Home Decoration & Real Estate

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Too many real estate investors fail to achieve their dreams because they fail to properly launch their investing careers or because they reach a crossroads and don’t know which way to turn. Confused about the next step to take, they spin their wheels, do nothing, and eventually opt to walk away from real estate completely and go back to a life of mediocrity. To prevent this from happening to you, follow this simple seven step roadmap to success.

Step One: Education – The right education is critical to your success. Before getting started you should begin learning about a variety of creative techniques. You don’t want to spend so much time preparing to invest that you never launch your investing career, but you don’t want to go off half-cocked and fire at everything that moves either. Learn enough to be able to write an intelligent offer and then make it happen. As your career advances, continue learning as you go along. There’s a ton of accumulated investing knowledge available, so take advantage of it. Keep in mind, too, that education doesn’t have to be a $2,000-$3,000 guru-sponsored super course. You can sometimes learn more from a $20 book, but never quit learning or you will quit growing.

Step Two: Planning – What steps are you taking to reach your goals? Are you sitting around with a pad of paper and a pen planning how you’ll spend your real estate profits or are you taking a series of deliberate steps to all but guarantee your success? How many calls are you going to make today, this week, or this month? How many properties will you look at? How many offers will you write? Real estate is a numbers game, so you need to plan your numbers and then you need to follow up by analyzing your activity. If you don’t keep score you won’t know if you’re winning or losing. It all starts with a plan and ends in the winner’s circle or the employment office. Planning – or failing to plan – will determine where you’ll be in a year and how much money you’ll have.

Step Three: Team Building – Major league ball teams don’t wait until the season starts to begin looking for members of their team. Their team-building effort starts months ahead of opening day. As a real estate investor you need a team of professionals in your corner. Start today with a small title or escrow company and a mortgage company. Make sure they understand creative real estate and have experience. If you’re not working with a mentor familiar with creative investing, you need to find one. He or she can shave years off your learning curve by helping you to avoid some of the stupid and costly mistakes they made.

Step Four: Circle of Influence – Who are you listening to? Your brother whose idea of creative real estate investing is buying a time share in Arkansas? If your circle of influence – people who give you advice – don’t know and understand real estate investing, they’ll constantly be taking aim on your hopes and dreams because they don’t understand the concept or because they don’t want your success to shine a spotlight on their mediocrity. Tap into as many creative – and successful – real estate investors as you can at your local REIA meetings.

Step Five: The Right Sellers – Wasting time trying to browbeat somebody into accepting your creative offer is unproductive and demoralizing. Make sure that the sellers you’re dealing with are highly motivated to sell and good things will happen. Don’t be afraid to walk away from the wrong deal even if the price is right. Know your ideal situation and then capitalize on it when the opportunity presents itself.

Step Six: Hobby/Business? – Is real estate investing going to be your pathway to prosperity? While there are plenty of opportunities for you to have fun, never lose sight of the fact that you’re playing in a very competitive sandbox. You have something going for you, though. A lot of investors lack the education, training, and mindset to prosper. If you’re one of them, you should save your money and take up stamp collecting or join the rock club. If, however, you’re serious about success and give this business the effort it deserves, your future is a blank check – and you’re holding the pen.

Step Seven: Stick with It – Real estate investing success won’t necessarily come overnight. That’s not to say that you won’t become an overnight sensation, but be prepared for the possibility that it might take 3-5 years to achieve a level of success that inspires you to throw all of your time and energy into enriching yourself. Real estate investing is easy, but it’s not simple. It takes work, effort, and a willingness to keep plodding ahead even when your big payday is years away – instead of mere days.

By following this seven step action plan you can set your sights on reaching all of your personal and financial dreams. Real estate investing is one of the most lucrative careers in the world, but you’ll have to dedicate yourself to your success. How bad do you want it?

Now go get it!

Sunny Miami Florida is without a doubt one of the hottest real estate markets in the world.  Over the years, Miami has noticed a lot of changes in it’s real estate market.  Miami Florida has always been known for it’s pristine beaches and activities, making it perfect for a vacation home or a permanent home for anyone wanting to live close to one of the best cities in the world.

In the past, Southern Florida was known to be a realtor’s dream of a real estate market with extremely explosive growth potential.  During the beginning of the year 2000, Florida noticed some high rises in real estate.  In most areas, including Sunny Isle Beach, the prices of real estate went up as much as 250% in some areas.  This was a drastic change in price, making real estate in Florida very hard to afford.

This change in price let the world know that Florida was very sought after for real estate.  Although the prices were very high, this also changed the entire economic structure throughout Florida, resulting in more businesses, work opportunities, and a lot more income.  Even though it brought more opportunities, the economic growth also helped to make Florida a very expensive city to reside in.

Miami Florida is the second largest city in the state, making it a great choice for real estate.  These days, the homes here aren’t very expensive.  If you are interested in renting a home or apartment here, you may find it to be moderate to high priced.  Miami has long been known for sunshine and fun, which is one of the reasons why so many people decide to purchase real estate there.

Although the past has noticed a lot of interest in real estate for Miami, the future will always be in question.  Homes and housing units will always be built here, although real estate agents have found it increasingly difficult to sell homes.  Even though some homes will sell a lot faster than others, there are some homes that remain on the market for months and months at a time.

As you may have guessed, Miami Florida has noticed a bit of a drop in real estate price and transactions over the years.  Although past years have noticed Miami real estate to skyrocket in both price and appeal, the future makes many wonder.  A lot of areas here are harder to sell now days, with many sellers having to lower their prices just to make a sell.

In the future, Miami real estate will continue to be popular, although the trend of high and low will always be there.  Miami is still one of the best cities in the world to live in, no matter how much the real estate trend fluctuates.

There’s a growing impression that it’s not a good idea to put in some money in real estate at the moment. What happens is people read the newspapers or turn on the television and they get all these numbers, about how foreclosure rates have risen and how property values continue to plummet all around the country. And so it’s very easy for people to think that the whole country is losing value but it’s really not at all.

One thing to keep in mind is that these national averages and percentages fail to accurately depict real life market situations. One of my fundamental laws of real estate is that it’s local, not global. Case in point, the latest foreclosure market report from RealtyTrac ® shows that 1 in every 416 U.S. households were foreclosed. That number is far from encouraging but then again, it does not show the great degree of variance in between local markets. California reported a rather dismal foreclosure rate of 1 in 130. Nevada had it even worse at 1 in very 91. On the other hand, Texas only had 1 in 849. That’s a markedly huge difference.

Astute investors understand that real estate trends will always be highly localized and they are able to make this work in their favor. One of the key things is defining which investment strategy to employ and then, selecting a suitable market for that. For instance, if they employ a long term buy and hold strategy, they go into a robust market with very little fluctuations and shows a steady rate of appreciation over time, sufficiently protecting themselves from unpredictable liquidity events. Ideally, they also get their property to generate passive monthly cash flow in between the time that they purchase it and the time that they decide to sell it.

What more people need to see is that there are very real opportunities in the market right now and they should not be discouraged by these supposed national market trends. By focusing instead on local trends, they’d be surprised to find that now is in fact one of the best times to invest in real estate. For one thing, there’s an abundance of inventory and it’s quite possible to find some really, really good deals. Furthermore, like I mentioned in my last post, lenders would likely be more inclined to lend now than they might be in a few months. If certain changes in policy do occur, then these financial institutions may be discouraged to lend as much. As things are, anyone thinking of making an investment in real estate would be smart to do so as soon as possible.

If you’ve been thinking about beginning real estate investing for awhile, but haven’t made any actionable steps toward making the first start, you’re not alone.

It can seem daunting at first, but try and learn from others. Joining a real estate investment club is a good idea. You can find plenty by searching the internet.

There are many people who would like to get started in real estate investing but keep putting it off for one reason or another. Some people are intimidated by the thought of getting involved with something as obscure as real estate.

Most people only purchase one house during their entire lifetime and even this is being generous. There are some people who never purchase real estate. It is likely that this is the kind of thinking that causes you to procrastinate beginning real estate investing.

If you want to make progress towards your goal of beginning real estate investing, you must first put aside everything that is hindering you from making the first step.

The first thing you need to do is figure out what has been keeping you from beginning real estate investing. Once you know this underlying reason, then you can begin taking steps to become more comfortable with beginning real estate investing. There are some obstacles that are common among new investors.

Lack of training and understanding is one thing that might be keeping you from beginning real estate investing. If you feel like you don’t understand the world of real estate investing well enough to make a start, then you can take steps to familiarize yourself with the components you do not understand.

There are a number of resources available to provide you with the information you need for beginning real estate investing. You can purchase books, use the internet, or attend a training event to get more information about real estate investing.

Another reason that many people are afraid to take the first step in beginning real estate investing is because they feel they do not have the cash necessary to get started. One thing that you should understand before beginning real estate investing is that there are many ways you can get started in real estate investing without having any money.

In fact, many experienced investors will tell you that you should never have to put any of your money into a deal. There are many creative real estate investing techniques you can use so you never have to come up with cash yourself. Conduct research on some of these techniques to learn more.

One way of beginning real estate investing without much risk is to first work as a birddog. Essentially, a birddog is someone who informs other real estate investors about investing deals. The investor then pays the birddog a referral fee once the deal has closed. Being a birddog gives you experience with locating investing deals. Once you are comfortable with locating deals, then you can begin closing the deal yourself.

Beginning real estate investing is not as easy as it first may seem. There are a lot of details that make many new investors weary of getting involved. If you first figure out the aspects of investing that cause you to be fearful, then work on settling those issues, it will make beginning real estate investing easier.

Real estate investment get-rich-quick methods upset me for a couple of reasons. They generally assume that you are going to self-manage the property yet ignore your cost of time to manage. Moreover, they promote “no money down” methods yet fail to warn you about the risks of high leverage. Besides, I find it difficult to trust anyone claiming to have found a goldmine when they anxiously peddle a map so it can be found. If they really discovered the way to real estate investment riches, why would they share it?

Actually, there is no secret way to attain real estate investing success.

In real life, you must work hard with good research and a commitment to a sound and systematic analysis. Pathways leading from get-rich-quick seminars are littered with disappointment; the key to successful investing, however, is to take as much time as necessary for proper preparation. Time is on the side of the prudent real estate investor.

In this article, we are seeking to help you better understand several nuances associated with real estate investing. We would like to discuss the importance of building a sound investment plan with meaningful goals and then cover the formulas of four popular financial analysis models used regularly in real estate investing.

Build a Sound Investment Plan

Having a plan with stated goals is one of the most important foundations of successful investing. However, it’s not about having lofty intentions and then declaring, “I want to be worth twenty million dollars one day.” There’s nothing wrong with desiring better things in life, the problem is that simply declaring something doesn’t bring you any closer to achieving it. The idea is to develop a general plan with stated goals and a method on how to get there.

Goals Must be Meaningful

Goals are the shortcuts to your desired destinations. Goals are not essential to life, many people do just fine without any kind of goal at all, but goals are essential to successful real estate investing. For a goal to work for you, however, it must be attainable, measurable, tied to a timetable, and clearly defined.

Moreover, divide long-range goals (say further out than one year) into intermediate goals, and your investment plan into subsections such as “cash flow requirements,” “net worth projections,” “tax shelter benefits required,” “cash withdrawal from plan,” and so on.

Start here: How much cash do you have available to invest comfortably? What length of time do you plan to stay invested? How much of your own effort do you plan to contribute?

Define a general plan: You plan to develop or own only the highest quality properties in prestige locations. You plan to own the largest market share of office buildings under 12,000 square feet in your local market. You plan to maximize your tax benefits on purchases and use tax-deferred exchanges and installment sales when available.

Define a detailed plan: How much cash do you want to collect each year beginning in the 10th year? What net worth do you want to attain by investing in rental properties after the 15th year? You plan on withdrawing $8,000 in three years to take your family on a cruise, or perhaps to generate $20,000 by the 4th year to buy a second car. And so on.

The idea is to create a target and then monitor your progress continually against that target to insure that you’re on the right course. A written plan with stated goals that projects where you’re headed and then reviewed regularly is critical to successful investing.

Financial Analysis Models

Okay, let’s switch gears and summarize four very popular investment value measures used regularly by investors and real estate analysts.

1) Cash on Cash Return – Cash on cash measures the initial profitability of a rental property. The higher the better, and typically a first-year cash on cash return ranges from about 4% to 10%.

Formula: Cash on Cash = Before Tax Cash Flow / Cash Equity (Initial Investment)

2) Gross Rent Multiplier – Gross rent multiplier measures the ratio between annual gross rental income and sale price. Think of it as an indication of the number of years it takes the annual rental income to equal the price, so the lower the better. It is good for simple comparisons to other rental property opportunities but insufficient as a stand-alone number.

Formula: Gross Rent Multiplier = Purchase Price / Gross Rent

3) Capitalization Rate – Capitalization Rate (cap rate) is essentially a return on asset indicator of how much debt an income property can carry. The higher the return rate, the more debt a property can support, and hence the better the investment opportunity for the real estate investor. Sellers of income property, of course, prefer to sell at lower cap rates. Local markets dictate capitalization rate (there is no one-size-fits-all) but they typically run from about 5% to 12%

Formula: Capitalization Rate = Net Operating Income / Purchase Price or Value

4) Internal Rate of Return – The IRR model essentially calculates the average discount rate that equates all future returns over the projected holding period back to the present value of the initial equity investment. It’s the most frequently used measurement of projected holding period overall returns because IRR delivers in one number an investment return that integrates rental growth rates and property value appreciation. IRR should be used as a comparison to the real estate investor’s required rate of return for making capital allocation and initial investment decisions. IRR can be computed for before or after tax cash flows.

Formula: To compute IRR you must use Excel or a qualified real estate investment software program.