Our introduction to this topic will include the basics.

Many times, the only factor that separate you from the ‘real estate tycoons’ is a willingness to learn and a some ‘intestinal fortitude’.

Investing in real estate has gotten a lot of awareness over the last few years. Unfortunately however, many people still think this to be something for ‘the big boys’. This kind of black-and-white idea is stimulated by our beliefs, which are basically fed by the media. In movies and TV shows the company of real estate is regularly associated with millionaires and even billionaires. Because most people don’t plummet into one of these categories, it’s painless for them to think real estate to be something that’s out of their league. They might say something like “I’m no Donald Trump, so I can’t do it!”. Have you ever heard anybody make a statement like that? Have you ever thought something along those lines yourself? Odds are your answer to one or both of these questions is “yes”.

Let’s take a look at the world around us to see if our assumptions about what it takes to be in real estate are correct. If you were to look at all the real estate around you, you would quickly find that the maturity of properties are residential. Home owners are real estate investors and as you perhaps know, most home owners are not millionaires. Owning your own home can be a great first move for a number of reasons. Obviously, as the value of your house increases, so does your net worth. However the increasing benefits doesn’t end there. The appreciation of your house over time not only builds your net worth, but it can also give you a great opportunity for creating some leverage. By refinancing your home, you can put overkill money in your hands that you can use to invest in other properties. This could be another residential home generating rental income, but you could also look at commercial real estate.

As we take a closer look, keep in mind all of the useful and important information that we have learned so far.

Many people learn to think about commercial real estate as shopping malls, skyscrapers and work buildings for multinational corporations. This is the picture that is communicated in the media. In reality, the largest type of real estate consists of small to method sized company properties; the corner shop grocery, the neighborhood hardware store and your local restaurant are just a few examples. The value of these properties doesn’t generally run into the millions and many are owned by people that are not millionaires. Not yet anyway. However their investment, if managed properly, provides them with a steady annual gain that puts them on the means to becoming a millionaire over time.

Of course refinancing your home to invest is not something you should do overnight without careful consideration of the consequences. Any investment brings a certain portion of threat with it and you should factor in these risks in your refinancing decision. What happens if interest rates go up? What impact would a decline in real estate prices have on your economic situation? Also, you should review the tax laws in your country in regards to increasing deductions and the taxation of different investments. It’s important to get good guidance before entering into a deal like this, so careful discussion with somebody that is knowledgeable in the part you want to invest in.

Many real estate opportunities don’t command millions to get ongoing and make some money. You don’t have to be a Donald Trump to be a successful real estate investor. What you must do is: have some assets to get started, some homework on the real estate state in your area, some good guidance from people who know what they’re talking about, and most importantly the courage to take the first step. Even if you don’t know everything, it’s a good idea to just go out there and find out what you must to know. You will never know everything and you will perhaps learn more by doing. As long as you make sure that you direct your risks, you will find that there are some pretty good opportunities well within your league.

Don’t procrastinate from what could be a life altering economic decision by not investing in sound real estate deals. Acquire the opening capital, ask questions of those that are successful in real estate investing and just do it! Expand your horizons and be convinced in your new expertise of how to correctly evaluate and negotiate a good real estate deal.

By: Dan Farrell

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Real Estate Forms Package

Real Estate investing is not nearly as legally complicated, financially burdensome, or time consuming as you might think. In fact, it is easy to add raw land, shopping centers, apartment complexes, and private homes to your portfolio without Brokers, Bankers, Attorneys, and a Rolodex full of maintenance professionals’ phone numbers. Even better, you can blend your Real Estate investments into your security portfolio for ease of management, income monitoring, diversification analysis, etc. Without having mega millions to work with, or a line of credit that goes around the block, you can have positions in various forms of Real Estate (Commercial, Industrial, Residential) at the same time, and focus either on Growth Opportunities, Income Production, or a combination of the two.

If you thought that Real Estate was out of your investment reach because of limited funds, or minimal personal experience, you were selling yourself short. All of the basic types of Real Estate Investing are available through CEFs (Closed End Funds) and REITs (Real Estate Investment Trusts), and both can be purchased in the same manner as any common stock. And for me, this has always been their (CEFs and REITs) single most attractive feature! You can own a piece of the action without the big commitment of time and resources. You can take advantage of changes in the Real Estate Market Cycle in precisely the same manner as you can deal with the volatility and fluctuations in the Stock and Fixed Income Markets.

Real Estate CEFs and REITs are obviously safer investments than outright purchases of Shopping Centers and Apartment Complexes. They are also somewhat less risky than owning the common stock of individual Real Estate companies. The size of the numbers may be less exciting, but the net income and capital gains potential are comparable and the turnover rate much more impressive. Both methods (of participation in the Real Estate market) should be considered as you add to your investment portfolio… but to which Asset Allocation “bucket”? I’ve always included REITs and Real Estate CEFs in the Fixed Income bucket while the common stock of a plain vanilla Real Estate Company would properly fit within the Equity portion. When adding Equities of any kind to your portfolio, you should avoid the standard “Mob Popularity and Greed” model and select only S & P, B+ or better, rated stocks that pay dividends (regardless of size) and that are priced at least 20% below their 52 week high. After a huge rally in any market, I would be even more selective than that from a percentage standpoint, and I would buy about one-half the normal position to facilitate average cost reduction later. You must establish a reasonable profit-taking target on any investment. Real Estate is no exception. No matter what the investment, Virginia, the longer and stronger the rally, the steeper and faster the correction is likely to be.

On the Income side of the portfolio, make sure that you look at a lot of REITs and even more CEFs of various kinds to get a feel for the levels of income they produce. REITs must pay out a certain percentage of their earnings, but CEFs may not have the same restriction. I believe that either can be “leveraged”, which simply means that management may choose to borrow some of the money that they invest. Leverage is not a four-letter word when used properly, and (in my opinion) it is more likely to help your results than it is to hurt them. It’s always a good practice to stay within the normal income range, assuming that there is either a risk or a management reason for the highest and lowest yields, respectively. Be careful not to create a poorly diversified income portfolio. Bonds, Preferred Stocks, Mortgages, etc. deserve your attention as well and should be represented. Monthly income is available and more attractive than any other.

The major distinction between the two types of investing needs some re-emphasis. When purchasing stock in a Real Estate company (or any other company), your main objective should be to sell the stock for a reasonable profit as quickly as possible. You will then select some other stock and repeat the process. It is likely that you will return to the same companies over and over again, and you are the manager… any dividend income is gravy. When purchasing a REIT or a Real Estate CEF, you are depending on the managers of these entities to generate income and capital gains and to pass it on to you every month, recognizing that the actual amount may vary slightly over time. You have the bonus capability either of selling the REIT or CEF shares when they rise to an acceptable profit level (more gravy), or of buying more shares to increase your income level. The distinctions (benefits?) of this form of Real Estate Investing vs. ownership of the properties themselves should be clear as well.

No attorneys; no debt; no maintenance; no problem.

By: Steve Selengut

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How To Flip For Profits… Make Money Flipping Houses!!

locate your prospective real estate investment, you must analyze it carefully and thoroughly. You must verify all the details about the property, especially the income and expenses the seller shows. You must never rely on just what you hear.

Develop a property analysis that includes reports like an APOD, Proforma Income Statement, and Rent Roll. In addition to helping you make a wise investment decision, these types of real estate analysis reports also serve as a reminder for items you want to know, such as type of units, age of the property, rent breakdown per unit, expense items, lot size, property and location features, and so on. You can use a real estate investment software solution to assist you.

Analyze the potential real estate investment using the following list of the various phases. If the rental property doesn’t seem to make financial sense after your initial analysis has been made, perhaps alter¬ing one or more of these will improve the financial picture and make the property a good real estate investment.

1) Income: Can rents be increased, and can they be increased soon after you purchase the property? Would a change in the type of tenant in the building allow for higher rents, maybe in¬come is suffering because of poor or non-existent management? Can the building be used in some other way to increase income, such as a mo¬tel, or small offices? Be certain local zoning allows for any proposed changes. Is it reasonable to conclude that the property has the potential to provide other income such as a coin-operated laundry facility, garages, or storage rooms?

2) Expenses: Take a close look at operating expenses to see whether any of them are excessive. If they are, is it reasonable to think that you can lower them? You can’t control every expense, of course, but you may save some money if you intend on doing your own lawn maintenance and repairs.

3) Financing: You can adjust the return on an investment merely by applying various financing techniques. Whereas one type of financing package might make your prospective real estate investment look unprofitable, another financing package might as easily turn your prospective property into a sound, profitable investment. Try various alternatives in financing to see how the mortgage impacts cash flow, rate of return, and profitability.

4) Cash flow: Don’t just consider the before-tax cash flow produced by the investment real estate to determine your overall benefits. Look at the after-tax cash flow and determine what your property will give you in the way of a return after taxes. It’s always best to consider the elements of tax shelter such as the paper loss the IRS permits for depreciation (cost recovery). Here again, good real estate investment software can make this computation for you in seconds, so it doesn’t have to be difficult.

5) Price: Some rental properties, regardless of other factors, simply will not make sense unless the seller is willing to accept a lower price. To increase your chances for success, however, don’t simply throw out a number. If a seller gets the impression that you’re numbers have no rationale, they’ll be less willing to discuss a price with you. Beforehand, tweak the price to see its affect on the cash flow and rates of return, and then select a price based on the reasonableness of the returns. Prepare those figures and discuss them with the seller. You might be surprised to discover a seller willing to listen to reason.

The point is that the numbers must make sense. Never make a decision to purchase investment real estate based on the aesthetic beauty of the build¬ing or by using a simple rule of thumb to determine its value. Remember, only women are beautiful, real estate investing is all about the numbers.

Take the time to prepare a property analysis. This is the only reasonably certain way of making the right investment decision on any prospective real estate investment. If your property analysis shows that the property doesn’t make financial sense, forget how pretty it may be and don’t buy it!

By: James Kobzeff

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The Reo List Every Agent Must Have!