How to build a profitable property portfolio

As more and more of us look for better ways to secure our financial future than investing into stocks and shares or relying on our government to provide for us in our old age, so interest in purchasing property as an investment asset is increasing.

After all rarely do careful investments made into real estate lose a purchaser money, whereas all too often investments made into pensions companies or on the stock market fail to come to fruition - is it any wonder therefore that more people want to know how to build a profitable property portfolio?

Here are ten top tips that expert property investors abide by when looking for property that they can do up and resell or rent out for profit. If you want to learn the tricks of the trade then read on…

1) Speak to letting agents and do your own research, find out how much rent you think you can comfortably get from a given property type in a given location. With that figure confirmed and in mind never pay over 100 times more than the monthly rental figure for a property. I. e., if you’re sure a property will return you GBP 700 a month do not pay more than GBP 70,000 for that property and you will then achieve a good rental yield.

2) Understand and harness the power of OPM – other people’s money! Never over commit your own personal wealth to a pure investment property, instead use loans, mortgages and credit facilities and put down the smallest deposit possible. Preserve your own wealth at all costs.

3) Don’t invest in future potential, invest in real potential. If an area is considered to be up and coming because in the future it will benefit from better infrastructure never bank on the investment being made…just know that if an area has already arrived and a particular property is already profitable, the future prospects for that property are already assured and make a far better bet than speculating to hopefully, maybe, potentially one day accumulate!

4) Don’t make it personal – an investment is a pure profit making enterprise therefore don’t get emotionally attached to any particular property, remain as objective as possible.

5) When letting property let it unfurnished because you will have enough to cope with getting the rent out of tenants and keeping on top of property upkeep without having to locate someone to fix a leaking washing machine or replace a broken crockery set.

6) Seriously reconsider plans to renovate and refurbish to sell on for profit. Unless you’re a builder and an interior designer and you have friends in the trade to help you and get you materials at cost you will end up paying more than you intend to pay and eating away at your profits. Yes money can be made from renovation property but it is far easier to make money from rental property!

7) Learn all you can from the wealth of brilliant books that have been published by property investors and real estate millionaires. You can bet your bottom dollar that all those who give seminars on making money from real estate are actually making their money from you attending their seminar – whereas if a successful property portfolio owner has committed their knowledge to print you cannot afford to overlook their wisdom.

8) Do hands on research – get out on the streets, visit letting agents and estate agents, look at property prices, rental rates, the popularity of a given area and only when you are certain about a location and a property type should you make a commitment to buy real estate.

9) If you do your homework and keep revising your facts and figures you should be confident in your own decisions and not be swayed by others who might say your plans will never work. You have to have dreams and ambitions and visualize all your hopes and hard work coming to fruition. Keep your feet on the ground and don’t be swayed by the negativity and limitation of others.

10) Be financially pessimistic. Always underestimate your returns and overestimate your outgoings that way at best you’ll be spot on with your earnings and at best you’ll be rewarded for practical and careful budgeting.

Forced to move

If you are in a position where you are forced to move, say by job transfer or because of health and clinic attendances, and you cannot sell your home, what can you do?

Well, first let's clarify the issue: chances are, you can sell your home - but you don't want to sell it for a nominal amount. You don't want to sell it for an amount below its value, or worse yet – you don't want to sell it for below what you owe on it.

Some people just walk away from their home and start over - not advisable. This impacts your credit rate badly – in fact, it is the worst possible thing you can do to it!

One possibility for solving this matter is to tell your Lender the truth. The Lender does not want the bother of foreclosure either; it will cost their company money. If you tell your Lender that you cannot pay the monthly costs, you can then ask them if they can help you with a short sale on your property.

In order to back this request up, you will need to have a copy of a financial statement that you will have drawn up. This will show your assets and wages and will prove to them that you have no more money left to pay the mortgage.

You will also need a current market evaluation of the property from your real estate agent, and an offer from a prospective buyer. If you don't have this, you will need to persuade your Lender that you can arrange all this.

This is where the crunch comes, because you must be genuinely without cash, assets, savings, investments or liquid retirement funds and anything else that could be turned into cash.

The reason for this stringency is because the Lender is going to take the loss for you. Therefore, he wants to make sure that you are not pulling a fast one on him!

Here is what happens: your mortgage is worth $400,000. Your house, at this time, is only worth $370,000.

You will lose $30,000 plus costs. If a buyer can be found, the Lender will 'write off' his loss of $30,000 and you will leave the house behind you - but with your credit rating still intact.

You will have to talk to the Loans Department of the Lender concerned. Once this is done, your real estate agent will start to prepare the deal.

At this point, both you and the buyer will have to be patient. There are several people involved in the decision over whether to accept the prospective buyer's offer or not. Firstly, the Lender is probably only the middle man, so he has to get agreement from the actual 'investor'. Assuming you have mortgage insurance on the loan, the next step is to get the Insurance Company to agree.

Short sales can take even longer in cases where there is a second mortgage held on the property; they also want 'a cut' of the capital released; sometimes having the second mortgage on a property makes the deal too difficult to negotiate.

In a short sale, at least your credit rating has been preserved which means that when you feel more confident, you may buy another home to own. There is one positive aspect to all this, and that is your newly-acquired expertise in short sales procedure. You are now familiar with it, and may be able to buy a new home through a short sale, thus offsetting some of your losses.

Be aware that the IRS looks upon short sales as a forgiveness of debt, and as such this counts as income. This means that you have to declare it to the IRS in your yearly returns.

Indian real estate pune retail boom times

:
Pune Real Estate: A Vibrant Market

According to a Times News Network report, the most vibrant retail real estate market in western India in the last 2-3 years is to be found in the city of Pune. Experiencing a economic revival due to the increasing inflow of IT / ITEs companies, Pune’s growth has given an added boost to the city’s real estate pushing retail in the forefront. Well-known brands and retail giants wishing for a slice of the real estate pie are setting up property ventures e. g. Central Mall belonging to the Pantaloons group. Not to be left behind, retailers with large portfolios i. e. Pyramid and Shopper’s Stop are also expanding their retail operations in Pune city.

A research undertaken by Trammell Crow Meghraj reveals over 5-million sq. ft. of built retail space will be available on the Pune real estate market within the next 24-months, while another 5-million sq. ft. still in the planning stage is scheduled to come up in the year 2010.

Amongst, the flourishing mall developments to come up in the high-street retail areas of Pune area are Nucleus Mall and Magnum Mall in the vicinity of MG Road and Kakade respectively. Other upcoming retail markets are along Bund Garden Road and Nagar Road, in large part due to their close proximity to predominantly residential areas of Kalyani Nagar, Koregaon Park and prominent colleges / IT townships of Senapati Bapat Marg, Magarpatta City, Ganeshkind Road.

With a booming retail real estate sector, in the next two years, Pune will see the Pyramid Supermarket chain come up in Kolte Patil, Kondwa on Nagar Road and Kakade City in Kothrud, as well as, an International Convention Centre on Senapati Bapat Marg.

As well-known national brands enter and quickly expand, setting up multiple outlets in the Pune retail market, various developments of retail real estate have experienced a 25% increase in rentals. And, despite recent developments, Trammell Crow’s retail real estate experts are of the opinion that an organised retail market in Pune is still very much at a embryonic stage, and tight control is required to make it sustainable. Unless, Indian mall developers arrive at a true understanding of a business model of mall development, restricting development to location, pricing right, positioning malls in areas of high population circulation, offering a popular product mix and offering infrastructural support, supply will outstrip demand. Innovation e. g. a theme or a hotel within the mall is what is necessary to help keep ahead of the competition. For example, Ishanya Mall – The Design Centre, a Pune mall a “one stop mall for interiors and exteriors” is a good example of what mall developers in the western region should emulate for success.

With great potential, Pune offers a tremendous opportunity to those interested in retail real estate development, as long as, developers make mall space efficiency, product compatibility, inside / outside mall infrastructure and quality development a part of their project. Using this as their mantra, mall developers are sure to make a rip-roaring success of their mall development project. The time was never riper for mall development investments in Pune!

This article is sponsored by: indiarealestateblog. com

Creative financing - ten ways

Do all the creative financing techniques you hear about really work? Yes, actually. They probably have all worked somewhere for someone at least once. The point isn't if they will all work for you. The point is to know what is possible, so you can find your own creative ways to invest in real estate. Here are ten methods to get you thinking.

1. Hard money lenders. You can ask around or find these online. They specialize in short-term loans at high interest. You typically use this type of financing for a "fix and flip." You can often get the money fast, and if you make $30,000 on a project, who cares if you paid $10,000 interest in six months.

2. No-doc and low-doc loans. No (or low) documentation of your income or credit required. Again, you can find banks that do these online now. The catch is that you will only be able to borrow up to 80% of the purchase price or property value. If you have 10% in cash, you might be able to borrow the other 10% from a friend or the seller.

3. Seller-carried second mortgages. Sometimes a bank will loan you 90%, and allow the seller to take back a second mortgage from you for 5%, leaving you needing only 5% for a downpayment.

4. Land contract. Called "contract for sale" or other names as well, this just means the seller lets you make payments, and delivers the title upon payment in full. I sold a rental this way for $1,000 down, because I wanted the 9% interest, and the higher price I got this way.

5. Credit cards. If a seller will take $10,000 down on a fixer-upper that you expect to make $20,000 on, why not use credit cards? This is a true 0-down deal for you, and if you turn the project in six months, you will have paid $900 in interest on an 18% credit card. Don't let $900 get in the way of making $20,000.

6. Retirement accounts. The laws get pretty complex in this area, but you can check with a tax attorney to see how you might borrow from your own retirement account to finance real estate investments.

7. Friends and family. Keep it all business, if you use this source, but loaning you money at 7% isn't a gift if their money is getting 2% in the bank.

8. Note buyers. The seller needs cash. He raises the price, and sells to you for $100,000 with no money down, taking back two mortgages from you for $90,000 and $10,000. He arranged (or you did) for a note buyer to pay him $80,000 cash for the first mortgage at closing, getting him the cash he wanted. You pay two payments now, one to each note holder.

9. Get a loan on other property. Interestingly, if you take out a home equity loan for a vacation, and then forget to use it for that, you can use it for the downpayment on an investment property, without violating the rules of the bank that gives you the primary mortgage. In other words, you got in with no cash of your own.

10. Partnerships. For bigger projects, you could arrange for five investors to each put money into a partnership, with your share being the management responsibility instead of cash.

Using a real estate agent to sell your house

:
Why use a Real Estate Agent to Sell your House?

A house is generally the largest investment that an individual makes in their lifetime. When it comes time for you to sell your home the bottom line is "Am I getting the best price for my house?"

In an effort to save money and maximize return, many people decide to go with "For Sale By Owner" (FSBO). It seems easy enough until you begin to look at the massive amount of work and uncertainty involved. Add to that, national statistics show that 80% to 90% of FSBO properties eventually list with a real estate agent.

As you begin the process of selling your house, you are faced with the following questions.

1. What is the right price?


2. What about marketing my house?


3. How do I make sure I'm dealing with qualified buyers?


4. What about the final sale?

The services of a qualified real estate professional of the highest value in answering these questions.

A good real estate agent has a strong understanding of the local real estate market, a high standard of customer service and the support of a solid local company. Most importantly, a good agent saves you money, time and aggravation.

Setting the Price --
Real estate agents know the value of real estate in your area. They should be able to show you properties comparable to yours that will help set a fair and competitive price on your home. They can compare current homes for sale as well as recently sold homes. Price variables include age of home, number of bedrooms and bathrooms, pool, garage type, renovations and other amenities. A real estate agent can assess the fair market value and help to set an agreeable asking price.

Marketing Plan --
Marketing your house is far more than putting a sign in the yard and an ad in the classifieds. A real estate agent should offer a variety of marketing tools including a yard sign, advertisement in local real estate magazines, inclusion in the local Multi-List Service (MLS), inclusion on their website and printed flyers or brochures. This multifaceted marketing plan ensures that your property is seen by scores of potential buyers.

Remember that the agent is not paid unless the house sells. Their commission depends on them implementing a successful marketing strategy.

Finding Quality Buyers --
An agents time is limited so they take care to bring quality buyers to your home. Many agents prequalify clients with a mortgage company before showing them a home. This is doubly beneficial. First, the buyers are serious. Second, the buyer is only looking at homes they can afford.

Not to beat this point, but agents don't make money showing houses, they make money selling houses. A good agent will make sure that the traffic coming through your home are quality buyers.

The Final Sale --
As expert in the home selling process, your real estate agent will advise you of your rights, options and obligations. Their negotiating skills help in determining appropriate offers, presenting counter-offers and getting you the best price possible price. They can help break down the legalese of the contract and streamline the process of closing the sale.

Why use a real estate agent to sell your home? -- Because it pays! It limits your stress, provides good marketing, offers quality buyers, gives invaluable assistance in closing the sale and provides peace of mind.