Tuesday, May 10, 2011

What it Takes to Invest in Real Estate

by: Mohammad Aljehani

Real estate industry is one of the oldest industries on the planet. People have been using real estate since the beginning of the human being and will still use it forever. It has an infinite use and value. Real estate will always worth something. It is a gift for the people to use in the best ways. There will always be a market for real estate even if people reached to another planet to live in. Therefore, investing in real estate is considered one of a lot of people’s concern because of the benefits this field provide for its owner. More details will show the significance of real estate, how to start investing in a real estate business and what plan should you have? And what critical decision should you take when investing in real estate with leverage.
Real estate is so important because of different reasons. It has a big value since the earlier ages because of the shelter and privacy it provides. As more population increases, people started putting boundaries and distinguishing who owns what. Beside the shelter it provides, people actually can make money out of it. Owning a piece of land is almost everyone’s dream. even though due to economy break down nowadays, still owning your own land is more valuable than anything else for the reason that you can stay under your private roof when you have no place to go to and you can trade it for a good amount of money whenever you feel it is a good time to put it in market. Because real estate is such a highly demanded product, investing in it would be a direction for a lot of entrepreneurs out there.
Before investing in real estate everyone should consider a plan before beginning on a project or an investment in order to have an organization of steps on how to complete the goals you acquire. Part of the plan you must consider is to see what you want to invest on and how. Also the local economy in where you want to invest in. You want to make sure that people in the area are actually buying, the amount of population that moves around there, are businesses succeeding or closing? And whether or not there are people working around that area. It is best to investigate the best place to find out about the economy of a certain area that you are interested in. Maybe consider looking at websites, magazines, newspapers, or take some ideas from certain books to fulfill your mind with certain or several ideas, as a fresh start. Later after being and feeling prepared to move on to the next step, meet people and some investors around there, places and attend to certain events if there are any. Have the eyes of a Real Estate Investor because this is what will train your mind to move forward and view what is successful and what is not.
The third step to consider is looking at the money in your pocket. Now in this economy it is not the best time to be making loans so it is best to start off with a good amount of money to have a better start up fund to adjust you for a while just in case there are issues that need to be addressed with the property, or delays in selling or renting a property. Before you even putting your money down on the table it is important to start off with an offer. Making no offers leaves you with nothing but wishing and hoping bad overall strategies for success in anything. You have to create a good dynamic of work when it comes to this , makings offers builds more confidence, makes you open up to new offers and can even be accepted. No matter what you know the deal will close so it is best to put in effort in what you want. As for the last step, finish what you have begun. Decide ahead of time you will finish what you start and close on every deal you make an offer on. Real estate will always bring deals that are not granted at how you want them, so you must sustain to being positive and bringing the closest deal you want to a close at your offer or closet offer. In the end you will be left with what you have invested on.
Due to a lack of cash flow, you will consider borrowing, but you should calculate the risk that would result from a decision you are about to take. Now a loan on secured by real estate collateral is known as a mortgage. Which is known to be popular but sometimes not the best option, real estate investments provide an opportunity to generate cash flow. Apart from commercial banks, savings banks, savings and loan associations, credit unions, real estate investment loans can also be obtained from insurance companies, mortgage bankers, mortgage trusts and so on. As we all know there are two types of mortgages residential and commercial loans. If one is to decide on a loan you must be careful before you proceed on what you have in mind because loans are a risky thing if you don’t succeed in you plan. Many investors have had financial trouble by looking at past and recent history and also for relying on the future to produce the same results. First point to consider is that once a business starts you must focus closely on the percentage rate for the number of years. If percentages are from 15% to 30% you are looking at a risky proposition that maybe leading to loss or something worse. Second point, you must avoid ending up with a high payment to avoid credit losses or higher than expected vacancy. Third point; do not let good financing lead to a bad investment. Avoid behaviors sticking in your mind, if the property is overpriced let it go, and move on to something more of your average price to avoid drag and loss of property. And last point; always remember that cash flow is what will bring you and your investment up if you work on it correctly. If your income and your mortgage costs and expenses are putting a nice cash return in your pocket every month, keep the work up and success will be right at your front door.
In conclusion, beside all the planning and calculations an investor would put in, an important element that lead to an action is the investor’s gut. That does not mean it is a typical gambling game because real estate business still need studies and data to work with before making a decision along with your guts. It is a risky business but it worth the risk taken at the end.

Kimmons, James. "Real Estate Leverage - Top Risks of Real Estate Leverage." Real Estate Business Guide. Web. 8 May 2011. .
Dunn, Tom. "Beginning Real Estate Investing - How Do I Start to Invest in Real Estate?" Real Estate Investor Stories- DealFiles! Web. 8 May 2011. .

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