Think Like a Millionaire – How to Invest in Real Estate

Think-Like-a-Millionaire---How-to-Invest-in-Real-Estate

Many people fail to see that skills fade, but assets are forever.

They don’t know their entire financial education in their lives is completely WRONG!

Too many people believe that a good job, good skills, and a positive attitude will make them great wealth. The problem is that it just doesn’t work that way. People who make an hourly wage and an annual salary cannot build wealth. This is because their money doesn’t work for them, and instead they work for their money. This idea keeps them from understanding that the only way to build wealth is to invest in multiple sources of income that you don’t have to work for, but instead build yourself or purchase from someone else.

Another misconception of multiple sources of income and passive income is that people assume government and financial institutions offerings such as the stock market, CD’s, and many other financial instruments are passive income. Most of the time however, unless it is a note or bond that pays you regular interest. It is not actually passive income or a stream of income. As a stream of income or passive income is income that you make every day, every month, and every year continuously as cashflow. Stocks and the like only make you money on the sale and never anything in the meantime. Meaning they don’t ever actually cashflow. For example, it is the same as purchasing a piece of fine art and hoping that it appreciates the longer you hold onto it. Which is risky and locks your money up from better uses.

Real Estate as an Investment

Real Estate is the King when it comes to creating wealth for people. No other offering has the traits and abilities like real estate does. It is constantly appreciating and gaining value. It is always in demand because people need a place to live. And most important of all, it is a real asset that isn’t going anywhere soon. Allowing you to borrow against it as collateral and even to write off all expenses and costs associated off on your taxes. Now let’s not wait a moment longer to get into Real Estate as an Investment.

Real Estate You Can Buy as Investments

There is so many ways to invest in real estate and the major differences comes to how much capital you will need to put down to purchase them. This could be as little as $40,000 -$50,000 to buy a condo outright, to only $10,000+ to purchase a $100,000 single family home, or to as much as $20,000-$30,000 to purchase a multifamily home (2-4 units). All of which are Residential and can be easily financed.

Once you get past 4 units, small office buildings, and industrial properties. You’re going into commercial territory and have a lot more hoops to jump through as well as have to start working with commercial lending which can require sizable amounts of capital before they will lend. In the rear, is my personal favorite of mobile homes and parks. Which are hard to sell, but can cashflow in all sorts of amazing ways from lending on the mobiles themselves to charging them for renting the use of the land. All of which is taxed as land which is the cheapest tax rate you can have on property.

  • Condos/Flats – Condos and flats are some of the best to buy for cashflow as they give the best cap rates. The only issue comes on the resale as many can be hard to finance as an investment property, preventing a large portion of the population from being able to purchase them.
  • Single-Family Homes – Single-family homes are easy to rent, easy to sell, and easy to finance.
  • Duplexes/Triplexes/Quads – Small multifamily properties (2-4 units). These property types combine the financing and easy purchasing benefits of a single-family home with the cashflow benefits and less competition found in larger investments.
  • Small Apartments – Small apartment buildings are made up of between 5-50 units, they can make great cashflow, but can be very illiquid on the resale.
  • Small Commercial Office Space – Buying small commercial buildings and renting out office space to business professionals.
  • Industrial Properties– Manufacturing, warehouses, distribution centers, etc.
  • Mobile Homes – Inexpensive way to enter the world of real estate investing and can also experience significant cashflow.
  • Mobile Home Parks – The entire park in which mobile homes are situated on can also be bought and sold. Rent the individual lots to mobile home owners, and as well as have corporately owned and leased ones.

Strategies in Finding Investment Properties

Just as there are a million ways to skin a cat, there is a million ways to find properties for investment. Of the many ways to find the properties for investment. The most common ways are to find the owner directly and give them a cash offer, to find properties that are owned by a lender or bank that they want to get rid of at a discount, or purchase a lien on the property so you can foreclose on the property yourself.

  • Lease Options – Buying the property and “renting” it with the legal right to buy it later.
  • For Sale By Owners (FSBO) – Private owners sell their property themselves with a sign or newspaper advertisement, they may want to sell their properties at a discount to avoid paying a realtor.
  • REO’s – Foreclosed Property owned by banks can be bought under market if the demand isn’t too high.
  • Auction at the Courthouse Steps – During the process of foreclosure, a home is brought to the courthouse steps to be sold to the highest bidder.
  • Buying in Pre-foreclosure – Sellers on the brink of losing their home can be very motivated to sell their home and save their credit and their lives.
  • Short Sales – A bank will often take less than the loan amount on a property to save from the hassle and costs of foreclosing and reselling.
  • Tax Liens – When homeowner’s refuse to pay their taxes, the government can foreclose and resell the property.
  • HUD Foreclosures – When a US government ensured loan is foreclosed on, it often becomes the property of the department of Housing and Urban Development.
  • VA Foreclosures – Similar to the HUD foreclosures, the US Department of Veteran’s Affairs sells their homes as well after foreclosing on one of their insured properties

Strategies in Buying, Renting, and Selling Properties:

When you finally have the property in your grasp, there are many techniques you can use to maximize your return. Some properties are great for buy n’ holding. Meaning you buy them for cashflow, but are expecting to also make a sizable return on the resale due to appreciation. Next up is Fixing N’ Flip/Hold, which is finding properties undervalue and fixing them up to either hold onto for cashflow or to sell immediately for instant profit. Then there is Turn-key-Investing, this is where you find the property, turn it into a profitable cashflow and sell it as a source of income to a big fish investor. For Big Commercial, there is NNN leasing that entails having the company renting the property takes care of all the trimmings of the property and pays you for leasing the space. Another Buy N’ Hold strategy that can make decent money is to turn your Buy N’ Hold property into a Vacation Rental and charge 3x as much than a normal lease. Then there is hard money lending, where you finance others in their fix n’ flips, buy n’ holds, or primary residence.

  • Buy-N-Hold – Buy real estate, rent it, and hold it until the market is up and a great buyer comes along.
  • Fix-N-Hold– Buy below market value, remodel to force appreciation, and held until the market improves and sell it.
  • Fix-N-Flip – Buy well below market value, remodel to market prices, and sell it immediately to get your return.
  • Turn-Key-Investing – fix-and-flipper, but sells remodeled properties to out-of-town individuals seeking a good place to keep their money moving.
  • NNN Lease – Big Businesses rent the building and pay all costs associated with the building such as maintenance, taxes, insurance, and more. We can own these buildings for highly-passive income.
  • Vacation Rentals – Buying vacation property and renting it out off and on season (Snowbirds).
  • Cash Purchase, Sell on Contract – Buy properties and immediately re-sell them to buyers who may not be able to conventionally qualify for a mortgage. Collect a large down payment when using this method.

How to Finance:

Financing is readily available to anyone who has a cash for a down payment. Below is the major ways you can finance your Real Estate Investments.

  • All Cash – Property with no mortgage attached is very stable and a safe return. May not be as great as when using leverage (like a mortgage).
  • Seller Financing – Seller owns a property free-and-clear (no mortgage), and can be negotiated with to find a finance deal.
  • Unconventional Lending – There are many lenders who will lend on any deal you have as long as the number make sense, this can be anything from landlord loans, had money, and much more.
  • Self-Directed IRA – If you have a 401(k), throw it out, it’s time to put that money in a self-directed IRA and make that money finally work for you than expecting some money manager who is just trying not to lose your money than make you any. You can use your money in your SD-IRA to do all the strategies in buying, selling, and renting.
  • 20%-25% Down Conventional Investment Mortgage – buy a real estate investment through a bank. Come up with 20-25% down payment and have the bank finance the rest.
  • 10% HomePath Investment Mortgage– These loan types are only available on Fannie-Mae backed bank REOs, but can allow an investor to purchase the home for just 10% down payment with other benefits.
  • Home Equity Line of Credit (HELOC) – With significant equity in real estate, M&T can borrow a line of credit off M&T Real Estate equity.
  • Small Business Loans – Banks often will finance a line of credit or loan for small businesses- to include a real estate investment company.

Conclusion:

If you have the mind for real estate or want to hire someone who does. Then you should forego a large portion of your portfolio to invest in real estate. It easily as one of the highest returns than any other investment in the world, the only caveat, like anything else, is that you need to do it right to be successful.

Article Source: http://EzineArticles.com/9392552


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

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The Purpose of Investing in Real Estate Should Be to Create Passive Income

The-Purpose-of-Investing-in-Real-Estate-Should-Be-to-Create-Passive-Income

When investing in real estate there are many different avenues to choose from. When deciding which avenue is best for you, it’s important to consider the difference between passive-income generating avenues and earned or working-income generating avenues. In fact, in my opinion, understanding the difference between passive income and working income is one of the most important things to consider when investing in real estate.

Working Income vrs. Passive Income:

Working Income: Working Income is buying a house, fixing it, and then selling it for a profit. Or building a house then selling it for a profit. Or my favorite is buying a house, holding it (hoping it will appreciate in value, while losing money every month), then selling it.

Passive Income: The best way to understand passive income is to play Robert Kiyosaki’s board game, “Cash Flow 101.” To win (get out of the rat race), you have to get your monthly passive income to exceed your monthly expenses. It’s a real eye-opener. In his game, the quickest way to achieve this is purchasing cash flowing rental properties. Passive income is income that is earned without you doing the work to earn it. Rental income is a great avenue for passive income.

Here are a few reasons why investing in rental properties are an attractive avenue for investing in real estate:

Lower Taxes: Passive income is one of the lowest taxed forms of income, especially rental income. Uncle Sam likes that you’re providing affordable housing and is willing to cut you some slack on the taxes. When you buy, fix, and sell a property, that income is taxed as capital gains and you’re going to pay Uncle Sam 25-40%. Also, owning rental properties is a business, allowing you to write off operating expenses of your business.

Depreciation: This is a benefit often overlooked. Owning rental property provides a non-cash write off over the useful life of the property. Depreciation is defined as the loss in value of the property over time due to wear and tear, physical deterioration and age. Residential income property is depreciated over a 27.5 year period using straight line depreciation (or in other words, depreciated by equal amounts each year over its useful life). While your accountant will do the math, the point is, it’s a non-cash expense lowering you overall tax liability.

Time: Perhaps the best benefit of investing in turn-key rental properties is that it creates time. Remember, passive income creates time, working income takes time. The problem with working income, not only in real estate but in any business, is you have to keep working to make money. The whole reason why any of us get into real estate is for the life-style it can provide. To me, real estate is a means to and end. It doesn’t define who I am. But if done right, it provides time and money to be, do, and have everything I want in life. That’s what this is all about. While a measly $200/mo cash flow on a single family rental property doesn’t sound as sexy as flipping a house and making a quick $15,000, you have to look at the bigger picture.

For example; if you acquire 20 turn-key properties from Equity Services, LLC, each providing $200/mo cash flow, that would be $4,000/mo passive income. That money comes in while you’re eating, sleeping or surfing on the beach (we have a lot of Hawaiian investors)! Now there is some work you’ll have to do, unless you get someone else to do it. Someone has to walk to the mailbox to collect your checks! I get my kids to do it. (There’s more to it than that but you get the point). If 20 properties seems too hard to achieve, remember the old saying; “How do you eat an elephant? One bite at a time!” Well, how do you acquire 20 rental properties? One house at a time! We have one client, Mitch, who is buying his first rental property from Equity Services, LLC. His goal is 500 units in 3 years. Wow! He’s definitely caught the vision of passive income.

Equity Services, LLC = Turn Key

When we’re asked what it is we do, we often state that we sell “turn-key rental properties.” In fact, if you look at our company logo, you’ll see a house with a key. So what does turn-key mean? It means, we have a system in place to handle everything from acquiring the properties, to managing the renovations, to providing the tenants and everything in between. While there are many benefits to using Equity Services, LLC such as our houses are priced right, they have equity, etc., the real value we add is by saving you the time and energy to acquire solid cash-flowing properties. We have a strong relationship with the banks and purchase distressed properties at a discount. We renovate the properties to our high standards (we have rehabbed over 100 properties since 2007). The property manager handles filling the units and managing the tenants. As Timothy Ferriss states in his book, The 4 Hour Workweek, “Our goal isn’t to create a business that is as large as possible but rather a business that bothers us as little as possible.” We have developed a proven system that saves our investors their valuable time. Every now and then we run into the “do-it yourself” investors. We had one investor who gathered information from us, flew down to Michigan, and bought a house. He quickly found out that it wasn’t as easy as he thought, especially long distance. If anything, it helped him appreciate what we do.

Before you run out and quit your “working income” J.O.B., consider this; Keep your job but focus on building your passive-income empire. Use you earned income to invest in more passive income. Then as Robert Kiyosaki teaches in his book Rich Dad Poor Dad, once your passive income surpasses your expenses, you’re financially free. And remember, “profit is only profitable to the extent that you can use it. For that you need time.” (T. Ferriss, The 4 Hour Workweek)


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com