10 Important Tips to Successful Real Real Estate Investing

10 Important Tips to Successful Real Real Estate Investing

When it comes to investing, everybody has certain goals and aspirations. However, we have found that there are certain guidelines every aspiring real estate investor needs to know:

1. Compare Property Values and Rents

Financial statistics only go so far; the best measure of a property's market value is often the sale prices of nearby properties. The same holds true for area rents. A low price can often be justified by a reasonable rent; renters who can afford a high rent can afford to buy instead, so reasonably priced rent is a need.

2. Be Careful - Tax Laws May Change

Don't base your tax investment on current tax laws.

3. Specialize In Something You Know

Start in a market segment you know. Whether you focus on fixer-uppers, foreclosures, starter homes, low-down payment properties, condominiums, or small apartment buildings, you'll benefit from experience by specializing in one aspect of investment real estate properties.

The tax code is constantly changing, and a good investment is a good investment regardless of the tax code. The right property with the right financing is what you should look for as an investor.

4. Know The Costs Going In!

Know the financial statements inside out. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These are key issues that must be addressed before making a solid investment.

5. Know Where Your Tenants Are Coming From

If the last rent increase was recent, your tenants may be considering a move. If tenants have a short-term lease, they may be living there simply to attract unsuspecting buyers. It is also important to collect the tenants' security deposits at closing.

6. Assess The Tax Situation

Taxes are an integral part of successful real Real Estate Investing, and they often make the difference between a positive cash flow and a negative one. Know the tax situation, and see how it can be manipulated to your advantage. It may be a good idea to consult a tax advisor. 7. Investigate Insurance Coverage

If seller's coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price.

8. Confirm Utility Costs

Ask the local utilities to verify recent utility expenses, especially if any of these costs are included in your tenant's rent.

9. Consult Your Accountant

Taxation is a key element of successful real Real Estate Investing, so be sure to find an accountant who is well-versed with the constantly evolving tax code.

10. Inspect!

Make sure that you always perform a thorough inspection of the property before buying it. Never, ever buy any property without at least examining the site. In some cases, hiring professional inspectors to examine the structural mechanical system may be a sound investment.

(c) Copyright 2005 Madan Ahluwalia. All rights reserved.

Madan "Raja" Ahluwalia is an Attorney at Law & Realtor. Raja offers his clients a counseling-based approach to home buying, where the client's long-term goals are the most important consideration. He possesses a thorough understanding of the market and trends, based on years of involvement in real estate. He provides expert insights and helps clients understand timing, pricing and financing issues. Contact Raja at raja@kw.com or 650.430.4023.

The Difference Between Investing and Trading

Investing and Trading are not the same thing. The returns you seek, the length of time it takes to achieve those returns, the amount of risk one is prepared to take, and the commitment one can make to monitor the investments dictate the strategy of whether to invest or trade.

Investing

Investing is holding an asset for a longer term, expecting it to increase in value. The most common example is investing in equity mutual funds through a retirement plan. Many of these funds are held for years and are expected to show a substantial appreciation over the long term.

You can also invest in individual stocks and hold them for 6 to 18 months or longer, sometimes much longer. This is referred to as the "buy and hold" strategy.

Real estate would be another example of investing, unless the property is purchased for quick flipping.

Jewelry, art, stamps, and collectibles are still other examples of investing where they are kept for a long time in the hope their value appreciates. Trading

Trading is also investing but the time frame for a return on that investment is a much shorter period, usually a matter of a few days or weeks.

The most obvious example would be day trading where a trader is in and out of a market the same day.

Still other trading takes place over a period from a few days to a few weeks.

Most trading takes place with individual stocks and commodities, with commodity markets being the most predominant vehicle.

Rob Hall is a successful futures trader, President & CEO of his own investment firm, and international author. His books on learning to trade futures markets are distributed through Sumas International Sales Ltd. View them at http://www.futuresopps.com/Comm.htm

Dramatic Profits From Preconstruction Real Real Estate Investing

The preconstruction process is an innovative real estate investment opportunity in which you buy tomorrow's property at today's price. Preconstruction investing is a boon for the investor or buyer as well as the developer or builder. The biggest advantage of preconstruction process is that you can reserve your buy at discounted prices without investing a fortune. You simply have to make a small investment that is as low as 5% of the total cost to reserve a unit and pay the balance on achievement of different milestones.

For the buyer, preconstruction process provides an opportunity to seal a property deal with little margin money and achieve sizable discounts over the tentative price of the finished condos. For the developer it is an opportunity to presale the entire property even without laying a single brick and to procure a construction lending with relative ease.

In the the preconstruction process, property developers place the building plans of a proposed real estate venture for pre-selling. Only thing made available to the buyer are architectural rendering and floor plans of the condominium, town house, or single family residence. The good news is that preconstruction prices are normally at an attractive discount of the proposed sale price of complete units.

In theory, the buyer gets the discount because they displays the grit and tenacity to invest on mere paper and "air". However, in reality, they are getting discounts because the are a crucial piece of the puzzle for the developer because pre-selling of a particular percentage of the total units is a need for getting a prospective lender to fund the construction process.

If you are interested in investing in preconstruction property, you can check out the list of preconstruction offers available in your locality in the newspapers, on the Internet or with your real estate consultant; that is if you have those types of projects in your locale. When you have the list, you can shortlist the offers that are suitable according to your budget and needs. After that you must run a thorough check on the property and the developer on many issues. Certain key reasons are, the going and expected cost of the similar units in that locality; demand supply factors; whether the units are assignable and uniqueness of the property. You must also check for the future or proposed development plans in the vicinity to protect your view. This aspect is important because you might choose to buy an apartment in a preconstruction process at a premium due to the prefect view of lake or waterfront. However, after some time you may find out that another developer is building a project, which may blind your view.

After you have satisfied yourself with the suitability and pricing of the condominium, you can proceed for the reservation. Most preconstruction properties have a nominal reservation amount, which is normally 5-10% of the total cost and can go as low as $1,000. The reservation process has a simple "Intent to Purchase Agreement" in which you hold the right to first refusal. In this phase, you are safe because your money is in escrow account and you can terminate the agreement without any obligation. Of course, the developer is not really bound to any prices yet at this stage either so both sides are in a loose arrangement.

Once the developer gets the needed licenses and permissions and has the legal authority to sell the units, you can enter into a hard contract. At the time of signing the hard contract, you have to make balance up-front payment. Usually, the upfront payment is 20% of the total cost of completed unit but can be more or less. You can pay by a direct deposit with the builder or through a letter of credit. After signing the contract and making an up-front payment, you do not have to make any other payment until the unit is ready and you close the deal and take possession.

However, before signing a hard contract you must be careful because by signing it, you are entering into a binding commitment to purchase the unit, failing which the builder can forfeit your deposit. In some states like Florida, you have a 15-day rescission period during which you can withdraw from the hard-contract without any obligations. Before signing the hard contract, you should check to see if you have the rights to assign the property to a qualified intermediary. If you would like to play safe, take a professional opinion on the terms and conditions of hard-contract for preconstruction purchase.

The construction phase normally lasts for 6 months to 2 years (depending on project type) and you have an expiration date on the hard-contract. If the builder fails to complete the construction and handover the possession, you can claim for refunds and will have no legal obligation to buy the unit. During the construction period as the building would move towards completion, there is typically several price increases but of course, you cannot absolutely count on that happening. If you are able to find a suitable buyer prior to closing, you can resell the unit and claim your profits on closing of the deal.

If you have not assigned the contract until the completion, you will have to close the unit. Closing in preconstruction process is similar to all real estate deals and you have to make the balance payment with additional payments like the association fee as disclosed in the "Good Faith Estimate".

There are a lot of things to consider when entering into a preconstruction investment and we strongly encourage you to learn all the do's and don'ts. Hopefully this article has given you an overview of the process.

Chris Anderson is a leading authority on preconstruction real estate investing. Get his 4 day e-mail course and a 33 minute video free today! Visit http://www.GetPreconstructionProfits.com

Defining Investing Risk

"Take a chance! All life is a chance. The man who goes the furthest is generally the one who is willing to do and dare. The "sure thing" boat never gets far from shore." Dale Carnegie (1888 - 1955)

In 1998 Economics Professor and Nobel Prize winner Paul Samuelson (1915 - ) noted that, "Many people now believe that if they simply hold stocks long enough they will not, lose money for statistics have shown that since 1926 the U.S. equity market has not suffered a loss in any given 15 year."

He called it a fallacy, and conceded that it is truly likely that if you hold stocks over long periods of time that they would tend to produce returns higher than other assets. But to believe that it is a God given statement ... Is simply not correct!

"Risk does not go to zero over long periods," but there are many articles that reflect how risk goes down the longer the time period. What is seldom introduced is the fact that if there is a significant onetime loss, it can be monumentally overwhelming.

In any case Samuelson noted that: "The problem is that when stock prices do turn down (as inevitably happens even in the strongest of bull markets!) your optimistic equity exposure can overwhelm your gut level risk tolerance, leading to poor short-term judgments and even outright panic!"

Risk is a complex, multidimensional concept that manifests itself in various ways. Risk is omnipresent and includes stock market crashes, corporate bankruptcies, currency devaluations, changes in sentiment, in inflation and interest rates, and even major changes in the tax code.

Risk is generally defined as return volatility, or the degree of ups and downs of returns. But there's more to risk than volatility. Risk and long-term reward are generally related. Risk is the chance that your actual return will be less than you expected.

People sometimes think that a good return can be achieved with little or no risk. Unfortunately, that's impossible. To achieve your objectives, you need to assume certain risks and avoid others.

Your ability to handle risk is related closely to your individual circumstances, including your age, time horizon, liquidity needs, portfolio size, income, investment knowledge, and attitude toward price fluctuations.

What's highly risky to one individual may be no problem to another. Short-term fluctuations are not that relevant for long-term investors who have the discipline, patience, and understanding to deal with them. Stock funds are actually less risky than money market funds for those with long time horizons.

Well-informed investors are far less likely to let risk get the best of them. Those who understand the various elements of risk are better equipped to enjoy a profitable long-term investment journey!

Copyright © 2006 I.E.C. Haramis haramis@greekshares.com http://www.greekshares.com

Ioannis - Evangelos C. Haramis was born in Greece in 1951. Studied Business Administration, Marketing and Economics in Greece, USA and in Belgium.

He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank

 

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