Real Estate Update

Archive for April, 2010

Advantages of real estate investing

Investing in real estate is as advantageous and as attractive as investing in the stock market. I would say it has three times more prospects of making money than any other business. But, But, But… since, it is equally guided by the market forces; you cannot undermine the constant risks involved in the real estate. Let me begin discussing with you the advantages of real estate investments. I found the advantages as most suited and really practical.

 
Advantages

Real Estate Investments are Less Risky

As compared to other investments, less of misadventure is involved in a real estate property. I will not get away from the fact that just like any investment you make; you have the risk of losing it. Real estate investments are traditionally considered a stable and rich gainer, provided if one takes it seriously and with full sagacity. The reasons for the real estate investments becoming less risky adventure primarily relate to various socio-economic factors, location, market behavior, the population density of an area; mortgage interest rate stability; good history of land appreciation, less of inflation and many more. As a rule of thumb, if you have a geographical area where there are plenty of resources available and low stable mortgage rates, you have good reason for investing in the real estate market of such a region. On the contrary, if you have the condo in a place, which is burgeoning under the high inflation, it is far-fetched to even think of investing in its real estate market.

No Need for Huge Starting Capital

A real estate property in Canada can be procured for an initial amount as low as ,000 to $ 15,000, and the remaining amount can be taken on holding the property as security. This is what you call High Ratio Financing.  If you don’t have the idea as to how it works, then let me explain you with the help of an example. Remember that saying… Examples are better than percepts!

Supposing, you buy a condo worth 0,000, then you have to just pay the initial capital amount say 10% of 0,000. The remaining amount (which is 90%) can be financed, against your condo. It means that in a High Ratio financing, the ratio between the debt (here in the example it is 90% Mortgage) and the equity (here in the example it is 10% down payment) is very high. It is also important to calculate high ratio mortgage insurance with the help of Canada Mortgage and Housing Corporation (CMHC). If needed, you can also purchase the condo on 100% mortgage price.  

Honing Investment Skills

A real estate investment, especially when you buy a condo for yourself, will be a pleasurable learning experience. It gives you the opportunity to learn and when I went ahead with my first real estate property, I was totally a dump man. Ask me now, and I can tell you everything, from A to Z. Necessity is the mother of all inventions. I had the necessity to buy the property and so I tried with it, and I was successful. I acquired all the knowledge and skills through experience of selling and purchasing the residential property. Thanks to my job. It gave me the experience to become an investor.

 
Not a time taking Adventure

Real estate investment will not take out all your energies, until you are prepared and foresighted to take the adventure in full swing. You can save hell lot of time, if you are vigilant enough to know the techniques of making a judicious investment in the right time and when there are good market conditions prevailing at that point of time.

You should be prepared to time yourself. Take some time out, and do market research. Initiate small adventures that involve negotiating real estate deals, buying a property, managing it and then selling it off. Calculate the time invested in your real estate negotiation. If the time was less than the optimum time, you have done it right. And if you end up investing more time, then you need to work it out again, and make some real correction for consummating next deals. You have various ways and methodologies, called the Real Estate Strategies that can make it happen for you in the right manner.

Leverage is the Right Way

The concept of leverage in real estate is not a new one. It implies investing a part of your money and borrowing the rest from other sources, like banks, investment companies, finance companies, or other people’s money (OPM). There have been many instances where people have become rich by practically applying OPM Leverage Principal. As I had discussed under the sub head – No Need for Huge Starting Capital, the high ratio financing scheme gives an opportunity of no risk to the lenders, as the property becomes the security. Moreover, in case the lender is interested in selling the property, the net proceeds resulting from the sale of the property should comfortably cover the mortgage amount.

Now consider a situation, where the lender leverages the property at too high ratio debt say 98% or even more, and all of the sudden the market shows a down turn, then both the investor as well as the lender. Hence, greater is the mortgage debt, more is the lender’s risk, and it is therefore necessary that lender pays higher interest rates. The only way out to ease the risk from lender’s head is to get the mortgage insured. Two companies authorized to insure your high-ratio mortgage debts are CMHC (www.cmhc-schl.gc.ca), and GE mortgage Insurance Canada (www.gemortgage.ca).

Let me explain you with the help of an example… supposing, you are buying a real estate property worth $ 200,000 at three mortgages, with the first one of  0,000, the second of  ,000 and the third one of  ,000. Possible percentage of interest rates charged can be 3%, 5% and 7%.  The last mortgage amount of  ,000 will be accounted, as riskiest; as it would relatively be the last mortgage that you will pay when you finally make a selling deal.

On the contrary, if the first mortgage representing almost 90% of your property price is insured against getting default or as high ratio mortgage, then in the above example, the basic interest rate would be 3%.

Let me explain you the leveraging concept by taking another example.

 Supposing, you are buying a real estate property worth 0,000, and made down payment of 10%, equitable to ,000, while financed the rest amount of ,80,000. Over the year’s time, the value of your property appreciates by 10%. In this case, what would be the total return that you’d incur on your down payment of ,000? It would be 200%. Yes 200%. Putting in simpler words, the down payment of  ,000 made by you has an appreciation of 10% over it, i.e. (10% increase of original home price of $ 200,000), 200% return on your down payment investment of ,000.

On the contrary if you invest all the money in buying the property of 0,000, and in wake of appreciation of 10% over the year (,0000 would then be accrued to as 20%.

Synonymous with leveraging is pyramiding, where you borrow on the appreciated value of your existing property. Pyramiding applies the principal of leverage that enables you to purchase even more properties. This appreciated value over the real estate property in some selected areas results in accumulation of rich financial virtues.
 
Real Estate Appreciation

An appreciation is an average increase in the property value over original capital investment, taking place over a period. There are some neglected real estate properties that have an appreciation below the average mark, whereas, some of the properties located in maintained geographical areas, showing high demand, have an above average appreciation. In such centrally located and high demand areas, the average appreciation can reach up to 25% in a year. I will discuss appreciation in the chapter on real estate cycles. For now, for general understanding, appreciation is what goes up.

You Make Your Equity

As you gradually pay your mortgage debts, you are creating your equity. In other words, you would be reaching to original house price on which you have no debt. Your equity is absolutely free of percentage increase in appreciation.  From the investor’s perspective, in real estate market, equity is the amount that is free of debt and it is the amount that an investor holds. When you sale your property, then the net money you get, after paying all the commissions and closing costs, becomes your equity. Lenders don’t want to take risk by allowing a loan on over 90% of equity. Therefore, in this manner, the lenders take the safety measures in wake of their loan being defaulted.

The Federal Bankruptcy act says that all the first mortgages of over 75% of the appraised or purchase value must be covered under high-ratio insurance schemes. However, there are certain conditions, wherein, CMHC offers the purchasers of real estate property qualifying the insurance, a mortgage of up to 100% of purchase price over your principal house value. In the wake of an event where borrowers want more money from the lenders, they would ideally settle for second and the third mortgages.

Low Inflation

Inflation is the rise in the prices of the products, commodities and services, or putting it another way, it is the decrease in your capacity to buy or hire the services. Supposing, a commodity was worth a decade back, will now cost $ 100 as the result of inflation. For people who have fixed salaries feel the real brunt of the dollar, as the inflation rises. In Canada, the inflation rate varies and it varies every year. There was a time when Canada had a double-digit, but it was controlled to single digit, after the regulation of policy.

If we analyze closely, the land appreciation value for the residential real estate is 4% to 5% higher than inflation rate. Therefore, when you invest in real estate, then you are paying mortgage debts in high dollar value. Now as you are getting more, salary to pay less amount than the amount that you had paid in the original mortgage.

Tax Exemptions

You get various tax exemptions on your principal and investment income property. The tax exemptions available in real estate property investment are more than available in any other investment.  In other investments, you lose terribly on the investments in your bank in the form of inflation and high taxes therein, but in real estate; you don’t actually have such hindrances.

Various tax exemptions available are:

•The interest receivable from your bank account, term deposit or guaranteed Investment Certificate (GIC) is completely taxable as income. A little math here will do the magic work for you. Supposing, if you get an interest of 8% on the deposit, and the on going inflation rate is 5%, the Real Return Rate will come out to be settled at 2%.
•You get completely tax-free capital gain on principal amount of your residential real estate property.
•You have the opportunity to ward off principal amount of your residential real estate property against the home expenses incurred by you.
•You can easily ward off the property depreciation against your income.
•You can cut the expenses incurred in real estate property investment through your income
•Tax rate reduced to approx. 50% of the capital gain.
•And many more

Net Positive and High Income is Generated

If taken in right direction and played seriously, a real estate investment can be your virtue making endeavor now and in times to come. You will not only be having additional assets building in your favor, but also with positive cash flow, your real estate property value will increase automatically.

High Return on Investments (ROIs)

Real estate investment gives you potentially high ROIs before and after the taxes levied on your income. In fact, investing in real estate gives you high ROIs after the taxes.

Demand for the Real Estate Increases

As a natural instance, when the population of a region increases, the total usable land decreases, and this provides the impetus for high real estate prices. There are many communities that can or cannot have growth and development regulations, thereby, resulting in limited land available for use. Therefore, the real estate prices of the area shoot up. Remember housing is the necessity of an individual and therefore it is much in demand than any other single commodity taken. Furthermore, there are people who purchase additional houses for their recreation, recluse or as a past time. This in turn increases the demand for land.

Finding a realtor in Colorado is easy but whether the realtor is the best in his category cannot be decided until you get a scope to work with him. So in search for the best realtor in Colorado we need to find out the trade experts realtors with proven success records about customer satisfaction and dealing experience for intricate property matters. Superior Colorado Realtors are found with general expertise who can guide a client about the requirements of documents and other issues in a purchase deal. It is always better and safe to work with superior realtors because these realtors can guide about a purchase, they simple do not execute a deal like other common realtors of market.

For example, a Louisville Realtor can conduct a sale or purchase deal with professional efficiency but a Superior Realtor from Louisville real estate market can guide a client about the pros and cons of a sale and purchase deal with his latest industry knowledge and relevant insight.

Finding the best realtor is not tough if you depend on the credential, market report, existing or old customers’ satisfaction level etc. about a realtor. The word of mouth also works as fantastic resource for finding a competent realtor for your purpose. It is always wise to contact realtors from local real estate market for example, for Louisville property dealing one should search his realtor within Louisville realtors’ list and for Boulder property matters Boulder realtors will have better and professional expertise.

It is always wise and recommended to browse different websites of expert and reputed realtors before signing a deal with one of them. Although a well maintained website is not the whole issue about the reputation of a realtors but still the get-up somehow reveals the underlying success story of the concerned person or the concerned company.

It is always good to do the cross checking with the local business directory while finding the names and contact details of the reputed and expert real estate agents or realtors; for example, if you are searching for a reputed Lafayette Realtor, you should check the local business directory of Lafayette, the reputed and well known realtors will definitely be listed here.

The database published by Superior Colorado Realtors Association works as a good resource for finding a competent and expert realtor for managing your property dealings. The member realtors of this association are ranked as superior realtors and superior realtors, in general, are especially honored in real estate market for their exclusive and efficient trade expertise and detail knowledge.

The nature of job or assistance you are asking from your realtor decides the best suitable realtors for you. For example, some realtors may have proven expertise in dealing with foreclosure purchases and some realtors maintain their expertise in executing sale and purchase deals as well as resale cases of commercial properties. Some realtors work more on villa and condos whereas some realtors work mainly with luxury apartments. You need to select the best realtors depending on the nature of your tasks.

Private property sales need to be exposed so that there would be prospective buyers. Otherwise, there would be the difficulty of disposing the property. To make sales possible, there must be people involved in the transaction. It does not only concern the property itself. It also concerns other players of the transaction.

When you decide for private property sales, there could be three important players who will be involved. They are the owner, the sales agent, and the solicitor. These three players will be busy in dealing with the sale. However, each one has their own role to take.

As the owner, you are tasked to dispose the property. You will determine the market value of the property as well as the selling price. You need to consider the purchase price of the property, the marketing costs, and other costs incorporated in the sale. Then it is your responsibility to ensure that the property is saleable and legally available. Generally, the owner can sell house privately. He can sell it by advertisement or word of mouth. It is actually his discretion on how he can sell it.
The sales agent is normally the middleman of the sale. They are tasked to sell the property. When an owner has dealt with a sales agent, the owner is giving the sales agent full rights to the private property sales. However, it is the responsibility of the owner to ensure that the agent will get the commission due him.
The third player is the solicitor. Contrary to most beliefs, it is not the role of the sales agent to undergo conveyance, legalizing the transaction, and dealing with the buyer’s solicitor. It is the sole task of the solicitor as the solicitor has the expertise in property documentations, legalization, and conveyance.

With these players, there is the tendency that the cost of the house will increase more than just the market value. The cost for solicitor and the sales agent as well as the markup for the owner will be incorporated in the purchase price of the private property sales.

To be able to lower the selling price of the property or for the owner to have considerable markup for the private property sales, one must slash down the cost for the players. Definitely, one cannot do away with the role of the owner, as this is the reason why the property is for sale in the first place. Solicitors cannot also be disregarded because property documentation has to be done by qualified solicitor. This leaves a question if sales agents are necessary. Actually, if the owner cannot sell house privately due to limited time, effort, and resources, then the sales agent will prove to be necessary.  However, if there could be ways to improve exposure of the private property sales, then by all means, it would be more practical to sell house privately. You just need to advertise the sales for enough exposure.

One way to sell house privately for enough exposure is through advertisement online. The Big Move Online is one site that offers private property sales. The owner will have complete control on how to go about the advertisement of the property because it can be done once an account is made on the site. With Big Move Online, to sell house privately is made easy because of exposure. This way, the owner will save on the commission of sales agents.

In particular the sections on selling Ebooks, building a mailing list, and using your EBay About Me page successfully all contain superb information. The advantages of building an opt-in email list go on and on, because once you build up a trusting relationship with your customers, you can contact each and every one of them with the click of a button. This generally means purchasing a list from a list broker and then building on it.Building a list is one of the single most essential things you can do to survive and stay alive in business. This is the magic of building your client list.Harnessing the power of innovative marketing bluntly stated, the significance of this is that we should separate out the merits of list building and relationship building and find novel ways to complete success in both fields. One of the most valuable ways of building your customer list is to use direct mail. So, for more details visit to www.mailing-list-gold.com for people who are not yet aware of the importance of building a highly targeted Opt-in list and would like to know how to build them, here are some tips that could be very constructive. Build List and Reorder Questions – This type of question asks you to indicate the correct answer by building an answer list. Refer back to the issue on keyword list building for keyword avenues you can explore.Identification recalled that an acquaintance, Sue, who worked in the campus center building, had mentioned to me that she had a list of groups who were holding events in the concourse of the campus center that summer. Here are some of the skills you should learn and develop: a) Market research and analyses) Website design and management’s) Keyword researching) Developing content for your website) Effective Site promotion strategies and techniques) Traffic generations) List building and maintenance’s) Website conversion; I) Business automation. Building an opt-in email list is one of the best ways to ensure the long-term viability of any long-term internet venture.With good targeted traffic, you can pretty much do what you want with them – test and track your conversion, your clickthroughs, for more details visit to www.email-auto-format.com list building, to name a few. In this case, there is very little good information about list building. If they don\’t already offer a list before the sale, chances are, they don\’t have list building integrated into the sales process. 11 attacks in New York, or the August blackout and a whole list of building failures by the central phone system.

One of the most often-asked questions in the real estate world is “Do I need to use a realtor?” In Georgia, much like any other state the answer is: “Yes, if you want the best deal possible.” Many people have tried to sell their homes themselves or purchased without the aid of a realtor. There have surely been some success stories as well, but statistics also show that a large percentage of the people that do go the buy or sell yourself route end up working with a realtor in the end. Why is this? It’s simply because realtor are real estate professionals, they know their business and they know the local market and can supply services that are not attainable anywhere else.

Realtors services include several aspects of the buying and selling process that are unique to their profession. One of the most noticeable of these is the lengths they go to to market a property for sale. Perhaps the most vital tool in a realtor’s arsenal is the website. A properly maintained and optimized website is an invaluable tool in this modern age of high-technology. A huge percentage of the homes sold in the U.S. are first viewed online and some are even purchased entirely online without the buyer actually visiting the home.

In finding the right home, the experience and contacts of a realtor are unmatched. Realtors have years of experience in matching people with the homes that best suit them and their financial picture. They will be able to quickly eliminate homes that do not suit your needs and wants. Once the proper home has been found, the realtors experience really starts to shine through. The complex contracts process involved with a home sale can seem like a foreign language to those who have not dealt with it before. Realtors make the contract process easy and stress-free. Let’s look at it this way, would you allow a secretary to fix your car? Of course not you would take it to a mechanic. So why let a non-professional sell your home or guide your purchase?