Investing in real estate

Gone are the days when buying real estate meant you were purchasing a place for you and your family to live.  Today, one of the most popular ways of investing involves the purchasing of commercial or residential property in order to generate a better monthly cash flow and possibly save towards retirement.  Granted, they will encounter increased personal income tax implications, but there are tax deduction benefits to help offset that.  Besides that, real estate has been a consistent revenue generator for centuries now.

Suggestions for earning money with real estate

We listed our suggestions for making money through the purchase of real estate properties below in the hopes that if you are financially able to pursue one of these, you may realize some sizeable gains on that investment in the near to distant future:

Consider investing in rental properties – if you have the financial means and the ability to purchase and maintain a rental property, you can generate an excellent monthly cash flow and be building equity in that property that you can apply to your retirement years.  On the other, if you have the financial means to afford a property manager, which will make things less stressful for you in the long run.

Become a part of a property investment group – these function similar to the way in which a smaller mutual fund works.  You and several other investors are pooling your money in order to invest in potentially profitable properties instead of bonds, money-market securities, or stocks.  As with mutual funds, you might want to consider hiring a fund manager for this.  Additionally, you can include constructing new properties in this method.

Trading real estate properties – this is probably the most risky and wilder side of investing in property.  This is a whole different breed of animal compared to investing as a landlord in rental properties because you will be more like a stock market day-trader rather than a real estate investor.  Properties are purchased in the hopes of turning a quick profit on their investments.  Unfortunately, this carries a high risk element with it as the potential for loss is there as well as the potential for sizeable gain.

“Flipping” homes – this doesn’t mean turning the home upside down as the name would imply.  It is the art of purchasing a home, sinking some minor capital into its refurbishing, and then selling it quickly.  Most “flippers” try to accomplish this within a 4-6 week period.

Make Money with Real Estate Property

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A brief word about investing in rental properties

Although it is easy to understand rental property factors from a tenant’s perspective, it’s a totally different story when you are considering investing in this type of real estate.  Where many investors are concerned, investing in any type of property has always been viewed as a viable long-term investment as well as being a great avenue for diversification of your investment portfolio.

In the 26-year period, real estate investments realized an average annual return of nearly 9%.  Additionally, during that time frame, commercial real estate investments realized a return of 9.5%.  Despite the fact that average annual returns with the stock market were over 13% during that same period of time, annual returns on real estate have remained steady over the course of time.

How to invest in rental properties

The following is a list of helpful suggestions to follow if you are a beginner at investing in rental properties:

Consider the type of rental property that you want to invest in – there are several types of rental properties to research.  These include:

• commercial properties
• multi-family dwellings
• single-family units
• vacation homes

Investigate your local area first – it’s always advisable to stay close to home whenever you are investing in rental properties since they are more easily managed.

Compare prices – research what current market trends are doing and compare the pricing on similar properties by contacting real estate agents in your local area.

Estimate what the potential annual income will be – this is the step to take after performing the prior one as it will give you an idea as to what your annual return on that rental property will be.

Determine potential losses when considering cash flow – expenses that you’ll want to consider include:

• cost of repairs
• insurance payments
• maintenance fees
• your monthly mortgage payment

Speak to an attorney or your tax person – investing in rental properties does carry certain legal and tax consequences that you need to be aware of.

Have your attorney or real estate agent review your agreement and/or contract – make sure this is done prior to submitting a bid or offer on the rental property.

Once you have taken the pricing on similar properties into consideration, submit your offer – make sure that you compare those prices a couple of additional times.

Figure out if you want a property manager – remember that this adds to your monthly expenses so you will want to decide whether or not you want to tackle this responsibility by yourself or hire a qualified individual to do the managing for you.

Attending Real Estate Investing Seminars

As you probably realized, investing in real estate is not a walk in the park, far from it. Actually, if you’re planning to be part of the select group of people making money in real estate, you have to understand that the amount of success and profits is directly proportional to the amount of knowledge you have. Now let’s be clear: said knowledge will not guarantee your success, but it will go a long ways towards increasing your chances at being successful.

Don’t assume that real estate is one of those ventures where you can learn “on the job”. There are big sums of money in play, and you don’t want to put that in jeopardy. Attending a real estate seminar can help you learn critical information on investments and related issues. Another aspect that’s often understimated is the opportunity to network with fellow investors in your area. They have the experience and developing business relationships with them can turn out to be extremely profitable.

When it comes to choosing the right real estate investing seminar to hone your skills, you should stay away from those two extremes: too expensive and too cheap. As one website put it best, “Expensive seminars may not deliver the quality they promise. Free seminars may be sales pitches in disguise.”

Your sweet spot will be real estate investing seminars that are reasonably priced, but not overly expensive. The money you spend should get you in a class that’s not too large, so you can still get some level of individual attention; your speaker will more likely be more of an expert on the topic, and with a reputable company, you’ll most likely be covered by a refund policy. These are the main things you need to find in a good real estate investing seminar.

Investing in Rental Properties for Beginners | Real Estate Investing Seminars

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Definition of mortgage-backed securities

A mortgage-backed security or MBS as they are usually referred to is a security backed by assets or a debt obligation that signifies a claim against the cash flow of a mortgage loan.  It is typically a claim against residential property, hence the terminology mortgage-backed.  Interestingly enough, very few individuals understand how mortgage rates are established.  Granted, interest rates with mortgages are influenced by a number of different things, but basically, it all comes down to the MBS or mortgage-backed security.

Categories and variations of mortgage-backed securities

Mortgage-backed securities are typically divided into sub-categories or subtypes as they are called.  These include the following subtypes:

• collateralized mortgage obligations
• commercial mortgage-backed securities
• residential mortgage-backed securities
• stripped mortgage-backed securities

Additionally, within the mortgage industry and the array of mortgage-backed securities that exist within it, there are variations indicative as to the way in which the borrower will pay off their loan.  These include:

• Alt-A – A prime borrower who is borrowing in non-conformist fashion, oftentimes employing a lower form of documentation
• Prime – Conforming mortgages featuring full documentation inclusive of a strong credit score and verification of income
• Subprime – geared towards those borrowers who have no verification of assets or income, or who have weak credit scores

What affects the pricing of mortgage-backed securities?

There are a number of factors that affect the way in which a mortgage-backed security is priced or valued.  First and foremost, the lender will want to know how quickly the borrower is going to pay the loan off.  Some loans appreciate in value if they are paid off quicker whereas others may devalue if paid off ahead of the term.  Other factors that influence the pricing of an MBS are:

• changes in tax laws (included in regulatory risk)
• demographic trends
• economic growth
• inflation
• turnover of housing in the real estate market
• unemployment

Things to consider when investing in mortgage-backed securities

There are several things to take into consideration before investing in any mortgage-backed securities.  They are considered as being low-risk investments due to the following:

• Banks and other lenders only loan funds to individuals who are deemed as being credit worthy
• Securities are typically issued by those organizations who offer Federal Government guarantees on these types of loans
• Risk is reduced and/or spread out by pooling mortgages
• The property remains as collateral should the property owner default, enabling the bank or lender to receive some form of payback on the loan

Investing in Mortgage-Backed Securities

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Tax Liens, Taxes, and Real Estate

Since the dawn of real estate ownership in the US, taxes have been levied against this by the US Government.  Typically, income taxes on property help to fund certain facets of the local community county expenses such as:

• hospital funding
• law enforcement
• parks
• public schools
• road construction and maintenance

Obviously, if these real estate taxes go unpaid, then the above entities of the infrastructure do not benefit.  As a result, the tax liens on property are being offered to investors in order for the government to recoup the funds that are needed.

Investing in Tax Lien Certificates for Profit

A simple education regarding the real estate industry will reveal why it has been considered as one of the best wealth builders there is.  For all practical purposes, it is not only one of the most lucrative investments you can make, it is also one of the safest as this is a lower risk form of investing.  So it makes sense, whether you are an experienced investor or one that is just getting their feet wet to consider how to make money with tax lien investing.

Here are some suggestions regarding how to make money with tax lien investing and other things to consider:

Understand that this is not some “get-rich-quick” investment scheme – it involves taking some time to research this.  Granted, you can find numerous websites that offer information on this subject, but you would be better off contacting your county and/or local government offices as you know you can trust their paperwork.  Just remember that this industry is not immune to scam artists as with anything involving the online arena.

Tax lien sales are available via government auctions – just remember that you are not purchasing the home and/or land.  You are actually acquiring a debt that the government will want to collect on.

As an investor, your local government will allow you to pay these taxes off – as was mentioned above, you paying those taxes off enables the government to invest in the local community entities listed above.

Be aware of when tax lien auctions are held – usually, government auctions involving tax liens are conducted once a year.

Know what type of tax lien sale you are attending – make sure that the sale you are attending is either a “tax certificate” or “tax lien” sale, not a tax deed sale.  The guidelines and the rules are different.

© How to Make Money with Tax Lien Investing

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