Categories
Commercial real estate

Best Real Estate Investments for 2012

The receding economic recession left behind chaos and disaster in the financial and the real estate sector. As a result the confluence of these sectors that is the real estate investing and the mortgage industry have been worse affected. The result is that even in 2011, the real estate market in the USA was generally dull and several investment portfolios performed poorly. From the point of view of investment, it seems that the same issues will haunt us all through 2012. While many of us may think that way, the truth is that this can also be quite a good opportunity to invest money into the real estate.

Now, before we go any further, make a note that this article is quite generic in nature and applies to most of the regions of the United States. However, in high real estate markets, some of these facts, equations and theories may not apply because the market still remains driven by factors such as prestigious locations and also prices of surrounding estates.

Economics of Real Estate Investments

The aforementioned ‘weird’ trends in the real estate markets have arisen as a result of the sub-prime crisis and also the overall recessionary cycle. The problem plaguing the real estate market is that in several places the market and equity value of the real estates have been in limbo as a result of the market conditions. Nevertheless, with the speedy recovery of the harsh economy, estate markets can be attractive investment tools to make decent money. Let us understand the general scenario of the estate markets.

The real estate markets operate on the basis of the laws of demand and supply.

In a nut shell, these laws principally imply that more the demand for a particular property, the more is the cost of the property, and hence the high real estate cost in New York City or other desirable places. Conversely, when the demand is less, so is the cost of the property.
Usually, the supply side of the graph also affects the cost side of a commodity. However, the supply side is absent for the real estate market as let’s face it, we cannot produce land and we also cannot increase the land area of earth (beyond a certain extent).

The reason that the real estate market collapsed in the United States, in the last couple of years was because of the sub-prime lending and the recession. There are a lot of factors to blame.

When the sub-prime crisis led to the recession, foreclosure and bankruptcy become rampant and people even resorted to short sale. In such a case, the market saw time where the properties were sold or were valued for much lesser than their prior valuation.
Further due to the drastic fall in the economy due to nationwide job cuts, unemployment and salary delays, it meant that the demand for properties dwindled even further, decreasing the market prices.
After the end of the recession, as of now, bad credit scores, unemployment and a general decrease in the growth rate of the economy have affected the real estate and mortgage markets.
As of now, in 2012, reports from several industry specific magazines and sources have indicated that foreclosures in 2011 were lesser than the previous year. So, it can be believed that this year will propel the real estate sector, faster than ever.

Owing to the general negative atmosphere regarding investments in property and difficulty in availability of capital to buy the property, real estate markets have shown a relatively slower trend. Nevertheless, under the guidance of expert brokers, dealers, best property deals are still very much possible. By properly analyzing budget, chalking out a timeline to buy the property and planning carefully about the return on investment, one can make successful deals. However, some questions like the kind of real estate one should invest or how is the investment to be done, must be pondered. Let us understand more about them.

Insights into the Real Estate Market

Some common trends of the real estate investments have been suggested in the following paragraphs.

1. Mortgage Loan Trends
Now when you consider investing in the real estate, you will have to obviously take a mortgage. In such a case, the common problem that is usually faced today by a number of people is that lenders simply refuse to grant loans owing to falling real estates market rates. In such a case there are two good alternatives which would help you to get a loan: proof of steady income and a really good credit report, with a rating that goes beyond 600 or 650. Apart from these two conditions, make it a point to purchase a real estate, in a locality where price fluctuations have been relatively low.

2. Smaller and More Compact Homes
The usual market trend of the larger suburban homes, has given away to smaller compact homes and in certain cases, even apartments. Hence, buying a villa or a large house and then, separating its rooms into independent units and selling them or even better, renting them out is a great option. Of recent, houses and bungalows which are quite nearer to the cities and urban areas are being torn down and converted into big apartment complexes with the intention of selling or renting the property.

3. Buying Foreclosed and Short Sold Homes
Purchasing and using short sold homes always proves to be beneficial, there is only one problem which would be experienced. Foreclosure or short sale would usually bring down the market prices and values of all the real estates in the given area, and it would be a couple of years before the price rises. Assess the economic premise of the real estate for clues such as crime-free or beautiful locality or even proximity to commercially important places such as business avenues or prominent business complexes because such properties tend to have good value projections.

As the value of real estate is determined on the basis of demand and supply, you need to worry about the value rise of property. Since the world population is always on the rise and the real estate supply is limited, the price or value of your real estate is bound to go up in years to follow. The rate of rise however, differs quite a bit. Actually, this factor makes the real estate one of the best investments.

While buying any real estate, think and analyze the situation of the real estate, also analyze the locality and the geographical location in which it is located. Such things often serve to be great pin-pointers as to the value projections of the real estate.
By Scholasticus K
Read more at Buzzle: http://www.buzzle.com/articles/best-real-estate-investments-for2011.html

Categories
Commercial real estate

Investing in Real Estate for Retirement

Over the last few years, the interest rates of various investments have fallen and despite all the attempts taken to make the economy stable, millions of people had to extend their work years just to maintain the minimum standard of living. Yes, everything lost has its value, but one asset has only risen in spite of this recession – real estate. Most people dream about spending their retirement period in a calm and quiet place. A place where the crime rate is low and the entire surrounding is filled with intelligent people who are just living the much-needed peaceful and retired life. However, all these dreams can only turn into reality if an individual makes intelligent decisions regarding his/her investments.

How to Invest in Real Estate for Retirement

There’s no doubt that investing in real estate is a smart move, but it is advised to check out all the loopholes before putting money in a piece of property. Buying real estate is more than just living on a piece of land. The practice of property selling and buying has become a popular practice over the last few years, and more and more people are joining this bandwagon. Yes, the real estate market has plenty of lucrative opportunities for investors, but sometimes dealing in real estate can be more complicated than dealing in stocks and bonds. In this piece of information, we understand different and safer ways of investing money for real estate.

Giving on Rent
An vacant, habitable house can rented to a tenant for a considerable period of time. The owner pays for its maintenance, mortgage and various additional taxes. The rent on the property is usually decided on the basis of its location. The land owner earns a fixed income every month which is known as rent. In due course of time many landowners charge more rent in order to gain more profit. However, the best thing to do is to charge rent which would be enough to cover the mortgage payment. Plus the value of the property is likely to have appreciated with time. As soon as the tenant moves out due to various reasons, it is advised to put up the property on the market to earn additional profits.

Real Estate Trading
This is perhaps the fastest form of making money in the market of real estates. In real estate trading, the traders buy properties from owners with the motive of holding them temporarily and selling them for a better profit later. This practice is also called ‘Flipping Properties’ and traders who follow this usually purchase properties which are highly undervalued or are very high-priced. In some cases, when traders purchase a low priced property, they try to increase its value by doing some renovations on the property. This customization can actually result into a huge profit for the trader.

REITs
One of the most easiest ways of investing in real estate is putting money in the Real Estate Investment Fund (REIT’s). A RIET is created when a trust or a corporation uses the investor’s money to buy and operate properties. RIET’s function just like stock trade. The trust or corporation has to pay out 90% of all its taxable profits in the form of dividends to its various investors. By paying the dividends, the REIT is exempted from paying corporate income tax. RIET is the perfect choice for people who want to earn regular income.

401 (k)
Most people believe that the money saved through the 401 (k) plan is simply for retirement. However, there are some smart investors who have figured out ways to invest in real estate without disturbing the money saved for retirement. 401 (k) account holders can take out a loan against their account. The money which comes from the loan can be used to buy real estate. However, there are some limitations which come with the loan. First and foremost, there’s a cap on the amount which can be borrowed. Normally the cap is of $50,000 but it can be less depending on the money in the 401 (k) account of an individual. Another thing to remember is that real estate purchased through this method is not eligible for any tax benefits.

Roth IRA
Almost everyone in the US knows about the Roth IRA (Individual Retirement Account), it is a great form of investment and is non taxable. People who open an IRA account deposit some money from their salary in the IRA for retirement. In some companies the employer deducts some part of the salary and deposits it in the IRA of the employee. The good news here is people can use the IRA money to invest in real estate. Let’s make it more simple; If you have $50,000 in your IRA account and you want to purchase a property which is priced at $100,000. You can put in $50,000 of your own money and put in more $50,000 from the IRA. This makes your IRA account nil but you can put back that $50,000 once you sell that property at a better rate.

For legal advice regarding these investments, it’s necessary to get in touch with your attorney.

Investing money in real estate for retirement is a good idea if the investor keeps himself/herself updated with the latest regulations and strategies of the market. Real estate is perhaps the best way of earning easy money in retirement but before the game of investment begins it is a good idea to know all the rules.
By Kulbhushaan Raghuvanshi
Read more at Buzzle: http://www.buzzle.com/articles/investing-in-real-estate-for-retirement.html

Categories
Commercial real estate

Investing in Commercial Property

In the aftermath of the real estate property market meltdown, people were naturally averse to taking risks, by investing in residential and commercial property. As a seasoned investor would advise you, in such bearish times, there are a lot of opportunities to take advantage of. With the real estate prices hitting rock bottom in recent times, many properties can be bought, at a fraction of the price they would have earned during boom time. While there is substantial amount of risk involved in buying commercial property, with proper research and wise choice, there’s profit to be made. At the outset, let me expound some of the advantages of investing in properties of the commercial kind.

Advantages of Investing in Commercial Property

Commercial properties primarily include office spaces, shops, storage warehouses, industrial spaces or any other piece of real estate that is leased out or used for commercial purposes. Location and space are two of the prime requirements of businesses and leasing a property is a much more affordable option for them, instead of buying it. This presents commercial property investors with an opportunity to make substantial profits.

One of the prime advantages of investing in commercial properties are the long leases and high rent that owners can earn. Compared to residential properties, commercial ones tend to maintained a lot more professionally, which automatically reduces expenses. The high percentage of return on investment, in excess of 8% to 9%, justifies commercial real estate investment.

Properties in prime locations can expect an annual hike of 3% to 4% in rent, which guarantees higher returns in the future. By handing over the maintenance and administration to a commercial property management firm, you can simplify your life and reap profits in the long term. Commercial property that are located in prime business zones are always in demand and hence you can expect a decent resale value in the future, when the prices in that locality appreciate substantially.

Commercial Property Investment Tips

You need to appreciate the prime importance of ‘Location’, when it comes to investing in commercial real estate. Businesses are looking for office, shop spaces, warehouses with all the necessary amenities and resources in their vicinity. So choosing a commercial space in the right location is the first important thing and it requires a substantial amount of market research to find such properties. You will have to network with real estate agents, who have a database of such properties on sale.

Decide on how much you are willing to invest, which will automatically limit your choices and help you focus on what kind of properties you can afford to invest in. Once you have shortlisted a few properties, determine the asking price and the projected returns through lease, after accounting the maintenance and taxation costs. If you are thinking of buying commercial property and plan to arrange for the investment corpus through a mortgage loan, do the math and determine the profits you will gain in the future after maintenance costs and loan installments. If the math shows you that the investment is a feasible one and you are guaranteed that your principal is safe with decent returns, go for it!

If you have a commercial space in a prime location, there is always going to be demand from businesses and the chances of your investment being highly profitable are higher. Work out the yearly maintenance costs for the property, research every aspect of the investment thoroughly before going ahead. Here’s me wishing you all the very best for your commercial property investment endeavors!
By Omkar Phatak
Read more at Buzzle: http://www.buzzle.com/articles/investing-in-commercial-property.html

Categories
Commercial real estate

How to Start Investing in Real Estate

Real estate has always been a good investment option. It is also a much safer option compared to other forms of investment such as the stock market. However, before you invest your hard-earned money, it is necessary that you are aware of the risks and expected returns from the investment. So, this article will give you some pointers on how you can go about beginning your foray into the real estate business.

Market Study
If you wish to invest in real estate, but have a limited budget, then conduct a thorough market research to know about attractive investment opportunities. By doing a careful study, you will understand which property deal suits you the best and will generate the maximum returns.

Fix Your Budget
First fix the budget for your realty investments. Decide what is your investment capacity first. Before you decide the amount to be invested, take into consideration factors such as your annual income, current liabilities, monthly expenses, etc.

Finalize the Type of Property
There are different kinds of properties you can choose from. Apartments, row houses, independent villas, bungalows, penthouses, offices, shops, residential plots or commercial land are some options which you can explore. Be aware that commercial establishments will cost much more than the residential ones.

Finalize the Location
Location plays a crucial role in all kinds of real state investments. Whether you get good returns for your property will depend on where your estate is located. So, study the areas in the city and find out the current property rates and scope for further price appreciation there. Ideally, you can try to invest in upcoming locations where you can get properties at cheap prices.

Check the Developer’s Reputation
Checking the reputation of the property developer/builder from whom you will be purchasing the property is extremely important. You should buy a property from a developer who has a good track record of delivering properties on time and having the best construction standards and quality in the real estate industry. Make sure that the developer has followed all the necessary laws while constructing the project and there are no controversies and legal hassles.

Check the Plan
The next step is to check the floor plans with the developer. Visit the developer and understand each and every minute detail and specification of the project. Take along a property agent/realtor whom you know so that he can guide you in your property selection.

Get Finance from Lenders
Real estate is one of the biggest investment options in the life of any person and a lot of money is required for that. So, you might feel the need for finance and hence you should approach top banks with your income and personal information details. Also take the project details to get your loan sanctioned easily.

One way to invest in real estate is by selling a property you own and buying a new one for higher returns. So use these tips and some advice from an expert before you dabble in the world of real estate.
By Charlie S
Read more at Buzzle: http://www.buzzle.com/articles/how-to-start-investing-in-real-estate.html

Categories
Commercial real estate

Real Estate Vs. Stock Market Investing

Recently in the Forbes magazine, I came across, a delightful term, ‘accepted wisdom’. My interpretation is that accepted wisdom is something that is handed out, free of cost, and is irrational and illogical. But here, I will provide some insights that are based upon logic, not on accepted wisdom and certainly not my personal wisdom that are sure to help you tackle your dilemma about investing in real estate or stocks. The problem with both the fields is that you cannot set an arithmetic equation which is 100% correct, to ascertain the rate of return on investment that you would receive. Hence the confusion and dilemma, as both options seem equally pleasing and at the same time uncertain. Well, every channel of investment has its own pros and cons.

Investing in Real Estate

When clearing the dilemma about where to invest – real estate or stock market, you must have a time frame in your mind. The time frame for any kind of real estate investment ranges from 7 to 30 years depending upon the size and the purchase cost of the real estate. The actual amount invested in it would amount to about 15% or so of the equity value of the real estate. To gain a good return on the total invested amount, you will have to look for a real estate which has a rising equity value, that is the market value of the real estate should be on the rise. So here’s how the usual mechanism works out:

First off you will have to finalize the actual property or what kind of real estate you are looking for. It can be anything right from bare and barren land to a studio apartment.
Now, when you try to find and finalize the type of real estate there are some very essential factors which you would have to consider. How safe is the neighborhood?, is a prominent factor of these. A safe neighborhood means a rise in the equity value of the investment in future. Similarly, a huge mall nearby, means a rise in the equity of the real estate. A New Mount Rushmore like site in construction near your property, can bring rise in the equity.


Thirdly, you have to improve your credit score as the more is your credit score, the less would be the interest on the mortgage. The interest on mortgage plus charges such as closing costs and commissions are your only expenses in the total investment deal. Because the principal amount of the mortgage, which you would be borrowing and paying off in the mortgage loan, would be ultimately owned by you as the equity.
The only problem with such an investment, is that the rate at which the equity would grow is unpredictable. It can be very fast or at the same time quite stagnant.
This real estate can be used as money-maker in 3 ways. The first option is that you can rent it out to people. You can borrow loans and lines of credit by pledging the real estate and its equity as a collateral. Such loans are known as home equity loans and are personal loans. Lastly, you can sell off the property if the real estate prices in the locality sky rockets.

Let’s take a look at the probable pros and cons of this investment.

Cons: There is always a chance of facing foreclosure, however you have the option of short sale. Secondly, you have the liability of the mortgage loan for quite a long time period. Thirdly, the investment is in bulk, you can lose everything in one go in case of any financial crisis which might result into real estate price drops.
Pros: It’s a very secure investment and the chances of losing everything is very, very less. Secondly, if you have a well-paying secured job then getting and paying off the mortgage is not a big deal.

Best of all, if you are in your middle ages, 35+, with a well-paying job then this is a really, really good investment for you. Just make sure that you pay off the mortgage on time.

Investing in the Stock Market

The stock market is also another quite a good option, though there are a few disadvantages of this investment option. Again like the real estate, it’s impossible to figure out the rate of return on investment. A very nice word can be used to describe this investment, ‘dicey’ yet profitable. The thing that scares several people away from the stock market investments is that there is always a possibility that one might lose all the money invested. There are of course, several strategies and methods which are followed by the professional and institutional investors. The following are the basic mechanisms.

Now, when you invest into any stock related investment, you will need to consider the total commission, loads, charges and minimum balances that you will have to pay the brokers. The amount though small, if not complied with can incur dire and mortifying actions from the United States Securities and Exchange Commission. Hence making appropriate and effective provisions for such charges is an absolute necessity. Again note, compliance is of negligible cost.
Now, the basic trick of the trade, to make money though the stock market is to buy the stock at lower market price and sell it at a higher one. This shall always be your basic motive of trade, buy at the lowest possible and sell at the highest possible. Now, you would have to keep a watch on the stocks which you buy on a daily basis for this purpose.
Secondly, you can also buy stocks which remain really stable yet, give a pretty good dividend.
Lastly, it is also necessary to obtain a good overall yield. A yield is chiefly, the total of the dividends that you received from a said investment plus the total sales value of stock minus the price at which you bought the stock. Now, it goes without saying that the dividend plus sale price of the stock should exceed the purchase price substantially.
The best way to attain the aforementioned objectives is to research continuously about the stocks, on company websites, stock exchange websites, economic news, etc. Being well aware would substantially help you purchase and sell at the right time and price.

Let’s take a look at the pros and cons of this investment option.

Cons: There is a possibility that you may lose everything that you have invested as, prices rise and fall rather quickly in stock markets. Secondly, you have to keep on updating your knowledge non stop and round the clock.
Pros: In comparison to the mortgage, you invest relatively low volumes in the stock markets. Yet you can have substantial rate of returns. Secondly, you do not have a prolonged liability on your balance sheet.

If you are in your twenties, then this is the best investment for you as you can take the risk of trading. In such a case, you can afford to take such a risk. If the investment fails you then you will still have ample time in your life to recover from it than an investor past his 50’s.

Before you invest, there are two things that you need to consider. Firstly, is the stock is worth investing in, and which one is better for me. Secondly, can I take up other options such as annuities or mutual funds and still get similar (equal) rate of return on investment.
By Scholasticus K
Read more at Buzzle: http://www.buzzle.com/articles/where-to-invest-real-estate-or-stock-market.html

Categories
Commercial real estate

Property Investment For Beginners

Traditionally, one of the best high return investment options has been investment of money in real estate. While the property prices may go up and down in the short term, over the long term, they have always appreciated substantially. The ownership of a piece of land is an investment you can eventually bank upon, as it acquires value through development of the areas in its vicinity. With the falling of property prices, many people will advise you to stay away from investing in real estate. However, if you look at it from a different perspective, you will see opportunity in this situation.

Properties which were once beyond your budget reach are suddenly within your range. For those of you who have been smart enough to save money throughout the past bearish decade, now is the time to invest and take advantage of the opportunity, which has presented itself. In this Buzzle article, I shall share some tips on real estate investment for those of you, who are smart enough to recognize the opportunity this recessionary background has presented.

Tips on Property Investment for Beginners

Any investment comes with its share of risks, which cannot be entirely eliminated but lessened through research and planning. Same goes with real estate investment. You have to do your homework and get your research right to end up on the winning side. Here are some tips for beginners.

Know about the Range of Real Estate Investment Options
Firstly, you need to begin with a study of the varied range of investment options in real estate, which you may consider. You may invest in buying residential houses, commercial properties, condos, apartments or purely specialize in land investment. There are a lot of options out there and you need to consider the entire range, to decide which would ideally suit your investment budget and align with your future plans.

Invest to Sell or Invest to Rent out Properties
There is the important decision of deciding whether you buy to rent or buy to sell again for a profit. The former option is open, if you buy residential properties. You can create a regular income source for yourself by investing in rental property.

Otherwise, you also have the option of entering the house flipping business, which is buying old houses, renovating them and selling them back again for profit. You may buy a piece of commercial property, hold it till the prices rise and sell it to make a substantial profit.

It’s All About Location
Remember when it comes to property investment, it’s all about location. The price of any real estate property is largely a function of location. The localities decide the price range and therefore you need to research the price trends according to location, before you make a purchase.

Research & Do the Math
Once you have decided on what kind of property you plan to buy, what purpose you intend to buy it for and are clear about the amount of money you are willing to spend, start researching real estate listings to find properties that fit the bill. Calculate the returns you plan to gain from the investment and the amount of mortgage loans you can afford to apply for.

Networking With Real Estate Agents
A real estate agent can make your job easier in finding properties that are exactly what you are looking for. Creating a good network of real estate agents who can point you towards good investment properties is essential. Real estate brokers can handle the legal affairs associated with purchase and sale of property for you. They can make an offer to owners on your behalf and negotiate on your behalf.

Making Financial Arrangements for the Investment
Once you have decided on the property and made an offer, you need to arrange for the money you plan to invest. A pooling up of your own savings and a mortgage loan if needed, can cover the total investment amount. Talk to financial institutions and mortgage brokers for financing options.

The key to making good investment decisions in real estate, lies in research. For a property, the location is the most important aspect of consideration and all other points come later. Good location, with access to resources in its vicinity, creates an opportunity for eventual growth of property value. With a pooling in of your own savings and a mortgage loan, you can buy strategically located properties and rent them to generate revenue, or sell them as the prices appreciate substantially. You can’t eliminate risk, but minimize it by putting your money into properties with high potential of price appreciation. Get a good real estate agent to advise you and a mortgage broker to assist you in the arrangement of finance.
By Omkar Phatak
Read more at Buzzle: http://www.buzzle.com/articles/property-investment-for-beginners.html

Categories
Commercial real estate

Investment Property Financing

Have you ever considered real estate investment as a measure to generate capital gains or rental income? An investment property promises good appreciation in the coming years and a lot of people are applying with banks, mortgage money lenders, etc., in order to finance their investments. Loans are the most common forms of investment property financing. There might be cases when one is able to borrow from family and friends, but more often that not banks and private money lending agencies are the institutions one looks forward to while thinking about financing a property. There might be some real estate investors who have got enough funds to buy the property outright, but a majority of prospective investors look for the various sources of financing.

Investment Property Financing : A Few Guidelines

While you may be all excited about owning properties and increasing your monthly income, there are certain strategies that you should know before obtaining an investment loan. Some of these strategies are

Knowing the purpose are you borrowing the money for. While talking to your lender make sure that you reveal the true motive behind the financing. If it is a second home or you want to put it up on rent, let the lender know about it.
While calculating the mortgage payments, the plan of action for most people is that they pay off the monthly installments through the rent they receive. While this is good business planning, things can go wrong if you are not able to find a tenant. So, ensure that you are in a position to pay regularly from your funds so that things like foreclosure, bad credit rating etc., can be kept at bay.


The sub-prime crisis has made the financing of the down payment a bit difficult, however if you have a good credit score or can put up a collateral, then the down payment would not be that big a concern. You can also use the equity in the house for making a down payment.
A small chink in the armor can make things complicated. So, before obtaining the loan, carefully check your IRS returns, credit card statements, other debts etc.
If you are fairly new to real estate investment, take advice from realtors or mortgage professionals who can guide you with various financing options. Once you are all versed with all the rules of the game, then you can start with the investments on your own.
Try to see if you can get a pre approved loan. Pre-approved loans save time and money and also instill the confidence in the property dealer that his property won’t be tied up in case it takes time for you to get the loan approved.

There are various options available for people who are considering investing in real estate properties. Some of the available options are line of credit loans and standard loans.

Line of Credit Loans: These loans can be thought of as the maximum money that a bank lends to an individual without requiring additional approvals. Having a line of credit entitles you to take several loans over a period of time without going through the approval process again. For example, instead of applying for a $100,000 loan once, a person with a line of credit can borrow $50,000 once and another $50,000 next time without going through the process associated with the approval of the loan.

Standard Loans: Well, these are the most common forms of investment property finance where you meet with a bank official to check what rate he offers you. If you feel that you are getting a fair deal, then you can either take up the loan with either fixed or variable rate of interest. It is very important to do a bit of research before considering an investment. The research should include the location of the property you are interested in and whether the property has the potential to bring you a good profit. Apart from this, you should also check the affordability of the loan the rate of interest that you will be charged.
By Rahul Pandita
Read more at Buzzle: http://www.buzzle.com/articles/investment-property-financing.html

Categories
Commercial real estate

How to Buy Commercial Property With No Money Down

About two decades ago, if you did not have 20% of the down payment for buying a property, not many banks would have entertained your mortgage application. But times and changed and how. Today a down payment of around 5% is good enough to buy a commercial property. But is a zero down payment realistic? The answer is yes, but it has its own baggage of certain terms and conditions. Read on to know more.

Seller Financing
Suppose, a property is evaluated at $100,000. You sit down with the bank officials to discuss the interest rates, repayment plans, foreclosure charges etc. The bank is willing to finance 90% of the total amount, leaving you with round about $10,000 as a down payment. What if you propose a second loan of $10,000 at a higher interest rate. If you have a decent credit rating and are willing to pay a little higher interest rate, the bank might finance your down payment, with you buying the property without paying a single dime as down payment. But, you have to keep in mind that every month you would be liable to pay monthly installments on both the loans, and it may take a huge chunk out of your salary. Also, personal loans charge the higher interest rates – roughly around 20%, and you will have to pay a lot extra than you would have taken.

Rural Development Plans
Another way of buying a commercial property is to apply with the USDA rural development plans. It provides you with 100% financing for your home purchases and one does not need to be a first time buyer to qualify. Some of the benefits of buying a home this way is that there is no cap on the purchase limit and you can include the repairs and improvements in your loan. The property that you want to buy should be in a qualifying area as per the USDA rural development guidelines.

Veteran Affairs Loans
Veteran affairs loans allow veterans to buy mortgages with no money down. One has to meet all the requirements set up by the United States Department of Veteran Affairs. People who are eligible for VA loans are veterans, active duty personnel, National Guard members and some surviving spouses. You need to have documented proofs to apply for a VA loan.

These were some options for you if you are thinking of buying a property with little or no initial payment. If you are eligible for a no down payment mortgage loan, should you go for it? You should definitely think about it, but before doing that, it is essential that you have a clarity on its disadvantages.

Disadvantages

If you do not pay anything up while buying a property, you are definitely going to pay higher mortgage rates and your monthly payments would also be higher.
When you buy a property with zero down-payment, you would not get all the choices to make, and you may need to make a few compromises.

The sub-prime crisis was a result of too many people taking mortgage loan and then defaulting on their payments. While a zero down-payment may work for people who are spending more money by paying rents etc., one should carefully think about all the pros and cons of a zero down-payment loan before taking one up. I hope this article would have helped you to know how to buy commercial property with no money down and its financial implications.

By Rahul Pandita
Read more at Buzzle: http://www.buzzle.com/articles/how-to-buy-commercial-property-with-no-money-down.html

Categories
Commercial real estate

Cash on Cash Return

Every investment is only as much worth as the return it generates for you. In every business, you have to evaluate profitability if you want to have any hopes of staying afloat. More importantly, you need to calculate the cash inflow for every investment you make. When it comes to real estate investment, one way of knowing the profit generated from a venture is to calculate the cash on cash return percentage.

Of all the investments you will make in your lifetime, one of the most important ones is real estate investments. If you have bought a property, not as a home, but as a pure financial investment, you need to evaluate the cash return that it is generating for you. Cash on cash return is a ratio that will help you understand the profitability of any of your real estate investments.

What is Cash on Cash Return?

It is the ratio of the profit or cash flow generated by a property and the amount of net investment made in it, multiplied by 100. The cash flow or profit generated, which is used in its calculation, does not include taxes charged on the returns. That is, the profit considered is before taxes. Thus it is the percentage of cash that is recovered from your initial investment in a property.

This calculated ratio is mostly considered only a year after the purchase of a property. That is, it is only an estimate of the fresh profit generated a year after property purchase. It is not an accurate estimate for later years as it doesn’t take the time factor into consideration.

Most importantly, this ratio doesn’t consider the appreciation in price of property that may happen with time. Even though a property might be generating meager cash flow, its inherent worth might have increased with time. Cash on cash return percentage does not take this fact into consideration. That’s why, it is not the ultimate indicator of the profitability of any property investment. It can only provide you with an idea about the profit you are making through rental properties from any other business related to it.

Calculation

Let me present you with the associated calculation formula. The above definition itself, must have made it quite clear. The formula is as follows:

Cash on Cash Return = [Net Cash Inflow (Before Taxes) / Total Cash Investment] x 100

So if one has made a $160,000 investment in a property and you receive a $20,000 cash return in one year, the percentage would be:

Cash on Cash Return = ($20,000 / $160,000) x 100 = 12.5%

Thus, calculating the return ratio can provide you with an idea about the profitability of your real estate investments. The higher the return ratio, faster you will recover your initial investment in a property. Properties with a low ratio are a liability, unless their value is progressively increasing in the property market. A periodic evaluation of your investment returns is essential. Hope this article has clarified your understanding of this financial concept applied in real estate investment evaluation.
By Omkar Phatak
Read more at Buzzle: http://www.buzzle.com/articles/cash-on-cash-return.html

Categories
Commercial real estate

Investment Property Advice

Investing in a property is a popular trend followed by many people these days. The real estate market is on its peak and land prices are not only sky high but are continuously increasing day by day. And this is the reason why many people are investing in properties so that they can reap greater benefits in future. With increasing land prices, the cost of infrastructure development and construction is also on the rise so investing in property is considered as a smart choice today. If you too have some great savings and are planning to invest in a property then read this article further. This article shares some real estate property investment advice with you.

Investment Property Info

Before you buy or invest in any property you must consider the following things carefully:

Kind of Property
You also have to decide about which kind of property you wish to invest in, commercial or residential property. If you wish to use the property as a office or business center then go for commercial property. If you just thinking of an investment then residential property is a good option.

Location of the Property
Where the property is located matters a great deal. In prime locations rates can be very high so think again if you are really going to get any benefit by investing so much. In the same price you can invest in a suburban area. One of the important commercial property advice is that you also have to think about the property in terms of maintenance and surveillance. If the location suits your purpose then go for it.

Property Search
Once you finalize the primary things you have to understand the market completely through good market research. Take the estimates of all the properties you are interested in and compare all of them. Check how many of them suit your budget, purpose, and future plans aptly. You may have to establish contacts with people from the industry, such as real estate agents, builders, contractors, real estate attorneys, and other investors, etc., to get the detailed insights about the properties that interest you. You can also go for an online property search option to help you further.

Financial Management
Once you decide on the property, you have to manage your finances. First, you have to analyze your own bank balance. Make sure that even if you invest your savings, it should not affect your current and daily requirements. You can also think of taking a real estate loan but it should not put a lot of burden on your existing financial condition. You also have the option of investing jointly. You can go for joint venture with your friends and colleagues. You may consult your financial advisor who may suggest some better real estate financing ideas tailored to your needs.

Consult the Experts
This is one of the best investment advice I can give you. Each state has different land and property laws so to be aware of the nuances of property investments. It is advisable that you consult your investment advisor who will provide you with detailed information about the pros and cons of buying a certain property, be it a commercial property or a residential one.

These were some of the crucial factors that any investment advice will include. Given below are some of the investment property tips that would help you for a safe and rewarding investment.

Be aware of the legal issues concerned with the property.
Evaluate the revenue potential of the property.
Also check if the property is subject to any socioeconomic, demographic and financial trends.
Make sure that the construction quality is good and durable.
Understand the details of the property such as total area, FSI, amenities, maintenance cost, taxes, etc.
Use the equity from your other properties if possible.
Go through all the legal documents carefully before signing the contract.
Visit the location of the property at least twice before you invest.

With the above tips you know how to buy investment property. I am sure this property investment advice will help you make a safe property investment.
By Geeta Dhavale
Read more at Buzzle: http://www.buzzle.com/articles/investment-property-advice.html