Investing
How Investment Property Works
December 24, 2011 | 
Author The property investment game can seem confusing from the outside, and that is exactly how the people on the inside would like to keep it. They don’t want more investors moving in on their deals and increasing the competition. There is plenty of money to be had in real estate, but not too many real estate gurus want to share it. Well, today you are going to learn how investment property works, and you will realize that it really isn’t that complicated after all.
Basically there are a few different types of property investments. The most popular ones would be rentals and flipping. Obviously rentals are where you buy a property and then collect a monthly fee from a tenant. Flipping is the process of buying a home and holding it, or fixing it, and then selling it at a higher price for profit. The first three steps are the same for each type of investment.
Step one – find a good deal with motivated sellers
Step two – obtain financing on the property, unless you are paying cash
Step three – make an offer and negotiate a good purchase price on the property
The next step in the rental process would be to find renters for your newly obtained property. If you do it right, you should be collecting enough rent to cover your mortgage interest, utilities, property tax, insurance, and any other expenses. Whatever you get on top of that is your income. This type of investment can also pay off in another way if your property appreciates in value during the time that you hold it.
Posted in Investing | 
Tags: Buying A Home, Insurance, Investment Game, Investment Property, Investors, Mortgage Insurance, Mortgage Interest, Mortgage Tax, Motivated Sellers, People, Plenty Of Money, Property Insurance, Property Investment, Property Investments, Property Tax, Real Estate Gurus, Tax Insurance, Three Steps | 
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The Things You Need To Know Before Investing In Real Estate
Location Location Location: I am sure you’ve heard this before. Location is the most important factor in real estate. Because real estate is so local and driven by hyperlocal factors, location is extremely important and price sensitive. Location can mean what neighborhood the property is on and where it is proximally located in relation to major freeways. But when you are thinking about location, you need to think about both the present and future. For instance, the location of your prospective property might not be much now. However, it can be worth a lot more in five years if there are major developments around the area such as shopping malls or new high-rise apartments. So when shopping for property, think about the present condition of the location as well as the imminent future.
Cash In Hand: The days of zero percent down are all but over. With banks being extra careful with who they lend to, you will need to bring cash to the table if you want to buy an investment home. Ideally, you will have enough cash for 20% down. Yes, putting 20% down will make it a big harder to invest in real estate. But this new restriction is balanced out by the low prices of real estate. After you’ve had a successful track record with your first investment property, you can then ask the bank for more money to invest in other properties. With housing prices being so low and rental prices high, you can often take in residual income on your rental property and thereby recoup your original down payment quite fast.
Posted in Investing | Tags: Banks, Bargain, Budget, Estate Location, Freeways, High Rise Apartments, Houses, Insulation, Investing In Real Estate, Investment Property, Location Location Location, Money To Invest, Neighborhood, Prospective Property, Remodeling, Rental Property, Residual Income, Restriction, Shopping Malls, Zero Percent | No Comments »
Understanding and Managing Property Investment Risks
Although property investment can be relatively safe, there are certain risks inherent in the investment process. To ensure a positive outcome, it is always important to understand and manage these risks. The success will thus always hinge on an effective risk mitigation strategy that you have to think about before buying your investment property.
1. Economic Instability & The Property Market
Your property investment will greatly depend on current and future economic conditions. Property prices and rental yields can be cyclical, and thus if you are planning on a long term investment, achieving positive cash flow constantly might not be possible. Property prices might decrease, property appreciation might not be as expected. While you cannot predict the future, you can make sure that you have an understanding of the risks involved in your investment, by employing due diligence, and researching the property market thoroughly. Economic developments, political stability and new investments in your chosen area for example are always positive signs.
2. Slow Property Appreciation
While house prices are said to double every decade, this might not be the case in times of economic recessions. You will thus have to have the resources and patience if you are planning for a long term investment. You can also achieve higher levels of property appreciation if you manage to buy an investment property below its market value. A BMV property can thus represent a safer long term investment that has better chances of bringing you high yields.
Posted in Investing | Tags: Amp, Backbone, Due Diligence, Economic Conditions, Economic Developments, Economic Instability, Economic Recessions, House Prices, Investment Property, Investment Risks, Long Term Investment, Patience, Periods, Political Stability, Positive Cash Flow, Positive Signs, Property Appreciation, Property Investment, Rents, Risk Mitigation Strategy | No Comments »
Elements of a Good Real Estate Template
Designing a good real estate template in Excel requires some prior thought about the end use, components, and calculations needed. This article discusses some of the nuances that will help you either build your own or choose an effective pre-built Excel spreadsheet.
One of the initial considerations is what type of investments or projects will you use the real estate template for? Is it for a single family home, multi-unit apartment building, new construction project, or land use and leasing such as a parking lot? There are big differences in the data that needs to be collected and how it should be placed in the Excel template, depending on the nature of your project. At a high level, residential real estate investments require analysis of occupancy, number of units, interior and exterior attributes, and tax information. Commercial real estate investments require more analysis of funding sources such as local government subsidies, drive-by traffic, tenant contractual terms such as triple net leases, and project financing schedules.
You should consider how the Excel real estate template will be used by the person analyzing the investment or project. Is it for gathering basic information like tenants, building condition, number of bedrooms and bathrooms, and the like? Or is it more of a quantitative cash flow analysis tool where you intend to plug in some base financial information and project cash flows over time with some factors? A data-gathering tool should be laid out in a simple way where the user can quickly tab through cells to enter the data. It should also be easy to capture the data in a database for future analysis. On the other hand, a quantitative calculation template should be focused on capturing the input data and factor multipliers then extrapolating future cash flows with accurate formulas and charts.
Posted in Investing | Tags: Cash Flow Analysis, Commercial Real Estate, Construction Project, Contractual Terms, Excel Spreadsheet, Excel Spreadsheets, Excel Template, Flow Analysis Tool, Funding Sources, Government Subsidies, Initial Considerations, Input Data, Nuances, Project Financing, Quantitative Calculation, Real Estate Investments, Residential Real Estate, Several Ways, Tax Information, Unit Apartment | No Comments »
How to Find the Best Type of Real Estate to Invest In – Step By Step
Have you clearly identified, given your current situation and the current economy, what is the best kind of real estate to invest in? In this article I am going to answer this question and help you out with this part of your investment business plan. I have discussed this in the past, but the first thing you want to do is decide whether you want to be an Active Investor or Passive Investor in real estate. Let’s define what I mean by this:
Active Investor:
An investor that does everything A-Z with their property. They manage all of the day-to-day operations of their property.
Passive Investor:
An investor that does nothing to manage the day-to-day operations of their property. They may or may not be involved in the acquisition process, but as far as property management is concerned, they are hands-off.
Again, there is no right or wrong answer to this question, and both types of investors can be very successful in owning real estate. But realistically decide how much time, effort, and energy you have to put into your investment, and whether you want to be an Active or Passive owner.
Next – just as important as deciding what kind of investor you want to be, is to decide what kind of properties you should be looking at.
What I suggest investors do is to take some time and think about this:
“What do i want my financial picture to look like in 1, 3, and 5 years?”
Posted in Investing | Tags: 10 Years, 12 Months, Acquisition, Active Investor, Business Plan, Business Planning, Crystal Ball, Current Situation, Economy, Estate Business, Financial Scenarios, Investment Business, Investors, Owning Real Estate, Passive Investor, Property Management, Road Map, Time Effort, Time Frames, Wrong Answer | No Comments »
The Return of the 100% Mortgage
Turn the clock back 4 or 5 years and we probably all know someone who had been able to realise their dream of purchasing a home by buying a house using a 100% mortgage. Indeed one of my friends went one better than that and purchased using a 120% mortgage!
That particular product. offered by Northern Rock, consisted of a 100% loan to value mortgage coupled with a secured loan for 20% of the value of the property, to be used to complete necessary improvements. At the time it seemed that everyone, lenders included, saw the property market as a one way, upwards bet.
How things have changed since the credit crunch. In the last few years many people on good incomes, with clean credit records have struggled to even get a 75% loan to value mortgage. But early this month, accompanied by much publicity, the 100% mortgage product returned.
Aldermore, a relatively new player in the mortgage market, launched a 100% mortgage product earlier this month aimed at first time buyers. But, before you get too excited, I should point out that they’re not taking too many risks with this offer.
The product, called the Family Guarantee mortgage, doesn’t come cheap. The rate is fixed at 6.48% for 3 years. Although it does allow a buyer to purchase without using a cash deposit, any borrowings above 75% must be guaranteed by a parent or other close relative in the form of a charge lodged against their own property.
Posted in Investing | Tags: 3 Years, Borrowings, Buying A House, Credit Crunch, Family Guarantee, Family Member, Fanfare, First Time Buyers, Guarantee Mortgage, Guarantor, Incomes, Lenders, Marsden Building Society, Mortgage Market, Mortgage Product, Necessary Improvements, Property Investor, Savings Account, Secured Loan, Upwards | No Comments »
Tips About Real Estate Investing
When people want to make money from buying and selling homes, they will often look for information online to start the process. People who want to succeed and make a living in the housing market need to learn about the different tips that surround real estate investing. There are six tips that every investor needs to know.
The first way to be successful in the housing market, is to create a plan. When people do not plan every detail, they will often lose a lot of money. Investors need to figure out what markets they want to enter; such as single family homes, commercial, or multifamily residences. Having a plan will help investors succeed in the housing market.
Another tip is to have a professional read the business plan over. People who have been in the housing market for a long time can tell new investors if they are missing critical details, or if they have a solid plan. They can tell investors if their plan will be effective or not.
The next tip people need to know when buying properties, is to never give up. The process is often frustrating, with deals falling out, or not being able to close on the property in a specific time period. This happens to everyone, and when investors roll with the punches, they will get the properties they want.