Real Estate Investment Demystified

Brace yourself, I am about to tell you something that may be shocking. Real estate is hot. Don’t believe it? What if I told you that real estate is a great investment to earn additional income, and it can be simple. How do I know this?  Because I have personally helped clients earn tens of thousands of dollars through real estate investments.  And no, I do not own a time machine and I did not travel back to 2005. 

With all the current opportunities, I ask myself why people are not taking advantage of these options. My goal is to briefly explain the process of investing in real estate so you can determine if this tool is the right option for your financial interests.

There are two primary reasons that investors typically do not choose real estate. First, they do not understand the true potential, and second, they feel that compared to stocks, bonds, annuities, etc., real estate is just too much trouble and too complicated. In my experience, real estate helps to diversify a portfolio and may give your investment dollars greater impact. This is true even in today’s uncertain housing market.

A real life example:

When you place $15,000 into most investments you receive $15,000 worth of investment. When you place $15,000 into real estate, however, you can receive $125,000 worth of investment. If that piece of real estate appreciates at 10%, you earned $12,500 in investment dollars as compared to $1,500 in investment dollars for your other investment. QUITE a DIFFERENCE!

The next question is what does it really mean to invest in real estate? Let’s look at another example.

I have a client; I'll call him Joe.  He takes the opportunities available through real estate to heart. Joe purchases foreclosed homes auctioned daily at the courthouse.  I receive a list each day of about 400 homes up for auction the following day.  Quite the inventory for making a bundle!!  After running comps on select properties, if I feel Joe can make a profit on a fix and flip, I recommend these properties to Joe. 

Joe has authorized an associate at the courthouse to place bids on these properties up to a certain amount.  If we are successful, we pay cash and receive the deed from the Trustee.  I have worked with Joe to secure a great team of trusted contractors. Joe sends his people out to do the necessary repairs and I list the house.  We usually make around $20,000 - $25,000 on each property within 90 days.  Not a bad return, huh?  We also offer financing for these properties, but keep in mind we are not in the lending business so you'll need to put 20% down and get it refinanced when you can. 

I hope this explains some of the mystery around investing in real estate. My goal is that you and your family are able to live your dream.  Let me know what you think and if you have questions or wonder if investing in real estate is an option for you, contact me.  

10 Reasons Why Renters Should Buy Real Estate Now!

Life is full of milestones.  As a real estate professional, one of my personal favorites is when people make the leap from renting an apartment to owning their own home. Achieving the America Dream marks a significant change in a person’s life. But with daily headlines blasting stories of lower property values, foreclosures and economic downturn, many people are taking a good hard look at their options before signing their name on the bottom line, as well they should.

Despite the headlines purchasing your own home is still a sound economic investment. I have always encouraged potential buyers to carefully consider all of their options before moving forward with purchasing a home. Now more than ever many people can significantly benefit from purchasing a home as compared to remaining in their rental.

Below are 10 reasons why you may want to consider purchasing a new home:

1. Save money: It may be less expensive to own than rent. Your mortgage payment may even be less than your monthly rent.  Even if your mortgage is higher, the tax benefits may outweigh the added expense.

2. Desirably: Trulia.com analyzed the largest 50 cities in America as to which are better to buy in versus rent in. They ranked Mesa #6 and Phoenix #8 as best areas to buy!

3. Affordability: Many buyers who could not afford to buy a home a few years ago can now afford to buy. The Greater Phoenix median purchase price level is close to what it was in the year 2000.

4. Interest rates are very low! Save money! The lower the interest rate the lower the monthly house payment.

5. Save on taxes: If a buyer itemizes on their federal tax return, they can deduct mortgage interest and property taxes. These tax deductions may mean it costs less to own your 1500 square foot house than to rent a 900 square foot apartment.

For example, if someone paid $12,000 in mortgage interest in a year and were at a 20% federal tax rate, they may receive up to a $2,400 annual tax deduction. (The buyer needs to see their accountant as to which is better for them: itemizing deductions versus taking the standard deduction before buying.)

6. Supply: A home buyer has so many choices – one-story or two; patio or backyard; Tuscan or southwestern.  The choices are endless.

7. Negotiating power: Since it is a buyer’s market, the seller often will pay many of the buyer’s closing costs and prepaid expenses.

8. If you previously owned and lost your home to a short sale or foreclosure you may still be able to buy again and don’t know it.

9. Home ownership means a place of your own and place to put your own stuff!  All of it – no more storage units.

10. Someday home prices will go up again!

At the end of the day, purchasing a home is a huge responsibility.  However many people stand to benefit from purchasing a home over renting. Consider the benefits and don’t be paralyzed by fear. See your Real Estate Professional for details and recommendations based on your personal circumstances.