How Much Should I Pay for an Investment Property?

Many people wonder if there is some formula to be able to reach reliably, the amount of money one needs to spend in order to invest in a significant gain of Investment Property. It is worth mentioning that more and more people have already started to deal with such real estate investments and also with remarkable results. This is because the housing market to hire is highly effective and can bring substantial profit and fast payback of the initial investment in less time.

Although each housing market correlations may vary, there is some items worth to know and to take into account when going to buy one Investment Property. One significant size is the CAP rate. The capitalization rate is the relationship between the amounts of net income from the rental of this house, with its total market value. The net income can be calculated approach if from the annual rental fee we subtract approximately a rate of 10% for taxes, maintenance, etc. If we divide this net amount to the real value of the house, we find the CAP rate. A remarkable CAP rate for newly built residence that do not require special maintenance should be about 8%, while for most old houses or repair this figure should be at least twice.

Another important factor that one must consider about the amount of money you spend on one Investment Property is how the local rental market is moving in this area. If, for example, invest in a house with low rental rate frequency, even if spend little money, this will harm us in the long term. Unlike the high rental rate can ensure us a risky investment. In this issue should be considered and the place of residence, as well as the direct benefits it offers, such as hospitals, banks, schools, etc.

Operating costs that this house will have should be the lowest possible. That money will be spent on maintenance repair and care of the house should be the less possible. This may help if several of these procedures you can take yourself. The less expenses the higher net profit and therefore easier to recoup the investment.

The amount of money you have to pay for one Investment Property depends on all these factors and therefore should be carefully choosing your moves. Investment as one understands with lower risk are those relating to new houses, modern, with several facilities, comfortable accommodation and easy maintenance. This means that the price of the rent of such housing will be high and our monthly income is quite important. Another good here is that if we want we can maintain the Investment Property for 10 years and then sell it at a very considerable value, something that will not be easily achieved by an old house.

Are You Treating Your Real Estate Investing As a Business?

Although it is likely that no one will ever see it, it is essential that you create a business plan for your real estate business. You are treating your real estate investing like a business aren’t you? Just the process of putting the plan together is extremely valuable. You will be forced to ask yourself questions and come up with solutions for problems that you don’t even know you have. At the very least, it will expose some threats to your business or identify potential opportunities, so you are aware of what is around you.

Here are four reasons why you need a business plan:

Evaluating your strategy

There is no process that will teach you more about your business. When you are done with the plan, you will have a clear understanding of your SWOT (strengths, weaknesses, opportunities, and threats.) With this information, you will be able to accurately plan for success. Creating the business plan should take a fair amount of time and there are some key areas you will be focusing on. These include your product, your competition, the market and of course your numbers.

I love numbers, so going through the financial section is one of the most important pieces of the business plan in my opinion. You will want to tie in your financial goals with your plan to narrow down what your margins need to be and how many deals you need to be doing. Of course these are all projections, and a business plan is a breathing document which needs to be updated throughout the year.

Monitor performance

Several times through the year you need to run your financials and update your business plan. Read about your industry and check into your competition. Stay on top of what is going on. It is easy to over look this and get caught up in the everyday business operations, but without keeping current, you will not be able to make necessary changes to stay or become successful.

Let’s say you are really focusing on flipping properties in Thornton. Thornton becomes saturated with investors and wholesale pricing starts to increase. Prices for materials are also increasing, but you are not seeing higher resale prices. Your plan calls for $15,000 profit per property, but you are now making $5,000 or $10,000. The sooner you identify this and research other neighborhoods, the closer you will be to staying on track with your yearend projections.

Locating your target market

Most of the successful investors we work with focus their business. With real estate, it is most often focusing on location. I met with an investor yesterday that only buys houses in Washington Park. He never adds square footage, but does full renovations. He does this over and over and makes a couple hundred thousand dollars a year. This is great because he knows the area and makes offers on almost all properties that come on the market. He buys houses that no one else knows about because he markets his business in this area. He knows the market and the competition.

Other investors really focus on a type of seller and market to them. Some of my best deals were when I was marketing to probates. Direct mail to probate was a big part of my business plan. Looking at the different opportunities should be part of the business planning process so you will be forced to look for your target market.

Attract partners and investors

This is rarer than you might read about on the internet, but it is a true benefit of your business plan. I have never been asked by my banker or a vendor to supply a business plan, and I have borrowed millions of dollars. Where it really does come in handy is when you are dealing directly with individuals for funding. This could include private lenders or partners. Investors need to know how we run our business and how they are going to benefit. For this reason, we share our full business plan with them when they consider us as an investment option. This proves that we have done our research and have a solid strategy for growth.

Tips for Launching Your Real Estate Investing Career

Most investors looking to launch real estate in their investment portfolios may face a challenge on how to start the entire process and understanding the complexity involved in starting this business. Investing in Real estate is typically different from other investments such as bonds and stocks as it may look overwhelming to new investors. However, the real estate business does not have to be scary or difficult if you follow the helpful 5 tips that have been discussed below. The tips will help you in reducing risks and maximizing your returns in the long run. Real estate investing is among the best and safest wealth-building businesses in the world if carried out correctly.

• Find the best and convenient location for properties.

New investors often make a mistake by limiting their search and focusing on areas that are near their homes. You may find a Realtor to advise you on the most appropriate location for launching your investment, which in most cases might be a bit further away from your home. New investors often think that their properties need to be close to their homes in case tenants contact them with problems such as repairs. However, if the real estate property undergoes put into good quality and any necessary repairs done before the tenants move in, you will be able to find a more suitable location position for your investment.

• Start small, but go bigger as soon as possible.

It is perfectly okay to start investing in low-end and smaller properties depending on your capability. This is however not how to establish your empire. You should ensure to keep your records and as soon as your investment seems adequately stable, do not hesitate to acquire bigger properties. The larger assets have a tendency of appreciating faster which makes them more beneficial to your investment than cheaper and smaller properties.

• Be creative.

If you want to launch a long lasting real estate, creativity is among the most important aspects to consider. Your creativity may apply in marketing ideas and also investing in attractive properties which attract tenants effectively. It is recommended to do extensive research on the popular real estate patterns and you will definitely launch your real estate business successfully.

• Learn to Sacrifice.

If you are looking to start your business successfully and achieve financial freedom, it is vital to develop a habit of sacrificing some irrelevant activities. You might need to relinquish things like vacations and direct the funds toward the down payment of your investment. Sacrificing offers a great way of building up adequate initial capital for launching your real estate business.

• Find a supportive and highly recommended bank if you are looking to finance your investments.

A superb source for recommendations for a supportive bank or mortgage broker, for new investors who plan to finance their investments, includes a Realtor and other investors in the same business. They will offer you helpful advice on the bank that will finance the launch of your business effectively.

Conclusion

The above simple tips will certainly help in you in the successful launching of your real estate business. It is also important to keep in mind that putting more effort and working smart in your investment will give you quality results and greater rewards over time.

How To Stay Motivated As a Real Estate Investor

So you’ve finally decided to pursue your life-long passion of becoming a real estate investor! More importantly, you’ve educated yourself on several investment strategies (to include exit plans). Although you love what you do, you find it quite challenging to stay motivated on a day-to-day bases. On some days you even ask yourself rather or not you’ve made the right decision. Yet the lure of lucrative passive income has propelled you to take the risk.

Most if not all successful real estate business owners share similar struggles. However, to stay driven and reduce risk, practice the following tips starting today:

1. Have clearly defined investment goals upfront: visualize it, do it and be it!

2. Make a list of your “whys”. Your list should evoke some emotions. In other words, write down the reasons why you want to achieve your list of goals. Your list of “whys” will keep you motivated and unafraid of accomplishing your investment goals. Your “whys” will also help you overcome the hurdles that may stand in your way.

3. Knowledge. Know and understand the latest techniques and investment strategies. Knowledge prevents mistakes and mitigates risk. It will also give you the confidence to be able to influence others.

4. Kick the Tires. Evaluate real estate deals estate deals by talking to brokers and other investors. Fully immerse yourself by learning while doing!

5. Always be grateful. Practicing gratitude and spending some time reflecting on the things you are thankful for gives you a much better perspective and mindset.

6. Focus on the long-term plan. Focus on your long-term goals when you’re feeling unmotivated. Having problems collecting rent from tenants? Just got hit with major repairs for one of your properties? Expenses and problems will happen from time to time. Assess the situation, fix/solve them and move forward with your business.

7. Plan for how you will deal with a lack of drive. Temporary setbacks are bound to happen. You’re only human. Think of what others in more adverse situations have endured. Yet ultimately they have reached their goals, Using them as an example will push you through your most trying times.

Lastly, stay positive! Be positive and surround yourself around positive people. Positive energy will lift you up and increase your motivation and productivity. Being positive will also help you deal with the various changes in your business. This in turn will enable you handle the pressures that come with the real estate investing industry.

The Incredible Importance of Networking for the Real Estate Investor

Networking is an important skill in any business if the goal is a profitable business. The same holds true for real estate investing, at least on behalf of those who are serious about pursuing real estate investing as a business rather than a part time hobby. Either way, in all honesty, the ability to network for potential business partners, investors, and join ventures along the way can be critical to providing the type of diversity your real estate portfolio needs in order to be solid in a market that is nothing short of volatile.

With the recent collapse of the sub prime lending market, networking has become more essential than ever before for real estate investors. Networking can not only lead you to potential properties that might prove profitable but also to people who need your specific specialty or may be looking for a property you have access to. Even if you share your profits, as long as you are also sharing the workload, you can find a very favorable working environment when you join someone else in a venture such as wholesaling properties, offering lease options, or even working together on a quick flip situation (though caution and clearly defined parameters are best in any of these situations it is critical when flipping a property).

Whenever you have the opportunity to network with other real estate investors it is in your best interest to do so. Dont limit yourself to only networking with those who engage in the same sort of investing you are most comfortable with as diversity is important to all real estate portfolios and you never know when an ideal flip will come across your desk that you can pass along, while making a bit of a profit from the transaction of course (to a flipper) or a perfect buy and hold unit will catch the eye of someone who generally purchases properties with the intent of flipping. Contacts work both ways and you can all stand to profit from the eyes and ears of others, whether as a joint venture, equity sharing project, or simply acting as business partners on specific projects for quicker results and an extra set of hands and eyes on the job.

If you arent a part of a real estate investors networking group in your area, take the time to find them and join. The contacts you will make are invaluable if you intend to make real estate investing your primary business now or hope to make it your primary source of income in the future. Join as many groups as possible today (locally and within a reasonable driving distance) and see what a difference they make in the volume and scope of your real estate investing business.