I really believe in getting an education in real estate investing, especially before launching a real estate investing career. I have been investing in real estate for 25 years, but I still spend thousands of dollars each year to learn more about real estate investing. To avoid unnecessary risks, you need to know as much as possible. If you make a wrong move in buying, managing or selling your property, you can lose everything, and your efforts will be flushed down the toilet. On the other hand, if you have what I call know-how savvy, you can weather almost any of the financial storms that will inevitably brew around your real estate investing venture.
Here are some of the critical essentials to make real estate investing pay off.
1.You've got to have a solid overview of the business.
You just can't go out and start making offers - even if you have some money. I guarantee you'll lose your money if this is your approach.
Don't think that fixing up houses is a piece of cake. You've got to know what you're doing.
2.You've got to have a good contract.
Picking up a crinkled ole contract document from your friendly real estate agent won't cut it. Most contracts are NOT written to give you the slight edge as a real estate investing professional.
A good contract means the difference in walking away from a closing with money out of your pocket or in your pocket. I have taken home thousands and thousands of dollars from closings - up to $75,000 from my best closing on just a cheap little house. But a fistful of bills at closing is not your only reward for having a good contract. You can get your seller to take care of some or all of your closing costs if you have a good contract. And you can avoid some of the usual buyer costs if you have a good contract. Have a good BUYER'S contract as a real estate investing professional.
3.You've gotta have a good working model as a pattern for your fix-up project.
If you have never tackled the job of remodeling or even fixing up a house, you don't have any idea what needs to be done and what should NOT be done.
Let me tell you from experience, you will be tempted to spend far more than necessary if you want the perfect house to sell. I know, because my wife is always suggesting what we need to do to our houses. Sometimes she is right, but often she wants to dress up a house with items that do not bring return on investment. It's a very thin line of distinction.
You need a model for your fix-up project to establish a working formula.
Let's face it. You can spend a bank full of money in fixing up a cheap little house. And it's easy to over-spend with money you will never get back. But, on the other hand, if you don't spend the right money on the right things, no one will buy your house. The margin of difference is close.
4.You have got to put on the hat of salesman when you get into this real estate investing business.
Your remodeled house will not sell itself. You have to polish to a spit-shine, and make the finished appearance of your house come off as the most desirable house in the neighborhood.
Don't fix up a cheap little house if you are unwilling to show it and sell it. You will lose a big chunk of your profit if you have to list it with a real estate agent.
It's O.K. to sell your makeover house through a real estate agent if you feel deficient as a salesman. But it is important to see your house AS a salesman in order to do your best job.
The key to success in real estate investing is in knowing what you are doing when you sell.
5.Real estate investing is a business.
Real estate investing is not a hobby and it's not a game. It is, however, a slam-dunk, dead-serious, rock-solid way of making money when you learn the ropes. And it just may be the easiest way you have ever earned a living.
Showing posts with label investing in real estate. Show all posts
Showing posts with label investing in real estate. Show all posts
The Worst Real Estate Investment Strategy Ever!
It's true, You can make a lot of money by investing in real estate. Yet, many investors are not. And when you look at their real estate investment strategy, it's no surprise.
The problem is that they have been brainwashed by the so called real estate investment gurus. You know the ones that I am talking about. The ones that tell you that for a few of your hard earned dollars they will teach you all their ultimate short-cut secrets to successfully making millions.
They will tell you that you don't need a job, money or credit. All you need to do is pay them and they will show you the exact way to invest in real estate. Do what they say, follow their real estate investment strategy and your life will changed forever.
Well I have some bad news for you. In most cases, it's the worst real estate investment strategy you could ever follow.
Don't get me wrong, Its' OK to go to seminars, buy books and audio products if you are using this information to learn certain techniques, financing options, tax laws and other ways to invest. In fact, you should do this, because it will make you more creative and you will become a smarter real estate investor, however it's not the most important thing that you should do.
>>> The Most Important Step When Investing In Real Estate
Before you start to invest in real estate, you should sit down and create a very specific plan of what you want the outcome of your real estate investment plan to be!
I know that this is not very exciting, however, if you don't know why your investing and the overall outcome that you want, then how do you know if you making a good or bad decision?
>>> Two Important Questions
The only reason to invest in real estate is to make money. There are two important questions you need to ask yourself.
1.) When do you want the money and how much?
2.) What are you willing to pay to get that result?
The answer to these questions will help you determine your real estate investment strategy.
Let me give you several examples.
>>> Buy and Sell Strategy
If you want the maximum amount of money in the short run, you should be buying real estate with the intent of a quick sale and profit. This may be buying fixer-uppers or looking for below market properties that you can sell for a profit quickly (know as flipping).
To do this, the price you will have to pay is your time to find, analyze, fix, finance and sell the properties. Once you sell any of your properties and realize your profit, you must go out and repeat the process again and again to continue to make a profit.
One problem with this strategy is that when you stop buying and selling your profits stop. So it's important to make sure you take some of your profits and invest in something that will produce the income you will need and want later on in your life.
>>> Buy and Hold Strategy
This strategy is to buy properties, rent them out and have the tenants pay for the properties. Once the properties are paid for, you will continue to have rental income for the rest of your life.
The price you pay in this strategy is not only the time to find, finance and analyze, it's the problems that may occur when ever you have tenants. So you will need some type of a system to manage or you can hire a management company to do this.
Personally, I like the Buy and Hold strategy because you are building up assets and income that will come to you for the rest of your life. To deal with the management part you need to create a system of policies and procedures.
Whether your strategy is to Buy and Sell, Buy and Hold or maybe a mix of the two, the key is to plan for what you want your ultimate outcome to be.
If your outcome is to have an income of $100,000 per year without any work, you may choose to buy and hold enough rental real estate that will provide that.
In summary, the worst real estate investment strategy ever is when you don't take the time up front to to decide exactly why your are investing in real estate and what do you want when you are all done.
Copyright 2006 David Schneider
Why Real Estate Investment?
Why should you invest in real estate? Well, investing in real estate for profit is one of the most popular approaches to generating additional income in the United States today. In fact, if you pay attention to recent press you will have seen numerous reports about the real estate investment craze that seems to be sweeping the Nation.
When done carefully and intelligently, real estate can yield fantastic benefits that can not be achieved through any other type of investment. Here are just a few examples of why real estate investing can be such a powerful wealth generator.
1. Real Estate Markets Are Slow to React - Although real estate, like everything else, has ups and downs, it is generally a lot slower to react than the stock market. For example, you won't get up in the morning and discover that your real estate investment is worth ten or twenty percent less than it was yesterday.
2. Leverage. You can borrow money to buy real estate, whereas, generally you can not borrow money to buy stocks. You can control a large dollar value of real estate with a small amount of your own money by using loans and mortgages. The stock market, by law, limits the amount of leverage (margin) you can use to buy stock. There are no such limits with real estate.
3. You Can Purchase Real Estate For Less Than Its Market Value. In many cases you can purchase a property for as low as 60 to 70 percent of the market value. When buying stocks, you may be able to find a stock that is considered "under valued" but generally it's tough to do that on a regular and consistent basis.
4. Real Estate Offers A Tremendous Amount Of Tax Advantages Through Depreciation. Real estate basically has two values, the land and the building(s) on the land. For example, if a property is valued at $250,000 and the assessed value of the land is $75,000, the building would be worth $175,000.
The government allows real estate investors to depreciate the value of the building in equal parts over its "useful life" which is defined as 27.5 years. So for example, based on the $175,000 building value above, the annual depreciation value would be $6,363.63 ($175,000 divided by 27.5). This means that for tax purposes, the investor would be able to reduce his/her annual income by $6,363.63!
Many people find the notion of depreciation to be confusing since it's not really a loss of money. I recommend you check with a qualified tax professional for more details and how this can benefit you.
5. Real Estate Markets Are Insulated Local Markets. For instance, when the stock market falls, it takes down just about everybody and everything involved with it. When home values drop in one city such as New York, generally it does not affect property values in other cities like Boston or Chicago. To protect yourself, you can have a "geographically diversified" portfolio of real estate investments to hedge against these types events.
6. You The Investor Can Control The Value. Another aspect of real estate investment is that unlike any other investment, this investment is controlled by the investor. For example, as an investor, you can increase the value of your investment property by making some modifications to the property such as adding a garage or replacing the carpet, etc. With stocks or any other investment, the investor can't do anything to increase the value of the investment.
7. The Efficient Market Hypothesis (EMH). When a market has prices that always "fully reflect" available information, it is called "efficient". The stock market for example is considered by most to be an efficient market. When you call your broker to purchase or sell a stock, you can be sure of one thing - the price you bought or sold the stock for was indeed the "correct" price for that stock on that day and at that time. Why? Because the existing price for the stock will already incorporate and reflect all relevant available information about the company such as earnings, and other metrics.
With real estate, the market is very inefficient. Unlike the stock market, with real estate, the "correct" price discovery mechanism is left to each buyer and seller to figure out on their own. There is the almost always uncertainty as to whether the price offered by the seller is too high or too low. Moreover, there is typically little to no help available from analysts and research agencies (like when dealing with stocks) in this respect. This inefficiency is the very reason why real estate offers such a great investment opportunity to be smart and win! But it requires experience and a sharp eye for good deals and great negotiation skill. This expertise can be developed.
If done correctly, real estate is probably one of the smartest investments you could ever make. Hopefully this short rambling has provided you with a fresh perspective of the many benefits of real estate investing. So be smart, continue to learn and above all don't wait for some magic moment, just get started.
To Your Success!
When done carefully and intelligently, real estate can yield fantastic benefits that can not be achieved through any other type of investment. Here are just a few examples of why real estate investing can be such a powerful wealth generator.
1. Real Estate Markets Are Slow to React - Although real estate, like everything else, has ups and downs, it is generally a lot slower to react than the stock market. For example, you won't get up in the morning and discover that your real estate investment is worth ten or twenty percent less than it was yesterday.
2. Leverage. You can borrow money to buy real estate, whereas, generally you can not borrow money to buy stocks. You can control a large dollar value of real estate with a small amount of your own money by using loans and mortgages. The stock market, by law, limits the amount of leverage (margin) you can use to buy stock. There are no such limits with real estate.
3. You Can Purchase Real Estate For Less Than Its Market Value. In many cases you can purchase a property for as low as 60 to 70 percent of the market value. When buying stocks, you may be able to find a stock that is considered "under valued" but generally it's tough to do that on a regular and consistent basis.
4. Real Estate Offers A Tremendous Amount Of Tax Advantages Through Depreciation. Real estate basically has two values, the land and the building(s) on the land. For example, if a property is valued at $250,000 and the assessed value of the land is $75,000, the building would be worth $175,000.
The government allows real estate investors to depreciate the value of the building in equal parts over its "useful life" which is defined as 27.5 years. So for example, based on the $175,000 building value above, the annual depreciation value would be $6,363.63 ($175,000 divided by 27.5). This means that for tax purposes, the investor would be able to reduce his/her annual income by $6,363.63!
Many people find the notion of depreciation to be confusing since it's not really a loss of money. I recommend you check with a qualified tax professional for more details and how this can benefit you.
5. Real Estate Markets Are Insulated Local Markets. For instance, when the stock market falls, it takes down just about everybody and everything involved with it. When home values drop in one city such as New York, generally it does not affect property values in other cities like Boston or Chicago. To protect yourself, you can have a "geographically diversified" portfolio of real estate investments to hedge against these types events.
6. You The Investor Can Control The Value. Another aspect of real estate investment is that unlike any other investment, this investment is controlled by the investor. For example, as an investor, you can increase the value of your investment property by making some modifications to the property such as adding a garage or replacing the carpet, etc. With stocks or any other investment, the investor can't do anything to increase the value of the investment.
7. The Efficient Market Hypothesis (EMH). When a market has prices that always "fully reflect" available information, it is called "efficient". The stock market for example is considered by most to be an efficient market. When you call your broker to purchase or sell a stock, you can be sure of one thing - the price you bought or sold the stock for was indeed the "correct" price for that stock on that day and at that time. Why? Because the existing price for the stock will already incorporate and reflect all relevant available information about the company such as earnings, and other metrics.
With real estate, the market is very inefficient. Unlike the stock market, with real estate, the "correct" price discovery mechanism is left to each buyer and seller to figure out on their own. There is the almost always uncertainty as to whether the price offered by the seller is too high or too low. Moreover, there is typically little to no help available from analysts and research agencies (like when dealing with stocks) in this respect. This inefficiency is the very reason why real estate offers such a great investment opportunity to be smart and win! But it requires experience and a sharp eye for good deals and great negotiation skill. This expertise can be developed.
If done correctly, real estate is probably one of the smartest investments you could ever make. Hopefully this short rambling has provided you with a fresh perspective of the many benefits of real estate investing. So be smart, continue to learn and above all don't wait for some magic moment, just get started.
To Your Success!
Real Estate Investing: Five Indisputable Benefits You Can Bank On
If you've ever played Monopoly, you already know that you can't go wrong investing in real estate. Compared to stock market investing, real estate investments are much safer and less affected by economic downturns. But the advantages of investing in real estate don't stop there. Real estate investments have at least six indisputable benefits that will make a positive impact on your bottom line.
Real Estate Investing Has Tax Benefits
The government understands that real estate ownership and development is good for everyone. That's why there are so many tax advantages to investing in real estate. Mortgage interest is deductible in most situations. In some cases, depending on how you finance and handle your real estate investments, even profits can be tax deductible. Sheltering your profits and deducting your expenses from your tax bill is just as good as putting money in your pocket.
Investing in Real Estate Offers Significant Profit Potential
In a perfect world, all investments would return a profit. In case you haven't noticed, we're not living in that world. We are in a world where the supply of secure and affordable housing is dwindling, and the number of deteriorating homes is growing. This situation offers an outstanding opportunity for real estate investors who buy, renovate, and then sell or rent out properties. Investing in real estate easily returns profits in the 30-40 percent range, and has the potential to return much more.
Real Estate Investing Diversifies Your Portfolio
Investing in real estate is a great way to diversify your financial portfolio. Investment opportunities abound in today's world, and there's no reason to pick just one. Some of them have great potential for profit, and for significant loss. You have to make your own financial decisions about which investments are right for you. But chances are it will be your real estate investments that keep you going when your riskier investments aren't performing well.
Investing in Real Estate Provides Income
Real estate investing gives you options. If you want to supplement or replace your monthly income, you can choose to rent out a property instead of selling it. A property manager can handle the rental for you, which means your only work for the month will be depositing the checks.
Real Estate Investments Appreciate
If you can count on anything, then you can count on your real estate investments increasing in value. Based on long-term, historical trends, you can expect real estate to appreciate about nine percent a year. And that's if you do nothing at all. Just imagine what could happen if you buy a handyman special and do some renovation.
Investing in real estate is one of the surest ways to improve your financial situation. The stability and benefits of real estate investing make it a best choice for the foundation of your investment portfolio.
Real Estate Investing Has Tax Benefits
The government understands that real estate ownership and development is good for everyone. That's why there are so many tax advantages to investing in real estate. Mortgage interest is deductible in most situations. In some cases, depending on how you finance and handle your real estate investments, even profits can be tax deductible. Sheltering your profits and deducting your expenses from your tax bill is just as good as putting money in your pocket.
Investing in Real Estate Offers Significant Profit Potential
In a perfect world, all investments would return a profit. In case you haven't noticed, we're not living in that world. We are in a world where the supply of secure and affordable housing is dwindling, and the number of deteriorating homes is growing. This situation offers an outstanding opportunity for real estate investors who buy, renovate, and then sell or rent out properties. Investing in real estate easily returns profits in the 30-40 percent range, and has the potential to return much more.
Real Estate Investing Diversifies Your Portfolio
Investing in real estate is a great way to diversify your financial portfolio. Investment opportunities abound in today's world, and there's no reason to pick just one. Some of them have great potential for profit, and for significant loss. You have to make your own financial decisions about which investments are right for you. But chances are it will be your real estate investments that keep you going when your riskier investments aren't performing well.
Investing in Real Estate Provides Income
Real estate investing gives you options. If you want to supplement or replace your monthly income, you can choose to rent out a property instead of selling it. A property manager can handle the rental for you, which means your only work for the month will be depositing the checks.
Real Estate Investments Appreciate
If you can count on anything, then you can count on your real estate investments increasing in value. Based on long-term, historical trends, you can expect real estate to appreciate about nine percent a year. And that's if you do nothing at all. Just imagine what could happen if you buy a handyman special and do some renovation.
Investing in real estate is one of the surest ways to improve your financial situation. The stability and benefits of real estate investing make it a best choice for the foundation of your investment portfolio.
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