Sunday, June 29, 2008
The foremost benefit of real estate investments is it is a steadily rising market as compared to the speculative stock market with its ups and downs. It is too well-known to need any reiteration that the stock markets range from quick highs to sudden drops. One can assert, without any fear of contradiction, that there is no other market is as profitable with such a low level of risk as investment real estate market. Since real estate investing is extremely profitable and equally safe, a large amount of amateur investors are entering the real estate market everyday. Almost every traditional investment opportunity requires the investor to have an excellent credit rating. In addition to an excellent credit rating, a real estate investor needs a fair amount of money for down payment.
The biggest incentive is the United States government has setup multiple tax breaks for real estate investors including the very popular 1031 exchange that states: "A 1031 exchange or Like kind exchange is defined by section 1031 of the Internal Revenue Code. This code specifies that if an asset, usually some form of real estate (i.e. land or a building), is sold and the proceeds of the sale are then reinvested in a like kind of an asset. By this occurring no gain or loss is recognized, allowing the deferment of capital gains taxes." The simple explanation of 1031 is that as long as you reinvest the money you made from your real estate investment into another investment you are not required to pay taxes on said profit. This makes a real estate opportunity a highly attractive proposition and it is evident that no other form of investment offers you such freedom with taxes.
There are potential rewards and the effort you put forth can yield disproportionately large monetary returns on your investment bringing in an attractive ROI. Please remember to acquire as much experience as you possibly can if you become an investment real estate investor or choose investment real estate as a career. Your confidence level will substantially increase when you have gained some experience and successfully closed the first few real estate deals. But, do not be carried away by any initial euphoria but continue to learn about real estate investing and learn to develop your investment skills by getting real world experience. In a short time you may find yourself managing a profitable and growing real estate portfolio of investment properties.
Do not fail to take advantage of outside finance as banks are willingly coming forward to lend money to buy houses. This is because unlike other forms of investing, banks have enough money to keep if you decide to foreclose. Banks are usually not as willing to give loans for stock or gold investing because the value of your stocks may dwindle by the time you sell them. And gold prices fluctuate. The worth of real estate, on the other hand, is always steady and may increase in value every year. Several hundreds of lucrative real estate investment opportunities are available in the market and with a little experience, knowledge, and desire, you can exploit them.
There is no denying the fact that real estate is today becoming a fast-paced and rewarding business proposition. Due to the high dollar amount of home sales, agents commissions are often very high which is what drives so many new people to into real estate every year. When you compare the time and money you spend for getting a real estate license, the potential yearly income you will make as a real estate agent, is formidable.
Wednesday, June 25, 2008
The question that obviously arises is why the lender should be willing to accept such a discount. One reason is banks or lending agencies do not like excess inventory and bad loans on their books. Thus, when they get a chance to sell the property without a huge loss, they may as well do it. Secondly, lenders are fully aware they could be bigger losers if the property goes to auction. They feel would be better off accepting the discount rather than the cumbersome route of auction.
Foreclosures are steadily on the increase, which means more and more opportunities for the real estate investor. It is advisable to accomplish a short sale when the property is in the pre-foreclosure stage.
One can visualize two different stages within pre-foreclosure. The first stage is when borrowers are behind on payments and the second stage is when those behind on payments are facing a notice of default. In order for you to successfully get a short sale, you must seek the homeowners who are in the second stage of pre-foreclosure. Once the notice of default has been recorded, banks also become agitated and so you are more likely to get a discount. All mortgages can be discounted immaterial what type of condition the property is in. You should more appropriately perform a short sale on the houses that need renovation and repairs because lenders will be more forthcoming in offering bigger discount.
However, foreclosure investment in real estate is not without its pitfalls. Foreclosure investing is certainly not a good approach for beginners. It is more for investors who have at least a couple of years' experience in real estate market. The profits from foreclosure investing are bound to be huge and that makes foreclosures attractive. But one disastrous foreclosure investment can wipe out your capital and your enthusiasm for all future investments.
There are three stages to buying properties in foreclosure process - buying at the pre-foreclosures, buying at the foreclosure auction, and buying from lender post the foreclosure sale. If you buy from the property owner before it goes to auction, you will be a beneficiary. Buying at the auction means if nobody bids, the lender gets the property. Buying from the lender after the auction is called buying REO (real estate owned) or Repossession. REO is less risky than in buying at the auction as REO is somewhat similar to a regular sale. The foreclosure purchase can also be risky. A pre-foreclosure seller might be desperate and mislead you about the condition of the property and the neighborhood. There might also be liens on the property that the seller may claim he forgot to mention. The big utility bills become the buyer's responsibility if the pre-foreclosure investor failed to check them out.