Real Estate Investing â?? 5 Primary Reasons it Will Help You Create Ultimate Wealth & Financial Freedom
Posted on 26. Jan, 2010 by admin in general
Itâ??s a fact that real estate â?? more specifically, real estate investing – has been the investment vehicle that has created more wealth than any other financial instrument in the history of humankind.There are 26 different reasons I can give you to as to why real estate investing is the IDEAL business for youâ?¦but for now, Iâ??ll give you the top 5 reasons. In fact, the word â??idealâ? is actually an acronym for the top 5 reasons why real estate investing is an excellent way to create ultimate wealth and freedom â?? unfortunately, I canâ??t claim that I came up with the acronym because I heard this from another great real estate investor, but itâ??s so good, I want to share it with you.I â?? Income: You can earn a full time corporate salary in just one or two deals. Interestingly enough, I learned this powerful principle when I did my first dealâ?¦all told I spent less than six hours looking for an investment property, contracting and closing on it, and had an immediate equity position that rivaled more than half of my corporate salary. The message was clear, I was going to be investing in real estate full time no matter what it took.D â?? Deductions: This is the only business in the U.S. and Canada that affords you to take advantage of the highest business deductions, personal deductions, and real property tax breaks and deductions available by either government.Just imagineâ?¦you live a nearly tax free life (completely legit!).E â?? Equity: Build $ value into the assets that you own, and take advantage of time value of money.A â?? Appreciation: Law of Supply & Demand. With the world population doubling in the next half-century, and no more real estate being made (except in Dubai), price (demand) will outstrip supply.Regardless of how things may look in your market, today, over the long term, real estate always goes up in value.L â?? Leverage: This is the secret that the Wealthy use. If youâ??re a real estate investing syndicator, applying leverage in all scenarios (OPM, OPK, OPR, OPT) is what itâ??s all about.You can learn real estate investing at many different levels â?? from wholesaling, to commercial investingâ?¦even create your own real estate investing institute in your own marketplace that allows you to disrupt your competition, deliver an innovative solution, so you can generate a 6 figure bank account and realize 7 figure gains in as little as 7 months.
Commercial Real Estate Investing Handbook
Posted on 24. Jan, 2010 by admin in general
Real estate is defined as a property which is not mobile and is something affixed to a land. When it comes to commercial real estate, it refers to the office buildings, shopping malls, hotels, warehouses, etc, which have commercial, value and do not belong to any single family. Investing in commercial real estate is a very speculative job, which needs proper study and guidance, without which a novice can be out of business soon. In order to get a correct scenario of the market one should unmistakably seek help from the handbook on commercial real estate investment. A Commercial Real Estate investing handbook is basically a ready reckoner which states the precautions one should take before investing in the market and guides the buyer or investor through the effective methods. Most of the people tend to harbor certain misconceptions regarding this issue. In this regard a real estate investing handbook can help to develop and evaluate commercial real estate properties. Successful real estate investing is not just about regulating the cash flow, but it’s more about investor and investment and the proper selection of property, which in turn brings money. A Commercial Real Estate investing handbook in this regard is a unique guide towards real estate and mortgage lending and the other difficulties specially faced in this field. It is an excellent compilation, which provides a complete guide starting from the beginning till the disbursement of the case. Such guide gives a comprehensive review about the probable problems of loans along with the probable prevention and protection of the loss. Commercial Real Estate investing handbook provides complete information of the initial stage of investment process. Asset management, which is a vital part of the entire process, gets a strategic guide in managing the overall real estate investment process along with the best tools required for operating in the area. Investments in the real estate sector have created more millionaires than any other field. The proven track record of the handbook is a comprehensive step- by-step method for the new comers and also the professionals, to know the knick-knacks of the investment sector. Investment in the real estate gives good returns; it builds equity, provides a steady return, and lastly but most importantly provides tax benefits. The Commercial Real Estate investing handbook helps the people to be armed with innovative ideas and gives an idea on actual case studies from experts. It helps us in knowing better and wiser ways of earning within a short time. The Commercial Real Estate investing handbook is basically a glossary, which helps to find about market deals, investing without down payments, tax sales, mortgage loans, insurance, exchange rates apart from other relevant information. It is a wealth of modern tips and strategies for getting started in this lucrative area.
Creative Real Estate Investment Financing
Posted on 24. Jan, 2010 by admin in general
Creative real estate investment shapes the real estate investment behavior of individuals. Real estate, also known as immovable property, comprises of land or anything permanently connected to the land, like buildings. Real Estate is often viewed and used in contrast to personal property. With the development of private property ownership real estate investment has come up as an emerging area of business. Creative real estate investment is commonly known as creative realty investment. It comprises of the purchase, sale of residential land and building and non residential buildings. The main conduits involved in this are landlords, tenants, buyers, developers, builders, real estate agents et al. The development in hospitality, entertainment and IT sectors are highly influencing for the creative real estate investment business. Creative real estate investment as viewed normally is not only the business of the rich strata of the society as even if the investment is low it can reap huge benefits. Certain points are to be kept in mind before go for creative real estate investing in this business like where to invest and how to invest. The people involved in this business should have a complete and comprehensive knowledge abut the areas, which are risks prone. Success in property is the main cause behind its upsurge in countries like USA, Canada, Australia, Europe and New Zealand. The best way to get stated with creative real estate investment is to advertise. Creative real estate investment is an art for successful real estate investment. One should start from the initial stage of gathering information and resources. Apart from that getting information from the net, the local newspaper is of utmost help. Information from the bulletin board also helps a lot. The legal section of the newspaper also helps in getting the right kind of information. A list of the houses, which are fire damaged or abandoned, should be made with notices attached to it so that it may help in getting the buyer. The neighbors should be talked to as they have full information about the buyer and other sell plans. Attending free seminars also gives an insight into the nuances of the creative real estate investment business. Real estate agents and real estate brokers are also there who help getting information on investment.This way it can be said that creative real estate investment is one of the business ventures, which involves minimum risks, and maximum gains. It has now spread over different fields and segments. There has been a remarkable growth in the real estate prices in recent years. This new area of business is attracting many of the newcomers, who want to make good money.
Commercial Real Estate Syndication: Property Selection and Purchase, Part 2
Posted on 15. Jan, 2010 by admin in general
We’ve been discussing the process of assembling groups of investors for the purpose of acquiring income producing commercial real estate. The first part of this article can be found at www.InvesmentPropertyInsider.com/?p=97. We’ll assume for the purposes of this article that you’ve selected your target investment property. Now you need to get it into escrow, but with a purchase structure that favors your group investment strategy.
The ideal time period for a group investment purchase is 120 days. This time period breaks down as follows:
Days 1 to 30: Focus on completing your Due Diligence (investigation) on the property, clearing contingencies, and verifying everything stated by the seller.
Day 31 to 45: Here is where you create the Investment Circular and form the LLC that will own the property, by filing the Articles of Organization and the Operating Agreement.
Days 46 to 90: Now you can solicit interest from potential investors. Your goal will be to get completed subscription agreements and monetary contributions from the new members of the LLC by the end of this period.
Days 91 to 120: This is basically a contingency period for you in the event the subscription process takes longer than expected.
As a matter of strategy, you should consider the 90th day as the “make or break” of your group investment. It is very likely that you won’t be able to keep the escrow open longer than 90 days without putting your deposit at risk (called “going hard”). So, if it looks like you can’t fully fund your LLC by the 90th day, it’s probably best to unwind the escrow and get your deposit back … sooner, if possible.
In fact, you’ll probably have quite a bit of pressure to release your deposit sooner than 90 days. What to do? Well, as you continue with your group investment program, you’ll want to line up your investors sooner than indicated above. Realistically, you’ll want to give your “A-list” of investor candidates notice as soon as you take a property to escrow.
Speaking of escrow, when you open it, you want to write the purchase contract with you, the syndicator, as the borrower. This is for tax reasons. By doing so, you establish your ownership of the property rights. It is by assigning these rights to the LLC before you close that you establish your ownership percentage (whatever you negotiate with your investors) in the property.
To be perfectly safe, you should consider opening two escrows. The first one is for the purchase of the property, as described above. The second is set up to fund the LLC. Its sole purpose is to hold the funds from the members as they subscribe into the group investment. Once it’s fully subscribed and the purchase escrow is ready to close, funds are transferred from the “funding” escrow to the purchase escrow. The reason to have the second escrow is to protect the investors’ funds in the event there are complications with the purchase escrow. The seller’s permission would not be required to release the investors’ funds back to them with this structure.
Another option is the “receipt of third party deposit.” In this process, investors fund their contributions directly to the purchase escrow, but they do so under certain conditions which allow the escrow officer to return the funds in the event the purchase doesn’t close. The LLC (after assignment by the syndicator) and the seller are the parties to the transaction. The investors are third parties whose funds are disbursed according to separate instructions. Check with your escrow provider to see if they will allow third party receipts before opening escrow.
In my next article on this subject, I’ll cover the strategies you need to consider to control a property for a sufficiently long period of time to allow you to actually fund as a group investment.
Commercial Real Estate Investment Decisions
Posted on 09. Jan, 2010 by admin in general
WEIGH YOUR RISKS CAREFULLY
When you decide to embark on a commercial real estate investment program, how do you get your start? We know that there is no such thing as 100% financing for commercial property, so where do you get your initial capital for that first purchase? One method which I have discussed before is to use Other People’s Money as your initial “stake.” Perhaps having partners is not the path you wish to follow in your investment program. That makes the other option using your own funds. Before you dip into your resources, however, consider some of the risks you face.
First, you are embarking on an investment program about which you have little practical experience. You may have read every book on commercial real estate investing ever printed and gone to every seminar ever produced in a hotel for a year, but you have no experience in the business. Do you really know what can go wrong? Do you realize what additional reserves you might need in case things don’t go as planned?
Second, consider the source of your equity. For most people who have done some real estate investing, they have probably focused on residential investment properties. Residential properties usually enjoy a large number of comparables to easily estimate value, financing programs for residential properties allow potential buyers to facilitate sales with little equity investment, and residential properties are usually less expensive, and therefore more accessible, to most people. If you are such an investor, then you probably have a pretty good pool of equity to tap. But how do you access it? Sell them outright and pay your capital gains? Sell them in a 1031 Exchange? Refinance them? Each option has its advantages and disadvantages.
Third, if you are like most people, your biggest chunk of equity is sitting in your home. There may be a great temptation to go get yourself an equity line, suck out the equity, and go buy a commercial property somewhere. Before you do, make sure to consider how the increased debt service of the equity line will affect your finances. Can you truly afford the payments if something doesn’t work out with your commercial investment? Yes, your commercial property will be producing income. However, the majority of that income will be used to pay its operating expenses and paying off the loan you arranged to acquire it. That doesn’t leave a lot left over for you in the initial years of the investment to pay down the equity line, which will most likely have a rate somewhere above the Prime rate (8.25% today).
The point is to consider your investment goals, your tolerance for risk, and your ability to live without the funds you are using for your commercial investment. Over time, your commercial portfolio should provide you with significant current income, a hedge against inflation, and net appreciation. You need to pay careful attention to how you structure your commercial real estate financing to minimize unforeseen risks and increase your chances of success. In your quest to achieve your commercial investment goals you need to carefully asses the impact of the financing decisions you make.
Commercial Real Estate: Outlook at the Power Breakfast
Posted on 07. Jan, 2010 by admin in general
A GOOD OUTLOOK FOR COMMERCIAL REAL ESTATE IN 2007
I had the opportunity to sit in at the International Council of Shopping Centers (ICSC) annual “Power Breakfast” that featured some high powered institutional investors as panelists. They included Erwin Aullis, the Managing Director of Transwestern Investment Company, Stanley L. Iezman, the President of American Realty Advisors, Inc., and Glen Sonnenberg, the President of Legg Mason Real Estate Services. The panel was moderated by Mark Schurgin, the president of the Fesitval Companies.
These are some high-powered commercial real estate fund managers who don’t even get out of bed for a deal less than $50 Million! They were there to give us some of their thoughts on how the economy will impact commercial real estate investment, where interest rates might be headed in the coming year, and how buying and selling parameters have changed for shopping center owners.
Some of the thoughts that came from these guys were fairly insightful. Here’s what I got from the breakfast that I think you’ll find interesting:
1. Commercial real estate lenders are awash in money thanks to Collateralized Debt Obligations. These are derivative debt instruments that allow lenders to dramatically increase their ability to raise money at low overall costs.
2. The ageing of the population and the retirement of the Baby Boomers means that there is a large chunk of retirement money looking for alternate income opportunities … think “income property.”
3. Large funds are taking on more real estate, making it a legitimate “investment class” like stocks and bonds.
4. The REIT Index was up 35% last year, trouncing the S&P 500. Large urban areas can expect low cap rates in the months ahead, meaning that there are opportunities in secondary areas, but you still need to beware in “tertiary” markets, like Detroit and St. Louis.
5. Oversupply of commercial properties is not yet in evidence.
1031/Tenants-In-Common buyers are drying up, slowing price appreciation.
6. “A” quality commercial properties are becoming “commoditized,” meaning that there are real opportunities in “B” and “C” product.
7. The big players are getting out of condominium product at significant discounts to original asking price (which means you might get a nice home for cheap). This was in evidence in San Diego and South Florida. Residential projects are taking a back seat to commercial in the minds of the big investors.
There’s some good intelligence in these observations for anyone serious about investing in commercial property this year.
The final few minutes of the session were devoted to a group consensus on where interest rates and cap rates would be a year from now. While not a real prediction, the sense of the room was that the Prime Rate would be .75% to 1% lower, commercial mortgage rates for “A” product would be about .25% to .5% higher than today, and cap rates for class “A” properties would be essentially unchanged.
My conclusions are that there will be some opportunities to make money in smaller commercial properties in outlying areas and smaller urban markets. New construction and other “value added” projects should also do well. One caveat is do not make the mistake that rents will continue to trend upward, though. Stay conservative in your projections and you should be able to ride out any recession that might follow in the wake of possible Congressional tax hikes.