Category — Investing
As a real estate investor, I’m always looking for property to purchase. I love finding great deals from people going into foreclosure. In this case it’s usually a win/win situation. The owners win as they are selling their home before it is foreclosed on and I win because I can purchase a property without having to pay another Realtor commission.
Unfortunately, you can’t always find the deals before they go into foreclosure. Some investors try to purchase foreclosed properties at real estate auctions or sheriff’s sales. I tend to avoid those. When purchasing a home at an auction there are several factors that can work against you such as very tight time constraints and a limited ability to inspect the property.
If a property doesn’t sell at auction then the mortgage holder, usually a bank, is stuck with the property. The property is now known an REO, or Real Estate Owned. I found a great article that I’d like to share about “The Advantages of Buying REO Properties – Real Estate Owned Properties.”
Here’s what the Author has to say:
- All liens against the property are removed once it becomes an REO, and taxes are paid.
- Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents.
- While many foreclosures are often in deplorable condition, REOs are typically restored to at least a readily salable condition by the lending bank.
- The bank or lending institution that owns the property will often offer financing with better deals then they would offer on traditional properties.
- The bank or lender that owns the property will often provide an allowance for certain repairs.
- You can save money in your title search if you use the same title company that the lender used during foreclosure. They will often discount the cost up to as much as 100%!
- REO properties are usually listed on your local MLS (multiple listing service), or can be located by going directly to your local REO bankâ€™s website.
- REOs will often times include appliances
- While in hot markets, you may not see a difference in price between an REO and a typical property, during slower markets, you can pick up an REO at discounts to the propertyâ€™s actual value.
Checkout the rest of the article here.
January 12, 2007 No Comments
Real estate has been an incredibly hot investment over the last several years. The number one subject that I speak the most on is Real Estate. Working in a real estate investment firm, I am immersed in the market. Over the last few years, I’ve seen people succeed and I’ve seen people burn in real estate investing.
Why Has It Been So Hot?
With the housing market boom over the last several years, people have seen incredible returns in their real estate portfolio. The cable channels are flooded with shows about ‘flipping houses.’ We see every day people making six figures with what seems like minimal work.
Because of all this, real estate looks to be a safe, secure investment. We see people like Carleton Sheets and Robert Kiyosaki that have supposedly made millions from real estate. Everywhere we turn, we see people making money in real estate.
Whatâ€™s The Truth?
We constantly hear reports of people making ridiculous returns on their investments, however, what we don’t hear is how many people have lost their shirts playing the same game. Real estate investing can be incredibly risky unless you are very well informed. People like Carleton Sheets make more money selling their programs than from actually practicing what they preach. Everyone may be in real estate, but everyone isn’t making money.
Try This With Your Stock Broker
What would your stock broker say if you brought him $10,000 and wanted to buy $100,000 in Google. Even with an aggressive margin account, that would never be happen! Here the great thing about real estate, that same scenario happens every day! In fact putting only 10%-20% down on a property is the norm. In real estate, you get the benefit or using other people’s money.
Real Estate Is Tangible
One reason many people prefer to invest in real estate over equity markets is that real estate is tangible. You can touch it. If you own shares of XYZ company, the best that you can get is a quote on your screen. I like being able to drive to a house and say that I own it. It makes me feel more secure. I feel like I have more control when I can reach out and touch something physical.
Less Risk = Greater Return
When done correctly, you can achieve much better returns in real estate than you can on wall street without additional risk. In fact, I would argue that you can achieve better returns with less risk. Try getting insurance on your stock portfolio. It will never happen because insurance companies know that real estate is a much safer investment.
It’s Not Rocket Science
The last and the best advantage of all is that you don’t have to be a Warren Buffet to make good money in this ring. When trying to make money in the stock market, you need to understand technical and fundamental analysis techniques. You need to understand things like inventory turnover, daily sales ratios, bollinger bands, and historic trends.
In real estate, it’s a much simpler process. If you have a good real estate agent and you can understand a basic financial sheet, then you are set. A good Realtor can help you with everything else.
Get Rich Quick (or not…)
Real estate can be a very good investment if done properly. But hereâ€™s the caveat: real estate is a long term investment. That doesnâ€™t mean that you have to hold the same property for 60 years, but it does mean that you shouldnâ€™t go into it expecting to make a small fortune overnight. The majority of the time, people that are making serious cash in real estate either had a lot of money to start with or they’ve been systematically investing for many years. Real estate is not a get rich quick game.
January 9, 2007 4 Comments
Deciding on your [tag]portfolio[/tag] [tag]asset[/tag] [tag]allocation[/tag] can seem overwhelming. “What if I am too conservative and my returns are too low” or, “What if I take too much risk and loose my nest egg?” “Should I invest in stocks, bonds, or money market securities? What about real-estate investment trusts (REITs) or emerging markets?” There are so many choices available!
I’ve laid out some vary basic options that one could choose from in determining their optimal asset allocation.
Let’s define several of the major investments:
- [tag]Large Cap Stocks[/tag] – These are shares issued by large corporations with a [tag]market capitalization[/tag] of $10 billion or greater. The big players like Microsoft ($293 Billion) and Google ($140 Billion) are in this group.
- [tag]Mid Cap Stocks[/tag] – These are shares issued by corporations with a market capitalization between $2 billion and $10 billion. Companies like Rent-A-Center ($2.07 Billion) and Sherwin Williams ($8.57 billion) fall into this category.
- [tag]Small Cap Stocks[/tag] – The last group contains shares issued by corporations with a market capitalization of less than $2 billion. Some companies in this category are Sonic ($1.67 Billion) and Six Flags ($494 Million.)
- [tag]International Securities[/tag] – These are exactly what they sound like, securities from foreign companies. They can be good for diversification, however the risk will most likely be higher. Examples of foreign companies would be Samsung Electronics traded on the KOSPI and Japan Tobacco traded on the Nikkei.
- [tag]Emerging Markets[/tag] – High risk, high return investments in a developing country. Some popular emerging markets are Brazil, and Chile.
- [tag]Bonds[/tag] and other [tag]Fixed Income[/tag] Securities – Debt securities that generally pay the holder a set interest amount at set intervals or at maturity. In addition, the principal is repaid at maturity. These can be safer investments due to the fixed income, however this is still a risk of default by the issuer. Examples of fixed income securities are corporate bonds, U.S. treasury bonds, municipal bonds, long-term certificates of deposit (CDs) or any other debt security with a maturity date greater than 1 year.
- [tag]Money Markets[/tag] – Highly liquid debt securities with a maturity date of less than one year. Examples would include short-term CDs, corporate paper, treasury bills (t-bills) and savings accounts. These are generally safer due to their liquid nature.
- [tag]Real-Estate Investment Trusts[/tag] ([tag]REITs[/tag]) – Investments that are very similar to other equities with the exception that the investor is purchasing ownership is a pool of properties or mortgages rather than a corporation. These have wildly popular due to the incredible returns they’ve had during this last real estate boom.
Personally, I like small cap stocks and REITs. They’re some of the riskier choices, but your portfolio needs some risk until you begin creeping up on retirement.
What are your thoughts? What do you like to invest in and why?
January 2, 2007 1 Comment