Full Time Real Estate Investment & You

The term “real estate investment” can mean many different things to many different people. I want to expand your concept of what real estate investment means to me, and the first concept to grasp is – that there exists a full-time (or greater than part-time) real estate investment business model that works and works very well. As I’ve said before, I know this because I am engaged in it more or less full time and have been engaged in it since I was 12 years old.

Let’s talk about full-time investment for a moment here. The predominant concept of real estate investment and perhaps many other forms of investment is that it is an activity that is mainly passive – part-time. You the investor spends some time, usually part-time engaged in the investment activity from time to time – perhaps in research or oversight, but for the most part you are engaged full-time in something else that is not the investment activity – something that can range from full-time employment to full-time enjoyment or fulltime retirement. The “investor” image, is therefore a somewhat higher level or higher status occupation than most other forms of work (that require active, full attention engagement), implying that you have money to invest – money that is over and above what you need to survive on and that the money is what is doing some meaningful enabling “work” instead of you. In this popular notion, “investment” is work, one step removed from “real work” that requires real time hourly engagement.

The term “investment” is also tied in with the concept of money instead of time. People who spend time in pastimes of their choice are frequently thought of as volunteers, not investors; whereas people who spend “money” – itself a form of “bottled” time, on the same pastimes, are called investors. Investment and real estate investment also implies a form of long-term attention to some form of “business” as distinguished from speculation. Investment and especially long-term investment is regarded as a higher form of engagement as distinguished from speculation, which is regarded as a short-term form of gambling. Finally, in absolute terms, “long-term” investment technically means longer than a year according to the IRS. In real terms, long-term can mean anything longer than a few months.

How to Structure Real Estate Investing For Retirement

With the massive swings in volatility associated with the stock market in recent years, many people look for different forms of investment in order to save for their retirement. Many people choose to invest in real estate primarily as the main vehicle for their retirement planning.

This creates several problems that need to be addressed that deal primarily with timing. Rental properties are great but unless you structure them correctly they may not throw off the right amount of income at the right time for you to take advantage of them when you retire and need the money to live off of. Of course, this could all be taken care of with a few careful steps that you can take and which I’m going to discuss in this article today.

The best forms of real estate investing from the point of view of retirement planning are called limited partnerships. These partnerships invest in a pool of shared appreciation mortgages or sometimes flat out pay all cash for income producing properties. Many partnerships include a combination of the two as well.

I find that these partnerships afford you the largest possible appreciation potential, the best tax gains, all at the lowest risk which is especially nice when you’re talking about investing in them for retirement plans. Because there’s one thing that we can all agree on and that is lowering risk is important for retirement planning. The closer you get towards your retirement, the safer you need your investments to be as I’m sure you are aware of.

There are seven or eight main criteria that most people will agree are the most important for investing with an eye towards retirement. They are…

Safety; will your money be returned to you without being diminished in any way? Income; retirement accounts are required to throw off cash. Growth; you want both the underlying assets to grow and the income that they throw off to grow over time to keep pace with inflation at the very least. Inflation; as I just referred to your retirement account must grow at least as high as inflation every year and hopefully more.

Liquidity; certain real estate investments are very illiquid so you are going to need to structure yours in a way that allows you to liquidate when necessary. Ease of administration; the last thing you want to do during your retirement years is get telephone calls at two in the morning to fix leaky plumbing. Professional management; ditto what I just mentioned about leaky plumbing.

Making sure that your real estate investment conforms to these seven or eight requirements is essential, so before you invest in any sort of real estate deal, go through the checklist I just gave you and ask yourself whether or not the investment fits those criteria. If so then you will have successfully structured your real estate investment for optimum retirement planning.

Popular Countries For Real Estate Investment

Many people are investing in houses, condominiums or land to make money. The real estate market is more stable compare to the stock exchange market. There are several countries that offer profitable real estate investments including Thailand, China, and Malaysia. There are many reasons why you should invest in Thailand. Thailand has a thriving tourist industry.

Thousands of people visit Thailand every year. Many people retire to Thailand after they are old. Retirement visas are granted to foreigners aged above 50 years old. There are many good schools in Thailand. The health care system in Thailand is efficient. There are many mountains, beaches and forests in Thailand. The climate of Thailand is warm and cool throughout the year. If you want to stay in a place that is cheap yet have lots of natural environment, you should stay in Thailand. The real estate property in Thailand is cheaper. You will be able to buy cheaper condominiums and houses compared to the ones in your own country.

China has a fast growing economy. The Property Rights Law will offer security on your private property. The demand for the local properties has been increasing over the past few years. The price of houses, condominiums and land in China will increase by 10% to 50% in the coming fifteen years. The downside of investing in China is the Communist government can cause problem. The rental yields in the cities in China including Shanghai, Guang Zhou, Shenzhen and Chengdu is about 5%. In Beijing, the rental yield can be up to 5.5% or more.

Another country which is very popular you can invest in is Malaysia. Malaysia experiences a fast growth in the economy. Malaysia has many freehold properties you can invest in. The government offer incentives for foreigners. Foreigners can get 10 year entry permit if they invest in the houses, condominiums or land in Malaysia. The capital growth in Malaysia is in between 15% to 30%. If you remit the income you make from the real estate property in an overseas country, you won’t be charged with tax. You won’t be charged tax for unearned income. After 5 years, the capital gains obtained from the real estate property will be lesser than 5%. There is a low buying cost for the properties in Malaysia.

When you want to invest in one of these countries you can find good properties easy by searching the Internet. This saves you time and you can fly over anytime after you have found the property to invest in. Another option is to contact your local real estate agent or property broker in your country which offers foreign properties for investment purposes.

Best Real Estate Investment Retirement

The best way to make use of your money is to tuck property funds into your retirement amount. It is a known fact that you can own real estate property in your retirement plans. With retirements being long term, you cannot get more than real estate. Though it seems to be a good idea, you should be very careful. A single wrong step can create an unbelievable tax disaster. Though you can invest income and appreciation, you cannot deduct depreciation as it is taxable investment. Real estate property will give you maximum profits and there is no better way than to tuck it into your retirement amount.

There are many things that must be kept in mind before you invest in real estate for retirement. To own a property you must have an IRA or any other kind of retirement plan. You can invest on any type of property. It can be land, home, or improved or unimproved property. It should be notes that there are overheads while investing into real estate for retirement. If you are careful enough you can be on the safe side and get profited. The income and appreciation are tax free with an IRA till you start withdrawing the amount. There is no debt-finance income in retirement plans which makes it tax free.

You can also be a tenant in common interest if you’re if you don’t have sufficient cash in your retirement plan. You can purchase a partial interest on property and making cash transactions is very easy. There is a high rate on return, low risk on the long run, and added diversification with planning real estate with retirement plans. The way in which you can attain the best real estate investment retirement is by converting your traditional IRA into Roth IRA in one year. Roth IRA provides more advantages over traditional IRA.

You can keep converting your traditional IRA in portions as required into Roth IRA. If you do not have sufficient cash in your retirement plan you can be a tenant in common and finance the property by borrowing. You can at the same time pay your UBIT during insufficient balance. Converting from traditional IRA into Roth IRA is very easy. And you will lose little will doing so. You need to make sure that you are eligible for taking up a Roth IRA plan before conversion. You need to satisfy the income, age limit etc of Roth IRA in order to convert into it for profit.

Investing in real estate is a great bargain and is the best way to use your retirement investment. For real estate investment retirement you need to invest in a promissory note that earns passive income. The amount on the promissory note increases if there are any cosmetic of functional repairs in the property. In order to sell the property you need not wait for sale as you would in the actual property. Selling is very easy because investors are always looking for the best sell. And as soon as you keep your note for sale it will be sold. A promissory note once kept for sale is a right buy and a great way of passive income. Someone or the other will surely buy it. So there are no problems involving the sale of your note when you want.

Wealth Building With Real Estate

When it comes to saving for retirement, investment advisors generally recommend that one contribute regularly to an Individual Retirement Account (IRA) or a company 401(k) plan. Steady growth can be achieved, they suggest, by diversifying one’s portfolio with a mix of stocks and bonds. Rarely, however, do they recommend adding real estate to the investment portfolio. By neglecting to invest in real estate, one could be missing out on the many benefits afforded by this asset class.

Advisors and investors may shy away from this investment for many reasons. Advisors might avoid it possibility because they are not licensed to sell it. Thus, they have no incentive to decrease the amount of money that they have under management. Also, investors often avoid real property because often they don’t understand it. Even if they do, they don’t feel that they have enough capital to make an initial investment. But if they became better educated in the benefits of real estate, they would find that it offers some advantages not seen in other investments.

Often, advisors recommend utilizing investments such as mutual funds to achieve risk-adjusted, long-term appreciation when saving for retirement. By utilizing qualified retirement vehicles such as an IRA or 401(k) accounts, investors can often receive a tax deduction to offset income, reducing their current tax bill. They may also use Roth accounts to forego the upfront tax deduction enabling them to receive retirement account distributions tax free. Real estate may also provide long-term appreciation, as seen in stock and bond mutual funds. In addition to receiving up-front tax advantages just as qualified plans do, real estate investments may add other tax advantages when the property is liquidated.

Many might be surprised to learn that over the past ten years, despite the “real estate meltdown,” real estate prices have outperformed the Standard and Poor’s 500 stock market index by a wide margin. As of May 2011, data provided in the Standard and Poor’s Case Shiller index (CS) showed that real estate prices, based on a 10-region composite, advanced 30.1% over the latest ten year period. During that same time the Standard and Poor’s 500 (S&P500) stock market index advanced just 7.1%. This is despite the fact that over the past two years, stock prices nearly doubled off of their March 2009 lows. During this same period, bond and commodity prices have also moved dramatically higher, causing many to worry about future market corrections. Only real estate prices have not performed and remain 32% below than their peak. The S&P 500 was just 13% from its all-time high based on May data. This is a value that an investor might look upon as a good opportunity based on current prices.

Both qualified retirement plan contributions and real estate investments offer tax incentives. When one contributes to a qualified retirement plan, the investor can usually deduct the contribution from gross income, reducing the income tax liability. Real estate, even when purchased outside of a qualified plan, offers tax deductions, sometimes as great as a qualified plan contribution. Individuals who own their own home can deduct mortgage interest and property taxes paid if they itemize their tax deductions. If they don’t itemize, they can still deduct their property taxes to receive some tax relief. Investors who purchase real estate investment property do even better. In addition to the mortgage and property tax deduction that home owners receive, real estate investors also receive deductions for property maintenance and depreciation. If this investor is not generating positive cash flow on the property and the investor has an income of less than $100,000, he or she can write off up to $25,000 for losses against their gross income.

A residential real estate also receives a special capital gains tax exemption not offered to other investments. If one had lived in the home as a primary residence for two of the previous five years, the individual is allowed a capital gains exemption of $250,000. This amounts to a $37,500 tax savings based on the current 15% Long Term Capital Gain tax rate. Not so with distributions taken from a qualified plan. These are taxed as ordinary income, at your highest tax rate. If the investor owned a primary residence along with a rental property, the investor could sell the primary residence at retirement, take the capital gain, and move into the rental. The tax-free distributions from the liquidation of the primary residence could be used to pay off any remaining mortgage on the rental property and provide extra funds for retirement expenses.

Real estate offers many positive benefits that may be important to a person planning for retirement. Like stocks and mutual funds, real estate has the potential to appreciate, preserving purchasing power. Adding real estate to one’s holdings increases diversification and reduces overall portfolio risk helping to ensure a financially successful retirement. Residential and investment real estate often provide tax benefits not found in other retirement investments.

Gary Lewis, CFP® provides Guardian Angel Protection in your Financial Affairs through comprehensive financial planning and monthly follow-ups. Gary doesn’t want to replace your current advisers, only make sure that they are working for you and not themselves. With Guardian Angel Protection, you can be assured of making informed choices in all of your investment decisions.

Real Estate Investing and Compounding Interest

I am constantly reading books on real estate investing, marketing and other similar topics that interest me. Right now I am reading Warren Buffet Wealth by Robert P. Miles. In the book, there is a section where Warren Buffet addresses compound interest. He poses a hypothetical scenario, where if Queen Isabella, instead of investing $30,000 in Christopher Columbus’ scheme of charting a new passage to Asia, had invested in anything else that provided only a 4% compound rate of return, she would have made $2 trillion by 1963. In 2003, her investments would have been worth $9.6 trillion, which, according to the author, is more than the value of all the publicly traded stocks in the same “new world” that Columbus stumbled upon some 500 years ago.

Why am I sharing this with you? Because one of the benefits of investing in real estate is the compounding effect that comes from long-term appreciation. Let me explain.

To make the discussion easier, let’s make an overly-simplified assumption. Let’s assume that all the income you receive from your rental property exactly equals all your expenses for that property. In other words, we will assume that there is never any positive or negative cash flow. For our discussion, the house always has break-even cash flow.

If you purchased a house for $100,000 where all the income from the property paid for all the expenses of the property, what happens to the value of that property over time?

History has shown that, despite short-term downward fluctuations, real estate tends to go up in value over time. In Warren Buffet’s example, he used a 4% compound rate of return. Historically, real estate has gone up between 6% to 7% per year, but let’s use Warren Buffet’s 4% growth rate for this exercise to keep our numbers conservative.

If the value of your house were growing at 4% per year, what would the house be worth when you paid it off in 30 years? It would be worth approximately $311,865. At the 30 year point, when your mortgage has been paid off, you will also have a nice monthly income from the property.

This appreciation is one of the things that attracts investors to real estate as a long term investment. If, in 30 years, when you are preparing to retire you want to have a certain amount of money, you can calculate how many houses you need to purchase this year with break-even cash flow to achieve that goal.

For example, if you wanted to end up with $2 million in net worth 30 years from now and you think real estate will be going up in value by 4% per year, then you would need to purchase approximately $642,000 worth of real estate today. If houses in your area are $100,000 that would be about 7 houses. If houses in your area are $200,000 then that’s about 4 houses.

Making Self Directed IRA Real Estate Investments

If you have a self directed IRA real estate is one option that you should have for investments. The problem is that most custodians do not offer their clients the real estate option. In a truly self directed IRA, you would think that you could invest in whatever you want, but that is not always the case. The key is finding the right custodian.

In order to meet IRS and other government requirements, you must have an account trustee or custodian. This person is responsible for filing the appropriate paperwork and making transactions, among other things.

In a traditional IRA, the custodian makes investments, with your approval. In a truly self directed IRA, the custodian performs the transactions, as directed by you. The only consideration should be whether or not the transaction fits into the parameters outlined by the laws that govern the IRA.

Self directed IRA real estate investments must fall within those parameters, just like any other type of investment. Some custodians feel that there is a “gray” area in the law when it comes to real estate, but it’s really pretty simple.

You cannot use your IRA to purchase real estate for your own personal use and the property cannot be used by your family members. Purchases must be for investment purposes only.

Any funds required for maintenance or improvement of the property must be made with IRA, not personal funds. By the same token, self directed IRA real estate investment profits must be returned to the IRA. Otherwise, the profits would be subject to capital gains and/or income taxes.

In the truly self directed IRA, you can buy property, build, repair, remodel, resell, rent out…just about anything that you can think of. A knowledgeable custodian helps to insure that your transactions are allowed by law.

Equity Trust is a good choice for self directed IRA real estate investing. Each custodian is familiar with the dos and don’ts. One of the “don’ts” has to do with advice.

In a truly self directed IRA, the custodian is not allowed to suggest or persuade you to make this or that investment. That kind of advice could be construed as self-dealing, which means making transactions with IRA funds in order to benefit the broker or brokerage.

If you are unfamiliar with real estate investing, you may need some help on that front. They say that real estate is always a good investment, but not all real estate deals are profitable. If you have a good eye, you can grow your retirement funds quickly. If not, well, you could be stuck with swamp land.

Luckily, there are experienced investors that are willing to advice you about those self directed IRA real estate investments. They can help you find the deals that are most likely to be profitable and avoid the hassles and the headaches. With a little help, after just a few deals, your IRA may be growing faster than you ever dreamed possible.

Researching Property for Real Estate Investing

Much is being said lately about investments. There are many investments that one could make: stocks, notes, gold, retirement plans, etc. However, one of the safest ways to invest is in real estate. Credit Union Rate is your source for information on the market and the investment potential it offers.

It is important to note that no investment is safe, and that all investments have risk. However, real estate investing tends to have less risk, as most property values go up rather than go down. And even when interest rates are in flux, the overall value of real estate tends to increase. It is a good idea to talk with your credit union financial adviser about current trends in your area, and how real estate investing can diversify your portfolio.

But like any good investor, knowledge is required to make a wise investment decision. You should have a good idea of what it is you are investing in, as well as what its potential worth is. Making investments blindly is a good way to lose, rather than make, money.

Here are some tips for more efficiently researching property with real estate investing potential.

Understand the neighborhood. Thoroughly research a neighborhood before purchasing a property there. Know whether mostly young couples live there for starter homes. These neighborhoods often see turnover as families grow and young couples upgrade. In order to know how to best market the property, you should know about the area’s primary inhabitants. Is the neighborhood safe? And, of course, how is the location? The old saying “Location, location, location!” is a true one. If the neighborhood is near good schools, minutes away from shopping, and located away from main thoroughfares, it is considered much more desirable.

Determine the future prospects of an area. Like the previous tip, knowing whether the area has potential for growth is important. An area that is rundown and likely to end demolished to make way for a new highway or utility station is not a sound investment. However, if a developer is planning to open a high end shopping, dining, and entertainment plaza a few blocks away, you are likely to find that the area has great growth potential. If you are looking to buy land, check to see if the growth rate of a city warrants you buying a few acres on the edge, allowing you to hold it until developers need it for expansion.

Watch for new developments. Keep an eye on the newspapers and city council meetings. This will give you an “in” as to where ideal areas are located. Beautification projects in “rundown” areas are great things to keep in mind, as it usually means an influx of money and new attractions. Make sure the developer is reputable, however, or you may find that you have been taken in along with the rest of the city’s residents when delays, scandal, and stoppages sink the entire project.

Don’t forget the Internet. The Internet is a great place to look for potential real estate investing opportunities. Your range immediately widens beyond your immediate locale. In fact, you can search for opportunities across the country or even on the other side of the world. But, as with all things located on the Internet, you should be wary. The Internet is also a prime place for scam artists to find unwitting victims.

As with all investing, it is important to avoid something that looks “too good to be true.” Real estate investing is not about making “easy money.” Whether you plan to invest by buying and then actually using the space for a few years before selling, or whether you plan to rent or lease the property out to somebody else, real estate investing can be a lucrative proposition. By doing thorough research before making a purchase, you can be sure that you are making the best possible use of your investment dollar.

Post-Retirement Fun With Real Estate Investments

The baby boomer generation that has survived the 2008-’10 recession must have realized how vital and essential it is to save. There’s a point of time in everyone’s life, when they have to retire from their work. However, life’s demands do not cease to exist along with your retirement. You need to fulfill your daily necessities that are same as they used to be. On the other hand you have no job, which means you have no income. Would you leave your post-retirement life to such uncertainty?

You might not be too much worried about your post-retirement financial concerns. You might be too confident with your life-long savings. True, you have no reason to worry or feel concerned about if you have been saving a part of your earnings. And yet, can you ever be so certain, especially when it concerns ‘finance’ and that too in ‘future’? Many retired professionals who had never ever feared financial uncertainty found it tremendously tough to put things together during the recession.

I have no intention to demean the fact that you save or the ways you save for your retired life. In fact, I wonder at the fact that most elderly people are content with their savings and the interests gained on it while they have no intention to earn further. I understand, you might argue the point of retiring if you have to work to earn. However, I do not mean to suggest you to carry on with your work and earn even when you are past sixty. I rather feel surprised, why don’t you invest in those business sectors that will reward you with greater returns – so significant that you will consider them to be your regular earning rather than mere bonus?

You might like to some prudent ways of investing, which will help you earn when you are already retired. One best way to earn without working is to bank on your experience. You might have worked as a professional during your professional life. However, at the same time, you should also try your genius as an entrepreneur. Try to grow the same business while you play a completely different role. With optimal utilization of your experience you can beat your competitors who you have known for years.

Why don’t you think of real estate investments? You need not be a hard core realtor to earn through real estate investments. There are various ways you can invest in the land, property or construction business. You can start investing in real estate business even before your retirement. In fact, the earlier you start the more lucrative it is for you. However, even if you feel you are late, let me remind you, you are never late when it comes to investing. Al you have to do is to make sure that you choose the right realtors to partner with or the right business to invest in. Checking out a few perspectives before you start investing will make you understand what is right for you and what not.

Maximizing Your Profit With Real Estate Investing

One of the best places for a person looking for good returns over time and minimized risk is real estate investing. Worldwide real estate markets are following an upward trend, that are creating exceptional returns for investors which has led to more people getting involved in this sector, and pushing gains even higher.

One of the reasons why investment in real estate is so attractive is the fact that as well as the appreciation in value of your asset, you can also take tangible benefits from it over the lifetime of your investment.

When you are investing in real estate there are several different strategies that you can follow. You can sit back and watch your investment grow over the period of time and then sell it to make a profit out of it. Downsizing is a popular option for seniors who no longer need a family home when they retire, and would rather take advantage of the value of their property.

Developing properties is a more aggressive means of earning income from real estate ownership. By buying a rundown home, and redecorating and improving the building, you can turn it around for a quick profit which you can then reinvest in more projects.

More ambitious investors will consider the possibility of full scale construction projects, and certainly taking a building from ground level through until completion is ultimately very satisfying both on a personal and financial level. Construction is not for the faint hearted through, as hands on project management will take up a lot of your time and requires very specific skills, so amateurs need not apply.

Although it requires greater investment of your time as well as money, building a portfolio of rental properties offers some of the best returns of any real estate investment strategy. Aside from the long term appreciation in the value of the properties that you own, you can also enjoy a consistent stream of rental income from your tenants that should easily cover any outstanding mortgage payments on the property.

It is important for people to realise that whichever method of real estate investing they choose, profit is not guaranteed nor is it easy to earn money. If you are developing properties, you should take into account the cost of any work that you carry out, and maximize your margins by doing as much of the work as you can yourself.