Tips To Started Investment on Real Estate

Introduction

This article has been written to provide a novice person considering real estate investing some fundamental concepts to consider as you commit yourself to this area of interest. Like all new endeavors explored, it will be to your advantage to have some basic knowledge on the particular topic before you can truly appreciate if this is right for you.

What Are The Financial Benefits Of Investing In Real Estate?

There are various opportunities that will financially benefit you by investing in real estate. Based upon your current financial condition and future investment goals, there are many factors that must be considered when selecting both a business model as well as a specific project. The following section will provide an overview on the significant financial benefits that are achievable when you invest in real estate.

Property Appreciation

Although predicting future appreciation with great certainty is not feasible, by looking at specific economic indicators can assist the Real Estate Investor in understanding future trends with regards to property value and possible appreciation. Some of these key indicators are as follows:

Job growth

Job growth is a key contributor in establishing possible future appreciation. As Primary jobs (those jobs that export products outside of the local area like the car makers of Detroit) increase, the need for Secondary jobs will also increase by 2-3 times the number of Primary jobs. Secondary jobs provide services to the people performing the Primary jobs. Examples of secondary jobs include the following:

Restaurant workers

Retail store workers

Local trades (plumbers, electricians, builders, etc.)

School employees

Demographic Trends

Demographic trends are another factor to consider when trying to determine if an area has the potential for future appreciation. Demographic research will provide data on the general population of an area which includes the following:

Population Changes

Age distribution

Income

Family Size

Race

Owners verses renters

Marital status

Revitalization Initiatives

Another factor that can affect the appreciation of an area is any revitalization initiatives the local government is undertaking. Revitalization can include the following:

Improvements of roads and transportation

Condemning and removing abandoned houses and buildings

Crime reduction

Tax credit, grants, and loans to developers and Investors to come into the area as well as programs to help keep the current employers from moving away.

Economic development offices from the local government are typically responsible for implementing and managing the revitalization efforts.

Cash flow

Another aspect of how to financially benefit from real estate investing is through the creation of cash flow. Although there are many factors that are taken into consideration that derives your cash flow, simply put, it is the amount of money left over for you after all of the expenses have been paid.

The term cash flow is usually associated with properties that you are holding and generating income from rental units or homes. The great thing about creating a cash flow stream is that it will typically continue whether you stay in bed all day or off on a vacation. However, sustaining this cash flow will take some effort on your part and may include the following:

Maintaining the property

Managing the existing tenants

Keeping the property occupied

Managing property management companies

Equity

Property equity is the difference between the fair market value of the property and the sum of all of the loans against the property. For example, if a property is worth $250,000 and there is a first and second mortgage totaling $200,000, the property has $50,000 in equity. Having equity in your property is essential in order to have a cushion in the event the market exhibits declining value during the time you are holding the property. By utilizing strategies like a refinance or Line of Credit, it will allow you to pull this equity out of the property and use it as you see fit including a return of your initial investment or to leverage this capital to purchase another property. Although having strong cash flow with your properties is vital during your hold times, this income stream will disappear if you ever need to sell the property. Ultimately, it is the equity in your properties that will help set the stage for your long-term wealth creation and financial security.

Tax Incentives

In addition to the benefits mentioned above, there are outstanding tax incentives that the real estate investor can benefit from, they include the following:

Depreciation of the actual property and any capital equipment that may be utilized in your business.

Deductions resulting from expenses from owning and managing the property the property as well as business expenses you may incur.

IRC 1031 exchanges, this is a powerful tax strategy that will allow you to leverage Capital Gains taxes that you would normally pay on the sale of an investment property and defer paying those taxes by purchasing a “Like-kind” replacement property with the full proceeds you received from the sale.

Why Do You Want To Invest In Real Estate?

It will be important for you to understand what reason(s) have motivated you to be interested and involved with real estate investing. Over the years, I have spoken to many new Investors on this subject and I have boiled it down to the following reasons:

Supplement Your Current Income

There are some people who are looking at just supplementing their current income without the intention of leaving their current profession and look at real estate investing as their second job. The Investor’s that fall into this group are fortunate because they are not relying solely on real estate investing as their primary source of income, this will be very beneficial during the time you are developing you real estate skill set and investment portfolio.

Take Control of Your Financial Future

Based upon the many years of speaking with Real Estate Investors, perhaps the most compelling reasons people consider real estate investing is the ability for you to have a significant influence of your financial security and for you to control the level of income you would like to receive.

Create a Retirement Plan for Yourself

Using real estate investing as a vehicle to establish or augment a retirement plan is another common motivator I hear frequently from new investors. It is understandable that when economic conditions include downsizing, cost of living increases, and the fear of Social Security meltdown, people are concerned about having an adequate financial foundation to sustain them during their retirement phase of life.

Critical Things to Consider Before Considering Real Estate Investing

Investing in real estate is certainly not for everyone and it will be important for you to honestly assess if this is the right path for you. The following section will provide some basic questions you should ask yourself as you evaluate the feasibility of becoming involved as a Real Estate Investor.

How Much Time Will You Have To Dedicate Towards Real Estate Investing?

As we all know, you can’t create anymore time; there can only be 24 hours in a day. As you consider real estate investing, you will need to be realistic with regards to how much time you will have to devote to this endeavor. With today’s fast paced society that requires multiple income sources combined with the commitments you may already have with your family, many people can be left with little or no time to devote towards their real estate investing goals.

Are You Able To Motivate Yourself And Have The Discipline Required To Succeed?

Having the desire to be a successful Real Estate Investor is only part of the equation for ultimate success. Along with the desire to succeed comes the need for you to be able to motivate and discipline yourself. Real estate investing is certainly not for everyone despite the late

 

All About Real Estate Auction

The popularity of auction sales of real estates is increasing day by day despite the dominance of the traditional process of real estate selling. Earlier these auctions were labelled as dishonour sales done by the distressed sellers when there was no other way to liquidate a property. But this view has changed as the number of real estate auctions are increasing day by day because sellers of residential as well as commercial properties are opting to auction their property directly or turning to real estate broker houses to get top price as per market rates from the auctions.

Auction opportunity arises when a seller’s mind is auction oriented with a hope that the property will fetch a fair market price. To get a fair price, his equity position in the auctioned property should be strong. With a strong equity position in the property, he will save the cost of paying a sales commission. The time of auctioning should be perfect, when the market is soaring high. The auctioneer should also try to avoid bearing high carrying costs associated with the property.

A profitable auction opportunity is created when there is limited supply of a particular type of property whose demand in the real estate market is relatively high or the market is declining with limited buyer’s interest in this traditional sales process.

When a property is offered for auctioned, a sense of urgency arises to bring the interested parties together on a particular day and the sales process creates a sales price through competitive bidding among the participating parties.

In early days of real estate auctions only the properties in bad conditions or subjected to foreclosure were auctioned. But now sellers are shifting to real estate auctions to sell their homes. This transformation has occurred because the earlier believe that a seller will not take the risk of auctioning his property at a lesser price than its market value has changed. Real estate auctioneers are at a liberty to set a minimum price which is more than its market value that he will receive in any case. In addition by setting a minimum price, he will no longer have to bear the risk of buying back the property if it does not reach that price and will also save the cost of paying the required sales commission to the auction house.

Many real estate owners prefer to go for a direct auction instead of going to a auction houses to avoid payment of sales commission to real estate brokers which is about 8-10 percent of the property’s value. Also the property owners have absolute control on the auction sales process. This is essential when a real estate takes lot of time to sell and the owner is represented by a real estate agent or broker. Many times, it is wise for a real estate owner to auction a property not in use to cut down maintenance expenses. Real estate auction is an exciting event both for the auctioneer and the bidding parties therefore they are always well attended.

Since auction is the best way to get true market value for the real estate, the magic of an exciting real estate auction works for the marketing of these properties for sale. Onus rests on the auctioneer to create demand or an urge to make a bid in the buyers/bidders mind and to attract the attention of the potential buyers/bidders. The potential buyers of the property are then registered after it is ensured that they are financially qualified. It is to be ensured that a considerable sum is paid by the buyer as a down payment which is non refundable and both parties are willing to close the deal as soon as possible. It is necessary to make sure before the auction that the buyer is financially secure so that the seller will not have to wait for receiving the entire payment. Many times it has been found that real estate auctions remain incomplete because the buyer or successful bidder is turned down for mortgages.

The following factors should be kept in mind before a real estate is auctioned by the property owner-

. He should consult experienced and professional auction consultant who have specialized in real estate auctioning.

. It should be ensured that the marketing campaign of the auction event focused properly to have a high impact.

. Importance should be given on direct mail marketing to targeted bidders/buyers.

. The auction event should be advertised in print and audio visual media to have a greater impact. If possible the consignment should be assigned to a reputed advertising agency to make the ad campaign more attractive.

. The auction event should also be advertised through internet and email.

After the promotion or advertisement campaign is launched, the auction event takes place within a few weeks on completion of official formalities. Sellers are informed about the auction date before hand after the auctioneer is ensured that the sellers/bidders are able to meet the preset terms and conditions laid down by him.

Following are the advantages of real estate auctions for the seller-

. The property owner is able to make a quick liquidation of their property.

. The auction is successful in creating a healthy competition among the bidders.

. Their property is exposed to a wide range of prospects.

. Closing is accelerated.

.The sellers are well aware about the date and time when the property will be sold.

. Auctions are successful in considerably bringing down the amount of time a property is on the market for sale.

. Auction gets rid of number of out of the blue events related to property sales.

. Auction reduces the burden of negotiation process from the sellers mind. He is able to sell the property according to the terms and conditions set by him.

. In contrast to conventional sales processes where it is mandatory for the property owner to make necessary improvements and renovations to get a fair price, these properties are auctioned on as-is-where-is basis. Potential buyers receive enough time to make a decision on whether to make a bid or not after having a good look at the property to be auctioned. Therefore it is sold with no emergency and the seller gains from it.

The buyer also enjoys innumerable advantages from real estate auctions, they are-

. He can set his own purchase price.

. He purchases the property at a fair market price.

. He does not have to make long negotiations or bargains to finalize a deal.

. Auction reduces the time to purchase a property.

. He will not have to worry about emergencies because purchasing and closing dates are known to him beforehand.

. Buyers are well aware that sellers are predetermined to sell.

 

How To Make Money in Real Estate

Are you ready to get started in real estate investing,but not sure where to begin?

Afraid to make a HUGE Mistake??

Stuck with the Paralysis of Analysis???

You are not alone! Almost all real estate investors had to spend countless hours at the beginning of their investing careers researching the various strategies trying to figure out where they should begin.
While there is no single right answer for everyone, there are three key questions every potential investor needs to ask:

1. How much TIME do I have to invest?

2. How much MONEY do I have to invest?

3. How BIG and FAST do I want my business to ultimately grow??

A Great way to start any venture is by having an END Goal in mind, then laying out a plan to go get it! Even if you have to make changes along the way – which you will, the “getting there” is a great part of the fun.

Real estate investing can do anything from learning how to put a quick (in 30 days, or less) EXTRA $5,000 in your pocket every month, to making all your financial dreams come true with an annual after-tax income in Millions of Dollars. You really do need to decide upfront, if you are looking for the multi-millionaire status, or just to put some quick cash in your pocket to pay bills.

Regardless of your dreams and desires how you will use real estate investing to get where you want to go in life, we believe that there are three critical rules you must follow, if you are going to be successful. Here they are:

RULE NUMBER ONE IS: FOCUS-FOCUS-FOCUS

If you are looking for a long-term commitment to this business, then you need to establish up-front that you will need to set-aside some money from each of your transactions/deals to re-invest in your education, AND it is probably in your best interest to start with one strategy and be prepared to switch to a different strategy once these goals are met.

As an example, let’s say you ultimately want to be a developer (like Donald Trump, or Sam Zell, or Trammell Crow), but today you have a job and are $50,000 in debt. Your first step might be to generate quick cash over the next year to pay off the debt, then half way through making this happen (say in month six) begin the process of implementing a strategy to generate enough income from your real estate investing to leave your job, then after you have created a stable base (enough to pay bills and then some) from your investing activity, to start a plan to become a developer. All together, this may require three different strategies.

A “Classic” mistake that many novice investors would make is to attempt all three strategies AT THE SAME TIME – DO NOT DO THIS!!! Better to learn a strategy for quick cash, master it, then move on, then to attempt to learn three strategies at the same time.

OLD AFRICAN PROVERB: “He Who Chases Two Tigers Ultimately Gets None”
Regardless of the Strategy to start with, history has shown that people who FOCUS their time, energy and money, are more likely to succeed than those who do not.Be Patient – Be Focused – Start Small, Grow Big.RECAP: Rule Number One is: FOCUS-FOCUS-FOCUS

RULE NUMBER TWO: YOU LEARN BY DOING!The second important thing to know about real estate investing is that you learn by doing! We know that there are a lot of late-night infomercials which say “Come to our FREE seminar, spend $5,000, and tomorrow you will wake up a Millionaire – but the problem is we have never found anyone who will admit that this really worked. Also, there are people who spend good money going to college, or graduate school and study how to “succeed in real estate”, and by and large, this can work, if you then go on to commit to 25-40 years working as an employee of a real estate firm, making someone else rich – if you are fortunate enough, you may learn, enough (over time) and then go out on your own.

And yes, we all know of people who buy every book, every tape, and go to every seminar, and become walking real estate investing “Encyclopedia’s” – BUT NEVER DO ANYTHING WITH IT – BAD IDEA! Why, because if you never put into practice what you read, or hear, you will ultimately convince yourself that “this real estate thing” does not work – UNFORTUNATELY, both history and Forbes Magazine would prove you wrong.

Ever since John Jacob Astor became America’s First Millionaire in the 1800’s by buying what would ultimately become Manhattan, more American’s have become wealthy through investing in real estate, than by any other means. And those who have made their fortunes in other areas (like operating businesses) have reinvested their profits into real estate than any other asset class.

THE BEST WAY TO LEARN TO BE AN INVESTOR IS TO BE AN INVESTOR.

RECAP: Rule Number Two: YOU LEARN BY DOING!

RULE NUMBER THREE: START TODAY – RIGHT WHERE YOU ARE.Final Key Thought – many new investors kid themselves by saying thing like “When I get enough money…”, or “When I get enough time…”, or “When I can get some other things out of the way…” Then I will get started – BALONY!! What they are really saying is “I am Scared to Death of Failing at this Real Estate Thing”, and the sooner they stop lying to themselves the sooner something really great will happen in their lives. The truth is almost every successful real estate investor out there (including Donald Trump, and Sam Zell, and Ron LeGrand, and Robyn Thompson, and (Place Millionaire’s Name Here), was scared to death when putting their first deal together. What made the difference is that they moved forward and did something.

Sir Isaac Newton said it best in his first Law of Motion: “An object at rest tends to stay at rest and an object in motion tends to stay in motion…” In other words – if you keep on doing what you have been doing, you should expect to get the same results. But if you want something different for your life, you will have to go “in Motion”. You learn the Real Estate Business by DOING, so the sooner you DO, the Sooner you GET. Today is the day to stop making excuses and to “Go In Motion”. And as you Go In Motion, make a commitment to continue to learn, so you “Stay In Motion”

RECAP: Rule Number Three: START TODAY – RIGHT WHERE YOU ARE.

So with these three rules in mind, we hope that RealInvestors(TM) will become a key partner in your success and we want to hear about your success, no matter how small, or how great. Most importantly, we want to help you “Go in Motion” and “Stay In Motion”…
So, Let’s Get Started…

Choose ONE strategy to get started. Please Take to Heart Rule Number One: FOCUS-FOCUS-FOCUS… DO NOT TRY TO BECOME AN EXPERT ON EVERY STRATEGY BEFORE EVER GETTING STARTED! If you do, we can almost guarantee you that will become confused from information overload, and you will never begin! Decide on a single strategy that is right for you, learn about it, and go out there and DO IT!

Make a commitment (let’s say 6 months) where you are completely focused on that strategy. Network with other investor’s who are working that particular strategy and do not quit until one of two things has happened: either 6 months has gone by with no results, or you get your first deal done using that strategy and decide you want to try your hand at something else. But do not allow yourself to be taken off course. It was o.k. in elementary and middle school to try out for every team sport, but when Spring came, you had to make a choice; it was either going to be track, or baseball/softball, or lacrosse, or crew, or tennis – but you could not play two sports at the same time.

Each sport had its own rules, and each one required a slightly different mental “game”. If you had come to the baseball field with a lacrosse stick and shoulder pads, someone would have asked you to “go home” and come back when you were “ready to play this sport” – same is true with investing – ESPECIALLY WHEN YOU ARE JUST GETTING GOING. Now, one day you will be able to “Play Like Mike”, but as a new investor, let’s keep it simple: One strategy, complete focus until you have proven to yourself that it will work, for you, or it won’t, and for most people this will mean at least a 6-month commitment.

NEXT STEPS: Once you have familiarized yourself with this Getting Started section of the website, we recommend that you take the following steps:

• Read and post regularly in the Real Investors Forums to gain exposure to the issues facing other real estate investors. Chances are, those same issues will face you in the near future.

• Real all the Real Investor Articles. This will help to build your knowledge base about real estate investing in general.

• Visit the Real Investor Bookstore and pick out courses that focus on the ONE strategy you have chosen to use to get started. Do not purchase courses on a myriad of strategies before you ever do your first deal!

• Join your local REIA. You will meet many other investors… some seasoned, some just getting started. You will have an opportunity to network with other professionals that may be able to provide you with services you will need as anew investor… a contractor, a real estate agent, a mortgage broker, a hard money lender… etc. You may even find a really great mentor!

• Invest in your education! Attend any and all opportunities to learn more about real estate investing, such as The National Real Estate Investor’s Conference. These events are invaluable opportunities to learn from, network amongst, and make deals with other more seasoned real estate investors and scholars. Look for online class offerings, such as Real Investor’s University (REIU) to fill the times in between live events

• Most importantly… go out there and take action – GO IN MOTION!!!

• Get your first deal done – Your 1st deal will be the hardest – we promise!!!

• Repeat, Repeat, Repeat!

• Then, when you’re ready, come back and add another strategy to your portfolio… and continue the process….

 

Pro and Cons Real Estate Investing

One creative way to get started investing in real estate is to use a lease option. The biggest advantage of using lease options to invest in real estate is –control. This method of investing, basically gives the investor the right to possess — be in control of — and profit from a property without owning it.

A real estate lease option contract is a combination of two documents.

The lease part of the contract is where the owner agrees to let you lease their property, while you pay them rent for a stated period of time. During the lease period, the owner can not raise the rent, rent it to anyone else, or sell the property to anyone else.

The option part of the contract represents the right you purchased to buy the property in the future, for a specific price. If you decide to exercise your option to buy, the owner has to sell it to you at the negotiated price. The option part of the contract obligates the seller to sell to you during the option period — but it does not obligate you to buy. You are only obligated to make rental payments as agreed during the lease period.

When the lease option contract is written and structured properly, it can provide tremendous benefits and advantages to the investor. If the lease option includes the “right to sub-lease”, the investor can generate a positive cash flow by renting the property to a tenant for the duration of his lease, or lease option the property to a tenant-buyer for positive cash flow and future profits. If the lease option includes a “right of assignment” the investor could assign the contract to another buyer for a quick profit.

Lease option real estate investing, is a flexible, low risk, highly leveraged method of investing that can be implemented with little to no money.

High Leverage

It is highly leveraged because you are able to gain control of a property and profit from it now–even though you don’t own it yet. The fact that you don’t own it, also limits your personal liability and personal responsibility. Only if you decide to purchase the property by exercising your “option to buy”, would you take title to the property.

Little to no money

The real estate investor’s cost to implement a lease option contract with the owner requires little to no money out of pocket, because it is entirely negotiable between investor and owner. Also, there are a variety of ways the option fee can be structured. It can be structured on an installment plan, balloon payment or other agreeable arrangement between both parties. The option fee can even be as little as $1.00.

In order to secure the property for purchase at a later date, tenant-buyers typically pay a non-refundable option fee of approximately 2%-5% of the negotiated future purchase price to the seller. Depending on how the lease option agreement is written and structured, the investor could possibly use the tenant-buyer’s option fee money to pay any option fee owed to the owner.

Flexible

Lease option real estate investing is a flexible method of investing because the terms of the agreement, like payment amounts, payment dates, installments, interest rate, interest only payment, balloon payments, purchase price and other terms are all negotiated between seller and buyer. Responsibilities of both parties are also negotiable. For instance, if the investor doesn’t want to act in the capacity of a landlord, he could specify in the lease option agreement that tenant-buyer will be responsible for all minor maintenance and repairs and the original seller will remain responsible for any major repairs.

Financially Low Risk

It is low risk financially, because if the property fails to go up enough in value to make a profit, you have the purchased the right to change your mind and let the “option to buy” expire. Even if your tenant-buyer decides not to buy the property, you have profited by a positive monthly cash flow from the tenant-buyer’s rent payments, and upfront non-refundable option fee.

Let’s look at an example of a lease with option to buy structured in a way that the investor profits in 3 separate phases of the investment.

Profit #1: non-refundable option fee

Future sales price negotiated with the current owner is $125,000 with an option fee of 2% of the sales price. Option Fee you owe the owner is $2,500. The future sales price you set for your tenant-buyer is $155,000 and the option fee is 4% of the sales price. Option fee the tenant-buyer owes you is $6,200. You collect $6,200 from tenant-buyer and pay $2,500 to the owner and your profit = $3,700

Profit #2: monthly cash flow from rental payments

The Monthly rental payment you negotiated with the owner is $1,000. You set the monthly payment at $1,250 per month for your tenant-buyer. Each month you collect $1,250 from your tenant-buyer and pay the owner $1,000 each month. Your profit is $250 monthly positive cash flow during the lease period.

Profit #3: is set up when the lease option contract is initially written

The third profit is the difference in the negotiated future purchase price with the owner, and the future purchase price set for your tenant-buyer. Let’s say the property goes up in value to appraise for at least $155,000. Your tenant-buyer decides to exercise their option to buy. You buy the property from the owner at $125,000 and then sell it to your tenant-buyer for $155,000. $155,000 – the $125,000 you pay to the owner = $30,000 profit.

Of course the key to making lease option real estate investing work, is finding motivated sellers and buyers. Finding these motivated sellers and buyers shouldn’t be difficult. The continuing down turn in the real estate market, has created a large number of sellers who can’t sell their property and buyers who can’t get financing to buy. The seller could possibly get a fair offer to be paid in the future, by selling their property to a real estate investor on a lease option basis. A potential tenant-buyer could obtain home ownership, without having to qualify through traditional home loan guidelines.

One disadvantage of lease option real estate investing, involves the tenant or tenant-buyer possibly defaulting on monthly rental payments. This would make it necessary for the investor to come up with money out of pocket to pay the owner, and possibly have to proceed with eviction process. However, there are certain provisions that can made, and also various “contract clauses”, that can be included in the lease option agreement, to deter buyers from defaulting on payments.

If the investor fails to do “due diligence” before entering into a lease option agreement, he could end up with a property that is unmarketable. There could be a number of liens on it, issues involving ownership of the property or it might be in foreclosure. By diligently performing research before entering into a lease option agreement, the investor can avoid these mistakes. A few things the investor could do is– perform background and credit checks on both the seller and buyer, search public records in reference to ownership and property status, or do a title search.

Despite the few disadvantages, lease option real estate investing continues to be an excellent way to invest in real estate with little to no money and low financial risks. It also remains to be an excellent way to gain control of a property you don’t own, to generate cash flow now, and possible future profits on flexible terms.

Bottom line– you don’t have to miss out on the lucrative profits being made by investors in today’s real estate market

The more you understand creative real estate investing strategies, and apply them now, the more profits you will make in today’s real estate market. Don’t put off getting the real estate investing education you need — to succeed in today’s real estate market.

Learn these things and more:

  • Creative investing strategies and concepts for Lease option real estate investing, foreclosure investing, and wholesaling and flipping real estate.
  • How to structure every deal right so you make more on each deal and eliminate your risk.
  • What needs to be included in your real estate contracts now– to safely avoid issues that could cost you thousands!
  • The most powerful legal clauses you can use to completely eliminate your risk in all your offers.
  • The step by step approach to invest in real estate with minimal risk.
  • How and where to research properties effectively to save hundreds of hours in time.
  • The best ways to creatively finance your investment properties.
  • How to know the true market value of properties so you never overpay again.
  • How to control properties with no money, credit or income verifications so you can make a lot more.

Don’t miss your opportunity to profit from today’s real estate market’s crisis. Go to [http://www.creativerealestateinvesting101.com/] to get profitable creative real estate investing strategies and concepts that will help you be successful in lease option real estate investing, foreclosure investing, and flipping/ wholesale investing.