Tips For Individuals New To Real Estate Investing

Real estate investing is a great way to make money and create a business venture for yourself. There are a few tips to keep in mind for those who are new to real estate investments.

Real estate investing can be a daunting concept, especially to those who know little about the subject. With that said, it is also a concept that can be extremely lucrative and one can learn the basics thereof with a little independent research and some experience in the field of real estate. For those who are new to this arena, there are a few tips to get you well on your way to learning about investing in real estate and feel comfortable doing so.

Research the Subject of Real Estate

Prior to starting your investing endeavors, it is crucial that you know the basics of the real estate field. One way to do so is to engage in various forms of research relating to this topic. This can be done by attending classes on the subject of real estate, finding information online or reading books on this topic. Start out with the basics of buying and selling real estate and then get more involved with how to fix up your investment so that it gains the largest amount of revenue, whether it be by selling or renting the property.

Determine Your Investment Goals As They Pertain to Real Estate

It is also important that you determine what you are trying to obtain from investing in real estate. Are you doing so for the money, the enjoyment or both? Also, determine whether you wish to buy the property on your own or go into the venture with partners. Lastly, it is also wise to figure out if you would like to fix up the property to sell or keep the property and then rent it out to gain money via rental income.

Speak with an Investment Advisor and Real Estate Attorney

Before jumping into real estate investing it is important to speak with professionals in the field so that you do everything correctly. Investment advisors and real estate attorneys are two individuals who may come in handy during the investment process. The investment advisor can detail exactly how you should structure your investment dealings while the real estate attorney can ensure that the purchase and/or sale of the property is done correctly and in a legal manner. Both individuals will be your best friend with regard to this type of transaction and help you to stay on track throughout your investing endeavors.

Determine How Much Money You Have to Invest

You should also figure out how much money you wish to invest in the property and are able to do. Also take into account that certain amounts of money will also have to be provided during the life of the investment for repairs, improvements, taxes and more. Make sure that you have the necessary funds to make the investment a complete success.

Keep an Eye on the Overall Goal of the Investment

Last but not least, those investing in real estate should keep their eye on the prize. In other words, constantly remind yourself why you are doing this type of investment as this will help to keep you on track and help to make your real estate investing venture a complete success in the end.

Real Estate Flipping

Real estate flipping is a term used to refer to the practice of acquiring a property for the purpose of generating profit. When you flip a property, you do a purchase transaction and aim to sell the asset at a much higher price when the market is very supporting an upturn.

As you see, it is a usual practice of capitalists and investors to buy real estate with the aim of selling the property at a much significant price in the future. Valuation almost always rises. The only question and uncertainty at hand would be when this rise would happen. Property investors are always on the lookout for market up-ticks. When such price hikes occur, investors take the queue to divest and monetize their profits.

What is most exciting about real estate flipping is that investment returns and profits can go uncontrollable. In other words, profitability can be easily achieved and can be bounded by no limits. You can easily double, triple or quadruple your investments if you would only be appropriately strategic about your investment. Here are some tips that would help you make the most out of flipping.

• Do your homework by researching about the asset you are considering. It would also be advisable if you would know what you should know about the venue, the location and the overall market situation of the real estate asset's site. Failing to do so would not spare you from any market fluctuation and dips that may arise.

• Tour the property long before you finally implement and execute the flip transaction. Assess if the property is strategically located or if it is potentially ideal for your investment. Some real estate assets are obviously inappropriately priced. If you think an asset is overpriced, stay away from it if the seller or broker is not willing to adjust prices. If the asset is priced too low for its actual valuation, grab it.

• Have a working business plan upon buying the asset. Set your goals and schedule a working plan that you would do about the property. Check the calendar and set strategic and practical schedules for any activity involving the asset.

• Consult professionals or experts. Before putting up and taking the transaction, it would be better if you would touch base with accountants, realtors, tax officers, property inspectors, lawyers and contractors to check if the real estate is sound and safe in all possible aspects. This is not being difficult and tedious, but being practical and cautious.

• Set your mindset that the real estate investment is actually a long-term investment. While it is possible that you may generate income or profits in the short to middle term, depending on market influences, most real estate flippers are prepared to treat the investment as a long term one. Do not worry because you can actually use your property productively. You can live in it, lease it or develop it while you wait for the right timing to sell and generate investment returns.

Real Estate Investing Startup Career

We want to look at six real estate investing tips that are sure to help anyone just getting started in real estate investing to successfully launch a real estate investment business and hit the ground running. It begins with the correct attitude.

1. Develop the Correct Attitude

To stand a chance of succeeding at real estate investing, foremost, you must understand that real estate investment is a business, and you will become the CEO of that business.

As your first order of business, then, it's crucial to develop the correct mind-set about investment real estate and be able to make this distinction between buying a home and investing in real estate:

"You buy a home to live and raise a family; you buy real estate investment property to pay for the home, live comfortably, and raise your family in style"

As one very successful real estate investor said, "Only women are beautiful, what are the numbers?" In other words, you will not succeed at real estate investing until you acknowledge that it's not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; what counts most is the property's financial performance.

2. Develop Meaningful Objectives

A meaningful set of (realistic) objectives that frames your investment strategy is one of the most important elements of successful investing. Yes, we may all desire to make millions of dollars from real estate investing, but fantasy is not the same as expressing specific goals and a method on how to achieve it.

Here are some suggestions:

How much cash are you willing to invest comfortably? What rate of return are you hoping to achieve by making the investment in real estate? Are you expecting instant cash flow, looking to make your money when the property is resold, or merely looking to achieve tax shelter benefits? How long do you plan to own the property? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? What net worth are you hoping investing will help you to achieve, and by when would you like to achieve it? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

If you're new to real estate investing, you undoubtedly know little about investment real estate in your local market. So, do market research to learn as much as you can about income property values, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal when you see it.

Here are some good resources:

(a) The local newspaper, (b) A local appraiser, (c) The county tax assessor, (d) A qualified local real estate professional, (e) A local property management company

4. Run the Numbers

I can't stress enough the importance of running the property's cash flow, rates of return, and profitability numbers. Remember, real estate investing is a business, and as the CEO of your investment enterprise, you've got to know what you're buying, especially if you're trying to determine which of several investment opportunities would be the most profitable.

At the very least, work with a real estate professional that has invested in real estate investment software and can calculate, present, and discuss the property's financial data with you.

5. Develop a Relationship with a Qualified Real Estate Professional

Working with a qualified real estate professional is a great way for beginners to get started with rental property investing because an astute professional can acquaint you with local market conditions, recommend a property that meets your investing objectives, and discuss strengths and weaknesses about specific property performance.

Here's a warning, however: Work with a real estate person who understands investment real estate.

Be sure the agent has a firm grip on key financial measures inherent to real estate investing, knows how to measure profitability and rate of return, has the ability to present the data you need to make wise investment decisions, and, most importantly, shows a genuine interest in how you spend your money. The last thing you want to do is to get involved with a real estate agent that would throw you under the bus just to make a commission.

Here's a good way to interview for an agent. Ask them for the property's cap rate and then request an APOD(annual Property Operating Data). If their response (even to these basics) is to stand there looking at you like a deer into the headlights of a car, find another agent.

6. Start Investing

Hopefully, this has given you some insight into real estate investing, highlighted a few things to make you a more prudent real estate investor, and perhaps alerted you to a couple of things that should be avoided.

Selecting a Real Estate Agent

Selecting a real estate agent to represent you in a home purchase or sale can be one of the most important decisions you make. There are obvious considerations, such as choosing a reputable agent with experience in the area where you want to buy or sell. Here are a few not-so-obvious points to keep in mind.

One of the biggest complaints made about real estate agents is that they don't communicate often enough. Make sure before you commit to working with an agent that you know how often you can expect updates. If you prefer communicating by e-mail, find an agent who will accommodate you. If you find that your agent is not communicating often enough, let your agent know what you need.

Before cementing your relationship, find out who will be working with you. Some buyers and sellers are disappointed when they discover that they won't be working with the agent they selected. Instead, they might be working with an assistant. Many top agents use assistants to help them do their jobs. There's nothing wrong with that. Just make sure that you know what to expect ahead of time. If you don't want to be handed over to an assistant, let your agent know.

When you commit to working with an agent, it's reasonable to expect that your agent will attend to your real estate needs.

Find out in advance if your agent is planning a lengthy vacation in the near future. If so, you can ask to meet the agent who will be filling in before your agent leaves town.

Return on Investment (ROI)

Investors are also looking how many pesos they earned for every peso they put in. there are ways to calculate the return on investment and the most common is presented here. To illustrate: the cost of a lot is P200,000 and you expect to sell it for a net return of P250,000 a year later. By using the formula below, your return on investment is 25 percent (50,000/200,000). In the example, the ROI formula like the payback method does not consider the time value of money if you held on to the investment for a certain number of years.

Return of Investment = Net Income/Total Investment

Expanded Value-Added Tax

Transactions on goods, properties and services newly covered under R.A. 7716 (the Expanded VAT Law) effective January, 1996 includes real properties held primarily for sale to customers or held for lease in the ordinary course of business.

Section 109 (w) of the NIRC states that exempt transactions from value added tax includes sale of real properties primarily held for sale to customers or held for lease in the ordinary course of trade or business for real property utilized for low-cost and socialized housing as defined by R.A. 7279, otherwise as the Urban Development and Housing Act of 1992, and other related laws, house and lot and other residential dwellings valued at P1,000,000 and below; provided, that not later than January 31^st of the calendar year subsequent the effectivity of Tax Reform Act of 1997 and each calendar year thereafter, the amount of P1,000,000 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO:

(x)Lease of a residential unit with a monthly rental not exceeding P8,000; provided, that not later than January 31^st of the calendar year subsequent effectivity of RA 8241 and each calendar year thereafter, the amount of P80,000 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO. (R.A. 8241, an act amending R.A. 7716, approved on December 20, 1996).

Capital Gains Tax

Under the NIRC Chapter III Tax on Individuals Section 24 (D)

1. In General- the provisions of Section 39 (B) notwithstanding, a final tax of 6 percent based on the gross selling price or current fair market value as determined in accordance with Section 6 (E) of the NIRC, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts; provided, that the tax liability, if any, on gains from sales or other dispositions or agencies or to government-owned or controlled corporations shall be determined either under Section 24 (A) or under this subsection, at the option of the tax payer.
2. An Exemption from the payment of capital gains tax on sale of real property is available to residents who sell their principal residences for the purpose of building or acquiring a new principal residence within 18 months from the date of sale. The proceeds of the sale must be fully utilized in acquiring or building the new principal residence. The exemption may be availed of once every 10 years.

For corporations, under Chapter IV Sec. 27 (D)(5), a final tax of 6 percent is imposed on the gain presumed to have been realized on the sale, exchange or disposition of lands and/ or buildings which are not actually used in the business of a corporation and are treated as capital assets, based on the gross selling price or fair market value as determined in accordance with Section 6 (e) of the NIRC, whichever is higher of such lands and/ or buildings.