How to know when you’re being discriminated against while trying to buy a house

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  • Housing-related discrimination based on race, gender, sexual orientation is all too common.
  • Both appraisers and realtors have been accused of changing or adjusting their behaviors.
  • Here are a few ways to tell if you’re being discriminated against.
  • This article is part of “The Road to Home” series focused on helping first-time homebuyers navigate the daunting and exhilarating process of purchasing a home.

Homeownership – made ever more attractive this past year because of the rise of remote work and record-low mortgage rates – has long been regarded as the fastest path to wealth and the ultimate representation of the American dream.

It is, however, more difficult for some Americans to pursue that dream than it is for others.

In the 20th century, discriminatory practices like redlining helped the white middle class build home equity while most others missed out, as Andre Perry, a senior fellow at the Brookings Metropolitan Policy Program, told the US House of Representatives in February testimony about racial disparities in homeownership.

Today, “the most insidious forms of discrimination that were once supported by federal policy are now illegal,” he said. But the long-lasting effects of those policies are still apparent, and discrimination is still something many house hunters have to grapple with.

As a house hunter, it is your right to find a property without fear of discrimination based on race, religion, sex, familial status, and more. But Perry said personal biases of “individual appraisers, realtors, and lenders” could still affect your search.

It is “particularly hard to tell” whether you’ve been discriminated against when it comes to housing, the civil-rights attorney Alanna Kaufman said. It can be as discreet as a realtor describing one neighborhood as more of a cultural fit for you over another.

Trust your gut: If you feel something is off during your house hunt, it very well might be. The best advice in confronting housing discrimination is to “pay attention, ask questions, take notes, investigate, and seek legal counsel,” Kaufman told Investopedia.

If you suspect you’re being discriminated against for any reason, you can file a complaint with the US Department of Housing and Urban Development’s Fair Housing and Equal Opportunity Office and reach out to a local fair-housing center to take legal action.

Housing discrimination can take numerous forms, including harassment and intimidation. Here are the two most prevalent – and sometimes more covert – forms of discrimination to watch out for:

Realtors using coded language

“If you feel a person is trying to direct you to certain neighborhoods with certain races or religions, that could often be a flag,” Kaufman said. The Department of Housing and Urban Development refers to this kind of realtor activity as “steering.”

For instance, you could meet with a real-estate agent to discuss house hunting and list a few neighborhoods of interest. That realtor may then try to show you homes in different neighborhoods under the guise of you “feeling more comfortable.” While visiting those suggested homes, you may notice the neighbors share your ethnicity or religion.

Seemingly harmless statements like “This house and neighborhood don’t seem like the right fit for your family” or “Don’t you want to live somewhere where more people speak Spanish, like you?” are also forms of steering. The Fair Housing Center of Southeast & Mid Michigan even tells community members that housing discrimination like this often comes with “a smile and a handshake.”

Recognizing those behaviors can help you combat discrimination, Kaufman said.

Mortgage lenders and home sellers immediately waving you off

Discrimination stemming from realtor biases is not the only kind to look out for. Receiving an immediate denial from a mortgage lender could also be cause for concern.

On its website, HUD provides the example of a couple being denied a mortgage because one partner is pregnant. In the example, the loan officer asks the couple whether the pregnant woman will take maternity leave. When she says yes, the loan officer denies the loan and says, “I’ve seen too many women change their mind about going back to work.” The situation would be considered discrimination based on sex and familial status. It also extends to ultimately being offered a loan but under nonstandard terms.

Similar to the lender example, home sellers refusing to entertain your competitive offer could also be discriminatory. If you reach out about a home and are immediately told the home isn’t available even though you are financially prepared for the property, you should question the denial from the property sellers and “see if the home is still on the market,” Kaufman said.

Another form of this is having the availability of housing change from the time of initial contact by phone or email to the time of an in-person visit. Kaufman said she saw this variety of discrimination most frequently.

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Evergrande has reportedly paid off $83.5 million worth of interest in dollar bonds ahead of deadline to avoid default

A view of the Evergrande Center, which hosts the regional HQ of Evergrande Group, in Shanghai, China Thursday, Sept. 16, 2021.
Evergrande Center in Shanghai, China.

  • China Evergrande has transferred funds to pay $83.5 million in bond interest payments ahead of a weekend deadline.
  • It had already missed the payment on Sept. 23, but had a 30-day grace period before it’s considered a default.
  • News of the payment sent Evergrande’s dollar bonds up, Bloomberg reported.

Embattled real estate giant China Evergrande has wired $83.5 million to pay the interest on an offshore dollar bond, reported state-owned Securities Times.

The transfer yesterday came just days ahead of a closely watched deadline this weekend.

The property developer had already missed the Sept. 23 deadline for the interest payment, and had a 30-day grace period before it would be considered a default, according to Bloomberg.

This amplified uncertainty in the market over whether the debt-laden real estate developer would be able to meet obligations.

News of the payment sent Evergrande’s dollar bonds up 3 cents on the dollar, Bloomberg reported, citing credit traders.

Evergrande is facing several more deadlines on bond payments it has already missed, as well as those on upcoming ones. It has another interest payment worth $45.2 million due to bondholders later this month.

Bloomberg data shows Evergrande has some $7.4 billion of bonds maturing next year.

China Evergrande shares in Hong Kong are up over 2% in early trade after tanking as much as 14% yesterday.

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China Evergrande shares plunge as much as 14% in resumed trade after $2.6 billion deal collapses

Evergrande housing complex.

  • Shares of China Evergrande have plunged as much as 14% after its deal to sell a $2.6 billion stake in a key unit fell through.
  • Evergrande shares were suspended for more than two weeks before trade resumed on Thursday.
  • Once China’s top-selling developer, Evergrande is now reeling under more than $300 billion of debt.

Shares of China Evergrande Group slid as much as 14% on Thursday after a deal to sell a $2.6 billion stake in its property services unit fell through, in the latest blow to the developer whose massive debt woes have rattled global markets.

Evergrande said on Wednesday it had scrapped a deal to sell a 50.1% stake in Evergrande Property Services Group Ltd to Hopson Development Holdings Ltd as the smaller rival had not met the “prerequisite to make a general offer.”

Both sides appeared to trade blame for the setback, with Hopson saying it does not accept “there is any substance whatsoever” to Evergrande’s termination of the sales agreement, and it is exploring options to protect its legitimate interests.

The deal is the developer’s second to collapse in a matter of days after two sources told Reuters the $1.7 billion sale of its Hong Kong headquarters had failed amid buyer worries over Evergrande’s dire financial situation.

The latest setback also comes just ahead of the expiry of a 30-day grace period for Evergrande to pay $83.5 million in coupon payments for an offshore bond, at which time China’s most indebted developer would be considered in default.

Trading in shares of China Evergrande, its property services unit and Hopson all resumed on Thursday after a more than two-week suspension. China Evergrande trimmed opening losses and was down 6% in early trade, while its property services unit dropped 5.7%. Shares of Hopson fell 0.3%.

Once China’s top-selling developer and now reeling under more than $300 billion of debt, government officials have come out in force to say Evergrande’s problems will not spin out of control and trigger a broader financial crisis.

Separately on Thursday, Modern Land (China) Co Ltd said it has ceased to seek consent from investors to extend the maturity date of a dollar bond due on Oct. 25. Its shares were suspended from trading on Thursday.

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Evergrande has abandoned plans to sell a $2.6 billion stake in one of its key units, even as Chinese officials seek to calm nerves about the company’s debt crisis

evergrande china
Evergrande headquarters in Shenzhen, southeastern China.

  • Embattled Chinese property giant China Evergrande formally abandoned plans to sell a $2.6 billion stake in one of its key units.
  • The news comes as Chinese officials have been trying to soothe fears over Evergrande’s debt crisis.
  • Once China’s top-selling developer, the company is now reeling under more than $300 billion of debt.

Teetering Chinese property giant China Evergrande formally abandoned plans to sell a $2.6 billion stake in one of its key units on Wednesday, as Beijing officials went out in force to say the problems would not spin out of control.

Once China’s top-selling developer and now reeling under more than $300 billion of debt, Evergrande was in talks to sell a 50.1% stake in its Evergrande Property Services arm to smaller rival Hopson Development Holdings.

In a stock exchange filing late on Wednesday, Evergrande said that the company had reason to believe that Hopson had not met the “prerequisite to make a general offer” for its unit without elaborating further.

In a separate exchange filing, Evergrande said barring its sale of a stake worth $1.5 billion in Chinese lender Shengjing Bank Co, it had made no material progress in selling other assets it has put on the block.

Evergrande’s disclosures came after a number of top Chinese officials had sought to reassure homebuyers and markets that the current woes in the property sector would not be allowed to turn into a full-scale crisis.

Worries that a cash crunch at Evergrande, whose liabilities are equal to 2% of China’s gross domestic product, could cause economic contagion have seen swathes of other heavily-indebted developers hit with credit rating downgrades, while some smaller ones have already defaulted.

In comments reported by state media Xinhua and echoing words from the country’s central bank late last week, Vice Premier Liu He told a Beijing forum on Wednesday that the risks were controllable, and that reasonable capital demand from property firms was being met.

The chairman of China’s securities regulator, Yi Huiman, added at the same forum that authorities would properly handle the default risks and look to curb excessive debt more broadly.

“(We need) to improve the effectiveness of the constraint mechanism on debt financing, to avoid excessive financing through ‘high leverage’,” Yi said.

Chinese property developers have total outstanding debt of 33.5 trillion yuan ($5.24 trillion), according to Nomura, equivalent to roughly a third of the country’s gross domestic product.

Evergrande, which has epitomized China’s freewheeling era of borrowing and building, has been scrambling to raise funds to pay its many lenders and suppliers, amid expectations it is about to formally default on one of its international bonds.

In its Wednesday filing, Evergrande said it would continue to implement measures “to ease the liquidity issues” and would use best efforts to negotiate for the renewal or extension of its borrowings with its creditors.

“In view of the difficulties, challenges and uncertainties in improving its liquidity, there is no guarantee that the group will be able to meet its financial obligations under the relevant financing documents and other contracts,” it said.

Creditors have so far said there has been no contact from Evergrande despite weeks of effort on their behalf. Evergrande will officially be in default if it doesn’t make an already- overdue March 2022 bond coupon payment by Monday.

Blame game

Sources told Reuters on Tuesday Evergrande had been forced to shelve its property services unit stake sale to Hopson after failing to win the blessing of the Guangdong provincial government, which is overseeing Evergrande’s restructuring.

Some of Evergrande’s international creditors had also opposed the deal, one of them said. If companies sell assets just before they collapse, creditors have less to claw their money back with.

There was a blame game starting too though.

Hopson said in an exchange filing that it had been prepared to complete the deal but had received a transaction termination notice from Evergrande on Oct. 13.

Evergrande, Evergrande Property Services, and Hopson, which have had trading in their shares suspended since Oct. 4 pending the deal announcement, all said they had requested for their shares to resume trading in Hong Kong from Thursday.

The sale setback for Evergrande comes after Chinese state-owned Yuexiu Property pulled out of a proposed $1.7 billion deal to buy its Hong Kong headquarters last week.

Rebuilding process

Pan Gongsheng, head of China’s foreign exchange regulator, added to a chorus of officials trying to soothe concerns, saying excessive tightening by financial institutions and markets on the property sector was being gradually corrected, financial magazine Yicai reported.

Those comments followed a speech by People’s Bank of China (PBOC) Governor Yi Gang, who said on Sunday that the world’s second-largest economy is “doing well” but faces challenges such as default risks for certain firms due to “mismanagement.”

A transcript of the comments released by the PBOC on Wednesday showed Yi also saying that China will fully respect and protect the legal rights of Evergrande’s creditors and asset owners, in line with “repayment priorities” laid out by China’s laws.

Strong demand at a sale of Chinese government bonds on Wednesday showed there was no sign of the troubles impacting the wider markets.

The official reassurances in recent days and some coupon payments from other major developers, helped China high-yield debt spreads continue to improve after hitting record high levels last week.

There was an increasingly stark divide though. While many firms saw their bond prices continue to regain ground, Kaisa group, which was the first Chinese real estate firm to default in 2015, saw its bonds hit new record lows.

Central China Real Estate became the latest to see its credit rating chopped, and like many of its peers in recent days, was immediately warned that it could happen again too.

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A 1031 exchange is a tax-deferred way to invest in real estate

Two hands each holding a mini house surrounded by arrows, to signify using 1031 exchange
Real estate investors can swap properties for more profitable ones while deferring capital gains taxes with 1031 exchanges.

  • A 1031 exchange lets you sell one property, buy another, and avoid capital gains tax in the process.
  • There’s a strict time limit on 1031 exchanges. You must purchase your new property within 180 days.
  • A 1031 exchange can help you buy more profitable properties, diversify, or defer taxes associated with depreciation.
  • Visit Insider’s Investing Reference library for more stories.

A 1031 exchange is a type of real estate purchase allowed under Section 1031 of the US Internal Revenue Code. It allows you to defer capital gains taxes when selling a property, as long as the proceeds are used toward a similar investment within a certain time frame.

As Adam Kaufman, co-founder and chief operating officer of real estate crowdfunding platform ArborCrowd, explains: “By using 1031 exchanges, real estate investors are able to sell a real estate asset and reinvest the proceeds into a like-kind investment – another real estate asset – and defer the capital gains tax associated with the transaction.”

How a 1031 exchange works

The exact 1031 exchange process depends on the type you’re using (more on this later). In most cases, it works like this: First, you’d determine the property you want to sell, and identify the exchange facilitator you want to handle the transaction.

1031 Exchange Timeline

Then, like many investors, you’ll probably want to have a qualified intermediary hold the proceeds of your sale until you’ve identified the property or properties you’d like to purchase. After that, you have 45 days to find your replacement investment and 180 days to purchase it.

It sounds complicated, but there are many reasons you might use a 1031 exchange.

“In a typical real estate transaction, an investor can expect to pay as much as 40% of the taxable gain,” says Paul Getty, chief executive officer and president of First Guardian Group. “Now, with a 1031 exchange and with the ability to defer those capital gains taxes, investors can seek out a different sort of investment, diversify their holdings, expand their portfolio, or realign their investments with their long-term goals.”

You can also use a 1031 exchange to buy a property with better cash flow or reset the clock on depreciation. Depreciation essentially allows you to pay fewer taxes as a property experiences wear and tear over time. For residential rental properties, the benefit is gradually spread out over 27 ½ years.

Typically, if you used depreciation to your advantage, then you’d owe what’s known as depreciation recapture – or income taxes on the financial gains you realized from doing so – once you sell the home. Using a 1031 exchange can allow you to push these payments out to a later date.

While deferring these taxes (and capital gains) is a nice benefit, 1031 exchanges aren’t free. You’ll still owe a variety of closing costs and other fees for buying and selling a property. Many of these may be covered by exchange funds, but there’s debate around exactly which ones. To find out which costs and fees you may owe for a 1031 exchange transaction, it’s best to talk to a tax professional.

What are the rules for a 1031 exchange?

There are several rules that come with a 1031 exchange, so be sure you’re well-versed in them before selling your property.

  1. The replacement property must be of equal or greater value than the original.
  2. You can purchase as many as three properties without regard to the fair market value, or any number of properties as long as their aggregate value doesn’t exceed 200% of your original property’s sale price.
  3. You must identify your replacement property (or properties) within 45 days of selling the first property.
  4. The purchase of the replacement(s) must be completed within 180 days of your initial property sale.

If your property is financed or mortgaged, you’ll need to take on at least the same debt for the new property. As Kaufman puts it: “If an investor’s debt liability decreases as a result of the sale and purchase of a new asset using less debt, it is considered income and will be taxed accordingly.”

The different types of like-kind exchanges

A 1031 exchange is a like-kind exchange – a transaction that allows you to essentially swap one asset for another one of a similar type and value. Technically, there are several types of 1031 like-kind exchanges, including delayed exchanges, built-to-suit exchanges, reverse exchanges, and others.

Delayed exchanges

According to Getty, the delayed (also called deferred) exchange is “by far the most common 1031 exchange.” This is the traditional type of exchange noted above – wherein you must identify a new investment within 45 days and purchase it within 180 days.

Build-to-suit exchanges

A build-to-suit 1031 exchange allows an investor to use the proceeds of their property sale to not only purchase a new investment but fund improvements on the replacement property, too. As with other exchanges, the value of the replacement property (after improvements) must come out to be equal to or greater than the sale proceeds of the initial property.

Reverse exchanges

In a reverse exchange, the replacement property is purchased first, and then the initial property is relinquished afterward.

Timeline of reverse 1031 exchange

As in a delayed exchange, both steps must occur within 180 days. You’d use an exchange accommodation titleholder to retain the property while you sell your previous one.

Other types of exchanges

There are other types of exchanges, too – including a drop-and-swap exchange and a tenancy-in-common exchange.

The drop-and-swap exchange is used in the case of partnerships. “A drop-and-swap exchange occurs when an investor has partners that either want to cash out of the transaction or invest in the replacement property,” Kaufman explains. “In short, the ‘drop’ refers to the dissolution of the partnership and the partners cashing out. The ‘swap’ is when partners invest their common interests into the replacement property instead of cashing out.”

With a tenancy-in-common, as many as 35 investors can pool funds and purchase a property. When the property is sold, each can perform a 1031 exchange with their portion of the proceeds.

The financial takeaway

A 1031 exchange transaction can help you avoid short-term capital gains taxes and continue growing your wealth through real estate.

They are complicated purchases, though, so make sure you have an experienced intermediary on your side, and consider consulting a tax professional before moving forward. This can ensure you make the best decision for your long-term financial health.

Investing for income: 7 money-generating assets for your portfolio and how to get startedWhat is simple interest? A straightforward way to calculate the cost of borrowing or lending moneyHow market value can help you determine the true worth of company or assetWhat is ROI? This simple metric can offer greater insight into the profitability of the assets in your portfolio

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Take a look at small town in Tennessee that’s up for sale for $725,000. It’s drawing comparisons to Schitt’s Creek.

Water Valley in Tennessee
Water Valley in Tennessee is on sale for $750,000.

  • A seven-acre town 50 miles south of Nashville is on sale for $725,000.
  • The town has four former stores, a barn, and a creek.
  • The real-estate broker said some people had likened it to the fictional Schitt’s Creek.

A seven-acre town in central Tennessee has hit the market for $725,000.

Water Valley in Maury County, near the Natchez Trace Parkway, has four former stores built pre-1900, a barn, and “Mulberry trees galore,” per the listing by real-estate broker Christa Swartz.

Water Valley in Tennessee
The property spans seven acres.

Two of the buildings have updated wiring and plumbing, and could be used for commercial services, housing, or a B&B, per the listing.

The town also comes with “plenty of frontage on Leiper’s Creek,” which flows through the middle of town, Swartz told Insider.

Water Valley in Tennessee
Water Valley also comes with part of a creek.

Swartz told Fox Television Stations that she had received multiple offers on the town, and that both locals and from Hollywood producers had inquired.

“I am inundated with calls from all over the United States,” she told Fox, including one day where she received 93 calls.

Water Valley in Tennessee
Water Valley in Tennessee is on sale for $750,000.

“We’ve had a couple of calls from Hollywood asking if they might buy the whole town to use as a movie set,” she told Nashville station News Channel 5. “It would really strip this of the reality of the history and make it more of a stage rather than something we preserve as the history of Tennessee.”

“I think until I get it sold, I’m going to continue to get calls from Hollywood and Las Vegas – folks that are saying, ‘this is perfect, let us have it,'” she told WKRN. The sellers didn’t want this, she said.

She told News Channel 5 that some of the people who spoke to her about the town mentioned the Schitt’s Creek television series, in which a family loses all their money and relocates to a small town they once purchased as a joke.

Water Valley in Tennessee
Water Valley in Tennessee is on sale for $750,000.

Swartz told Fox that four relatives had bought the town in the 1970s. She told that they wanted to sell it to someone who would preserve the town and keep all the buildings.

Swartz told Insider on Tuesday that the sellers hasn’t agreed on an offer to accept yet, but that she expected it may go under contract this week.

Water Valley in Tennessee
Water Valley in Tennessee is on sale for $750,000.

Swartz said there are loads of options for the future buyer.

“You could totally be your own mayor,” Swartz told Fox. “You would also be your own everything else though, too … so the cleaner and the mayor and the barkeeper. You could be the antique store owner.”

Water Valley in Tennessee
Water Valley is located in central Tennessee, around 50 miles south of Nashville.

“You get to make the decisions and make the rules for your own little town if you get Water Valley,” she added.

County officials would handle the infrastructure, such as roads and water, Swartz told Fox.

Water Valley in Tennessee
Water Valley in Tennessee is on sale for $750,000.

Though the former town has 15 residents, Swartz told Insider that the property on sale doesn’t include any homes. She did note, however, that it included living quarters with two bedrooms and three bathrooms.

The average house price in Tennessee is $472,000, per the Federal Housing Finance Agency’s house price index, which is based on sales and appraisals in the second quarter of 2021.

Water Valley in Tennessee
Water Valley also comes with a barn.

Swartz told Insider that Water Valley was one of Maury County’s first settlements, changed its name from Spencer’s Mill in 1874 when a post office was established there. Water Valley was chosen as a name because it was regularly flooded by Leiper’s Creek, she told The Tennessean.

She told Fox that most of the original Water Valley was incorporated into nearby Williamsport, and that what remains was no longer formally recognized as a town because its post office had closed.

Water Valley in Tennessee
The stores, however, need some work before they can be used again.

Flyover footage of Water Valley is available on YouTube.

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Evergrande’s Hong Kong unit has paid a $19 million onshore bond coupon due today, prioritizing the domestic market

The logo of Evergrande Real Estate on a crane in Hangzhou, east China’s Zhejiang Province

  • China Evergrande’s main Hong Kong unit paid a $19 million onshore bond coupon due Tuesday, Reuters reported.
  • This comes as Beijing seeks to calm investor fears over the fallout from a looming debt crisis.
  • Evergrande has already missed a series of US dollar bond coupon payments.

Hengda Real Estate Group, the flagship Hong Kong unit of beleaguered China Evergrande, has paid an onshore bond coupon of 121.8 million Chinese yuan ($19 million) due Tuesday, Reuters reported, citing four people with knowledge of the matter.

The news comes on the back of assurances from Chinese officials that Evergrande’s debt crisis will not derail the country’s economy.

On Sunday, Chinese central bank governor Yi Gang told a Group of 30 meeting that China’s economy is “doing well.” However, it faces challenges, including default risks at certain firms, Reuters reported.

On Friday, another China central bank official said the problems from the Evergrande Group crisis are “controllable.”

Evergrande has already missed several rounds of US dollar bond coupon payments.

One of Reuters’ sources said the real-estate giant needs to prioritize paying domestic bondholders as the country’s financial system is on the line.

The developer has another $14.25 million bond coupon payment due at the end of this month.

The company’s CEO, Xia Haijun, was in Hong Kong discussing possible restructuring and sale of assets, Reuters reported last week.

Evergrande was also seeking to sell its Swedish electric vehicle unit and Hong Kong headquarters, the news agency reported.

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Demand for land in China is slumping as the Evergrande crisis unfolds, and local governments have withdrawn more than 200 plots of land from auction in the past month

China Evergrande property development
Evergrande is China’s second-biggest property developer.

  • Local governments in China have withdrawn 206 plots of land from auctions since September.
  • Demand among property developers for land has fallen due to tightening bank credit due to the Evergrande crisis.
  • Home sales by value have dropped about 17% on-year in September.

The Evergrande debt crisis has hit land sales in China, prompting local governments to withdraw land from auctions in major cities.

Since September, local governments have withdrawn 206 plots of land from auction, the South China Morning Post reported. The withdrawn plots account for almost one-third of the 700 plots of land that were up for sale in 22 cities, according to the Hong Kong newspaper.

In capital city Beijing, 17 plots of land were sold last Wednesday – but there were 26 other plots with no bidders, according to local Chinese media.

In the business and financial hub of Shanghai, 20 plots of land were sold in the auctions last Monday to Wednesday. There were no buyers for seven plots, according to Chinese media reports.

The withdrawal of the land from local government auctions comes as banks are tightening lending to property developers in the wake of Evergrande’s debt crisis.

The episode has also hit risk appetite.

“Regulators’ property curbs and liquidity strains caused by Evergrande are contributing to the growing reluctance of cash-strapped developers to acquire more land, slowing land sales in the primary market,” said Moody’s Investor Service late last month.

It’s a stark contrast to last year, when land sales grew 16% on-year to a record 8.4 trillion Chinese yuan ($1.3 trillion).

Homebuyers are holding back, too.

Home sales by value slid about 17% in September on-year, according to Bloomberg calculations based on government data. That’s after a drop of almost 20% in August.

The fallout from the Evergrande crisis is rippling across the entire Chinese society, sending millenials into an existential crisis and questioning if they would ever be able to afford to buy their own homes, Insider’s Cheryl Teh reported.

China’s economic growth has already been hit. The world’s second-largest economy’s third-quarter GDP growth hit a one-year low in 2021.

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What is ROI? This simple metric can offer greater insight into the profitability of the assets in your portfolio

Acronym ROI (Return on investment) on a futuristic Button with circuit board texture background
Return on investment, or ROI, is a widely used financial ratio that measures the profit or loss from an investment relative to the amount of money initially put into it.

  • Return on investment (ROI) is a metric used to assess the performance of a particular investment.
  • ROI is expressed as a percentage and can be calculated using a simple ROI or annualized ROI equation.
  • Looking at ROI doesn’t take into account risk tolerance or time and may not show all costs.
  • Visit Insider’s Investing Reference library for more stories.

Return on investment (ROI) is a financial ratio that’s used to measure the profitability of an investment relative to its costs and is expressed as a percentage. When you consider investing in anything, you often hear about getting a “return on investment” but may wonder what that really means and how it works. Here’s what to consider with ROI.

Why ROI matters

When you invest, whether in the stock market or in your business, your goal is to earn money and get a return on your investment. You put up cash anticipating that what you put in offers an even greater ROI.

“ROI is expressed as a percentage and is calculated by subtracting the cost of an investment from its current value and then dividing by the cost,” explains Nicole Tanenbaum, partner and chief investment strategist at Chequers Financial Management in San Francisco. “It is a simple and straightforward formula that can be easily used to calculate the rough profitability of nearly any investment, from stock investments to business projects to real estate transactions.”

As an investor, it’s important to assess ROI as a financial metric to see how your particular investments are doing. In basic terms, are you getting more out than you put in? Or are your investments costing you, in the form of negative returns?

ROI goes hand in hand with risk and reward, meaning that with greater risks comes the potential for even higher rewards.

According to, a website run by the Securities and Exchange Commission (SEC), for many decades stocks have had the highest average rate of return but also tend to come with the highest risk.

ROI matters because it’s an easy-to-use metric to evaluate an investment’s performance. Expressed as a percentage, the higher the number, the greater the return.

If an investment doesn’t have a solid ROI, it may be a good time to rebalance your portfolio and sell off some assets that aren’t doing well. However, it’s important to consider any transaction costs and affects on your overall returns in the long run.

How to calculate ROI

In order to calculate ROI, you can use the following formula:

Formula for return on investment

Let’s break down the pieces of the ROI formula.

  • Net investment gain refers to the net return you get with an investment, after considering costs already put in.
  • The cost of investment is the total amount of money you’ve put in a particular investment.

To calculate ROI, you take the net investment gain and divide it by the cost of investment and multiply it by 100 (this converts it to a percentage).

For example, let’s say you put an initial investment of $10,000 into a company’s stock. Then you decide to sell your shares three years later for $12,000.

Here’s the simple ROI formula in this case:

ROI = ($12,000 – $10,000) / $10,000

In other words, you take the final sale of $12,000 and subtract the initial investment of $10,000 which gets you a net investment gain of $2,000.

You then take that number and divide by the cost of investment.

ROI = $2,000/$10,000 = 0.2

The last part of the equation is to multiply the decimal by 100 to get the percentage.

0.2 X 100 = 20%.

This simple ROI formula is pretty standard when evaluating returns. But the drawback is that it doesn’t take into account the amount of time you held the investments or any opportunity cost.

Annualized ROI can offer more nuance in regards to how long you’ve held an investment and offer a more accurate ROI. Here’s the annualized ROI formula for our example:

Formula for annualized return on investment

A= (12,000/$10,000) (⅓) -1

A= (1.2) (⅓) -1

A= 1.063-1

A= 0.063

A= 6.3%

As you can see, the simple ROI vs annualized ROI numbers are quite different. Looking at the annualized ROI can offer greater insight into an investment’s performance if you’ve held it for a good chunk of time.

It’s also important to note the difference between a realized gain and unrealized gain.

  • A realized gain is the total you gain or profit from an investment that you actually sell. In that case, you’d want to use net income as part of the net investment gain and include any transaction costs, fees, etc.
  • An unrealized gain is a gain “on paper.” In other words, it reflects an increase in value but since it’s not actually sold, it’s unrealized. In this scenario, you’d take what your current investment is worth to calculate the net investment gain.

Pros and cons of ROI

While evaluating ROI is a good way to measure performance, there are some limitations, especially when it comes to the simple ROI formula. Here are pros and cons of ROI:

Pros Cons
  • It’s an easy-to-use calculation to evaluate performance of an investment
  • ROI can help you decide to stick with an investment or sell
  • A standardized way to compare investments
  • Simple ROI doesn’t include the time you held the investments
  • ROI doesn’t consider risk tolerance or your age, two crucial aspects when coming up with an investing strategy
  • May not consider the true cost, depending on the formula (such as looking at transaction costs, fees, taxes, etc.)

You want to evaluate the pros and cons and know where the ROI metric can fall short.

“ROI can be a useful tool in comparing performance across multiple investments. However, it is important to understand that ROI does not take into account the overall time frame of an investment, or how long it took to generate the overall profit from initial purchase to eventual sale,” explains Tanenbaum.

Time is a key consideration when evaluating the true ROI of a particular investment.

“Time is a factor which should always be considered when evaluating and comparing relative performance across investments,” says Tanenbaum. “Even if an investment earns a higher profit based on its ROI, the longer the time to realization, the less efficient the investment. Therefore, ROI should be used in tandem with other performance metrics such as the rate of return, which takes time and efficiency into consideration.”

Average ROI in the stock market

The reason investing is better than keeping money in a savings account is that the possibility for a higher return is much greater. Savings interest rates have been abysmally low, but the stock market historically has offered good returns over time.

According to the SEC, the stock market has provided annual returns of about 10%, or 6% to 7% when adjusting for the impact of inflation.

Some returns are much greater depending on the type of investment and the timeframe.

“On average, the S&P 500 Stock Index has generated an ROI of about 10% per year over time, but when looking at ROI across industries, they can vary greatly, with higher growth segments generating average an ROI that’s well above 10%, and more defensive industries generating single digits or in some cases, negative ROI,” notes Tanenbaum.

Aside from evaluating ROI, remember to account for “realized” vs. “unrealized” gains as well. This is also important for losses, too. So if the stock market is tanking, you don’t necessarily need to take any action because the loss is “unrealized” until you sell. If you sell at a loss, that’s final. But if you stay in the game, you could recover in the long-term.

The financial takeaway

Return on investment is a commonly used metric to evaluate investments and business decisions. Ideally, your ROI will be positive and growing over time, however it’s possible to get negative returns as well.

ROI can help you decide where to invest and whether you should sell or hold onto assets you already own.While the ROI percentage is useful, it’s important to understand its limitations when evaluating overall risk and time horizon.

Additionally, it’s important to understand the nuances between simple ROI vs. annualized ROI. You also want to be clear on total costs such as transaction fees, taxes, and more, so you’re getting a clearer picture on your actual return on investment.

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Zoom and HP are working with a prefab workspace maker to create a $17,000 office pod for video calls – see inside the Room for Zoom

renderings of black Room for Zoom booths in an empty office
Room for Zoom booths in an office.

  • New York-based prefab office pod maker Room is working with Zoom and HP to create the Room for Zoom.
  • Room for Zoom is a soundproof office pod designed for video conferencing.
  • The modular almost $17,000 workspace can be assembled within a few hours.
Most people probably associate using Zoom with working from home.

renderings of black Room for Zoom booths in an empty office
Room for Zoom booths in an office.

But one New York-based company is banking on the continued use of the video conferencing platform even after we all return to an office, hybrid or not: Room.

a rendering of a Room for Zoom booth with a black frame and a chair, desk, whiteboard, desktop
A Room for Zoom booth.

Room specializes in creating prefabricated work pods – such as phone booths and meeting rooms – for office spaces.

renderings of white Room for Zoom booths in an empty office
Room booths in an office.

Source: Room


And now, with the help of Zoom and HP, the company is expanding its product lineup to include an enclosed booth built just for Zoom calls.

renderings of black Room for Zoom booths in an empty office
Room for Zoom booths in an office.

A booth designed specifically for Zoom meetings may seem unusually specific.

a rendering of a Room for Zoom booth with a white frame and a chair, desk, whiteboard, desktop
A Room for Zoom booth.

But according to Morten Meisner-Jensen, the co-founder of Room, customers have been requesting an office space designed specifically for video meetings, Morten Meisner-Jensen told Katie Deighton for the Wall Street Journal.

a rendering of a Room for Zoom booth with a white frame and a chair, desk, whiteboard, desktop
A Room for Zoom booth.

Source: The Wall Street Journal


“When it comes to discussing the post-pandemic office, the one thing that has universal agreement is that video conferencing is here to stay,” Brian Chen, Room’s co-founder and CEO, said in a press release.

a rendering of a Room for Zoom booth with a black frame and a chair, desk, whiteboard, desktop
A Room for Zoom booth.

The Room for Zoom combines Room’s existing “Focus Room” booth with a webcam and a 27-inch HP PC touchscreen pre-downloaded with Zoom Rooms.

a rendering of the inside of a Room for Zoom booth with a desktop
A Room for Zoom booth.

The company’s soundproofed booth has also been upgraded with two dimmable LED light strips for brighter video calls.

a rendering of a Room for Zoom booth with a black frame and a chair, desk, whiteboard, desktop
A Room for Zoom booth.

The Room for Zoom will also come with a height-adjustable desk, power sources, a skylight, and air ventilation and fan system …

a rendering of a Room for Zoom booth with a white frame and a chair, desk, whiteboard, desktop
A Room for Zoom booth.

… as well as little knickknacks that make the space feel more productive, such as a whiteboard and storage for personal belongings.

a rendering of a Room for Zoom booth with a white frame with a chair, desk, desktop
A Room for Zoom booth.

Source: Room


Plus, setting up the Room for Zoom is fast and easy, according to the company.

renderings of black Room for Zoom booths in an empty office
Room for Zoom booths in an office.

Source: Room

The booth comes flat packed and can be built within a few hours. And because it’s modular, the Room for Zoom can be moved around to different parts of the office.

a rendering of a Room for Zoom booth with a black frame
A Room for Zoom booth.

A unit starts at $16,995, which is more expensive than the almost $15,000 Focus Room.

renderings of black Room for Zoom booths in an empty office
Room for Zoom booths in an office.

Source: Room

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