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.
Showing posts with label property. Show all posts
Showing posts with label property. Show all posts
8.22.2009
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.
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.
8.21.2009
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.
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.
8.20.2009
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.
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.
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.
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.
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.
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.
8.19.2009
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.
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.
8.18.2009
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.
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.
Important Property Investment Tips
Investing in real estate can be a tricky business especially in present economic conditions. However, there are indicators and things you can do to ensure you make the best possible decision. Below are some property investment tips that should help you on your way.
Location is one of the most important factors when investing in property.
Consider the area or country that is likely to provide you with the best return. Many would be investors fail to look beyond their local areas which means they are potentially losing thousands by ignoring other opportunities.
If you are considering other countries look at their economies. Are they growing fast, is there lots of national or foreign investment or are they perhaps about enter the EU. All of these positive indicators will have an affect on the property market.
The same applies to areas with in your own country. You should look for local regeneration initiatives. For example, the East London train line is going to be extended, this will increase demand in the areas along this extension and increase local property prices.
And you should also look for large businesses moving into an area. This normally means more jobs and more jobs means greater demand for housing.
Consider the cost of letting the property and the likely return on your investment. It's likely that you will have to factor in letting agent management fees, mortgage repayments, maintenance costs (about 10-15% of the yearly rent) and the possibility that the property may be empty for 1 month every year.
When purchasing a property make sure it will be easy to maintain and has no major defects. Low maintenance properties mean fewer headaches for you.
Choose a safe area, look at local crime rates. It's possible to find out how many youths have ASBO's in an area this is a good indicator of local crime levels.
The amount of money you make from a property investment is largely determined by the quality and suitability of the property in terms of your target market and the location of that property. Even in these hard times there are still viable investment options for the savvy property investor.
Location is one of the most important factors when investing in property.
Consider the area or country that is likely to provide you with the best return. Many would be investors fail to look beyond their local areas which means they are potentially losing thousands by ignoring other opportunities.
If you are considering other countries look at their economies. Are they growing fast, is there lots of national or foreign investment or are they perhaps about enter the EU. All of these positive indicators will have an affect on the property market.
The same applies to areas with in your own country. You should look for local regeneration initiatives. For example, the East London train line is going to be extended, this will increase demand in the areas along this extension and increase local property prices.
And you should also look for large businesses moving into an area. This normally means more jobs and more jobs means greater demand for housing.
Consider the cost of letting the property and the likely return on your investment. It's likely that you will have to factor in letting agent management fees, mortgage repayments, maintenance costs (about 10-15% of the yearly rent) and the possibility that the property may be empty for 1 month every year.
When purchasing a property make sure it will be easy to maintain and has no major defects. Low maintenance properties mean fewer headaches for you.
Choose a safe area, look at local crime rates. It's possible to find out how many youths have ASBO's in an area this is a good indicator of local crime levels.
The amount of money you make from a property investment is largely determined by the quality and suitability of the property in terms of your target market and the location of that property. Even in these hard times there are still viable investment options for the savvy property investor.
Knowing Market Cycles in Real Estate
In order to be successful in the real estate business, it is vital to become familiar with the current market trends. Knowing the market cycles, you as a potential buyer, can make a smart investment decision by developing a strong market strategy. This strategy can help you to weigh out the potential risks and rewards to investing at any point in the market cycle, and it imperative to making profit in the area of real estate.
The first advantage is the ability to know when you are getting a good deal, and when you are not when looking to purchase a property. Many times people will tend to but overpriced pieces of property based on the belief that the property will appreciate and go up in value. This, many times does not occur and the buyers are left let down and without the profit they had once expected. If you study the market, and know you are in a current down cycle, it is important to know you are buying a property for a good deal. A deal that allows you to hold on to the property during the down time, with the possibility of still making profit.
And, if you are aware that a down cycle is going to occur, you want to make sure that you have the freedom to gather up your resources in order to take advantage of the new buying opportunities that you may have. As a buyer, you can find a great deal in the down market because of all of the sellers who are looking to get rid of their properties. Being ready in a situation like this can set you up for some money saving properties that will bring you a great deal of profit later on.
Knowing the market cycle can help you design a proper exit strategy for selling your existing properties. If you buy a property for a certain price, the odds are you want to sell that property at an even higher price in order to make the profit that you are looking for. In order to make the most for your property, it is imperative, that you as owner try to sell your property at the top of the market cycle, or in the so called "boom phase". In this phase of the cycle, you have the opportunity to bid up the price of your property due to short supply. This cycle is relatively short, however, and only tends to last between six and 12 months, which leaves many unprepared investors with a missed opportunity.
Investing for an entire property cycle, or for around five to ten years, can give you a clear picture of the market cycle from boom to bust. It is important to get a long-term view in order to be most advantageous at exploiting every possible marketing opportunity. It is important to remember that while there are ideal times to buy and sell a property in a market cycle, a savvy investor can make money in any phase of the cycle by simply becoming familiar with each phase and identifying the characteristics, knowing and researching the best strategies for each phase, and by having the ability to recognize when the next phase is about to begin.
During a contraction, a smart investor who knows the market cycle may only look to buy properties that are largely discounted, ensuring a large cash flow. During a recession, it is important to remember to buy properties that are below market value. A smart investor will know that buying a property at this point in the cycle should only occur if you are planning on holding that property for a long period of time. As the market begins to recover, it is vital to invest your money into properties that have taken the largest fall in price, as it is these properties that will gain their value back at the fastest pace. As the market begins to expand, it is important to recognize that you may not be getting deals below the market value. You want to put your money in to areas that are in high demand, ensuring that you will get good cash flow.
The first advantage is the ability to know when you are getting a good deal, and when you are not when looking to purchase a property. Many times people will tend to but overpriced pieces of property based on the belief that the property will appreciate and go up in value. This, many times does not occur and the buyers are left let down and without the profit they had once expected. If you study the market, and know you are in a current down cycle, it is important to know you are buying a property for a good deal. A deal that allows you to hold on to the property during the down time, with the possibility of still making profit.
And, if you are aware that a down cycle is going to occur, you want to make sure that you have the freedom to gather up your resources in order to take advantage of the new buying opportunities that you may have. As a buyer, you can find a great deal in the down market because of all of the sellers who are looking to get rid of their properties. Being ready in a situation like this can set you up for some money saving properties that will bring you a great deal of profit later on.
Knowing the market cycle can help you design a proper exit strategy for selling your existing properties. If you buy a property for a certain price, the odds are you want to sell that property at an even higher price in order to make the profit that you are looking for. In order to make the most for your property, it is imperative, that you as owner try to sell your property at the top of the market cycle, or in the so called "boom phase". In this phase of the cycle, you have the opportunity to bid up the price of your property due to short supply. This cycle is relatively short, however, and only tends to last between six and 12 months, which leaves many unprepared investors with a missed opportunity.
Investing for an entire property cycle, or for around five to ten years, can give you a clear picture of the market cycle from boom to bust. It is important to get a long-term view in order to be most advantageous at exploiting every possible marketing opportunity. It is important to remember that while there are ideal times to buy and sell a property in a market cycle, a savvy investor can make money in any phase of the cycle by simply becoming familiar with each phase and identifying the characteristics, knowing and researching the best strategies for each phase, and by having the ability to recognize when the next phase is about to begin.
During a contraction, a smart investor who knows the market cycle may only look to buy properties that are largely discounted, ensuring a large cash flow. During a recession, it is important to remember to buy properties that are below market value. A smart investor will know that buying a property at this point in the cycle should only occur if you are planning on holding that property for a long period of time. As the market begins to recover, it is vital to invest your money into properties that have taken the largest fall in price, as it is these properties that will gain their value back at the fastest pace. As the market begins to expand, it is important to recognize that you may not be getting deals below the market value. You want to put your money in to areas that are in high demand, ensuring that you will get good cash flow.
8.17.2009
Tips for Buying Investment Property
When exactly can you jump in and start buying up investment properties? You will never make your financial goals come true unless you become an investor, preferably a real estate investor. That is, if one of those goals is to become wealthy.
Set your ground work.Part of that ground work is educating yourself on the basics – basic accounting, basic tax law, basic real estate law. Yes, you will have professionals doing the bulk of that work for you, but you don't want to be completely dependent on them.You need to consider what type of property you want to pursue and where you want to pursue it. Get to know the area. Get a feel for what you are getting yourself into.
First, do online research in order to find an area to explore for possible real estate purchases. When you choose an area, call ahead and set up meetings with people who will be your advisers for the area. Then visit the area and the people you contacted. Look for investment leads. Visit sites.
Finally, know the limits of your abilities. Even though you need to have a basic knowledge of every aspect of the real estate game – which you will continually expand upon – you need to build a team of experts that will be able to save you time and money. Even though it doesn't seem like they're saving you money in the beginning, they are actually saving you from making costly mistakes.
Hire on an attorney, an accountant, a real estate broker and a property manager. He warns that, before you make any purchases, make sure your real estate acquisitions business is set up correctly.
After that, you will need to meet with appraisers, architects, insurance agents, property tax consultants, income tax consultants, estate planners, surveyors, structural engineers and industrial hygienists. Keep searching and meeting with people,until you find people whose goals and business methods mesh with your own. After all, your livelihood will depend in large part on your team. You want it to be a good one.
After you have educated yourself, researched the markets, made your goals and set up your team, then you are ready to begin hunting for investment properties.
Set your ground work.Part of that ground work is educating yourself on the basics – basic accounting, basic tax law, basic real estate law. Yes, you will have professionals doing the bulk of that work for you, but you don't want to be completely dependent on them.You need to consider what type of property you want to pursue and where you want to pursue it. Get to know the area. Get a feel for what you are getting yourself into.
First, do online research in order to find an area to explore for possible real estate purchases. When you choose an area, call ahead and set up meetings with people who will be your advisers for the area. Then visit the area and the people you contacted. Look for investment leads. Visit sites.
Finally, know the limits of your abilities. Even though you need to have a basic knowledge of every aspect of the real estate game – which you will continually expand upon – you need to build a team of experts that will be able to save you time and money. Even though it doesn't seem like they're saving you money in the beginning, they are actually saving you from making costly mistakes.
Hire on an attorney, an accountant, a real estate broker and a property manager. He warns that, before you make any purchases, make sure your real estate acquisitions business is set up correctly.
After that, you will need to meet with appraisers, architects, insurance agents, property tax consultants, income tax consultants, estate planners, surveyors, structural engineers and industrial hygienists. Keep searching and meeting with people,until you find people whose goals and business methods mesh with your own. After all, your livelihood will depend in large part on your team. You want it to be a good one.
After you have educated yourself, researched the markets, made your goals and set up your team, then you are ready to begin hunting for investment properties.
Choose Investment Property
There are a number of factors to consider before you make your decision because each differs from the other.The first decision you must make before looking for your investment property is on the type of property you want.
What to Look For
1. General location - location is the mantra in real estate. Unless the property is located in an area that will sustain or boast rents, and in turn be able to be sold for a profit, forget it.
2. Site improvements - Does the property require repairs that might eat away at your cash flow, or are there repairs that can be made that would substantially increase your cash flow and return?
3. The lease form used - In the case of a commercial building are you locked in to a favorable or very unfavorable lease? In other words, are you buying a favorable or unfavorable income, and for how long?
4. The income produced - How much income does the income property generate and is it realistic, and can it be sustained? Is there room to increase the income?
5. Type of expenses - What does it take to keep the property operational? Is there anything out of the ordinary, and is there a chance that some expenses can be reduced or eliminated?
7. Management requirements - Will the property require a professional management company, perhaps a resident manager, or is it something you can handle.
8. Financing - Can you leverage the property? What about the rates and terms will you and/or the investment property qualify for the best loan possible? What are the loan payments?
9. Depreciation benefits available - How much of your income can you defer by depreciating the property?
10. Unique features - Is there anything about this particular investment that sets it apart from other real estate investment opportunities? Perhaps its location, construction, or maybe it offers great upside potential.
Types of Investment Property
1. Apartment Complex - This is the most popular form of real estate investing and can include anything from a duplex to a high-rise building. The size and mix of the individual apartments are usually keyed to local market demands and typically include studio apartments and larger. Apartments can be rented on an annual lease basis or month-to-month. When present, coin-operated laundries and storage facilities or garages can produce a small addition income fro the owner. A well-managed apartment complex can be a highly profitable investment and a great way for new investors to get started.
2. Office Buildings - This type of investment property requires more savvy then multifamily property, so first time investors should be cautious. Office buildings are generally leased on a square footage basis rather than a flat price per unit; typically including a cost for a proportionate share of common areas like entrances and hallways. Depending on the lease, tenants might also be required to pay a proportionate share for parking lot and roof maintenance, and as a rule, tenants will pay all or part of the cost of finishing the interior of his suite. Office buildings generally make for a sound and relatively easy-to-manage investment.
3. Shopping Centers - In many parts of the country this type of real estate investment is very popular, but as with office buildings, contain some unique features of which an individual investor should be cognizant. A shopping center can mean anything from a couple of stores (known as a strip center) to large regional malls. Tenants generally sign a lease and are expected to share in the cost of maintaining the common parking lots, landscaping, daily cleaning of the grounds, etc. in what is known as common area maintenance (CAM) charges. Small neighborhood centers with a moderate cash requirement can be a great way for a beginner to start in this type of investment.
4. Warehouses and Industrial Buildings - Rental warehouses provide small-to-large bays or rooms used for storage and small workshops. These typically rent on a month-to-month basis and thus (because tenants can move out at anytime) make it one of the least stable of all real estate investments. Industrial buildings are usually characterized as larger space and generally leased on longer terms to more stable tenants such as manufacturing plants. The ultimate investment here is a "sale/leaseback" situation wherein a major company sells you their building and then leases it back from you on a net basis but are difficult to find because they are excellent investments.
5. Mobile Home Parks - This type of real estate investment has become one of the most sought after in recent years because it provides retirement-age people and young couples a reasonably priced home. In this case, a pad with water, sewer and electricity hookups, plus a concrete patio area and tie down rings is rented to someone who wants to place a mobile home there. Other improvements include the streets (which may be deeded to the local municipality, thereby relieving the owner of street maintenance), recreation facilities (perhaps with a building), and laundry facilities. Because mobile home parks are profitable and easy to manage, they can make for a very good investment.
You should never purchase investment property without doing a thorough real estate analysis. Quality real estate investment software makes it very easy. So be sure to check it out.
What to Look For
1. General location - location is the mantra in real estate. Unless the property is located in an area that will sustain or boast rents, and in turn be able to be sold for a profit, forget it.
2. Site improvements - Does the property require repairs that might eat away at your cash flow, or are there repairs that can be made that would substantially increase your cash flow and return?
3. The lease form used - In the case of a commercial building are you locked in to a favorable or very unfavorable lease? In other words, are you buying a favorable or unfavorable income, and for how long?
4. The income produced - How much income does the income property generate and is it realistic, and can it be sustained? Is there room to increase the income?
5. Type of expenses - What does it take to keep the property operational? Is there anything out of the ordinary, and is there a chance that some expenses can be reduced or eliminated?
7. Management requirements - Will the property require a professional management company, perhaps a resident manager, or is it something you can handle.
8. Financing - Can you leverage the property? What about the rates and terms will you and/or the investment property qualify for the best loan possible? What are the loan payments?
9. Depreciation benefits available - How much of your income can you defer by depreciating the property?
10. Unique features - Is there anything about this particular investment that sets it apart from other real estate investment opportunities? Perhaps its location, construction, or maybe it offers great upside potential.
Types of Investment Property
1. Apartment Complex - This is the most popular form of real estate investing and can include anything from a duplex to a high-rise building. The size and mix of the individual apartments are usually keyed to local market demands and typically include studio apartments and larger. Apartments can be rented on an annual lease basis or month-to-month. When present, coin-operated laundries and storage facilities or garages can produce a small addition income fro the owner. A well-managed apartment complex can be a highly profitable investment and a great way for new investors to get started.
2. Office Buildings - This type of investment property requires more savvy then multifamily property, so first time investors should be cautious. Office buildings are generally leased on a square footage basis rather than a flat price per unit; typically including a cost for a proportionate share of common areas like entrances and hallways. Depending on the lease, tenants might also be required to pay a proportionate share for parking lot and roof maintenance, and as a rule, tenants will pay all or part of the cost of finishing the interior of his suite. Office buildings generally make for a sound and relatively easy-to-manage investment.
3. Shopping Centers - In many parts of the country this type of real estate investment is very popular, but as with office buildings, contain some unique features of which an individual investor should be cognizant. A shopping center can mean anything from a couple of stores (known as a strip center) to large regional malls. Tenants generally sign a lease and are expected to share in the cost of maintaining the common parking lots, landscaping, daily cleaning of the grounds, etc. in what is known as common area maintenance (CAM) charges. Small neighborhood centers with a moderate cash requirement can be a great way for a beginner to start in this type of investment.
4. Warehouses and Industrial Buildings - Rental warehouses provide small-to-large bays or rooms used for storage and small workshops. These typically rent on a month-to-month basis and thus (because tenants can move out at anytime) make it one of the least stable of all real estate investments. Industrial buildings are usually characterized as larger space and generally leased on longer terms to more stable tenants such as manufacturing plants. The ultimate investment here is a "sale/leaseback" situation wherein a major company sells you their building and then leases it back from you on a net basis but are difficult to find because they are excellent investments.
5. Mobile Home Parks - This type of real estate investment has become one of the most sought after in recent years because it provides retirement-age people and young couples a reasonably priced home. In this case, a pad with water, sewer and electricity hookups, plus a concrete patio area and tie down rings is rented to someone who wants to place a mobile home there. Other improvements include the streets (which may be deeded to the local municipality, thereby relieving the owner of street maintenance), recreation facilities (perhaps with a building), and laundry facilities. Because mobile home parks are profitable and easy to manage, they can make for a very good investment.
You should never purchase investment property without doing a thorough real estate analysis. Quality real estate investment software makes it very easy. So be sure to check it out.
8.16.2009
Be Careful Buying Investment Property
There are lots of things that go into determining whether or not the property you purchase will be worth something in the end.
Don't make the mistake of assuming that all properties will be worth more than their value in a few years. Instead, try and follow some simple steps that will lead you towards a real investment. Below, you will find some of the things that should be considered before purchasing any kind of property.
Before you buy investment property, think about the location of the property itself. The property that you are considering should be located in an area that has a lot of job opportunities. This location should also include schools, shopping, transportation, and it should also be relatively easy to locate and reach when you need to visit your property.
Lastly, make sure the area is safe. If you are going to purchase a rental property, the next thing that you need to do is find out what the going rental rate is within the neighborhood that you choose.
Find out what price other rentals are being let at by speaking to local landlords, and find out how other landlords in the area are doing with the current market. This is the best way to buy investment property. If you rush into purchasing any kind of property, you will likely live to regret your decision.
However, a well informed decision is one that is worth your time and energy. You should never be in a hurry to purchase any kind of investment property. Instead, you should always take your time to find a property that meets the criteria listed above.
Remember to look for location above all else, and never try to rent a property for more than it's worth.
A good investment can turn into a lucrative venture, but a bad investment is a bad choice for everyone involved. If you aren't sure about investing in property, make sure to give a knowledgeable real estate agent a call because sometimes, helpful agents can be your best defense against a poor choice.
Don't make the mistake of assuming that all properties will be worth more than their value in a few years. Instead, try and follow some simple steps that will lead you towards a real investment. Below, you will find some of the things that should be considered before purchasing any kind of property.
Before you buy investment property, think about the location of the property itself. The property that you are considering should be located in an area that has a lot of job opportunities. This location should also include schools, shopping, transportation, and it should also be relatively easy to locate and reach when you need to visit your property.
Lastly, make sure the area is safe. If you are going to purchase a rental property, the next thing that you need to do is find out what the going rental rate is within the neighborhood that you choose.
Find out what price other rentals are being let at by speaking to local landlords, and find out how other landlords in the area are doing with the current market. This is the best way to buy investment property. If you rush into purchasing any kind of property, you will likely live to regret your decision.
However, a well informed decision is one that is worth your time and energy. You should never be in a hurry to purchase any kind of investment property. Instead, you should always take your time to find a property that meets the criteria listed above.
Remember to look for location above all else, and never try to rent a property for more than it's worth.
A good investment can turn into a lucrative venture, but a bad investment is a bad choice for everyone involved. If you aren't sure about investing in property, make sure to give a knowledgeable real estate agent a call because sometimes, helpful agents can be your best defense against a poor choice.
Cheap Property for Sale
Cheap property for sale is a great way to make long term capital gains but most investors make common mistakes and have know idea on how to turn the above into 30 – 100% profits or more.
The simple guidelines:
1. Look for fair value property
Don’t ever buy the cheapest property you can find, it’s cheap for a reason no one wants it.Instead look for property that is fairly priced and has solid reasons to rise in value.
2. NEVER BUY
If there are not solid reasons for the property to rise.You will get it cheaper, but you probably won’t make money.Pay a bit more and you will get better growth and lower risk
3. Buy a Bull market
When in many countries interest rates start to bite. Its getting harder to make money.So do what many foreign investors are doing, buy cheap property for sale overseas in countries that are close and stable.
4. Getting the big gains
For example making 30 – 100% gains in a market like the US on your investment capital is hard if not impossible in the current economic climate, however overseas not only can you buy property cheaper, you can get bigger gains.In effect you get more bang for your buck.
Costa Rica has been providing this for years and an example will illustrate this:
A property bought near the popular resort of Jaco Just 15 years ago for $30,000, is worth as much as 750,000 today and prices still continue to rise.There are however still some great cheap properties for sale on the Central Pacific coast that will show great gains.
5. Why will gains continue?
Quite simply beach front property is 70% less than in the southern USA and Americans are traveling just 3 hours south by direct flight to own their own slice of paradise at affordable cost.
6. Demand continues to rise and gains continue to be made.
Add in tax advantages, low property tax, the same rights as residents and one of the most stable countries in the world and you have a great way to make money in cheap property for sale.
So if you want more for your money and bigger gains head south to Costa Rica and you will discover what increasing numbers of foreign investors have.
7. A good booming location
Perhaps one of the best areas is the Central Pacific Coast which continues to expand buying near these expanding locations and infrastructure can be very lucrative.
The simple guidelines:
1. Look for fair value property
Don’t ever buy the cheapest property you can find, it’s cheap for a reason no one wants it.Instead look for property that is fairly priced and has solid reasons to rise in value.
2. NEVER BUY
If there are not solid reasons for the property to rise.You will get it cheaper, but you probably won’t make money.Pay a bit more and you will get better growth and lower risk
3. Buy a Bull market
When in many countries interest rates start to bite. Its getting harder to make money.So do what many foreign investors are doing, buy cheap property for sale overseas in countries that are close and stable.
4. Getting the big gains
For example making 30 – 100% gains in a market like the US on your investment capital is hard if not impossible in the current economic climate, however overseas not only can you buy property cheaper, you can get bigger gains.In effect you get more bang for your buck.
Costa Rica has been providing this for years and an example will illustrate this:
A property bought near the popular resort of Jaco Just 15 years ago for $30,000, is worth as much as 750,000 today and prices still continue to rise.There are however still some great cheap properties for sale on the Central Pacific coast that will show great gains.
5. Why will gains continue?
Quite simply beach front property is 70% less than in the southern USA and Americans are traveling just 3 hours south by direct flight to own their own slice of paradise at affordable cost.
6. Demand continues to rise and gains continue to be made.
Add in tax advantages, low property tax, the same rights as residents and one of the most stable countries in the world and you have a great way to make money in cheap property for sale.
So if you want more for your money and bigger gains head south to Costa Rica and you will discover what increasing numbers of foreign investors have.
7. A good booming location
Perhaps one of the best areas is the Central Pacific Coast which continues to expand buying near these expanding locations and infrastructure can be very lucrative.
Investment Loans for Property
Some theorists believed in the time preference explanation of how interest arises. They believes that interest is the price paid for the use. It asserts that the rate of interest is determined by the equilibrium between demand and supply in the credit market.
The supply is derived from four basic sources, namely, savings, dishoarding, bank credit and disinvestment.
Savings by individuals or households constitute the most important source. In their theory, savings are looked at in either or these two ways, firstly, as ex-ante savings, i.e., savings planned by individuals at the beginning of a period in the hope of expected incomes and anticipated expenditures on consumption, or secondly, savings of the difference between the income of the preceding period and the consumption of the present period.
Like individuals, businesses also save. A high rate of interest is likely to encourage business savings as a substitute for borrowings from the loan market. But these business savings are often demanded for investment purposes by the firms themselves.
Dishoarding is another source. Individuals may dishoard money from the hoarded stock of the previous period. Thus, cash balances, lying idle in a previous period, become active balances in the present period and are available. At higher rates of interest, more will be dishoarded. At very low rates of interest, there is a greater tendency to hold on to money.
Banks, by creating credit money, can advance loans to the businessman. Banks can also reduce the amount of money by contracting their lending. The new money created by the banks in a period adds greatly to the supply of loan funds. The supply curve of funds provided by banks is to some degree interest-elastic, i.e., it varies with various rates of interest.
The supply is derived from four basic sources, namely, savings, dishoarding, bank credit and disinvestment.
Savings by individuals or households constitute the most important source. In their theory, savings are looked at in either or these two ways, firstly, as ex-ante savings, i.e., savings planned by individuals at the beginning of a period in the hope of expected incomes and anticipated expenditures on consumption, or secondly, savings of the difference between the income of the preceding period and the consumption of the present period.
Like individuals, businesses also save. A high rate of interest is likely to encourage business savings as a substitute for borrowings from the loan market. But these business savings are often demanded for investment purposes by the firms themselves.
Dishoarding is another source. Individuals may dishoard money from the hoarded stock of the previous period. Thus, cash balances, lying idle in a previous period, become active balances in the present period and are available. At higher rates of interest, more will be dishoarded. At very low rates of interest, there is a greater tendency to hold on to money.
Banks, by creating credit money, can advance loans to the businessman. Banks can also reduce the amount of money by contracting their lending. The new money created by the banks in a period adds greatly to the supply of loan funds. The supply curve of funds provided by banks is to some degree interest-elastic, i.e., it varies with various rates of interest.
8.15.2009
Property or Shares - Which is the Better Investment?
From the investor's point of view, both territories can prove to be highly beneficial provided they make wise financial decisions and invest when the time is ripe.Deciding which the better investment is, especially in terms of return on investment for both short term as well as long term basis, has left many an investor stumped.
Advantages of Investing in Property:
1. Real Estate is a tangible asset and it's possible until date to control it with literally no money down. Something, which is almost impossible to do with stocks and shares. For instance, you could easily leverage a 100k investment property with a mere 5-10k. One major advantage provided by investment in real estate, when it comes to the battle of shares vs. property is the benefit of tax deductibility when controlling/owning or selling real estate.
2. Real Estate also offers serious Capital gains simply because property values are on the rise all the time. Why? Well, to put it plainly, the supply of land is limited. And as humans continue to fill up every nook and cranny on this planet; this is one commodity the demand for which will almost never stops increasing. In other words, property investments can provide an investor with serious capital gains over a very short period of time.
Advantages of Investing in Stocks:
Wall Street offers two great ways how you can profit from investing in the stock market. These are Capital Appreciation and Dividend Payouts. With the huge number of corporations floating their stocks in the market and turning over substantial profits with every passing quarter, there's a very real chance that your investment will continue to grow up to the point you wish to sell your stocks. You also stand to gain from the dividend payouts handed out regularly by these companies.
Despite the fact that in the topic of stocks versus property, the stock market may not look like a great place to invest your money in, especially considering the latest developments, it still is one of the best ways to make lots of money, fast, provided you have the necessary speculation skills, and can read the market correctly. Stocks are also an extremely liquid form of investment, which you can sell off at any time to get back your investment.
So,while shares vs. property may seem like a question with unlimited possibilities, it makes sense to do your research and see which area of investment you feel more comfortable with and maybe even divide your investments between the two, depending on whichever option serves your plans and needs better.
Advantages of Investing in Property:
1. Real Estate is a tangible asset and it's possible until date to control it with literally no money down. Something, which is almost impossible to do with stocks and shares. For instance, you could easily leverage a 100k investment property with a mere 5-10k. One major advantage provided by investment in real estate, when it comes to the battle of shares vs. property is the benefit of tax deductibility when controlling/owning or selling real estate.
2. Real Estate also offers serious Capital gains simply because property values are on the rise all the time. Why? Well, to put it plainly, the supply of land is limited. And as humans continue to fill up every nook and cranny on this planet; this is one commodity the demand for which will almost never stops increasing. In other words, property investments can provide an investor with serious capital gains over a very short period of time.
Advantages of Investing in Stocks:
Wall Street offers two great ways how you can profit from investing in the stock market. These are Capital Appreciation and Dividend Payouts. With the huge number of corporations floating their stocks in the market and turning over substantial profits with every passing quarter, there's a very real chance that your investment will continue to grow up to the point you wish to sell your stocks. You also stand to gain from the dividend payouts handed out regularly by these companies.
Despite the fact that in the topic of stocks versus property, the stock market may not look like a great place to invest your money in, especially considering the latest developments, it still is one of the best ways to make lots of money, fast, provided you have the necessary speculation skills, and can read the market correctly. Stocks are also an extremely liquid form of investment, which you can sell off at any time to get back your investment.
So,while shares vs. property may seem like a question with unlimited possibilities, it makes sense to do your research and see which area of investment you feel more comfortable with and maybe even divide your investments between the two, depending on whichever option serves your plans and needs better.
The Commercial Property's ABCD
Like any professional language there is terminology you can learn. These terms, are used to help you to understand a property's assets and expedite decision making when referring to asset property classes.
Class A properties are new, upscale apartment buildings. Average rents are high, and they are generally located in desirable geographic areas. Class A properties have the highest valuations often referred to as per door and the lowest market cap rates.
Their main attraction appreciation as it relates to their area position.
Class B properties can be ten to fifteen years old. They are generally well maintained and have middle class tenants. Cap rates will be higher than Class A but lower than Class C properties. However, they are valued primarily as appreciation assets, rather than cash flow, vehicles.
Class C properties generally have blue-collar and low to moderate income tenants. The buildings tend to be thirty to forty years old, and the rents are below market. Class C buildings are very attractive because they offer the best cash flow - compared to Class A and Class B. And they can be the first to appreciate in an emerging market.
Class D properties are generally positioned in lower socioeconomic areas. The neighborhoods are often referred to as war zones and can be in neighborhoods prone to violence. Class D properties can cash flow but typically do not they appreciate because of their condition and where they are located. Owners of Class D properties have to spend more money on management and security and renter overturn.
The cash flow investor generally considers Class C properties are the bread and butter of the apartment industry. The best deals occur when an investor finds an unlisted or pocket listed Class C property in a Class B area and makes improvements to it.
Likewise, finding a Class D property in a Class C area and repositioning it to generate more income through forced appreciation will increase occupancy and/or rents while creating equity that enhances Return On Investment.
Class A properties are new, upscale apartment buildings. Average rents are high, and they are generally located in desirable geographic areas. Class A properties have the highest valuations often referred to as per door and the lowest market cap rates.
Their main attraction appreciation as it relates to their area position.
Class B properties can be ten to fifteen years old. They are generally well maintained and have middle class tenants. Cap rates will be higher than Class A but lower than Class C properties. However, they are valued primarily as appreciation assets, rather than cash flow, vehicles.
Class C properties generally have blue-collar and low to moderate income tenants. The buildings tend to be thirty to forty years old, and the rents are below market. Class C buildings are very attractive because they offer the best cash flow - compared to Class A and Class B. And they can be the first to appreciate in an emerging market.
Class D properties are generally positioned in lower socioeconomic areas. The neighborhoods are often referred to as war zones and can be in neighborhoods prone to violence. Class D properties can cash flow but typically do not they appreciate because of their condition and where they are located. Owners of Class D properties have to spend more money on management and security and renter overturn.
The cash flow investor generally considers Class C properties are the bread and butter of the apartment industry. The best deals occur when an investor finds an unlisted or pocket listed Class C property in a Class B area and makes improvements to it.
Likewise, finding a Class D property in a Class C area and repositioning it to generate more income through forced appreciation will increase occupancy and/or rents while creating equity that enhances Return On Investment.
8.13.2009
Leveraging Equity of Rental Property
Owning investment property is a tremendous wealth building strategy. Thousands upon thousands of individuals have amassed great wealth by investing in rental properties.
However, few investment property owners learn how to leverage equity in a way that maximizes tax deductions while creating and locking in equity gains. Instead, they leave themselves open to price fluctuations in the residential real estate market. These fluctuations can wipe out or severely reduce equity positions in property.
End of the Boom Market?
There is little doubt we are coming to the end of a huge boom market in residential properties. For the last four years, properties have appreciated at unheard of rates. The question, of course, is what happens when the market cools off? Will we simply see a price plateau or an actual drop in prices? While nobody is sure, the clear consensus is property owners should move to preserve equity while they can.
Protecting Equity Gains
Protecting equity gains in your investment property requires careful planning. This leveraging strategy is fairly simple, but can sound complex. Please keep in mind this is just an introduction to the investment property tax strategy. You will need to contact us to learn more.
The investment property tax strategy protects your equity gains by separating and leveraging them. The leveraging process is best explained with an example.
Scenario 1 – Without Tax Strategy
Assume you purchased a rental property in 1999 for $250,000 with nothing down. As of July 2005, the combination of loan payments and appreciation has resulted in a gain of $250,000. You have amassed wealth, but all of it is at risk. If prices drop twenty percent over the next year, you will lose $100,000 of your equity in the rental property.
Scenario 2 – With Tax Strategy
To protect the profits in gain on the rental property while also maximizing tax reductions. The first step is to refinance the property with, typically, an interest only loan. A percentage of the equity gain is taken out of the property and placed into an equity index insurance product. The equity percentage is arrived at by determining the payment amount you can afford on the loan. Typically, it is tailored to match your current loan payment amount.
Equity Index Insurance
The investment grade insurance product isn’t just any policy. Instead, the policy we use is tied to a stock market index. What if the stock market suffers a loss? Not to worry, this policy carries a guarantee that you will never lose a dollar, even if the market crashes. If the stock market did crash, the policy would simply credit you with nominal growth for the year in question. In all other years, the policy would grow with the stock market. On top of all of this, the money in the insurance product grows tax-free.
What has been accomplished?
First, you have protected your rental property equity gains from home price fluctuations. Second, you have leveraged your equity into two growth channels, the stock market and appreciating house prices. Third, you have converted property appreciation into insurance.
With housing markets ready to cool down, this strategy effectively locks in your profits. Preserving equity gains should be a primary goal of any investment property owner.
The Best Investment Option is Property
Every person in this world works 24x7 to earn. Many of us then look to stabilize and multiply the earned money by investing it in potentially lucrative avenues. There are a lot of investment options to be chosen. But there are risks involved as well. Then people looked to invest in small businesses. Over time this investment option too failed to sustain the large numbers and is now fading away. But one investment option has stood against the test of time and stayed as reliable as it ever was. Yes, property is one of the best and most recommended investment options of all times.
What makes it so lucrative an investment option?
The positive cash flow
Real estate is probably the only investment option that allows you to have a positive cash flow all along. After all what is more attractive than making money while you own the property? A lot of people are today looking for loans with low interest rates. The trick is to look for property which will then generate a positive cash flow. A lot of people look for three to four less expensive properties than looking for one which is rather expensive as it increases the positive cash flow. Interest only loans are another way of generating positive income. Since you will only be paying the interest for the first few years, you can easily use this loan to keep the cash flow going. Then by the end of the interest only term period, most people sell or refinance the property. There are of course several other ways by which you can maximize the income that you can generate with real estate.
The rules of the game
Like any other investment, property has its own set of rules too. If you play your right cards at the right time, you will be maximizing your profits. Opportunity cost is the cost of something in terms of a lost opportunity. The opportunity cost would also be the amount of money that you would have made by investing the same money in some other business. In property, it is extremely important that a person understands the opportunity cost factor. A lot of people try to invest in a couple of properties and then keep it for a time frame of 20 to 25 years. But what they do not realize is that in doing this they are limiting the earning potential that the property has. There are options of selling or refinancing as well which might need to be looked into before investing in any property.
Subscribe to:
Posts (Atom)
Posts
