Connect with us
// (adsbygoogle = window.adsbygoogle || []).push({});

Real Estate

4 Traps Real Estate Investors Fall For

Focus on finding properties that will generate enough rent to cover the mortgage payments, taxes, insurance, maintenance and management of the property on a monthly basis and ideally, leave a little in the account afterwards.



With the real estate industry booming many, main street investors are entering the fray. Unfortunately too many of them are ill-equipped, uneducated and fall into the same common traps over and over again. Here are 4 common mistakes that real estate investors make. By being aware of these common traps, you can navigate the new real estate boom with knowledge and watch your portfolio soar.

Real Estate Investor Trap #1 – Buying a Property for the Wrong Reason

When we really get down to the nuts and bolts there are only 3 ways to make money from real estate investing.

1. The rental income exceeds your expenses and generates positive cash flow for you each month (cash flow).

2. The tenants will pay down your mortgage (equity growth).

3. The property is poised to grow in value over time (appreciation).

The ideal property is the one that is highly poised to deliver on all three. Unfortunately, far too many investors buy with solely the third reason (appreciation). When you adjust for inflation history has shown us time and time again that this is a very high risk game as it is speculation and not investment. Unless you are happy gambling or speculating, or you know how to create value through redevelopment, renovation or repurposing the use of a property, you should never buy for appreciation.

Focus on finding properties that will generate enough rent to cover the mortgage payments, taxes, insurance, maintenance and management of the property on a monthly basis and ideally, leave a little in the account afterwards.

If you are able to consistently focus on that formula, you’ll find that you are far less vulnerable to the volatile marketplace and you won’t be shelling out you profits from your good investments to cover the shortfalls of your bad speculations every month.

Real Estate Investor Trap #2 – Chasing Deals

Just like a bloodhound, most investors start out very focused with a clear destination in mind… until they see a squirrel.

Suddenly all attention is directed to the squirrel and they are no longer worried about their plan.

This is what seems to happen to a lot of investors. They either don’t have an investment plan to follow so they are always looking for squirrels or they allow themselves to get easily distracted from that plan when a new squirrel appears.

Sticking to a well thought out plan, based on the fundamentals of real estate investment (buying for cash flow in areas with good economic fundamentals), instead of chasing the latest deal destination will help you make more money, put in less effort and minimize the risks in your investments dramatically.

Real Estate Investor Trap #3 – Not Weighing the Risks and Rewards

All I ever hear anyone talk about is their return on investment. While there is no doubt that this is a critical variable; No one ever seems to consider their return on time. Time is money, so it is imperative that you weigh in the return on your time just as heavily as you do your return on money. Both of these constitute your return on investment.

It’s an important number to consider, but it’s actually not the first thought I have when I’m evaluating an investment. Instead, I am asking:

– What is my return on my time?

– Then, what are my returns relative to my risks?

Time is your most precious resource. You can’t create more time. You can create more money. Money for investment is unlimited when you know how to raise it. And making money isn’t that difficult – it’s keeping it that is tricky. That’s why your biggest consideration in a deal is the time you have to invest and the risks you have to take on to get the return.

When we focused only on return on investment we were drawn to deals with a lot of risk and that required a lot of time to manage and maintain. We weren’t weighing the risks against the returns though. The cash flow was gigantic – so the opportunities seemed great.

Unfortunately, deals with big returns tend to eat up a ton of your time and energy as you manage all the risks. And if something goes wrong, pretty soon you’ll find your funds draining too.

Many real estate investors do not think carefully about the risks and rewards before entering a new investment deal and then end up unable (or unwilling!) to grow their portfolio because of a problem property or two.

Real Estate Investor Trap #4 – Trying to do it alone

There is a temptation as a new real estate investor to pursue the exciting deals. Like a dog distracted by a squirrel, you can end up heading in the totally opposite direction than where you were going when you began. Real estate investing should not be exciting. If it is, you’re probably doing it wrong, or you’re taking huge risks that had better be coming with huge potential rewards.

Personally I would hire a real estate investing coach to help me with this part. Since we’ve started working with the right business coaches for us we work less and earn more. You can save time, stress and money by getting the right experts on your team. But regardless of WHO you work with you should get help with this part. Sit down with your coach, an experienced investor or at least someone who specializes in helping real estate investors finance their deals, to map out your investment master plan. Then, run that plan by your accountant and even your lawyer. Get input from key team members. Then, stick to that plan by focusing on minimizing risk and time investment and maximizing monthly cash flow and future potential.

A good option to look into is joining an association. There are local and national groups and associations that regularly meet and swap ideas, news, knowledge and support. Associations are chock full of coaches, mentors and tools that can take a huge chunk out of your learning curve.

The boom years of the 2000′s are behind us for now. However, so are the bust years. The new boom is starting now and experienced investors are gearing up for huge returns.

If you avoid these four mistakes as you build your portfolio, you’ll move closer to your goals a lot faster and easier too!

Source by Mikel K Smith

Real Estate

Miami – A Great Place to Buy Real Estate



Miami has evolved into a cosmopolitan wonder city under the sun. Famous for its great beaches, this city has also earned a reputation of being a sexy, marvelous and trendy place to live. From amazing golf courses like the one at Crandon Park in Key Biscayne to the Miami Metro Zoo, this beautiful city has something to offer to everyone. Owning a piece of paradise is a dream within reach of locals and foreigners as well. People from all parts of the world have already taken advantage of the great opportunities available today in the marketplace.

Miami has some of the most amazing real estate developments like the astonishing Santa Maria located in Brickell, or the unbelievable towers of Icon Brickell. Some other exclusive and impressive Miami condos include, the Jade at Brickell, the 900 Biscayne in downtown Miami, the fabulous Trump Palace in Sunny Isles Beach and the astonishing Icon South Beach just to name a few. These modern Miami luxury condos have all the comforts and amenities only found in five star hotels.

The city of Miami has it all, great golf, amazing beaches, a turquoise beautiful ocean, a warm weather, excellent shopping, an electrifying night life, lots concerts, entertainment and sports events at the famous America Airlines Arena in downtown Miami.

Miami real estate buyers are as diverse as the city culture and population itself. Buyers come from all over the globe, Europeans, Latin Americans, and Asians and of course buyers from all around the United States. Some have chosen this beautiful city to have a second home and some have fallen in love so much that they now call Miami their home making it an exciting melting pot to live in.

Source by Mauricio Chaparro Bosch

Continue Reading

Real Estate

Real Estate Investor's Secret Weapon



Real Estate Investors have a unique tool in their arsenal that other types of investors do not. One of the oldest tax code sections is 1031. This secret weapon is called a 1031 exchange. It is one of the few areas of the tax code where the US Government allows taxpayers to sell an asset and not immediately pay the taxes. Even State taxes are deferred. The way a 1031 Exchange works is simple. If you sell piece (s) of investment property, and you are want to buy of another piece (s) of investment real estate of equal value, you can defer indefinitely all taxes (capital gains (15%), recapture tax (25% ) and state income tax). This is the benefit: by not having to pay those taxes, you can keep your money (instead of giving it to Uncle Sam) and smartly reinvest it for yourself to grow your real estate portfolio. 1031 is a free financial tool that let you keep 15-30% of taxes you would have had to pay. In the world of increasing taxes, 1031 is a viable alternative.

There are some guidelines that need to be followed, and I will break them down. First, what is investment real estate? Investment real estate is defined as property used in a trade or business. It could be used to run your office or it could be rental property. One of the nice flexible features of 1031 is that all real estate is exchangeable. This means that a home can be exchanged for a condo or a piece of land can be exchanged for a commercial property. I use the rule of thumb that any property with a deed can be exchanged for another property with a deed. The other nice feature is that you can sell one property and purchase more than one replacement property or vice versa.

There are three main rules that investors need to know about 1031 exchanges. First of all, you must use a Qualified Intermediary (an Independent Middleman) to help facilitate your 1031 exchange. The QI, as they are called will do many things including prepare the Exchange Agreement, Escrow your 1031 proceeds, and most importantly make the exchange go smoothly. The QI must be hired prior to the closing of the relinquished property. Secondly, the Exchangor (the person doing the exchange) has 45 days from the closing date of the relinquished property to identify the replacement property. Identification means to list (not go under contract) up to 3 properties of any value and send them to the QI. Finally, the Exchangor has 180 days (from the date closing on the relinquished property), to close on one of those three identified replacement properties.

I don't want to over simplify 1031. Please consult your tax advisor in addition to your Qualified Intermediary to analyze your exchange and to be sure you are making the best tax decision. I do believe the rule of thumb should be if you want to keep your money invested in real estate, then 1031 is a tool you must consider.

1031 can be a potent weapon for the smart real estate investor. There is nothing worse than having a client not consider 1031 or not have their real estate professional tell them about it and the relinquished real estate closes and the client changes their mind. After the relinquished property closes, it is too late to do an exchange. 1031 is an efficient tool for an investor to build their portfolio. Plan your transactions and watch your real estate fortune grow.

Dave Owens, CPA, CES is the managing Member of Entrust 1031 Exchange. Dave and his staff have successfully performed over 10,000 exchanges since 1997. Entrust has an arsenal of tax free strategies. Feel free to contact Dave for more information or questions at 239-333-1031 or .

Source by Dave Owens

Continue Reading

Real Estate

How to Become a Successful Real Estate Developer



Real estate investment and development has never been a more popular pastime or career changing challenge; if you would like to learn seven secrets for consistently successful real estate investing through development or you would like to know how you can continue to profit from property even if the market takes a downward turn just read on …

1) Do Your Location Homework – did you know that through successful and sustained location research professional property investors actually continue to profit during a market down turn? It's true – whatever the market conditions you can apply their location research approach to your real estate investments and also make consistent profits from property.

Take the necessary time to learn all about a town or city you're considering for your next property development purchase and discover where the up and coming areas of that town are likely to be. If there are inner-city redevelopment projects planned examine the real estate market in the immediate vicinity, if there are areas that are booming right now examine the immediate neighboring areas for their potential for future prices arises for example.

Do not follow the crowd – have the confidence to buck the trend and get ahead of the curve by positioning yourself in a market that is about to boom rather than one in that has already blossomed.

2) Know What You Can Afford – While it can pay to sometimes speculate never be tempted to jeopardize your own home. Work out your finances and be ruthlessly strict about what you can and can not afford as a down payment, for mortgage costs and for the renovation and redevelopment of your next real estate investment. Only proceed within the confines of your tightly allocated budget and do not be tempted to over extend yourself specifically if competition in the property market is tough and the market is slow or stagnant.

3) Identify Your Target Market – Having identified your next location for property investment identify the types of people who buy into renovated assets in that location. Know who your target market are going to be and what they are likely to look for in a property in that location. If for example you're examining inner-city spaces you might identify that your buyers will be young single professionals and that the ideal property type for these people will be luxury low maintenance apartments – seek out suitable properties with the potential for redevelopment into luxury low maintenance apartments and you will fulfill your target market's brief … seek out large homes with substantive gardens in the area and you will have totally missed the market and potentially created a property that will not sell!

4) Renovation Not Rebuild – Know your budget limits and your personal skill restrictions. Do not consider taking on a property that is in need of a complete structural overhaul when your budget is tight or you do not personally have the time, skills or inclining to do the structural work yourself. Be realistic about what you and your budget can achieve and seek properties that fulfil that brief. Pay to have an independent and complete survey done on any property you are seriously considering buying before making a down payment to ensure that there are no hidden surprises waiting for you benefit the floorboards to eat up your budget in its entity.

5) Manage Your Budget – With your survey in hand you can approach builders for statements and seek out prices for fixtures, fittings, finishes and furnishings. Take the prices quoted and sourced and build your budget. Factor in overwriting mortgage and service costs and labor costs as well as your findings and structure and allocate your money accordingly. Watch every single spend and be ruthlessly strict with yourself and your builder. If at all possible have your builder commit to a contract with fixed finish dates and fees and stay on top of every single penny or cent every single day. At the end of each week tally up your outgoings and expenditure and ensure you're not exceeding your budget. If you're overspending rein it in or you will have to shave it off other areas of the development. Remember never to scrimp and save on finishing touches and always give yourself a realistic fall back fund in case of emergencies.

6) Appeal To The Widest Market – Forget putting your personal stamp on any property you develop – you are not going to be living in the property! You should already have identified your target market which will give you a good idea of ​​the level and quality of finish expected, now meet those expectations without adding your own personal taste into the equation. By appealing to the widest market or the lowest common denominator your property will be attractive to the majority of buyers making it faster and easier to sell on and profit from.

7) Make Friends With A Real Estate Agent – Your greatest ally when developing property will be your real estate agent. Make friends with these guys and you will build a beautiful and successful symbiotic relationship in which you both profit to the maximum! Real estate agents are a fountain of untapped knowledge about the local market, who is looking for what property in which area, which additional features cost little to add but which push up the asking price and what a buyer expects from your particular property type. Get the facts from your real estate agent and then apply their advice. You will create a property they can market for top dollar and to the widest market – you will make more profit and they will make a larger commission including a beautiful and lasting friendship!

Finally, remember that when you've bought, renovated and sold on you'll be looking for that next property opportunity and any real estate agent who you've worked with well will be on the hunt for suitable real estate for your next investment making any identical purchases that much easier to source.

Source by Rhiannon Williamson

Continue Reading