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Preconstruction real estate investment can be profitable

Preconstruction real estate investing consists of purchasing properties that are at an early stage of construction. Often, these investment properties are townhouses or condos. Because they are purchased at such an eary stage of construction, they are less expensive. And, even though you may have to take on the remainder of the construction costs, you can still make a tidy profit on the units when you sell them later.

Investing in property

One of the great things about real estate investing is that it involves owning something tangible — actual property. Owning an investment property (or two, or three, or more) can have great advantages. Real estate investments in general appreciate (rarely do they go down), and you can create additional cash flow by using your real estate investment property as a rental property.

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Analyze your real estate investments with help from a software tool

If you are interested in real estate investing, it can help to be able to have the tools to be able to measure the value of a real estate investment property, or to analyze or calculate various aspects of your investment opportunity. Real estate investment computer programs are designed to help you analyze the possible value of a real estate investing opportunity, as well as analyze how well your investment is doing once you have made it. You can input information on multiple investment properties, and keep track of cash inflows from rental properties. Additionally, real estate investment software can aid you in your research, helping you better manage your real estate investments and choose better investment opportunities.

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Real estate investing that produces yearly returns

Many timber companies are looking for good hardwood (and even some softwood) to harvest. You can turn this into a real estate investment vehicle. Buy anywere between 50 and 500 acres of land with forest on it, making sure there is good wood. Then you allow companies to harvest some of the timber for free. Make sure you do not have it over-harvested, and be sure to plant trees in place of those cut down.

Additionally, if there are deer and game birds in the wood, you can also allow hunters to do hunting on the land for a fee. And, when you do not want to manage it anymore, you can sell the whole bit of it, or subdivide it and sell it as lots.

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Learning about supply and demand can help you with real estate investing

When it comes to real estate investing, it is a good idea to dredge up those high school economics classes and remember what you learned about supply and demand. When it comes to making real estate investments, understanding the basics of supply and demand is important. You can make money both when there is low supply and high demand and when there is high supply and low demand. The trick is making sure you get in at the right time, and making you sure you wait just long enough before you sell.

Low supply and high demand

In such cases, you often find that the price is high because there is not enough real estate to meet the demand. However, because real estate will likely remain in demand for at least a while longer, chances are that you can still make even more money because the investment property in these areas appreciates so quickly. But make sure you sell when your investment property appreciates sufficiently, rather than hanging on until the demand slacks off.

High supply and low demand

This is a bit trickier. You have to be aware when using this method that you might have to wait years for the market to turn around. And you have to have a good eye for future value. Buying an investment property in a poor location that will never turn around is not a good idea. However, if it is a pretty good bet that things will turn around in 3 to 7 years, buying something for a rock-bottom price in a glutted market can bring you a good return on your investment in a few years when demand increases.

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One way to make money in real estate investing

Real estate foreclosures often represent real estate investing opportunities. You can often get the investment property at a reasonable price, and you can find a motivated seller who might not be completely foreclosed, but starting the process. Read this article on foreclosure real estate investing by Ronald Starr to learn if real estate foreclosures could work for you.

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Understanding how much money you can really spend

When it comes to real estate investing, chances are that you will need some sort of financing. And it is usually a good idea to know about how much a bank will give you before you start looking into real estate investment options. This usually means prequalifying or getting preapproval. However, it is important to note that these are not the same thing. You should understand the difference so that you can avoid a nasty surprise later.

Prequalification

This is when the bank gives you an idea of what you probably qualify for. The process does not take terribly long, and can be inaccurate — to the tune of tens of thousands of dollars. Prequalification does not usually include thorough checks by the institution; it is based mainly on what you tell the bank. This means that when a more thorough check is done, you may qualify for much less.

Preapproval

This process takes much longer. But you will get a more accurate quote on what you can afford to spend on your real estate investment property. An in-depth look at your credit information is part of the process, and a bank will approve you for a certain amount — an amount that is likely to hold up under an application.

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Creative real estate investing requires an attorney

When it comes to finding ways to creatively finance real estate investments, an attorney is essential. A good attorney can help you avoid being "taken in," and he or she can help you make sure that you are doing everything in a legal manner. Consider hiring an attorney who is experienced and knowledgeable in real estate investing matters so that you get the optimum situation.

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A good way to get into real estate investing

Time, knowledge and money are all needed to get started in successful real estate investing. Many of us only have one or two of those things, not all three. However, a real estate partnership can help you get around that. If you have money, but no time and knowledge, or vice versa, you can partner with someone who has what you lack. However, before you go into a real estate investment partnership, make sure that everything is clearly outlined, in an official document, regarding the transaction and the distribution of investment income. Responsibilities of each real estate partner should be defined as well. 

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When you start in real estate investing, it is important to realize it is much like running a business

Real estate investments don’t just magically spout cash when you make them. You actually have to put in time and effort to make a successful real estate investment. And, if you decide to do real estate investing as a regular source of income, it is doubly important that you treat it like a business. Granted, it is a business in which you are your own boss, and you don’t have to ask for vacation (you make money on your investment property even when you leave town), but you still need to realize that there is business-like work involved if you want serious real estate investing success. Here are some of the business-like aspects of real estate investment to consider:

• Deal with people, even people who are hard to deal with
• Fixed expenses (electric, heating, etc.)
• Operating expenses (renovations, upkeep, etc.)
• Takes time and a measure of consistency to start-up
• Need some source of funding to get started

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Looking for motivated sellers

A motivated seller can be your best friend when it comes to finding a great real estate investment property deal. Motivated sellers are people who have reasons to sell their homes, whether they are in foreclosure or whether they need to move for a new job. One way to find possible motivated sellers is to take a trip to the county records office. By looking through public records (there might be a small fee), you can find these following types of motivated sellers:

• People going through divorce
• Those in probate
• Bankruptcy cases
• Landlords who have been in eviction court

Finding sellers who want to get out is a great real estate investment tool that can help you get a great deal.

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Don’t go crazy with upgrades and expansions

If you are planning on using apartment units as an investment property, you should carefully think about how much work you will put into them. While you want them clean and comfortable, and with sufficient amenities for your tenants, you also want to make sure that your real estate investment property is affordable for your tenants. If you go crazy making upgrades and renovations to a small apartment, you may find yourself needing to price the apartments too high for your tenants. And that means that your great real estate investment property isn’t going to make you that much money.

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You want to charge rent people will pay for your real estate investment property

If you have an investment property that you want to rent out, it is important to set the right rent for your real estate. After all, you want a good cash flow, but rent needs to be reasonable so someone else will actually pay to live in your real estate investment property. One good way to get an idea of what a property is renting for is to look in the Sunday Classifieds. You can look at what a rental property meeting your description rents for in your part of town. This is very important, since a rental property in one part of town may go for $150 to $200 more per month if it were moved to another part of town. Getting an idea of what to charge for a reasonable rent is essential to getting a good return on your real estate investment.

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3 tips that can help you sell your residential investment property

Even if the housing market in your area is slow, you can sell your residential investment property with a little good planning. If you feel your real estate investment has appreciated sufficiently, and you are ready to sell, you can make the process fo better with a little help from creative methods of reaching potential real estate buyers:

1. Realistic Pricing. So many real estate investors set the bar too high. A realistic price can draw buyers in, and, if you price it a little lower, you can possibly create urgency among buyers and create a bidding war that actually puts the price back up.
2. A Special Detail. Find something unique and special about your real estate property, and emphasize its distinctiveness.
3. Advertising Outside the Box. Instead of relying solely on real estate publications and the local Classifieds, look into different advertising markets. Your real estate ad will stand out more in an alumni magazine, a train magazine or a hobby publication. Additionally, advertising abroad can catch the attention of those that would like a home in America.

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Understanding that lasting wealth takes time to build

Real estate investing can be very profitable. However, when you first start out, real estate investing takes time, effort and money. And few people manage to get rich quickly. While some people do manage to make a great deal on real estate investments in a short period of time, these people are in the minority. If you plan to get into real estate, it is important that you understand that it takes planning, usually some cash, and a solid financial base on which to build. Resist the "jackpot mentality" of the "gurus" that say you will get rich immediately. While there is a chance that you will, chances are that you will not.

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In many areas, this can bring more rental income

If you have a single-family dwelling with a basement, it can be a good idea to turn it into a multiple-family unit by adding a kitchen to the downstairs. This is a wise real estate investment, as it allows you to make a higher rental income on your real estate investment property. However, you should be aware of zoning laws. If your rental property is in an area zoned exclusively for single family dwellings, you cannot even put a kitchen downstairs, and you will be unable to rent out to more than one family. The same is true of having multiple renters. So, before you buy a real estate investment property that you hope to use for more than one family, check the zoning laws to make sure everything is legal.

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Keeping real estate investment records is important

One of the most important things you can do when it comes to real estate investing is to keep good records. Records of your real estate investment property can help you prove ownership, show how much you are paying interest, and how much you spend maintaining the property for rental purposes (if you are using your real estate investment as income property). All of these records are good to have for tax purposes and for purposes of selling, when it comes to that. Having your real estate records properly sorted and easy to look through can help you more effectively find documents you need.

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Should you finance your real estate investment with an interest only loan?

When it comes to buying real estate, investment property or otherwise, it can be tempting to agree to an interest only loan. This is because the payments are lower, and it can help the new real estate investor get more investment property for the money he or she spends. Payments are low because for the first five to seven years of the loan, you are only paying the interest. None of the money is going to principal. And, while this can be good for new home owners with a high risk tolerance and a certainty of future wealth, it may not be the best strategy for buying investment property.

Problems with interest only loans and investment properties

One of the biggest problems with buying a real estate investment property with an interest only loan is the balloon payment. After the initial term is up, the payments suddenly start including the principal and this can make the payments too big to make, especially if your income hasn’t skyrocketed. Additionally, because you are paying only the interest and no principal, you aren’t building any equity, and the point of real estate investing is to build equity that equals more than the purchase price of the investment property.

Before getting an interest only loan to finance your real estate investment, make sure that it really is the right decision for you.

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In some real estate investing cases, more than one real estate note is a better idea

When it comes to real estate investment, there are some situations where multiple real estate notes are better than just one. This is especially true when you find a motivated seller who is flexible, and who can provide you with the financing for the real estate property. Michael Morrongiello offers excellent insight into multiple real estate notes in a compelling article. Click here to read this article about real estate investing strategy.

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Using the 1031 tax deferred exchange when you sell real estate for investment purposes

One of the real estate investing tools at your disposal is the 1031 tax deferred exchange (also called a Starker exchange). This can help you defer your capital gains taxes when you sell real estate and then use the funds to invest in another investment property. You do have to purchase a like-kind property, however.

Here’s how it works:

You can roll over the proceeds from a real estate sale into another investment property purchase (or even purchases). When it comes time to close, the proceeds go to a third party who is a qualified intermediary and you can hold them until you are ready to actually buy the new property. You can use the proceeds from one real estate property to buy more than one investment property, and vice versa. Many people find it helpful to sell several smaller real estate investments to go toward purchases a high-end property investment.

However, you have to exchange real property for real property. So, while you do not necessarily have to buy a house when you sell a house (you could buy land instead), the investment has to be like-kind. Check with the IRS and a knowledgeable tax attorney to make sure everything is done properly.

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