damaged, the replacement cost will not be as high. Lastly, professional photography is critical, so be sure to hire a reputable photographer to capture the best images of the property.
2. Failure to Screen and Manage Cleaning Teams Effectively Without a reliable cleaning and management team, even the best property will fail to generate sustained profits and may create endless problems. It is important to spend time finding and selecting trustworthy short-term rental management and cleaning teams.
3. Insensitivity to Investment Returns Analysis Several critical data points are essential for analyzing the profitability of a short-term rental property, including daily rental rates, occupancy rates, and expenses such as management fees, cleaning fees, HOA fees, insurance, utilities, taxes, and loan interest. The income data can be easily accessed online (e.g., AirDNA), while the expense data can be obtained through real estate brokers. Given the significant investment involved in short-term rentals, spending a day or two doing due diligence is necessary.
4. Underestimating the Time and Effort Required Many investors and landlords abandon their short-term rental properties because they require more time and effort than initially anticipated. Short-term rentals typically yield 2-3 times higher returns than long-term rentals, but this also means more effort is needed to manage the property effectively.
5. Blindly Following Others Copying other investors’ strategies without thorough analysis can be detrimental. Even adjacent properties built on the same day can have vastly different maintenance needs and financial performance. Others may have better management teams, networking resources, or investment experience. Therefore, it is essential to conduct thorough research and analysis before investing in a short-term rental property.

In conclusion, investing in short-term rental properties is a promising opportunity that requires careful consideration, thorough analysis, and consistent management to achieve maximum profits. By avoiding the common mistakes listed above, novice investors can establish a solid foundation for their short-term rental property investments.