Wednesday, January 2, 2008

Investing 101

For those who wonder how to invest in real estate -- the roads are many. You don't always need a huge down payment, there are syndication opportunities, and your investment can be passive rather than active. Intrigued?

More importantly, profits come in many forms:

- Converting the use of a property: Purchase apartments and convert them to condos if the apartments have low rent yields.

- Pick the property up below market value: If you take your time, you can find office buildings, apartment buildings and warehouses that are priced below market value. Why would they be priced this way? Simply put, there are always owners who need to get out of their property and raise cash quickly. Sometimes a property is in foreclosure and the lender (bank or private lender) will take less than market value just to move the property. This is an investor's opportunity.

- Creating new value in a neighborhood: Sometimes it makes sense to pick up a property in an area that is slated for renovation and re-development. If you can get it bought right, you will have a gem when the neighborhood property values rebound due to re-development.

- Cash flow is king: With an investment property, your tenants or residents pay your note for you. By paying down the mortgage, and increasing your equity, and exploiting (and I use that word on purpose) a plethora of tax advantages, an investors' returns frequently are greater than that of the stock market.

More tomorrow . . .

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