Show Investors a Property Investment Opportunity

In order to raise private equity for any developer,the first step is to compile a detailed information package. This typically including comprehensive pro forma spreadsheets, investment vehicle structure, site details, and other such information.

However, the packages often neglect to include a snapshot of the deal from the investor point of view.  At a high level - how much investment is required, for how long, at what rate of return and how will that investment and return be repaid.

Investors first want to know the basics and establish if a deal matches their investment criteria and how it rates against other deals currently on offer.

If a deal is presented in a beautiful, large package that has to be read from cover to cover to determine its essence it can be a major turnoff to the busy investment professional and casual investor alike.

The more detailed information is really only necessary when an investor has established its suitability on a general level. What is suggested is first producing a more simple deal overview for the potential investor to review.

Begin with the name of the project and a very brief description of the deal.

The next piece of information to be included is the cost of the deal and so the equity needed. This part of the document will resemble a traditional debt term-sheet. It shows the investor how much the sponsor is committing to the deal themselves and how much is being sought externally. A typical equity split involves investors providing 90% of the required equity with the sponsor adding the remaining 10% .

Moving on to one of the more important sections, for obvious reasons. One needs to display exactly what the investor will receive in return for their equity contribution  - "Expected Returns to Investor".  You state what you are going to pay (typically per year) followed by an IRR calculation. The IRR tells the investor what their annual return would be if they invested in your project for x number of years.

The most common time frame for real estate investment opportunities is probably between 3 to 4 years. But, investors can also be sweet to deals that have a high long term return if the figures stack up. When the equity requirement and the associated returns over the timeframe have been established, the next step is proving the model. This requires presenting a breakdown of the various cash flows to the investor and sponsor, along with the refinance assumptions that feed the model.

On the supporting worksheets it is best practice to build the model in such a way that when an investor sees a number in the summary sheet that isn't clear, they can follow the links and understand its origins.

Constructing an investment summary can be relatively easy, especially if you have the proforma model outlining all the costs and revenues - it is really just highlighting the right information and presenting it in a clear and concise manner.

Without it however, your deal can die before it is even reviewed by the investor.

 

Technorati Label: real estate,property investment,investment

Sell Your Investment Property in Bad Economy,10 Simple Strategies

Real estate investors have made a big discovery. America is on sale. It is the perfect time to purchase good investment properties at bargain prices. Many new investors are considering this the perfect time to enter into the investment arena by purchasing properties hoping they can sell quickly and make a profit.

For investors purchasing with the intent to remodel there is an abundance of available homes in need of various stages of TLC can be purchased for deep discounts as REO properties and motivated sellers continue to increase everyday.

Selling real estate in a slow market is challenging. Everyone from President Obama to the person standing in line beside you at the local Wal-Mart is talking about the decline of real estate values and the difficulty people are experiencing selling their homes. Even with Michael Jackson dominating the news the conversations usually turn back to the housing market, job loss, and the economy, all which have a direct impact on the ability to sell real estate.

If we look at an overview of the real estate market across the United States, we find that many areas have experienced massive property devaluation, high foreclosure rates and poor home sales. Other areas have only seen a modest decline in values and sluggish home sales.

Recent housing reports hint at a glimmer of hope for a slight increase in home sales in some areas. The reality is that the sale of new and existing homes may show slightly improved sales in areas with more stable markets while others are continue to experience stagnated home sales.

Investors purchasing existing homes and remodeling to sell face challenges as they add their properties to a market overflowing with MLS listings and FSBOs.

The big question is this. If we locate a good investment property, purchase it at a deep discount and invest money to remodel it, can we sell it in todays market?

The answer is "yes."  You can stimulate your real estate investment property sales even in a slow economy if you educate yourself on the local real estate market before you buy, target desirable areas with increasing populations and stable or increasing home sales and invest in properties that have features appealing to a buyer. This process starts from the first moment you look at the property.

Follow these 10 simple strategies for selling your investment properties and you will increase your odds for success even in a slow real estate market.

1. Buyers today are searching for homes offering extra features, high value, reasonable price, and available first time home buyer financing or other financing programs. Ask your Realtor to provide current information on what type properties are creating the highest number of sales in the area. What is the sale price? Purchase properties that you can market in these price ranges or a small percentage below. Target homes in areas where USDA, FHA and first time homebuyer financing is available to attract first time home buyers. First time home buyers tax credit and other programs will offer you a pool of available buyers.

2. When you are considering an investment property, identify the qualities the home has that will appeal to a wide range of buyers. Choose homes that offer additional square footage, garages, large lots, fenced yards, maintenance free exteriors and other features. Determine the age range of your potential buyer and identify what features they will look for in a home. Enhance or create these features during your remodel and use them as a marketing tool when you list the property for sale. Tour new home open houses to get the latest ideas on what builders are offering then apply these ideas to your home.

3 Women usually make the final decision about purchasing a home, but don't discount the things that appeal to men. While women may fall in love with the spacious kitchen, stainless steel appliances or the master bath, men are looking for other things. Create a workshop area and a space for the John Deere Mower and yard equipment. A nice patio perfect for a family cookout will make the man of the house feel right at home.

4. Choose interior and exterior paint colors that create warmth in the home but at the same time are appealing to buyers in general. Avoid using multiple colors on the interior of the house since it will make the home look smaller. Have a professional to advise you on colors that are neutral but still add soft color to enhance the appearance of the home. Sherwin Williams, Home Depot or Lowe's offers professional information on choosing and coordinating colors.

5. Offer the little extras like book nooks, all season rooms, extra storage, special kid friendly spaces and family areas. The addition of motion sensor lights will offer the buyer a sense of security. Consider installing a home security system and paying the fees for the first year is a big bonus to a buyer.

6. Create a series of "wow's" from the time the buyer pulls into the driveway. A fantastic first impression can be made even if you are on a tight budget. Landscaping, a neatly manicured yard, fresh paint and sparkling clean windows make the home inviting. Coordinate your colors and style inside so that everything from the light fixtures to the floor coverings complement each other to create a total put together look. Pay specific attention to the details when remodeling older homes so everything blends in with the architectural style of the home. With older homes the key is to make everything look like it has always been there.

7. Think green. Install Energy Star appliances and other energy saving features. Even a few energy saving changes in an older home can be appealing to an energy conscious buyer. Your local power company, Home Depot or Lowe's will have information on how to make your remodel more Energy efficient and still stay on budget.

8. Choose properties with family friendly neighborhoods where buyers feel safe. Consult with the local police department for crime rates in the area. Neighborhoods where the majority of the homes are single family and owner occupied are the most desirable. Ask if there is a neighborhood park, pool or other amenities. Some areas have an active neighborhood association which plan family events and have active websites promoting their neighborhood. These neighborhood perks are excellent marketing tools to attract buyers.

9. Consider the surrounding area and the convenience it offers the buyer. Is it convenient to shopping, schools, parks, etc? Is the property on a quiet street or one with high traffic? What does the community have to offer the buyer?

10. Always strive to create a quality product. Nothing will sell your house faster than a home that has been remodeled correctly. Investors who are remodeling homes to sell are competing against large numbers of MLS listings and FSBO's in the same neighborhoods. Many of these will be newer homes. Your attention to quality and detail will set your home apart from other homes on the market. Adding some simple interior and exterior staging will enhance the appearance of the home, highlight desirable features and will offer visual suggestions for use of the space for the buyer.

Investors who take the time to properly evaluate properties, research the market for current home values and sales, consider the availability of financing programs for first time home buyers and who are selecting good properties in desirable areas can be successful even in a sluggish market, creating a good return on their investments.

New investors should contact their area Real Estate Investor's Association and find a qualified mentor who can advise and guide them through their first purchase and rehab. You can visit the website for the National Real Estate Investor's Association to locate groups in your area. Taking the time to learn will avoid mistakes and bad investment decisions that will be very costly.

Delivering more than your buyer expects and offering the home at a price just a little under value will give the buyer a reason to choose your homes over a competitor.

Summary

As real estate investors we are aware that America is on sale. It is the perfect time to purchase good investment properties at bargain prices. Many new investors are considering purchasing properties that they can remodel and sell quickly. For rehabbers there is an abundance of available homes in need of various stages of TLC can be purchased for deep discounts as REO properties and motivated sellers continue to increase everyday. But the question is this...Can we sell in a slow real estate market?

Technorati Label: investment property,real estate,strategies,investment,property investment

Property Investment Tips , 2009

Contrary to the constant barrage of fear mongering by the media, most people are still in work and many still have a decent amount of money to invest. Most will also be aware that now is the best time to buy just about everything, judging by the deals that are out there. Property therefore is no different.

Decide what you want - it is important you get your strategy right from the start. Do you want income or capital growth for example? Do you want short-term or long-term? Once you know what you want, it is easier to decide which type of deals to enquire about. If you're unsure ask yourself if you want to have cash now, or cash later? In a down market, many investors wish to generate income now rather than speculate on getting it in 2 year's time, mainly because they need it now. In an upmarket, many tend to do the opposite and speculate as immediate income is less important.

Be prepared for ups and downs. As good as an investment may sound when you are looking at it, do understand that, barring extremely secure guarantees, it may not work out. Is this an amount of money you are prepared to lose? If not, you may wish to go for something more secure like bonds, or lower the amount you wish to put into a property deal.

Do your own research - this is critical, not just for your peace of mind, but so you become better at investing. Don't just take your broker's word for it, check the deal out. Are the rental comparables offered correct for the area? Is there plenty of independent evidence to support the perceived investment case? What other developments has the supplier built before and were they delivered as promised?

Ask for evidence to back everything up that is said - following on from conducting your own research, make sure any claim made is backed with evidence. Ask for title and building permits if it is an off-plan deal and get them checked out. If the product involves insurance, ask for a copy of the policy and check for loopholes. If you are buying off-plan, make sure you have copies of all contracts you will be signing so you don't have any nasty surprises further down the line. It takes some extra time and effort it is worth it in the long run.

View the property if possible - many, many investors have bought property over the phone, which may or may not be a good thing to do. If the deal is off-plan there is nothing to see but land, but going reassures you that the location is a good one. If the property is already built, go and view it if you can. Check out the condition and satisfy yourself.

Big is not always good - when using service partners such as rental management companies, lawyers, accountants, etc. using the most well known brand might not be the best move. Quite often the bigger companies have less time for you or are less willing to bend their rules. Local family run companies can quite often offer the decent, thorough and personal service you will be looking for. Again it is important to spend time checking these companies out.

Consider different styles of property deals - there are a number of different types of deals on the table today, such as off-plan, below market value (BMV) deals, Developer Joint Venture schemes, or in different sectors such as student lets, short business lets and nursing homes. Have a good hunt around to find the type of deal that suits or diversify your risk by investing in a variety.

Value a good broker - as much as many critise the role of the middleman, he or she quite often is the one putting the deal together, not the developer or supplier. As a broker myself I may be biased, but a lot of work goes into structuring the deals and bringing them to market, as well as assessing which companies to work with. Quite often the broker has a better overall knowledge of the market place than the supplier does so use and value their service.

 

Technorati Label: property investment,tips,real estate

Investment Property Loans

 

You may find that applying for a mortgage is harder than it was first time around when you decide to purchase an investment property. However, there are a number of mortgage providers that will offer loans for investment property, so long as you bear a few important factors in mind.

When it comes to the down payment you should be prepared for the fact that many lenders will not give 100 percent loans, unless you are providing security for the loan. They could require a large down payment of around 30 percent of the total price of the investment property. However, if you do your research ahead of time, you should be able to find a lender that is a little more lenient and may offer 20 percent or less. You may even find some that offer 100 percent financing, although this can be a lot harder to be approved for.

The best option is to seek out a mortgage lender that specialize in loaning to finance investment property. These will have special plans available to you as they deal with people that want to invest in property all the time. They usually have special plans and features attached to their loans that are designed especially for property investors.

The features of loans for investment property are a little different to traditional mortgages. This can be a little daunting to new investors, but there are many options available to you as long as you are prepared to spend some time to research to find the best deals available to you.

Technorati Label: investment Property,loan

These Investment Property Financing Things You Should Know

 

A property fire sale as homes and buildings everywhere are being foreclosed caused by the current financial crisis makes it an excellent time to purchase properties as investments, the drying up of credit lines has made it a mite more difficult to secure loans from banks or credit unions that are in the best interests of the investor.

You should know that investment property financing is different from financing a residential property. For one thing, it usually requires a better credit history. For another, the down payments tend to be considerably larger. However, with a decent enough credit history, proper diligent research and enough knowledge of the current market it is possible to secure a fixed rate mortgage to cover the entire cost of the property for 15 or even 30 years. Should this prove impossible, however, there are still many other ways to obtain investment property financing. In cash strapped times like these, for example, it is not uncommon for seller financing to be a possibility. Seller financing is, in essence, establishing a separate mortgage with the seller. If the bank's mortgage only covered 50% of the cost and the seller is willing, he can carry the other 50% as a personal debt and be paid in installments to be contractually determined by himself and the investor. It is even possible, in buyer's markets such as this one, to get seller's financing for 100% of the cost if a bank is unwilling to offer a loan. Should seller financing prove inconvenient or impossible, other possibilities remain such as taking out a home equity loan or even receiving legal personal loans from third parties in order to cover the down payment.

The current buyer's market presents a unique and potent opportunity to buy investment property. The multitude of options available for investment property financing ensure that each investor can find a plan that is beneficial to him or her as long as he is diligent and disciplined enough to do the research.

Technorati Label: Investment Property,Financing

The Choices and Alternatives of Property Investment

Property investment has been popular for numerous reasons, amongst which the ability to leverage and borrow at low cost and for its perceived lower correlation with the state of the economy. Leverage, in particular, is highly attractive to investors. For a million-dollar investment property, one needs to put down a small downpayment of 10-20% of the cost of the property. Along with this, we also observe that the cost of borrowing funds for property is far lower than the prime rate charged by banks for other collateralized loans. Investors leverage up to purchase the property, rent out the property and use the rental to repay the loan instalments. If all goes well, they own the property after 10 years.

2005-2006 has seen a boom for high end property in Asia, reminiscent of the heydays of the late 1990s.

However, one of the downsides of property investment in this form is the illiquidity of one's asset. In simple terms, this means that the piece of land or apartment or bungalow is not easily convertible into cash. Selling off an investment property would take easily more than a few weeks and it could be another few months before the transaction is completed and money is received in the bank.

The other disadvantage of property investment is the indivisibility of the investment. One buys a condominium apartment; he or she cannot easily sell off 10% or 20% of the property to raise cash as there is no ready market for investments in this form.

In recent years, financial innovations have emerged in the investment space, providing investors exposure to property and overcoming the two disadvantages described above.

Real Estate Trusts - in some countries, this is called a Real Estate Investment Trust. In this structure, a company commonly purchases commercial buildings and takes over the management of rental and maintenance. The assets are then placed in a trust and units in the trust are sold to institutional and retail investors. The income received from the rental is then distributed to unitholders after deducting management fees and other relevant costs. Real estate trusts can also comprise residential buildings, but this is less common and higher risk as rental rates are more volatile.

The real estate trust enables investors to get in on property investment without having to come up with a large amount of money, as the units in the trust are usually bought and sold on a stock exchange. For as little as a thousand dollars, investors get to hold a share in a portfolio of property investments.

Trading on an exchange also enables units of the real estate trust to be easily exchangeable for cash, as these units trade frequently.

The other benefit of this structure is that yields are more easily projected due to the long term contractual nature of commercial leases. This is not necessarily true for residential property.

The one disadvantage of this, is that investors do not get the benefit of substantial leverage, nor do they enjoy the lower cost of borrowing that comes from buying a property. In addition, there is no physical asset being owned, as the investor owns a right to the distributions of the asset, the sentimental among us might want to touch and feel a live physical building.

Lately, we have seen unit trusts specializing in property investments. In most cases, the fund manager reviews the universe of investible property trusts and selects those that fit his criteria. A property trust might also comprise infrastructure trusts and shares in property development companies.

Such property trusts and property unit trusts have done well in the last year and are gaining rapid popularity. Time will tell if they continue to realize the early promise shown.

The Land Speculation

You should always consider land speculation when buying investment property. A lot of people have heard stories about how someone got rich speculating on land. Sometimes we hear stories about how someone just missed out on the investment opportunity of a lifetime by passing up on buying that land.

Some of the best land speculation happens when you have a use for land and can afford to hold it for a long time. Buying land close to towns and farming the land is a great way to speculate over time. Other uses of large tracts of land such as the old drive-in theaters proved to be an excellent way to provide income while holding land. These theaters are rarities these days, but you get the idea. Try turning land into a salvage yard, outdoor storage facility, campground, or any way you can think of that will allow you to affordably hold onto the land.

Here is a true story: When the first generation of a family came to America, they worked very hard to save enough to buy a property. All the children wanted to buy a big piece of land outside the city. The parents nixed their plan, however, since you could not walk to town from the land. So, they bought a home in the city instead of the big piece of land down the road. Had they bought and held the land, it eventually would have become part of a high value uptown St. Louis neighborhood.


Land speculation does not need to involve a large tract of land. Whenever you purchase a home, you are still speculating that the ground it sits on will increase in value. Try to look for houses that border nicer neighborhoods or are close to a large improvements, such as a new train station.

Whenever you look to buy real estate, always look beyond the structures on the land and its current usage. Look past the properties current value and towards the potential of the ground itself.

Buy Investment Property in The Early Stage of Construction

You may probably hear about buying brand new homes in the pre-construction phase of development and having their home value increase as its being built. These stories usually involve someone getting in during the earliest stage of development when the builders initially release the new homes for sale and typically offer home buyers good incentives and competitive pricing to pre sell as many new homes as possible.

Many new home buyers have found that new-construction purchasing is the best way to own a new home or reserving a price in the market, but postponing their closing date until the new home is completed, in some cases, can take as long 6-12 months to complete construction on the new home community.

Giving buyers time to sell their current house, save for additional down payment, or find a competitive lender. Along the same lines, most builders only require the buyer to put down a small amount of down payment money when purchasing a home in a new home community upfront. After making this payment, one does not typically need to put more money down or make a single mortgage payment until the new home is built, or they close on it. So, if you are still making mortgage payments on your existing home, there’s no need to worry about making double mortgage payments until your new house or investment property is completed and you close escrow.

Another benefit of buying a new home in the early stages of construction is the home owner can be assured that their new home will be low maintenance once the new home is built. Builders are required by law to give specific minimum warranties to ensure that one will not face any major problems during the first few years of living in your new home. One of the warranties is a minimum of 1-year “bumper to bumper” warranty, which ensures that everything in the home is covered by the builder. There is also a 2-year warranty that covers all systems in the home. Another warranty is the 10-year structural warranty that covers foundation and other structural problems.

One more benefit of purchasing a pre-built home is that the buyer will get to choose many features in their home. Depending on the progress of construction, one can often choose flooring, cabinetry, light, plumbing fixtures, etc. A buyer can either go with the upgrades, or they can keep the standard features in order to keep costs down. When buying a new home during the early phases of development, he or she usually has the option to choose the floor plan they want to use and the lot they want to build on.

Take the Advantages of Investment Property

What kind of benefits can investment property afford?

Stability in Investment Property

Although taking risks on the stock exchange may yield higher returns, investment property can provide you with a stable, steady income and a relatively secured level of return on investment. When looked at with a long-term view the investment property is unlikely to ever lose you money. You may have to pick the right time to sell a property but as long as you keep looking at this investment with a long-term view you will be hard pushed to go wrong. Property is historically stable and if you are prepared to wait it out you can make money on it.

Financial Gain

If you do your homework and consider your investment property as a long term investment the financial gains to be won through investment into property are fairly substantial. In short, one of the most significant benefits with regards to investment property is that as long as you have a bit of free capital you are able to borrow money from the mortgage lenders, in order to buy a property which you can then let out and charge tenants money in order to pay back the mortgage lender. In affect you become a middleman who is set to earn a good return on investment as long as you decide to follow a few basic steps.

Return on Investment.

Studies suggest that, on average, a home doubles in value every seven years and whilst this is not guaranteed as long as you have the property correctly evaluated and you buy in the right area you can feel certain that you are making a good, financially sound investment. This means that if you have a lump sum of money which you are interested in investing then Investment Property is certainly a type of investment worth having a look at.

Be Careful When Buying Investment Property

With the real estate prices dropping steadily, it is more tempting than ever to jump into the real estate investment game. But before you go out and buy an investment property, there are a few things you should keep in mind.

You need to consider the type of investment property you are interested in. Are you looking for a fixer upper that you will flip for a quick sale or are you more interested in a rental property. If you are looking for a flip, you will need to find a property well below market value which is in need of only cosmetics updates. You will need to be very careful in budgeting the renovations as they tend to take longer and cost more than originally planned. When it comes to rental properties, you must once again be careful to buy something that offers you good rents to cover the mortgage, taxes, upkeep, etc.

Before buying an investment property as home you need to understand the real estate market dynamics in your selected area. Location is very important in purchasing investment properties, almost more so than in buying your own home. Even though you may have lived in a particular area for a very long time, make sure you look at its potential from an investment standpoint. Do your research whether you are considering a neighborhood or area you know well or a new market. Most towns and cities will have areas that are more desirable than others so try to keep in mind specific postal codes, average median income, sale price of homes, schools, shopping, and any other factor that may impact on your investment property.

The help of a real estate professional will save your time and aggravation. Try to choose a real estate professional with experience in investment properties. This person will have invaluable information to help you make the right decision. They will be your eyes and ears when searching for the perfect investment property. They will also have access to comparative material to help you review prices and rents.

You will need to have a good credit rating and or collaterals as well as a substantial down payment to purchase an investment property, particularly one that is a rental property. You may also need to make cosmetics or mechanical repairs to the home before being able to flip it or rent it out. Make sure you are aware of the type of investment needed to bring the property up to date for a quick sell or to bring it up to acceptable living standards to attract great renters.

Property investment is a challenging and rewarding business. Those who do it are often addicted to it. However, the rewards may be great for certain investors, there are also a number of them of fail. Careful planning and number crunching with the help of a good real estate professional will help you choose the type of real estate investment that's right for you.

Find Investment Property in Tax Foreclosure Market

Tax foreclosure real estate is property that has been taken by the IRS due to the home owners' inability to meet the demands of his tax bill. While the Government is loath to take this property away from home owners, if the home owner makes no attempt to contact them and rectify matters, they will do so. This means that thousands of homes have been taken in tax foreclosure and the Government has to sell them to recover their debt.

Not many of people who know investment property can be found in the tax foreclosure market are aware that they can take advantage of this market.There is a great deal of information available in the internet that helps anyone wanting the take advantage of this market.

If you inform yourself of all the processes required to take advantage of the market then the world can quite literally be your oyster. Just be prepared to do some homework and have patience and you might just find the tax foreclosure home of your dreams. Real estate obtained at tax foreclosure auctions offer the buyer much better value for money. At present the economic climate is such that the market is flooded and real bargains can be had.

Tax foreclosure real estate is generally able to be viewed prior to the date of sales. So do your utmost to ensure that you have viewed the property. You would never purchase a motor vehicle sight unseen and real estate is a large investment, so don't purchase anything you have not seen in person. Of course, don't worry about dirty carpets and cracked windows. These are relatively minor problems, however steer clear of any property that has major structural damage, these are duds in the long run and will not see you getting a bargain.

The more you know about this process the better armed you will be to deal with it when it comes to auction time. But it is not only important to know about the processes that take place, it is also important to have as much knowledge of the property as you can. The more you know about the property the better; this will give you the knowledge to place your bid so that you cane either make a good return on your investment or make a wise choice in terms of the kind of home you will be living in.

Make use of a detailed inspection list and evaluate what repairs are needed as well as what they will cost you. This enhances your bidding ability and also lets you know if your purchase will be within your budget. Make a short list of properties that you think suit your investment criteria and always stick to your budget.

Are Commercial Real Estate Courses Really Helpful?

More and more investors are looking at leaving the amateur ranks of residential investors and playing on the big kid's playground of commercial property investing. In order to feed this exploding need gurus and self proclaimed experts of all sorts are coming out of the woodwork with their "proven" systems.

How do you know that the commercial investing courses you buy are going to actually help you make the money you are looking for?

First, you have to look at commercial property investment as a business. Any business worth getting into is not going to hard sold to you by a salesman in a hotel conference room. You would never buy an existing business or start a new one based on the threat of a ticking clock. You would do your due diligence, run the numbers and check out the market place for sinking money into anything. So do the same when it comes to one of those expensive commercial real estate courses.

If you're new to commercial investing, elect to get your feet wet by reading some of the top quality books we recommend on this site, or for that matter blog posts. Try to find a reliable source of information published by people who are actually doing the investing, not just talking about it.

If you're already accustomed to the commercial investing market and are looking to get to that next level, then take a look at some of the courses out there and see what they offer. Does the guru offer ongoing support and help when you run into rough waters? If not your expensive real estate course just turned into the most costly paperweight you owe.

A great alternative to buying any of the commercial real estate courses out there is to look into getting a commercial real estate mentor. By joining the right investment clubs, networking or even becoming a silent partner with a proven commercial real estate investor you will learn from a seasoned pro while having a friendly hand to guide you.

Should You Buy Investment Property

When you invest, you have a virtually unlimited array of ways to make money. But that entails being able to make choices. You have to decide how much you will learn about each aspect of real estate, whom to add to your team, where to seek properties, whether a particular property is a good one for you—and on and on.

What to do with a property once you have purchased it. You may not be the type of investor who wants to buy a property and hold on to it for a long time. You may not want to deal with property managers and tenants or to see to the upkeep of a piece of real estate. If these things don't appeal to you in the slightest, your other option is flipping.

Flipping a property is simply the practice of selling it as soon as you buy it, often at the same closing. At the very latest, flippers tend to begin the selling process the day of the sale. Some even begin before they own the property, which is very risky business. However one goes about doing it, flipping always entails a mad rush to the auction block because an empty property is always a liability.

When you hold a property,however, you have the opportunity to raise that property's value. If you get a really good deal, the amount you have paid for it will probably be a drop in the bucket compared to what you stand to make from it. And when you do decide to sell it, you will be able to do so at your leisure and get more than you would have by flipping.

This holds true especially if you property is a multi-family dwelling such as an apartment high rise. If it is a good property in a good location, and you take care of it, chances are that occupancy is going to stay up. With a property like that, your earnings tend to increase exponentially. With good management, that is almost guaranteed.

Speaking of management, you will need to decide whether you will do that yourself or hire a management company to do that for you. If you own a particularly large piece, or if you own many pieces, you will have to hire a manager. Ken McElroy, author of “The ABCs of Real Estate Investing,” strongly suggests that you hire a real estate management company so that your talents and your time will be put to better use elsewhere.

Ultimately, however, whether you flip a property or hold it depends on what you would rather spend your time doing. Perhaps you thrive on the fast-pace workday that flipping entails. Maybe the adrenaline rush feels like an adventure to you. In that case, you should learn the proper way to flip properties.

However, if the idea of nurturing a property appeals to you, then buying and holding is the way to go. Depending on your talents, you personally may be able to make more money working one way as opposed to another. It's totally up to you.

Buying Your First Investment Property

Here's my tips on what to buy and where to start to maximize your investment.

For most first-time investors, the choice is usually between a Single Family Home or a 2-4 unit property, commonly called Duplexes, Triplexes and Fourplexes. There are large differences between both and you should fully understand them before plunking your money down. In this segment we're going to focus on Single Family Residences or SFRs for short.

SFRs provide an investor with the greatest leverage possible, meaning you can put the least money down. It's not unusual to buy these types of deals with 10% down, meaning on a $150,000 home, you'll only need to come up with $15,000 plus closing costs. This makes these types of investments very affordable for most young investors who don't have a lot of capital to begin. Be prepared, however, to feed the alligator every month, because these properties typically don't debt cover, which means the rent you collect every month probably won't be enough to cover your mortgage payment, tax bill and any other expenses you have.

Most often these properties are purchased as pure speculation or appreciation plays, meaning the goal is to create equity over time. For example, if you bought a property for $150,000 with 10% down, and were able to resell it in 3 years for $175,000, you'd earn $25,000 on your $15,000 investment, which equates to a 167% ROI over a 3 year hold.

Be careful when buying these types of deals, because your goal is to come as to close to break even as possible, so you don't have to come out of pocket. And remember, if you're tenant moves out for any reason, you won't have any money that month to cover the mortgage or expenses, so make sure you have 3 months of mortgage payments in reserve for a rainy day.

And remember, the more SFR's you own, the more tenants and properties you have to manage. It's easier to own a 10-unit apartment building than 10 SFR's since you only have 1 roof and 1 lawn to mow, versus 10 roofs and 10 lawns. Finally, as soon as you're able, take your equity gains from the SFR's and 1031 into properties with multiple units so you can begin your climb up the Property Ladder.

Market Your Income Property

You should expect to see some investment properties listed for sale by a residential real estate agent. Mostly duplexes or triplexes, but occasionally residential real estate agents also sell larger apartment complexes.You might call it professional pride, even intolerance.

Residential agents typically do not include essential income and expense data about the property. This is frustrating because it necessitates a call to that agent, which easily could be avoided if the agent merely took a few minutes to present the income property properly.

Price
Number of Units
Unit Mix - Are the units two bedroom one bath, three bedroom two bath, and so on.
Gross Scheduled Income - The potential annual income if all units were occupied and collecting realistic rents.
Operating Expenses - The dollar amount spent annually to keep the property running. Property tax, liability insurance, utilities, trash collection, maintenance and repairs, and so on. Depending on the number of units, this should be somewhere between 25-50% of the gross operating income. With duplexes, for instance, tenants usually pay for trash collection, and utilities normally associated with laundry facilities in larger complexes, or landscaping costs do not exist.
Rent Per Unit - Show the current rent for each unit. In cases of larger apartment complexes, show a rent-range by unit configuration.
Capitalization Rate This is optional in the MLS listing, but it can help generate interest. Simply divide the property's net operating income by the asking price.

Moreover, prepare a marketing package you can send to those inquiring about your income property listing. Whereas, the MLS is meant to broadcast the listing and peak interest in the property, the marketing package fills in the blanks. In addition to the obvious like price and address, a marketing should also include

An Income and Expense Statement
Property Description
Property Features
Current Loan Information
Proposed Loan Information - Show the annual debt service and cash flow before tax
Rates of Return such as capitalization rate, gross rent multiplier, cash on cash return.
The more eloquent the better, so you might also consider adding calculations for price per unit, pricsquare foot, expense ratio, break-even ratio, and debt coverage ratio.
Property Picture

Remember, your goal is to sell your income property listing. Why not present it in a way that would appease investment property specialists, perhaps get them interested, and at the same time make you look more professional. Plus, it's a great way to show your seller how proactive you are about rental property marketing.

Tax Shelter Benefits You With Investment Property

Thanks to the tax shelter benefits provided by the tax code, a real estate investment can shelter some of its own income from taxation and occasionally shelter income received from other investment sources as well.

There are two allowable deductions for real estate investment properties that provide tax shelter.

The first of these deductions is for mortgage interest. The IRS allows you to deduct the interest you pay on the mortgage you obtained to acquire the income property. The benefit to real estate investors is that interest is really a cost associated with acquisition of property rather than operating it, and the argument can be made that tenants really pay the mortgage interest for the real estate investor.

The second source of tax shelter is through depreciation deduction, which the tax code now calls cost recovery, but we'll continue to call depreciation for our purposes. In this case, the IRS allows you to assume that the buildings (not the land) are wearing out over time and becoming less valuable, and as such permit you to take a deduction for that presumed decline in the value of your asset.

Okay, now here's what's great about real estate depreciation.

Depreciation is a non-cash tax shelter deduction. In full compliance with the tax code, you get a deduction that is not an operating expense and therefore does not affect your cash flow. Moreover, depreciation can shield some or all of your property's year-to-year income from taxation and in some cases when the depreciation deduction is large enough, it can even exceed the amount needed to shelter the property's own income and provide tax shelter for other investment income as well.

Though you won't find a simple formula for the tax shelter component of a real estate investment, here's the idea.

Income less Operating Expenses = Net Operating Income

Net Operating Income less Mortgage Interest less Depreciation (Cost Recovery) = Taxable Income

Example: Let's say you own an income-producing property that generates rental income of $48,000 and operating expenses of $19,200, leaving a net operating income of $28,800.

To calculate your taxable income, you would then deduct your mortgage interest and allowable depreciation from the net operating income.

Unless you have an interest-only loan, your mortgage payments are made up of both interest and principal. Only the interest portion is deductible, which we will say is $17,559.

The amount of depreciation depends on several factors: The useful life of the buildings as specified in the tax code, which is currently 27.5 years for residential property and 39 years for nonresidential property, and the percent of the investment real estate allocated to buildings and land. Only buildings can be depreciated, and for our purposes, we'll say that the deductible amount for depreciation is $10,037.

Here's the calculation: $28,800 - 17,559 - 10,037 = $1,204

In other words, you must pay Federal income tax on a taxable income of $1,204.

There are other components to tax shelter. For instance, you can typically depreciate capital additions over the same useful life, starting when they are placed in service. You are allowed to amortize closing costs associated with the acquisition of an investment property over the same useful life. And you can amortize loan points over the number of months of the loan term and write them off.

Calculating Your Investment Property Monthly Rent

There are a number of things that factor into determine how much rent to charge. First you have to look at the supply and demand within the real estate market. There may be other real estate properties similar to yours, but do you know how many there are?

You may have a tough time if you find out that there are plenty of vacancies for the taking. For you, that also means that you will be facing steep competition from others who are trying to do the same thing. When you're trying to come up with a price, that can have a negative effect. You may have to consult with experienced real estate professionals to assist you with this.

If you have property in an area where it is booming or have more people moving out. You will be able to provide good rental prices if the area is stable and on the upswing.

Depending on what will benefit you, you may choose lower rental prices over higher ones, and vice versa. One thing that you will need to do is to check out other properties and find out what they are renting for. Get a real estate agent to assist you. They have the tools where they can get information on the prices of home in nearby neighborhoods.

If you see some "For Rent" signs, then you may want to call the number to inquire about how much the property is being rented for. Search online for tools that can help you get comparable rental prices for similar properties in the area. Don't forget about the MLS system.

Once you have come up with a price for the rent and put it in place, you will have to work on maintaining a profit. Initially, you may not see much, but as different things happen, such as inflation and the like, you will have more expenses and your taxes will increase.

However, you can counter that by raising the rent. After the end of the current term is when the rent increase would take place and start with the new term. You want to keep the tenants that you have so that the cash flow will continue to come in. In order to do that, you must keep the lines of communication open with them. Once you cut it off, they will be more tempted to leave.

Commercial Real Estate Clubs is Really Helpful

Many investors are turning to commercial real estate clubs. These clubs bring together investors from the entire spectrum of the industry for investment, learning and networking purposes.

Commercial property clubs first gained popularity in the early days of the real estate boom. Modeled after stock investment clubs, commercial property clubs have formed all around the country to bring investors and other members of the commercial investment community together. Some clubs function as meeting places for networking and learning more about the local market and industry in general. Others pool their money together and invest in property to increase their returns.

Many investment clubs of this nature bring together novice and expert investors. The novices understand the power of commercial property but maybe don't have the time, patient, knowledge or contacts to make a deal work for them. Many of these types of investors are looking for passive income from their investments and find a perfect source in commercial investment clubs.

Passive income is any money you are not actively working for. By putting your money in the pool and helping finance a deal you reap the monetary benefits but don't have to root the deal out yourself. Plus, if you get involved in an investment club with commercial real estate professionals, you get their years of experience and get to sit back and collect the benefits. In addition you have the added benefit of sitting back and seeing what kinds of deals they do on a regular basis. In a sense, you're paying yourself to learn!

Investment clubs of all sorts have their ups and downs. You want to make sure you joining one that fits your goals, comfort level and ideas about investing. Some charge dues to be able to afford to host seminars or bring in guest speakers, so try them out for a couple of meetings to see if you're getting what you pay for.

Even if you aren't looking for a silent partnership, commercial real estate clubs are great ways to network with commercial real estate members. One of the best ways to get your feet wet in real estate investment without risking tons of cash and endless hours of frustration is finding a mentor to guide you. Finding a professional who can steer you through rookie mistakes is one of the benefits of investment clubs. You can benefit from someone else's years of experience and hard work in the field, and build a valuable friendship and professional contact in the process.

Residential Investment Property is Important to You

Residential investment property is residential property that an investor purchases in order to profit either by reselling or renting.

There are typically three types of residential properties, each with their own potential investment risks and benefits.

Private Houses: An individual house on an individually owned plot of land. The value of a private house is typically high due to the space and privacy but precisely because of its higher price it is more likely to stay unoccupied and on the market for longer than ideal. There is also no mechanism to ensure it won't depreciate due to neglect by its occupants save for what direct observation and attention the landlord can provide himself, which can be difficult if he or she has invested in multiple properties.

Condominiums: A type of housing where part of the property is individually owned and the exterior areas, internal roads are owned commonly. The value of a condominium is generally lower than that of an equivalently located private house and they are governed by a series of agreements and bylaws that each of the inhabitants have signed. Proper governance can raise the value of a condo and improper one can lower it. As a whole, the value of a condominium can fluctuate but because much of it is owned by everyone then maintenance and cosmetic repairs, at least in the exterior, are less of a problem than with private houses rented out.

Multifamily Housing: A classification of housing where several individual housing unites reside inside one building.The main advantage to using multifamily housing as residential investment property is the following: when a condominium property or a private house is inhabited, it is completely inhabited and when it is uninhabited it is completely uninhabited. The same is not true of multifamily housing: a single building can be completely inhabited, completely uninhabited and anything in between. Because there are so many housing units inside the building it makes for an ideal source of diversified income which eliminates the hassle of depending exclusively on one specific source.

Finding Good Investment Property Deals

Here are six resources where you might find good real estate deals. Perhaps they're all rather obvious, but worth mentioning nonetheless.

A Real Estate Professional Developing a good-working relationship with a qualified real estate salesperson can be an excellent resource for you. There are just two suggestions: the more loyalty you give the agent the better, and getting two or three agents to beat the bushes for you in the same community can be counter-productive because most real estate agents won't generally spend a lot of extra time trying to hunt down a property for a real estate investor when it looks like a dog race.

Builder-Developer Look for people who are in the business of selling their own real estate. Often you can find someone with a treasure trove of inventory motivated to sell off some of it.

Code Violations Local building codes sometimes change during the course of ownership and put a seller into a difficult spot. For example, the state now requires buildings of a certain category to have fire sprinklers installed, or earthquake reinforcement. A sudden added investment to do that work may be more than the owner has to spend, and in turn might motivate the owner to sell at a reduced price instead.

Foreclosure-REO When lenders foreclose on a delinquent loan and buy the property themselves at a foreclosure sale they end up with real estate owned property (REO) they prefer to sell rather than operate. REO properties can sometimes be a prime source for good deals.

For Sale By Owner It's common for owners to market their own properties to avoid paying a real estate commission. When properly handled, sale by owner can be a good source for good deals.

Management Problems Properties in need of maintenance can be an indicator that the owner no longer has a heart to continue managing the property and might want to sell. A call to the owner expressing your interest in the property might be all it takes to negotiate a purchase and good deal for yourself.

Investment Analysis for Off Plan Property Abroad

If you are buying a property that has not yet fully completed in all regards, then it is said to be an off plan property. The demand for pre-construction overseas property, or off-plan property, has seen a steady rise over the past decade as more investors turn to the overseas property market for bigger capital growths. On the face of it, investing in property abroad seems a good proposition, but it's always advisable to acquaint yourself, as far as possible, about the pros and cons of an unfinished property.

Advantages Of Investing In Off Plan Property Abroad

An off-plan property investment abroad entails a whole lot of advantages to the investor. Some of these include -

The foremost advantage is the price factor. You can avail strikingly lower prices for the undeveloped property. The builders offer these discounts because they need to raise immediate capital for construction purposes. Moreover, it's always the endeavour of a builder to sell the property during construction to offset any probability of failure to gain from selling it in future. Another reason for builders to offer off-plan property at discounted rates is to obtain better interest rates on their development loans from banks and investors. The price obviously has to be on a lower side for an unfinished construction as the builders have hardly anything to show except for a floor plan and an artist's impressions of the finished development.

Moreover, even this discounted price is not paid immediately. Normally, the builders ask for 20%-30% deposit at the time of the Sale Agreement, and the balance normally becomes payable on completion of the property. You can easily finance the balance on a 70% mortgage in most countries.

Investment in an off-plan property overseas will, most certainly and drastically, mitigate your capital gains tax liability.

If all the payments you make to a builder are covered by a bank guarantee, it means that anything paid is returned to you should the builder defaults. So, your investment is largely secured by a bank guarantee.

An off-plan property investment gives you a chance to supervise your returns on the property during the construction period as well, which is generally 1-3 years. This way you can realize the profit during the construction period as well, should you require immediate money. This benefit is particularly significant if one considers the small amount invested in the form of deposit at the time of Agreement.

The overseas property should be alluring enough to invest. In other words, the builder must, at least, promise to employ state-of-the-art construction materials and install modern gadgetry to make the finished product an exciting proposition to reap maximum rewards, if resold. Some builders also allow the investor to choose the fixtures and fittings to be installed during the construction.

Disadvantages Of Investing In Off Plan Property Abroad

Though off-plan property investment abroad may seem quite a cheap proposition, it has some pitfalls too. Here are some of the disadvantages you might face in an off-plan investment -

The apparent negative feature of off-plan property investment is the chances of the developer disappearing or going bust. Therefore, it's extremely vital that you do your homework and research thoroughly the credentials of the developer. If the developer is a well known entity in that particular region, chances are that the deal will be good, but if he is a new entrant in the business, you must be extra vigilant in ensuring that your money won't go down the drain.

Another risk you will be undertaking by investing in off-plan property is its possible sudden fall in value within the real estate sector. You can never predict the tilt of market forces, and can incur losses if the demand for that kind of property has hit a low during construction.

There is a wide gulf between the projected and the actual product. The overseas builder can easily take you for a ride if he uses inferior or different materials during construction than promised. However, if the developer has a good reputation, chances are that such cheap tricks won't see the light of the day.

If you are planning to move into your newly acquired possession, then ensure you are flexible with your moving dates. You can never be sure about the precise date by which the construction will be completed. There may be any number of hurdles in the construction process, and during this period, you just cannot pack your bags and hop in your dream home or apartment.

Legally speaking, you are not the actual owner of the off-plan property until it is completed. So, you don't enjoy all the rights against the property as enjoyed by an owner. Without ownership, the banks may not lend against the property, and therefore, any money required before completion may have to be raised from personal resources. However, these cases are few and far between, most banks will lend the remaining monies in the form of a mortgage secured on the finnished product.

Tips For Real Estate Investors In Bad Economy

You know the world economy is not prosperity.Credit has dried up, foreclosures are raining down and people everywhere are tightening their purses. The days of almost immediate profits in real estate via speculation, gambling and unethical methods are over. Why then, do people keep asking and offering property investment advice? Simply put, because while the above is quite true the current economic crisis has also provided a series of unique real estate investment opportunities.

While this is no time for undisciplined investors looking to make a quick buck, disciplined businessmen will find that the cost of obtaining a house is at its lowest point in years. Debt and the threat of foreclosure have led homeowners to sell their houses for 70% or less than their fair market value. Investors who do their homework will find this is a great time to obtain properties cheaply and either flip them immediately to larger investors for minimal but low risk profit or resell them for a larger profit once they have remodeled and renovated then. There will always be a market for appropriately priced houses and there are alternatives to an immediate sale that can be equally advantageous. Leasing with the an option to purchase at the end of the lease, for example, will generate at least enough income to pay for the mortgage and a person who is interested in a lease with an option is very likely seeking to purchase the house at some point.

Yes, the economy has stalled and everyone is suffering the consequence. The lack of credit and the continued layoffs have reduced the number of people purchasing homes. But for those seeking property investment advice I will only say this: unique and exclusive opportunities are available to those who are intelligent and disciplined enough to make the most of them.

Property Investment is the Best Markets For Positive Cash Flow

When an individual invests his/her money to purchase any property or assets with intent of gaining higher returns is described as an investment property. Generally, many people think cash flow from property is guaranteed, but this is not the case with some few investments, under some uncertain conditions they will not guarantee any cash flow at all.

An investment is called positive property cash flow when you are able to hold that property even in uncertain condition without extra burden. It can happen only when there is some extra margin built in, even though your property won't grows fast in capital, you can gain equity with help of cash flow from the investment. Here are some of the ways through which positive cash flows can be driven.

Rent or lease: the positive cash flow from investment on house is rent. Just like any other investment, income from house is possible only when it is well managed. House which is close to school, shops, offices will attract high rent when compared to those which do not have any special features.

Capital gains on investment: capital gain is one that differentiates good investment from bad investments. For property, it's surrounding and structure affects the property value. The property which is surrounded by schools, shopping area will attract higher demand when compared to one those far away and hence appreciation in capital value of the property.

Here are some of the tips on selecting the best market for positive cash flows.

Establish your goals: first decide your goals about what are you looking out of real estate property investment. Then implement the strategy to achieve you goals. For ex: do you want to gain higher returns with in short period through flipping or want to become financial independent through rental income. If you want higher returns through flipping the property than decide how much time and returns do you plan about or when looking for financial independence how much do you need for that.

Once you establish your goals then you must establish how much capital you have to achieve these goals. If you have small amount then start with low cost houses and renovation can be done for less amount for low cost houses and make profit through flipping. Gaining money in real estate market can also be done with no money, but it requires time and luck. If you want to gain return in investment property then you require some funding to start with. Whether it is to hold, rent or to flip anything it may be you always need reserve money in real estate market.

Once you decided the strategy to investment property then search for best real-estate market to invest you amount. Not all real estate market is good for you to invest your hard earned amount. The best real estate markets are those where people are looking for house in.

Get a Property Investment Mortgage

For the vast majority of people to purchase a piece of real estate immediately out of pocket is difficult. A loan, provided by a bank or credit union, is the most common solution. Those who may be seeking to take advantage of the current housing price drop to invest in real estate, however, need to be aware that obtaining a loan for an investment property is different from obtaining one for personal use.

The economic crisis has caused previously free flowing credit lines to dry up and loan interest rates to rise. Banks and creditors are more thorough now than they have been in years as to who is approved for a loan and for what purpose. If that weren't difficult enough, a property investment mortgage typically requires a cleaner credit history and a considerably larger down payment than a mortgage for a personal property. To those with a good record history, however, and who are sensible and diligent in doing their homework when finding out what property to obtain and what institution to solicit a loan from should have little difficulty securing it.

Even in the midst of economic instability partially caused by an overflow of credit it is possible to find fixed rate mortgages for 15 or even 30 years. If it proves otherwise, however, and obtaining a mortgage to cover the full cost is not a possibility, the investor should use their knowledge of the market and get creative. If the bank only approves a mortgage that covers 70%, the possibility of using seller financing to cover the remaining 30% exists, especially in a buyer's market such as this one. Even if that proves more trouble than it is worth, he or she could obtain a home equity loan and use it to cover the remaining percentage.

Despite the troubled financial climate, it is not impossible by any stretch of the imagination to secure a property investment mortgage. With enough intelligence, homework and creativity an investor should be more than able to finance his or her investment with minor difficulties.

8 Investment Property Documents You Should Keep

The financial records you should keep fall into these three main categories: rental income, allowable expenses, and capital costs.

Rental income

Keep records detailing all of the rent you charged and received, as well as the dates each property was let out.

Allowable expenses

These are the costs that are involved in letting out or managing your property investment portfolio these may be subtracted from the rental income to reduce your taxable profit. Those expenses can include all or part of these costs:

8 Property Investment Documents That You Should Keep

1) Documents relating to fees paid to letting agents and accountants, and
for legal Fees.
2) Documents for property insurance insurance for Homes and Commercial buildings and contents;
3) Documents showing the interest on your property loan
4) All paperwork regarding maintenance and repairs on your Investment Property.
5) Document the utility costs;
6) Make sure you document the rent, ground rent, and service charges.
7) Keep records of your Council tax bills;
8) advertising costs not to mention to document other direct costs of letting out the property.

Capital costs

You may claim different types of allowances for the cost of furniture and equipment you provided with the property. You may also deduct certain capital allowances for cost of equipment relating to your lettings business. To take these deductions, you need to keep records showing exactly how much these items cost you and what date you purchased them.

For all of your expenses, an accountant should give you guidance on exactly what you can claim and how to keep the required records. In general, you should document all of your income and expenses by having rent books, receipts, invoices, and bank statements. Remember to keep your business and personal records separate.

Finally, if you do profit from selling property that is not your primary home, you may have to pay a set amount of capital gains tax. Some of your costs should be deducted when calculating this amount of this tax, so make sure you keep a record of when you purchased and when you sold the property.

The acquisition and the sale price, all buying and selling costs, and the cost and dates of improvements. yearly capital gains tax reductions are available to landlords under certain conditions. Confirm with your accountant what you can claim and when so you can then plan to sell your property at a tax advantageous time.

Property Investment Finance is Really Worthy

The economic crisis has brought down housing prices almost to the ground. The cost for obtaining a home today is the lowest in recent memory. This is an excellent opportunity to invest in real estate, to purchase it with the intent of either making an immediate sale or establishing a long term lease, but with credit no longer flowing as freely as it once did everyone is concerned about property investment finance: will the banks and creditors play ball?.

It is tempting to think that banks have stopped credit entirely, but that is far from true. Yes, loans are being approved less frequently than in recent memory, but anyone who has a solid plan and a strong credit history should not have major difficulties obtaining a reasonable one. Bearing in mind that loans for investment properties are more stringent than loans for personal properties and generally require a better credit history and a more substantial down payment, it may not be possible for everyone who is looking to invest to secure one that will cover 100% of the costs. Even if that proves to be the case, there are still many other property investment finance opportunities.

Seller's financing, for example, where the seller assumes the debt of the property is more and more frequent in the current real estate market and can be used to either cover the percentage that the mortgage doesn't or even to replace the need for one if the conditions are right. There are also legal means to obtain personal loans for reasonable interest rates and the possibility of obtaining a home equity loan and using it to cover the down payment or even the remaining percentage not covered by a mortgage and/or seller's financing is always present.

Transactional Funding in Real Estate Investment

You need to understand the basics of transactional funding and proof of funds letters and how they relate to your real estate interests and activities if you are interested in purchasing short sale properties. Essentially, the transactional funding refers to the funds borrowed for a very short period to transfer a property from the current owner, to the transaction coordinator, then to the new owner. Proof of funds letters are used to help secure financing and smooth the way for the real estate transactions you are involved in.

Transactional Funding

The use of transactional funding allows the short sale process to take place smoothly. The basic premise for the loan is that once the original owner is ready to sell and the buyer is ready to take over the property, there is a short term loan needed to facilitate the transfer period. This means that the transactional funding is a loan that exists for just a few hours, before being recovered when the final property owner pays for the property.

The two separate transactions that place on the day of settlement create a unique situation known as a double closing. Lenders like these loans as the lending period is typically just several hours. If the transactional funding lender ensures that all the other financing for the transfer of the property is in place, this makes this short term loan deliver a relatively low risk opportunity for a profitable outcome from the provision of the short term loan.

Transactional funding works not only for the short sale scenario described above. A savvy investor can structure the use of a short term loan to easily carry out purchases of real estate owned (REO) properties, or any other real estate transaction that is based around a double closing.

Proof of Funds Letters

The proof of funds letters are used to demonstrate that investors have the financial resources or means to fund a property transaction. They indicate to the other parties that your funds are legitimate and can be used for the purchase of the property. This type of document is particularly useful if you are involved in short sale transactions and REO purchases that are structured with a double closing or when using transactional funding. They can also be used for other transactions that require documented evidence of your financial resources.

The proof of funds letter is generally provided as a bank, security or custody statement, stating that the investor or property buyer has funds for the real estate purchase that are obtainable and legitimate. Using this letter, the buyer/investor is able to secure any necessary additional funding or to assure the seller that they have the means to fund the real estate purchase.

To achieve success in real estate investment, it pays to fully understand the different options available to you and how to use them to maximum advantage. Transactional funding and the use of proof of funds letters are two added 'tools' in your investment toolkit. Once you understand how these financial opportunities can be used to the best advantage, you'll be on track to achieving financial security through real estate investment.

Tips For Commercial Property Investment Mortgages

There are plenty of commercial investment mortgage options available today. They help you in buying commercial properties.

Commercial property investment is generally made to rent out for business reasons. Prior to buying a property you must ascertain the quality of users you are looking for. It might have to do with area credit history record, needs of the borrower and his payment capabilities.

People might have a single investment in mind. They might also be looking for a portfolio of sorts. In both cases, loans are easily accessible. If you show your worth and neat intentions, you will be able to get Government Grants as well. Such grants are not easy to procure. You have to wade through a lot of red-tape. But if you present your profile well and the grant is being administered then you can even fetch millions from government. It is important to note that government is entitled to hold different audits and periodic assessments for finding out the progress you are making.

An authentic and smart commercial mortgage company would provide you with the right kind of lender. It will also post your entire presentation to him so that he can see your plans clearly and provides you a formal sanction. It would also teach you the basic of insurance and minimal cover. The commercial investment property mortgage companies arrange the most competitive deals for you so that you get your infrastructure cost minimized.

Reduce Risk of Property Investment

Working your way up the ladder by buying and selling properties for profit is a great way to earn money, providing that the market doesn't collapse and leave you stranded with a property that no one can afford to purchase. Possibly the scariest prospect of your property venture is the fact that you will shoulder the burden of responsibility that inevitably follows with buying property. If we are honest, a problem shared is a problem halved and when it comes to taking responsibility for something as significant as buying and selling houses, it would be great to be able to halve any problems!

There are pros and cons of forming partnerships to share the burdens and the most obvious benefit is that you get to share the starting price. Equally as obvious though is the fact that all the profits will then be split if you have a successful sale which can be highly annoying! The main aspect that needs careful consideration before jumping head first into a joint property project is the negative impact that money can often have on relationships. It can be a fatal trap to fall into and if you choose to work alongside a family member or friend rather than an insignificant partner there may be trouble ahead.

The successful relationship of a joint venture with someone close to you will largely depend on your personality as well as your current relationship status. If you are able to express your feelings without getting frustrated and angry when confronted with stressful situations then you stand yourself in better stead to be successful. You also need to be confident to be heard on major decisions and it may be a good idea to form an odd numbered partnership so that the majority rules vote can come into play.

Investing into property with someone that you know means that you already have an established relationship with them and it makes discussions and meetings comfortable as everyone feels more at ease with each other. The only downside of feeling more at ease in each other's company is that this can lead to complacency and many people may feel more inclined to start an argument, rather than discus a problem, with someone they are comfortable with.

It is vital to really consider all the potential pit falls in investing into the property market with a loved one as not only are you risking your money but you are also potentially putting your relationship on the chopping board and simply waiting for the knife to strike. If the whole venture goes down the financial drain you run the severe risk of leaving the partnership with no money, no property and no relationship.

When the roof caves in and walls crumble to the floor, a friendly partnership may prove invaluable as you have a shoulder to cry on and financial back up all rolled into one person. One of the major concerns when you do business with someone who you do not know is that niggling worry in the back of your mind that at any point in time they may rip you off and pull the carpet out from underneath you; a worry that will, or at least should, be eliminated if you work in conjunction with a friend or family member.

Development and progression can be hampered as potential work orientated meetings can fast become social jamborees where everyone falls down the slippery slope of getting too comfortable. Let faces it, enjoying a few beers and a summer barbeque during a discussion about your next step will always bring in outside opinions from wives, husbands, parents and if you are really unlucky; the dog. This can lead to messy and unclear collaborations that can spiral into resentment and deeper set issues that simply can't be resolved and all because the dog wanted to make the garden bigger and your partner opted for a conservatory that got obliterated in a storm.

It is notoriously tricky to separate your work life from your home and social life so be prepared that if tension raises its ugly head in the workplace, feelings will also be apparent in the local pub. Make sure that a good business plan is written up by everyone involved to confirm that you are on the same side when it comes to ideas and routes forward and having the same visions on time frames, finances, responsibilities and property types will make the process smoother and hopefully divorce free.

Refinancing Home Loans with Investment Property

Many investors took advantage of adjustable rate mortgages or the more exotic option ARM loan in order to finance their investments recently. Faced with resetting payments and rising rates many of these types of investors have tried to refinance and found that is now harder than ever to refinance adjustable rate mortgage on rental property that they own.

Why Investors May Not Be Able To Refinance Their ARM Home Loans

Reduced Property Values- Many people jumped into the rental property market when times were good and creative financing programs allowed them to buy second or even third homes with 100% financing and little proof of income. But now as banks have tightened up and property values have dropped many investors are finding they owe more then the house is worth and they can at best get a loan for 75% of the value of the home.

Not Enough Income- Because many of these loans were purchased with no doc or stated loans they are very hard for the owners to refinance using their actual incomes. Stated loan,no doc loans and high DTI loans are long gone so if you need this type financing and do not make enough to debt ratio properly you are in big trouble.

What Can You Do If You Are Unable To Refinance

The best thing that you can do as a property owner who is in trouble is to call your lender and try and work out a reduced interest rate or payment. Many times if you were a great customer before the lenders will change your loan to a fixed rate and set the rate to your initial rate or one that reflects the current going rate in the market place.

Real Estate is A Legitimate High Yield Investment

Why should savvy investors consider buying investment property in the form of "raw land development projects"; What makes them "legitimate" high yield investment opportunities.

Can you think of a better time to purchase real estate than in a down market like we're experiencing right now? The golden rule of investing is to always "buy low and sell high" is it not?

Here are 5 reasons why buying investment property is a legitimate high yield investment opportunity right now:

1) More millionaires are said to have been created by real estate that any other form of investment.

2) Raw land development is considered the most profitable form of real estate. [Per industry average: professionally managed land development projects increase the value of raw land by 2-5 times its original cost.] And it can be much higher.

3) Land development is one of the most secure, low risk investments that an investor can make. This is because the developer will typically back their investors' capital investments with the assets of the project (the property itself). In addition, they will place their investors in "first position" for the project assets and revenue. This means, in the event of a land developer's default or other problem on a project (heaven forbid), the property can be sold and investors can recoup some or all of their principal plus any net profits. Also, it means that the investors, being in 1st position, are the first in line to be paid, if project assets must be sold. (Not unlike how a bank will hold the mortgage or first deed as collateral or security on a house.)

4) Real property prices are very reasonable right now. Buying investment property in the form of raw land is literally a "buyer's market". This is because landowners aren't any different than other folks. They have been affected by the stock markets and the overall economy like the rest of us. The net effect is that many are willing to sell their land for very reasonable prices because they need the money.

5. The United States population is projected to grow +29% from 2000-2030. That means the addition of 82 MILLION new people in America! And these new people are going to need new homes, new schools, new stores, and new communities to support them.

Secure Your Property Investment Loan

It is a great time to purchase properties as an investment with housing prices at their lowest point in recent memory. There is always a market for houses of quality that are reasonably priced and with the economy in shambles the amount of people looking to rent has increased drastically. Whether by immediate sale or by extended lease, investment properties can be a source of valuable income.

Before they can be sold or rented, however, they need to be purchased.

Despite the ridiculously low costs and the ample opportunities to buy at foreclosure auctions, it is still impossible for the vast majority of investors to purchase a house without first securing a property investment loan.

Getting a loan for an investment is not as simple as getting a loan for private use. For one thing, creditors usually demand a good to very good credit history, and for another down payments tend to be a lot larger. Even in such credit strapped times like these, however, it is not terribly difficult and certainly not impossible for a properly motivated investor who has done his homework to secure a mortgage that is right for him or her.

If obtaining a mortgage proves difficult, seller financing is more and more common in our current buyer's market and even if it proves difficult to obtain there is always the option of a home equity loan. Potential investors should make sure to do their diligent research as there are myriad opportunities out there to receive a property investment loan.

Making a Smart Property Investment

What is the best way to invest in Property to achieve a high rate of return and play it safe? The following steps will help you make a safe investment which has the potential to grow:

1) Invest in small houses that are ideally suited to the new average family unit of 2 adults and 2 children. These types of houses will always be in demand and are easier to shift when the property market is not behaving so well. They are also fairly easy to rent out whilst you wait for the property to appreciate.

2) Buy your property in areas that are close to all amenities and have good transport links with the City Centre. Make sure entertainment facilities are nearby as well as good schools and universities. A large retail park with good shopping facilities must be within easy reach although you don't want to invest on its doorstep.

3) Buy a property which has clear potential for adding an extra room or building an extension. A property with some land can end up being a fantastic investment if you get planning to extend the property even if you don't build the extension your self.

4) Buy in areas where there are plans for long term regeneration nearby and you can see a clear reason why people will want to live there.

5) Avoid new builds and stick to established areas for housing. Sometimes you can make a killing buying new builds and watching them appreciate quickly, but often when an area is released for new builds, the builders move in and build properties to quickly for the market to absorb. This leads to a stagnation of house prices until the properties have been absorbed by the local community.

6) Have a long term plan for the properties. Buying and selling properties quickly is best left to the experts and even they sometimes get their fingers burnt. Be prepared to hold the property for at least 5 years, preferably closer to 10 and you will ride out any short term cycle in the property market.

7) Obtain multiple quotes from lenders and beware of penalty clauses that do not allow you to sell the property or transfer your loan for many years. Get quotes from specialised lenders as well as the traditional banks. Get quotes from independent financial advisors who are able to scour the whole market and get you quotes from many lenders. Beware the advisor who charges you a fee as most get paid a healthy fee from the lender when you proceed with the loan.

The world's population is increasing every year and therefore the demands for housing, particularly in the affluent and potentially affluent countries. If you think that the prices are exceptionally high just now, wait until the population of this planet doubles as all forecasters are predicting.

How to Buy Investment Property By Numbers

Buy investment property without seeing it is a numbers game. Whether or not you see the property before you make an offer isn't nearly as important as making sure the numbers make sense.

A man in California used to just send out offers on a hundred MLS listings at a time, offering 25% less than the asking price on each one. Occasionally a few sellers would accept his offers. He never had to look at the homes beforehand. Including an "inspection and approval" clause in the offer meant he could always back out of the deal later when he saw the house. Meanwhile, he efficiently found the truly motivated sellers.

This true story demonstrates that with a good clause or two in the contract, you don't have to worry about making an offer before you see a property. It's true when you buy investment property or your next home. When it isn't everything the seller says it is, you can reject the deal with little or no loss. So why wouldn't you want to look at the property?

Buy Investment Property By Numbers

The main reason you might skip looking at a property before making an offer is time. This is certainly true if the property is far away. If you don't get a price that makes sense, why spend your time traveling to look at real estate investments? A price and terms that make sense - this is what is important. Of course you'll probably want to look at the actual property eventually, but looking at the numbers is how you invest.

Investors value income property according to current cash flow,so start by verifying income. Get the actual income figures for the past 12 months. Always consider the potential income if rents are raised, vending machines are added, etc., but base your offer on the current income.

Verify all expenses with investment properties. If any expenses listed by the seller seem unusually low, they most likely are. Just substitute your own best guess in place of any suspicious numbers.

After you determine the net operating income, apply the appropriate capitalization rate to arrive at the value. If you're not sure how to do this, get help. However, you really should understand the principle of how to figure a cap rate. This is a numbers game you're playing.

Calculate loan payments, and see how much cash flow you'll have. Then you can figure your cash-on-cash return based on how much of your own money you put into the deal. Just divide the cash flow by your investment.

When the numbers work, you can safely make an offer. Inspections will tell you if there are problems that will affect the cash flow. You can always renegotiate if there are such problems.Of course, you can even go take a look now that you are truly ready to buy that investment property.

Proper Research Before Buying Investment Property

If you want to buy investment property you can go ahead with the plan. But yes, you need to make proper enquiries and do adequate research.

First,you shall find about the area where you are planning a purchase. Is the area strategically placed? Are major constructions in the pipeline in the area? Is the area safe in terms of criminal behavior? Is it fairly attached to the network of roads? Lastly, but most importantly, what is the property-escalation scenario according to the experts there?

You shall check with the deeds of the property. You must ensure that it is not a case of multiple deeds. This is where a property investment company comes handy. It lets you secure a legally safe portfolio. It checks on the liens, property arrears, accrued interests, and fraudulent property transfers. Of course, a property investment company can be an asset if you have a smart portfolio (at least 10 properties)

Buy investment property with an eye towards flipping it. Get one through the various loan programs and then modify it in an aesthetic way, no structural modification is required. All you need to do is to add interiors and give it a smart paint. People will make a beeline for your property in no time.

Protect Yourself from Economy Crisis with Investment Property

The recent stock market falls decrease wealth and liquidity in the economy with property prices falling they could fall further.There are however solutions that allow anyone in investment property to protect themselves against falling prices and lock in their current value regardless of how far the market goes down.

The background

We have had a great rise in property prices across the board but this is now coming to end and prices are falling and they could due to the size of the rise plunge.

The facts are:

1. Interest rates have risen.
2. Many people who started with low starter rates have moved to the full rate - the equivalent of an interest rate rise to them.
3. The huge property boom has seen a glut of new housing that is proving hard to shift.
4. Uncertain economic conditions are seeing people stay put rather than move.
5. First time buyers due to the cost are finding it hard to get on the property ladder.

Lessons from History

It's an economic fact that when interest rates are up and liquidity is decreased the housing market slows.With the huge boom we have just seen prices could tumble and if stocks turn into a bear market this will make things worse.

Peace of mind

There are companies that for a small premium will guarantee the value of houses at a specific rate.

Protection against falls

If prices tumble then you can sell and get the full locked in rate.
On the other hand, if prices rise then the gain is the property owners.

Gains are unaffected

Of course these schemes charge but it’s a small fraction of a percent annually and for many people in investment property this is a small price to pay for peace of mind.

Buy new property with locked in value

It also allows speculators to buy property with a fixed lock in rate of value so that even if they think prices may rise they are protected against falls.

These schemes have done very little business due to the huge bull market we have seen in the US economy, but they are set to do increasing business as investors take a more conservative approach.

Buy Investment Property - The Order of Tasks When Renovating

The best deals are found where there is the most work. However, these deals are not for everyone. In order for you to capture these bargains, you need to know how to properly renovate a house. You will need cash flow, materials, and competent workers. The focus of this article is to teach you the proper order of tasks when renovating.

Rebuilding a house is a mostly sequential task. One task waits on another, your timetable increases when a single job holds up the rest. Usually multiple jobs can be finished side by side, but if you and your crew do not master completing the jobs in sequence then one job may hold up all the other jobs. Time is important since no matter what you spend, you will not construct much financial advantage until your project is complete. In other words, you need to know how to renovate a building quickly if you really intend to renovate your finances!

Planning: Invest plenty of time constructing a building plan, timetable and floor plan before starting. Try to set a meeting with all the mechanics to draw out what they need. You will need to adjust for building all the mechanical chases and closets in your floor plan.

Permitting: Always make sure to get local approval before spending dime one.

Temporary power: This will be needed if you don't have power available.

Demolition: Remove and discard all outdated and rotten materials. Deconstruct all the way to the bare studs if needed. Clear the work site of any trash, weeds and unnecessary items.

Structural: Repair all structural elements from the foundation to the roof rafters

Roof: Complete the roof now so interior stays dry

Siding: Repair all siding on the house now

Windows and exterior doors: Once completed the building is dry and secure.

Exterior painting: This can happen at any time forward now.

Internal framing: Build all internal walls and framing.

HVAC: Install the unit and all necessary piping.

Plumbing: This goes next since sewer pipes are somewhat inflexible and bigger than wires.

Electric: All the wires and boxes go in the walls.

Insulate: Now insulate walls and while they are open. Consider more effective spray foam insulation.

Walls: Now sheetrock or plaster your interior walls and ceilings

Insulate attic: The new ceiling boards will support the attic insulation.

Paint: Paint the walls and ceilings at this point.

Interior doors: It is time to install doors and door knobs.

Kitchens: Install your kitchen cabinets and countertops.

Bathrooms: Install your sink base and top. Finish your tub surround.

Finish carpentry: Complete all door and window trim, baseboards, and any other finish carpentry needed in house

Finish mechanicals: The HVAC contractor can now put in the register covers and thermostat. The plumber can now attach faucets, set toilets, and trim the tub and shower fixtures. Electricians will now install outlets, switches, and hang light fixtures throughout the house.

Finish painting: All trim painting can be completed now.

Clean up: Remove leftover materials and clean the house and site again.

Floor: Install your flooring now that the house is clean and ready.

Landscape and decorate: Now is your chance to doll up your building.

Rent or Sell: Time to stop spending and start earning some money from your project.