I don’t know anything about this subject, but if you invest large sums of into real estate properties (for example hundreds of thousands of dollars) does that mean you own the building? What is best to invest in – apartment buildings? How much can someone really make off of real estate investment in the US? And last, do you have to "keep tabs" on the properties you invest in (flying to where they are, checking on building codes, landlords, finding tenants etc). Can YOU rent the properties out or not? TY.
** Okay if Real Estate is not a good idea, how can I invest some I have to turn it into more? I don’t want to squander it.

 

  • Invest Pro 7:06 pm on October 30, 2009 Permalink

    The last answer mentioned rental properties as a "risky" investment. Everything in life has risks, it is how you evaluate and manage those risks. Real estate is the single most effective way (and the safest if you know what you are doing) to build wealth. Any wealthy individual will agree on this and there are statistics that show that of all the mega wealthy, over 35% of there wealth is held in real estate.

    If you have large sums of money, I suggest you look into the commercial RE field which is where the real $ is. You must know what you are doing or work with someone who does, as you can generate lots of income and future appreciation (both speculative and forced) but you can also get hurt by making a mistake.

    When you own RE, you are responsible for your business and as such, you need to manage yourself, or hire a competant team consisting of a property manager, tax attorney/CPA, agent/broker, lender, etc.

    Your other option is to loan money secured by real estate, which gives you a set interest rate (return on investment) and the ownership/management is the responsibility of the borrower. In other words, ou become the bank. This is also a great way to get started in the business and learn prior to actually owning property.

    Placing your $ into REIT’s or real estate stocks/funds is placing your future in someone else’s hands. If you are comfortable with that, then good luck to you. Or you can take control of your financial future and rely on yourself rather than some stock broker or fund manager. There are also many more tax advantages to RE than in any other investment which can increase your returns dramatically. You can even invest in RE with your IRA funds.

    Check out this website and make contact for any questions or assistance.

  • Andrew M 7:06 pm on October 30, 2009 Permalink

    That depends. If you are purchasing a property outright, then yes all the items you mentioned are your responsibility.

    There are other options available though, such as REITs (Real Estate Investment Trusts), which basically pool investors in real estate similar to how mutual funds pool investors in stocks. Other options are to by stock of real estate companies, or to invest in certain real estate funds such as those offered by private equity companies.

    Which sector is best to invest in? That also depends. Each asset class yields different returns and is impacted differently by market forces. For sale residential, Multi Family Rentals, Offices, Industrial, Hotels, Golf, etc all react differently. Other questions are, is the asset already leased/ready to sell or in the middle of development? Basically, there is a wealth of information to study to determine what investment is best for you. If you are interested in this field, this is definitely something you will want to read up on first.

    Do you have to "keep tabs". Again, this depends based on the type of investment vehicle you are looking at. If you are investing outright by purchasing an asset, it is 100% your responsibility, while other investment choices may require less oversight, but still warrent your knowledge regarding the ongoing operations.

  • kimmers163 7:06 pm on October 30, 2009 Permalink

    Buying rental properties is a risky investment. You are not guaranteed tenents, nor is there a guarantee they will pay. Then there are taxes and maintenance fees.
    Investing in real estate means you buy property and hope the value rises when you want to sell.
    Land is a safer investment, especially if you can rent it out to a farmer, but you will always have to pay property taxes.

  • brian-the-brain 7:06 pm on October 30, 2009 Permalink

    What a wonderful set of questions. You are looking out for yourself and have stumbled upon the greatest investing vehicle if done properly that exists. Let me share with you what I think you should do to learn more. But first I will give a few basic answers.

    There are two components to investing in real estate. First, owning it and second, managing it. You can do both or just one. Just remember you will pay for the management and will likely have no profits left over from the monthly income in most cases. You will just be hoping to have the debt paid off by the tenants and become rich over time if you hire a manager that does a good job. Any extra income will likely go to repairs and maintenance, if you have chosen a wise investment.

    Unless you have a large down payment you won’t be buying an apartment building anytime soon. They are usually lower cost per unit and more income per unit proportionally but more cost in management per unit. It is the way to go if you need to invest lots and lots of money. If you only are getting started you should invest in single family homes or possibly up to a duplex, triplex, or four-plex. The reason is the type of loan you can get. You can get a conventional loan just like you were buying a house for yourself to live in but a few more requirements and fees. It is nothing like trying to get a loan from a bank which is what you need for 5 units and up.

    I personally will buy a house with 20% down and 80% loan. I then avoid the PMI insurance which is costly and have some room to rent the unit out for more than the payment. If I don’t have 20% to put down then I keep making more until I do. This might not work for some people in which case I say just find out what things will cost you and how you afford it without risk of ruin. The key is that you need to assume it will only be rented 11 months a year and 10% of the rent is to go for maintenance and repairs. They come in bursts and you need to have them saved up for. So the way I do it I also buy a house that needs a little work so by the time I an done repairing and upgrading it I have a house worth about 25% more than I paid for about 10% of the value for costs and 15% is now additional equity. For example I buy a $100,000 house for $20,000, spend $10,000 to upgrade doing something like adding a new bed and bath in the basement and make it worth $125,000. I now spent $30,000, and have a house worth $125,000 and owe $80,000. There is $45,000 in equity which I can tap into with a second mortgage or HELOC one day. Usually this is not something you do until you have owned it for a few years and the number is much larger. In 5 years the numbers would be more like I owe $75,000, its worth $155,000 and I can get a HELOC for $49,000 and still have only 80% LTV which gives you a great interest rate. Now this $49,000 will get me into one and a half more houses. They multiply like rabbits I tell ya!

    Now about the return. The way I do it I get about 12% back on my $30,000 I spent per year. That is I clear about $3,600 a year after maintenance. But I manage them myself and do minor repairs and upgrades myself so it is not very good pay on an hourly rate for the work I do. If that is all there was I would not take a second part time job for this much. However, while I am doing these things and getting $300 a month for the headaches, which can honestly go for several months in between, the tenant is paying down my debt and the houses are appreciating in value. Very cool indeed. So this $300 ( 12%) is only my cash on cash return and does not include my labor. The real return is that in 5 years, as in the example above, I went from an equity of $15,000 to start (because of my free work) to an equity of $74,000. This $49,000 earned once I sell or refinance over 5 years is the equivalent of another 13% a year. So my total return per year after 5 years is 25%. In addition to that I get to depreciate the property on my taxes at a rate that exceeds the $3,600 I made so I pay no taxes on that income until I eventually sell the house which I may never do. I also pay no taxes on the $49,000 until I sell because it’s not income it’s a loan. I pay a little more per month for borrowing the money, but the house is now renting for more as well.

    OK there is an example that about summarizes what you can expect if you do it all yourself. Now if you are interested in learning more about how to do this go to a free podcast I found that really tells you all about how to do this. It is as good as all the $500 kits to learn about how to do it as far as learning the how to go about it. The only difference is that he doesn’t give you all the forms, which honestly you won’t use anyway because your state has its own rules. Check out his podcast I think there are 36 lessons which will tell you all about how and why to own local residential real estate. In fact he says to own 6 houses and you will be set for life. I have 9 now could stop expanding and be right where he says in 25 years, but I am not stopping.

    The podcast is by Bill Fitzpatrick, he used to have it on success.org, but now it is at his website. It is the master real estate course. http://billfitzpatrick.com/podcasts/

    Good Luck Investing

  • bob W 7:06 pm on October 30, 2009 Permalink

    when you do L2P you are not risking any of your money but you have total control over the property.

  • Pool Funds For Real Estate Investing in New Jersey 3:25 am on November 12, 2009 Permalink

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