Investing in Real Estate

Are you tired of your day job? Do you love to travel? Do you sometimes wish that you could find a way to scrap your nine to five in favor of a trip to Europe? Well if so, you are definitely not alone!

Many people just like you have set out to find a new way to invest their money so they can have the freedom to live the life they want to. And a good number of them have found the answer is investing in real estate. Here are some of the tricks that they used – things that can help get you started on the road to financial freedom:

- Start slow. First time investors are generally discouraged from buying several properties within a short time period. Cash flow difficulties could arise, making it difficult for the owner to balance all of their new responsibilities. Rather than get discouraged, it is a better idea to purchase one property at first.

- Return favors. One of the things that many new investors do not realize is that if you help out those in your network with referrals, they are more likely to help you in the future. A good example would be someone who comes to you and asks you to buy their property, with you realizing that they would be better off getting a refinance loan than selling. At that point, you could them point them to your refinance contact. In the future, that same contact might send potential properties your way in return.

- Learn how to flip houses quickly. When purchasing a short-term property, your goal should be to sell the house as quickly as possible. For one thing, this will reduce your outgoing cash flow. One thing to remember is that you should quickly identify a list of necessary repairs. Invest as little cash as possible to complete those repairs, and then place the property back on the market. One rule of thumb is to make only cosmetic repairs, so that the property is more appealing to prospective buyers.

- Consider purchasing a property by assuming the original mortgage amount through refinancing. Then, borrow a second mortgage loan for the difference between the discounted selling price and the remaining mortgage balance. The payments will be significantly lower on the refinance than they were on the first mortgage. You can then turn around and sell the property for a higher price, paying off both loans immediately and generating a substantial commission.

- Learn what the reputation of a rental property is. If you are considering purchasing a rental property from another owner, be sure to investigate the reputation of the property. A bad reputation can mean high initial vacancy and little interest from potential tenants.

- Consider small improvements that will allow you to increase rents. If you are purchasing a rental property as an investment, consider making some inexpensive upgrades that will help you to increase the amount of rent that a potential tenant is willing to pay. These can include something as simple as new light switch covers and outlet colors to a new front door, a new mailbox and coordinated window shutters.

- Know your financing options. If you are considering purchasing your first investment property, take some time to carefully investigate the financing options available to you. While in some cases, using traditional mortgage programs may be a great option there are programs specifically designed for investors. First time investors need to pay particular attention to the options available, because most lenders will offer a program specially designed to help first time investors and first time buyers in general.

Now that you have read some information from the experts about what you need to consider if you are interested in becoming a real estate investor, you are well on your way. Be realistic in your expectations of yourself and those with whom you work, and you are certain to find real estate investing a very rewarding experience.

Property Investing: Fairly Low Risk

Real estate investors are typically people who want a way to develop financial security and a comfortable retirement income. To do this they’ve chosen a method of investing that is fairly low risk and requires a minimal investment up-front.

Real estate investors tend to focus on the development of equity, which enables them to leverage one property to purchase a second and so on. While you may not be interested in becoming a real estate mogul, even a single property can bring you opportunities that you never before thought possible. Here are some things to consider if you are thinking about investing in real estate:

- Understand “negative cash flow”. Before you make the decision to invest in real estate, you must first understand the idea of negative cash flow. Negative cash flow is very common with investors who have little or no money to invest in their first property. What the term means is that for some length of time, you will be putting more money out than you are bringing in. While the idea of negative cash flow might seem daunting, consider this. If you are purchasing an investment property with no money down, the cash that you will need to pay out of pocket is the equivalent of the down payment that you would have normally made to the lender. It is always best to enter any investment with true knowledge of the risks and benefits. Negative cash flow is something that you must learn about prior to making the decision to purchase an investment property.

- Get it in writing. If you decide to purchase a property by way of assuming a loan, you will basically be writing a check to the seller for the difference between the selling price and the amount remaining on the mortgage. In this case, you must request a statement showing the current loan balance before signing an agreement. Otherwise, you may find out quickly what a difference a few thousand dollars can make – particularly when those dollars are coming out of your pocket.

- Find out what you need to know to be a landlord. If becoming a landlord is your goal, then you will want to get familiar with what is required when it comes to managing tenants. There are many different situations that you will want to prepare for, contracts that you will need to prepare and many other aspects of property management to consider.

- Know what tenants have been promised. When purchasing a rental property with existing tenants, always ask the seller to certify in writing that he/she has not made any agreements with the existing tenants that might have an impact on your responsibilities. For example, if the seller promised a free month’s rent with a lease renewal – you need to know! If you are not aware of these agreements, you are not required to honor them. However, if you intend to keep the same tenants it is important that you honor any agreements and factor your costs into the purchase agreement.

- Understand the tax implications for the type of financing you choose. Be aware that if you use a home equity loan to finance the purchase of an investment property, you will not have the same tax benefits as you would if you used a traditional mortgage program. The cost-savings may make using the equity loan a better choice, but be sure to investigate carefully.

Hopefully, the information presented here has given you new insight into the world of real estate investing. Our intention is that you can now take this information and put it into play in your own investment plan. Careful planning is the first step to financial freedom, and real estate is an excellent vehicle for carrying out the plan.

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