Fundamental Principles of Real Estate Investing

Real Estate investing has always been viewed as a conservative investment opportunity. Real property is thought to not only hold value, but is expected to increase. This is generally true, but like any investment, there is risk involved. There are some fundamental principles of investing in Real Estate that will tend to reduce this risk. These principles hold true no matter where the actual location of the property. They apply to investing in Utah real estate as well as they do for any other area.

The first principle is education. Actually, this applies to any investment. Real estate is often about relationships. You need to learn about people. In many ways, they are going to be the key to your success or failure. You also need to learn all you can about markets and marketing techniques. Investors will have to evaluate properties and must know about home repairs. There is a lot of information that can impact your success or failure, and the more prepared you are, the better chance you will have.

Another principle is to understand cash flow. Real estate investments are not very liquid. Properties can rarely be sold quickly. The investor must be prepared for short term losses due to the need for costly repairs or the sudden departure of tenants. There are many relevant numbers involved in real estate. If you understand these numbers, you will be prepared to deal with cash flow fluctuations. It is a good idea to start small and look for every way possible to reduce risk. Although it is impossible to eliminate risk completely, when you are working to eliminate as much as possible, you are going in the right direction.

It is important to research your property. You need to find property that is going to be in demand. Provo real estate might always seem to be in demand, but every property and location has things that make it more or less desirable than the average. In addition to inspecting potential property, make an inspection of the neighborhood. It is better to be aware of conditions that might lower property value, or make rentals problematic, before you are the owner of the property.

The most important principle to remember in real estate investing is this: Your home may be where your heart is, and emotion and sentimental attachment may matter in selecting your personal home, but when you are investing, return on investment is all that matters.

7 Simple Steps To Real Estate Investing

Whether you are BRAND NEW to real estate investing or an expert in the game, it’s critical that you understand these 7 Simple Steps to real estate investing.

First things first…

* Real Estate is NOT a get rich quick scheme. However, if you learn the foundations and put them into practice, you will make more than enough money to realize any and all of your dreams and goals.

* The real estate bubble is not going to burst! The real estate market will, however, shift and the real estate market will change - just as it always has! What’s “hot” now may turn ice cold in the next 3 years (or perhaps even 3 months). But, there are ways to “bubble proof” your real estate investments. It’s actually quite simple.

Did you know that in the United States, in 1975, the median home price was $33,300? In 2005, the median home price was $195,000. Historically, the average home doubled every 7 years. If you do the math, it should be well over $200,000.

OK… Now, having said that… The real estate market WILL change and what is “working” today in real estate may not in the future… The rental market was strong a decade ago, but has been soft in recent years. We are getting ready for a turn once again.

Real Estate IS a cycle… and cycles have some degree of predictability. With predictability, you can grow your real estate business into a cash-producing, profit-pulling machine that runs itself WITH the changing real estate market trends. It is still possible to make money in real estate. In fact, now is just as good a time as any to get started in real estate investing.

But, you’ve got to make wise investments. Sure, you may make some SERIOUS cash in pre-construction, but what happens if (no, not if - when) the market shifts and there are suddenly 35 identical properties on the market for sale in the same building? How long can you afford to carry a negative cash flow on the property?

Or how about taking over property ’subject to’? Sure, it’s a great strategy and lenders may be inclined to turn the other way and not exercise the “due on sale” clause as long as the interest rates are at rock bottom prices (You know, those sellers that you’re usually taking property subject to from usually don’t have the lowest interest rates, right?) If the interest rates spike to 10-11%, don’t you think lenders might be MUCH MORE inclined to exercise their option to make you pay off the 6.5% note?

What this means is simply that you must be experienced in the basics - the tried and true techniques, strategies and systems that have worked in the past, are STILL working and will work in the future. You’ve got to have all the tools in your bag so that you can go with the flow and not be affected when real estate markets begin to shift (which they are already in the process of doing, in case you’ve missed that memo!

Step #1 - Set your plan: Figure out what your long term real estate goals are (aka retirement and wealth building) and figure out what your short term needs are with regard to making money in real estate. Then, set up the proper entities and put the plan in place.

Step #2 - Determine what your target market will be: You cannot be all things to all real estate markets. If foreclosures appeal to you, start investing in the foreclosure market. If you want to be a landlord, look to out of state owners to focus your real estate marketing efforts.

Step #3 - Be consistent and persistent: Real Estate is not a get rich quick scheme. Real Estate is get wealthy over time and put some quick cash in your pocket today. You’ve got to follow your plan and stick with it to see real results in real estate. You’ve also got to continue to increase your education and your experience.

Step 4 - Don’t fall into the “Analysis Paralysis”: Learn to analyze properties quickly. Don’t get caught up overthinking. It’s quite simple actually: What’s the property worth? What does the property need for repairs? And how much can you get the property for? It all comes down to numbers!

Step 5 - Become a master of finance!: Real estate is the business of marketing and finance. You must learn about mortgages and interest rates and loan programs that are out there. You must know how to use finance to negotiate your deals and to sell your properties.

Step #6 - Become a skilled problem solver: The reason you will get real estate deals that others don’t, is because you are able to solve people’s problems. Anything goes on the real estate playing field. You’ve got to be ready!

Step #7 - You must continue your education: It is important that you are always investing in your education and learning new tactics, strategies and tips that will help you make more in real estate.

If you enjoyed this article, make sure to look up the other articles discussing The 7 Simple Steps To Making Money on Real Estate. The next article discusses Step #1 - set your plan in further detail!

The Next Level Institute is dedicated to helping real estate investors - whether a brand new or a seasoned investor - become more successful with less effort. Get your free 4-part mini-course on finding deals AND learn the 7 keys to sucking in the deals faster than a “Hoover” vacuum! Get your free e-book at: http://www.7steprealestate.com

About the Author

The Next Level Institute is dedicated to helping real estate investors - whether a brand new or a seasoned investor - become more successful with less effort. Get your free 4-part mini-course on finding deals AND learn the 7 keys to sucking in the deals faster than a “Hoover” vacuum! Get your free e-book at: http://www.7steprealestate.com

Why Reinvest Profit Earned From Real Estate Investing?

Creating a business plan with the future in mind can be a daunting task. I mean who knows what tomorrow is going to bring, and if you can not see the future, how can you plan for it? One thing that you know for certain is that there will be problems; there always is with real estate investing. So what can you do to ease the burden of those problems when they occur?

The best buffer that you can create to protect yourself from unforeseen problems with real estate investments is to put aside some cash for a rainy day. A buffer of several thousands of dollars can take care of any number of setbacks including excessive carrying costs, unplanned repairs, illness, budgeting miscalculations, and inclement weather.

While you may not be able to begin your career in real estate investing with this type of cash insurance policy in the bank, you can build one over time if you are smart with your money. Every time that you pull off a successful investment, you will have a large chunk of profit that you will need to use to pay off any outstanding bills and to finance your life. But before you do this, you should take a flat percentage of your profit and put a portion of it in the bank and reinvest the rest into your next project.

By constantly reinvesting a small portion of your profit into subsequent projects, you will increase the amount of profit that you make with each investment. This is because many repairs and upgrades that you make to a property add value to the property that is well above the amount originally invested. Having more money to work with in real estate investing will also allow you to purchase high end properties that can bring high end profits.

Another reason that you should always reinvest a portion of your profits is that homes and properties appreciate in value. This is the very thing that makes you money in real estate investing, but it is also the very thing that makes the purchase price for investments continue to rise. You cannot expect to pay the same for a property next year as you paid for it this year even if it is in the same condition. It is just not going to happen, and you need to be prepared to meet this reality with a little extra cash on hand to make initial investments.

Reinvesting profits is also a smart way to compound profit on money that you earn through real estate investing. Think about it this way. If you took the money you earned from an investment and ran with it, you would have nothing to show for it. But if you took the profit earned and reinvested it to make more profit, you could increase your profit margin without increasing the amount of work that you have to do. Now, that is smart business.

4 Tips On Foreclosed Real Estate Investing Success

Foreclosed real estate investing will take more than just having enough capital to invest. Such a venture may require you to learn more about the ins and outs of foreclosed real estate investing. Such investments also come with their own risks, just like any other profitable venture. Success belongs to the wise investor and that is what you should aim for if you wish to profit from your real estate investments.

Real estate investing is governed by rules and guidelines that you should be following. Along with such guidelines, there are also a number of useful tips that you can utilize when you venture into foreclosed real estate investing. Here are just some of them.

1. When looking at the profitability of properties in foreclosed real estate investing, one of the things that you should first be considering is its location. Location has everything to do with foreclosed real estate investing.

The right location will determine the attractiveness as well as marketability of such foreclosed real estate properties. The best locations where you can get the best deals in foreclosed real estate investing is in mid-level to upscale neighborhoods. Property investments in such areas not only will make you acquire properties that have a wider market among prospective homebuyers, they might also be easier to sell.

2. Investing in properties during an economic downturn can also work to your advantage when you are into foreclosed real estate investing. With the slowdown in the economy, some families may not be able to cope up with their higher than average mortgages and might opt to put their homes up for foreclosure in order to salvage what might be left of their investments.

And it is during these times that many foreclosed real estate can be acquired at very attractive bargains. And with the bargains that you might get will result to more profit when you put up such properties for sale.

3. During a typical foreclosed property transaction, never sign any purchasing contracts without including an inspection contingency period for the property in question. This will be able to safeguard your own interests especially when you find out about serious problems that might show up during such property inspections. Remember that most foreclosed properties are fixer-uppers, with some in need of major repairs.

Such a case is not necessarily a bad thing since they can also help bring the property prices down even lower. But you must also be able to weigh out the costs of repair with the property value that you have in mind. Be also wary of hidden problems that may crop up only during inspections. This way, you are trying to cover all the bases and keep your investment options work to your advantage always.

4. Before you go into price negotiations with the property seller, try to obtain a loan pre-qualification or a loan pre-approval letter. This will make you a very attractive potential buyer in the eyes of the property seller, knowing that financing such purchases on your part is already guaranteed. Property sellers are more likely to deal with buyers with available funds than someone whose financing capabilities might still be in doubt.

Success in foreclosed real estate investing would rely on how you follow such tips and make them work for you. It would be a mistake going blindly into any investment opportunity that comes your way. It pays to know and learn what you are getting into. That is essential to every successful real estate investor.

Real Estate Investing Alternatives

You’d like to invest in Real Estate, but you aren’t sure what to invest in (condos, apartment buildings, commercial properties, land), and you’re not certain if you have enough money available to make a suitable Real Estate investment.

It seems that everyone is investing in some form of Real Estate, but you consider yourself a novice and your risk tolerance is low. You don’t want to make a costly mistake, so you decide to wait. You may have even purchased tapes and books and videos extolling the virtues of Real Estate investing, and how simple it is to become financially independent.

The old saying, “If it’s so easy, everybody would be doing it,” is just as appropriate for the Real Estate market.

Also, you may think that it’s too late — the so-called Real Estate “bubble” is about to burst.

Are there any alternatives for the neophyte, or the conservative investor who’s very concerned about his or her life savings?

There are such alternatives, a method by which you can own real estate and have it managed, with the liquidity of the stock market. It’s called a REIT, or Real Estate Investment Trust.

For about fifty years, REITS have offered investors the opportunity to own a variety of Real Estate investments — commercial and private — without the aggravation, inconvenience, and time-consuming hassles of individual ownership.

On top of this, a REIT can be purchased or sold just like as common stock. Professionals who are experienced in buying, selling, and renovating properties manage them.

Because many REITS purchase several properties, their diversification often keeps the investment risk low. Within the REIT, the management team has the capability of divesting itself of unprofitable properties, and, if the timing is appropriate, the ability to purchase additional properties.

Many REITS also offer very competitive dividends, which make them an excellent alternative to bonds and preferred stocks.

Also, the value of the properties in the REIT can appreciate, giving the investor a very important investment advantage — total return (appreciation plus dividends).

This appreciation in value is rarely seen in bonds (unless interest rates drop sharply), and, unlike bonds, REITS do not have a maturity date.

REITS are not without their risks. The Real Estate market could weaken, apartments and mall locations could remain vacant for a period of time, or the REIT may not want to risk putting additional capital in certain properties.

If you don’t have the expertise to invest in individual Real Estate ownership, or, if you’re a conservative investor who demands liquidity in your portfolio, speak to your investment advisor regarding REITS. These trusts may give you the liquidity and the diversification you need and deserve.

As a final note: If you’re searching for appropriate vehicles for your IRA, REITS may be one of your best alternatives. Remember to do your homework. There are many different types of REITS out there.

Real Estate Investing: Protecting Your Assets

Real estate investing can provide you with positive cash flows, tax benefits and the satisfaction of having impacted your life positively. Just like in any other business, in real estate investments too, there are intricacies that are personal to it, and can cause negative impacts if ignored. Many first time real estate investors make the mistake of investing their hard earned money without understanding, and thereby risking their investments. There is a need in real estate investing of protecting your assets.

Avoiding the Errors:

It depends on why you are investing in a particular property. Do you intend to hold it for a long period, or do you intend to turn it around for selling at the earliest? Let us look at some of the errors that certain investors make, which you need to avoid to protect your assets, and ensure excellent returns on your investments.

Check the Property:

Do not get sucked into the excitement of investing in a real estate property. There are rampant claims of high return on investment in the real estate business. Check the condition of the property, and how much modifications, renovations, etc will be required. Ensure you have a right real estate agent who will not overlook all the seemingly insignificant but important details.

Inspect Thoroughly:

Have a professional inspector thoroughly check the property. You need to exercise sound business judgment, as you are ready to invest your hard earned money. If it is a rental property, check with the tenants regarding pest problems, structural damage or any reoccurring problems.

Check All Documents:

Documents involved in a property can be overwhelming: building permits; zoning laws; rental and lease applications (in case of rental property); underlying loan documents; CC&Rs (covenants, conditions and restrictions); by-laws; title policies; inspection reports; purchase contracts; insurance; the list is never ending.

Cash Flow:

If your real estate investing is in a rental property, you intend to hold on to the property for a longer period, as much as 15 to 20 years. You will need to ensure cash flow to take care of your property, vis-?-vis the property?s maintenance, repairs, improvements, etc. There will be times when your rental property will be vacant and not earning you a rental. You still need to have cash for the upkeep of your property.

Short Duration Investing:

If you plan to invest in a real estate property for a shorter duration, you may not feel the need to invest heavily on improvements etc. Sometimes, short duration investing could be risky, as the property may lose in value. Generally, property prices appreciate over longer periods.

To help you in real estate investing, there are professionals available, online as well as offline, who can guide you in protecting your assets.

Real Estate Investing: Protecting Your Assets

Real estate investing can provide you with positive cash flows, tax benefits and the satisfaction of having impacted your life positively. Just like in any other business, in real estate investments too, there are intricacies that are personal to it, and can cause negative impacts if ignored. Many first time real estate investors make the mistake of investing their hard earned money without understanding, and thereby risking their investments. There is a need in real estate investing of protecting your assets.

Avoiding the Errors:

It depends on why you are investing in a particular property. Do you intend to hold it for a long period, or do you intend to turn it around for selling at the earliest? Let us look at some of the errors that certain investors make, which you need to avoid to protect your assets, and ensure excellent returns on your investments.

Check the Property:

Do not get sucked into the excitement of investing in a real estate property. There are rampant claims of high return on investment in the real estate business. Check the condition of the property, and how much modifications, renovations, etc will be required. Ensure you have a right real estate agent who will not overlook all the seemingly insignificant but important details.

Inspect Thoroughly:

Have a professional inspector thoroughly check the property. You need to exercise sound business judgment, as you are ready to invest your hard earned money. If it is a rental property, check with the tenants regarding pest problems, structural damage or any reoccurring problems.

Check All Documents:

Documents involved in a property can be overwhelming: building permits; zoning laws; rental and lease applications (in case of rental property); underlying loan documents; CC&Rs (covenants, conditions and restrictions); by-laws; title policies; inspection reports; purchase contracts; insurance; the list is never ending.

Cash Flow:

If your real estate investing is in a rental property, you intend to hold on to the property for a longer period, as much as 15 to 20 years. You will need to ensure cash flow to take care of your property, vis-?-vis the property?s maintenance, repairs, improvements, etc. There will be times when your rental property will be vacant and not earning you a rental. You still need to have cash for the upkeep of your property.

Short Duration Investing:

If you plan to invest in a real estate property for a shorter duration, you may not feel the need to invest heavily on improvements etc. Sometimes, short duration investing could be risky, as the property may lose in value. Generally, property prices appreciate over longer periods.

To help you in real estate investing, there are professionals available, online as well as offline, who can guide you in protecting your assets.

Real Estate Investing Gurus Reviewed

We’ve seen all the claims that have been made by many late night real estate informational gurus. They all talk off making thousands of dollars when you buy a property. But is it really possible? Is it really possible to buy a house and pay no money down and walk away with cash at the closing table?

It’s because of these late night infomercials that no money down real estate to pull cash out at closing has become one of the most sought after topics on the net and late night television. Most everyone has seen these commercials or even bought these real estate investing courses. Most of these courses get filled with dust, then to only find their way to the yard sale. Now, you may be asking, ” is it really possible and if so, how’s it done?”

Honestly, the one technique that gets talked about the most is the least creative way to do a deal and the most risky. There are many more profitable ways to real estate investing without the personal risk and the liability. See, what happens is you find an undervalued property, then you go to the bank to acquire financing. Many lenders will loan 80% of the appraised value on real estate investments. Many investors will then borrow the 80% even if they only paid 65% of the fair market value of the property. The crucial factor that investors must realize is that this is borrowed money and you can’t live off of borrowed money. Also, you are personally guaranteeing that you will pay back the loan. Therefore, if something goes wrong, then you are on the hook with the bank.

Not only is this very possible to pull cash out when you buy, this one method to real estate investing could be the single worst mistake that investors make when buying properties. It’s a financial disaster waiting to happen. See, when you buy to pull cash out at the closing table, you are pulling the equity out of the deal. The equity is the value of the property beyond what is owed against the property. When an investor buys a property using this method, they are truly risking their financial stability because they trust that properties will always go up in value. This myth couldn’t be farther from the truth. Most don’t even care to think about “what if the fair market value goes down? Or what if the tenants that I have completely destroys the home?”

So, are there other ways to create profitable real estate deals?

The answer is a very loud “YES”. There are numerous ways to hedge your risk of these scenarios while you avoid personal liability and financial risk all together. You should seek out a mentor or a trainer that will show you the ins and outs to real estate investing without costing you a fortune. Also, when you decide to use a mentor or buy a course of any kind, you should look at what the guru’s previous students have to say before you decide to give up your hard earned money. We’ve outlined the most popular real estate gurus and allow real life consumers to give reviews on many of the top real estate investing programs selling today. To read these reviews, then go to www.101Gurus.com.

About the Author

Discover what others have to say about the Real Estate Investing Gurus as you read the latest Real Estate Course Reviews by visiting http://www.101gurus.com

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