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Question by jsnaughtywife: what is a broker for if you have a real estate agent?
in stead of century 21 on my sign and i wanted my business “bbw properties” would i have to hire a broker so i “a real estate agent” can sell my investment properties or just do it myself
Best answer:
Answer by hollywoodmelody
You must state that you are a licensed real estate agent in any transaction you do. All agents must work for a broker unless you have taken a brokers exam and have a license. You can have your sign read as follows so you won’t have any moral or ethics questions arise.
BBW Properties
Your Name
Your Phone Number
and then somewhere on the sign in small letters w/logo state Century 21.
What do you think? Answer below!
Have you ever noticed how buyers flock to purchase property in droves when real estate prices are at their peak, yet buyers are relatively scarce when prices are most affordable? Notwithstanding the fact that this occurrence defies the generally accepted investment strategy to “buy low and sell high”, one can’t help but wonder why attending social gatherings during the real estate boom years of 2005 and 2006 would inevitably lead to engaging in a conversation about someone’s real estate investment and the promise of future profits to be derived from the venture. It’s not all that surprising that many of those recently boasting about their real estate exploits have softened their tone while seasoned investors, dormant for the past six or seven years, have begun to once again start purchasing lucrative investment property. Despite news about the recent real estate and financial industry tribulations that the public is seemingly bombarded with every day, the last few months of 2008 provided a relatively quiet, yet dramatic, surge in real estate sales.
The National Association of REALTORS® (NAR) has reported that residential home sales have increased by an astonishing 115% when the last quarter of 2007 is compared against the same period for 2008. Have the experienced investors purchasing all of this property been ignorant to the steady stream of media reports warning of declines in real estate values? The answer is no, they have simply been waiting for the right time to emerge like a small swarm of locusts to steadily reap houses for sale like crop. In fact, their buying presence has been so prominent that national housing inventories of homes for sale have significantly decreased during 2008’s final quarter, a reliable sign that demand is beginning to once again catch up with supply.
But how do these brave souls know precisely when they are buying at the bottom of the market? Do they throw caution to the wind and simply force themselves to muster the courage to purchase property despite the fact that values may continue to decline in the future? The simple answer is that savvy real estate investors do not purchase property with the expectation of immediate appreciation in value. Rather, investment real estate should be purchased based on the property’s potential for positive cash-flow. Positive cash-flow occurs when a property’s rental income exceeds the owner’s costs to maintain the property. Consequently, when a property provides a positive cash-flow, a decline in real estate prices is of little concern since the owner can simply enjoy the income his property generates until the market revives and the property can be sold for further profit.
During the real estate boom years our nation became blindly infatuated with the appreciation of real estate prices, which represents the amount of value that a property will gain over time. So called house “flippers” brazenly leveraged money to buy numerous properties with the expectation that their values would increase, thus enabling them to sell the properties for handsome profits in a short period of time. These novice real estate quasi-moguls, often addicted to HGTV and other television shows created to promote the industry like Flipping Out and Flip This House, regularly failed to consider property cash-flows prior to making their purchases. Why bother when real estate values will always continue to appreciate, thereby alleviating the need to hold properties for long? After the housing bubble burst, many of these speculators realized that they shouldn’t have built their investment houses out of sticks, and social gatherings became pleasant once again.
Seasoned investors build their investments out of bricks by carefully and conservatively analyzing a property’s cash flow potential prior to purchasing. The primary reason that these investors have been sitting on the sidelines for many years is that most real estate prices have been far too high to generate positive cash-flows and a reasonable return on investment. It hasn’t been until recently that both residential and multi-family housing prices have retreated to levels where rental income will cover monthly mortgage payments and other operating costs. Further, with the construction of new housing and apartments decreasing to a virtual halt, a still rapidly growing local population, and many families displaced from foreclosed properties, an investment property’s owner is free to choose from a tenant base that is now stronger than ever. One can clearly see why a decline in real estate sales prices typically accompanies an increase in monthly rental prices.
No matter what the year 2009 holds in store for real estate investing, it is essential to remember that investing in real estate should always be considered over a long term. Although the opportunity for a “quick flip” may present itself, the distinguishing benefit to sound real estate investments is their ability to provide income no matter what the economy throws your way.
Written by GlOcK99
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It’s interesting how rental real estate gets treated as an investment. Like Rodney Dangerfield, it gets no respect. While conventional investments like stocks and bonds get the Financial Post and the Wall Street Journal, do a search on “how to purchase real estate” and you’ll discover all kinds of no-money down schemes that seem designed to sell books and tapes instead of investment real estate. On TV there is Report on Business TV, but for real estate you’ll see flipping shows or infomercials. It strikes me as pitiful that such a solid investment vehicle gets such a bad reputation.
It is possible to buy with no money down, but it involves arranging a high ratio mortgage, and for rental property you only do that if you have equity in other properties. In other words, if you’ve got one property free and clear its relatively easy to arrange a line of credit at prime. A 0,000 property would cost about 0 per month, plus taxes and maintenance of about 0. In short, it would carry itself and give you income to pay the financing costs.
A more common method to buy income real estate is with a deposit. Usually is you can make investment property itself with less than 40% down its probably a good deal. These kinds of properties are easier to come across in stable markets.
There are lots of reasons to own investment real estate.
Reason #1 to own income real estate is because your renters buy it for you. Even if the other benefits didn’t accrue, that on it’s own justifies the investment. But the fact is, there are more benefits to buying rental property
Reason #2 is leverage. The most effective description of how leverage works comes from the book Buy, Rent, Sell, by Lionel Needleman (Needleman is not a fast talker; in fact, he’s an accomplished author and professor with many published books and articles on housing in Great Britain and Canada. His assumptions and math is a bit simplistic, and need to be tweaked for your local market, but the book is worth looking at).
He explains leverage in the following manner: John and Mary each buy a property 0,000. After a year both houses have increased 10% in value. Both buyers sell the properties and compare the profits.
John began with 0,000, and now has 0,000, which means he has earned a 10% return on his investment. Mary, on the other hand, put ,000 down on her property, and mortgaged the balance for,000. When she sells she clears off the mortgage and totals everything. She also received a ,000 profit, but since she only invested ,000 in the income property, she’s made a 100% return on her down payment. As you may suspect, the real kicker is that while John invested in one house, kept it for a year and then sold it with a ,000 profit, Mary acquired 10 houses, kept them one year, and then sold them for a 0,000 profit. Both started out with 0,000, but after a year John has only got 0,000 while Mary ,000 more. The numbers are simplified in this example, but they decisively demonstrate the magic of leverage.
Reason #3 is taxes. In most tax zones costs incurred on investment real estate is comes off income. And, you can generally incur depreciation expense on the structure that in effect are paper losses that reduce the tax burden. Depreciation works like this: we know that the value of a durable item, like a structure, decreases with the years. Even if the property is maintained perfectly, an old house is not worth the same amount of money as a new house. This loss is depreciation, and you can use that depreciation loss to decrease the total tax payable.
Of course, when we invest in income property we expect that it will go up in price, and over the long run it often does. What occurs with the depreciation in that case? The tax collector was told the property fell in price through depreciation, but at the end of the process we sold at a profit. The taxman usually says that you’ve “re-captured” the depreciation and levy tax.
Re-capture is no fun. It’s like discovering that you’ve already spent the money that you intended on spending in the future.
There is a great solution. When you buy the investment you cut up the original investment between the building value and the property value. Without cheating you set the value of the land as low as possible and the structure as high as reasonable (do the math and you’ll see it pays to be reasonable on your splits). When the property goes up in price and you liquidate, you tell the taxman that you didn’t recapture any depreciation since the structure did depreciate, while the land increased in value. This profit is capital gain, and capital gain is usually taxed at lower rates than income like…rent. You depreciate the money you make when you earn it as rent, and pay tax on it when it comes from capital gain.
Owning income producing property also enables you to write off the costs of things that you might have bought anyway, from office supplies to a trip to see the property.
Reason #4 is capital gain. Capital gain doesn’t always happen, but it often does. As we’ve seen with leverage, the capital gain can be leveraged. Even better, the capital gain can, sometimes, be greater than what some folks earn in a year of work.
Reason #5 puts everything together by combining cash flow, leverage, and tax planning. Rental real estate generate cash flow. Initially the cash flow could be neutral or even negative, but after some time it will often becomes positive. When it does you need to pay income tax on the excess rent. The solution for that is to re-mortgage and incur additional interest cost, reducing your taxes. You also re-leverage your initial property. The next step is to take that money and buy another income property. You pay no income tax, incur more depreciation, and still earn a capital gain. Better yet, with two properties you spread the risk, and when the time comes to sell you can stretch out the timeline and sell the properties in different years to minimize tax.
It can’t be repeated enough that you need to buy income property wisely. You need to know the location and the potential tenant. Properties that are desirable and are in a desirable area stay rented. “Desirable” doesn’t have to be “mansion”, but warm, clean, dry and well priced are critical. Whether you buy a 1 bedroom apartment or a three bedroom house with a suite isn’t important.
Metrics are critical. The first is price-to-rent ratio. What that means is that you take the price, say 0,000, and divide the rent, say 00/month, into that. In this case the result would be 100. Numbers between 75 and 175 are great, but never forget that projected capital gains and interest rates impact what numbers you go with. Low interest rates permit higher numbers, and solid capital gain projections will demand higher numbers. Over 200 is no good in almost every location unless all you need is dependable income, aren’t concerned about capital gain or don’t ever plan to sell.
Another excellent metric is the break even rate. This is the percentage of the price need for a down payment to allow the realistic rent to carry the property. The rent has to be a) market rent, not “hoped for” rent, and b) net rent, not gross rent. If the investment will carry at less than 45% down its worth looking at. Clearly, if interest rates are low the net rent will carry more, meaning the break even rate can be high. Remember that low rates don’t last forever, so unless you can lock in very long term you have to assume that the break even rate to be low in low interest rate environments, and can be higher in higher interest rate environments.
If you discover a piece of property that has a desirable price to rent ratio and a desirable break even rate (and is in a good area and isn’t a bad idea), its worth throwing the numbers onto a spreadsheet and determining the internal rate of return (a real estate investment metric that combines various income streams) and projected cash on sale. There are spreadsheets and programs that can calculate this for you, but the key is “GIGO” – garbage in, garbage out. Use correct taxes, the correct interest rates, your projections of income tax rate, and realistic estimates of capital gain and maintenance. Properties in bustling urban areas generally go up in value more than properties in rural or depressed locales. They also often have what seem to be inferior metrics – a downtown city condo could have a much worse price to rent and break even point than small house in a mill town. However, capital appreciation in a rural area is likely much riskier. Measuring mortgage pay down and tax benefits on a detailed spreadsheet let’s you fairly evaluate exactly how competing investments compare.
It would be foolish to ignore the issue of a property bubble, or crash. Buying on metrics both helps and hinders. It helps because if you are hard-nosed with break even rates and rent multipliers you wouldn’t purchase overpriced investment property (underpriced income property doesn’t really turn up in a bubble, and it doesn’t crash in value). It hinders because you can’t buy on metrics in a bubble, no matter how much you want to, because metric compliant properties don’t exist.
The other side of this is that when a market crashes there are lots of metric compliant properties, but often little mortgage financing and plenty of scared buyers and stressed sellers.
All in all, a balanced market is the optimum for purchasers, although buyers who acquire on metrics and exit the market near the peak often feel like they’ve hit the jackpot.
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Written by Honestwiseguy30
hey guys, Im a keen philosopher, fitness obsessed, lover of enjoyment but in all still god fearing ( but never boring ) respect to those who respect
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Most real estate investors invest incorrectly or at a higher risk level than needed. As we have just seen through this gigantic mortgage fiasco and the failing of multiple banks most people buy properties with the hope that they will go up in value over time and do not take into account the financial implications this puts on themselves. That type of investment objective is considered capital gain investing, investing for increases in equity on your property based on an appraiser’s opinion of value. The other way to invest in real estate has more to do with strategic investing than capital gains and the value of the real estate you hold is based on how much cash flow it is producing for you relative to your investment, NOT the opinion of an appraiser.
Many investors come to me telling me that they want to be a real estate flipper and make huge wads of cash by flipping bank owned properties. Let me tell you first, that type of investing is definitely not a passive cash flow investment by any means and you will end up spending 70 hours a week trying to do it. It is also extremely specialized. You need to know your market very well and know what the appraiser’s opinion will be before buying the property. You also need to understand renovations, the closing process, the sale process, the lending process, and most importantly how to market to sell your properties very, very quickly (within 10 – 15 days). In order to sell that quickly you have to search and search and search for that one property where you can buy it cheap enough to be able to flip. This means typically going through and analyzing the market values, renovations and areas of over 100 properties before you find one good property. I ask many of the people I meet that are interested in wholesaling and flipping properties what their long term goals are. And guess what, their long term goal is to make enough money flipping properties to be able to buy enough property to have a cash flow stream coming to them to cover all of their expenses so they can be financially free. My answer to them is, “Did you know you can do that without having to flip properties and without having to build this massive savings to re-invest into cash flow real estate investments?” Most have never heard of such a thing.
In my opinion, the best way to invest in real estate is to invest in passive income first. But how do you do that without any money? How do you invest without the capital. Simple, you raise the capital. Instead of focusing on finding buyers, focus on finding capital investors to invest with you. Do you think it’s better for YOU and the INVESTOR to find and investor that has 0,000 for an investment or find a buyer that has 0,000 for an investment that you make ,000 on wholesaling it to them? Actually it’s better to raise the money, especially when you are dealing with real estate investments. There are many reasons for this.
First, when partnering with the investor with the capital you can structure the transaction where they get paid first, before you make money and you get paid based on your performance. This builds a significant amount of trust between you and the capital investor because you are making money when they make money instead of making money off of them. For example, assume you find a single family home that is worth 0,000 but you can buy for ,000 already fixed up with a tenant in place renting for ,000 you can structure the transaction as follows:
The investor gets a 6% return on investment before you get paid. Meaning they get 5 per month on their ,000 out of the rental income then you split the remainder 50/50. That would mean out of ,000 in monthly cash flow that nets 0 after all expenses you are getting 2.50/month (0 – 5 investor 6% return = 5 left x 50% = 2.50). I know 2.50 does not sound like a lot but look at it annually. You are now making ,950 per year in cash flow for as long as you hold the investment AND you own the property at 65% of the market value. On top of that your upside potential of the ,000 you would have made wholesaling the property is still there in equity, you didn’t lose it. If you were to hold for 10 years you would have made ,500 in cash flow assuming NO RENTAL INCREASES and if you sell in year 10 assuming only a 3% appreciation rate you would make close to ,000 on the sale. That means over the 10 years you made ,500 instead of ,000 and the investor that bought it made more money too so it’s a win, win scenario.
In addition, there are multiple tax benefits to holding property long term instead of flipping. You can take depreciation deductions against the income you produce in rental income making the cash flow taxed at a much lower rate. Also, if you flip property most likely you are going to pay short term capital gains rates which is one of the highest tax rates so you do not even get to keep your entire ,000 wholesale gain.
You get more tax benefits, the benefits of long term appreciation and have hedged your money against inflation (which let’s face it we all see coming very shortly and its already happening). You also get to collect passive cash flow (income that you do not have to work for) unlike wholesaling. Focusing on cash flow investing and raising capital for investments instead of finding buyers for wholesaling can make you very wealthy and can get you to your goal much more effectively than wholesaling. Most wholesalers are full time real estate investors because it takes a large amount of time to wholesale. If you are an investor and went to 2 networking events per week I can almost guarantee you that you can raise the capital for one deal per month in order to increase your passive income and slowly and effectively cover all of your expenses with that cash flow.
Think about it, if you raised capital for 1 investment per month and you were making 2.50 per month off of each investment property at the end of the first year you would have ,950 per month coming in cash flow. And that is if you do not have any money of your own into the deals. If you had 5,000 to invest you could easily buy 5 properties and automatically have ,250 per month coming which is a 12% return on your money and that is without using leverage. If you leverage your money with a loan from a bank you can increase your returns to above 25% very easily with very low risk as well.
The moral of the story is that cash flow investing is much more lucrative that trying to flip properties full time in the long run unless you are a professional real estate investor that has 70 hours a week to commit. Cash flow is the key to your real estate success, cash flow is what makes you financially free, cash flow is what keeps you financially stable during retirement and cash flow is what makes you more financially stable during economic turmoil like we are going through in the current economy. If you are going to focus on making money in real estate, focus on cash flow investing instead of a much riskier investment type, capital gains through flipping.
Written by Mathew Owens
California licensed CPA and full time real state investor. Read more of my articles at www.ocgproperties.com/wblog/
Foreign real estate investors who are interested in buying property worldwide find sufficient support in the economic fundamentals. The Canadainvestment property offers promising deals for those who want to make the real estate investments in Canada.The bleak state of the Global economy and the property trades worldwide makes the buying investment property in Canada a good option in comparison to investing your hard earned money in stock exchange or buying bonds.
Investment property market in Canada has the constancy and development potential that make the investing in Canada real estate highly profitable. The Canadian market’s highest level of transparency in world increases the interest level and confidence in the investments made by the interested people. Safety and stability of the Canadian investment property market attracts the foreigners buying investment properties in Canada. Even Canada has been ranked as the most profitable investment property market.
Canadahas emerged last year as a winner because of his brace escaped from the global economic crisis with minor cuts and bruises while many other countries are still being hit hard. With the result some of the world’s most influential economic thinkers, investors and leaders are on keen on visiting Canada to learn more about of its financial and banking industry.
This shows that among other 82 markets worldwide Canada real estate investments market is at par in terms of legal framework related top property investment, cross- border capital flows, market fundamentals and translation processes. In addition even the degrees of enforcement of private property rights are good in Canada. The occurrence of corruption inside the judiciary system is nominal and the ability of individuals and businesses to enforce contracts is as high as possible. These features make the Canadainvestment property as a positive venture and highly desirable for the foreign investors.
All the above mentioned factors make Canada’s investment propertyas a beneficial global property investment community. It has the minimal risk of buying, investment in property. Also the other profitable actors like higher average return on property investments also make Canadajoint venture property an added available option for the interested foreign investors.
So if you’re a foreign investor looking to earn profits, buy investment property abroad then Canada’s investment property market could be the right place for your investment.
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Written by daniellemillar
Question by connecticutwebuyhouses.com: What is the substitute of real estate investment?
Real estate is a legal term that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in location — immovable. in some situations the term “real estate” refers to the land and fixtures together, as distinguished from “real property,” referring to ownership of land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof. The real estate industry has taken the world by storm in the last decade or so. The large amount of constant upheaval and rapid changes that this sector has seen has had a considerable bearing on the world as well as local economies
The real estate is such a large term as defined above ,so i want to ask is there substitute of real estate investment ?
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Best answer:
Answer by Pierre O
Why would we need a substitute for Real Estate investment? Each investment type has advantages and disadvantages, which is what makes investing both challenging and rewarding when you get it right.
Granted that Real Estate investing has had significant ups and downs recently, but on a long term basis, and all investments should be viewed on long term basis except very safe ones, Real Estate still has the same advantages and disadvantages as before.
There are no substitutes, and there will not be any substitute, because we do not need one!
Add your own answer in the comments!
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