Wednesday, September 11, 2013

Ways to Invest in Real Estate?

Way to Invest

In Real Estate


Are you an individual that seeks to make a sound return on their investment dollars?

Do you like long term investments that have a steady return?

Can you accept a modest risk factor in your investments?


These questions are important as one looks to invest in Real Estate.
As a non-liquid investment, Real Estate has typical factors of such investments:

1) Low Liquidity
2) Steady returns
3) Long Term Ownership
4) Slow Turnover

Yet, there are a number of means to invest in Real Estate.

The primary means that most Americans invest in Real Estate is in the purchase of their personal residence and perhaps a vacation home.   Though seeing the purchase as a place to raise a family or retire, the intrinsic nature of the home is that it's value can rise or fall, as is typical to any investment vehicle that most commonly own such as stocks and bonds.   Many people who own a home for 20 or 30 years will typically see their investment double.  A modest 3% average increase in value per year is all it takes.   And one gets to enjoy living there the entire time.   Try that with a stock certificate some time!

Other avenues to invest in Real Estate are:

1.  Invest in REIT(Real Estate Investment Trust directly or via 
        mutual fund like T Rows Price Real Estate Mutual Fund(lots
         and lots of mutual fund choices)

     REITS and the like Mutual Funds typically results from pools
         of investors investing money to allow a manager(s) to purchase
         property and income from rents

         A second type is a Mortgage REIT that invests in mortgages
          and mortgage instruments with income for interest on 
          mortgages.

        Expect:  Steady returns and low volatility
                    Note:  Closely examine portfolio information to ensure
                               you know the investment objectives

2.  Purchase properties with intent to rent
        Desired Outcomes:    Steady monthly income
                                         Home value appreciation

3.  Purchase properties with intent to renovate and re-sell(FLIP)
         Along with purchasing properties with intent to rent, flipping
         houses is the second most discussed topic in real estate 
         investing.

         Greatest challenges for successful flipping is financing and
          quality contractor availability.   Unless one has very deep
          pockets, bank loans, personal loans and lines of credit
          on main residence are typical to finance homes.  For the
          individual desiring to flip homes, institutional investors(i.e.
          REITS and mutual fund companies) can be tough 
          competition.

          Yet, locating and maintaining a relationship with quality 
          contractor(s) can be an investor's largest challenge. Unless
          one can keep a contractor in work 365 days a year, he/she
          will look for other work.

          If these two hurdles can be managed well, flipping houses
          has two expected outcomes:
      
           1.   Quick turn on investment
           2.   Substantial return(excess of 10%) per project

           Note:  I didn't mention finding properties as an obstacle.  
                     Distressed properties are always available in
                      every market.

4.   Provide funding for investors looking to flip homes.

         Hard to believe?  You can make money in Real Estate if you
         have cash, stock, a line of credit with available credit even
         if you never walk into some distressed house.

         This concept is for the savvy Real Estate investor that is
         willing to make money based on another person using his/her 
         money to renovate homes. Such RE investors make money
         by sharing profits with the individual that renovates a house
         to sell.   A common term for this investment is Hard Money
         Lending.

         Should you invest in Real Estate in this manner, you must
         be very savvy about the market you are investing in, the 
         before and after value and in vetting the investor that
         comes with you with this opportunity.

Without a doubt, a Realtor experienced with flipping houses and working with such investors is a key ally in items 2, 3 and 4 above.  To make money in these three ventures, knowing the market, the competition in the market and home values is absolutely necessary. Such knowledge can't be attained by looking up homes on Zillow or Truila or by driving a few neighborhoods.  It takes a professional real estate agent knowledgeable of all factors involved with the Real Estate Investment.

Yet, as to REITs and Real Estate Mutual Funds, you need to talk to your financial advisor.   The returns, history and company information that he/she can share will be very valuable.  In addition, the financial advisor can evaluate how such Real Estate ventures will fit in your portfolio.

If you have questions, let me know!!  I have that Real Estate experience in all these avenues.  So if you want to get started, I can help.  I will share what I have learned and know to help you make 
a nice return on your Real Estate investment.

Call today   757-580-6546         

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