Information for Real Estate Investors
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
welcome to:
Trigon Real Estate, LLC
Trigon Real Estate, LLC
Email Us
You frequently hear about people who made their fortunes investing in the stock market,
but you also hear about investors who lost their shirts playing the same game. You hardly
ever hear about real-estate investors who go bankrupt, however; that's because it doesn't
happen often.
That's right: Those individuals who invested wisely in real estate many years ago are living
a very comfortable lifestyle. Investing in real estate can garner interesting returns, so if
you're just getting started or have considered investing in real estate, the information that
follows is invaluable.
but you also hear about investors who lost their shirts playing the same game. You hardly
ever hear about real-estate investors who go bankrupt, however; that's because it doesn't
happen often.
That's right: Those individuals who invested wisely in real estate many years ago are living
a very comfortable lifestyle. Investing in real estate can garner interesting returns, so if
you're just getting started or have considered investing in real estate, the information that
follows is invaluable.
Why Real Estate?
No one hears about how much money one can make investing in real estate. That's
probably because it is a well-kept secret. If everyone knew about it, everyone would be
doing it, right?
Wrong. Much like starting your own business, investing in real estate requires
entrepreneurial skills and a vision, which is why not everyone is jumping on the real-estate
bandwagon.
In fact, most people aren't willing to take the risk that real-estate investing entails;
fortunately, these are the same people that will make you rich by renting from you. The little
secret is that there are hundreds of individuals who procrastinate for every one individual
who has a vision and chooses to take the risk.
probably because it is a well-kept secret. If everyone knew about it, everyone would be
doing it, right?
Wrong. Much like starting your own business, investing in real estate requires
entrepreneurial skills and a vision, which is why not everyone is jumping on the real-estate
bandwagon.
In fact, most people aren't willing to take the risk that real-estate investing entails;
fortunately, these are the same people that will make you rich by renting from you. The little
secret is that there are hundreds of individuals who procrastinate for every one individual
who has a vision and chooses to take the risk.
Take the Risk
When I initially started investing in real estate, I really didn't have a clear vision. The only
thing I was sure of was that I wanted financial freedom. Of course, achieving these goals
did not come without a price, and only afterward did I develop a plan and vision of where I
was headed.
Investing in real estate requires a lot of time; you need to deal with a vast array of tenants --
good ones as well as bad. Just like a business, you also have to deal with operating and
fixed expenses, such as heating bills and renovation costs.
On the other hand, I don't have to wear a suit all day and run around doing someone else's
bidding. My dress code consists of shorts and a shirt six months out of the year unless I'm
on vacation; in that case, it's 10 months out of the year.
If I want to go out of town for a few days, I go. I don't have to ask for vacation time. While I'm
out of town, my rents keep ticking away 24 hours a day, seven days a week, whether I'm on
the job or not. And those loans keep amortizing. The magic is happening just the same.
thing I was sure of was that I wanted financial freedom. Of course, achieving these goals
did not come without a price, and only afterward did I develop a plan and vision of where I
was headed.
Investing in real estate requires a lot of time; you need to deal with a vast array of tenants --
good ones as well as bad. Just like a business, you also have to deal with operating and
fixed expenses, such as heating bills and renovation costs.
On the other hand, I don't have to wear a suit all day and run around doing someone else's
bidding. My dress code consists of shorts and a shirt six months out of the year unless I'm
on vacation; in that case, it's 10 months out of the year.
If I want to go out of town for a few days, I go. I don't have to ask for vacation time. While I'm
out of town, my rents keep ticking away 24 hours a day, seven days a week, whether I'm on
the job or not. And those loans keep amortizing. The magic is happening just the same.
What Lies Ahead
Aside from being your own boss, having the freedom to travel while earning profits,
increasing your net worth, and having a place of your own to call home, investing in real
estate holds even more benefits.
Cash flow
Cash flow is the difference between your income and your expenses on a piece of
property. You can have a positive or negative cash flow. Obviously, you'll feel a lot better if
the cash flow is positive.
My advice on cash flow is this: Never use all of your positive cash flow for rapid debt
reduction. You will be walking a thin line. By keeping a strong positive cash flow, you will
have more options and space to maneuver.
Appreciation
Appreciation is the increase in value of a property. There are two kinds of appreciation. The
first is from economic conditions beyond your control, such as inflation. But you won't gain
much from this type of appreciation since the gain is offset by the higher cost of living.
The second kind is market appreciation, which you can control. When you improve a
property (through renovations), you force its value higher. You can purchase a piece of
property in need of repairs and bring it back up to neighborhood standards or slightly
higher; this will give you a property that is much higher in value.
Leverage
Leverage is the ability to borrow a percentage of the value of a piece of property. Real
estate, in comparison to other investments, offers a very high degree of leverage. In some
cases, a couple buying a single-family home can obtain 95% financing. This allows
individuals to purchase real estate with little, if any, of their own money. What other
investments offer such a high degree of leverage?
Amortization
With leverage, or the use of other people's money, comes a repayment schedule. Your
outstanding balance is reduced with every payment you make. Part of each payment goes
to interest (applied first) and the rest goes to pay off the principal. The principal reduction is
called amortization -- reducing debt. Hence, amortization can make you wealthy, slowly and
steadily.
Tax advantages
Owning real estate with the goal of making a profit allows you to deduct interest payments
and other expenses come tax time. But don't be fooled into buying real estate for the tax
advantages; rather, purchase it because it makes economic sense to do so.
increasing your net worth, and having a place of your own to call home, investing in real
estate holds even more benefits.
Cash flow
Cash flow is the difference between your income and your expenses on a piece of
property. You can have a positive or negative cash flow. Obviously, you'll feel a lot better if
the cash flow is positive.
My advice on cash flow is this: Never use all of your positive cash flow for rapid debt
reduction. You will be walking a thin line. By keeping a strong positive cash flow, you will
have more options and space to maneuver.
Appreciation
Appreciation is the increase in value of a property. There are two kinds of appreciation. The
first is from economic conditions beyond your control, such as inflation. But you won't gain
much from this type of appreciation since the gain is offset by the higher cost of living.
The second kind is market appreciation, which you can control. When you improve a
property (through renovations), you force its value higher. You can purchase a piece of
property in need of repairs and bring it back up to neighborhood standards or slightly
higher; this will give you a property that is much higher in value.
Leverage
Leverage is the ability to borrow a percentage of the value of a piece of property. Real
estate, in comparison to other investments, offers a very high degree of leverage. In some
cases, a couple buying a single-family home can obtain 95% financing. This allows
individuals to purchase real estate with little, if any, of their own money. What other
investments offer such a high degree of leverage?
Amortization
With leverage, or the use of other people's money, comes a repayment schedule. Your
outstanding balance is reduced with every payment you make. Part of each payment goes
to interest (applied first) and the rest goes to pay off the principal. The principal reduction is
called amortization -- reducing debt. Hence, amortization can make you wealthy, slowly and
steadily.
Tax advantages
Owning real estate with the goal of making a profit allows you to deduct interest payments
and other expenses come tax time. But don't be fooled into buying real estate for the tax
advantages; rather, purchase it because it makes economic sense to do so.
The Benefits
Owning a real-estate business is a great way to achieve your financial freedom. What
could be more worthwhile than taking up real estate as either a full-time business or even
a hobby? The benefits are definitely there.
Probably the most important aspect of real-estate investment is the notion of time. A
seasoned investor knows that in the real-estate game, there is no "quick buck." Everything
comes with time.
could be more worthwhile than taking up real estate as either a full-time business or even
a hobby? The benefits are definitely there.
Probably the most important aspect of real-estate investment is the notion of time. A
seasoned investor knows that in the real-estate game, there is no "quick buck." Everything
comes with time.
The Benefits of Buying
Real estate, like a business, is a great form of investing, but it takes a lot of work and time
on your part. Especially if, to begin with, your resources are limited. But that's okay
because you're going to build your wealth one brick at a time.
The first thing you need to spend time on is developing a vision. You need to be specific
about what things you want for you and your family. Then you need to ensure that you act
on your vision by motivating yourself. What do you want Real Estate to do for you? Spend
some time thinking about it because money really isn't enough.
The desire to make a million dollars won't get you going. It is things such as new cars,
vacations, improved health, improved housing, and upgrading your lifestyle that will
motivate an individual to succeed.
The worst thing that you can do -- especially while planning -- is surround yourself with
negative people who will trample all over your vision. Once your vision is established, you'll
need a game plan to help you reach it effectively.
on your part. Especially if, to begin with, your resources are limited. But that's okay
because you're going to build your wealth one brick at a time.
The first thing you need to spend time on is developing a vision. You need to be specific
about what things you want for you and your family. Then you need to ensure that you act
on your vision by motivating yourself. What do you want Real Estate to do for you? Spend
some time thinking about it because money really isn't enough.
The desire to make a million dollars won't get you going. It is things such as new cars,
vacations, improved health, improved housing, and upgrading your lifestyle that will
motivate an individual to succeed.
The worst thing that you can do -- especially while planning -- is surround yourself with
negative people who will trample all over your vision. Once your vision is established, you'll
need a game plan to help you reach it effectively.
The Secret Isn't Money... It's Time
Once you realize that unlike the stock market, investing in real estate is for the long haul,
you can begin to develop your plan of action. Here is a list of the important things that you
should consider:
1. Get a good support team
Don't wait until you have a deal in the works to find a supporting team. The idea is to get the
competent professionals on your side. And by bringing them repeat business, you can
bargain for better prices. You need to get the following players on your team:
2. Be persistent
Very few deals are made on the first attempt. Most deals are actually booked by persistent
individuals who follow up with a fifth and sixth attempt. If the deal is too good to pass up,
have a follow-up system (schedule follow-ups and keep a running history of
conversations). Eventually, you'll come to an agreement and close the deal.
3. Stay informed
You can lose a lot of money thanks to an investment mistake. Ignorance can cost you more
than what it would cost to stay informed on new developments within the real-estate
market. Consider attending seminars every year. You can usually learn something that
either increases your income or prevents you from landing in trouble.
4. Treat this as a business
Real-estate investing is a business like any other. It takes a long time to develop
customers, associates, partners, and so on. You need to be disciplined and professional,
and with much effort -- and of course some time -- it will flourish into a profitable business.
you can begin to develop your plan of action. Here is a list of the important things that you
should consider:
1. Get a good support team
Don't wait until you have a deal in the works to find a supporting team. The idea is to get the
competent professionals on your side. And by bringing them repeat business, you can
bargain for better prices. You need to get the following players on your team:
- Attorney -- One that specializes in real-estate deals for himself as well as others.
- Title or Escrow Co -- Don't deal with big-name companies; find one that specializes
with real-estate investors. Make sure they understand double closings and land
contracts.
- Insurance Agent -- Just like the Escrow Co, find one who specializes in real-estate
investors and who understands land contracts, landlords, and so on.
- Contractor -- Always deal with one who offers free estimates and knows how to
"cut corners" in the right places.
- Mortgage Broker -- Find one who is creative, savvy and experienced in dealing with
real-estate investors.
- CPA (Certified Public Accountant) -- Look for an aggressive individual who owns real
estate himself.
- Sound Partner -- Sometimes you have limited resources such as cash flow or
experience. This is where you might need to bring in a partner.
- Mentor -- Someone who's been in the business for some time now and knows how
to smooth out the rough spots, or who can give you wise advice for sticky
situations. Maybe even a potential partner.
2. Be persistent
Very few deals are made on the first attempt. Most deals are actually booked by persistent
individuals who follow up with a fifth and sixth attempt. If the deal is too good to pass up,
have a follow-up system (schedule follow-ups and keep a running history of
conversations). Eventually, you'll come to an agreement and close the deal.
3. Stay informed
You can lose a lot of money thanks to an investment mistake. Ignorance can cost you more
than what it would cost to stay informed on new developments within the real-estate
market. Consider attending seminars every year. You can usually learn something that
either increases your income or prevents you from landing in trouble.
4. Treat this as a business
Real-estate investing is a business like any other. It takes a long time to develop
customers, associates, partners, and so on. You need to be disciplined and professional,
and with much effort -- and of course some time -- it will flourish into a profitable business.
Have a Game Plan
I personally recommend that a novice real-estate investor begin with single-family houses.
Why? Because they have the two biggest players in the market. Whereas apartments only
have investors playing in the market, single-family homes have both investors and
owner-occupants. For this reason, financial institutions feel more comfortable lending a
higher percentage of value on the property.
Single-Family Home Investment Strategies
The following is a list of three strategies used by many investors who deal in the
single-family home market. The idea is to take on one at a time and eventually combine
several strategies with your investment plan, also known as stacking.
Stacking entails using more than one method at a time, either in conjunction with, or in
addition to, the other methods. You are maximizing your potential when you stack.
1. Buy and Hold Strategy:
The starting point for most investors. The goal is to purchase the house with the sole intent
of renting it. For this method to be successful, you must purchase under some set price
and terms that allow for a healthy, positive cash flow. The rent has to be higher than the
mortgage payment.
2. Buy Low-Sell High Strategy:
Purchase a home located in a neighborhood with high sales activity. Make the necessary
cosmetic and structural repairs and then sell the house for a higher price than what you
paid.
Keep in mind that the purchase price must be low enough to allow room to cover your
repair costs, holding costs and resale costs... plus, leave room for a healthy profit.
3. Leasing Strategy:
You can control property without actually owning it. Look for property you can lease under
favorable terms, where you give the rights of use, enjoyment, and occupancy to a tenant
who agrees to pay a price higher than your own lease (sublease). The longer the term of
the favorable underlying lease, the more value your position holds.
Why? Because they have the two biggest players in the market. Whereas apartments only
have investors playing in the market, single-family homes have both investors and
owner-occupants. For this reason, financial institutions feel more comfortable lending a
higher percentage of value on the property.
Single-Family Home Investment Strategies
The following is a list of three strategies used by many investors who deal in the
single-family home market. The idea is to take on one at a time and eventually combine
several strategies with your investment plan, also known as stacking.
Stacking entails using more than one method at a time, either in conjunction with, or in
addition to, the other methods. You are maximizing your potential when you stack.
1. Buy and Hold Strategy:
The starting point for most investors. The goal is to purchase the house with the sole intent
of renting it. For this method to be successful, you must purchase under some set price
and terms that allow for a healthy, positive cash flow. The rent has to be higher than the
mortgage payment.
2. Buy Low-Sell High Strategy:
Purchase a home located in a neighborhood with high sales activity. Make the necessary
cosmetic and structural repairs and then sell the house for a higher price than what you
paid.
Keep in mind that the purchase price must be low enough to allow room to cover your
repair costs, holding costs and resale costs... plus, leave room for a healthy profit.
3. Leasing Strategy:
You can control property without actually owning it. Look for property you can lease under
favorable terms, where you give the rights of use, enjoyment, and occupancy to a tenant
who agrees to pay a price higher than your own lease (sublease). The longer the term of
the favorable underlying lease, the more value your position holds.
Where Do You Start?
Don't expect to go through real-estate investing without making any mistakes. Like most
businesses, there is a learning curve. You will only learn the real-estate game by being
active and understanding the buying process.
To be successful, you need to learn the market, how to locate property, inspect property,
negotiate your deal, contract to buy, finance the purchase, and close the transaction. You
can't possible learn all this at once; the only way you'll ever be ready to understand, is by
actually going through the motions.
businesses, there is a learning curve. You will only learn the real-estate game by being
active and understanding the buying process.
To be successful, you need to learn the market, how to locate property, inspect property,
negotiate your deal, contract to buy, finance the purchase, and close the transaction. You
can't possible learn all this at once; the only way you'll ever be ready to understand, is by
actually going through the motions.
A Final Tip