Diane Turton presents:
 Why Residential Real Estate Makes a Great Investment
                                Princeton Con...
Body

I. First Main Point

Today is one of the best times in real estate to invest for personal use.

    •   Prices are m...
Transition:

   When you invest in real estate you have a tangible asset unlike when you
   invest in stocks where if you ...
are everywhere. The main difference is people do not HAVE to own
stock; they DO have to own real estate, at least from a f...
Conclusion

I. Review your main point

So you think you’re ready? You’re convinced it’s a great time to invest in a
tangib...
Diane Turton presents:
 Why Residential Real Estate Makes a Great Investment
                 Supporting Research

The Ame...
Why Real Estate Makes a Good Investment

Many of those who succeed in real estate have foresight or the ability to predict...
remember that the cost of your investment on the property can find its way into your profits, so
make sure that you are pr...
investment trusts). Vacation-home owners who place their properties into a “rental pool”
managed by others usually do not ...
relatively flat economy, low inflation and real estate market in many areas should stagnate the
current trend towards the ...
Many of these myths one hears on a daily basis do have merit but only if they kept within
the contexts of what they were i...
help to avoid placing contingencies on the sale, such as the need to sell an old home
       before closing on the new one...
Investing in Residential Income Properties

    •   People need shelter… there will always be someone who will be there to...
•    If you think you have found the perfect property to meet your needs, there are a few ways
        to decide if you ar...
4.      If considering adjustable rate, consider the worst-case scenarios and your
            ability to pay when the ini...
1.       The first is sustainability. Is the property in solid condition and is it going to
                 stay that way...
•   Invest in an area of development.

Cities and suburbs outside of bigger metropolitan areas are often much more likely ...
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Diane turton princeton speach investing in real estate

  1. 1. Diane Turton presents: Why Residential Real Estate Makes a Great Investment Princeton Conference September 2, 2007 Introduction I. Central Idea The American dream will always continue to be homeownership. Homeownership is the foundation on which families grow, thrive and build their futures. And, given record levels of homeownership in the United States, owning a home appears to be the clearest sign of achieving the American Dream. II. Attention Getting Device • How many of you own homes today? • How many are considering buying a second home for yourself? • How many are considering the purchase of an income property? • How many of you have no idea what makes the best sense for you today? III. Specific Purpose There are a lot of different investment strategies out there but investing in real estate is still one of the best investment strategies to make. So long as you have realistic expectations about how long it might take to turn a profit, real estate will always prove to be a strong investment in the long run so long as you do your homework. Today I’m going to tell you why real estate makes such a great investment. I will cover a few different types of real estate properties… each with its own characteristics, risk tolerance, tax implications, and investment potential. Finally I’ll tell you what you need to know to invest in real estate and offer some tips to make your investments a success.
  2. 2. Body I. First Main Point Today is one of the best times in real estate to invest for personal use. • Prices are more realistic than at any time over the last several years, in many areas • Plenty of inventory in some areas But you must keep in mind a few things about investing in real estate. • It should be seen as a long-term investment • The valuations for your real estate property will go up and down at times, depending on the situation of the real estate market. Transition: Because the demand to own a home is never going to go away, investing in real estate is a move that is almost certain to pay off in the future. II. Second Main Point There are many reasons why real estate makes a great investment. Many of those who succeed in real estate have foresight or the ability to predict the trends in real estate or even the developments that will happen in an area. Some properties do not seem like good money makers but with certain changes in the environment, migration patterns, city developments, etc. they may turn out to be really great investments. Of course, there are risks that need to be taken, and you have to analyze whether you can take the possible failures - emotionally and financially - that may be brought about by these risks. • Investing in Real Estate is plain common sense • Real Estate is a great investment because it is simple to get in to • The flexibility of Real Estate makes it a great investment • Real Estate Values Appreciate • Real Estate Investment offers good profit • Real Estate can Provide Steady Income • Tax Advantages • Real Estate Property is a Tangible Asset and is safer than other investments
  3. 3. Transition: When you invest in real estate you have a tangible asset unlike when you invest in stocks where if you don’t play your cads right you can lose all your money. III. Third Main Point It’s not all doom and gloom, there are many myths about current real estate market conditions. All you hear these days is gloom and doom from most real estate prognosticators. Our media is infatuated with perpetuating “new and exciting” viewpoints and is consumed with reporting sexy stories. A normalization of the market is not sexy but it is the truth. In fact, normalization isn’t even the correct term to characterize the current market. Real estate is still experiencing one of the top markets in history. But do we ever really hear that? Bottom line is the market is strong and booming in many areas. I have compiled what I feel are my favorite clichés used in analysis of the current market and point out why many of them are either seriously flawed or simply incorrect. • Interest rates are the cause of the current bust • Real estate was too expensive and had to come back to a normal state • Buyers are using exotic loans to aid in purchasing and it will come back to haunt them • Housing has become too expensive for the average homeowner • Inventories are at an all-time high and it will take months for buyers to work through this inventory • When all theories fail, there are still the statistics: According to a nationwide telephone survey conducted by The Boston consulting Group, Americans are as optimistic now about the rising value of their homes as they were years ago. √ 55% of Americans say their home would sell for more money now than it would have a year ago √ 85% of Americans believe their house will be worth more five years from now than it is today √ Nearly 75% of homeowners say they’re confident they could sell their home within the next six months at a price they think it’s worth Transition: Many of these myths one hears on a daily basis do have merit but only if they kept within the contexts of what they were intended to communicate. Constant references and comparison to the tech bust of 90’s
  4. 4. are everywhere. The main difference is people do not HAVE to own stock; they DO have to own real estate, at least from a financial planning viewpoint. • One of the first things you should do is create a team of support professionals around you to help you out with the first real estate deal you make beginning with a sales associate • Research potential properties before purchasing them √ sustainability √ location √ average income of the area • Don’t pass over properties that you may be able to resell to other investors. • Start by purchasing a home of your own • Let potential home sellers know you’re looking to buy • Work with a mortgage broker • Find a great attorney • Try not to invest in areas that are reliant on one factor • Invest in an area of development • Know exactly what you’re getting in to
  5. 5. Conclusion I. Review your main point So you think you’re ready? You’re convinced it’s a great time to invest in a tangible asset like real estate despite all the negative attention the industry is getting? II. Final Thought We can sit together any time you like, but before we do, Be sure you understand the ups and downs of the real estate market as a whole. Simply throwing some money into the ring and watching to see if it grows is not the best option for an investor. Do your research and talk to your team of professionals. Become aware of your surrounding and you will be a safer investor.
  6. 6. Diane Turton presents: Why Residential Real Estate Makes a Great Investment Supporting Research The American dream will always continue to be homeownership. Homeownership is the foundation on which families grow, thrive and build their futures. And, given record levels of homeownership in the United States, owning a home appears to be the clearest sign of achieving the American Dream. • How many of you own homes today? • How many are considering buying a second home for yourself? • How many are considering the purchase of an income property? • How many of you have no idea what makes the best sense for you today? There are a lot of different investment strategies out there but investing in real estate is still one of the best investment strategies to make. So long as you have realistic expectations about how long it might take to turn a profit, real estate will always prove to be a strong investment in the long run so long as you do your homework. Today I’m going to tell you why real estate makes such a great investment. I will cover a few different types of real estate properties… each with its own characteristics, risk tolerance, tax implications, and investment potential. Finally I’ll tell you what you need to know to invest in real estate and offer some tips to make your investments a success. Today is one of the best times in real estate to invest for personal use. • Prices are more realistic than at any time over the last several years, in many areas • Plenty of inventory in some areas But you must keep in mind a few things about investing in real estate. • It should be seen as a long-term investment… You must have realistic expectations about how long it might take to turn a profit, especially if you’re looking more for an investment property. Having a slow and steady profit strategy can greatly improve the value of your real estate investment. One good thing about investing in real estate is that there are a lot of ways that you can make money of it. You can purchase a low-cost foreclosure home, or a home that needs some improvement, spend a considerable amount of money on it to improve it, and then sell it for a higher price. You can even keep the home for yourself, and allow people to rent the home or the space. • The valuations for your real estate property will go up and down at times, depending on the situation of the real estate market. But properties will almost always prove to be a good investment in the long run if you educate yourself and reasonably estimate how much time and money it may take to rejuvenate your property before selling it. • Because the demand to own a home is never going to go away, investing in real estate is a move that is almost certain to pay off in the future.
  7. 7. Why Real Estate Makes a Good Investment Many of those who succeed in real estate have foresight or the ability to predict the trends in real estate or even the developments that will happen in an area. Some properties do not seem like good money makers but with certain changes in the environment, migration patterns, city developments, etc. they may turn out to be really great investments. Of course, there are risks that need to be taken, and you have to analyze whether you can take the possible failures - emotionally and financially - that may be brought about by these risks. For those with the gusto, however, here are the most common reasons people invest in real estate: • Investing in Real Estate is plain common sense The first reason for investing in real estate is common sense - everyone needs a place to live or work. When you need to have a space for a certain function, you turn to the real estate market, whether you're renting or buying. Because this demand is never going to go away, investing in real estate is a move that is certain to pay off in the future. Even as housing prices rise and buyers are more hesitant, there is still a market for renting. And when the housing prices go down, the buyers will be ready to buy again. No matter what the market is doing, real estate still sells. • Real Estate is a great investment because it is simple to get into You will also find that real estate is a great investment because it is so simple to get into. In many cases with Adjustable Rate Mortgages, you won't have to pay a lot of money to buy a property and then can turn around to sell to someone else. Known as flipping houses, this has become common practice with many real estate investors. While you will need to make the initial investment and then wait for someone to buy your home, you will be able to make a large amount of money in exchange. Of course you will need some money to get into this kind of business but at least you know your money is now a tangible asset. You can even buy property under a financing arrangement so you don’t have to shell out all your savings. Some financing companies will allow you to use the property as leverage for your loan. But for this to work you must have good credit history. • The flexibility of Real Estate makes it a great investment The flexibility of real estate is also something that makes it a great investment. While it used to be difficult for the buyer to buy a home, it's easier than ever with a wide range of mortgages, making it easier for the seller to sell. If you are a homeowner that's not looking to sell, but owns your own home, you can use the equity in your home to add value to your home as well as to your life. The investment you've made will continue to pay off for years to come. • Real Estate Values Appreciate This is especially true for areas where there is high demand for properties. Condominiums in cosmopolitan and highly populated cities, for example, can cost an arm and a leg but there it is very unlikely for these properties to depreciate in value especially if they are well maintained. Because of the ever growing world population and the increasing population density in cities, there will always be a demand for real estate. It’s your choice whether you want to be the one renting in the future or if it’s you renting out valuable space. People can always improve on a particular property in order to make it more marketable than what it previously was. People can renovate a property, and change it into a different type of property that has other uses. In this type of investment strategy, however, you will need to
  8. 8. remember that the cost of your investment on the property can find its way into your profits, so make sure that you are prepared to shell out money in order to improve the property that you are investing in order to increase its value. You also need to keep in mind that the valuations for your real estate property will go up and down at times, depending on the situation of the real estate market. Nonetheless, investing in real estate properties will always prove to be a good investment in the long run since real estate investments do well in this type of run. • Real Estate Investment offers good profit Investing in real estate is a proven method of increasing net worth and with a few sound decisions can earn you great profits. You can also control the profit you make from a real estate property. One such instance is when you improve a house to raise its value. You may purchase properties in bad need of repairs and improve the house so you can resell it or rent it out for good gains. Real estate investment also offers short-term gains for people who are not interested in investing on real estate properties in order to gain profit for short periods of time. These people just usually buy into whole properties with the hope that its value will go up. Sometimes, they develop these real estate properties in order for them to make the best use of their purchased land. They can either keep or sell the developed property, depending on their goals. Ultimately, these investments always turn out to be substantial investments due to its long- term returns, just as long as these real estate properties are properly handled. • Real Estate can Provide Steady Income If you have made a good investment, you can recoup your investment from the income that the property will generate in a fairly good length of time. You need to earmark part of the income for renovations and repairs but generally, you should be able to earn good money from your investment. It may take a special type of investor who can form a long-term real estate income that will generate income along the way. Overall, real estate is the same as any other investment vehicle in that it’s a long-term, active type of investment. There will always be people who need a home…there will always be someone who will be there to rent your property. Just keep the transaction non-emotional—unlike a primary home, this is a business decision. And don’t forget to consider your potential income weighed against carrying costs. You can also arrange your loans and financing so that the monthly income generated from your properties can be greater than your debt payments. • Tax Advantages If as an investor you “materially participate” in managing your properties you may receive big tax benefits. Even if you hire professional property managers you can meet this tax test by making the major decisions, such as setting tenant selection and repair policies in rentals, yet leaving the day-to-day operating details to the manager. To enjoy maximum tax benefits you must own at least 10% interest in the property. This leaves out investors in large partnerships and other group investments such as REITs (real estate
  9. 9. investment trusts). Vacation-home owners who place their properties into a “rental pool” managed by others usually do not meet the material participation test. If you do meet the two management and ownership tests, then you can deduct up to $25,000 of your investment property losses against your ordinary taxable income if your adjusted gross incomes is less than $100,000. When your annual adjusted gross income exceeds $100,000, the realty tax loss deduction gradually phases out to zero above $150,000 AGI. The only downside of the depreciation tax deduction, which saves income taxes during investment property ownership, is at the time the property is sold. Uncle Sam is waiting to “recapture” and tax the total depreciation deducted during the years of ownership. However, capital gains taxes and the recapture of depreciation tax can by fully avoided by making an Internal Revenue Code 1031 tax-deferred exchange. The 1031 exchange allows for investors not to pay taxes on profits made from real estate sales as long as the money is re- invested to real estate. What that means is that when you are ready to sell an investment property, you can use the gain on it to re-invest in “like kind” property(s) without being taxed on the gain if you use a qualified intermediary and follow the 1031 rules. • Real Estate Property is a Tangible Asset and is safer than other investments When you invest in real estate you have a tangible asset unlike when you invest in stocks where if you don’t play your cads right you can lose all your money. It's fairly common to hear of people losing tons of cash in the stock market. It is fairly rare, though, to hear of a real estate investor going bankrupt. The simple truth is that despite the headlines you may see in the morning paper, real estate, as a market, cannot suffer a serious crash without seeing the rest of the financial world crash around it too. It is important to keep in mind, though, that market hot spots can, and do change at will with the world around them. While a switch like that may have you losing a bit of money on some deals you probably shouldn't have brokered in the first place, you certainly won't lose the investment as a whole. MYTHS ABOUT THE MARKET – It’s NOT Gloom & Doom All you hear these days is gloom and doom from most real estate prognosticators. Our media is infatuated with perpetuating “new and exciting” viewpoints and is consumed with reporting sexy stories. A normalization of the market is not sexy but it is the truth. In fact, normalization isn’t even the correct term to characterize the current market. Real estate is still experiencing one of the top markets in history. But do we ever really hear that? Bottom line is the market is strong and booming in many areas. I have compiled what I feel are my favorite clichés used in analysis of the current market and point out why many of them are either seriously flawed or simply incorrect. • Interest rates are the cause of the current bust Yes, interest rates do have a marginal effect on some buyers not purchasing that bigger home or making that first purchase but not to any great extent. Rates are historically better than they have ever been. The increases in the interest rates over the past year or so have only brought back normalcy to the real estate sector. But, rates are still not high. In fact, the 30 year rate has actually decreased of late and has risen less than one point in a year’s time. It also is not any higher than it was a short time ago during the expansion itself. We never hear about these two important facts. The fact that the conforming conventional loan amount has increased allowing higher borrowing amounts at lower rates is also never mentioned The
  10. 10. relatively flat economy, low inflation and real estate market in many areas should stagnate the current trend towards the Fed ‘s continued raising of rates. • Real estate was too expensive and had to come back to a normal state This is what pundits have been saying about the stock market and certain individual stocks for years. Real estate in many areas has been “overpriced” for years and will always be because there will always be individuals willing to pay the price for it. Sure, some areas will show decreases in price for a short interim. This cannot be avoided. • Buyers are using exotic loans to aid in purchasing and it will come back to haunt them Ridiculous. Everyone is saying interest only loans are dangerous to the average consumer. How do they figure? What a great deal….you pay only interest and if you want, in any given month, you can pay principal rather than HAVING to pay principal every month. Some negative amortization loans CAN be dangerous in the wrong hands but only if the borrower doesn’t understand them. If he does, they can work magic for cash flow for owners and investors alike. • Housing has become too expensive for the average homeowner Not true, housing has never been more affordable for the average family. If they are in a high price area, they can do an interest-only loan and keep their payments lower. There are many options. Many people are open to rent-to-own deals which can benefit the buyer and seller in less-than-ideal market conditions. • Inventories are at an all-time high and it will take months for buyers to work through this inventory Of course there is more inventory than ever, in some areas. There are also more buyers and more of a demand and more of an opportunity to demand these homes. That is the way it should be. If inventory numbers weren’t high, we would have a housing shortage like never seen and prices would be out of reach for everyone. The real cause of the downturn relates to the psychology of the average buyer and seller. The media has perpetuated the slowdown through talk of it being inevitable. Also, the current market has help to skew current inventories through rental agreements or other forms of assisted ownership. This “skewed” ownership will help negate a large dumping of additional inventory any time soon. As these homes are slowly re-introduced to the market, their impact on inventories and sale should be negligible. • When all theories fail, there are still the statistics: According to a nationwide telephone survey conducted by The Boston consulting Group, Americans are as optimistic now about the rising value of their homes as they were years ago. √ 55% of Americans say their home would sell for more money now than it would have a year ago √ 85% of Americans believe their house will be worth more five years from now than it is today √ Nearly 75% of homeowners say they’re confident they could sell their home within the next six months at a price they think it’s worth
  11. 11. Many of these myths one hears on a daily basis do have merit but only if they kept within the contexts of what they were intended to communicate. Constant references and comparison to the tech bust of 90’s are everywhere. The main difference is people do not HAVE to own stock; they DO have to own real estate, at least from a financial planning viewpoint. Different Types of Real Estate Properties There are three main types of real estate properties; each has its own characteristics, risk tolerance, tax implications, and investment potential: • Principal residences • Vacation homes, or second homes • Income properties or rental properties Investing in a Principle Residence Qualifying yourself: Is it a good time to buy for YOU? • Must be buying for the long-term If you plan to move within five years, consider the purchase carefully—minimum of five years to expect a payback, considering moving costs, realtors’ fees, maintenance, etc. • Make sure you can comfortable afford the carrying costs-- Consider all costs – taxes, utilities, maintenance, emergency repairs, furnishings, town services, etc. Financial factors to consider: • Interest paid on mortgage is tax deductible. • Real estate taxes paid on principal residence are tax deductible. • Home improvements add to the basis in your investment which will be a factor when the time comes to sell your home. • Selling your home also provides tax benefits: If you are single and have lived in your primary residence for two years, the first $250,000 of profits from the sale of the house is tax-free. If you’re married, the exemption is $500,000. • You are able to benefit from this tax advantage every two years as long as you live in the property for two out of the previous five years. Once you have decided it’s a smart decision for you to buy: • Make sure you are an attractive buyer. Today’s sellers not just looking at sales price—but also looking at well-qualified buyer who is highly likely to obtain a mortgage – some may take less $ for a more well-qualified buyer. • You'll find the best values if you prove yourself to be a qualified buyer who can quickly close the deal. That means getting your mortgage pre-approved, where you have a written guarantee that you'll get the loan for the amount you need. Also it would
  12. 12. help to avoid placing contingencies on the sale, such as the need to sell an old home before closing on the new one. • When shopping for homes where the market is weak, consider buying a newly built home. Home builders are hoping to lure buyers with discounts of as much as 20% and other valuable incentives, such as granite countertops, luxury appliances and in- ground pools. The National Association of Home Builders reports that 56% of builders are offering financial incentives, up from about 45% a year ago. • The best deals will often be found where home price declines are the worst. But consider whether the neighborhood is one you really want to live in for the long-term. • Look for locations that are up and coming. Investing in Second Homes Baby boomers have fueled an increase in the number of vacation-home sales in recent years. In fact, the National Association of Realtors reported that a record 1.07 million vacation homes were sold in 2006, a 4.7% increase over 2005. • Before starting the actual home search, decide what the home will be used for. People want to spend more time at their vacation homes today than years ago. √ For example: Will it be a getaway during the winter months, summer months or both? √ Also consider whether nearby recreational activities are important or if it's a place for retreat and solitude. √ Think about the ideal proximity to a primary home as well. The NJ shore communities are popular with people from Philadelphia, New Jersey and New York because the drive to the homes is relatively short • Find out if a property is rentable at the time of purchase; even if you’re not sure you want to rent it. Here’s why: √ People often rent a home out if they're not using it as much as they originally thought. A rentable property might also be a selling point at resale. √ Before buying, ask about renting terms if applicable. For example, some condo communities have leasing restrictions to comply with. √ For single-family homes, remember it is often easier to rent property when there are other rentals around it. Secluded homes could have less success attracting renters. Tax implications of vacation homes • Consult with a tax professional on your specific circumstances when dealing with second homes. • There are specific rules on number of days per year you must use a home in order for a property to qualify as a second home. • Also specific rules for how many days a year you can rent the property before it is no longer a second home but is considered an investment property. • Deductions are treated differently when it’s a personal property versus rental or investment property
  13. 13. Investing in Residential Income Properties • People need shelter… there will always be someone who will be there to rent your property. • Selecting the right property: √ Investigate, know the market, know what people are willing to spend for certain properties, locations √ As market stabilizes, prices can be very reasonable today √ See the conditions of the property thru the eyes a tenant. Remember—you won’t be living here. What will someone else find attractive or not? What qualities are most critical for a typical renter in this area? Is it safe? Is the property aesthetically pleasing? Are the amenities sufficient? • Considerations: √ Will the renter find the properly affordable? Utilities (especially if oil or gas today)? Amenities? Maintenance costs? √ To realize a solid appreciation on your investment, consider how best to make it more marketable. You can renovate a property or change it into a different type of property that has other uses. In this type of investment strategy, make sure that you are prepared to spend in order to improve the property that you are investing to increase its value. √ Can you afford the carrying costs—will the rental income offset your recurring costs? E.g. taxes, repair, maintenance costs you plan to pick up (e.g. lawn mowing, snow plowing, tree-trimming, etc.) √ Consider the costs of a property manager to oversee the property, assuming you may not have time, skills or proximity to take this on—costs might run from 10-20% of the monthly rental fee, depending on the services What You Need To Know How to begin to invest in real estate Once you've made the decision to start investing in real estate, there are several things you need to know as you begin the process: • One of the first things you should do is create a team of support professionals around you to help you out with the first real estate deal you make • Your team should consist of a real estate lawyer who has actually been an investor in recent years, a title company who deals with investors on a regular basis, an insurance agent who knows the ins and outs of real estate investments, a mortgage broker you know and trust, and an accountant who is familiar with the tax laws involved with investing in real estate. • When you have your team in place, it's time to take your next big step, finding the right property to meet your needs. Real estate sales associates can be a big help in this area. They can give you comparable selling prices of homes in the community and tell you how long properties have been on the market, an indication of how active -- or inactive -- the market happens to be.
  14. 14. • If you think you have found the perfect property to meet your needs, there are a few ways to decide if you are getting the best possible deal: 1. decide what the property is truly worth by looking at comparable sales in the area 2. Check the appreciation values of homes for the past two years to give you an indicator of how the property will appreciate 3. From there, think about the kind of work the property will need, and how much that work might cost you in the long run. Don't let yourself get swayed into making a decision because you like the white carpeting or that bay window in the kitchen. Evaluate the investment on criteria that cannot be changed without great expense, like location or floor plan. 4. Try to determine the seller’s motivation. If he or she is not highly motivated, they will not be likely to negotiate. On the other hand, the Seller might be highly motivated to sell, due to many reasons such as a death in the family, or he or she may have been transferred or laid off. In that case, there is a good chance they may be willing to discount their property for the peace of mind and convenience associated with a quick sale. 5. Try to negotiate a price that is at least 20% below the market value of the home. If you intend to lease the property, make sure the cash flow from the home will cover all of your costs and generate a profit. 6. Try to avoid making "on the spot" decisions -- go home and think about it before you commit. See other properties that are similar, and take photos to accurately compare all the details. Take someone else along who is not involved, and let them point out any potential pitfalls you may not have seen. 7. BUT Keep in mind that you may not have as much time to delve into a complete analysis of the property as you would like. So if you are interested in a property, move as quickly and prudently as possible. Just because you have decided to invest in real estate doesn't mean that you have found an easy way to pay the bills associated with such an investment. There are a few good ways to finance your first real estate deal: • One of the most common ways to handle this is through a line of credit on your current home • Most banks will offer up to one hundred percent of the value of your home through a home equity line of credit, and in many cases, this will give you the cash you need to get started in the investment market. • Another good way to get the money you need to get started is through the use of a hard money loan. These are private loans made with strict repayment schedules. o They are not as difficult to obtain as conventional mortgages, and they were designed specifically for investors. o The terms tend to vary from lender to lender, but in general, this is a great way to get started in the real estate market. About Mortgages 1. Mortgage rates still very attractive 2. Lots of mortgage money out there today– though lenders are much more selective and cautious today 3. Buyers must be more careful not to enter into a commitment they can’t meet
  15. 15. 4. If considering adjustable rate, consider the worst-case scenarios and your ability to pay when the initial 3 or 5-year term is up. Be conservative when calculating your ability to pay. When seeking a mortgage, here are important steps to take: • Access your credit report to make sure there are no errors. Establishing good credit is the key to locking in a favorable mortgage rate, yet many buyers fail to check their credit reports before applying for a home loan. One in four people reported finding serious errors on their credit reports. • Don’t borrow more than you need. Some buyers make the mistake of assuming that they can afford to borrow as much money as lenders are willing to give them. Just because you qualify for a loan doesn't mean it's in your best interest to take it. If you're already struggling to pay rent and a lender offers you a loan requiring even higher monthly payments, you should seriously consider the financial repercussions before accepting it. • Maintain a stable income. If you have an unsteady employment history, you're likely to appear less than stable in the eyes of a lender. It's particularly important to avoid job hopping while your mortgage application is pending. If switching jobs in unavoidable, angle for a position that offers the same or better pay. • Think twice about cutting down on credit cards. Paying down credit-card balances is an important part of responsible money management, but closing accounts when you're trying to secure a mortgage is a mistake. Contrary to what you might think, reducing the amount of credit available to you during the buying process can make your credit score go down rather than up. • Consider maintaining a current HELOC if you have one. If you are already a home owner and have an existing home equity line of credit, don't offload it before purchasing your new home. It can come in handy if you need to temporarily cover the down payment while your old home is being sold. Tips for Investing in Real Estate The earning potential of a smart real estate investor is extremely high, because real estate does not typically decrease in value. Here are some things I recommend you consider when investing in real estate: • One of the first things you should do is create a team of support professionals around you to help you out with the first real estate deal you make beginning with a sales associate. • Research potential properties before purchasing them. When buying a rental property, there are several key features that you should be looking for:
  16. 16. 1. The first is sustainability. Is the property in solid condition and is it going to stay that way with minimal upkeep? 2. The second is the location. Yes, location is extremely important for most rental properties. You need to ensure that your tenants can get to where they need to go and that the property is near commonly used retailers and service providers. 3. The third is the average income of the area. This is different from physical location, because you should keep in mind that a high rent area is definitely a better location than a low rent area. And, in high rent areas location is often less of a concern than in low rent areas. • Don’t pass over properties that you may be able to resell to other investors. Sometimes it is a good idea to purchase a property that is an excellent value simply because it is a property that is attractive to other investors. Keep in mind that when you purchase a property that is not what you are looking for or one that requires extensive work, it may end up being a long term investment. However, when someone who specializes in rehabbing comes along you are likely to make a substantial commission on the sale. • Start by purchasing a home of your own. If you are not already a homeowner, it is probably a good idea to purchase a home before you purchase an investment property. There are several reasons, but perhaps the most important is that you will learn the process of purchasing a property by actually buying one. It is not unusual for investors to turn their first home into their first investment property, because the property and the market become familiar entities. • Let potential home sellers know you’re looking to buy. One way to find hidden investment properties is to distribute flyers around a neighborhood in which you would like to buy. Consider having someone drop them door to door. A thousand flyers will only cost you around fifty dollars, and you never know who might give you a call to discuss or point you in the direction of a property. And, much like business cards, you never know who is going to see your contact information. This is an excellent outreach technique when you would like to get your name out there and to find properties that meet your criteria. • Work with a mortgage broker. When you are considering financing options for the purchase of your investment property, contact a mortgage broker to see if he can help you to find financing that is the most advantageous for you. Shop around, and talk to several different brokers to get a feel for experience and access. • Find a great attorney. Before you become involved in the purchase of an investment property, you should form a relationship with a real estate attorney who is familiar with situations similar to yours. This is especially true if you are attempting to purchase a property with non-conventional financing, because an attorney will help you to ensure that you are making good decisions in terms of your investment. • Try not to invest in areas that are reliant on one factor For example, areas where entire communities are employed by one employer can pose great risk should the business have lay-offs, close or move.
  17. 17. • Invest in an area of development. Cities and suburbs outside of bigger metropolitan areas are often much more likely to have a favorable housing market because most people don’t want to live inside the city, but do want to live nearby. As a result, developing homes in the outer regions of busier areas are a great investment since they’re less expensive but in high demand. Areas outside of Metro New York has the third largest number of housing permits issued between 2004 and 2007, at an annual rate of nearly 70,000 permits. Real estate experts declare New York and its suburbs probably the best market in the country in which to invest. • Know exactly what you’re getting in to. Be sure you understand the ups and downs of the real estate market as a whole. Simply throwing some money into the ring and watching to see if it grows is not the best option for an investor. Do your research and talk to your team of professionals. Become aware of your surrounding and you will be a safer investor.

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