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(1) CONTROL- Many money managers will advise you to diversify your investments in paper assets such as mutual funds and cd’s. Yet as investors search for investments with lower risk, they increase the level of risk for themselves by investing mainly in mutual funds. The problem being you have no real control over the assets value since you can't renovate or improve its value like you would real estate. You can't control the risk of the quality like you could with real estate by using creative legal structuring, having proper insurance, or protecting yourself against economic cycles through positive cash flow. Due to the demand of control of the asset, mutual funds are some of the worst investments available. On the other hand, real estate can be controlled much easier by investing correctly in assets that are under market value with multiple exit strategies that help increase the return on the investment while decreasing the risk. An increase return on an investment does NOT have to mean an increase in risk.

(2) INFLATION- Paper assets do not have inflation protection. With all of the “funny money” the U.S. government has printed in the past couple of years our economy is in shambles. Just look at the price we pay for commodities and gasoline, inflation is already happening. People’s paper assets primarily stay the same while everything else goes up in value, so most investors are losing money and being left behind by not investing in assets that keep up with inflation. Real estate value generally goes up even though the demand for it stays the same thus keeping up with inflation, regardless of how much the dollar weakens. By investing in real estate you diversify into another quality class instead of the U.S. dollar which since 1971 is considered one of the worst investments of our time.

(3) DEPRECIATION- Paper quality income does not come with tax benefits like real estate even though taxes are one of our biggest expenses in life. Learning ways to reduce taxes is extremely important, especially in our current economic time. Reducing the taxes you pay to financial predators such as the U.S. government will help you get ahead financially. It’s their job to find additional ways to tax you and it’s your job to find ways to reduce or even eliminate those taxes. When investing in real estate you get depreciation benefits which topically equal 60%-80% of your purchasing price divided by 27.5 years. For example, if you buy a property for 0,000, then ,000 (depending on the land value) is written off over 27.5 years, which means you get a ,909 tax deduction on any income that property produces. So if you make ,000 per year in rental income you are only paying taxes on approximately ,000 instead of the original ,000, which is massive when compared to other investments.

(4) LEVERAGE- Rarely can you use leverage with paper assets to borrow money against them and increase your return on investment. When using leverage, assuming it done correctly, you can increase your returns. With paper assets using leverage is extremely risky since there is no control. That’s why financial planner and advisors will tell you leverage is risky. However, it’s only risky on assets you have no control over or when you over leverage without looking at the cash flow closely after debt service. If you buy the same 0,000 property (in point 3 above) but get an ,000 loan at 5.5% for 30 years and place 20% down you now have a monthly payment of 4 per month leaving you with 3 per month in positive passive cash flow (,000 / 12 months = 7 – 4 payment = 3).  That means on your ,000 you are making ,556 per year or a 12.7% return on investment instead of an 8% return on investment on your 0,000.  Using leverage correctly is a great way to increase returns which is extremely necessary in an inflationary economy.

(5) CASH FLOW- Most paper assets do not produce positive monthly cash flow.  Cash flow is everything.  When you invest in most paper assets you typically invest for capital gains, not cash flow.  Capital acquire investment income has higher taxes and do not wage you income when the economy is doing poorly.  You can easily lose your investment or a massive percentage of it, like we saw when most American’s retirement and 401k accounts lost 40%.  If you invest in cash flow, the value of the property does not matter.  You are seeing your return on investment on the cash flow and no matter what is happening in the economy you are not in danger of losing the quality or your initial investment.  You will typically see your cash flow come rain or shine even with fluctuations in the general overall economy. However, you are much less susceptible to economic fluctuations if you are prepared. By building your cash flow stream over multiple quality classes you will be in a much superior financial position where your monthly expenses will be covered by the cash flow. As your expenses rise with inflation so does your cash flow due to rental inflation as well.

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Each style involves varying degrees of risk on behalf of the investor. If careful consideration is taken there is a type of real estate investment that is ideal for most people though there are some that real estate will never be a good investment for.

Those who are simply not cut out for real estate investing are those who love to watch the ticker roll crossways the personal monitor or TV screen indicating the worth of their portfolios on a regular basis. Those who need to see in print the wisdom of their investment practices rather than those who are content to sit on their investments as they take shape or those who are willing to actively work in order to make their investments pay off.

Buy and hold real estate involved purchasing property and holding on to it for a very long time while the value of the property appreciates in value. This requires someone that is very savvy when making buys or extremely lucky for the most part.

More importantly however, it involves someone who has the patience and tenacity to hold on to their investments for a long period of time. These investments can wage a nice retirement for the right investor as well as funds at the proper time for the weddings of kids or to pay for college.

Rental properties are another excellent way to make money for those who are willing to deal with a long-term property investment. In this type of investment money is prefabricated apiece month to either pay or contribute to the mortgage and funds can be prefabricated once the property is paid for and sold later in life in order to receive a more complete and total profit from the endeavor.

There is some degree of expense along the way that is involved in keeping properties up to date and in demand however the benefits of this particular type of investment are nearly undeniable for the right investor.

Flipping is another type of real estate investment that is receiving a massive amount of press these days. This process involves purchasing a property below its value, investing in repairing or rehabbing the property, and then reselling the property for a substantial profit. This is one of the few short-term sorts of investment that are widely profitable when it comes to real estate investing. There are others but those carry even greater risks than flipping.

Of course there are high-risk real estate ventures for those that need a tiny excitement in their lives. One of the more common high-risk investments would be pre-construction real estate investing. With this form of investment the investor is actually ‘betting’ that the future property will sell for a higher price than the investor paid once the building is complete.

Whether your investment needs are low-risk, high-risk, or somewhere in between there is quite likely a style of real estate investment that will be appropriate for your specific investment needs. If you do not find a real estate investment plan that is right for you then do not despair there is no style of investing that is right for everyone.

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If you are just beginning investing you should do so conservatively.  You might begin by opening an interest bearing savings statement simply to set aside the money you plan to invest with.  Money that you invest with is going to be that which you don’t need to live on from day to day.

When most people think of investing, they think of the stock market.  But, not all investments involve stocks.  There are other, lower risk ways to invest your money.  And, considering how many once thought of as legitimate business have turned out to be Ponzi schemes, right now might be a good time to think about other investments.

Whatever you invest in, don’t think about making money in a short time.  Conservative investments pay off over time. 

One good place to invest your money right now might be in real estate.  There are some special problems going on in real estate that you will want to watch out for right now when investing in residential real estate, especially foreclosures.  Make sure you have clear title and title insurance. 

Give preference to a non-foreclosure home over a foreclosed upon home right now.  There are lots of problems with the paperwork on mortgages, especially foreclosures.  There is a quiet revolution going on through the court systems, which is why there has been a slow down in foreclosures.  The banks are being forced to establish their claim on houses they have tried to foreclose on.  In most cases, they cannot.  This illustrates the problems of widespread mortgage fraud.  So, while no is a good time to invest in real estate, you should proceed with caution.

Another good place to invest at this time might be in precious metals, particularly silver, but also gold. There has been a very massive increase in silver prices in the last year as the value of the dollar as a world reserve currency has plummeted. 

If you had invested in gold or silver two or three years ago, you would have quite a nice return on your investment at this time.  But, there is no reason to believe that the current trend is not going to continue, so you might want to think about adding silver, gold and maybe some other precious metals to your portfolio.  You can invest in gold and silver by purchasing silver and gold coins from a local coin dealer.

Wherever you decide to invest, do your research and invest carefully.  Never risk tying up money you need for your day to day expenses.  And, always think long-term.  You should be suspicious of anyone promising you massive returns on your investment in a short period of time.

Disclaimer:  The author is not a legal or financial advisor and is only expressing a individualized opinion.

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real estate finance provides financing for the buy of property, which is an essential component for the construction or rehabilitation of buildings. In the banking sector there is distinction between private real estate financing and real estate financing.

A private real estate financing provides finance for residential properties, private equity real estate can obtain debt such as bank loans. Private loans for real estate are generally secured by a mortgage, usually in the form of a mortgage book.

In the primeval days until the seventies real estate finance was nearly exclusively offered directly by banks and building societies, the understanding of real estate loans is nowadays through various distribution channels.

The private real estate financing comes with the lowest bad debt, since the loans are secured through a mortgage. However, in the event of liquidation of collateral under some circumstances recourse will still be reached from the understanding or foreclosure of the property.

The debt paid as shares in private real estate is repayable, over a fixed period in the form of interest and principal. The funds flow directly into the loan repayment and reduce the interest burden in the course of the repayment period.

Given the close interdependence of the private real estate with the acquisition or construction of homes, real estate constitutes a considerable economic importance. The context of private real estate has a direct impact on employment intensive construction and performance of residential real estate.

A real estate buy and the associated financing represent transactions in which funds are moved, typically representing a multiple of annual earnings for the private real estate buyers. For this reason, the legislature has created here a variety of consumer endorsement rules.

The commercial real estate includes the financing of commercial properties or residential properties used, and is pertinent to business assets. The financing of office and retail real estate is much more complex than the private residential property or commercial real estate financing.

The assessment of long-term letting of the property, managing current tenants and the lease requires special expertise. In this respect, particularly  reserving such expertise for specific niche property areas.

In some countries, for self occupied property, the financing costs are not tax deductible. The tax treatment of real estate can depend on the usage of the property. In some instances, a loan cancellation is only doable at a deficit rate of 2.5% of the loan.

The major owner of commercial residential properties are housing companies, they dominate local, mostly urban societies and housing cooperatives in the market. Few for profit larger companies operate in this market in some countries. These housing companies usually have a substantial capital base and positive cash flow from a portfolio of residential properties.

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When dealing with real estate investments there are many steps to go through before investing.  Here are my top 10 keys to a successful real estate investment.

(1)    Education – If you are not experienced in real estate investments the very first thing you should do is to get educated.  Take the time to find out what all of the risks are in the investment type you are interested in.  Find others that can help educate you on the investment type, which are not involved in the transaction you are doing specifically so there is no conflict of interest.  Purchase books, tapes, and go to multiple seminars in order to continue your education, and don’t purchase the ,000+ books and tapes sets from the gurus.  Purchase your educational material from the bookstore and save yourself thousands of dollars. 

(2)    Goal Settings – If you do not have a goal lined out for your real estate investments how do you plan on getting there?  Most investors purchase one property, or invest based on emotion rather than having a set goal in mind.  For example, you could have a goal of obtaining ,000 per month in passive rental income from your investments through buying single family rental homes and apartment buildings.  Your goals should be clearly defined and should include protections and risk mitigation techniques to make sure it is a stable viable plan that can be obtained. 

(3)    Building Your Ressources– You WILL NOT become a successful real estate investor without resources.  In real estate resources include, capital investors, property leads, team members and much more.  For this you must go to networking events if you do not already have your resources built.  It’s imperative that you go to networking events and expand your relationship base.  Real estate is a team sport so if you do not go network you can't build your team.

(4)    Building Your Team –In order to make your investments work you must build your team.  Some of the team members you need are Real Estate Agents, Brokers and Bankers, Private Lenders, Appraisers, CPA’s, Attorney’s, Affiliates, Inspectors, Property Managers and Contractors.  There are much more but it’s pretty impossible to study them all.  It takes quite a bit of time to develop your team and make sure they can be relied upon.  I have found that building a team is the most important aspect of investing other than your due diligence on the investment itself.

(5)    Due Diligence – Before investing in any real estate calibre your due diligence is crucial.  You need to examine the market your investing in, the market timing relative to that market, the specific neighborhood, the market value of the investment, the cash flow it produces, the rental income it should bring in, all of the expenses related to the investment and much more.  Inspections should be done as well as review of all of the backup documentation such as leases and contracts.  Think like an auditor, review all of the backup information provided by the seller and verify it with an outside source as much as possible.  I hear horror stories all the time about how people lost money in real estate.  After inquiring as to what happened I can state that 99% of the time the investor did not do or know how to do the right due diligence on the investment in the first place.

(6)    Property Management– Property management can make or break your investment.  If you do not have a competent property manager that actually cares about your investment and your success you will have a losing investment.  We went through about 5 different property management companies before finally starting our own company and bringing the management in house.  Most managers are bad at some of the basic management functions such as accounting, rent collection, tenanting, leasing and background checks, repair calls and taking care of the tenant. By far the most important and biggest problem is communication with the owner of the property.  Communication is crucial because without communication the investor can't make decisions regarding the investment and demand control.  Property management also needs to be structured based on performance, meaning, they get paid if it’s occupied only, not when it’s vacant and there are incentives in place to optimize performance. 

(7)    Marketing – If you do not know how to market for property, capital, property sales, and resources you will not be successful in real estate.  Marketing and income is one of the most important parts of any business.  During economic problems and recessions most companies cut back on marketing when it’s most important to increase your marketing efforts.  If there are less investors, buyers, and resources acquirable because of the economy, there is more of your competition going after your resources.  So in order to attract those resources before your competition you have to market more.  Marketing and income is a business all in itself so getting educated on marketing strategies is imperative to your success.  When most people think marketing they think of posting classified ads, sending out mailers, coupons, billboards and more but the most important and underutilized marketing strategy is world wide web marketing.  World wide web marketing is revolutionizing the way most companies market and if you do not comprehend it or begin to learn about world wide web marketing you will not acquire the market share you deserve and will not be as successful.  85% of buyers go online first for investments.  It is an online world weather you know about it or not.

(8)    Treat Your Investments As a Business – Most investors purchase one real estate investment and do not fully utilize all of its abilities from a business perspective.  If you own one property or 50+ properties you should be treating it as a business.  Be sure to keep track of ALL of your expenses related to the investment, the due diligence you did, travel costs you incurred, etc so that you can get a deduction for those items against income from other sources.  These types of expenses can happen annually and a percentage of your individualized expenses can be used as a tax loophole in order to deduct more against your active income from your job.  Your biggest expense in life is your taxes.  It is the government’s job to find more creative ways to tax us.  It is our job to find creative ways to legally not pay taxes.  If you are not winning against the government, begin to educate yourself on key tax saving strategies. 

(9)    Legal Protection And Tax Structuring – It is crucial that you protect yourself from financial predators.  There are people out there that will sue anyone they possibly can.  It’s really important to obtain additional umbrella insurance or place your assets into a proper entity so that you are not liable in frivolous lawsuits.  Generally for tax purposes you want to keep passive investments (investments like rental real estate that produce income you do not work for) in an LLC and active investments (investments you actively work for) in an S-Corporation or similar entity.  Please consult your individual tax advisor to go over your specific situation as it is impossible for this advice to relate to each situation.  Also be sure to keep yourself separate financially from the investment or entity you hold the investment in so that you do not pierce the corporate veil.  If you co-mingle your funds there is a very real possibility that in court your legal entity endorsement that you worked so hard to setup is worthless. 

(10)Investing In Sustainable Investment Types – Invest in calibre types and real estate investments that are sustainable in the long run.  Look closely at the cash flow included in the investment.  If it’s negative, unless you are flipping, do not invest.  Flipping can be much more hazardous than investing for cash flow because you typically have a payment on a flip investment that is not covered fully by the rental income and if you get stuck with the property you find yourself in a negative cash flow situation and can only sustain as long as you have money in the bank that can make that payment.  Many people lose a lot of money trying to flip property, not knowing fully what they are doing and the risk they are taking only to lose a significant amount of money.  On the other side when you are investing for cash flow only invest in calibre assets.  Typically if you invest in low end assets in your market you get low end tenants also.  What I think about a low end tenant is someone that does not pay the rent on time if at all, causes alteration to your property and is a nightmare to deal with.  This happens quite frequently in low end property for a particular market.   You want to invest in calibre long term assets that are going to produce positive monthly cash flow and make you a great return on investment after you have been conservative with the numbers.

I truly believe if you do these things along with increasing your financial IQ you will be successful if you work hard for it.  Most of the wealthy individuals in the world work hard for their money and are constantly evaluating their financial situation and investment goals.  Putting a individualized budget together and reviewing it monthly, creating additional income sources, implementing tax savings strategies, protecting your money from financial predators and constantly educating yourself are the keys to becoming wealthy.   

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