Not to be confused with, “Real Estate: A Recession-Proof Industry”.  Clearly, over the past ten years, the real estate market has been falling to a catastrophic point.  This title is not meant to suggest that real estate is not affected by the economy; rather, I mean to say that an informed investor can profit in any type of market or economy, simply by knowing what he’s getting into and modifying his strategies accordingly.

Sure, there are buyer’s markets and seller’s markets, but truth be told, there is no true good or bad time to make an investment.  You can make money any time by making intelligent, informed decisions; and you can lose money in any market by making hasty or ill-advised decisions.  If you are waiting for changes in the market to hatch your plan, maybe you should consider adjusting your plan and hatching it now.  Real estate, unlike stocks and bonds, is not something that fluctuates dramatically day-to-day; it follows long, drawn-out cycles and trends which must simply be endured during the course of any investment career.

The extremely oversimplified version is this: in a rising market, finding deals is very competitive and difficult, but they can be quickly resold for reliable profit; in a falling market, those same good deals become more abundant, but because you cannot expect to quickly resell the property for profit, your good deal must now be a great deal to compensate either for the cost of ownership or repair as you await an opportunity to sell or rent for profit.  Obviously, there are a million factors with which you could complicate that equation, but it illustrates the potential to make money even during hard times.

The best advice for making good decisions is—quite obviously—to be well-informed by doing thorough research.  Study market trends at every scale (from international all the way down to the specific target neighborhood).  Find local professionals who can help interpret highly localized trends, for example the amount of time a home spends on the market, asking vs. sale prices, etc., and how all of those figures compare to previous years.  Having a solid foundation of knowledge is the key to understanding a neighborhood, where it’s been, and where it’s heading.  This is the only way to effectively shape and mold your strategy to fit the circumstances.  You cannot simply always rely on flipping homes, or always rely on long-term ownership.  Depending on the market conditions, one or more of these approaches could be a dead end.

Let us know what you think. J

SuperiorPrivateMoneyReturns.com

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Everybody makes mistakes. Business or personal, minor or catastrophic—they happen all the time. What separates successful investors from the hoards who never make it beyond a second, third, or fourth deal, is not how they get their good deals, but rather how they handle it when they make a mistake. Successful investors are not exempt from the law that everyone makes mistakes; in fact, they make more mistakes than failed investors. What makes a failed investor fail is that he never bounces back from his first mistake (if you can show me someone who has gotten through five deals without making any mistake, I will be very impressed). Successful investors, on the other hand, make their first mistake, learn their lesson, and continue investing until they make their next mistake, whereupon they learn from that one, and they continue investing until they retire happy and rich on a beach at 50.

Learning from a mistake requires four simple-sounding steps (they are not so simple to enact consistently, which is why not everyone is a millionaire real estate investor): 1) identify the mistake, 2) take responsibility, 3) let it go, and 4) use what you learned. If you can get in the habit of taking care of each of these steps when a mistake is made in your business, you will find that the mistakes are rarely ever repeated, and you will slowly eliminate all of the major hurdles that stand in the way of inexperienced investors, leaving a clear path toward smart decisions and successful deals.

The first step is to identify the mistake. Sometimes this is easy, like when you get that “Ah, I’m such an idiot!” reaction to something you realize you’ve done. Most of the time, however, things simply go sour and you can never pinpoint exactly what went wrong. The key is to be systematic and detailed throughout the process, so that you can always refer to notes and records to learn exactly what happened, or be confident about what didn’t happen. But the key to development is to know what went wrong.

Next, you must own up to your mistake. This means not hiding from those who may have lost money because of your actions or decisions, but rather confronting them and making every effort not to burn any bridges (which in the real estate industry can be a death sentence). When you’ve taken responsibility for something, you can move on from it guilt-free. Part of that is the process of forgiving yourself for the error, and letting it go so that you can maintain the confidence that is required to make big investment decisions (which are often something akin to strategic decisions).

Once you’ve forgiven yourself, you need to jump right back on the horse. While the sting is still fresh, get back in the game and use what you’ve learned from examining your bad experience to ensure it never happens again. Obviously, new problems will inevitably arise, and you need to be prepared to go through this examining and rebuilding process quite a few times to clear away the common investing errors. The definition of insanity is repeating the same action again and again, expecting a different result. In real estate, you’d really have to be insane to repeat your mistakes over and over, losing more and more money, but you would be shocked at how many investors fail simply because they continue to fall into the same traps again and again. Learn, and rise to the top.

Tell us what you think.

SuperiorPrivateMoneyReturns.com

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Investment real estate is a great addition to an investor’s portfolio for creating wealth and long term capital gains. Every investor seeks ways to increase wealth and reduce risk. This is primarily accomplished through portfolio diversification. The traditional thought promoted by securities dealers is that you need to be diversified into stocks, bonds and mutual funds to reduce risk. These funds are further dissected into small cap companies, mid cap companies and large cap companies in addition to sector funds such as health care, utilities and technology. The types of funds that are available are almost endless. The bond funds are almost as endless as the stock funds. Now I ask you, how does the average securities dealer stay on top of all of these funds selecting the best ones for your situation when he is dealing with multiple clients at the same time? It is a challenging task. Don’t get me wrong, I am not bashing the securities dealers. They play a vital role in wealth creation, however, you need to understand their limitations. Also keep in mind that most securities dealers work for a specific company. That company also has a specific agenda. That agenda may be in line with your agenda and it may not be. How do you know? Remember it is your money and you ultimately have control and responsibility.

Their are funds available that offer you the opportunity to invest in real estate for further diversification via a REIT. (Real Estate Investment Trust). This is one way you can invest in real estate. Keep in mind though, do you understand what the fund invests in, what is the track record of the company and how much of the profits are siphened off for management fees and overhead? That could be money in your pocket! These are things you really must understand. If you are someone that wants to have a little more control over your money and know exactly where it is being invested, then real estate investing through owning investment property or being a private lender to talented real estate investors is clearly an option for you. When you understand and follow the proven principals of real estate investing that have demonstrated success repeatedly over time, in my opinion, it is safer than the stock market and more predictable than the stock market.

Here are just a few of the additional advantages owning investment real estate provides:

• Leverage – The ability to control and grow an asset exponentially without all of the money up front.

• Appreciation- The increase in value of property over time via market appreciation, forced appreciation through higher and better use or rehabilitation.

• Depreciation – Tax advantage right downs on long term held properties.

• Capital Gains – Long term capital gain rates significantly lower than ordinary income rates or short term capital gains.

• Cash Flow – The consistent monthly income provided to you after expenses. If done properly, far out performs the dividends received on stocks or bonds.

• Security – When done properly,your investment capital being secured by an asset that will never be zero. Not necessarily true in the stock market.

• Peace of Mind – Knowing where your money is invested and the details of the investment asset. Do you really know what is going on inside the company of the stock you have purchased?

Investing in investment real estate provides an investor unique advantages compared to stocks and bonds plus diversification for one’s entire portfolio. It is not unusual for the financially astute individual to be invested in stocks, bonds, mutual funds and investment real estate.

Jay Redding

SuperiorPrivateMoneyReturns.com

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To enjoy life one need is for a long term, solid and certain source of income to provide us with a comfortable and secure lifestyle.  With massive economic and global changes continuing, a traditional 9-5 job is not secure nor does it afford us a style we consider comfortable.  Many people are now creating their own businesses and other income sources.  Due to steady clientele and potential wealth building people have purchased investment real estate for long and short term financial growth.   The term Investment Real Estate indicates a property bought and sold for the purpose of leasing, growing equity and selling for a profit.  This is a property that is lived in by many. While getting rich and building long term wealth have happened, there are some significant dangers too.  I call them dangers as they have the capacity to ruin one financially.  Of the many dangers possible the significant ones are constant reparations, empty units, bad renters (both non payers and destructive renters), and the big one; foreclosure.

Ideally, you acquire a property in good condition, below market value, rent it out for a profit over payment, and watch the equity grow.  But not all is ideal.  Many of these homes are in disrepair from either lack of funds for maintenance during the previous owner’s tenancy or vandalism in retaliation for the foreclosure.  Getting a property with numerous problems costs you up front money, increasing your investment, decreasing the ‘equity profit’.  Excellent home inspections save you thousands.

Repairs and maintenance are key to your to success as livability and appearance keep you from having another danger occur, empty units.  Every day your unit sits empty you still make the mortgage, insurance, and tax payment.  Making one mortgage payment can be a challenge, but having another one and no income to cover it can cripple you financially.  Add the growing risk of homeless squatters, vandals, and other things that happen to vacant properties.  And the cash to cure this is RIGHT NOW cash or credit cards, which is another monster but adds to the issue.

Occupation is the desired result for success, but sometimes you get more than you bargained for.  With the recent economic downturn the number of non paying tenants has grown, as has the number of destructive tenants.  Studies show that poverty creates petty crimes of passion such as vandalism and domestic issues.    If they are already so broke you are not getting paid the likely hood of them having first and last for another place is small.  Pepper this with legal fees for eviction and even more repairs.  Becoming a vicious cycle it only takes a few months of carrying 2 or more mortgages and your neck is on the line.

That line is foreclosure.  Yes, the same list you got that beauty on will be where it returns to.  While it is wise to create an LLC and put the properties under that name to lessen or avoid losing all of your personal assets your credit will never be the same.  Depending upon the type of foreclosure, HUD, Government, Bank, standard, it is the biggest black mark credit wise you can get.  Also, the type of foreclosure dictates the time and process of repossession and additional fees.

When you  create the financial success plan for your life and Investment Real Estate hits the idea list it is wise to remember the dangers, that are talked about here.

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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Appreciation is a frequent term in real estate that often plays an important role in the decision to invest.  Appreciation is the increase in value of a property, which historically has held true.  However, in light of the slow economy, house prices have dropped and many properties have depreciated in value.  In order to predict if the property you are investing in will likely appreciate in value, and what that value may be, it is important to understand appreciation.  It is not as simple as thinking that house prices just go up.

Appreciation is complicated and the truth is that the general public doesn’t fully understand it.  If they did, they would not have been shocked when housing prices fell dramatically, known as the “bursting of the housing bubble”. A number of different factors caused the housing bubble; over speculation, loose lending and fraudulent practices just to name a few.  However, in my opinion, one general rule that should only be used as a general rule had become accepted by many to be an absolute truth. That general rule is that housing prices generally increase over time, this is true, but that does not mean that there are not corrections along the way. The idea that real estate generally increases over time came to be known by the inexperienced investor and even some overzealous investors as real estate always increases. Obviously that is mistaken as many have learned.  Real estate can increase in value, but it certainly doesn’t have to. The general rule should always be interpreted in the context of the current local and global environment.

Please don’t confuse appreciation with inflation. Inflation affects your salary and your daily living expenses, although inflation does increase the price of the house, the value does not increase since you get less for the same amount of money.  There is always inflation, but there is not always appreciation.

Natural appreciation is attributed to supply and demand. There is an ever increasing population in the United States, so the demand for land to build houses tends to outpace the actual supply of houses.  If you have experience in different housing markets, you know that this natural appreciation is not uniformly true however.  Local areas can have drastically different economies, with a surplus of vacancies or a waiting list for properties to become available.  An important distinction here is that if demand is the force behind appreciation, then it is the land which contributes more to the appreciation than the house. Houses get run down, need repairs, and become architecturally outdated.  The land, however, may be in a great community and associated with a strong educational system, which would make the location even more attractive for families. Knowing which component contributes the most to the appreciation is an important point to determine when looking for long term valuation.

Finally, there is forced appreciation.  Forced appreciation is an active process of taking a property to its highest and best use to force the value of the property up rather than allowing natural market supply and demand dynamics to play out. The two can work in tandem however. Forced appreciation happens when ever a dilapidated home is rehabbed and the property is brought up to current market value.  The value of the land has not changed much in this case, but the structure certainly has.  The value of the home has been forced up because the home has been updated and is now modern.  Natural appreciation and forced appreciation would both be in play in a situation where raw land is developed into a new strip mall.

To determine if your property will appreciate in value, you need to look at the local housing supply and demand data. Evaluate the local economy, is it growing or retracting?   Evaluate population trends, is the city growing or retracting? Where is the growth taking place? How long are houses on the market? Are there new homes being built?  Understanding this information will allow you to become more confident in your purchases. Don’t take appreciation for granted.

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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Real Estate Investing is a broad phrase that covers everything from short sales, to tax liens to wholesaling to rehab flips as well as commercial real estate.  If you are a beginner, where do you start? You start by understanding basic fundamental principles before choosing a niche to start out in.   Even the more experienced investor is wise to review these basic principles from time to time and conduct a quick evaluation to see if they are following their own criteria for investing.  Below are a few that have been helpful for me over the years and have protected me from making a bad decision on more than one occasion.  I hope you find them helpful as well.

1.  Invest and Negotiate From a Position of Strength.   An example of this would be making a cash offer rather than an offer contingent upon financing.  Remember, cash is king.  With cash you can negotiate better deals that provide more profit.  If you don’t have cash, then find some private lenders to bring onto your team so you can make cash offers.  This site does a great job of providing you opportunities to learn how to get private lenders on your team.

2. Invest in Properties That Provide Multiple Exit Strategies.   With multiple exit strategies available, you have less of a chance of getting stuck with a home you can’t move.  When I invest in single family homes for a retail flip, I like to invest in homes that provide me the ability to conduct a rehab and flip, a lease option possibility or a rent to own possibility. This means you must know the rents in the area and if the rents will support the last two exit strategies.  A surrogate to this would be to always plan for the long term.  In the above scenario, I have both short term and long term financing arranged through private lenders that provide me the flexibility to do whatever the market dictates.  The more viable exit strategies available to you tips the odds greatly in your favor that your real estate investment will be highly profitable.

3. Know Your Market!    Conduct your market research before investing in real estate to know if your market is a good market to invest in.  Although most beginners tend to start out in their local market, keep in mind that may not be a good place to start. You need to know the answers to some of these basic questions:  Who are the major employers in the area and are they stable?  What is the population growth trend?  What are the local rents and how are they trending?  What are the average and median home prices in the area?  What economic anchors does the area have? These are all factors that can have a direct influence on your investment regardless of what niche you may be in.

4.  Don’t Get Emotionally Involved.  Again I will say, don’t get emotionally involved.  Be willing to walk away from any deal that doesn’t meet your criteria.  Although this may sound a little harsh, remember that other people’s pain is your opportunity. You are looking for opportunities where people have to sell rather than just want to sell. Buy your real estate investment in a way that makes sense for you.   Be strategic in your investing criteria and follow your plan.  That is of course assuming that you have a plan, if you don’t, then put one together.  This will help you tremendously from making emotional decisions.

Following these four principles will go a long way in ensuring that your real estate investments are highly profitable. Feel free to post any additional principles that you feel can be helpful to others below.

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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There is no catch-all evaluation of current real estate conditions.  That is to say, although we hear a lot these days about the “buyers’ market”, it is impossible to utilize one trend as a means of describing an entire national or international market characterized by complex idiosyncrasies.  Here is a list of factors which must be considered when attempting to gauge the climate of your market.

The first and most obvious of these parameters is pending home sales, which gives a since of just how much business is being done in a given market.  It is not as useful to look at the raw number of sales as it is to look at the changes and trends over the course of the past few years.  For example, although it’s a difficult time economically in this country, pending home sales nationally have increased by 17% over the course of the last year (indicating a rise in deals done and the start of a healthy comeback of the real estate industry).

In addition to pending sales, you will want to take into account how many of those sales are new vs. existing homes.  This gives a sense of what’s happening in the community—whether or not projects are under way, buildings are being built, communities being developed, etc.  Existing home sales are good, but new home sales mean your community is healthy enough to grow.

Inventory is a very important parameter, as it gives the investigator an idea of how many homes are listed for sale (which can be compared to the number of homes sold in the same time period for a sense of market efficacy).  A lot can be gleaned simply from studying how many and what types of homes are currently on the market.

The next big feature of the housing market to analyze is interest rates.  Although when taken alone, interest rates don’t provide a clear picture of what’s happening in the market, they do give a sense of the affordability of home ownership.  When mortgage rates are as low and attractive as they have become over the last few years, buyers have added incentive to pull homes from the overstocked inventory of the buyers’ market.

Finally, no analysis of the real estate market would be complete without including a consideration of the economy in general.  In the same area as your real estate market query, you’ll want to know the income level and unemployment rates, as well as any foreclosure statistics.  This will give you a good sense of the amount of disposable money available in these communities, and will provide insight into maximizing your opportunities to get a good deal.  Low-income combined with debt makes for a very dangerous cocktail, and although it can be a sign that the economy is suffering, such motivated sellers can provide great opportunities for savvy buyers.

Wherever you are looking to invest in real estate, do not be swept up by too many reports of national real estate trends.  The fact is, although many of the economic problems currently being faced by this country are ubiquitous, real estate success and failure is a local phenomenon.  Just because it’s a slow economy, doesn’t mean it’s not a great time to jump in!  And just because everyone is reporting that it’s a buyers’ market, doesn’t mean any deal you find is a good one!  Be careful and conscientious, and have an understanding of the statistics and trends pertaining specifically to your local real estate market before making any investment decisions.

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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