If you’d like to invest in real estate, but are new to the field and do not want to own property, you’ve most likely come across the REIT.  REIT, or Real Estate Investment Trust, is the mutual fund for real estate.  The managers invest multiple investors’ money into real estate and they distribute a share of their income back to the investors as dividends. There are many different kinds of REITs, just as there are a dizzying number of mutual funds.  Initially, REITs may seem like a good option for the inexperienced investor, just like mutual funds appeal to those who do not feel comfortable to navigate the complicated world of stocks and bonds.  However, real estate, stocks and bonds are all different and they each have their own unique characteristics.

REITs can be a good choice for the individual that wants to be a passive investor and knows absolutely nothing about real estate investing.  However, understand that the REIT does not distribute all of their profits back to the investors.  The REIT has overhead expenses, employees, as well as other costs of doing business.  These expenses are covered by the so called management fees.  These management fees can be quite expensive and can draw down the actual performance of a fund.  Pay particular attention to these management fees. These fees may or may not be directly tied to the performance of the fund.  In other words, you may not receive much of a dividend, but the people managing the fund may not see any change in their income.  (Ouch!) It doesn’t exactly make you feel like their interests are in line with your interests does it?

An alternative to the REIT would be participating in a private placement offering or seeking out an individual that is active and successfully investing in real estate. Then become a private lender or equity partner with them.  This approach puts you much closer to the action and places you in a position where you can reap a larger share of the profits than what the REITs will provide.  You still do not need to be the person that is actually doing the work, but you are much closer to the decision maker and can have some actual input into the deal.  This aligns both your interests and the person you are working with much closer together.  The potential for greater returns and lower management fees is greatly enhanced.

Although most fund managers will tell you that this approach is extremely risky, keep in mind that the ethically experienced real estate investor inherently wants to make your money perform very well.  The reason being is because he wants to use your money again for another deal so that both of you can make more profits.  If you are happy with how your money has performed the first time, do you think you are more likely to invest with him again?  Absolutely you are!

So the answer to the question: “Are REITs a Good Investment Option?”  will depend upon your experience, your risk tolerance and the type of returns you want to achieve.  In my opinion, the fewer management fees involved the greater probability of higher returns. This is assuming of course that the quality of the deal merits your investment to begin with.

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http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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There are countless people looking to launch a new career in real estate investment, and most of them don’t have the first clue as to how they need to start in order to be effective.  For those that intend to be serious career investors, and not those looking to just get rich quick, there are three basic elements which must be addressed before any actual investments can or should be made: education, infrastructure, and marketing.

Education is a simple, but time-intensive step every new investor needs to take.  Read every book you can find about real estate investment, every article on the internet (written by legitimate authors with proven investment records), and consider purchasing a course if you can afford it.  Whatever your approach, remember that you cannot possibly research too much before getting involved in real estate; the more you know about a given market, the better you can maximize your opportunity to profit from that market.  Further, don’t make the mistake made by so many new investors of reading two books and thinking you know everything about investing; always be receptive to new lessons from reliable sources—you never know which tip could earn you $100,000 in profits.  Do the research, pick the specific market you’re interested in, and never stop reading.

After you’ve educated yourself some on the industry, and have determined that this is still the career for you, start working on your new investment business’ infrastructure.  This means forming a limited liability corporation (LLC), creating a website, acquiring a business phone line, and ordering business cards.  If you set these facilities up in advance, they will prove very valuable when it comes time to cultivate relationships and find good deals.

Finally, the most important preparatory step will also become the most important part of your business to sustain moving forward: marketing.  Marketing is buying ad space, acquiring mailing lists, making endless phone calls and emails, putting up bandit signs, etc.  Marketing is a never-ending task, and the more you do it, the more potential deals you will have coming in to evaluate.  With the education behind you and the infrastructure of your business in place, now you can focus 100% on marketing your investment business, and wait for the deals to roll in.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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As an investor, you want to find the best deals out there.  Performing a little due diligence can go a long way to making those smart investments.

At the top of your due diligence list is how the property presents itself from the street. Does it have curb appeal? Ensure the value of your potential investment is in line with others in the neighborhood.

Have a thorough property inspection done by a good inspector.  Know the age and type of your roof, the age and efficiency of the heating and air conditioning units and if all the appliances work.  Are the windows efficient and the wiring safe?  How is the foundation and is there mold in the basement?  Make sure the property has a sufficient perk.

Is the home located in a historic district requiring you jump through hoops to make improvements if necessary?  And, how about the locations of the bedrooms, baths and kitchens?  Are they in line with current tastes?  Does the type of construction require maintenance?  A clapboard house is quaint as long as you’ve budgeted to have it painted periodically.

Obtain all necessary documents pertaining to the investment property.  Have a survey done so you know exactly what land you are purchasing.  Perform a title search to ensure there are no liens against the property.  During negotiation is the time to address any issues.

What is the proximity of the schools and are they considered good ones?  What kind of shopping is nearby and does the investment property sit near easy access to major roads?  Is the house zoned for its current use or the use you intend it for?

Are there any service contracts in place that are tied to the property?  Do you wish to continue them and if not, do the contracts have termination rights?  Are there tenants in place?  If the investment is currently a rental property, get copies of all leases and review them.  Do they provide for a purchase by a new landlord and what is included in that provision?  Can you change other clauses you may not like or do you have to live with the lease in its entirety?  If a tenant is in the middle of his/her lease term, does he/she have good credit?  How has their payment history been?  If you are purchasing a multi-tenant property, the tenants in place hold a value to you.  Make sure you understand that value.

Depending on the property, there may be additional questions which should be answered as part of the investors’ due diligence prior to closing on a property.  Knowing the good and bad of the property gives the investor a better negotiating position.  After all, you wouldn’t pay top dollar for a bag of organic apples if half of them were bruised. But, you might pay half price.  Performing your due diligence will ensure you only pay what the property is truly worth.

Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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