Great Ways to Invest in Real Estate

February 3, 2011, 11:12pm

If you want to invest in real estate you can buy property from a real estate investment group, buy undervalued properties or properties that are in a hot market, buy a reasonably priced property and make improvements to it, or you can look for corporations that have REIT status to invest in.

Many individuals are interested in venturing into Nevada City real estateinvestments, but to some the real estate industry can seem daunting and difficult. This could be the case if you do not know how to get started or are unfamiliar with this kind of enterprise. In spite of this, you can reap substantial rewards if you make the right real estate investment and know how to invest in real estate.

Buy property from a real estate investment group

You can still invest in rental property even if you don’t have the time or experience as a landlord. Real estate investment groups work when a company purchases or constructs multiple apartments or condo units and then sells these properties to investors. The investors will then be made part of the investment group run by the company. Whether you choose to own a single or multiple units, the company overseeing the investment group will manage all the properties as one which relieves you from the tasks of maintaining, repairing and advertising the rental properties to tenants. You will have to pay the company a percentage of the rent you receive from tenants in exchange for having them manage your property.

Buy undervalued properties or properties in hot markets

Property flipping basically involves investing in properties generally perceived to be undervalued or in a hot market. There are two classes of property flippers. Pure property flippers only consider properties that have intrinsic value and do not need improvements which is an effective, short term investment strategy. This is a higher risk approach because many pure property flippers do not have cash readily available as a buffer and are often unable to pay the mortgage on a long term basis when they cannot sell a property right away.

Buy a reasonably priced property and make improvements to it

Another class of property flipping involves adding value to reasonably priced properties and then selling them for a profit. You can purchase a property first and then make significant improvements and renovations to it. This method of property flipping is a long-term investment because it can extend over longer period of time depending on the renovations needed. The time intensive characteristic of this investment makes it straining on the investor who usually cannot work on multiple properties at once.

Look for corporations that have REIT status and invest on these

If you prefer highly liquid investment options, you can look at listings and invest on a Real Estate Investment Trust, or REITs. Some corporations or trusts buy and manage income properties using money from investors and form an REIT. REIT corporations distribute 90% of their taxable profits as dividends which makes this a stable form of real estate investment because investors will receive regular income.

There are many ways you can invest in real estate, but the important thing is to find what is best for your capacity and needs.

4 reasons why we need to be financially literate real estate investors

Reason #1: You will eventually be able to save enough money to finance your own deals

As I have said in my series on managing finances, you need to learn how to manage your finances to get ready for your first real estate deal, and you do this by taking care of your finances by becoming your own Chief Financial Officer, who is always on top of one’s cashflow by properly tracking income and expenses and proper money management.

Still have nothing to invest? Buried in credit card debt? Living paycheck to paycheck?

As Rich Dad would say, “It’s not how much money you make, it’s how much you keep.”

Why not take a deep hard look at how you manage your money and take the next step?

Reason # 2: You will become trustworthy when it comes to money

Think about it, would you do business with someone who is not trustworthy?

This not only applies if you do decide to get other people’s money or OPM to finance your deals, you also need to be able to trust yourself. If you trust yourself, I’m assuming you really are trustworthy and you act in a trustworthy manner.

As they say, “If you want people to trust you, be trustworthy.”, and you start by being trustworthy with your own money, not with OPM.

If you can’t even trust yourself to handle your own money well, don’t even try to get into real estate investing.

Reason # 3: When you get your own deals, you will be on top of your finances with regard to your investment properties

So you got a deal, finally! But how do you know that you are doing good? You’re an investor and you need to know if you really are making money!

If you are financially literate and manage your finances the way you should, you will know at any given time if you are really making money or losing money, you will be on top of your cashflow.

What if you eventually got your very first real estate deal but never really learned how to manage your money? You might lose track of your expenses and then you end up wondering what’s happening to your cash, or even worse, you might even lose track of important payments like monthly amortizations  or you simply have no money left to settle your obligations and end up facing foreclosure.

On the other end, you might lose track of your receivables and end up NOT getting the money that is rightfully yours, some if which are meant for mortgage payments, maintenance, etc.

Things get even more complicated once you acquire more and more deals, so without financial literacy, you might end up with nothing but a financial mess.

Reason # 4: When you do start earning money from your investments, you will certainly not end up like a lot of Lotto winners

In a recent talk during The Feast at the PICC, Bo Sanchez mentioned stories of Lotto winners who lost all of their money, get buried in debt, ended up with broken marriages, etc. (Actually Bo also wrote an article that mentioned this and you can read it here: How To Use Your Pain To Achieve Great Success). These are perfect examples of what can happen if one who is not yet financially literate gets a big amount of cash. Sad but true.

Earning money from real estate investing, though not as big as Lotto winnings(at least not at the start  ), can still be considered as a big windfall of money, especially, if your real estate investing strategy is more focused on capital gains. If you are not financially literate, you might not be able to handle the sudden windfall, and you may end up just like those Lotto winners mentioned by Bo, where money became a curse.

On the other hand, imagine if you were financially literate, and you earned a lot from your real estate deals (or if you won the Lotto), you will be able to handle it well, you won’t go into a shopping spree, you won’t go for instant gratification, you won’t accumulate liabilities, you will focus on real income generating assets, you will be generous, you will spend wisely, you will be in control. You will be able to manage it well and put your new found wealth into good use, it will become a blessing.

There you have it folks…

1. You need to start by working on your financial literacy first, it cannot be just an afterthought.
2. To be someone who can be trusted, you need to become trustworthy, and that definitely applies to money and real estate investing.
3. Financial literacy will let you know if you are really making money with your deals, and help you run your business through proper cashflow management. Yes, real estate investing should be treated as a business. The importance of managing your finances well will get magnified as your business grows.
4. If you are financially literate, more money will be a blessing to you and the people around you, it won’t be a curse.

Remember we are just stewards of the wealth and abundance that come our way, and being financially literate helps ensure that we become worthy stewards.

“From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked.” – Luke 12:48

What do you think?

To our success and financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Follow me in Twitter:http://twitter.com/jay_castilloFind us in Facebook:Foreclosure Philippines facebook page

Text by Jay Castillo and Cherry Castillo. Copyright © 2010 All rights reserved.