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The Best Real Estate Investing Advice

I recently did a radio interview and this is a partial transcript from that conversation. Let me know what you think!

What is your Best Real Estate Investing Advice?

Don’t stop. Never quit. Never give up. You’re going to a hit ton of obstacles in this business – you CANNOT let them stop you. So many investors get stopped by either ignorance or fear saying, “this is just too hard” – “real estate doesn’t work for me” – “real estate doesn’t work in my area.” Then they get out! Don’t do that. Find someone who can guide you through. It could be someone in your REIA, another investor, an attorney, anyone successfully doing what you’re trying to do. Do what it takes to find answers to your questions. You don’t have to know everything today; you learn over time. Take the time to figure it out – but don’t get stopped.

Name on big obstacle.

Legislation – laws change and often investors don’t know their state laws or say “our laws don’t allow that” when actually they’re ignorant of the laws. The law may say you can’t do something a specific way, but you can in fact do it another way. Again – learn, find out, know – just don’t get stopped.

Best book you’ve read

I prefer business books because we run a business. If you have more than 2 properties, you have a business and need to treat it as such, rather than like a hobby. The great thing about business books is that most business needs are the same, no matter the industry. “The EMyth” by Michael Gerber is fantastic and “Think and Grow Rich” by Napoleon Hill.

Best personal growth experience and what you learned from it.

My best ever personal growth experience probably came from my worst ever life experiences. My three experiences were divorce and two extreme family health crises. One of the big things I learned through these was not to waste time – everyday is valuable, even the tough ones. Jim and I are so so busy every single day, our days are so full, but we love it because it’s all productive, it all serves a purpose, it serves others, and our activity constantly moves us toward our goal. We don’t have to be at our goal to enjoy life, just working for it and making steps brings us tremendous joy. Don’t sweat the small stuff because it really is all small stuff over a life span – it really does pass as time continues to march on. It’s precious, don’t waste it.

How I tie that into real estate is by pointing out that, if you decide to wait before you make a purchase, I promise that in five years you’ll be kicking yourself for waiting. Time is so precious.

Best success habit you practice

Not getting stopped. For that to happen, you must have a big enough “why?” You must have a big enough reason to be doing this business – and your reason’s gonna change. Starting out, our reason for this business was to provide for retirement (and of course I wanted to get to that sooner rather than later). Eventually, as we began to have income coming in for today, our reason became a better lifestyle for ourselves and our family along with being able to give more, which feels really good. Now our reason is to leave financial prosperity to our children and grandchildren

Best deal you’ve done

Our mountain house. About the time we started this business, we also bought a very nice house in our gorgeous North Carolina mountains. As it turns out, we just happened to buy it with private money because Jim was golfing with a friend one day and told him about a house we were hoping to get in spite of crazy lending regulations. When they finished golfing, his friend turned to him and offered to fund the deal. (We were shocked and amazed he even had the money – we’d worked with him and known him for years. If we didn’t have money, how did he???) Finding private money is easier than you’d expect – all you have to do is talk about what you do…

But, the point of this story is that this was 2005-2006 before the economy tanked. We bought the house and spent about $10,000 giving it a face lift. Shortly into owning it, Jim told me we’d have to sell as it was not generating cash flow and, with our new company sucking up cash, we couldn’t afford to maintain the mountain house. I was devastated, however… We agreed on a sales price, which I thought was high because I didn’t want to sell. It sold almost immediately. We had to set the closing date to a time when we would own it for 366 days. By holding it longer than a year, we would only have long term capital gains to deal with. We made $100,000 profit after loving it for 12 months. That was crazy huge money for us and we had super enjoyed the house and the mountains better than free all that time. We poured every dime of profit back into our investing business. This was another confirmation that real estate is an amazing way to make huge money.

Best quote

(1) Don’t Think for the Seller

Before you buy anything, you must always know your numbers. Their numbers and problems cannot influence your offer or you’ll pay too much.

(2) Failure is Not an Option

When we started out, we were at an age where we didn’t have time for a failure.

And, that’s what has kept us overcoming hurdles and knocking down walls even today. Failure is not an option.

(3) Hope is not a Strategy

There are so many moving parts in this business. You can never hope things will work out or the economy will remain strong or property values will increase. You must KNOW your numbers, your response rate, all the dynamics of your business at all times. That’s the only way you can improve what’s working, eliminate what’s not, and know the difference.

What’s the biggest mistake you’ve made in real estate?

Being influence by sellers. It’s hard to not get caught up in the emotion of the moment and in their needs, but that can ruin your deal. One of our very first buy opportunities, Jim went to the sellers home and, later, when he walked back in our front door he said, “I just paid too much for this house.” The woman had recently found out she had cancer and, while Jim was sitting in the house talking with them, their attorney called to tell them their home was being foreclosed. She started crying and Jim wanted to help them out. You MUST know your numbers and stick with them. They are your numbers for a reason!!! You CANNOT be influenced by the sellers situation or emotion.

How to Identify Emerging Real Estate Markets

If you are interested in making a career out of real estate investment, it is important to have the ability to spot emerging markets before they reach their full potential. This allows you to get in early and support the growth of the market, while also ensuring that you are in a position to make as much money as possible form your initial investment.

Of course, that sounds far easier than it actually is, as it is not always easy to see where the next market is going to emerge and it can often be difficult to get all of the pieces of the puzzle to align so that you can take advantage of it.

Here we will look at a few tips that will serve you well when you are considering your investments.

Take Away Personal Taste

If you are looking to invest in property, the first thing that you need to do is take away your own personal tastes. After all, the property isn’t intended for your own use, so what you think about it is actually not all that much of an issue.

Instead, try to consider how the property fits into the surrounding area and if there is going to be a demand for what it has to offer. Cheap apartments, for example, may not be to your personal taste but they may well serve a purpose to the area in which they are being built. Put your business head on and try to see the big picture in terms of how the market looks in a particular area.

Get In Early

The term “emerging” is important to consider here, as your investment will be worth less if you jump on a bandwagon that is already well-established. Keep your eyes open for news of potential investments and try to get on board at the earliest possible stage, so that you can reap the largest rewards at a later date.

Of course, this doesn’t just mean that you should invest in everything that is just starting up. Consider the reputations of the people behind the project and their previous successes. Be sure to meet with them to discuss their plans and the research they have put into the project, and be very wary of anybody who is not willing to speak to you directly but still wants you to invest in their venture.

Know The Local Market

The property market is extremely complex, with national cycles not always matching up to the way that the market is going in various localities. As such it is extremely important that you do the research into any area that you are looking to invest in and, just as importantly, you keep on top of the changes in that market that are always bound to happen.

Simply put, you are not going to make any money if you invest in a project where there is no demand. Find out if the area is a renter’s market, or a comfortable place for people to purchase a first home and look for upcoming projects that will satisfy that demand.

Ten Ways To Lose Money In Real Estate Notes

While investing in Non-Performing Real Estate Notes, or NPN’s for short, can be a great way to get secured, above average returns compared to the roller coaster stock market or 1% in a CD. Though like all investments, there is no guarantee you will make any money. Actually, if you are not careful, you can lose some or all of your investment.

We have put together a list of all the ways we can know of that you can lose money in the Distressed Asset Arena.

Ten Ways To Lose Money In Real Estate Notes:

1. Paying Too Much

We feel the #1 reason you can lose money in NPN’s is paying too much for the note by not researching the true value of the property As-Is compared to move-in ready comparable prices, or comps., and adjusting your price accordingly. There is a saying; There is no bad note, just paying too much for a note.

Typically the property is not in a move-in ready state, so it will have a lower price, and if you don’t take that into account, you will be pressed to many any profits when you go to sell it. The solution would be to either see if putting in $3-10,000 in light repairs would give you a $10-20,000 increase.

Other options are to rent it out for cash flow while hopefully, it appreciates. Then in a few years it can be sold for a higher price. Or sell it with owner financing to people with lower credit scores for a higher price, or sell that “loaded rental” with the tenant in it to an investor as a cash flow machine.

2. Wrong Location

By buying a NPN in a rural, blighted, or crime ridden location, even if it’s in great condition, you will have a harder time to sell it when you need to, and might have to drop the price to just get rid of it. No family wants to live in the middle of nowhere, or a war zone, or without basic needs like grocery stores, gas stations, or general merchandise stores.

3. Not Visiting The Property

Imagine if you buy a note, and you find out that the house is no longer there! It could have burned down, or the city could have condemned it. This will result in a loss of most of your money, and the only thing you can do is sell the land itself for a much lower price than you paid. At least it won’t be a total loss, the land does have value. It just depends if a builder will find the location good enough to invest in.

Or if the property is damaged, knowing the extent of the damage before paying for it is priceless as to saving you a lot of money. Sometimes it’s better to walk from a smelly deal, than risk the investment if it’s not making sense.

4. Not Confirming Your Lien Status

You are told you are buying a Senior or First lien on a home, then you find out that it’s really a 2nd or Junior lien. This could be due to incompetence or neglect from the seller to know what they were selling, or a Junior lien could have foreclosed and if unchallenged, they are now the Senior lien holder and you are now a Junior. You still have claim to the debt, though now you are not first in line.

5. Not Checking For Lawsuits or Liens

One of the first things we do after we narrow a list of NPN’s or REO’s (Real Estate Owned or Owner has title.) we are considering to purchase, and before we pay for it, is we run an O&E Report (Occupancy & Encumbrances) which shows how many liabilities are attached to this property.

The homeowner could have been sued in the past, or owed Federal, State, or County taxes, and a lien placed on the property. This would result in you now being liable for paying that if you get them to sign a deed-in-lieu of foreclosure. Only a foreclosure on the property would possibly eliminate most or all of the lien’s or encumbrances on it, considering IRS Liens have a 1 year redemption period where they can pay off the mortgage if they want it, though they really don’t want the house.

6. Not Checking For Taxes

There are a plethora of taxes fees, penalties, and fines that can be imposed on a property at every level up the government hierarchy. From city fines for not cutting the grass, or leaving garbage around, you have any number of agencies that can penalize you from water, to power, to trash, to schools. You also have the county real estate taxes and fines you get for not paying them. If you ignore them, the county can sell the tax lien to someone else, and after a redemption period of usually a year, you could lose the property.

The State can also put a lien for income taxes, child support, and any number of issues. Then you have the Federal government that can put a lien on the property due to not paying your income tax. We just purchased a note that had $67,000 in total taxes, fines, liens, and penalties. We intend to foreclose to wipe them out, and possibly sell the house back to the homeowner.

7. Not Checking For Bankruptcy

Bankruptcy is not the end of the world for the note investor; many times they are a good thing. A Chapter 7 will eliminate all unsecured debt like credit cards, etc., leaving more funds each month to pay their house off that would have gone elsewhere.

A Chapter 13 is a repayment plan and typically the house payments are part of the payment plan. It takes 5 years to complete, and many people fail to complete it, resulting in them still owing the debt.

If you have a junior lien, and there is no equity, you can typically lose your entire investment if the lien is stripped in bankruptcy. They still owe the debt, though its unsecured, and you can get a judgment against them that will be on their credit. If they tried to buy another house or car in the future, that debt would still be there, and they would have to work something out with you to have the court mark it as paid in full.

8. Land Leases

Not Checking For Land Leases means you could lose your entire investment at the expiration of the lease, depending on the surrender clause. It’s not your land, and if the owner wants to do something else with it, well, there is nothing you can do. Condo’s & Townhouses can be considered a form of Land Lease in that you don’t own the land, just the building.

9. Buying From Joker Brokers With Daisy Chains

We have seen people offering to sell notes that are number 5 or 6 in a chain of what we refer to as “Joker Brokers,” and our policy is to not avoid them for many reasons, #1, they don’t own the note, and to not deal with the owner is asking for problems. #2 is that they typically are getting it from someone else. And then, most likely, that person is getting it from somewhere else, and on & on, and this can go on for a bit, with each link in the “Daisy Chain” adding cost to the purchase price.

10. Buying From People Who Will Rip You Off.

Sadly, there are people who will rip you off in this business, and some still call the note business the “The Wild West.” A rogue employee can convince you that they own the note, and to send your money to him. In order to avoid this, using an escrow to hold funds secure, combined with a document scrubbing service from a Document Custodian insures they “sign off” that the collateral or document file identifies that the seller of the note/mortgage really own it, and are not trying to rip you off. Then the escrow can be released, that is the only way to prevent this fraud.

The Top 10 Mistakes Most New Real Estate Investors Make

Real estate investment can be a great way to make money, assuming that you do it right. There are a lot of pitfalls that you need to avoid to make sure that you actually turn a profit, so here are ten mistakes you should avoid if you’re new to the market.

10. Not Knowing Your Budget

The cardinal sin for any real estate investor is trying to buy beyond their means. You should be aware of your maximum budget and never exceed it, even if a property appears to be perfect. You will be setting yourself up for a fall.

9. Not Doing Research

Before you commit to buying any property, you need to know everything that you can possibly know about it. This not only allows you to better estimate how much money you will need to invest after purchase, but can also allow you to negotiate a lower price.

8. Going Outside The Comfort Zone

If you have managed to make a little bit of money investing, be sure to stick to what you know until you have the budget to try something new. Even then, you should never invest without the proper advice.

7. Charging Too Little

If you are renting properties out, you need to make sure you are charging enough to turn a profit. This involves researching the area and the average prices for a property of the type you are letting out, to ensure you stay competitive yet profitable.

6. Chasing Deals

All investors have the one that got away, but sometimes that isn’t a bad thing. Just because something seemed perfect at first, doesn’t mean you have to buy it, especially if the numbers don’t add up as you go along.

5. Early Payments

If your property needs renovation work, you should never be in a position where you pay 100% of the cost before the work is completed. Be sure that you are completely happy before you hand over the rest of the cash.

4. Relationships With Tenants

Any sort of relationship with a tenant, friendship or otherwise, is dangerous. Your relationship should be strictly business so that you are never in a position where your emotions are conflicting with doing what you need to do to sustain the business.

3. Not Being Diligent

Just because a property doesn’t have a problem that is easily viewable, doesn’t mean it has no problems. Be sure to diligently check your buildings so that you can catch anything that would become an issue as early as possible.

2. Not Looking At Grants

You don’t necessarily need to go into real estate investment alone. A lot of states offer special loan and grant programs that can cover some of the costs for you. Be sure that you’re aware of what you can and can’t claim for.

1. Ignoring Cash Flow

You should always be completely aware of what is coming into your account from each of your properties. Just assuming everything is okay is a great way to leave yourself open to losing money. Find out what isn’t doing as well as it should and solve the issue.

Choosing Your Real Estate Investor

A real estate investor can help you sell your house fast and easy. Whereas an agent just manages the selling process on your behalf, the investor is actually the buyer and hence you do not have to wait for long before an interested buyer comes to your way. The investor values the property and buys it in a short process helping you get over difficult financial situations you could be in or saving you when you are on a tight time fix in that you can handle a long selling process. But how then do you choose the best real estate investor for your house?

Is the investor experienced? – An experienced investor understand all procedures necessary when closing a deal and will therefore have an easy time doing or handling the paperwork fast so that the transfer of ownership is made easy. It also means that he is aware of the latest market demands and will therefore give you real value for your house. An investor who has been in the real estate industry for long is also more likely to have a good reputation and hence you can trust in a pleasant experience before, during and after the sale.

Are there any limits? – One of the reasons why most people choose to sell their homes and property to investors is because they do not let anything about the property stand in the way of the sale. You therefore know that your investor will buy your property in its current state, however bad it is. However, when choosing, it is still of importance to make sure that he has no limits as to what is acceptable property and what’s not. A good investor will not mind the size, the location or the style of the house. Whether you are selling a townhouse or a single family house the sale should not be interrupted. Choose an investor who has fewer limits and demands to give you a pleasant experience selling your house.

What do previous clients have to say? – One of the ways through which you can manage to choose a reliable and trustworthy investor is by finding out what past sellers have to say about them. Did they get real value for their houses or do they feel swindled? Was the process transparent in that they were involved? Was the payment prompt? These are some of the comments that can help you know your investor better and decide whether you find him best to work with on the deal.

What are the terms of payment? – The question is very important, especially if you need your money fast. Most of the real estate investors offer cash for the sales and this means that you get your money in cash as soon as you close the sale. However, this can differ from one investor. Find out what payment modes are available and how soon you get to receive the money from the sale, then gauge how convenient the terms are for you and how comfortable you are with the procedure.

5 Tips to Double Your Investments

If you’re investing in the property market then your eventual aim is to make as much money as you can from it. It’s the same for anybody who invests in anything, but there are a few tips that are specific to the property market that you should keep in mind if you’re looking to double your investment. Here we will take a look at a few of them to help you get the returns you’re looking for.

Tip #1 – Buying At The Right Time

The key thing to remember with the property market is that it is cyclical. The good times are always followed by the bad and vice versa. Both present opportunities to the investor, as long as they exercise a little patience. When it comes to buying, you want to wait until the market is at its lowest in terms of house and apartment prices. This allows you to pick up properties for far less than their market value in a good market, which means you can build on your portfolio and play the long game.

Tip #2 – Selling At The Right Time

On the other side of the coin is selling. In this case you want to try and wait for the market to reach its peak in terms of house prices before you sell off any of your portfolio. This will ensure that you get the highest possible return on the investments you made when the market wasn’t doing so well. You just need to have a little patience and not rush into the selling stage until you are sure the market is favourable to your goals.

Tip #3 – Buying The Right Properties

Having a well-stocked portfolio means nothing if the properties in them are not going to appeal to potential buyers. This means that you need to be very careful about what and where you buy at all times. Ideally, you want to pick up homes that appeal to first time buyers and families, as these are the two biggest purchasers of homes. As such, the location of the property, it’s suitability for multiple people and factors such as local schools and crime rates all need to be taken into account before you purchase the property.

Tip #4 – Consider Renting

If you are looking to invest over the long term, renting a property out is an excellent way to bring in cash. This allows for the property to generate a constant income stream that, over time, will pay back your investment. Best of all, you can purchase a property during a downturn, rent it out during the highest period of demand for rental properties, and then sell it on when the market recovers to squeeze the absolute most out of it.

Tip #5 – Keep An Eye Out For Property Developments

Generally speaking, if an area is undergoing development that is going to result in new properties being created, you should consider investing in that area as quickly as possible.

In many cases, once planning permissions have been granted there is a solid ripple effect before the properties have even been built. Get in early and you will see a good return on your investment once the project is finally completed.

Three Smart Reasons To Invest In Real Estate

The idea of investing in real estate can be daunting. It doesn’t matter if you plan to be a single homeowner, a landlord, a developer, or a house flipper. Many people are too afraid to take the chance, and, therefore, miss out on a lot of wonderful investment opportunities. Here are a few of the reasons why you should take the leap.

Buying Property Is A Double Investment

When you purchase stock in a company, you are counting on your purchase increasing in price as the years go on. That is all it does. When you invest in real estate, not only does your property appreciate in value, but you can also use the space. The average existing home appreciated 5.4 percent from 1968-2009. So a $100,000 home purchased in 1968 would be worth nearly $864,000 today. That alone makes it a good investment. But if you lived in that house during that time, not only were you gaining the increased value every year, but you were not paying rent to live elsewhere. If you rented the property out, you were making the 5.4 percent a year, plus whatever profits were gained from your tenants.

Tax Benefits

Investing in stock or contributing to your 401k is a solid investment strategy. However, it does not offer all of the benefits that real estate does. When you purchase a property, there are a myriad of tax write offs and deductions available. This is especially true if it is purchased as a rental property. Even minor expenses such as driving to check on the property, installing an alarm system, or buying new light bulbs can be written off. So not only are you increasing the value of your investment with each purchase, but you avoid paying taxes on that same amount.

Property Is A Vanishing Commodity

“Buy land, they are not making it anymore.” This is as true today as it was 100 years when Mark Twain said it. With increasing zoning laws and land use restrictions, it is becoming harder than ever to build new homes or businesses. Every property purchased makes the available market smaller. While we are nowhere near capacity yet, the value of existing properties only increases, and will continue to do so over time.

Investing in real estate can be a frightening undertaking. However, if done cautiously and with good advice, it is one of the best investments on the market. It is a finite commodity that will only increase in value. It provides the investor with a number of options for tax benefits. And most importantly of all, it is an investment that not only accrues value, but provides the owner with a place to live or rent as well. No other investment can offer the double value that real estate does.

Real Estate Math Made Easy

New agents often find that the single part of the certification process that intimidates them the most is not actually remembering the laws, but the math. There are some basic math skills you will need to master in order to become a real estate agent. Some you might remember from school, while others are unique to the world of real estate. Let’s look at a few math concepts to help you succeed.

When you work with percentages, you often get numbers that go well past the cents range. It’s necessary in those instances to round your numbers. This only has two rules – anything less than 5, you round down. Anything greater than 5, you round up. So, if you are looking at $13,245.9875 and you need to round to the nearest cents, you would round to.99 (since 7 is greater than 5).

Percentages are also expressed two ways – 63% or .63 are both the same figure. It’s easier for our minds to understand the first when we are speaking, but when doing the math, it’s much better to use the decimal point, unless your calculator has a % button, which many stand-alone models do. You’ll need to know this for computing interest for your buyers, and for knowing how much commission you stand to make.

Percentages are also used in calculating loan to value ratios. Let’s say your buyer has $30,000 for a down payment, and she is looking at a home worth $200,000. She will need to finance $170,000. The loan amount divided by the home price means the LTV is .85, or 85%.

To compute how much land someone is interested in, you may need to break fractions into decimals. Case in point – Mr. Jones wants to buy 1 ¾ acres of land. 3 divided by 4 is.75, thus making the land Mr. Jones wants 1.75 acres.

You may want to keep in mind how to compute square footage and square mileage. A square foot is a block of land that is one foot on each side. This means that a square yard (3 feet on each side), is 9 square feet. A mile is 5,280 feet long, so a square mile is a huge 27,878,400 feet. When dealing with larger properties, it may be simpler to remember things in acres. An acre is 43,560 square feet. A square mile is then 640 acres.

Prorating is another potentially confusing computation. You need to figure out the full term in days, then divide that into what your amount is per year or month to get a daily total. Then multiply that by the days in the month that you do need to pay for, and you should have your prorated amount. Here’s an example. Let’s say your client needs to pay HOA fees of $90 a month, and he is moving into a house on the 17th. Banking calendars use 30 days for each month so it is a nice average. This means your client’s HOA fees are $3 a day. The 17th – 30th is 16 days, so the first month’s fees will be $48.

Some real estate online courses will help provide you with formulas you can download and access when you need them to help make sure that you compute your figures correctly. You still need to know the process first, however, before you download them, so you will know how to use the formulas properly.

How to Get Rich From Real Estate Investing

Some people want to invest in real estate for the challenge, while others want to accumulate long term wealth. Still others are in it to strike it rich in the gold rush of finding property. If this sounds like you, you have come to the right place. There are two main ways you can invest in real estate and get rich – flipping homes and rentals. Each type carries its own unique type of risk. Let’s dive into those two types in a bit more detail.

Flipping homes

This is the riskier of the two types of wealth building methods. One of the main things about real estate investing is that people will seek out homes as one of the basic needs of life. Now that mortgage rates have reached the lowest they have ever been and are only slowly starting to rise, it’s easy to find loans at great rates to help finance your investing. It also means that people can start to afford their homes again. Here is where you come in. Finding homes in need of some love is the first step.

The hard part about getting those homes is that there are cash buyers out there you will need to beat out in order to take ownership of the property you want. On the upside, people are happy to have move-in ready homes, saving them from having to do their own work. In areas that are experiencing rapidly increasing home values, you have to move fast, but your investment will be more likely to pay off quickly versus having to wait a while to recover the money you spent on the upgrade. Look for repairs and home costs that will allow you to put in a 15% profit margin when you sell it. This will also mean you will need to research your house’s potential value when you are ready to put it back on the market.

Rental properties

This is how most people acquire their wealth in real estate – renting their properties. You don’t even have to be local, so you can buy properties in hotter markets or places that have a booming economy. If you are going to do a long-distance investment, you will need to have a good property manager who will take care of the property in the meantime. This is one of Warren Buffett’s keys to success, and that means it’s a good idea to follow suit.

To calculate how much you can charge for rent, you will need to cover the amount of your mortgage plus any other expenses like your property taxes. You should expect to put down a 20% down payment before you obtain your loan. If you plan to own multiple properties, you can start to use your profits or the equity you have in your first property to help finance your next buy. The cash from the properties should be able to pay off the loan in 15 years or less. If it can’t, the investment is too costly to start and other options should be explored instead.

Then there are vacation homes you can get into to build wealth. Finding homes in popular destinations will almost always assure you steady income during peak seasons as they are short term stays with high turnover, making for multiple tenants over the course of the year.

It is possible to earn just a little extra income off of real estate, or you can get wealthy in the process. It all depends on how you do things, and how much time you are willing to spend on your research. Good luck!

Real Estate Investing – Reasons to Invest in Commercial Property

Perhaps you got some advice from a well-meaning relative that you should invest in real estate, or maybe you have been following the trends of the economic recovery and you are ready to diversify your portfolio. Whatever your reason, you probably have only considered residential real estate options, but what about commercial properties? There are some interesting reasons you should if you haven’t already.

For one reason, commercial property is relatively low in terms of investment risk, especially when compared to stocks. The recent 1,000 point dive/400 point climb by the Dow Jones Industrial Average highlights the volatility of the stock market. Unless you are in love with rollercoasters, owning property is a more sensible option.

The income you can derive from property is often quite significant, and leases are steady income free from the fluctuations of the market. You will often be able to realize much more income than a stock portfolio can afford you also. Commercial property has a track record of appreciation, provided you take reasonable care of the property along the way. Select improvements can add to your property value and deliver exponential increases in income over time. Things like providing high speed internet or, even better, fiber optic internet can make business tenants happy by giving them the chance to be ahead of their competition.

One of the ways that real estate magnates expand their portfolio is by borrowing against the equity of the current property. You can get a loan on the full value of the property to use for acquiring additional properties, saving you from having to come up with the money on your own from your savings.

Property often is resistant to devaluation in the face of inflation, particularly in areas where the government is just printing money to try to overcome financial troubles. Property, over time, is the single investment that provides the greatest level of return on investment. When inflationary times hit, property values also go up, keeping investors well shielded. Both the land and the building possess discrete values and they can both increase, sometimes at different rates. No matter what happens to your tenants, you still have an asset that particularly in prime areas will offer you income potential.

Don’t forget the tax benefits you get from owning commercial real estate. Not only do you get to deduct the interest on the property loan, but you also can get depreciation deductions. For more details, consult a tax attorney who will be the best resource for the most up to date information on the tax code.

In prime areas, you can charge prime rent for your tenants. This doesn’t just mean a nice part of town, but you must also consider the traffic in the area, particularly if you own a retail or office space. Bad traffic patterns will keep people away even if you are in a lovely part of town.

The reasons to get into commercial real estate are many, and the reward potential is great. When you are looking to add to your investment portfolio, consider commercial real estate. It could be the best decision you make.