Showing posts with label Asset. Show all posts

Friday, December 4, 2009

Real Estate Investment Financing

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Real Estate Investment Financing

Use These Finance Techniques To Increase Your Net Worth

The area of Real Estate Investment Financing, is one that can have a huge impact on your progress as a property investor.

Starting from approaching a lending institution for a loan for your first REAL ESTATE INVESTMENT PROPERTY to building your property portfolio, the plan I recommend HERE is one that will see your net worth increase considerably and within a short time the banks will be treating you with the utmost respect.

Of course the way in which you obtain and use Property Investment Finance will have a bearing on how fast you progress and just how soon you can retire!?!

These real estate investment financing ideas and concepts will take you from uncertain initial contact with the bank to a seasoned property investment finance pro.

Be Prepared

This is an important step towards obtaining the best terms & conditions for your your real estate investment financing.

Right from your very first approach to any bank or lending institution you should be armed with a document that clearly shows your current assets and liabilities and your income and expenses.

So transform yourself from an hopeful applicant into a knowledgeable long term cliant. This is what banks love.

This has proved to be an extremely positive factor for me on numerous occasions in negotions with various loan officers. For our first two investment properties, we didn't have one and we were treated like amatuers.For the next time we approached the banks to apply for a loan, we went equipped with a document I had produced that gave a clear Statement of Financial Positionand showed our income and expenditure.

Avoid Cross Collateralisation

What is cross collateralization and why should I avoid it?

Cross Collateralizationoccurs when the bank uses the security for one loan to secure another loan. The advantage of doing this is that you can borrow a greater percentage of the purchase price of the next property, perhaps even 100%.

The disadvantage of cross collateralization is that it can bring your real estate investment financing strategy to a standstill.

You may find that because of cross collateralization you are restricted or unable to purchase another investment property.

For example it is usually mandatory that the properties being cross collateralized be in the same state. If you want to be free of restrictive banks Cross Collateralization rules then use a line of credit to borrow the funds you need instead.

Refinancing Real Estate Investment

This is one of the best ways to begin real estate investing and to keep your real estate investment financing moving freely. The best thing is that you can arrainge things so that any one property is not held ransom by a bank or financier (which can really put a dent in your property investing plans).

Refinancing real estate investment provides the perfect method for any property investor to extract capital from the increased value of a property without selling it.

This is a great way to move forward with your property investing plans and keep your real estate investment financing options open.

If you were to sell sell an investment property you immediately lose the future capital gains, income stream and taxation benefits that property would bring.

What's a HELOC and What Can It Do For Me?

A HELOC is a Home Equity Line of Credit.

This is where a bank values your home and determines the available equity you have in your home and then makes funds available up to a perentage of that amount.
This is the most flexible and effilcient way to get started with your real estate investment financing!

How can a home equity line of credit help you with your real estate investment financing you ask?

Once you have established a line of credit you can use it to fund any shortfall that you may have when purchasing an investment property, that includes deposit amount and purchase costs.

This is by far the most preferable way to purchase your first and successive investment properties.

Investment Property Mortgage Rates

Should you be concerned with investment property mortgage rates?

Many "property experts" say that INVESTMENT PROPERTY MORTGAGE RATES should not be of primary concern when looking for a PROPERTY INVESTMENT LOAN. This is only true if you are not concerned with your immediate cash flow situation. Read a more detailed analysis HERE.

No Down Payment Investment Property

This is tied in to the previous tips on refinancing and use of a line of credit.

The general ides is that you purchase a no down payment investment property using the equity you have in another asset, usually your home.

Real Estate Investment Trusts

If you prefer a hands off approach you can invest in a REAL ESTATE INVESTMENT TRUST. You can find more details HERE.

However, in my opinion, there are many more advantages to INVESTING IN REAL ESTATE directly.

For more information about a Home Equity Line of Credit see this article:
Steps to Freedom: What Is A Line Of Credit

A Home Equity Line of Credit (often called HELOC, pronounced HEE-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period ...

Go from this page Real Estate Investment Financing

To the Freedom Steps With Property Investing

Monday, November 23, 2009

Don't Cross Collateralize Your Loans

Image by thinkpanama via Flickr

Cross Collateralization - there is a better way

Does It help or hinder you?

Cross collateralization occurs when the bank uses the security for one loan to secure another loan.

What you want to aim for is to have any property you own, investment or otherwise, financed with free standing finance.

How Can It Help You

For property investors just starting out, using your home equity can help you get your first investment property most easily. The advantage of using cross collateralization is that you can borrow 100% or more of the price of your next property plus the costs of purchasing (usually about 5% - 6%).

How Can It Hinder You

The biggest disadvantage of crossing your collateralization is that it ties you to one financial institution.

I'm not saying your current bank is a bad bank, they may have served you faithfully and well for many years, but you are embarking on a new business venture here and your current bank may not be able or willing to meet your needs going forward.

Yes you heard me right, every piece of investment real estate you buy is like a new business venture. It works for you producing a cash flow week in week out and will produce long term capital gains profits that are reliable, rock solid and way beyond what you could earn by working or saving.

However cross collateralisation can bring your real estate investment financing plans to a standstill.

For example it is usually mandatory that the properties being cross collateralized be in the same state. If you want to be free of restrictive banks lending rules then use a line of credit to borrow the funds you need instead.

When you are planning to purchase a real estate investment and you approach the bank to get a loan amount pre approval, the bank will usually assume that you are going to cross collateralize your home to purchase the investment property.

Why Should You Avoid It

For most property investors this is not what you want. By asking that the equity you have in your home or other real assets be made available to you as a LINE OF CREDIT you are put in a much more flexible position.

If you are sure that you only want to purchase one investment property, cross collateralizing your home may serve your purpose.

No Money Down property Investment

This is usually achieved by using a cross collateralization. But using the techniques on discussed on the REFINANCEING REAL ESTATE INVESTMENT and HOME EQUITY LINE OF CREDIT pages you can use more advanced techniques to buy investment property with no money down.

Remember, what you are aiming for is to have any property you own, investment or otherwise, financed with free standing finance. This is achieved by making use of a line of credit secured against your home initially. As the value of your property investment portfolio increases you can set up more lines of credit to access the available equity you have in your real estate investment portfolio.

See these related related articles in
Wikipedia and EzineArticles for more information

Return From
Cross Collateralization
To Real Estate Financing Tips

Or go to Freedom Steps With Property Investing

Monday, November 2, 2009

A Property Investing Business Plan

Image by JohnHallAssociates via Flickr

Use this Business Plan to
Keep You Focussed on
Your End Goal

The Big Picture

The end state you want is to be able to retire wealthy with your wealth guaranteed to continue to grow.

This business plan will help you progressively increase your net worth to the point where you can retire.

The best part is that this process can take as little as seven years.

This plan presents an attitude of optimism. Your future is assured as you progress through the various stages of building your property investment business.

Business Plan for Property Investors

Your starting position right now may vary slightly in detail, but the execution of the plan does not change greatly. :You may be a home owner right now or currently renting where you are living. It doesn't matter.

What matters most to your success is your attitude right now!

Stop looking at yourself as a person who works
for a living.

I want you to start seeing yourself as a person
who has a property investing business.

I will show you how to acheive this!

Home Owners With Equity

For home owners with equity the steps are as follows:

Set a goal
Do initial financial research
Do property search
Select target property
Finalise financing
Finalise Purchase
Find a tenant
Start collecting the rent
Manage the property
Move on to next property

All of these steps are expanded on in the sections below. For now the important thing is to start changing your focus from a worker to an investor, in particular a property investor.

If you Don't Have Equity

If you don't have equity the steps are very similar to those listed above. The difference is in a small variation in how you finance the property.

You can read more about it on this page:
Financing your very first property starting from nothing

And remember you only have to do this for the first property or so. After that you will have some equity on your side.

Return From Business Plan for Property Investors
To Freedom Steps With Property Investing

Sunday, October 11, 2009

Why Property Investing?

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Why Property Investing?

Three Good Reasons to Invest in Property

Plus others you may never have considered

Many future investors ask why property investing is better than any other type of investing. Here I will give you a brief rundown as to the advantages of property investing over other forms of investing.

I'm sure you have heard about all the beat up about using investiment property to create instant wealth. But the truth is that is just not true. Successfully investing in property needs a different mind set. The change in mindset required is a change from a trader mentality to that of an asset holder.

A Trader is always looking to buy something at a lower price than he can sell it for.

There are three very good reasons for you to invest in property and they are:

The Multiplier Effect: This is the best reason. Property always trends upwards. If you buy a real estate investment propertty today, in 7 to 10 years (or even shorter) it will double in value! Stick with me and I will show you how to hold it and aquire more to grow your wealth faster.
Ready Access to Cash: Yes this is true and one of the little realised secrets of the truly wealthy. They do NOT sell as soon as it goes up in value, rather they use the increased value to borrow more money.
Property is Great Security: This is the basis for the whole philosophy behind property investing. this is the reason why banks will lend so much against real estate investments as opposed to any other form of investment. It just is plain and simply is the best form of security, even in the light of recent market fluctuations. But more on that later.

These are the three best reasons as to why property investing is still a great investment and here are some more.

Property prices Trend Upwards.
There are records going back for many years that show every property has doubled every 7 to 10 years. To verify this for yourself, just go the local department of records and examine the prices of properties for the last 50 or 100 years. You will see that each seven years a properties value is almost exactly double that of 7 years ago.
Yes it's true there are exceptions to this. In some areas prices go up faster and in some areas prices will hardly seem to rise at all with time. but well located property, as I will help you to identify, will inevitably rise in value.
Peace of Mind Investing
The main reason why property investing is "Peace of mind investing" - you dont have to follow the markets and make daily, weekly or monthly adjustments.
Property Investing is Very Tax Effective
Another reason why property investing is so great are that the costs of owning a real estate investment can be deducted from your taxable income. (You will need to check your particular circumstances in your particular jurisdiction.)
Risk and Reward
The approach I advocate in these pages of taking a long term holding position with regard to your property portfolio
Multiplier Effect
A Comparison of Growth Potential
Liquidity
What if I need money quickly? This is a question often asked by people who are trying to come to grips with the idea of balancing several million dollars of growing equity against a diminishing debt.
The answer lies in managing your credit. That is every year or so as your property values increase have them revalued and arrainge for a corresponding increase in your lines of credit from your banks. for my wife and I this happens automatically each year or so as we purchase new properties.

Do some of these reasons surprise you?

On other pages I'll go through these in more detail so you can see the analysis and support behind them.

Return From Why Property Investing?
To Freedom Steps With Property Investing

Steps to Freedom

Friday, December 4, 2009