With so many people making tremendous amounts of money in property or real estate it’s no wonder so many are looking at real estate as an investment. It offers more security than the stock market, provides great potential returns, offers tax benefits and it sounds cool to be ‘in real estate’.
One challenge many are faced with is the money to acquire a piece of property. You’ve heard, “I would love to invest in real estate, but I just can’t afford to!” Hardly anyone who buys a piece of real estate has enough money to pay for it. That’s where your banker comes in.
Owning your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. This step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. People rent because in their mind, “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!
When you rent,you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. If you own your own home, you would be paying your mortgage. The basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. Interest can be compared to rent. Those dollars are gone and you will never hear from them again. The part of the payment that goes to the principle is money you keep. Every dollar used to pay off the principal is a dollar you put in your own pocket.
So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and it makes more sense financially. There are opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. The money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. People that pay rent… Their net worth does nothing. Their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm feeling about making somebody else rich at your own expense… keep renting. To build your own capital … Buy your own house!
Many home owners have accumulated more money through appreciation of their property than by working a full time job for years. Before you go out and buy the first property you see, don’t forget some security measures are in order. As you may or may not know, real estate prices do not always go up. This can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage. Make sure to keep some slack. Overall, real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.
About the Author: With many years in the industry of property or real estate, host, Sintilia Miecevole’s site http://www.miraproperty.com will help you with searches from taxes, listings including residential, commercial and land to unclaimed property, vacation, waterfront and much more. Be sure to visit http://www.miraproperty.com for further information.
Tags: Dollar, First Steps, Getting Started In Real Estate, How Many People, Invest, Investing, Investment, Love, Money To Buy A House, Mortgage, Mortgages, Net Worth, One People, Principle Interest, Real Estate One, Real Estate Prices, Real Money, Rent, Renting A Property, Stock Market
With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.
One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?
Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!
When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.
So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!
Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.
About the Author
Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips
Tags: Challenges, First Steps, How Many People, Invest, Investing, Investment Vehicle, Love, Money Down, Money To Buy A House, Monthly Mortgage Payments, Obstacle, People Bank, Pleasure, Real Estate, Real Money, Rent, Renting A Property, Stock Market, Stocks, Toilet
With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.
One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?
Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!
When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.
So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!
Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.
About the Author
Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips
Tags: Challenges, First Steps, How Many People, Invest, Investing, Investment Vehicle, Love, Money Down, Money To Buy A House, Monthly Mortgage Payments, Obstacle, People Bank, Pleasure, Real Estate, Real Money, Rent, Renting A Property, Stock Market, Stocks, Toilet
Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.
This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.
I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn?t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.
The tenant I chose has not once in the first nine months paid the rent on time so he hasn?t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don?t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.
From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.
In the event the tenant doesn?t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.
Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn?t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don?t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.
Tags: 20k, 6 Years, 7k, Bett, Education, Eight Months, First Real Estate, Good Combination, Investing, Investor Group, Local Real Estate, Memphis, Networking, New Investor, Opportunity, Option Fee, Property Flyers, Real Estate Investor, Rent, Wholesale
With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.
One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?
Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!
When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.
So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!
Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.
About the Author
Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips
Tags: Challenges, First Steps, How Many People, Invest, Investing, Investment Vehicle, Love, Money Down, Money To Buy A House, Monthly Mortgage Payments, Obstacle, People Bank, Pleasure, Real Estate, Real Money, Rent, Renting A Property, Stock Market, Stocks, Toilet
With so many people making tremendous amounts of money in property or real estate it’s no wonder so many are looking at real estate as an investment. It offers more security than the stock market, provides great potential returns, offers tax benefits and it sounds cool to be ‘in real estate’.
One challenge many are faced with is the money to acquire a piece of property. You’ve heard, “I would love to invest in real estate, but I just can’t afford to!” Hardly anyone who buys a piece of real estate has enough money to pay for it. That’s where your banker comes in.
Owning your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. This step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. People rent because in their mind, “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!
When you rent,you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. If you own your own home, you would be paying your mortgage. The basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. Interest can be compared to rent. Those dollars are gone and you will never hear from them again. The part of the payment that goes to the principle is money you keep. Every dollar used to pay off the principal is a dollar you put in your own pocket.
So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and it makes more sense financially. There are opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. The money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. People that pay rent… Their net worth does nothing. Their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm feeling about making somebody else rich at your own expense… keep renting. To build your own capital … Buy your own house!
Many home owners have accumulated more money through appreciation of their property than by working a full time job for years. Before you go out and buy the first property you see, don’t forget some security measures are in order. As you may or may not know, real estate prices do not always go up. This can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage. Make sure to keep some slack. Overall, real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.
About the Author: With many years in the industry of property or real estate, host, Sintilia Miecevole’s site http://www.miraproperty.com will help you with searches from taxes, listings including residential, commercial and land to unclaimed property, vacation, waterfront and much more. Be sure to visit http://www.miraproperty.com for further information.
Tags: Dollar, First Steps, Getting Started In Real Estate, How Many People, Invest, Investing, Investment, Love, Money To Buy A House, Mortgage, Mortgages, Net Worth, One People, Principle Interest, Real Estate One, Real Estate Prices, Real Money, Rent, Renting A Property, Stock Market
Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.
This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.
I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn?t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.
The tenant I chose has not once in the first nine months paid the rent on time so he hasn?t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don?t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.
From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.
In the event the tenant doesn?t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.
Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn?t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don?t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.
Tags: 20k, 6 Years, 7k, Bett, Education, Eight Months, First Real Estate, Good Combination, Investing, Investor Group, Local Real Estate, Memphis, Networking, New Investor, Opportunity, Option Fee, Property Flyers, Real Estate Investor, Rent, Wholesale
With all the stories of people making tremendous amounts of money in real estate it’s no wonder why so many are looking at real estate as an investment vehicle. It offers more security than the stock market, provides great potential returns, offers tax benefits and let’s not forget; it sounds cool to be ‘in real estate’. Everybody can buy and sell stocks from their phone or computer these days. But real estate, now that’s something else.
One of the challenges that many are faced with is putting up the money to acquire a piece of property. Although in reality this is usually not the biggest obstacle. You might say “Hey, what do you mean, not an obstacle. I would love to invest in real estate, but I just can’t afford to!” The point is that hardly anyone who buys a piece of real estate has enough money in their account to pay for it. That’s where your banker comes in. Let’s face it. Do you know anyone that owns their own home? I mean truly own it? Probably not. Sure, you know a lot of people that have a house to their name, but wait until they get behind on their monthly mortgage payments and you will soon find out who really owns their house. That’s right, the bank. So if these people can use the bank’s money to buy a house, why can’t you?
Now ‘owning’ your own home may sound like a somewhat obvious way to get started in real estate, but it is also a very good way to do so. You might say “Duh…” But apparently this little step is overlooked by a lot of people. Just take a look at how many people are still renting a property instead of buying one. Now of course the relation between rent and housing prices varies from country to country and even from area to area. But wherever you go you will still find people renting, because in their mind “they don’t have enough money to buy a house.” In reality it would be much cheaper for them to buy!
When you rent, you are pretty much flushing your money down the toilet. Of course you are getting the pleasure of living, but the point is you’re not building anything long term. Every dollar you spend on rent is a dollar you will never see again. Whereas if you own your own home, instead of paying rent you would be paying for your mortgage. Even though there is a lot of variety in mortgages these days, the basics of practically all mortgages are more or less the same. Every month you make a payment which consists of two parts: interest and principle. The interest part can be compared to rent. Those dollars are gone with the wind and you will never hear from them again. However, the part of the payment that goes to the principle is money you keep. Every dollar that is used to pay off the principal is a dollar you put in your own pocket.
So if you’re thinking about getting started in real estate and you don’t ‘own’ your own house yet… Change it, and get some experience. It’s a great first step towards building your capital and in many cases, it just makes more sense financially. It can also supply a range of opportunities for accelerating the process of building your net worth. When real estate prices go up, so does the value of your property. Whereas the money you owe the bank, your mortgage, remains the same. In other words this helps you build your net worth. Compare this to people that are paying rent… Their net worth does nothing. However their landlord’s net worth is doing very nicely in this scenario and he or she will probably love you for it. So if you get a warm fuzzy feeling about making somebody else rich at your own expense… Keep renting. If you would rather build your own capital instead… Buy your own house!
Many home owners have accumulated more money through appreciation of their property than by working a full time job for many years. Now before you go out and buy the first property you lay eyes on, don’t forget that some security measures are in order here. As you may or may not know, real estate prices do not always go up, and certainly not in a straight line. Yep, this can be shocker to some people, as well as an ugly reminder for those who overlooked this minor detail in the past. If for some reason you would have to sell your home in a down market, it can be a costly adventure. You wouldn’t be the first to end up with a house worth considerably less than the mortgage resting on it. So make sure to keep some slack. In the long run real estate prices have always been on the rise, but in any cycle there are down periods. By keeping some slack and being patient you will be able to sit through these times and profit from the long term up-trend.
About the Author
Jim Mack is an expert on business, health and well being. He regularly contributes articles on these subjects. The Best Investing Tips
Tags: Challenges, First Steps, How Many People, Invest, Investing, Investment Vehicle, Love, Money Down, Money To Buy A House, Monthly Mortgage Payments, Obstacle, People Bank, Pleasure, Real Estate, Real Money, Rent, Renting A Property, Stock Market, Stocks, Toilet
Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.
This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.
I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn?t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.
The tenant I chose has not once in the first nine months paid the rent on time so he hasn?t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don?t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.
From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.
In the event the tenant doesn?t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.
Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn?t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don?t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.
Tags: 20k, 6 Years, 7k, Bett, Education, Eight Months, First Real Estate, Good Combination, Investing, Investor Group, Local Real Estate, Memphis, Networking, New Investor, Opportunity, Option Fee, Property Flyers, Real Estate Investor, Rent, Wholesale
Your first real estate decision is a no brainer! Truth is, you’ll live for free by buying instead of renting. Just the facts please. OK, here’s the facts and figures:
If you buy a home and live in it for 5 years you will have lived for free. Your mortgage payments, related closing costs, insurance and property taxes will be returned to you through tax savings and profits after you sell the property. Here’s how it works: (to make it easy we’ll use a $100,000 property even though this figure might seem very low for a home where you live, there are still many places where this is a realistic figure)
Price $100,000
Down Payment - 5,000
Mortgage $95,000
Interest Rate x 10%
1st Year Interest $9.500
Property Tax +1,000
1st Year Expenses $10,500
Income Tax Bracket x 33%
1st Year Tax Savings $3,465
Appreciation @6% + $6,000
Tax Savings and Appreciation $9,465
Your Interest for the first year was $9,500 and your property tax bill was $1,000, which together total $10,500, but your investment return from tax savings and appreciation was $9,465. If instead you were paying $600 a month for rent you would lose $7,200 a year or $36,000 in 5 years because renters don’t get any tax deductions nor can they take advantage on any of the property appreciation. These benefits go to the owner.
You as owner would have paid $760 a month for a total of $45,000 in mortgage payments during those 5 years. Add to that another $5,000 for property tax and your total would be $50,600 or $10,120 a year. These numbers are higher than the renter paid… but wait!
As the owner you would have saved an additional $3,465 a year in tax savings from tax deductible interest and property taxes. Also, your appreciation on the property is a conservative $6,000 (@6%) many cities have higher appreciation rates.
So you spent $10,120 a year and got back $9,465 in cash and equity. Realistically you only spent $655 a year or $3,275 to live in a place for 5 years.
But don’t forget, part of your mortgage payment went toward paying off about $4,000 of your principle of that 5 year period, which is more than the $3,275 you spent out of your pocket.
Would you rather be the owner of that home or the renter?
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Tags: Appreciation Rates, Brainer, Closing Costs, Deductible Interest, First Real Estate, Income Tax Bracket, Insurance, Interest Rate, Investing, Investment Return, Mortgage Payments, Profits, Property Appreciation, Property Tax Bill, Property Taxes, Realistic Figure, Rent, Renter, Tax Deductions, Truth
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