Get ready for the turning of the tide.

Posted on October 27, 2011 by admin

In today’s “hostile” financial climate we all need to tighten our belts and hold off on spending. The world is changing and big things await those that have patience. Now is the time to save and get ready for the big turnaround.

If you ever wanted to get into the property market the time is coming soon. As soon as the financial tide turns there will be lots of bargains up for grabs. Now I know that there are bargains out there now, but I would caution any one, that wants to be a real estate investor, from buying now. The market, and this is just my opinion, is not stable yet and we are still in for a rocky ride.

Instead of buying every “bargain” now, rather save up for when the time is right. The more cash you have in hand the better. If you have cash, you have negotiation power and you can get property at even better prices. And once you get a foot in the door, at the right time, your real estate empire will grow.

Now there are lots of ways you can start saving and one affective way is to make sure you have the best credit card deal, you will be amazed how much money you can save, and then pay off debt, if your credit card rate is good. And sooner than you know your debt will be paid off and you are financially free.

So start getting ready today and when the tide turns, you will reap the rewards

Where is the profit in Real Estate Investing?

Posted on March 16, 2010 by admin

One of the first questions a buyer has for a Realtor is, how do you make money investing in Real Estate?
The answer to this very complex question is actually very simple. Buy low and sell high.

Some of the best real estate investors are home owners. When a person has lived in a home that they own, they have a better understanding of maintenance and repairs.

To buy low, there is always a reason that a house has a considerably lower price than similar properties on the market. The most common reason is that the property is in need of repairs. This is where knowledge comes in to the equation. Working with a knowledgeable realtor can be extremely rewarding.

The most successful investors that I have worked with, over the years, do the majority of repairs on the property themselves. This reduces the bottom line considerably. The wise investor also knows when and where it is necessary to bring in a licensed professional. I have also witnessed the owner, prior to the arrival of the licensed professional, doing whatever is possible; to reduce the necessary time the professional has to contribute to the project. In short, they are prepared before the plumber or electrician arrives.

The easiest and most advantageous upgrades are painting the interior and exterior of the home, and adding new flooring. Cleaning inside and out, and a well maintained landscape, is also an inexpensive upgrade that makes the home more marketable, and increases the property value.

Before purchasing the investment property, a wise investor has to do their homework. This includes, investigating the condition of the property, and calculating the cost of each repair realistically. This often includes checking the cost of materials, and bids from contractors for bigger projects or repairs. Once the full cost of repairing the house is estimated. The buyer has to then check the historical high selling price of the similar homes in the area. This will give them a good idea of what they could re-sell it for as soon as the repairs and upgrades are complete.
In the initial calculations prior to the purchase, also have to include what it would cost to sell the property, which can be as high as 8-10% of the sales price.

The largest capital gain in real estate investing comes from owning the property for a number of years. The principal balance of the loan decreases, as the market values slowly increases. That would be in a normal real estate market. Some investors have tenants rent the property till the mortgage is completely paid off.

Currently, the US is not experiencing a normal real estate market. The property values are still decreasing in many areas. There are many foreclosures. When a house has been foreclosed on, the previous owner usually remove many of the fixtures and have even been known to take the kitchen sink. The empty houses are also subject to vandalism. This causes the property values to rapidly drop. Real Estate is definitely driven on the premise of supply and demand. When there are more houses for sale then there are people to buy them, the value drops. This is a buyer’s market. Even the country’s greatest economist, do not know when the prices will hit the bottom, and the market will turn around. In the mean time if you are looking to invest in real estate, it is a great time to do so. As a wise investor once told me, don’t be afraid to make a low offer, it is better than no offer at all.

Buy or rent your home:tips on how to decide.

Posted on March 31, 2009 by nats

Are you having trouble trying to decide on whether to rent a property or buy one, this can be frustrating to think about as there are positive sides to both arguments depending on your current circumstances. The following tips are given to try and help you in the decision making process. Answer the questions relating to them as objectively as possible and you will benefit yourself tremendously.

The expenses you will be responsible for. When you rent a property the main expense you will be responsible for is paying your rent to the landlord on time. However when you buy a property you are not only responsible for paying the bond you are also responsible for the rates and taxes, levies and other charges relating to the maintenance of your property. Objectively assess exactly how many expenses you want to be responsible for and this will make your decision easier.
How much of a commitment do you want to make to the property? When you receive a loan to purchase a home you are often bound to a 30 year commitment, financial and otherwise. You can’t just vacate the property at a moments notice by simply breaking your lease. The bank will hold you responsible for payment until the property is sold. When renting you are bound to what is usually a 12 month lease agreement and all you need to do is make sure you pay your rent pay on time. Decide on how much of a commitment you are ready for.
What will your monthly payment be? Renting will almost invariably be cheaper than paying off a bond every month, but at the end of paying off the bond you will have a great asset instead of helping someone else pay off their bond by renting. Work out your finances carefully and see exactly what you can afford to pay.
Creating personal wealth. Do you wish to increase your personal wealth and perhaps build a property portfolio that you can enjoy and leave to future generations? Or are you not concerned with building wealth and happy with your life as it is? Buying property has proven to be one of the soundest investments over the centuries, while renting gives you no investment advantage or growth in wealth over the long term. Decide what you want in the long term and start planning for it now.

Whatever decision you arrive at make sure you get the opinion of experts who are qualified to give you financial advice. Buying a property is a serious commitment but missing out on a potentially great investment because of poor advice is something most people will regret forever. Choose your advisers carefully.

What do our readers think? Is renting a property from someone else always a waste of money?

venture capital

Posted on March 26, 2009 by nats

Venture capital is money that is made available for investment in innovative or speculative enterprises that have a tremendous potential for growth and success. There is often a high risk involved in this kind of investment so it can also be known as ‘risk capital’.

Buy-back agreements encourage creative negotiations.

Posted on March 23, 2009 by nats

It is time for South African property investors to start thinking out of the box a bit and find new ways to make deals work better for them. Get creative and consider setting up a sell/buy-back agreement with your seller/buyer.

It could work for both you as a seller and you as a buyer. The basic idea is that the two parties sign an agreement that states that if a certain event occurs within a certain period of time the property will them be bought/sold back to the original owner for a specified price.

As a buyer you could get the seller to sign a buy-back agreement that states that if you are transferred to another province or city within 6 months of the purchase of the property the seller will have to repurchase the property at a price you have both agreed to.

As a seller you could try and get the buyer to agree to a sell-back agreement stating that he will sell the property back to you if , for example, your situation changes and you move back to the city the property is in.

There are many things that could be to your advantage and if you try and use a little foresight you could really come out a winner. As long as everything is legal and both parties are in agreement you could get a chance at owning your dream home again or protect yourself from getting stuck with a property you can’t use for an extended period of time.

As long as all parties involved are fully aware from the beginning of the consequences of the agreement it is a fair proposition. Get advice on the subject of sell/buy-back agreements from a qualified legal professional who has experience in setting up sale agreements and other property related legal agreements.

This could be just what you are looking for if you are trying to do everything to keep the home you love and have merely run out of time, it could be an opportunity at a second chance if your circumstances should change.

Money tips: 16 to 20 – Investment

Posted on March 9, 2009 by doublef

This week I am going to cover some investment tips. As an investor you need to have patience and a good outlook on the future. If you think you are going to invest in real estate or the stock market with a short term outlook you will be disappointed.

As always these tips come with a disclaimer. They are only tips, if you consider investing at all you should always consult a professional financial advisor first.

16. Investment

A true investor always invests for the long term. He knows that his investment needs time to mature and he will not rush to get there, that is when you make mistakes. If you really want to invest for the short term you will be better off using bank term deposits or money market accounts rather than real estate and the stock market.

17. Time not timing your investment

You should never try to time the markets or real estate you will lose money, Sure there are people that do this but successful ones are few and far between. Most of the time these guys die young with too much stress. The way to do it is to give your investment the time it needs to make you money, believe me you will not be disappointed.

18. Financial Services Board (FSB)

Always make sure make sure that the investment product you use is registered with the Financial Services Board (FSB). If things go wrong you will not have any means to take action. For more info check out http://www.fsb.co.za/.

19. Charges

Life assurance investments also known as endowments are priced higher with lower amounts. You should check the structure of costs in relation to the premiums and you might find that if you paid just a little bit more your cost will go down and increase your return on investment.

20. Regular investment

A good investment strategy in a volatile market is to invest on a regular basis. When the market falls you can buy cheap. If the market rises you can sell high. This also helps manage market sentiment, if you are always investing you don’t really get affected by what everybody else is thinking.

Until next time.

Real Estate Investment Strategies – Part 2: Risk management

Posted on February 16, 2009 by doublef

.Ok, I agree. Risk management isn’t really a real estate investing strategy but it is a very important part of real estate investing. If you are considering investing, you need to make risk management a top priority in your strategy.

What is risk management?

Well it is actually the term for long/short term insurance e.g. life insurance and home insurance. The problem here is that this isn’t the only risk management you should do as a property investor. Risk management, as far as I am concerned, is planning for the unforeseen, making sure you are protected when things don’t go your way.

So how do you manage your risks?

First thing you should do is identify all the possible risks that a real estate investor could face here are a few:

Crime

If your property has a stove, cupboards, light fittings etc. you need short term insurance. The last thing you want is to have to get cash somewhere to replace a stove.

Fire and water

Another good reason to have short term insurance is because your property could burn down. Another possibility is water damage. I am sure you’ll agree that these two elements can ruin a good piece of real estate.

Tenants

If you are going to be an investor you will probably have tenants that assist you in paying off the bond and maybe even provide you with a steady income. The problem is when your tenant defaults on his rent. For this reason there are some ways to manage these risks.

Firstly you could take out landlord insurance. This will assist you by paying the rental for up to 3 months if your tenant can’t pay any more. The 3 months is just about enough time to take legal action to remove the tenants from the property.

The second thing you could do is mange your cash. If you are able to put away about 8-10% of your rental each month you will build up a sufficient backup fund that could help you out when your tenant defaults or if you don’t have a tenant. It’s always a good idea to have an emergency fund available for unforeseen events.

Negative cash flow

Yeah, you will probably have negative cash flow, for a while at least. The only way you can manage this risk is by making sure you have sufficient cash in reserve to cover the shortfall until you either sell the property or have positive cash flow.

Interest rate

Yes the old interest rate. You need to plan well ahead and make sure you manage how interest rate changes affect your real estate investments.

You need to prepare for at least a 1% raise in the interest rate. This way you will be able to last in a downward market. I am not saying that the interest rate will only go up by 1% but this should at least give you a fighting chance.

On the other side, when there is an interest rate drop you should save the extra cash you have and build up that emergency fund. This way you’ll be prepared for ALL markets.

Death and taxes

Don’t mess with the tax man. Pay your taxes when you need to. If you are paying lots of tax, you are probably making lots of money. The last thing you want to do is go to jail.

Right enough of that now we come to death. If you die who will take care of all your real estate? Will they have the money to pay all the expenses etc.? If you are building a real estate empire that will empower your family you need to protect your assets.

You will need life insurance to cover the debt and expenses of your property portfolio. You will probably need to have all your assets in trust. This way you avoid the red tape where your estate is concerned. For more info read our article about trusts called: “Trusts: a description in layman’s terms (with a twist of Latin)”.

There are other risks you should also consider, it is always a good idea to make a list and plan for each risk you feel you have. Lastly you should review and asses your risks on a regular basis.

Next time we will talk about flipping.

Coastal property buying tips.

Posted on February 13, 2009 by nats

If you have always had the dream of buying a property on one of South Africa’s beautiful coastlines but have no idea how to start looking read the following and it may make it easier for you.

First ask yourself what you are going to be using the property for. Is it going to be your holiday home that you utilise once or twice a year and rent out to others for the rest of time, will it be your retirement home or will it be your permanent residence for yourself and your family. Answering this will focus your search as you will then know what the home will need to have.

If you are buying the coastal property purely for investment reasons there are more things to consider. Usually a property that is close to the beach that has a sea view is a sound investment. However if the view is what makes the property so valuable do some research and find out if there are any developments planned for your area that may interfere with your view or accessibility of the beach. Some buyers have been sorely disappointed when after purchasing a great house with a great view some developer goes and builds a high-rise beach front apartment complex right in front of their house.

Other things that will either increase the value of your home or improve it’s re-sale chances are the following:

1. A low crime rate. Investigate the areas crime rate and the measures in place that are there to manage the crime rate. 2. Investigate the need for tourist accommodation, it doesn’t help if you buy the property to rent out in the holiday season and then afterwards discover the market is completely over saturated and there are many similar houses that stand empty all season. 3. If the property is close to the beach, shopping malls, parks, schools and hospitals it will be even more valuable.

So, know what you want and investigate all prospective investments thoroughly.

Tips to invest in real estate.

Posted on January 29, 2009 by doublef

Real estate can make you and your family very wealthy, if done correctly. There are many experts that will say the stock market is better, but there are just as many that prefer property. I think the thing about real estate is the fact that we ALL deal with real estate in our daily lives.

You go home to be with your family and have a place to sleep. You go to the building where you work and we ALL go to shopping centres and other businesses.

But the biggest mistake many make is to thing hat it is a free ride when you invest in property. So here are a few rules you can apply to make real estate investment a realistic possibility for you.

Long-term investment

That;’s right, property is a long term investment. you can not get rich, wealthy or financially free over night when you invest in real estate you need patience. you should always focus on building your wealth in real estate over a long periods of time, years in fact. If you do you WILL be financially free one day. The great thing about long-term investments are that short-term fluctuations do not really affect them and you will be able to sleep at night. Be careful of get rich quick schemes. They seldom actually never work.

Cash flow is king – Income vs capital growth

Many investors underestimate the importance of cash flow. Without it you will go bankrupt. For this reason it is a good idea to focus on generating income from your property portfolio, the capital growth is the cherry on top. As long as you can pay the bonds, with the rental income, your property can keep growing and when the bond is paid up you get to keep the income as well as the capital growth.

Slow and easy…

Take your time when looking for that special property. The days of finding bargains at the drop of a hat are over, even when the economy does poorly. You have to keep your eyes open and find those properties that can give you positive cash flow immediately, this is difficult I know, but if you keep looking, you will find them. The other option is to buy really low risk real estate, property that has a minimal shortfall. As long as you can afford to py the shortfall out of your pocket you’ll be fine.

Become the expert.

Choose your property type and learn everything you can. Because people tend to think real estate is too difficult or even risky you can become an expert by getting the right info. Research areas and get growth reports. Many sellers don’t know how to research property so you could potentially get bargains because you have the information.

Use your raise to invest.

If you still have a day job you probably get raises through the year. instead of upgrading your life style buy real estate. In a few years you won’t need to work any more and you will be glad you decided to invest in the future and not instant gratification. This is probably the most difficult thing to do but if you motivate yourself you can and will do it.

So. Go out and start looking for that property, always plan first though…

Money tips: 1 to 5

Posted on January 27, 2009 by doublef

This is our new section called “Money Tips“. We are going to look far and wide for the best money tips out there and bring them to you. Our goal with this is to provide you with as much information as possible so when it comes to your real estate investing, personal finance and general money decisions, you make well informed decisions.

So let’s get started.

1. Pay yourself first.

I am sure you have heard of the “pay yourself first” mentality. Well if not let me explain. You should always take at least 10% of any money you make and save it. If you can keep yourself disciplined regarding this you will find yourself having a nice nest egg for all those real estate investments you would like to make.

2. Stay ahead of inflation.

When you get a raise put 10% towards saving. If you do this with your long-term savings like retirement plan, your contributions will increase automatically in proportion to your pay increase. This will help ensure you stay ahead of inflation.

3. Can you sleep at night?

When making investments you use the “Can I sleep tonight” test to make sure that the investment is in-line with your risk tolerance. If you lie awake at night thinking (worrying) about the investment, you probably should not have any money in the investment.

4. Diversify, diversify, diversify.

If you want to manage your investment risk you need to diversify or as the saying goes: “Don’t put all your eggs in the same basket.”. By doing this you limit any damages that might occur if one of your investments goes bust. Now some people will argue that you can not become rich if you diversify, but I must say I like having more than one type of investment, but still like to keep most of it in real estate.

5. Too good to be true.

There is a saying that goes: “If it is too good to be true than it probably isn’t true.” Now there are two sides to this one. One, it’s a scam or two it really is an opportunity of a life time. So how do you know which is which? My advice is research, research and then more research. Find out as much as you can. If the deal is of such a nature that you have to decide then and there I found then the deal is usually “dodgy”. Just don’t dismiss everything as being “too good to be true” before you did some homework but be careful at the same time.