Monthly Archives: June 2016

How to Start Investing in Real Estate

Real estate has always been a good investment option. It is also a much safer option compared to other forms of investment such as the stock market. However, before you invest your hard-earned money, it is necessary that you are aware of the risks and expected returns from the investment. So, this article will give you some pointers on how you can go about beginning your foray into the real estate business.

Market Study
If you wish to invest in real estate, but have a limited budget, then conduct a thorough market research to know about attractive investment opportunities. By doing a careful study, you will understand which property deal suits you the best and will generate the maximum returns.

Fix Your Budget
First fix the budget for your realty investments. Decide what is your investment capacity first. Before you decide the amount to be invested, take into consideration factors such as your annual income, current liabilities, monthly expenses, etc.

Finalize the Type of Property
There are different kinds of properties you can choose from. Apartments, row houses, independent villas, bungalows, penthouses, offices, shops, residential plots or commercial land are some options which you can explore. Be aware that commercial establishments will cost much more than the residential ones.

Finalize the Location
Location plays a crucial role in all kinds of real state investments. Whether you get good returns for your property will depend on where your estate is located. So, study the areas in the city and find out the current property rates and scope for further price appreciation there. Ideally, you can try to invest in upcoming locations where you can get properties at cheap prices.

Check the Developer’s Reputation
Checking the reputation of the property developer/builder from whom you will be purchasing the property is extremely important. You should buy a property from a developer who has a good track record of delivering properties on time and having the best construction standards and quality in the real estate industry. Make sure that the developer has followed all the necessary laws while constructing the project and there are no controversies and legal hassles.

Check the Plan
The next step is to check the floor plans with the developer. Visit the developer and understand each and every minute detail and specification of the project. Take along a property agent/realtor whom you know so that he can guide you in your property selection.

Get Finance from Lenders
Real estate is one of the biggest investment options in the life of any person and a lot of money is required for that. So, you might feel the need for finance and hence you should approach top banks with your income and personal information details. Also take the project details to get your loan sanctioned easily.

One way to invest in real estate is by selling a property you own and buying a new one for higher returns. So use these tips and some advice from an expert before you dabble in the world of real estate.

Investing in Commercial Property

In the aftermath of the real estate property market meltdown, people were naturally averse to taking risks, by investing in residential and commercial property. As a seasoned investor would advise you, in such bearish times, there are a lot of opportunities to take advantage of. With the real estate prices hitting rock bottom in recent times, many properties can be bought, at a fraction of the price they would have earned during boom time. While there is substantial amount of risk involved in buying commercial property, with proper research and wise choice, there’s profit to be made. At the outset, let me expound some of the advantages of investing in properties of the commercial kind.

Advantages of Investing in Commercial Property

Commercial properties primarily include office spaces, shops, storage warehouses, industrial spaces or any other piece of real estate that is leased out or used for commercial purposes. Location and space are two of the prime requirements of businesses and leasing a property is a much more affordable option for them, instead of buying it. This presents commercial property investors with an opportunity to make substantial profits.

One of the prime advantages of investing in commercial properties are the long leases and high rent that owners can earn. Compared to residential properties, commercial ones tend to maintained a lot more professionally, which automatically reduces expenses. The high percentage of return on investment, in excess of 8% to 9%, justifies commercial real estate investment.

Properties in prime locations can expect an annual hike of 3% to 4% in rent, which guarantees higher returns in the future. By handing over the maintenance and administration to a commercial property management firm, you can simplify your life and reap profits in the long term. Commercial property that are located in prime business zones are always in demand and hence you can expect a decent resale value in the future, when the prices in that locality appreciate substantially.

Commercial Property Investment Tips

You need to appreciate the prime importance of ‘Location’, when it comes to investing in commercial real estate. Businesses are looking for office, shop spaces, warehouses with all the necessary amenities and resources in their vicinity. So choosing a commercial space in the right location is the first important thing and it requires a substantial amount of market research to find such properties. You will have to network with real estate agents, who have a database of such properties on sale.

Decide on how much you are willing to invest, which will automatically limit your choices and help you focus on what kind of properties you can afford to invest in. Once you have shortlisted a few properties, determine the asking price and the projected returns through lease, after accounting the maintenance and taxation costs. If you are thinking of buying commercial property and plan to arrange for the investment corpus through a mortgage loan, do the math and determine the profits you will gain in the future after maintenance costs and loan installments. If the math shows you that the investment is a feasible one and you are guaranteed that your principal is safe with decent returns, go for it!

If you have a commercial space in a prime location, there is always going to be demand from businesses and the chances of your investment being highly profitable are higher. Work out the yearly maintenance costs for the property, research every aspect of the investment thoroughly before going ahead. Here’s me wishing you all the very best for your commercial property investment endeavors!

Investing in Real Estate for Retirement

Over the last few years, the interest rates of various investments have fallen and despite all the attempts taken to make the economy stable, millions of people had to extend their work years just to maintain the minimum standard of living. Yes, everything lost has its value, but one asset has only risen in spite of this recession – real estate. Most people dream about spending their retirement period in a calm and quiet place. A place where the crime rate is low and the entire surrounding is filled with intelligent people who are just living the much-needed peaceful and retired life. However, all these dreams can only turn into reality if an individual makes intelligent decisions regarding his/her investments.

How to Invest in Real Estate for Retirement

There’s no doubt that investing in real estate is a smart move, but it is advised to check out all the loopholes before putting money in a piece of property. Buying real estate is more than just living on a piece of land. The practice of property selling and buying has become a popular practice over the last few years, and more and more people are joining this bandwagon. Yes, the real estate market has plenty of lucrative opportunities for investors, but sometimes dealing in real estate can be more complicated than dealing in stocks and bonds. In this piece of information, we understand different and safer ways of investing money for real estate.

Giving on Rent
An vacant, habitable house can rented to a tenant for a considerable period of time. The owner pays for its maintenance, mortgage and various additional taxes. The rent on the property is usually decided on the basis of its location. The land owner earns a fixed income every month which is known as rent. In due course of time many landowners charge more rent in order to gain more profit. However, the best thing to do is to charge rent which would be enough to cover the mortgage payment. Plus the value of the property is likely to have appreciated with time. As soon as the tenant moves out due to various reasons, it is advised to put up the property on the market to earn additional profits.

Real Estate Trading
This is perhaps the fastest form of making money in the market of real estates. In real estate trading, the traders buy properties from owners with the motive of holding them temporarily and selling them for a better profit later. This practice is also called ‘Flipping Properties’ and traders who follow this usually purchase properties which are highly undervalued or are very high-priced. In some cases, when traders purchase a low priced property, they try to increase its value by doing some renovations on the property. This customization can actually result into a huge profit for the trader.

REITs
One of the most easiest ways of investing in real estate is putting money in the Real Estate Investment Fund (REIT’s). A RIET is created when a trust or a corporation uses the investor’s money to buy and operate properties. RIET’s function just like stock trade. The trust or corporation has to pay out 90% of all its taxable profits in the form of dividends to its various investors. By paying the dividends, the REIT is exempted from paying corporate income tax. RIET is the perfect choice for people who want to earn regular income.

401 (k)
Most people believe that the money saved through the 401 (k) plan is simply for retirement. However, there are some smart investors who have figured out ways to invest in real estate without disturbing the money saved for retirement. 401 (k) account holders can take out a loan against their account. The money which comes from the loan can be used to buy real estate. However, there are some limitations which come with the loan. First and foremost, there’s a cap on the amount which can be borrowed. Normally the cap is of $50,000 but it can be less depending on the money in the 401 (k) account of an individual. Another thing to remember is that real estate purchased through this method is not eligible for any tax benefits.

Roth IRA
Almost everyone in the US knows about the Roth IRA (Individual Retirement Account), it is a great form of investment and is non taxable. People who open an IRA account deposit some money from their salary in the IRA for retirement. In some companies the employer deducts some part of the salary and deposits it in the IRA of the employee. The good news here is people can use the IRA money to invest in real estate. Let’s make it more simple; If you have $50,000 in your IRA account and you want to purchase a property which is priced at $100,000. You can put in $50,000 of your own money and put in more $50,000 from the IRA. This makes your IRA account nil but you can put back that $50,000 once you sell that property at a better rate.

For legal advice regarding these investments, it’s necessary to get in touch with your attorney.

Investing money in real estate for retirement is a good idea if the investor keeps himself/herself updated with the latest regulations and strategies of the market. Real estate is perhaps the best way of earning easy money in retirement but before the game of investment begins it is a good idea to know all the rules.

Disadvantages of Investing in an Apartment

The Brighter Side
According to data from the National Council of Real Estate Investment Fiduciaries, for the period between 1984 to 2004, apartments provided a higher total return to investors, than the average for all other types of property.
With the current boom in real estate, many people are keen to invest in an apartment. Apartment investment has numerous advantages, making it one of the most desired investments in the real estate market. A steady cash flow is perhaps the biggest draw. You receive a said amount of money from your tenants, and depending upon the number of flats in the apartment building, this can be a significantly big amount. What’s more, investing in an apartment can also fetch you good profits when you sell it, due to a steady appreciation in its value. You can also save taxes when you sell an apartment and invest the money into acquiring another property.

However, every investment has two sides to it, and an apartment is no different. Let us have a look at the major drawbacks of renting out an apartment.

Demerits of Investing in an Apartment

Financing is Not Easy
It’s important to know that apartments are sold as a whole, which means quite a big amount needs to be invested. Add to it the fact that, lenders and financial institutions are not very eager to sanction loans for commercial properties, and financing the property can prove to be difficult. Financial institutions offer mortgage loans (albeit at high interest rates) once you have paid at least 20% of the value as down payment. However, the monthly mortgage payments are quite high, and can dig a hole in your pocket if you don’t find tenants sooner than later. To avoid such hassles, investors choose to invest in a group and share the expenses and liabilities.

Property Management
Most investors who invest in apartments find it difficult to manage the property. An apartment can have several issues, including maintenance issues, repairs, etc. So, investors hire a third party or a property manager to manage the administration and maintenance of the apartment. While tenants collectively bear the monthly maintenance cost for the apartment, unexpected expenses can come up once in a while, and then it is the owner who has to pay up. Also, if you’re on a tight budget, the additional cost of hiring a property manager may discourage you from seeing it as a feasible option.

Dealing with Difficult Tenants
If you’re lucky, you’ll have clients who pay the rent on time, and are more than willing to follow the terms and conditions mentioned in the rental/lease agreement. However, almost every investor has had an experience with a difficult client in their careers. Add to it, the current economic condition, and you know what to expect! If the tenant fails to pay the rent for a particular month, it means additional expenditure from your end towards payment of mortgage. Also, eviction of the tenant can be troublesome in certain cases, when the tenant simply refuses to move out of your apartment. In such a scenario, the only option left before you is to take legal action against the tenant, and it can take some time for the court to pass a judgment.

It’s Not a Liquid Investment
A liquid investment is something that you can sell easily, whenever you’re in need of money, and an apartment is certainly not one. While this is a common drawback of investing in any form of property, it can be a major disadvantage when it comes to apartment investing, because it means that a large amount of your money remains ‘blocked’ for a long period of time. In times of emergency, such an investment can hardly be of any help. Thus, it is recommended that you always include some liquid investments in your portfolio, and not invest all of your money in real estate only.

Nevertheless, the benefits of investing in an apartment far outweigh the demerits. So, if you’re planning to invest in one, don’t let the disadvantages discourage you. Instead, try to overcome them and go ahead on the road to huge profits and financial gains. Good luck!