Real Estate Investing

I should link to BripBlap more often because they nearly always provide pause when you’re considering decisions that could impact the future of your financial health.   A day or two ago, they said,

In real estate, the quicker you can go into massive debt, the quicker you can become massively wealthy. (Link)

It’s true, but in a very misleading way. The operative word here is “can.”  It is easy to miss, and many people will automatically interpret this as “will” or even worse, “probably will.”  That is precisely incorrect.

If you go massively into debt, what you do is you take on a massive amount of risk.  Risk isn’t necessarily a bad thing; we take risks many times every day – getting on the highway, crossing the street, eating that Big Mac (well, a bunch of Big Macs, over time).

I have taken risks before, but have never ventured into buying real estate for investment purposes.  I’d like to, but the specter of draining my retirement account to buy a house is daunting.  Then again, my retirement account has been steadily receding anyway - as has real estate.  Maybe this would be a good time to cut my losses in my 401(k) and invest in real estate while prices are low.

However, it’s not a decision to be made lightly, as our friends at BripBlap say.  It’s a crap shoot.  Is it worth it?

I keep hearing that investors are starting to snatch up houses and getting them at great deals.  I haven’t worked with an investor yet this year, but several of my colleagues have.  However, I *have* worked with sellers who have taken their homes off the market in order to rent them.  The cost of making months of mortgage payments on unoccupied houses has become too much for them, so they’ve become landlords to stop their pocketbooks from bleeding.

If you’re in this position, you need to know how to protect your home, how to insure the house, what rights tenants have, what your rights are as a landlord, how to budget for repairs, and more.  Even with typos, this site provides a helpful list of 10 Things You Should Know About Being a Landlord.  For example,

Having a clearly defined set of rules for residents can save you time and money. When you draw up your list of rules, make sure the same rules apply to all your residents. Don’t discriminate based on age or gender. For example, don’t just say “children are not allowed in the pool area.” You either have to say “no resident or guest is allowed in the pool area” or “children under the age of 8 must be accompanied by an adult in the pool area.” Using general terms, such as “resident” and “guest” will mean that you can’t be accused of discrimination.

If a resident does break your rules, then you have every right to keep a record of such behavior. Keep written records of the time and date when the incident took place and how you found out about the incident. Keeping records will mean that it’s far easier to evict a residents if there are any problems in the future. Having rules and guidelines for residents clearly laid out means they know what is expected of them before they agree to rent from you. Make sure you look at the laws in your own state before you finalize your rules.

In Ogden, Utah, a Realtor is also a landlord and shares his “no dogs” rule.  Some of his “good” tenants moved out and he discovered ruined carpet and subfloors,

Not surprisingly, the pad was completely disgusting as well. Subfloors too. In all, this reflooring experience will top $2500. The tenant’s (now forfeited) deposit was $700 so I am out about $1800 for the experience. Unfortunately, these particular tenants suffered a significant decline in their credit so it would be pointless for me to take them to court. As the saying goes: You can’t bleed a turnip.

Jeremy says the the biggest step in making money as a landlord is by thoroughly screening potential tenants. 

You can check their credit scores, ask for references from previous landlords (and call them!), ask for personal references.  Also, you can ask for their supervisors name and number to confirm employment.  Once you’re satisfied they have the ability to pay the rent and they move in, open communication is key to a happy relationship.

A few days ago, I promised to tell you how to buy a home to pay for college on behalf of your children and grandchildren.  Before giving you these tips, however, please visit the website for the College Savings Plans Network of the National Association of State Treasurers.  A lifetime ago, I helped to establish this organization as the lead staff member so I’ll always be a proponent of planning ahead for college funding.  The states do offer wonderful savings options where the earnings are exempt from federal taxation. Why is it important?

College is an investment for a lifetime - the gift of a college education can open the door to a world of opportunity for your child or grandchild. Saving, even a little at a time, can make a big difference down the road. With the cost of a college education continuing to increase, the key is to start saving early and regularly.

In addition to the prepaid tuition and college savings programs, investing in real estate is another way to save ahead for a higher education on behalf of your children or grandchildren.  Here are 10 tips for creating a savings option for future education.

1. Buy residential properties - houses and condos. Stay away from land and commercial real estate unless you are an experienced investor or are buying as a business “user.”
2. Buy “mainstream” houses and condos. Buyer properties that are at or below the average sales price. Buy properties that appeal to most buyers. Avoid high priced or unusual properties. Buy houses with at least three bedrooms and condos with at least two. If possible, buy properties with a garage.
3. Don’t buy with partners, unless you have to. If you have to have partners, make sure they have the same goals and values, are of similar age, and have job, geographic, and marriage stability.
4. Believe in the long run.  Real estate markets are cyclical but the long term trend has been up. Hang in there for the long run. The great investor’s lament is “I should never have sold that property.” The other investor’s lament is, “I could have bought that property for $xxx!”
5. Take care of your property and it will take care of you.  It’s your “golden goose.”  If you don’t like property management or are too busy, either hire a professional property management firm or buy condos or townhouses. They take a lot less management. The homeowner’s association takes care of most of the property maintenance.
6. Get started early.  Put time on your side. Albert Einstein was once asked what he thought was the most powerful thing in the world.  His reply, “compound interest.”  Don’t wait to buy real estate.  Buy real estate and wait!
7. If you don’t have the money, make a plan and commitment to get it.  Consider borrowing your investment money out of the equity in your personal residence.
8. Know your “enough.”  How much investment money do you need?  Know when you are ready to stop accumulating property and start paying off what you have - and enjoying life!
9. Work with knowledgeable people. Pick Realtors, accountants, attorneys, and property managers who know what they are doing.
10. Have a goal and a plan. Contact your agent and begin to develop a customized plan to start creating investment wealth.

Even if your child or grandchild does not go to college, you have still created investment wealth for your retirement.

Source: Butch Roth, friend and fellow-Realtor.Prendere le storie di mano quando i giocatori di party casino online non mostrano il loro al fiume - il Grande trucco di party poker che sono sicuro che molte persone hanno scoperto.