Posts Tagged ‘inflation’

When I tell some of my friends that I am a real estate investor during these ‘tough’ economic times, they tell me that I am crazy. They’ll say “Tom, haven’t you seen the news? Now is a terrible time to be in real estate. The market is horrible.” Well, if I’m going to buy a suit or shoes or even a car, I’m going to want to pick it up for as much of a discount as possible. And right now, real estate is on sale! Doesn’t this make it the perfect time to get involved?

So for those of you fortunate enough to have money, the big question is what should you do with your money? The obvious answer: Do NOT put it in a bank! Why earn 2% when inflation is over 5%? The safest bet is to invest in revenue producing assets. There are many types of investments in which you may focus: gold, silver, foreign currencies, the stock market, etc… But right now, for this economy, investing in real estate is ideal for me. Why?

First, if purchased properly, you should be able to generate consistent monthly income. Can you do this with other investments? If you purchase gold bullion and give it to someone else to hold onto for 1 year, will they pay you monthly payments to hold onto it? Probably not. If you provide housing for someone for an entire year, will they pay you a monthly stipend greater than what you own to live in your property? Absolutely!

When purchasing real estate, you should always calculate if you can positively cash flow on a monthly basis. If you purchase real estate only for the equity and the market changes, you lose your equity. Add your inability to cash flow into the equation, and you have investors walking away from properties and higher foreclosure rates. Sounds like a situation many people in this economy are finding themselves in! However, if your purchase real estate for the cash flow and you lose your equity, well, you’re still receiving monthly cash flow so you can be patient and wait for the market to appreciate again.

This leads us to the second reason to invest: appreciation. Since 1968, home values have consistently appreciated at a rate of about 6.34% per year! Sure, some years have been better than others, but for the past 40+ years, homes have steadily increased in value. I think about my parent’s house in Nebraska that they bought in 1983 for about $50,000. When they sold it 20 years later, it had more than doubled in value! Ask anyone who has been living in their house for more than 20 years and they will tell you of similar increases in value.

Think about the financial advantages of purchasing a property, holding onto it for 20 years, and having the value double in that time period. Wouldn’t that investment be worthwhile? Now, imagine if you have tenants living in the property, paying your mortgage, and providing you with an extra couple hundred dollars a month while it appreciates! Isn’t that even better!

If you have a 401k and contribute to it for 20 years, the amount will grow significantly. But who is paying for your 401k while is grows in value? You are. And who is paying for your rental while it appreciates? Your tenant! Which retirement plan sounds most secure for your future, Social Security, investing in the stock market, or investing in multiple properties? It’s a no brainer!

Now to my favorite reason to invest in real estate: leverage. Let’s take a look at how you are able to take advantage of leveraging banks in growing your net worth with real estate versus investing in the stock market. Say you have $100,000 to invest and you are trying to decide between investing in the stock market or in real estate. If you invested $100,000 into the stock market, how much value would you be able to receive? Well, $100,000 worth of stock. But what if you invested $100,000 into a commercial property? How much value could you receive? In many cases, you could invest $100,000 into a $1,000,000 property and leverage a financial institution for the remaining $900,000! (Try going to a bank and telling them that you are willing to put 10% down if they will finance the remaining 90% of Berkshire Hathaway stock. They will laugh you out of the bank.) As a stock grows in value, you are receiving benefit only in that increment. But as real estate grows in value, you are benefiting at a much higher per cent.

To clarify, let’s go over an example. Let’s say both the stock you wanted to invest in and the property you want to invest in had a great year and doubled in value. How would each scenario work out?

In the stock scenario, if your $100,000 investment doubled, you would have $200,000. And to take full advantage of this windfall of funds, you would have to sell off your stock and receive a pre-tax gain of $100,000. Not bad.

In the real estate scenario, if your property value doubles, then your $100,000 investment will have earned you $2,000,000! Remember, it’s the value of the property that doubled, not your investment. And, unlike with the stock example, you wouldn’t necessarily have to sell to take advantage of your windfall. Say you decide to refinance at 70% loan to value. You would have ($2 mil x 70% minus $900,000 loan repayment and $100,000 initial investment) $400,000 profit minus fees. And is this income taxed? No! So you would be able to keep it all.

And what to do with $400,000? Well, why not invest in another commercial property worth $4 million? Now, between the 2 deals, you would have already accumulated a net worth of $6 million dollars through real estate as compared to $200,000 through the stock market!

In summary, the main reasons why investing in real estate now is better than any other type of investment is that it generates consistent, it has a history of appreciating value, great tax advantages, and you can leverage financial institutions to assist you with funding your deals.

Tom Bukacek is a successful real estate investor with properties is both Arizona and Texas. He also oversees a real estate investing group in Austin, TX with over 100 members. Tom’s main focuses are purchasing properties ‘subject to’ and multi-family. If you would like more information on how to get started in real estate investing, please visit his website at http://www.AustinRealEstateInvestingTeam.info

Author: Tom Bukacek
Article Source: EzineArticles.com
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Many investors are unsure how they should invest their money for the best return.   Joint venture investing gives above average returns and is a popular way to use your money in the relatively short term.

So where can an Investor put their money?

·        Cash account
·        Share investing
·        Property investing
·        Joint Venture investing

Putting money into a bank account to just sit there very rarely helps an investor because although they get a few % return on their money, inflation eats it away at it just as fast.

Share investing is not for the faint hearted. Share prices move up and down at a reasonably fast rate and this can be quite difficult for some investors to handle financially and emotionally.  With share investing you have no say in how the company is run on a day to day basis and there really is no form of guarantee.   The best you can really hope for is that you will get paid dividends along the way.

Property investing can be a reasonably secure investment, although not without some risk, but the returns can take quite a while to come in. Returns can be made from rental and from capital gains.   Also it can sometimes take a while to realise cash out of properties if the market is not favourable, meaning that this strategy for investing is not everybody’s first option.

Joint Venture investing means that there is some leeway in areas that do not present themselves in other forms of investing. 

With Joint Venture it is possible to:

·        have small amounts invested
·        have money invested in property but no mortgage required
·        invest money in property but on a relatively short term
·        get above average returns on your property investment
·        invest directly with the developer
·        get guarantees from the developer

Joint Venture investing is seen as a way to get maximum return on your money.   This is how investment banks earn their money.   They take the money from the investor and pay them low interest rates for their investment, then use the money in the investment market lending to property developers at a much higher rate. 

By being the investor putting money up for property development through Joint Ventures, the investor can possibly even make 100% return on their money. It would be quite feasible to expect to receive at least in the vicinity of 25% return on a property development investment.

If you researched how the wealthy make their money and keep on making money, you will find that Joint Venture investment is one of their most sought after investment strategies. 

People favour Joint Venture investments mainly for two reasons:

1. As mentioned, the higher return
2. Being in a Joint Venture is virtually a passive investment

Most people who have $5,000 to $10,000 to invest do not have the skill, the expertise or the time to be actively involved. By putting amounts of this size into Joint Venture, good returns can be made and treated as a passive investment.

To download further information on property investment and related fields please go to http://www.vivaproperties.com.au. We are a property investment educator/developer and run seminars on Property Investment, Joint Ventures and Superannuation strategies.

Author: Greg Rips
Article Source: EzineArticles.com
Provided by: PCB Prototype & Manufacturing

Home among other investments provides superior returns because of its multiple income streams. The investor can create source of income that would last over time. The following are the rated top profits which made Property investing an attractive investment to investors and clients alike:

Property Value Appreciation

Normally property value appreciates overtime, benefiting the investor by providing better chances of reinvesting on properties with higher value. This is influenced by inflation which increases value on sales and an equity line for credit that can be utilized in another form of investment. Appreciation wouldn’t only escalate the value of an investment but it also generates additional investment to earn from.   

Mortgage and Stocks

Not everyone engaging in Real Estate investing is an active investor. Some would engage passively. In cases like these the investor would most likely place his or her investments in the hands of the stock market forming equities of many huge homebuilders. On the other hand, these investors can choose discounted notes for conversion of mortgage. 

Inflation of Prices

The general economy has the most unpredictable status. It tends to go up really high but seldom goes down really low. Nowadays, inflation has become a continuous process and a majority of the consumers would consider to be a nightmare. But inflation is an investor’s best friend. When prices go up, it is then assumed that the price of the investment properties goes up with it. Even if there are certain areas not technically affected by the appreciation, values can increase significantly through time just by the terms of inflation. During times of inflation, if the cost of construction materials and labor for building a structure rises, results will affect identical properties big time. Therefore due to recreation costs, the value of a property increases tremendously.

Market Value Depreciation

For several reasons, there would be properties that are sold due to immediate needs of the seller to gain the equity of their property. Due to pressure, some would agree to a price significantly lower than its original market value. There are properties that are in foreclosure wherein the lenders will concur with a market rate so as to clear any history in their books and avoid further expense in marketing. When you have found properties like these, take it as an opportunity. Immediately enter the equity position which serves as your profit within the given transaction.

Have the Right to Increase

Owning a property that has lesser or zero disadvantage and having more advantage reserves the owner the right to increase its value. One typical example is when the property is located in an accessible and profitable area. You can increase the price of this property type most especially if it is a commercially good location. Another site gaining much appreciation is the one located in areas where the views and environment are welcoming, calming and can provide some sort of relaxing enjoyment.

To further improve the site, one can renovate the structure through the removal of hindrances or bad aspects of the environment. Add a deck and patio facing the view or add bigger windows; a few ways to add to the total appearance and rate of the property.

Property Conversion

One of the best examples of property conversion connected with Real Estate investing is purchasing an apartment having a low selling price, remodeling majority of the structure, and conveniently converting it into condominiums.

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