Essentials Of Real Estate Investment

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Cons Of Real Estate Investing

How To Pitch a Real Estate Deal – Investment Memo Basics
  • Potential returns aren’t as high as the stock market: From 1991 to 2019, the S& P 500 gained over 600% housing prices increased by only about 160%.
  • Real estate investment can be cash heavy: If you really want to get a steady income stream going, then you need enough cash on hand. Whether it’s your own money or it’s loaned to you, you’ll need to be able to pay for building improvements, maintenance, and more.
  • Properties are not liquid investments: You can’t turn a property into cash quickly like you can when you sell a stock.
  • Managing tenants and building maintenance can be a challenge: Whether you hire a property manager or manage it yourself, running a property can be full of unexpected problems. These can include overdue rent, roof leaks, power outages, and more.

Get To Know Your Market

When investing in real estate, it is important to learn about and become an expert in your selected . Being well informed on the current trends, including any decreases or increases in the average rent, income, interest rates, and even unemployment/crime rates will allow you to recognize the current market status and plan for the future.

Being able to constantly forecast and stay a step ahead of the market can help lead you to become a more effective real estate investor.

Conventional Loans And Government Programs

When investors are starting out with rental properties, they may purchase the property and live in it while fixing it up or waiting for it to go up in value. If you will be occupying the home, conventional mortgages and government programs can be a possible source of funding.

Conventional mortgages may be available to you from either a credit union or a bank. Credit unions often have lower interest rates and fees because they are nonprofit organizations. Additionally, because credit unions are membership-based and serve specific communities, they may have easier underwriting guidelines that improve the chances of your loan being approved.

Government programs that may provide funding include the U.S. Federal Housing Administration, Veterans Affairs, and U.S. Department of Housing and Urban Development loans. Each will have its own specific criteria for eligibility. For example, FHA loans require a down payment as small as 3.5% and could be used to finance a maximum of four units.

When your mortgage balance is greater than 80% of the home value, youre charged a mortgage insurance premium that protects the bank in case you default on the loan. FHA loans may also require an upfront mortgage insurance premium of 1.75% and ongoing premiums of 0.45% to 1.05% each year.

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Maintain Contact During Escrow To Secure Your Deal

The deal is not closed once you open escrow. If you are buying off market, the seller will likely have some level of anxiety over the deal and whether everything and everyone is legitimate without a real estate agent.

Have the escrow/title company reach out as soon as possible to introduce themselves and to let them know that they will be preparing the paperwork. This will provide 3rd party validation to the seller and put them at ease.

Also, set the expectation up front that you will be touching base periodically throughout the escrow period and be sure to do so.”

Type Of Investment To Make

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There are many different types of real estate investment opportunities. For instance, you can decide to invest in rental properties or even residential properties.

You have to carry out research and determine the kind of opportunity that not only appeals to you most but also meets your requirements and abilities. You should also consider other aspects such as location and taxes.

These considerations will help you in making your decisions concerning making investments in real estate. The key to being a successful real estate investor is to do your research well. Ensure that you are very competent in your areas of interest. You can do this by reading widely and consulting with established professionals in the industry.

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Best Way To Structure Your Relationship With Your Ontario Real Estate Coach

The best way to structure your association with your real estate mentor is to create mutually aligned incentives by splitting in the profits fifty-fifty so that when you make money, the mentor earns money. That way, when you win, your mentor succeeds too. And perhaps just as important, if a deal is falling apart, your coach stands to miss out that money too so they are motivated to help put the deal back together. That’s how our company works. We coach creative real estate investing across this country by splitting the profits fifty fifty with the people we mentor to ensure success is achieved. To learn more, check out our Apprentice Program or call us at 909-366-4130. If you’re interested in mastering creative real estate investing, we could be your Ontario real estate coach. But we’re a small, close-knit group so we only have a limited number of openings, we choose not to oversaturate any one area and we choose to only mentor those who are 100% committed to becoming successful creative real estate investors. So, unfortunately, we don’t accept every person that applies. But, whether or not we are able to work together, hopefully now, after reading this article, you can make a much more informed decision when searching for a Ontario real estate coach and mentor.

Buying A Rental Property

Buying a home or apartment to rent out is one of the oldest real estate investment strategies – but it can also be one of the most challenging. To get started, you’ll have to find a property priced appropriately that you can purchase and then rent for a profit.

You also must decide between short-term and long-term rentals. A short-term rental with a company like Airbnb or VRBO can bring in substantial income, especially if you live in a tourist haven. Having a short-term rental may bring in more cash, but it also requires more day-to-day work.

If you have a long-term rental and don’t want the stress of late-night phone calls from tenants, you can outsource the work to a property management company. This will provide more peace of mind, but you’ll also have to sacrifice some of your profits.

If you’re considering buying a rental property, here’s how you can get started.

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Habits Of Successful Real Estate Investors

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Investing in real estate can be successful, but going it alone can be challenging and highly risky. Joint ventures, wholesaling, and property management are just a few of the ways that investors can profit from real estate. It also takes a little savvy to become successful in this highly competitive arena.

While certain universities offer general coursework and disciplinary programs that can benefit real estate investors, a degree is not necessarily a prerequisite to be profitable in real estate investing. Whether an investor has a degree or not, there are certain characteristics that top real estate investors commonly possess.

Here are the 10 habits that highly effective real estate investors share.

What Are The Tax Consequences Of Real Estate Investing

Essentials of Investing Chapter One

Real estate investing has unique tax consequences. If you earn monthly cash flow from rental property, your income is taxed at your ordinary-income tax rate. However, when you sell a rental property, you also pay taxes on the capital gains. In addition, you cannot exclude the capital gains like you can with a primary residence, which means you’ll increase your tax liabilities when you sell the home.

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Tips For Buying Your First Rental Property

Thinking about purchasing an investment property? Purchasing rental real estate requires knowledge of leasing, mortgage loans, tenant and landlord relationships, and property management. Buying real estate can be lucrative but, just like any investment, comes with benefits and challenges.

Real Estate Investment Groups

Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property but dont want the hassle of being a landlord, a real estate investment group may be the solution for you.

A company will buy or build a set of buildings, often apartments, then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space. But the company that operates the investment group manages all the units and takes care of maintenance, advertising, and finding tenants. In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups. In the standard version, the lease is in the investors name, and all of the units pool a portion of the rent to guard against occasional vacancies. This means you will receive enough to pay the mortgage even if your unit is empty.

The quality of an investment group depends entirely on the company that offers it. In theory, it is a safe way to get into real estate investment, but groups may charge the kind of high fees that haunt the mutual fund industry. As with all investments, research is key.

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Consider Flipping Investment Properties

This is HGTV come to life: You invest in an underpriced home in need of a little love, renovate it as inexpensively as possible and then resell it for a profit. Called house flipping, the strategy is a wee bit harder than it looks on TV.

There is a bigger element of risk, because so much of the math behind flipping requires a very accurate estimate of how much repairs are going to cost, which is not an easy thing to do, says Meyer.

His suggestion: Find an experienced partner. Maybe you have capital or time to contribute, but you find a contractor who is good at estimating expenses or managing the project, he says.

The other risk of flipping is that the longer you hold the property, the less money you make because youre paying a mortgage without bringing in any income. You can lower that risk by living in the house as you fix it up. This works as long as most of the updates are cosmetic and you dont mind a little dust.

» Which is better?Real estate vs. stocks

Citi Double Cash Card

Real Estate Investing for Beginners

While the other credit cards on this list are some of the best business credit cards, the Citi Double Cash Card is a personal credit card. Cardholders receive up to 2% cash back on every purchase with no limits on the amount of cash back you can earn. You can also transfer balances to take advantage of the 0% APR offer for 18 months ). This card could be great for you if you have real estate project expenses on another credit card that are incurring interest charges.

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Youre Our First Priorityevery Time

NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.

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Decide Your Investment Property Criteria

Your investment property criteria tell you and others what it means to have a good investment. I actually recommend creating a written investment profile that you can share with potential partners, investors, and sources of leads like real estate agents.

Your written investment profile should include descriptions of two major categories:

  • Target property
  • Your target property will become clearer when you choose a niche within your overall market. A niche means you focus on one smaller segment of the entire market. I discussed that some in Step #3, but you can also explore your choice of a niche with my in-depth article The 35 Best Niches for Investing in Real Estate .

    When youve chosen a niche , your basic target property description may look something like this:

    Single family houses with 3 bedrooms and 2 baths in the 30263, 30265, & 30277 zip codes. Target full market price range is between $120,000 to $199,000. Ideal properties are on quiet, safe streets convenient to schools and shopping. Ideal properties also include a garage or other storage and a useable yard.

    The second category on your investment profile is the ideal terms . I wrote a comprehensive guide called How to Run the Numbers For Rental Properties Back-of-the-Envelope Analysis. This will show you how to quickly determine the most important investment numbers for you.

    The ideal terms you choose will depend on the choices youve made up to this point, but they could look something like this:

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    Ink Business Cash Credit Card

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    The Power Of Leverage

    JLL Valuation Advisory is the essential guide to the changing face of real estate values

    With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. Leverage means to use debt to finance a larger purchase than you have the available cash for. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy orderunless you are buying on . And even then, the percentage you can borrow is still much less than with real estate, thanks to that magical financing method, the mortgage.

    Most conventional mortgages require a 20% down payment. However, depending on where you live, you might find a mortgage that requires as little as 5%. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, the size of your mortgage affects the amount of ownership you actually have in the property, but you control it the minute the papers are signed.

    This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage, or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value.

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    Think About Investing In Rental Properties

    Tiffany Alexy didnt intend to become a real estate investor when she bought her first rental property at age 21. Then a college senior in Raleigh, North Carolina, she planned to attend grad school locally and figured buying would be better than renting.

    House hacking allows you to live in your investment property while renting out rooms or units.

    I went on Craigslist and found a four-bedroom, four-bathroom condo that was set up student-housing style. I bought it, lived in one bedroom and rented out the other three, Alexy says.

    The setup covered all of her expenses and brought in an extra $100 per month in cash far from chump change for a grad student, and enough that Alexy caught the real estate bug.

    Alexy entered the market using a strategy sometimes called house hacking, a term coined by BiggerPockets, an online resource for real estate investors. It essentially means youre occupying your investment property, either by renting out rooms, as Alexy did, or by renting out units in a multi-unit building. David Meyer, vice president of data and analytics at the site, says house hacking lets investors buy a property with up to four units and still qualify for a residential loan.

    If you manage it yourself, youll learn a lot about the industry, and if you buy future properties youll go into it with more experience, says Meyer.

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