Posts Tagged ‘cash flow’

In this article, we’ll consider why you should start real estate investing now rather than later and then follow it up with a few suggestions to help you get started.

The proverbial saying “time is money” is true in real estate investing. Due to a phenomenon known as compounding, money grows faster and faster as time goes by. So the sooner you put your money to work in a real estate investment, over time the more money you will accumulate.

Say, for example, that you start investing $1,000 a year into real estate for the next forty years. At a 9% annual rate of return, your $40,000 cash investment (thanks to compounding) will grow to over $369,000. Whereas, if you wait ten years before you make that investment, that same amount only grows to about $150,000.

In the same way, the longer you wait to get started real estate investing, the less time you have to combine the factors of time and compounding interest, and hence (assuming all things equal) the less wealth you can expect to accumulate as a result.

Say your goal is to retire at age sixty-five. Because of compounding, you stand a far better chance of achieving more wealth by retirement if you start investing at age twenty-five rather then at thirty-five, or forty-five, and so on.

How to Get Started Real Estate Investing

1. Develop a plan – How much can you invest comfortably? Are you expecting cash flow or merely looking to make your money when the property is resold? How long do you plan to own the property? What amount of your own effort can you afford to contribute? What amount of wealth do you plan to accumulate, and by when?
2. Acquaint yourself with the local rental market – Read the local newspapers and see what types of income property have the highest demand for tenants. If there are tons of classifieds seeking apartment tenants, perhaps retail space is more in demand, and vice versa. In other words, learn what product would be best for you to invest in.
3. Acquaint yourself with the rates of return – At the very least understand the difference between cash and cash return, return on equity, and cap rate. Whereas cash on cash might show what your cash investment might achieve in one year, and return on equity over future years, cap rate helps you choose a property at a fair market value.
4. Invest in real estate investment software – It is never a good idea to rely on someone else’s numbers. It’s your money. Always run your own numbers on potential investment opportunities. Having the ability to create your own rental property analysis gives you more control about how the cash flow numbers are presented and a better understanding about a property’s profitability.
5. Create a relationship with a real estate professional that knows the local real estate market and understands rental property. A qualified real estate professional acquainted with your market can be a real plus. It will not advance your investment objectives to spend time with the agent of the year unless that person knows about investment property and is adequately prepared to help you correctly procure it.
6. Avoid buying into real estate investing “trade secrets”. Tons of real estate investing gurus out there repackage and sell the exact same material as the next guru. The sizzle in the business of real estate investing, however, is about owning a piece of ground that, if unduly researched and purchased sensibly by impartial numbers, with careful management, will likely be more valuable tomorrow than it is today.

How Much Do You Need to Get Started?

There’s no set amount to start real estate investing. You could start out very small and then as you begin to earn more, start contributing more. Start perhaps with 2% of your income and then add a percentage point more each year to your contribution.

The important thing is to start real estate investing now, while “time is on your side” and you can in fact take advantage of a favorable real estate market and compounding interest over the passage of time to achieve your retirement goal.

Here’s to your real estate investing success.

About the Author

James Kobzeff is the developer of ProAPOD – superior real estate investment software solutions since 2000. Why not work with rental property today? Discover how to create cash flow, rates of return, and profitability analysis presentations in minutes! Learn more at => http://www.proapod.com

Author: James Kobzeff
Article Source: EzineArticles.com
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I still remember buying my first apartment. I didn’t know anything about the real estate market, or what I should be on the lookout for. The entire purchase decision was based on my emotions towards the apartment, and the surrounding area. However, as timed passed on and I began to learn more about the real estate market, I quickly discovered that the purchase was not as good as it had at first seemed.

Buying property, especially when it is your first apartment or house, can be complex and time consuming. Many people see it as an important investment because they define it as an investment for a lifetime. After all, you will most likely live in it. That was what I also thought back then. However, as timed went on, I learned that buying property can also be a financial investment. It all depends on what you are buying the property for: To live in it, or to generate a passive cash flow.

When buying a house or an apartment, avoid basing your decision solely on the same standard I did. Namely looks. It is important to consider other factors as well. For instance financial risks and benefits, the market, cash flow and tax laws, to name a few. Financial factors are important and must always be considered. You should also take a closer look at both the pluming and electric system. After all, repainting the apartment will only costs a few hundred dollars, while changing the entire electric system can cost you more than $30.000. Don’t become a victim to these mistakes. You will regret it.

The decision to buy a property should only be done after a due consideration of all financial aspects. There are two main financial analyses that you need to conduct, which will help you decide on whether or not to buy a house or an apartment of your own.

Buy Vs Rent
A good way to start the decision making process is to conduct a buy Vs rent analysis. It is a simple financial tool called the Net Present Value (NPV), which you need to use to find, whether renting or buying, is cheaper. The NPV of the house is calculated and equated to monthly figures, which can then be compared with the rentals. There are many NPV calculators you can use for free on the Internet. Just type “Net Present Value Calculator” into your search engine. Except for emotional and social reasons, if you analysis tells you not a buy a house, it may not be worth taking all the trouble to buy one after all.

Financing the purchase
Have you saved up enough money for the down payment of the property? Can you pay the monthly installments for the mortgage? These are questions you need to answer before you decide to buy. Even if you have decided on a budget, do a recheck and add all other expenses that might have been missed. You need to account for maintenance and property tax as well. Do the analysis systematically and on paper so that you get to see all the figures. Only buy if you are convinced that you can pay off the mortgages without defaulting.

Buying your first house or apartment is a dream comes true for most people. Some people see it as an investment in their lifestyle, while others see it as a financial investment. No matter your reason, understanding both the financial and non-financial parameters is vital. It is up to you whether you choose to invest in your current lifestyle, or the one you want for yourself in the future. With that being said, you should now be able to avoid the mistakes I did, and embark on a real estate adventure of your own.

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Author: Oyvind Eriksen
Article Source: EzineArticles.com
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Investing in trust deeds is one of the best ways to earn a very high return on your investment, while at the same time making sure your investment is safe, secured by the value of the property, all while receiving a monthly check based upon the amount of your investment.

Smart investors pad their retirement accounts with Trust deed investments because they normally earn 10%-15% annually on their investment!

So, what is trust deed investing? Good question.

Trust Deed investing is the loaning of money with real estate as collateral. In California, most loans against Real Estate are called “Trust Deeds,” after the name of the legal instrument used to pledge their security. With expert guidance from Nnew Haven Financial, anyone can successfully invest in trust deeds. This contrasts with most other investments where extensive study and years of experience may be necessary before you can invest with confidence. Trust Deeds are safer than most other investments of comparable yield because the risks are identifiable, as well as the procedures necessary to counter them. Many investors, especially retired people, also enjoy the relatively minor effort needed to manage the investment once their money is in place.

The typical trust deed investor is a person looking for a competitive return on their investment. The interest rate the borrower pays is generally higher than the borrower would pay at a bank. The investor in turn, receives a higher return on his investment. Additionally, the money you loan is secured by the borrowers’ equity in their real estate. The security, the good return, plus the monthly cash flow, make trust deeds and excellent investment vehicle.

At New Haven Financial, we receive many calls everyday from borrowers, realtors and mortgage professionals who are looking for private money for a real estate transaction. It is our job to fund loans with our investors investments, then after the loan is funded, we collect the payment each month, and send our investors a check every month.

What is so special about our trust deed investments is that we normally only provide loans in the Los Angeles area. That way, before we ever lend our investors money, we physically see the property, interview the borrowers, and have a professional appraisal completed by a licensed real estate appraiser.

Our job is two-fold, to make sure we give our borrowers a good loan at a rate that they can reliably re-pay, and also make sure our investors receive a high return on their investment is the safest way possible.

What makes trust deed investing with New Haven Financial safe?

The basic premise of safe trust investing is to make sure that the property(collateral) is sufficient in case the borrower does not make their payment, and we have to repossess the property. Although this is rare, it does happen. However, we do have a healthy safety net, in that we only lend on low loan to value properties. Loan to value is simply the loan amount divided into the value of the property. Here is an example: a client calls and needs a loan for $100,000 on a property values at $300,000. In this scenario, the loan to value is 30%. This means that if the borrower were to default on their payment, there would be approximately $200,000 left over. Is this safe? You bet it’s safe. That is what makes trust deed investing so attractive to both experienced investors and new investors as well.

Donald Timms specializes in residential and commercial private money loans and traditional commercial loan funding. Donald can be reached at (818)222-5222 extension 122 or (805)832-0572. His email is into@privatemoneybankers.com and his website in located at http://www.privatemoneybankers.com

Author: Donald Glen Timms
Article Source: EzineArticles.com
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The modified internal rate of return is a financial calculation which is used by investors to determine the possible success and attractiveness of an investment choice. The modified internal rate of return assumes that cash-flow generated is reinvested into the business. While the modified internal rate of return has its value, it also has some limitations.

The Internal Rate of Return (IRR)

The internal rate of return, separate from the “modified” version, has long been used to determine whether or not it is a good idea to make a long term investment. The internal rate of return (IRR) has historically been used by corporations to calculate the ability of an investment to perform over time. The IRR is essentially the amount of income which comes from the corporation’s invested assets and funds.

The goal of any business is to have its IRR be larger than any other IRR which could be realized by another investment option. For any investment you are considering, you will want to calculate the IRR and compare that IRR to the returns you could realize in other investments. The goal in investing is to have the highest IRR as possible to make sure you at least hit the break-even point in your investments.

The Modified Rate of Return (MIRR)

An enhancement to the traditional IRR calculation is the MIRR, the modified internal rate of return. This is a bit more of a complex equation which is used to gauge how effective an investment may really be. The MIRR is used to look at the possible rate of return on your investment after you have re-invested your business profits over time. By calculating the MIRR, rather than just the IRR, you can easily get a better picture of how your investment can be since the MIRR takes into account the reinvestment of profits and not just your initial investment.

When you are looking at commercial property investment, you will want to use the MIRR because it will not mislead you like the IRR can. The MIRR uses much more accurate data than the IRR and this makes it much more reliable to use. The formula for the MIRR uses both positive and negative values, the investment finance rate, the net present value, and also the re-investment rate in its calculation.

In order for you to calculate the IRR and MIRR of your potential investment property deals you are well advised to consult a financial professional. However, if you choose to do the calculations on your own you can easily find calculators on the internet or can use spreadsheet software such as Microsoft Excel.

By understanding how the IRR and the MIRR differ, you can learn to better judge your investments for their longevity and success. Knowing just the IRR is of value, but because the MIRR uses more accurate data, the MIRR will be your best guide to keeping your investments safe and as profitable as possible.

The modified internal rate of return [http://www.kiscl.com/whatsnew_sitemap.php] is used to determine the possible success of an investment choice. KISCL, http://www.kiscl.com has all of the tools and resources of experienced real estate professionals to help you succeed in the commercial market.

Author: Andrew Stratton
Article Source: EzineArticles.com
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Let’s say I need money and I want to sell my real estate notes. There are several advantages to cashing in on my debt contract – I can avoid inflation, access my funds anytime, and get rid of the hassle of monthly collections. When you need extra cash flow, selling debt instruments is far more convenient than taking out a loan.

The first step in selling any debt note is finding a note buyer. The note buyer will assess the note based on the balance, interest rate, the payer’s stability, and other factors that contribute to the risk it poses. Because the buyer takes on the risk of the agreement, you can’t expect to get the full value of the note. For example, when I sell my real estate note worth $80,000, I might get about $75,000 in cash. The $5,000 is the cost of the risk I transfer to the buyer – the risk of inflation, of rising interest rates, or the payor defaulting or going bankrupt.

Most people simply sell the whole contract, but it’s also possible to sell just some of the payments. This can be a good option if you don’t need a large lump sum, or if you want to keep getting monthly payments. Or if I like the current interest rate on the contract, I can sell my real estate note partially and keep earning the same interest.
Another alternative is to sell my real estate notes in full, get part of the lump sum, and receive the rest in monthly installments. There are many other ways to structure the sale, and your note buyer should discuss all of them with you.

There are lots of note buyers willing to buy out contracts, but they don’t all offer the same rates. I wouldn’t sell my real estate notes to the first buyer who comes along; it’s best to consult different buyers and compare their quotes before settling on a deal. Most buyers will give you a quote for free, although they may charge for the appraisal and title policy. If they charge any other fees, just find another buyer – chances are they’re not stable enough to offer free consultation services.

There should also be no closing costs, points, or other associated fees throughout the transaction. Any fees involved are supposed to be paid at the time I sell my real estate note, and not midway or after the deal.

Also watch out for the “bait and switch” buyers who force you into a cheap deal after you’ve sold the contract. Basically, I sell my real estate notes for a decent price, but the buyer lowers the price later on because my property buyer allegedly had low credit. This is a highly unethical practice – the buyer is supposed to review your payor’s credit upfront.

Lastly, make sure to document the whole deal. It’s very risky to sell my real estate notes without a written purchase agreement to back it up. Put down in writing every detail of the sale, and be sure to understand all the terms and conditions.

Selling your real estate contract is a great way to raise money without the hassle of bank loans. As long as you find a good buyer, cashing in can prove much more profitable than waiting for monthly payments. Besides, you can do a lot more with cash than you can with a contract.

Jamie has been working in the finance industry for many years and is a contributing editor to http://www.selling-your-note.com. If you’re wondering how to sell my real estate note you can find out on our site.

Author: Jamie Sherman
Article Source: EzineArticles.com
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How does real estate investing work?

Simply buying real estate is not real estate investing.

Strategically sorting through many properties for sale and purchasing that one in many that meets your goals. Every real estate transaction should have one or more of the following to be called real estate investing, rather than real estate speculation:

• Income
• Growth
• Tax Advantages
• Leverage

Here are 4 simple tips to keep in mind as you begin to educate yourself in the process of real estate investing:

1. Only invest in properties that deliver Instant Equity or strong cash flow. Preferably the property you choose to invest in will deliver both! “Instant Equity” occurs when you change the use of a property, such as when you buy a distressed property and rehab it to excellent condition. Cash flow is generated from leasing your property to others which generates a stream of income.
2. Learn to use OPM – Most investments usually require you to invest all of your own money for the return. In real estate investing, you can leverage other people’s money to invest in real estate. If you invest $100,000 of your own money in a $100,000 property and get a $10,000 annual return, you’ve gotten a ROI (return on your investment) of 10% – However, on the same $100,000, if you invest only $20,000 (20%) of your own money and get a loan for the rest ($80,000) and you generate a $5,000 annual return, you’ve gotten a 25% return on your original investment of $20,000.
3. Begin your real estate investing with clear investment goals. Remember, just buying property isn’t investment – without clear goals it could be more speculation and that is too risky for most savvy investors. You or your team need to have clear goals to make the investment a successful one.
4. This brings me to my final tip, which is, “Experience Pays” To be successful in real estate investing or nearly any other investment, you’ll want to rely on either your own experience or the experience of others. If you don’t have the knowledge or experience, you can carefully seek the help of others who do and leverage their experience for your own personal gain.

If you’re tired of losing money or the very small gains from traditional investments like stocks, bonds, mutual funds, CD’s, etc. If you’d like to learn more about the amazing benefits of investing in real estate to acheive financial independence, but you might not have the time, money, knowledge, resources, and/or the contacts needed to be successful.

If you’re an investor wanting to learn more about low risk, high reward wealth building programs visit Mark Thompson’s Investor U. Join the Investor’s List to build wealth and financial security through safe, low risk, high return real estate investments.

Author: Mark T Thompson
Article Source: EzineArticles.com
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