WHY SHOULD YOU INVEST IN REAL ESTATE

As a Real Estate investors you can achieve much more attractive returns due to the multiple income streams from real estate investment.  The following are various ways in which you can achieve positive returns on your investment:
1. Rental yield: 
This is the percentage yield from direct rental income, and can be calculated as either gross or net. Experienced investors prefer to calculate the Net Rental Yield, which takes the expenses, taxes and other costs into account, and divides by the property value/cost. It could be a negative cash flow, as it doesn't take mortgage payments into account.
2. Appreciation:
Rental properties normally appreciate in value with inflation. Increased value can mean sale and reinvestment in higher value properties, or provide an equity line of credit to use for other investments. This is the second, and a historically proven value component of real estate investment return.
3. Inflation is Rent-Friendly:
Rents usually increase with inflation, while mortgage payments on the property remain stable. This increases cash flow, with more rent income without increased expense for holding the property. When inflation is up, it can also mean more renters, as the affordability of homes can be negatively impacted by inflation. More renters increases demand, so rents can escalate.
4. Leverage:
Using leverage, while being careful to buy properties with good rental yields, provides greater returns. Using $100,000 to purchase three properties with down payments, instead of one for $100,000 cash, can greatly increase returns. Of course, all leverage involves risk, so the successful investor must understand how leverage impacts their real estate investments.
5. Paying down the loan:
Amortization, or paying down the loan, frees up more investment resources to increase leverage. Some investors use increased equity in one property to free up funds to invest in others.
6. Property improvement for equity:
Many investors intentionally purchase properties at a value because they lack some feature or could use some improvements in condition or amenities. They have calculated that the value of the improvements will exceed the cost, resulting in an immediate increase in equity.
When compared to other investments, real estate can provide much better yields and multi-faceted investment returns. While stocks and bonds are inflation-sensitive, and typically involve only value appreciation potential and low or non-existent dividend/interest returns.
By: James Kimmons, About.com Guide

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MAKING MONEY WITH REAL ESTATE

Are you losing money in all kind of speculative instruments like share, bonds and forex and are wondering what asset class to invest in? Why not consider real estate investment with its traditionally higher yields as compared to leaving your money in your bank account.

Discussed here in this article are four common strategies that real estate investors use to make money in property investment.

Money Making Method #1 - Purchase run down property and spruce it up

This method involves finding a run down property in a good area that you think has promise for resale and sprucing it up like some of the shows where people do an extreme makeover on the property. Hence, you will need to redecorate and repair it and then you can resell this real estate for a much higher price.

Bring along a good structural engineer or architect when you do look for such properties so as to ensure that the renovation works that you have to do will not be so extensive that it does not become worth your while to purchase the property.

The key consideration when investing in this kind of real estate is to keep your renovation costs low but ensure that the basic utilities like the electricity, water and gas pipes are in good working condition.

Money Making Method #2 – Find places with high rentals

Find areas with traditionally high rental returns that outperform the national average and then spend time looking for them and make money from the rentals.

In this type of real estate investment, spending some time to find the real estate investment that is a bargain is a good idea, so that you can get better return on investment.

Rental yields or return on investment is critical when you decide what type of property you wish to purchase.

Money Making Method #3 - Purchase foreclosed property

Most people will know that foreclosed property usually fetches a lower price than the market value since banks are often eager to sell at a price that covers their mortgages or sometimes they just want to liquidate the property. Such properties tend to be auctioned off and you can then resell them for a higher value subsequently. However beware of hidden defects in auction properties and always arrange for a visit down to the property just to check it out.

Two people you should bring with you when deciding on this type of real estate investment is your professional engineer and your contractor. You want to check for hidden defects in your real estate investment to avoid buying a defective property that would cost loads of money just to repair.

Money Making Method #4- Cash Flow Investment

According to Robert T. Kiyosaki, the best investment you get is when you find a property at a bargain and then purchase it with as much debt as possible and then generate a cash flow from the difference between the monthly rent and the mortgage instalment. This method is highly interesting and requires you to really spend time looking for such a real estate investment that fits in that criteria.

Remember that real estate investment is dependent on rental and the higher the proposed rental the better your monthly cash flow is. You could also purchase the property at a lower price and this would mean that your monthly cash flow would improve. Note that once your property is partly paid up, you can refinance your loan and extract out some money and purchase a second property and so on. Soon you would have multiple streams of income from the purchase of one real estate investment property.

In conclusion, there are many ways to make money from real estate investment and what’s missing is massive action on your part. Take massive action and start hunting for your ideal real estate investment property today and start generating substantial real estate investment property profits.

Source: Joel Teo | The Real Estate Investment Site

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THE REAL ESTATE INVESTING STRATEGIES

If you're thinking about investing in real estate to make money, you need to first determine your financial goals. Do you need to make money quickly, invest for your children's college fund, or build wealth for your retirement? Once you determine your financial goals, you need to decide which type of investing strategy works for you. What's the difference between income and investment property?

Fast Cash Strategy

If you're low on cash, get started by finding a bargain house and selling the contract to another real estate investor. Join a real estate investing club to find investors willing to pay you for finding good deals.

Income Property Strategy

If you want to increase your monthly income, look for income property that returns a positive net income from month to month. Start with single family house. Look for a bargain below market value. Fix up the house to generate top rental income. Find houses that will rent for more than your mortgage payment.

You may need to go out from your home area to a location that supports this type of return on your money. You can't pay $300,000 for a home with a mortgage of $1,500 that only rents for $1,000. You might start with a home for around $300,000 that rents for $1,750. You will need good credit to get a loan with good interest rates. In a few years, your rental income should go up. Many real estate investors enjoy thousands of dollars each month generated by income property.

However, some investors don't like dealing with tenants and prefer to make money in other real estate ventures.

Investment Property Strategy

If you want to make money focusing on profits, investment property offers a different strategy. Instead of worrying about rental income, look for property that you can transform and sell or property that will appreciate significantly over time. Besides fixing a house up, you can transform a property by changing it. For instance, some investors buy apartment buildings and turn them into condominiums. Many investors speculate in land and make money by holding the land until new development in the area increases the value.

Examine your financial situation along with your long term goals. You can get started by flipping properties, move onto income properties, and then make larger profits with investment properties. You might end up using a combination of all three strategies to make money investing in real estate.

Source: Jeanette Joy Fisher | The Real Estate Investment Site

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CHARACTERISTICS OF REAL ESTATE INVESTMENTS

Some of the characteristics that make real estate unique as compared to other investment alternatives are as follows:


Tangible
Real estate is, well, real! You can visit your investment, speak with your tenants, and show it off to your family and friends. You can see it and touch it. A result of this attribute is that you have a certain degree of physical control over the investment - if something is wrong with it, you can try fixing it. You can't do that with a stock or bond.


No fixed maturity
Unlike a bond which has a fixed maturity date, an equity real estate investment does not normally mature. For instance, in Europe, it is not uncommon for investors to hold property for over 100 years. This attribute of real estate allows an owner to buy a property, execute a business plan, then dispose of the property whenever appropriate. An exception to this characteristic is an investment in fixed-term debt; by definition a mortgage would have a fixed maturity.


Inefficient Markets
An inefficient market is not necessarily a bad thing. It just means that information asymmetry exists among participants in the market, allowing greater profits to be made by those with special information, expertise or resources. In the real estate markets, information is king, and can allow an investor to see profit opportunities that might otherwise not have presented themselves.


Requires Management
Because real estate is tangible, it needs to be managed in a hands-on manner. Tenant complaints must be addressed. Landscaping must be handled. And, when the building starts to age, it needs to be renovated.


Lower Liquidity
With the exception of real estate securities, no public exchange exists for the trading of real estate. This makes real estate more difficult to sell because deals must be privately brokered. There can be a substantial lag between the time you decide to sell a property and when it actually is sold - usually a couple months at least.


High Transaction Costs
Private market real estate has high purchase costs and sale costs. On purchases, there are real-estate-agent-related commissions, lawyers' fees, engineers' fees and many other costs that can raise the effective purchase price well beyond the price the seller will actually receive. On sales, a substantial brokerage fee is usually required for the property to be properly exposed to the market. Because of the high costs of “trading” real estate, longer holding periods are common and speculative trading is rarer than for stocks.


Variability among Regions
However cliché it may sound, location is one of the important aspects of real estate investments; a piece of real estate can perform very differently among countries, regions, cities and even within the same city. These regional differences need to be considered when making an investment, because your selection of which market to invest in has as large an impact on your eventual returns as your choice of property within the market. 


Underlying Tenant Quality
When assessing an income-producing property, an important consideration is the quality of the underlying tenancy. This is important because when you purchase the property, you're buying two things: the physical real estate, and the income stream from the tenants. If the tenants are likely to default on their monthly obligation, the risk of the investment is greater.


Source: Ian Woychuk, Investopedia.com

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