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Investment InformationFinance Your Real Estate Investment Properties
by:
Peter Dobler
Copyright 2005 Peter Dobler
Unlike traditional act real estate mortgages, real estate investment funding is way much creative and offers much options than you think. The golden rule in real estate investment is OPM (Other People’s Money).
I have enough money; shouldn’t I buy my real estate investment for cash? No, I perfectly proposal
against investment large sums of cash into a single real estate investment. There are two reasons why not. First, you give away most of your profits by not leverage your real estate investment. Second, it is far too risky to put every egg into one basket.
Let me explain the leverage issue for a moment. I wish give you an example of a $100,000 investment property that typically increases its value (appreciates) by 7% average a year. Possibly more, possibly less depending wherever
you live. Paying all cash for this property wish yield in a 7% appreciation profit plus the net profit from rental the place. Now you’re looking at roughly 15% of returns.
If you’re conservative with your investments you mightiness be satisfied with this kind of a return. These days you mightiness get equal or better returns with another conservative investments minus the hassle of being a landlord. But you don’t mind being a landlord, because you understand and utilize the leverage know-how
with funding your real estate investment.
With the example above you wish do roughly $15,000 a year in profits from your investment. Now let’s take a closer look at what leverage can do for you. Now a typical real estate capitalist
can get funding as high as 95% - 97% of the purchase price. On occasion 100% funding is accessible as well. But this would-be be wholly unfair in this example to compare this with all cash purchasing.
15% return sounds like a lot, but wait till you see this. Let’s assume that the rental financial gain
wish cover all your expenses including the mortgage payments. Taking the same example from before your net return would-be be the 7% appreciation profits of your property. This would-be translate into a $7,000 a year profit. With a 95% funding in place you would-be get $7,000 return on $5,000 (your 5% down payment) invested. This is a humongous 140%
return on investment.
With the same $100,000 you can go out there and get 20 investment properties, finance 95% of it and do an amazing $140,000 profit a year. This beats the projected $15,000 profits with an all cash dealing any day.
Of course you wish have a lot of trouble to get funding for 20 properties in a single year. Typically 5-6 new rental property mortgages are the maximum lenders wish allow these days. This is the signal to get creative with your funding structures.
In this case sellers funding would-be be your key to accomplish your goal of maximum leverage of your investment dollars. Despite the message from all these late night infomercials, marketer funding is harder to get than they want you to do believe it is.
It all depends on the seller’s ability to offer marketer funding and the seller’s motivation. Only just about 1 out of 20 properties for sale are able to get marketer financing. That means that there’s no mortgage balance on the property. From this narrow selection the marketer must be actuated to sell under these conditions. This could be tax reasons, time constraints, personal reasons and galore more.
As you can see this translates into a lot of activity to accomplish your goals. But let me tell you one thing. This separates the tire football player real estate investors from the real go-getters. Wouldn’t you agree that a little bit of hard activity and determination is well worth it to build a real estate empire?
I think it is well worth the trouble and hard work. At the end of the day you support building your real estate investment portfolio and sooner than later you wish be able to cash in.
Sincerely,
Peter Dobler
(c) 2005
Just just about the author:
Peter Dobler is a 20+ year veteran in the IT business. He is an active Real Estate Capitalist
and a booming Computer network business owner.
Discover much just about real estate investments at http://www.suncoastrenttoown.comor send a blank email to mailto:suncoastrenttoown@getresponse.com
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