Give Me Ten Minutes To Make You Better at Real Estate Investing

Okay, I said ten minutes, but that’s a guess. You might absorb what I have to say in even less time (or more) depending on how fast you read. The information to make you better at real estate investing is all here, however, presented in three easy steps (honest).Shall we get stared?Acknowledge the BasicsReal estate investing involves acquisition, holding, and sale of rights in real property with the expectation of using cash inflows for potential future cash outflows and thereby generating a favorable rate of return on that investment.More advantageous then stock investments (which usually require more investor equity) real estate investments offer the advantage to sell cabo leverage a real estate property heavily. In other words, with an investment in real estate, you can use other people’s money to magnify your rate of return and control a much larger investment than would be possible otherwise. Moreover, with rental property, you can virtually use other people’s money to pay off your loan.But aside from leverage, real estate investing provides other benefits to investors such as yields from annual after-tax cash flows, equity buildup through appreciation of the asset, and cash flow after tax upon sale. Plus, non-monetary returns such as pride of ownership, the security that you control ownership, and portfolio diversification.Of course, capital is required, there are risks associated with investing in real estate, and real estate investment property can be management-intensive. Nonetheless, real estate investing is a source of wealth, and that should be enough motivation for us to want to get better at it.Understand the Elements of ReturnReal estate is not purchased, held, or sold on emotion. Real estate is not about love; it concerns return on investment. As such, prudent real estate investors always consider these four basic elements of return to determine the potential benefits of purchasing, holding on to, or selling an income property investment.1. Cash Flow – The amount of money that comes in from rents and other income less what goes out for operating expenses and debt service (loan payment) determines a property’s cash flow. Furthermore, real estate investing is all about the investment property’s cash flow. You’re purchasing a rental property’s income stream, so be sure that the numbers you rely on later to calculate cash flow are truthful and correct.2. Appreciation – This is the growth in value of a property over time, or future selling price minus original purchase price. The fundamental truth to understand about appreciation, however, is that real estate investors buy the income stream of investment property. It stands to reason, therefore, that the more income you can sell, the more you can expect your property to be worth. In other words, make a determination about the likelihood of an increase in income and throw it into your decision-making.3. Loan Amortization – This means a periodic reduction of the loan over time leading to increased equity. Because lenders evaluate rental property based on income stream, when buying multifamily property, present lenders with clear and concise cash flow reports. Properties with income and expenses represented accurately to the lender increase the chances the investor will obtain a favorable financing.4. Tax Shelter – This signifies a legal way to use real estate investment property to reduce annual or ultimate income taxes. No one-size-fits-all, though, and the prudent real estate investor should check with a tax expert to be sure what the current tax laws are for the investor in any particular year.Do Your Homework1. Form the correct attitude. Strike the notion that you’re house hunting and remember that real estate investing is a business. Unless they affect income, look beyond curb appeal and amenities such as spacious kitchens. Focus on the numbers. “Only women are beautiful,”