A good investor must understand the environment in which he is making investments to minimize risks. All investors have to constantly evaluate the mixture of risks linked with their investments. Money in a savings account takes for granted no risk factor, since the return is exactly what was originally expected. The further an investment moves away from expected return, greater the risk. In short, risk can be defined as uncertain return.
Business Risk
It refers to the risk of doing business in a particular industry or atmosphere and it gets repositioned to the investors who invest in the industry or the company. It has everything to do with equity market. The risk, simply put, is that the company whose shares you have bought may go down. While a bond or debenture holder has some recourse to the companies assets in such a situation, the shareholder is left to the mercies of the exchange.
Market risk
Market risk refers to the unpredictability of returns due to fluctuations in the equity market. All equities are open to the elements to market risk but equity shares get the most exaggerated. This risk includes a wide range of factors exogenous to securities themselves like wars, political situation of the country, etc. Market risk is the risk that the value of an equity, stock etc. will decrease due to moves in market factors. Forces that affect the whole economic system and bear directly on the markets are generally inescapable. Like the spring rain, they fall equally on all, and no amount of portfolio diversification minimizes vulnerability.
Interest rate risk
Interest rate risk refers the unpredictability in a security's return resulting from changes in the point of interest rates. The basic rule is other things being equal, security prices move inversely to interest rates. The reason for this is related to the valuation of equities.
How you can reduce risk?
To a number of degree investors can handle risk, or at least make it bearable. Each type of risk can be countered by employing some market ploy. This will support in keeping the amount of coverage that comes with each risk circumstances. For example, an investor can grip interest rate risk by appropriate timing to counterbalance interest rate shifts after cautious learning of the business sequence. On the other hand, market risk can be optimized, by appropriate diversification of securities . Most investors make the mistake of buying only two or three securities/ equity. It is suggested to keep at least 10-15 securities in your basket. To reduce the business risk, one can take a much conservative view and invest in mutual funds. Mutual funds can give high returns and also can take care of business risk by keeping all sorts of business securities in their basket. It is understood from the above that one can control risk factors by becoming more vigilant and by investing in big basket which is full of securities.
By Priyanka Grey
Sunday, December 30, 2007
Online Investment - Everyday Heroes
Ever since stock investment was introduced, traders used to visit clumsy and 'fish market' like stock market, where they needed a broker to accompany them for trading in stocks. But, as time goes by, a technology has proved to be a turning point in the stock trading and so does it has affected the perception about the stock market. The introduction of online investment has aroused just like a hero that is going to stay for long. Rather saying that online trading has totally transformed the world of stock trading would not be an understatement.
Talking so much about online trading, undoubtedly the advantages take the lead.
• Speedy transactions: major advantage of online investments is their speed at which the transactions can be executed. Just a click and trader end up buying as many shares as he wants. Another click may let him make transaction with other traders.
• Easy execution and meagre formalities: for executing any business, trading online is the easiest way. No more tedious paper works and no more cash payments. There are not many formalities to be followed to register for online trading. Because of less paper work and online bank transfers the trading gets really easy. However, it posses easy accessibility due to the growth of Internet even for the people who live in the small towns.
• Easy accessibility and comfort: it provides the benefit of sitting at home transaction. Traders need not to travel to stock exchange for their trading. All they need is the computer and their registration with online trading firms by paying meager amounts.
• Secured trading: the sites providing the facilities of online trading are totally secured and do not let any illegal passage of account information. The security with passwords and other software provide a sense of relaxation and reliability among the traders.
• Updates and online tips: the benefit of online investment lies in the fact that there are certain stock information sites that provide regular updates of market. They let a trader know the moods and swings of market that help in the decision making process. Also, the tips provided by the experts online can let the investors get a rough cut for the trading process.
Though online trading is quite handy but its risks cannot be overlooked. Major risk that is accompanied by online investments is the frauds and fraudulent activities. A trader comes across many frauds that claim to be the broker and take the initial amounts to be deposited. The best way to avoid such situation is to opt for firms rather than individual brokers. Apart from that, recommendations from trust-worthy people and experienced holders are better before selecting any online brokerage firm. Also, before investing the huge investments, take a look at the records of the company in the past. So you not only get the idea about the approach of the company but also, make sure you are dealing with a good company of the company. Whatever the drawback of the online trading is, the truth lays in the fact that it has actual brought a new facet to the stock's market and the investor's investments.
By Vijay Kumar Sharma
Talking so much about online trading, undoubtedly the advantages take the lead.
• Speedy transactions: major advantage of online investments is their speed at which the transactions can be executed. Just a click and trader end up buying as many shares as he wants. Another click may let him make transaction with other traders.
• Easy execution and meagre formalities: for executing any business, trading online is the easiest way. No more tedious paper works and no more cash payments. There are not many formalities to be followed to register for online trading. Because of less paper work and online bank transfers the trading gets really easy. However, it posses easy accessibility due to the growth of Internet even for the people who live in the small towns.
• Easy accessibility and comfort: it provides the benefit of sitting at home transaction. Traders need not to travel to stock exchange for their trading. All they need is the computer and their registration with online trading firms by paying meager amounts.
• Secured trading: the sites providing the facilities of online trading are totally secured and do not let any illegal passage of account information. The security with passwords and other software provide a sense of relaxation and reliability among the traders.
• Updates and online tips: the benefit of online investment lies in the fact that there are certain stock information sites that provide regular updates of market. They let a trader know the moods and swings of market that help in the decision making process. Also, the tips provided by the experts online can let the investors get a rough cut for the trading process.
Though online trading is quite handy but its risks cannot be overlooked. Major risk that is accompanied by online investments is the frauds and fraudulent activities. A trader comes across many frauds that claim to be the broker and take the initial amounts to be deposited. The best way to avoid such situation is to opt for firms rather than individual brokers. Apart from that, recommendations from trust-worthy people and experienced holders are better before selecting any online brokerage firm. Also, before investing the huge investments, take a look at the records of the company in the past. So you not only get the idea about the approach of the company but also, make sure you are dealing with a good company of the company. Whatever the drawback of the online trading is, the truth lays in the fact that it has actual brought a new facet to the stock's market and the investor's investments.
By Vijay Kumar Sharma
Beginning Investors Top Investment Strategy
There is an investing technique that will lower market risk and allow young investors to benefit from long-term growth. This technique is called dollar cost averaging; and it's a great technique to combine with broad based index fund investing.
Long-term gains using a dollar cost averaging plan.
Dollar cost averaging allows young investors to purchase stock investments consistently over a longer period of time. This stock market strategy works especially well with broad-based market index investments like the mutual funds and ETF's that mirror the return of the S&P 500. This powerful and simple investment plan will help lower risk and you have the potential for higher returns.
For young investors looking for consistent gains over time, establishing a dollar cost averaging plan could be a perfect solution. Young investors are able to purchase more shares when the stock market experiences short-term corrections. That way when the index turns around and starts heading up in value young investors are able to profit more because they own more shares.
When the market is rising young investors are able to capitalize on the market trend because they are following a consistent investment plan. As they purchase more and more shares in a bull market that money is going to work for them right away.
Dollar cost averaging spreads the prices that you purchase stock market investments (cost basis) over a longer period. Investors are protected from stock market corrections and benefit from long-term gains in the market.
Steps to creating an effective dollar cost averaging plan.
For young investors creating a successful dollar cost averaging plan is simple. There are two basic steps that will get your money working for you:
1. Decide on the exact amount of money you will invest each and every month. The key to a successful dollar cost averaging plan is consistency. You can increase your investment over time but avoid investing different amounts each month.
2. Set up the exact times you invest. If you decide to invest once per month do so on the same day. For instance, the fifth of every month invest $150. This is made simple with help from an automatic investment plan. Set this up one time and your investments are made automatically for you each and every month. All you have to do is check your statements to see how your investments are doing.
Improve your dollar cost averaging plan through diversification.
Diversification is a simple spreading out the risk of owning a stock investment by owning many different stocks in a variety of sectors. Owning a group of stocks, instead of an individual stock, could further reduce your risk. This will reduce the risk of owning any single investment. The investment of choice for many young and beginning investors is broad based indexes.
An example of a broad based market index is the S&P 500. By investing in the S&P 500 index you own a piece of every stock that makes up the S&P 500. Stocks like American Express, Google, Ford, Nordstrom, Home Depot, Staples and Yahoo are a few of the stocks that make up that index. That way you're protected in case one of the stocks in the S&P 500 drops 70% of its value, you're only invested 1/500th, and you won't experience too much loss from that. In comparison, if you just owned that stock by itself you would have lost 70% immediately.
For young investors, keeping your investments diversified and using a dollar cost averaging investing technique - you have effectively reduced risk and are in an excellent position to achieve long-term profits.
By Vince Shorb
Long-term gains using a dollar cost averaging plan.
Dollar cost averaging allows young investors to purchase stock investments consistently over a longer period of time. This stock market strategy works especially well with broad-based market index investments like the mutual funds and ETF's that mirror the return of the S&P 500. This powerful and simple investment plan will help lower risk and you have the potential for higher returns.
For young investors looking for consistent gains over time, establishing a dollar cost averaging plan could be a perfect solution. Young investors are able to purchase more shares when the stock market experiences short-term corrections. That way when the index turns around and starts heading up in value young investors are able to profit more because they own more shares.
When the market is rising young investors are able to capitalize on the market trend because they are following a consistent investment plan. As they purchase more and more shares in a bull market that money is going to work for them right away.
Dollar cost averaging spreads the prices that you purchase stock market investments (cost basis) over a longer period. Investors are protected from stock market corrections and benefit from long-term gains in the market.
Steps to creating an effective dollar cost averaging plan.
For young investors creating a successful dollar cost averaging plan is simple. There are two basic steps that will get your money working for you:
1. Decide on the exact amount of money you will invest each and every month. The key to a successful dollar cost averaging plan is consistency. You can increase your investment over time but avoid investing different amounts each month.
2. Set up the exact times you invest. If you decide to invest once per month do so on the same day. For instance, the fifth of every month invest $150. This is made simple with help from an automatic investment plan. Set this up one time and your investments are made automatically for you each and every month. All you have to do is check your statements to see how your investments are doing.
Improve your dollar cost averaging plan through diversification.
Diversification is a simple spreading out the risk of owning a stock investment by owning many different stocks in a variety of sectors. Owning a group of stocks, instead of an individual stock, could further reduce your risk. This will reduce the risk of owning any single investment. The investment of choice for many young and beginning investors is broad based indexes.
An example of a broad based market index is the S&P 500. By investing in the S&P 500 index you own a piece of every stock that makes up the S&P 500. Stocks like American Express, Google, Ford, Nordstrom, Home Depot, Staples and Yahoo are a few of the stocks that make up that index. That way you're protected in case one of the stocks in the S&P 500 drops 70% of its value, you're only invested 1/500th, and you won't experience too much loss from that. In comparison, if you just owned that stock by itself you would have lost 70% immediately.
For young investors, keeping your investments diversified and using a dollar cost averaging investing technique - you have effectively reduced risk and are in an excellent position to achieve long-term profits.
By Vince Shorb
Making Money With Real Estate With Nothing Down And Nothing A Month
At one time I owned 166 single family houses that I had bought with a minimum down payment by taking title subject to the existing financing. From the first house I bought, I used only seller financing and avoided negative cash flow problems primarily because I couldn't afford to take anything out of my meager earnings to support it. That means that I had to find ways to buy highly leveraged houses that could support themselves with a little left over for me.
My all time favorite way to buy houses in contrast to lease/Optioning houses, is to "cold canvass" neighborhoods that I want to own long term rental houses in to find a homeowner with a big equity who has to relocate out of town either because of financial distress or personal reasons. When I found such owners, in contrast to others who might have approached them with low offers, I offered to pay full appraised retail value for the seller's large equity and to take over relatively low payments so long as they were far below prevailing rents for the upscale house.
The catch was that I agreed to pay the sellers just enough money down to enable them to pay the moving company, and nothing more - neither interest nor principal -- until I sold the house at a price that would net me at least 10% profit over all my expenses.
Included in my expenses would be vacancies, repairs, taxes, insurance, mortgage payments, marketing, commissions, and settlement costs in addition to the fair market value of my management effort based upon 10% of collected rents. I usually specified that the seller would be paid no later than 5 years hence regardless whether or not I had been able to sell the house.
One day I noticed that I had a lot of balloon Notes coming due in five years, so I changed the maximum holding period to 6 years, then to 7 years. When I tried for 8, I got a lot of resistance, so stopped at 7 years.
The magic in this formula is that I was able to buy much better houses to hold for long term appreciation with very high leverage and positive cash flow that I could use to offset negative cash flow from other houses.
When I hear people mewing about not being able to buy good houses that will cash flow today, I get a little vexed that they haven't taken the time to invest in themselves by learning how structure a creative seller financing transaction that can solve problems for both seller and buyer; particularly cash flow problems.
What do you do when a seller is willing to meet your price, but wants some cash to solve his problems? Let me tell you about one such person. He was a baggage handler at the airport who wanted to sell his a house that I had sold him a few years back. (It always pays to maintain contact with old customers to whom you've sold or financed houses so they'll call you when they want to sell, or buy another one.)
He wanted $10,000 cash for his house and wanted me to take title subject to the first mortgage loan. The house had appreciated a lot since he had bought it and he didn't really want to move, but he needed $10,000 to pay some pressing family bills. The problem for me was to find the money to solve his problem. A natural inclination would be to go to the bank and borrow what I needed, but I've never done that. I pride myself on the fact that I've only signed personally on one loan; my VA loan which I paid off within a year by selling the house. All the hundreds of houses I've bought over the decades have been bought by taking title subject to existing loans and with seller financing.
Take a little test for me: Before going any further; how would you raise $10,000 without going to the bank or signing personally on a loan?
In the case at hand, the solution was fairly simple. I called one of my team of professionals, a 'can-do" mortgage broker who has both private and institutional sources of financing. He arranged a 5.5% home equity loan on the house that the owner signed. I then took title to the house subject to both the first and second liens. The owner then leased the house from me on a net basis for the amount of the first lien payments.
The payments on the home equity loan created negative cash flow each month, but I had a motivated occupant who swiftly forgot that he was a tenant and continued to upgrade the property; and I bought the $10,000 property equity above both loans with nothing down and only a little over $110 per month payments. As far as the seller was concerned, the $10,000 was at no cost, since they never had to make payments on it.
Why would he sell me the house with this financing rather than to sell it on the open market to raise cash. Because he really didn't want to move into an apartment or another house with higher payments; and have to put his kids into different schools. Being able to stay in the house was what he really wanted, and my purchase allowed him to do that.
By J. Jack Miller
My all time favorite way to buy houses in contrast to lease/Optioning houses, is to "cold canvass" neighborhoods that I want to own long term rental houses in to find a homeowner with a big equity who has to relocate out of town either because of financial distress or personal reasons. When I found such owners, in contrast to others who might have approached them with low offers, I offered to pay full appraised retail value for the seller's large equity and to take over relatively low payments so long as they were far below prevailing rents for the upscale house.
The catch was that I agreed to pay the sellers just enough money down to enable them to pay the moving company, and nothing more - neither interest nor principal -- until I sold the house at a price that would net me at least 10% profit over all my expenses.
Included in my expenses would be vacancies, repairs, taxes, insurance, mortgage payments, marketing, commissions, and settlement costs in addition to the fair market value of my management effort based upon 10% of collected rents. I usually specified that the seller would be paid no later than 5 years hence regardless whether or not I had been able to sell the house.
One day I noticed that I had a lot of balloon Notes coming due in five years, so I changed the maximum holding period to 6 years, then to 7 years. When I tried for 8, I got a lot of resistance, so stopped at 7 years.
The magic in this formula is that I was able to buy much better houses to hold for long term appreciation with very high leverage and positive cash flow that I could use to offset negative cash flow from other houses.
When I hear people mewing about not being able to buy good houses that will cash flow today, I get a little vexed that they haven't taken the time to invest in themselves by learning how structure a creative seller financing transaction that can solve problems for both seller and buyer; particularly cash flow problems.
What do you do when a seller is willing to meet your price, but wants some cash to solve his problems? Let me tell you about one such person. He was a baggage handler at the airport who wanted to sell his a house that I had sold him a few years back. (It always pays to maintain contact with old customers to whom you've sold or financed houses so they'll call you when they want to sell, or buy another one.)
He wanted $10,000 cash for his house and wanted me to take title subject to the first mortgage loan. The house had appreciated a lot since he had bought it and he didn't really want to move, but he needed $10,000 to pay some pressing family bills. The problem for me was to find the money to solve his problem. A natural inclination would be to go to the bank and borrow what I needed, but I've never done that. I pride myself on the fact that I've only signed personally on one loan; my VA loan which I paid off within a year by selling the house. All the hundreds of houses I've bought over the decades have been bought by taking title subject to existing loans and with seller financing.
Take a little test for me: Before going any further; how would you raise $10,000 without going to the bank or signing personally on a loan?
In the case at hand, the solution was fairly simple. I called one of my team of professionals, a 'can-do" mortgage broker who has both private and institutional sources of financing. He arranged a 5.5% home equity loan on the house that the owner signed. I then took title to the house subject to both the first and second liens. The owner then leased the house from me on a net basis for the amount of the first lien payments.
The payments on the home equity loan created negative cash flow each month, but I had a motivated occupant who swiftly forgot that he was a tenant and continued to upgrade the property; and I bought the $10,000 property equity above both loans with nothing down and only a little over $110 per month payments. As far as the seller was concerned, the $10,000 was at no cost, since they never had to make payments on it.
Why would he sell me the house with this financing rather than to sell it on the open market to raise cash. Because he really didn't want to move into an apartment or another house with higher payments; and have to put his kids into different schools. Being able to stay in the house was what he really wanted, and my purchase allowed him to do that.
By J. Jack Miller
Friday, December 14, 2007
Property Surveys For UK Land Investments - What You Must Know
If you are considering investing in UK land, you will need to have a property survey performed. The following questions and answers will help you understand the details about what a UK land property survey is, how the survey is carried out, and why a property survey is needed for UK Land Investments.
What is a UK land property survey?
A property survey is an examination of a piece of land that yields a report describing the land's features. Land survey is a vital preliminary step when one is investing in land. The various types of surveys are described later in this article.
Why do I need a property survey for a UK land investment?
The property survey provides important information that you will need in order to make good decisions about investments in UK land. The results of the survey may cause you to reconsider the asking price of the property, and may give you leverage to ask for a decreased price. You may even reconsider the decision to invest in that particular piece of land.
How is a property survey accomplished?
Conventional transit and tape, electronic angle and distance measurement equipment, as well as computer-aided systems are used. Physical markers are typically placed on the property and a survey map is created.
What are some of the different types of UK land surveys?
Subdivision Survey:
Maps out boundary determinations for the purpose of subdividing a portion of land into smaller sections.
Topographic Survey:
A survey of both natural (vegetation, creeks, contours etc.) and man made (buildings, fences, monuments etc.) elements on the property which is used to help plan, design, and build on a site.
Land Survey:
A land survey determines size, level, and character of the land, usually for purposes of obtaining project approvals.
Boundary Survey:
These surveys can be done in combination with a land survey or independently to establish disputed boundaries, when property ownership is being changed, or when a building project is planned.
How does one find a qualified surveyor?
Some land survey companies specialise in a specific industry or specific type of survey. Choose a UK land surveyor who has expertise in the type of survey that fits your specific need. Never select according to price alone. Choose one who has a good reputation and with whom you are able to easily communicate. The Royal Institute of Chartered Surveyors provides referrals to surveyors of all specialties.
How do I prepare for the UK land survey?
Discuss the specifics about your potential investment. The surveyor can then recommend the type and scope of survey needed. The surveyor should be given the current title report information about the property in which you are interested. Let the surveyor know about any specific questions or concerns you may have about the property, in order to be sure that those issues are addressed.
How long will the surveying process take?
The length of time it takes to complete a UK land survey depends on several things, including survey type, shape, and size of the land, terrain level variations, amount of existing brush, and how easy it is to get to and measure the land.
What is the cost for a property survey?
The variables listed above for the time scale will also affect the fee. Look for a surveyor who offers free quotations.
Remember, the fees you spend on a property survey before investing in land, can save you both time and money later on.
By Leonard Montgomery
What is a UK land property survey?
A property survey is an examination of a piece of land that yields a report describing the land's features. Land survey is a vital preliminary step when one is investing in land. The various types of surveys are described later in this article.
Why do I need a property survey for a UK land investment?
The property survey provides important information that you will need in order to make good decisions about investments in UK land. The results of the survey may cause you to reconsider the asking price of the property, and may give you leverage to ask for a decreased price. You may even reconsider the decision to invest in that particular piece of land.
How is a property survey accomplished?
Conventional transit and tape, electronic angle and distance measurement equipment, as well as computer-aided systems are used. Physical markers are typically placed on the property and a survey map is created.
What are some of the different types of UK land surveys?
Subdivision Survey:
Maps out boundary determinations for the purpose of subdividing a portion of land into smaller sections.
Topographic Survey:
A survey of both natural (vegetation, creeks, contours etc.) and man made (buildings, fences, monuments etc.) elements on the property which is used to help plan, design, and build on a site.
Land Survey:
A land survey determines size, level, and character of the land, usually for purposes of obtaining project approvals.
Boundary Survey:
These surveys can be done in combination with a land survey or independently to establish disputed boundaries, when property ownership is being changed, or when a building project is planned.
How does one find a qualified surveyor?
Some land survey companies specialise in a specific industry or specific type of survey. Choose a UK land surveyor who has expertise in the type of survey that fits your specific need. Never select according to price alone. Choose one who has a good reputation and with whom you are able to easily communicate. The Royal Institute of Chartered Surveyors provides referrals to surveyors of all specialties.
How do I prepare for the UK land survey?
Discuss the specifics about your potential investment. The surveyor can then recommend the type and scope of survey needed. The surveyor should be given the current title report information about the property in which you are interested. Let the surveyor know about any specific questions or concerns you may have about the property, in order to be sure that those issues are addressed.
How long will the surveying process take?
The length of time it takes to complete a UK land survey depends on several things, including survey type, shape, and size of the land, terrain level variations, amount of existing brush, and how easy it is to get to and measure the land.
What is the cost for a property survey?
The variables listed above for the time scale will also affect the fee. Look for a surveyor who offers free quotations.
Remember, the fees you spend on a property survey before investing in land, can save you both time and money later on.
By Leonard Montgomery
Want to Find Treasure in the Sierra Madres?
Do you remember the 1927 novel, "The Treasure of the Sierra Madre", which was about a couple of down-and-out Americans that joined up with a crusty old timer to prospect for gold in Mexico? It was later adapted into a film by John Huston in 1948, who returned to Puerto Vallarta, Mexico in 1964 to film "Night of the Iguana".
The Sierra Madres have been and continue to be rich in mineral wealth containing vast deposits of gold, silver, lead, zinc, copper, and tin. The problem is; the majority of us North Americans can't do very much to prosper from or enjoy the benefits associated with these rich mineral assets. However, the Sierra Madres do possess another great asset that we can benefit from and enjoy; that is real estate!
Now, we ask, where exactly are the Sierra Madres? Well, there are actually three mountain ranges in Mexico, all referred to as the Sierra Madres. The first is the Sierra Madre Oriental range that runs about 700 miles from north to the south on the eastern side of Mexico. On the western side of Mexico, the Sierra Madre Occidental range runs about 700 miles from the US border south to an area just north of Puerto Vallarta. The Sierra Madre Del Sur begins close to where the Occidental range ends and continues south to Guatemala. The two western ranges are bisected by the Trans-Volcanic Axis which is a geologically active volcanic mountain range whose smoldering cones link the western ranges with the eastern range. This east to west volcanic range starts near Cabo Corrientes, at the southern tip of Puerto Vallarta´s Banderas Bay, and ends just south of Veracruz on the Gulf of Mexico.
Now that we have the geography lesson behind us, let's just position ourselves where three of these four ranges intersect, i.e., in Puerto Vallarta. Standing in Vallarta, we look to the north and see the Sierra Madre Occidental range, to the south we see the Sierra Madre Del Sur range, and to the east we see the Trans-Volcanic Axis range. Yes, even though Puerto Vallarta is located on the Mexican Riviera along the Pacific Ocean coastline, you could say that it's in the center of the Sierra Madres. Being located in the center of the Sierra Madres and on the Pacific Ocean, Vallarta offers some of the most scenic land anywhere on the planet.
Being located at the same latitude as Hawaii, the climate in Vallarta is essentially the same as Hawaii. With the fabulous climate, outrageous views of mountains and ocean, located only two to three hours from the US, and a progressive PAN Party in power, real estate treasures in Vallarta have been discovered!
The coastline from Riviera Nayarit, 45 miles north of Vallarta all the way south to Careyes on the Costa Alegre, 55 miles south of Vallarta, is currently undergoing a major transformation. Due to the recent legal changes pertaining to the foreign ownership of coastal land in Mexico, the stable peso, the conservative and pro-US Mexican government, and of course, the onslaught of baby boomers searching for retirement destinations, this entire 100 mile stretch of the Mexican Riviera is exploding with population growth and new development.
One of the results of Mexico's 1917 Revolution was the Agrarian Law which provided the redistribution of land from the wealthy land owners to the farming peasants. This Agrarian Law prohibited the farmers from ever selling their land; they were only to work it. However, in 1973, the Mexican government modified the Agrarian Law, thus allowing foreign real estate investment in Mexico. Certain restricted zones were also made available to foreign buyers by establishing the fideicomiso, or bank trust. This 50 year bank trust grants the real estate title to a bank, acting as a trustee, who is obligated to follow all instructions given by the trust's beneficiary, the foreign buyer. The Agrarian Law was again amended in 1993, allowing the ejido farmers, with unanimous consent, to privatize or regularize their land and sell off parcels to others. In 1994, NAFTA created a dispute-settlement provision to protect direct foreign investments in Mexico. Since the PAN Party took control in 2000, there have been a number of other legal changes, all designed to encourage foreign investments in Mexican real estate. They include financing, title insurance, bank trust regulations, and other tools to provide security to the foreign investor.
All Mexican land within 100 km of the borders and 50 km of the shorelines is considered as restricted zones and treated differently than the interior land. Since the beautiful western coastline property along the Mexican Riviera lies within the 50 km restricted zone, it is being slowly but surely acquired by foreigners through fideicomisos, as the ejido farmers privatize it. Of course, as it converts, its value and selling price skyrockets, thereby providing substantial new wealth for those fortunate land owning families or ejidos. There is so much magnificent coastline available, this process of conversion will probably continue for another generation.
As this coastline gets privatized, sold to foreigners, and developed, the North American baby boomer invasion continues and the local economy thrives as thousands of new construction and service jobs are created. The head of the local Chamber of Commerce has predicted the population of greater Vallarta to reach 600,000 inhabitants by 2015, making it much larger than many northern US cities such as Cleveland, Ohio. The current construction boom seems relentless as new villas, condominium complexes, shopping centers, and office buildings continue to spring up daily.
While boating in Banderas Bay, you peer across the water and see countless beautiful villas and condominiums nestled in the foothills of the Sierra Madres and you must agree, "There's gold in them thar hills"; the real treasure of the Sierra Madres is the hills themselves and the real estate contained therein. It all lies before your eyes and is now available to you in Puerto Vallarta. So, why hesitate? Come on down this winter and explore the opportunities that await you in Paradise.
By James Scherrer
The Sierra Madres have been and continue to be rich in mineral wealth containing vast deposits of gold, silver, lead, zinc, copper, and tin. The problem is; the majority of us North Americans can't do very much to prosper from or enjoy the benefits associated with these rich mineral assets. However, the Sierra Madres do possess another great asset that we can benefit from and enjoy; that is real estate!
Now, we ask, where exactly are the Sierra Madres? Well, there are actually three mountain ranges in Mexico, all referred to as the Sierra Madres. The first is the Sierra Madre Oriental range that runs about 700 miles from north to the south on the eastern side of Mexico. On the western side of Mexico, the Sierra Madre Occidental range runs about 700 miles from the US border south to an area just north of Puerto Vallarta. The Sierra Madre Del Sur begins close to where the Occidental range ends and continues south to Guatemala. The two western ranges are bisected by the Trans-Volcanic Axis which is a geologically active volcanic mountain range whose smoldering cones link the western ranges with the eastern range. This east to west volcanic range starts near Cabo Corrientes, at the southern tip of Puerto Vallarta´s Banderas Bay, and ends just south of Veracruz on the Gulf of Mexico.
Now that we have the geography lesson behind us, let's just position ourselves where three of these four ranges intersect, i.e., in Puerto Vallarta. Standing in Vallarta, we look to the north and see the Sierra Madre Occidental range, to the south we see the Sierra Madre Del Sur range, and to the east we see the Trans-Volcanic Axis range. Yes, even though Puerto Vallarta is located on the Mexican Riviera along the Pacific Ocean coastline, you could say that it's in the center of the Sierra Madres. Being located in the center of the Sierra Madres and on the Pacific Ocean, Vallarta offers some of the most scenic land anywhere on the planet.
Being located at the same latitude as Hawaii, the climate in Vallarta is essentially the same as Hawaii. With the fabulous climate, outrageous views of mountains and ocean, located only two to three hours from the US, and a progressive PAN Party in power, real estate treasures in Vallarta have been discovered!
The coastline from Riviera Nayarit, 45 miles north of Vallarta all the way south to Careyes on the Costa Alegre, 55 miles south of Vallarta, is currently undergoing a major transformation. Due to the recent legal changes pertaining to the foreign ownership of coastal land in Mexico, the stable peso, the conservative and pro-US Mexican government, and of course, the onslaught of baby boomers searching for retirement destinations, this entire 100 mile stretch of the Mexican Riviera is exploding with population growth and new development.
One of the results of Mexico's 1917 Revolution was the Agrarian Law which provided the redistribution of land from the wealthy land owners to the farming peasants. This Agrarian Law prohibited the farmers from ever selling their land; they were only to work it. However, in 1973, the Mexican government modified the Agrarian Law, thus allowing foreign real estate investment in Mexico. Certain restricted zones were also made available to foreign buyers by establishing the fideicomiso, or bank trust. This 50 year bank trust grants the real estate title to a bank, acting as a trustee, who is obligated to follow all instructions given by the trust's beneficiary, the foreign buyer. The Agrarian Law was again amended in 1993, allowing the ejido farmers, with unanimous consent, to privatize or regularize their land and sell off parcels to others. In 1994, NAFTA created a dispute-settlement provision to protect direct foreign investments in Mexico. Since the PAN Party took control in 2000, there have been a number of other legal changes, all designed to encourage foreign investments in Mexican real estate. They include financing, title insurance, bank trust regulations, and other tools to provide security to the foreign investor.
All Mexican land within 100 km of the borders and 50 km of the shorelines is considered as restricted zones and treated differently than the interior land. Since the beautiful western coastline property along the Mexican Riviera lies within the 50 km restricted zone, it is being slowly but surely acquired by foreigners through fideicomisos, as the ejido farmers privatize it. Of course, as it converts, its value and selling price skyrockets, thereby providing substantial new wealth for those fortunate land owning families or ejidos. There is so much magnificent coastline available, this process of conversion will probably continue for another generation.
As this coastline gets privatized, sold to foreigners, and developed, the North American baby boomer invasion continues and the local economy thrives as thousands of new construction and service jobs are created. The head of the local Chamber of Commerce has predicted the population of greater Vallarta to reach 600,000 inhabitants by 2015, making it much larger than many northern US cities such as Cleveland, Ohio. The current construction boom seems relentless as new villas, condominium complexes, shopping centers, and office buildings continue to spring up daily.
While boating in Banderas Bay, you peer across the water and see countless beautiful villas and condominiums nestled in the foothills of the Sierra Madres and you must agree, "There's gold in them thar hills"; the real treasure of the Sierra Madres is the hills themselves and the real estate contained therein. It all lies before your eyes and is now available to you in Puerto Vallarta. So, why hesitate? Come on down this winter and explore the opportunities that await you in Paradise.
By James Scherrer
Buying a Building Lot for Your New Home: Phase 1 Costs
When you acquire your residence by purchasing an existing home (either a resale or a new home in a builder's new construction community), the process is fairly straightforward. The "package" is predefined with a resale property. You don't have to find a lot and then have a home designed. In a new construction community, the builder tells you the lots that are available and provides brochures with the floor plans and features of the different house models. When you want to buy a lot and then have somebody build you a home, however, this process has a few more twists to it and additional issues come into play.
The first (and perhaps the biggest) factor is cost. Before you decide to take the plunge, you'd want to have a rough estimate of the expenses you would incur. Your project consists of three separate phases (the lot, design and construction, and the completed property). Your cash needs and project expenses are going to be related to the purchase of the land parcel, the construction on it of the improvements (e.g., house, driveway, utilities, landscaping, grading), and the final mortgage for the finished property (the new home on the lot). The starting point for determining your project cost is finding out how much money you can borrow. This will help you define the amount of cash you may need to come up with, the price range of lots you should be investigating, and a realistic budget for the construction portion of the project (Phase 2).
The section of your budget for Phase 1 (acquisition of the building site) would include the cash for the down payment on the parcel, financing fees and payments on the lot loan, closing costs, "carrying costs" and attorney's fees. Programs, features, rates, fees and requirements for lot loans vary among lenders. Not all lenders offer residential building lot loans. Although you may be able to finance only 75-80% of the purchase price of the lot, you might have the option of using some of the equity in your existing home for the down payment. Since lot loans are designed to be relatively short term, some programs specify that you pay off the loan within a certain period of time. Where there's an existing structure on the parcel, lenders may require that the value of the land-only portion of the property not exceed a specified percentage of the appraised value of the entire property.
If you've ever bought or sold a home, you know that the buyer and seller are responsible for paying certain costs when title to the property is transferred. These vary by area and marketplace. Your closing costs when you settle on the building lot should be similar in nature to those you paid as a home buyer. The amount, of course, will be different because some items (such as title insurance and realty transfer taxes) are based on the purchase price of the property. You would be responsible for any ongoing or carrying costs of the property once you take title to it. In the case of a vacant parcel, these expenses might be limited to real estate taxes and grounds maintenance. Additional expenses would apply if the property has an existing house, such as insurance, utilities, and maintenance of the structure as well as the lot.
Other costs related to acquisition of the lot would vary depending on the particular scenario. For example, if no public water and sewer were available and the seller weren't including utility permits in the purchase price, you'd need to have the parcel tested, evaluated and approved for on-site systems (e.g., well, septic, sand mound). With public sewer and water, you would have to purchase the permits unless they were provided by the seller. If the property contained an existing house, you might decide to have professional inspections and testing done (e.g., radon, termite, well, septic). The results may necessitate repair or remediation work and you might have to pay for some or all of it, depending on the provisions in your purchase offer.
If you intend to create a building lot by subdividing a larger parcel, your Phase 1 budget should include development application fees or permits and fees for engineering and environmental assessments (such as wetlands and possible contamination by toxic substances). In addition, you should increase the amount allocated for legal expense because it's likely that your attorney would be doing more work on your behalf.
The spreadsheet that you set up for the project budget will serve its purpose if it includes all of the expenses for all of the project phases. As you tweak your pro forma, you'll want to be able to see the impact on the whole picture right away. Accordingly, instead of creating separate budgets, it might be better to have one spreadsheet with a section devoted to each phase of your project.
By Nancy Chadwick
The first (and perhaps the biggest) factor is cost. Before you decide to take the plunge, you'd want to have a rough estimate of the expenses you would incur. Your project consists of three separate phases (the lot, design and construction, and the completed property). Your cash needs and project expenses are going to be related to the purchase of the land parcel, the construction on it of the improvements (e.g., house, driveway, utilities, landscaping, grading), and the final mortgage for the finished property (the new home on the lot). The starting point for determining your project cost is finding out how much money you can borrow. This will help you define the amount of cash you may need to come up with, the price range of lots you should be investigating, and a realistic budget for the construction portion of the project (Phase 2).
The section of your budget for Phase 1 (acquisition of the building site) would include the cash for the down payment on the parcel, financing fees and payments on the lot loan, closing costs, "carrying costs" and attorney's fees. Programs, features, rates, fees and requirements for lot loans vary among lenders. Not all lenders offer residential building lot loans. Although you may be able to finance only 75-80% of the purchase price of the lot, you might have the option of using some of the equity in your existing home for the down payment. Since lot loans are designed to be relatively short term, some programs specify that you pay off the loan within a certain period of time. Where there's an existing structure on the parcel, lenders may require that the value of the land-only portion of the property not exceed a specified percentage of the appraised value of the entire property.
If you've ever bought or sold a home, you know that the buyer and seller are responsible for paying certain costs when title to the property is transferred. These vary by area and marketplace. Your closing costs when you settle on the building lot should be similar in nature to those you paid as a home buyer. The amount, of course, will be different because some items (such as title insurance and realty transfer taxes) are based on the purchase price of the property. You would be responsible for any ongoing or carrying costs of the property once you take title to it. In the case of a vacant parcel, these expenses might be limited to real estate taxes and grounds maintenance. Additional expenses would apply if the property has an existing house, such as insurance, utilities, and maintenance of the structure as well as the lot.
Other costs related to acquisition of the lot would vary depending on the particular scenario. For example, if no public water and sewer were available and the seller weren't including utility permits in the purchase price, you'd need to have the parcel tested, evaluated and approved for on-site systems (e.g., well, septic, sand mound). With public sewer and water, you would have to purchase the permits unless they were provided by the seller. If the property contained an existing house, you might decide to have professional inspections and testing done (e.g., radon, termite, well, septic). The results may necessitate repair or remediation work and you might have to pay for some or all of it, depending on the provisions in your purchase offer.
If you intend to create a building lot by subdividing a larger parcel, your Phase 1 budget should include development application fees or permits and fees for engineering and environmental assessments (such as wetlands and possible contamination by toxic substances). In addition, you should increase the amount allocated for legal expense because it's likely that your attorney would be doing more work on your behalf.
The spreadsheet that you set up for the project budget will serve its purpose if it includes all of the expenses for all of the project phases. As you tweak your pro forma, you'll want to be able to see the impact on the whole picture right away. Accordingly, instead of creating separate budgets, it might be better to have one spreadsheet with a section devoted to each phase of your project.
By Nancy Chadwick
Questions Before Purchasing Property Or Land
When purchasing a piece of property, there are so many things to consider. What are you looking for? Some are looking for a mountain-top piece of property with great views. Others are looking for something in the city limits for convenience. Then there are some that are looking for something in between. The options are endless, but you must decide where you and your family would feel most comfortable.
Once you decide WHERE you want to live, you should then consider some other questions:
1. How much acreage do you want to purchase? Some people want a simple building lot that consists of ½ acre to 1 ½ acres.Others want a mini private estate consisting of 3 to 5 acres. Then there are others that want a large parcel or 5 acres or more, and maybe as large as 20 acres. What are you looking for?
2. How much do you wish to spend on this piece of property or real estate? Depending on where you want to live, an acre of land can cost anywhere from $5,000 to $1,000,000 and up. Then there are larger parcels that could cost a lot less per acre if you buy the whole 20 or 30 acres.
3. What type of home do you want to build on this property? Restrictions can regulate what your neighborhood will become in the future. If there are restrictions, you can make sure that you home value will rise and that no homes will be built in your area to compromise that. A good question that our Realtors are ready to answer is "What are the restrictions on this piece of property?"
4. What will your home appraise for on this building lot? Some clients and lenders ask for a "Pre-Appraisal". A Pre-Appraisal is an estimation of what your new home built on this piece of property will be worth when it is completed. Some get a Pre-Appraisal and another Appraisal once the home is finished. When you get an Appraisal after the home is finished, it sometimes shows the value a little higher than the Pre-Appraisal because they are looking at a finished product and not just a concept. The Post-Appraisal being a little higher will also allow you to get a better mortgage rate.
This is simply a starter guide when looking for a piece of property. Some other questions to be considered:
1. Size of your property? Will the home you want fit on it?
2. How should the house sit on the property to allow for a garage and driveway?
3. How much grading and clearing will need to be done on the property?
4. Will you need to build or improve access to your home? Will the improvements/construction require a gravel or paved surface? How about drainage for the road?
5. What type of foundation do you want or what type of foundation is required? Whether you install a slab, crawlspace or full basement will determine the final cost for your home.
6. Does the area have access to a public water and a sewage system, or will a water well have to be drilled and septic system need to be installed?
7. Is there adequate space and drainage for the septic system needed for the size home you want to build?
8. How far away from your daily routine will your home be? Is it convenient to your job, family/friends, grocery store, gas station or church? Or will the distance matter to you at all?
9. Are utilities (electric, cable, gas) available in the area, or will you have to add these costs to your building budget?
10. Will your home increase in value over the years? Is this what you are anticipating?
11. How are taxes assessed and at what rate in the area you've chosen? Will your home raise in value as the taxes do? Is this a concern for you?
12. Has the property been approved for building by the local permitting office?
There are many bases to cover when dealing with Real Estate. Make sure you ask questions, negotiate, and feel completely sure about the deal before you make a purchase.
By Janet Marie Horan
Once you decide WHERE you want to live, you should then consider some other questions:
1. How much acreage do you want to purchase? Some people want a simple building lot that consists of ½ acre to 1 ½ acres.Others want a mini private estate consisting of 3 to 5 acres. Then there are others that want a large parcel or 5 acres or more, and maybe as large as 20 acres. What are you looking for?
2. How much do you wish to spend on this piece of property or real estate? Depending on where you want to live, an acre of land can cost anywhere from $5,000 to $1,000,000 and up. Then there are larger parcels that could cost a lot less per acre if you buy the whole 20 or 30 acres.
3. What type of home do you want to build on this property? Restrictions can regulate what your neighborhood will become in the future. If there are restrictions, you can make sure that you home value will rise and that no homes will be built in your area to compromise that. A good question that our Realtors are ready to answer is "What are the restrictions on this piece of property?"
4. What will your home appraise for on this building lot? Some clients and lenders ask for a "Pre-Appraisal". A Pre-Appraisal is an estimation of what your new home built on this piece of property will be worth when it is completed. Some get a Pre-Appraisal and another Appraisal once the home is finished. When you get an Appraisal after the home is finished, it sometimes shows the value a little higher than the Pre-Appraisal because they are looking at a finished product and not just a concept. The Post-Appraisal being a little higher will also allow you to get a better mortgage rate.
This is simply a starter guide when looking for a piece of property. Some other questions to be considered:
1. Size of your property? Will the home you want fit on it?
2. How should the house sit on the property to allow for a garage and driveway?
3. How much grading and clearing will need to be done on the property?
4. Will you need to build or improve access to your home? Will the improvements/construction require a gravel or paved surface? How about drainage for the road?
5. What type of foundation do you want or what type of foundation is required? Whether you install a slab, crawlspace or full basement will determine the final cost for your home.
6. Does the area have access to a public water and a sewage system, or will a water well have to be drilled and septic system need to be installed?
7. Is there adequate space and drainage for the septic system needed for the size home you want to build?
8. How far away from your daily routine will your home be? Is it convenient to your job, family/friends, grocery store, gas station or church? Or will the distance matter to you at all?
9. Are utilities (electric, cable, gas) available in the area, or will you have to add these costs to your building budget?
10. Will your home increase in value over the years? Is this what you are anticipating?
11. How are taxes assessed and at what rate in the area you've chosen? Will your home raise in value as the taxes do? Is this a concern for you?
12. Has the property been approved for building by the local permitting office?
There are many bases to cover when dealing with Real Estate. Make sure you ask questions, negotiate, and feel completely sure about the deal before you make a purchase.
By Janet Marie Horan
Work With It - Not Against It - The Key Switch For Land Stewardship
Its time for a new method of seeing Land. If you are working with houses, building or land consider a new philosophy of approaching your relationship to them.
In this day of wanting to prevent global warming, we are being asked to become wonderful stewards of the land. Most people are missing a step in the process of trying to steward. Its the key belief that needs updating.
The Native Americans and many Native Cultures are wonderful models for land stewardship. They honor the Earth as a living Being. They were aware of the miraculous energy dynamic between the sky, the earth and all who dwell there - living humans, ancestors, animals and plants.
You hear native cultures refer to elements of Earth as living with names like, "Grandmother Earth" "Father Sky." I had a very odd experience one day. I had been walking in Nature and connecting with a desire to help the Earth to help people not suffer so much. I started feeling odd - I felt like the Earth was moving all the time - it was moving in a rhythm. Over time I realized I was feeling the Earth Breathing. It was amazing and moved with the rocking of a boat on the water. I was feeling sea-sick.
In my journey to harmonize my relationship with the Earth, I learned a lot. I was already an energy worker, Reiki Master, Acupressure Therapist, and psychologist. I learned from my teachers ways to help myself not feel so ill and to develop a relationship directly with the Earth.
I began to walk and hike in Nature and have visit with the plant life and spirits that dwelled on the land. Not spirits like ghosts, but the energy of Devas - or keepers of the energies - Much like the quote from the Talmud- "Every blade of grass has its angel that bends over it and whispers "Grow Grow." I began to meet some of these angels and some interesting Beings that live on the land.
Now I teach others how to have relationships with the Beings on their land and in their work places to assist them with living in a positive place that feeds them energetically. There are powerful and simple techniques you can apply to do this.
The first step - and most important step - is to begin to think of the land as a living being full of flowing energy. This alone will take you far on the path of being a Energetic Land Steward. Thinking this allows your behavior to shift easily and naturally.
If you think the land and home is alive - then you want to clear your clutter, straighten the garage, fix the broken window. If you think a yard is alive - then you talk to it and let it know when you are preparing to prune, and you want to get rid of overgrown weeds and put it in order. If you think your home is a living Being, then you can control your mood or door slamming or stomping to honor the place that protects you from the elements.
Simply changing this thought belief to see the Earth, Land, and Dwelling as Living - you open up new opportunities to serve the world well and to present property that is harmonious to new buyers.
By Katherine Wright Desai
In this day of wanting to prevent global warming, we are being asked to become wonderful stewards of the land. Most people are missing a step in the process of trying to steward. Its the key belief that needs updating.
The Native Americans and many Native Cultures are wonderful models for land stewardship. They honor the Earth as a living Being. They were aware of the miraculous energy dynamic between the sky, the earth and all who dwell there - living humans, ancestors, animals and plants.
You hear native cultures refer to elements of Earth as living with names like, "Grandmother Earth" "Father Sky." I had a very odd experience one day. I had been walking in Nature and connecting with a desire to help the Earth to help people not suffer so much. I started feeling odd - I felt like the Earth was moving all the time - it was moving in a rhythm. Over time I realized I was feeling the Earth Breathing. It was amazing and moved with the rocking of a boat on the water. I was feeling sea-sick.
In my journey to harmonize my relationship with the Earth, I learned a lot. I was already an energy worker, Reiki Master, Acupressure Therapist, and psychologist. I learned from my teachers ways to help myself not feel so ill and to develop a relationship directly with the Earth.
I began to walk and hike in Nature and have visit with the plant life and spirits that dwelled on the land. Not spirits like ghosts, but the energy of Devas - or keepers of the energies - Much like the quote from the Talmud- "Every blade of grass has its angel that bends over it and whispers "Grow Grow." I began to meet some of these angels and some interesting Beings that live on the land.
Now I teach others how to have relationships with the Beings on their land and in their work places to assist them with living in a positive place that feeds them energetically. There are powerful and simple techniques you can apply to do this.
The first step - and most important step - is to begin to think of the land as a living being full of flowing energy. This alone will take you far on the path of being a Energetic Land Steward. Thinking this allows your behavior to shift easily and naturally.
If you think the land and home is alive - then you want to clear your clutter, straighten the garage, fix the broken window. If you think a yard is alive - then you talk to it and let it know when you are preparing to prune, and you want to get rid of overgrown weeds and put it in order. If you think your home is a living Being, then you can control your mood or door slamming or stomping to honor the place that protects you from the elements.
Simply changing this thought belief to see the Earth, Land, and Dwelling as Living - you open up new opportunities to serve the world well and to present property that is harmonious to new buyers.
By Katherine Wright Desai
Tips for Buying Land for a Custom or Modern Prefab Home
There are few things more exciting than building your own home, whether it be a custom design created expressly for you or a modern prefab house built with cutting edge technology. It isn't a complicated process, but it does require due diligence and a little legwork.
Whether you are looking for property in Marin County, the San Francisco area, California, or even outside of California there are some guidelines that will hold true regardless of the local real estate culture. Choosing a competent realtor to help guide you through the process is probably the first decision you should make.
Find the Right Parcel of Land for Your Custom or Prefab Home
After signing on with a realtor, your first step in building your dream house will be to find the right piece of property. Some of the conventional wisdom about buying a house holds true for buying land as well. You will want to consider the neighborhood. What conveniences are available? How about the schools? Where is the closest grocery store? Is medical care nearby?
If you are looking at property in a development or an already improved lot within an established community, you may find it to be more expensive than unimproved land, but you can be fairly confident that the lot is usable. Check the background of the developer and ask for warranty that the home site is buildable.
Unimproved land is generally less expensive and may offer more flexibility in the type of home you build, as well as the size and placement of your home. You may have to spend extra money, however, to provide access and utilities.
Do your homework before you purchase.
- Make sure the land is buildable:
- Soil composition - Is the soil suitable for building? Although most soils aren't a problem, some require beefed-up foundations or other special consideration.
- Drainage - Is the land in a low laying area or flood plain?
- Topography - Is the land on a steep hillside or some other difficult building circumstance?
- Access - Will building equipment and supplies be able to access the building site?
- Utilities - Are water, electricity, phone, and sewer hookups available? If not, will it be feasible to bring electricity in? In addition you will need a well and septic system. How deep will the well need to be? Can you have a standard septic system or will engineering be required?
- Be aware of encumbrances, including:
- Easements - An easement can be public or private, and include rights-of-way, utilities, and, occasionally, views.
- Restrictive covenants - These can restrict use of the land and may include zoning or use restrictions, deed restrictions, building envelopes, and CC&R's.
- Building moratoriums - Be sure you can build. Some areas restrict or suspend the number of building permits issued.
The Budget for Purchasing and Building on Undeveloped Land
One of the most common mistakes people make when buying property is not factoring in the cost of the building process. Land cost shouldn't exceed about 25% of your overall budget, unless you are considering an exceptional piece of property such as one with an amazing view, a waterfront parcel, or a highly desirable neighborhood.
Financing bare land can be a bit trickier than getting a loan for an existing house. Typically, as there is no collateral, you may be expected to make a higher down payment as well as pay a higher interest rate. If you have purchased improved property or have immediate plans for construction, a loan might be easier to find.
Sources for funding include:
- Home equity loan
- Your credit union, a community bank, or a land loan obtained through a mortgage broker
- A loan package that will cover the cost of both the land and construction
- Financing offered by the seller
The Bottom Line
Buying land and building a custom or prefab home is a little more complex a process than purchasing a home that is move-in ready. The end result, however, is a home that suits your needs and taste and was built with you in mind.
By Renee Adelmann
Whether you are looking for property in Marin County, the San Francisco area, California, or even outside of California there are some guidelines that will hold true regardless of the local real estate culture. Choosing a competent realtor to help guide you through the process is probably the first decision you should make.
Find the Right Parcel of Land for Your Custom or Prefab Home
After signing on with a realtor, your first step in building your dream house will be to find the right piece of property. Some of the conventional wisdom about buying a house holds true for buying land as well. You will want to consider the neighborhood. What conveniences are available? How about the schools? Where is the closest grocery store? Is medical care nearby?
If you are looking at property in a development or an already improved lot within an established community, you may find it to be more expensive than unimproved land, but you can be fairly confident that the lot is usable. Check the background of the developer and ask for warranty that the home site is buildable.
Unimproved land is generally less expensive and may offer more flexibility in the type of home you build, as well as the size and placement of your home. You may have to spend extra money, however, to provide access and utilities.
Do your homework before you purchase.
- Make sure the land is buildable:
- Soil composition - Is the soil suitable for building? Although most soils aren't a problem, some require beefed-up foundations or other special consideration.
- Drainage - Is the land in a low laying area or flood plain?
- Topography - Is the land on a steep hillside or some other difficult building circumstance?
- Access - Will building equipment and supplies be able to access the building site?
- Utilities - Are water, electricity, phone, and sewer hookups available? If not, will it be feasible to bring electricity in? In addition you will need a well and septic system. How deep will the well need to be? Can you have a standard septic system or will engineering be required?
- Be aware of encumbrances, including:
- Easements - An easement can be public or private, and include rights-of-way, utilities, and, occasionally, views.
- Restrictive covenants - These can restrict use of the land and may include zoning or use restrictions, deed restrictions, building envelopes, and CC&R's.
- Building moratoriums - Be sure you can build. Some areas restrict or suspend the number of building permits issued.
The Budget for Purchasing and Building on Undeveloped Land
One of the most common mistakes people make when buying property is not factoring in the cost of the building process. Land cost shouldn't exceed about 25% of your overall budget, unless you are considering an exceptional piece of property such as one with an amazing view, a waterfront parcel, or a highly desirable neighborhood.
Financing bare land can be a bit trickier than getting a loan for an existing house. Typically, as there is no collateral, you may be expected to make a higher down payment as well as pay a higher interest rate. If you have purchased improved property or have immediate plans for construction, a loan might be easier to find.
Sources for funding include:
- Home equity loan
- Your credit union, a community bank, or a land loan obtained through a mortgage broker
- A loan package that will cover the cost of both the land and construction
- Financing offered by the seller
The Bottom Line
Buying land and building a custom or prefab home is a little more complex a process than purchasing a home that is move-in ready. The end result, however, is a home that suits your needs and taste and was built with you in mind.
By Renee Adelmann
Sunday, December 9, 2007
Clean Up Your Finances Before You Invest
Before you consider investing in any type of market, you should really take a long hard look at your current situation. Investing in the future is definitely a good thing, but clearing up bad or potentially bad situations in the present is more important.
The first thing you should do is get a copy of your credit report. You should do this at least once a year. It is important to know what's in your credit report and clear up any negative items as soon as you possibly can. If you have $25,000 set aside to invest, but you have $25,000 worth of bad credit, your best bet is to clean up your credit before you start any type of investing.
The next thing you should do is look at what you are paying out each month and get rid of any unnecessary expenses. Although things like high interest credit cards are convenient and nice to have, they most certainly aren't necessary and can end up costing you thousands in the long run. Pay them off and get rid of them. Likewise, if you have high interest loans outstanding, you should pay them off as well.
If nothing else, you could do a balance transfer from one credit card to another, exchanging the high interest credit card for one with lower interest. You could also look into refinancing high interest loans with lower interest loans. You might end up having to use some of your investment funds to take care of these matters, but in the long run, you will see that this is the wisest course of action.
If you're living from paycheck to paycheck like a lot of people, it doesn't necessarily make sense to start investing funds right away. If you're struggling to pay your bills and your bank balance is always next to nothing, investing any money you have saved up will most likely put you in a worse financial situation. Your investment dollars would be better spent to rectify adverse financial issues that affect you on a daily basis.
Even if you are unable to invest money at the start, While you are in the process of clearing up your present financial situation you should make it a point to educate yourself about the various types of investments. Read up on things like savings accounts, CDs, money market accounts, stocks, bonds, mutual funds and annuities and choose the type of investments that best suit your needs.
Savings accounts are considered to be a safe haven for your money as your deposits are usually insured, but on the downside they usually offer low interest rates so it takes longer to get a good return on your investment.
A certificate of deposit or CD is an account that usually offers a higher rate of interest than a regular savings account. CDs are also insured up to $100,000 and the longer the period of investment the higher the interest rate. On the downside, there are usually penalties for early withdrawal.
A money market account generally earns a higher interest than a regular savings account. They are also insured and work like a checking account. However, there is a limit on the number of withdrawals or transfers you can make during a given period of time.
Investing in stocks gives you ownership of part of that company's assets. When the company makes money, its stockholders usually receive dividends and have the opportunity to sell their stocks for a profit. On the other hand, if the company does poorly, the stock price will probably fall and you could lose some or all of the money you invested.
A bond is a certificate of debt issued by the government or a company with a promise to pay a specified sum of money at a future date. Bonds carry a fixed interest rate. The term of a bond can range from a few months to 30 years. Bonds can be traded and are considered to be safer than stocks because bondholders are paid before stockholders if a company goes bankrupt.
Mutual funds are professionally managed pools of money from a group of investors. A mutual fund manager invests your funds in securities like stocks and bonds, money market instruments or a combination of all of them depending on the fund's investment objectives. Investing in mutual funds allows you to diversify, which makes the investment less risky. Keep in mind that mutual funds usually charge a fee for the service and you will have to pay taxes on any profits you earn.
Annuities are contracts sold by insurance companies to provide payments at specified intervals, usually after retirement. You will be charged a penalty for withdrawing funds prior to a certain age, but you won't be taxed until you withdraw the funds. Annuities are considered to be safe,low-yielding investments. Additionally, annuities have death benefits that equal either the current value of the annuity or the amount that has been paid into it - whichever is has a higher value.
Once you are ready to start investing, you need a plan. Start by making a list of your most important financial goals like buying a home, paying for a child's college education or living comfortably in retirement. When you have the extra money, make a habit of paying yourself first by putting money into your savings and investments.
If you feel you don't know enough about investing on your own, you can always seek professional investment advice. Investment professionals provide a variety of services at different prices. Some are very expensive and others are very affordable; it pays to shop around.
By Denise Villani
The first thing you should do is get a copy of your credit report. You should do this at least once a year. It is important to know what's in your credit report and clear up any negative items as soon as you possibly can. If you have $25,000 set aside to invest, but you have $25,000 worth of bad credit, your best bet is to clean up your credit before you start any type of investing.
The next thing you should do is look at what you are paying out each month and get rid of any unnecessary expenses. Although things like high interest credit cards are convenient and nice to have, they most certainly aren't necessary and can end up costing you thousands in the long run. Pay them off and get rid of them. Likewise, if you have high interest loans outstanding, you should pay them off as well.
If nothing else, you could do a balance transfer from one credit card to another, exchanging the high interest credit card for one with lower interest. You could also look into refinancing high interest loans with lower interest loans. You might end up having to use some of your investment funds to take care of these matters, but in the long run, you will see that this is the wisest course of action.
If you're living from paycheck to paycheck like a lot of people, it doesn't necessarily make sense to start investing funds right away. If you're struggling to pay your bills and your bank balance is always next to nothing, investing any money you have saved up will most likely put you in a worse financial situation. Your investment dollars would be better spent to rectify adverse financial issues that affect you on a daily basis.
Even if you are unable to invest money at the start, While you are in the process of clearing up your present financial situation you should make it a point to educate yourself about the various types of investments. Read up on things like savings accounts, CDs, money market accounts, stocks, bonds, mutual funds and annuities and choose the type of investments that best suit your needs.
Savings accounts are considered to be a safe haven for your money as your deposits are usually insured, but on the downside they usually offer low interest rates so it takes longer to get a good return on your investment.
A certificate of deposit or CD is an account that usually offers a higher rate of interest than a regular savings account. CDs are also insured up to $100,000 and the longer the period of investment the higher the interest rate. On the downside, there are usually penalties for early withdrawal.
A money market account generally earns a higher interest than a regular savings account. They are also insured and work like a checking account. However, there is a limit on the number of withdrawals or transfers you can make during a given period of time.
Investing in stocks gives you ownership of part of that company's assets. When the company makes money, its stockholders usually receive dividends and have the opportunity to sell their stocks for a profit. On the other hand, if the company does poorly, the stock price will probably fall and you could lose some or all of the money you invested.
A bond is a certificate of debt issued by the government or a company with a promise to pay a specified sum of money at a future date. Bonds carry a fixed interest rate. The term of a bond can range from a few months to 30 years. Bonds can be traded and are considered to be safer than stocks because bondholders are paid before stockholders if a company goes bankrupt.
Mutual funds are professionally managed pools of money from a group of investors. A mutual fund manager invests your funds in securities like stocks and bonds, money market instruments or a combination of all of them depending on the fund's investment objectives. Investing in mutual funds allows you to diversify, which makes the investment less risky. Keep in mind that mutual funds usually charge a fee for the service and you will have to pay taxes on any profits you earn.
Annuities are contracts sold by insurance companies to provide payments at specified intervals, usually after retirement. You will be charged a penalty for withdrawing funds prior to a certain age, but you won't be taxed until you withdraw the funds. Annuities are considered to be safe,low-yielding investments. Additionally, annuities have death benefits that equal either the current value of the annuity or the amount that has been paid into it - whichever is has a higher value.
Once you are ready to start investing, you need a plan. Start by making a list of your most important financial goals like buying a home, paying for a child's college education or living comfortably in retirement. When you have the extra money, make a habit of paying yourself first by putting money into your savings and investments.
If you feel you don't know enough about investing on your own, you can always seek professional investment advice. Investment professionals provide a variety of services at different prices. Some are very expensive and others are very affordable; it pays to shop around.
By Denise Villani
The 7 Mistakes Investors Make
Mistake #1: No Written Plan
I'm sure you've heard it before; people spend more time planning their vacations than their finances. It doesn't make much sense but it seems to be the norm.
A Fortune Magazine article stated that people with written plans for their investments average about 5 times as much money as those without a plan.
Of course the plan itself won't make you any money. But putting it in writing gives you focus and makes the investment decisions that much easier. Don't forget to review your plan regularly (at least once a year) to see if you're on track and if you need to make any adjustments. If you don't have a plan how can you know if you're heading in the right direction? The best plans are useless if they sit on a shelf collecting dust.
There are many ways to get started. If you are a do it yourselfer, there are plenty of websites with basic financial plans to get you started. If you have investments of any significance the holder of your money should do a plan for you (If they haven't already). If they can't or won't you should consider moving your money to one who can.
Mistake #2: Putting it Off
Waiting for the "right" time can lead to disaster. Procrastination comes in many forms. You don't start saving for retirement until it's nearly upon you. You should review your investments but there always seems to be more "important" things. What's more important than your finances? You think you can catch up later by contributing more or wait until the markets are "better".
Every day you avoid investing is a day you won't get back. The best time to invest always has and will always be today.
Mistake #3: Allowing Emotions to Drive Investment Decisions
Easily the two biggest forces driving the markets are fear and greed. Try to remember this the next time you listen to a radio or TV commentator explain what's happening in the markets. You'll hear either greed or fear over and over again.
Fear of rising interest rates. Fear of inflation. Fear of falling profits. Somebody's always afraid of something. This is why investors bail out when things look bleak and since everyone else is selling too; prices are down. This increases the loss in the value of the investments.
Greed on the other hand blinds investors. The thinking is it will continue forever. Don't forget the tech bubble of 2000. That was greed in its finest example. Many companies that hadn't shown a profit yet; were worth millions on paper. You can't ignore the fundamentals. Eventually it evens out.
Of course we all want to make money with our investments. But this can easily turn into greed when the desire for profit gets out of hand. At the same time we should respect bear markets but not enough to begin a panic that will exaggerate losses.
Mistake #4: Putting Too Much faith in Recent Performance
Whatever happened will continue to happen. That's true most of the time but the markets are unpredictable by nature and recent performance is a lousy indicator of future performance. The past does not equal the future.
Recent performance is a way of measuring an investments value but there really is no way to know. Longer term (at least 10 years) is better but is by no means infallible.
Investors tend to have an emotional attachment to a good performing investment. Often times to their detriment, by staying with it too long even when its run is over (Remember Nortel anyone?)
Mistake #5: Taking Too Much Risk
There is a very real possibility that you will lose money when you invest. Many investors take too much risk; they chase the latest fad or "hot" investment. The know that high risk can lead to high reward but think they are immune to losses or will somehow "know" when it's time to sell. Usually by that time it's too late.
Far too few investors actually understand the risks they are taking. Most don't understand what could go wrong and have a plan for what to do when it does.
This kind of risk taking is really nothing more than speculation, and is only ok if you are prepared and can afford to lose all you've invested.
Mistake#6: Not Taking Enough Risk
The flipside is those who perish the thought of losing any money at all ever. They want everything secure and guaranteed. Absolute security doesn't really exist.
Very low risk always means a low return. For example a GIC will guarantee you about 4 or 5% these days but if you factor in inflation it's only worth about half of that. If all your investments are with GICs you probably won't have enough money to retire with in the long run.
Of course risk is tempered by a long term approach. The markets have never lost money over a 10 year period or longer.
Mistake #7: Requiring Perfection to be Satisfied
There will always be an investment out there that's outperforming yours. Even if you happen to have the best performing fund this month, it's likely not to be in the same position the next month.
Perfectionists tend to chase the "best" investment using past performance as their guide. There's no way of knowing this will continue.
The way to increase the chances of a good performing portfolio is to stay the course. If you're always chasing for the "best" you'll never stay the course
How To Avoid These Mistakes
· Ensure you have a written plan that outlines what you must do to reach your goals. Use specific and measurable goals so you can easily keep track of your progress
· Educate yourself. Get research from reputable sources on investing. There are plenty of beginner investment books at your local bookstore or library. Remember to look for investment books of a general nature and not that of a specific investment or strategy
· If you don't understand an investment, don't invest in it. It will spare you a lot of stress
· Slow down. It takes time and patience to see a plan through and see real results
· When you notice emotions are driving your decisions, try to be disciplined. If you are having difficulty with that then consider seeking professional investment advice.
By Jason C Cohen
I'm sure you've heard it before; people spend more time planning their vacations than their finances. It doesn't make much sense but it seems to be the norm.
A Fortune Magazine article stated that people with written plans for their investments average about 5 times as much money as those without a plan.
Of course the plan itself won't make you any money. But putting it in writing gives you focus and makes the investment decisions that much easier. Don't forget to review your plan regularly (at least once a year) to see if you're on track and if you need to make any adjustments. If you don't have a plan how can you know if you're heading in the right direction? The best plans are useless if they sit on a shelf collecting dust.
There are many ways to get started. If you are a do it yourselfer, there are plenty of websites with basic financial plans to get you started. If you have investments of any significance the holder of your money should do a plan for you (If they haven't already). If they can't or won't you should consider moving your money to one who can.
Mistake #2: Putting it Off
Waiting for the "right" time can lead to disaster. Procrastination comes in many forms. You don't start saving for retirement until it's nearly upon you. You should review your investments but there always seems to be more "important" things. What's more important than your finances? You think you can catch up later by contributing more or wait until the markets are "better".
Every day you avoid investing is a day you won't get back. The best time to invest always has and will always be today.
Mistake #3: Allowing Emotions to Drive Investment Decisions
Easily the two biggest forces driving the markets are fear and greed. Try to remember this the next time you listen to a radio or TV commentator explain what's happening in the markets. You'll hear either greed or fear over and over again.
Fear of rising interest rates. Fear of inflation. Fear of falling profits. Somebody's always afraid of something. This is why investors bail out when things look bleak and since everyone else is selling too; prices are down. This increases the loss in the value of the investments.
Greed on the other hand blinds investors. The thinking is it will continue forever. Don't forget the tech bubble of 2000. That was greed in its finest example. Many companies that hadn't shown a profit yet; were worth millions on paper. You can't ignore the fundamentals. Eventually it evens out.
Of course we all want to make money with our investments. But this can easily turn into greed when the desire for profit gets out of hand. At the same time we should respect bear markets but not enough to begin a panic that will exaggerate losses.
Mistake #4: Putting Too Much faith in Recent Performance
Whatever happened will continue to happen. That's true most of the time but the markets are unpredictable by nature and recent performance is a lousy indicator of future performance. The past does not equal the future.
Recent performance is a way of measuring an investments value but there really is no way to know. Longer term (at least 10 years) is better but is by no means infallible.
Investors tend to have an emotional attachment to a good performing investment. Often times to their detriment, by staying with it too long even when its run is over (Remember Nortel anyone?)
Mistake #5: Taking Too Much Risk
There is a very real possibility that you will lose money when you invest. Many investors take too much risk; they chase the latest fad or "hot" investment. The know that high risk can lead to high reward but think they are immune to losses or will somehow "know" when it's time to sell. Usually by that time it's too late.
Far too few investors actually understand the risks they are taking. Most don't understand what could go wrong and have a plan for what to do when it does.
This kind of risk taking is really nothing more than speculation, and is only ok if you are prepared and can afford to lose all you've invested.
Mistake#6: Not Taking Enough Risk
The flipside is those who perish the thought of losing any money at all ever. They want everything secure and guaranteed. Absolute security doesn't really exist.
Very low risk always means a low return. For example a GIC will guarantee you about 4 or 5% these days but if you factor in inflation it's only worth about half of that. If all your investments are with GICs you probably won't have enough money to retire with in the long run.
Of course risk is tempered by a long term approach. The markets have never lost money over a 10 year period or longer.
Mistake #7: Requiring Perfection to be Satisfied
There will always be an investment out there that's outperforming yours. Even if you happen to have the best performing fund this month, it's likely not to be in the same position the next month.
Perfectionists tend to chase the "best" investment using past performance as their guide. There's no way of knowing this will continue.
The way to increase the chances of a good performing portfolio is to stay the course. If you're always chasing for the "best" you'll never stay the course
How To Avoid These Mistakes
· Ensure you have a written plan that outlines what you must do to reach your goals. Use specific and measurable goals so you can easily keep track of your progress
· Educate yourself. Get research from reputable sources on investing. There are plenty of beginner investment books at your local bookstore or library. Remember to look for investment books of a general nature and not that of a specific investment or strategy
· If you don't understand an investment, don't invest in it. It will spare you a lot of stress
· Slow down. It takes time and patience to see a plan through and see real results
· When you notice emotions are driving your decisions, try to be disciplined. If you are having difficulty with that then consider seeking professional investment advice.
By Jason C Cohen
Risk-Free Lottery
Lets face you probably won't win the lottery so you need to make sure you have a backup plan in place. A dead simple savings and investment plan can make the lottery a nice addition to your accounts.
Are you counting on winning the lottery to secure your financial future? According to Farm Credit of Western New York, 16% of Americans are. Unfortunately, for those 16 percent, you would have better odds playing the tables in Vegas or getting struck by lightning.
Sure most of us know counting on winning the lottery for retirement is a big gamble. But for young adults if you're expecting social security or pension plans to secure your retirement that is just as risky. If your under 40 you probably won't get money from any of the above mentioned sources. Don't be scared, there is an easy way to make sure you can afford to retire young without a lot of effort on your part.
What if I told you for only $73 dollars a month you have a good chance at enjoying a $1,000,000! No not the lottery ' by investing $73 a month starting at age 18 you or your child could reach the million dollar mark without a lot of effort. Everyone can live stress free when you know that you are secure financially at a young age.
The younger you start the bigger advantage you have. You will enjoy what 16 percent of people are hoping for everyday. A lottery jackpot that is guarenteed! Fix the game, retire young and secure your own big winner by using a powerful financial force.
This powerful money principle, that will almost guarantee every young person generates their own lottery winnings, is 'compounding interest'. Compounding interest has a snowball effect on your money and the earlier you start a consistent investment plan the easier achieving financial freedom will be.
Compounding interest? If you have you ever experienced debt you've seen compounding interest work against you. You pay your bill every month but your credit card bills keep getting bigger and bigger. That's compounding interest working against you. If you have experienced this then you have felt how powerful the effects of compounding interest can be. Avoid the debt traps that have plagued so many of us and get compounding interest to work your favor.
The definition of compounding interest is: income from interest that is earned by the amount you invested plus the interest already earned from prior periods. To break it down, your investment is paying you money on the principle amount you invested plus the return you that you have already earned. Basically you are generating money from your hard earned cash that you personally invested and what that original investment has already paid you.
By getting compounding interest working in your favor you are able to make money off money you already made. This creates a snowball affect on your money where it is able to grow larger and larger over time. The sooner you begin, the more time that you are able to benefit from compounding interest.
Just by reinvesting money that you're investments returned, the money you earned in interest last year is making you money. This is powerful because after 10 years of returns you will be making money off all your returns for the prior 10 years.
Jump online and check out free compounding interest calculators to see for yourself. It's motivating to see first hand the powerful effects that compounding interest has on your money.
Calculating compounding interest. Mess around with a compounding interest caculator. Seeing the effects of compounding interest first hand is a powerful motivator. You can access a compounding interest calculator by visiting www.FreeBy30.com/investing.html. What's more, you can calculate it manually by using a hand held calculator. In order to do so just enter the initial amount that you are planning on investing or already have invested. Then multiply that by the rate of return you are estimating.
To illustrate, if you had $2,000 invested and thought you would get a 12% return then you would multiply $2,000 x 1.12 = $2,240. The second year you would use $2,240 x 1.12 = $2,509. After 10 years that would be up to $6,212, $19,293 after 20 years and $59,920 in 30 years. That's $59,920 from a $2,000 original investment ' that's an example of the power of compounding interest!
Compounding interest goals. This section will give you investment goals that you can attain using the power of compounding interest. The examples presuppose that an investor is starting with $0 and using an annual return of 12%.
Investing $100 per month and you may reach the million dollar mark in 38 years. Investing $200 per month and you may reach the million dollar mark in 32 years. Investing $400 per month and you may reach the million dollar mark in 27 years. Investing $700 per month and you may reach the million dollar mark in 22 years. Investing $1,200 per month and you may reach the million dollar mark in 17 years.
How leverage can boost the effects of compounding interest. Using leverage will supercharge the effects of compounding interest. Using real estate investments is one way to benefit from leverage.
When you invest in stocks for instance, you are generating a return based on the principle amount that you invest. Real estate allows you to earn returns based on the value of the property. To illustrate, if you had $20,000 invested in the stock market and your stocks appreciated 10% you would make $2000 the first year. Not bad.
Now with real estate you could purchase a home with a 10% down payment. That would allow you to buy a $200,000 property with the same $20,000. Your return is based of the asset value of the property you control - in this case that would be $200,000. So the value of your property after the first year would be $220,000 ($200,000 x 1.1).
In a perfect world where the property increases ten percent annually, the value in the third year would be $266,200 and after 10 years it could be valued over $500,000. When you are able to leverage your investments, compounding interest may work more to your advantage. Investing in real estate may allow you to amplify the power of compounding interest.
Compounding interest - your advantage. Using the power of compounding interest - whether in the stock market or real estate investments ' will give you a many financial benefits. It is important to note that the sooner you are able to start saving and investing money the greater financial benefits you will experience.
So the next time you're thinking about dropping ten bucks on the lottery ' think again. Go for the sure lottery jackpot by investing that in your future.
By Vince Shorb
Are you counting on winning the lottery to secure your financial future? According to Farm Credit of Western New York, 16% of Americans are. Unfortunately, for those 16 percent, you would have better odds playing the tables in Vegas or getting struck by lightning.
Sure most of us know counting on winning the lottery for retirement is a big gamble. But for young adults if you're expecting social security or pension plans to secure your retirement that is just as risky. If your under 40 you probably won't get money from any of the above mentioned sources. Don't be scared, there is an easy way to make sure you can afford to retire young without a lot of effort on your part.
What if I told you for only $73 dollars a month you have a good chance at enjoying a $1,000,000! No not the lottery ' by investing $73 a month starting at age 18 you or your child could reach the million dollar mark without a lot of effort. Everyone can live stress free when you know that you are secure financially at a young age.
The younger you start the bigger advantage you have. You will enjoy what 16 percent of people are hoping for everyday. A lottery jackpot that is guarenteed! Fix the game, retire young and secure your own big winner by using a powerful financial force.
This powerful money principle, that will almost guarantee every young person generates their own lottery winnings, is 'compounding interest'. Compounding interest has a snowball effect on your money and the earlier you start a consistent investment plan the easier achieving financial freedom will be.
Compounding interest? If you have you ever experienced debt you've seen compounding interest work against you. You pay your bill every month but your credit card bills keep getting bigger and bigger. That's compounding interest working against you. If you have experienced this then you have felt how powerful the effects of compounding interest can be. Avoid the debt traps that have plagued so many of us and get compounding interest to work your favor.
The definition of compounding interest is: income from interest that is earned by the amount you invested plus the interest already earned from prior periods. To break it down, your investment is paying you money on the principle amount you invested plus the return you that you have already earned. Basically you are generating money from your hard earned cash that you personally invested and what that original investment has already paid you.
By getting compounding interest working in your favor you are able to make money off money you already made. This creates a snowball affect on your money where it is able to grow larger and larger over time. The sooner you begin, the more time that you are able to benefit from compounding interest.
Just by reinvesting money that you're investments returned, the money you earned in interest last year is making you money. This is powerful because after 10 years of returns you will be making money off all your returns for the prior 10 years.
Jump online and check out free compounding interest calculators to see for yourself. It's motivating to see first hand the powerful effects that compounding interest has on your money.
Calculating compounding interest. Mess around with a compounding interest caculator. Seeing the effects of compounding interest first hand is a powerful motivator. You can access a compounding interest calculator by visiting www.FreeBy30.com/investing.html. What's more, you can calculate it manually by using a hand held calculator. In order to do so just enter the initial amount that you are planning on investing or already have invested. Then multiply that by the rate of return you are estimating.
To illustrate, if you had $2,000 invested and thought you would get a 12% return then you would multiply $2,000 x 1.12 = $2,240. The second year you would use $2,240 x 1.12 = $2,509. After 10 years that would be up to $6,212, $19,293 after 20 years and $59,920 in 30 years. That's $59,920 from a $2,000 original investment ' that's an example of the power of compounding interest!
Compounding interest goals. This section will give you investment goals that you can attain using the power of compounding interest. The examples presuppose that an investor is starting with $0 and using an annual return of 12%.
Investing $100 per month and you may reach the million dollar mark in 38 years. Investing $200 per month and you may reach the million dollar mark in 32 years. Investing $400 per month and you may reach the million dollar mark in 27 years. Investing $700 per month and you may reach the million dollar mark in 22 years. Investing $1,200 per month and you may reach the million dollar mark in 17 years.
How leverage can boost the effects of compounding interest. Using leverage will supercharge the effects of compounding interest. Using real estate investments is one way to benefit from leverage.
When you invest in stocks for instance, you are generating a return based on the principle amount that you invest. Real estate allows you to earn returns based on the value of the property. To illustrate, if you had $20,000 invested in the stock market and your stocks appreciated 10% you would make $2000 the first year. Not bad.
Now with real estate you could purchase a home with a 10% down payment. That would allow you to buy a $200,000 property with the same $20,000. Your return is based of the asset value of the property you control - in this case that would be $200,000. So the value of your property after the first year would be $220,000 ($200,000 x 1.1).
In a perfect world where the property increases ten percent annually, the value in the third year would be $266,200 and after 10 years it could be valued over $500,000. When you are able to leverage your investments, compounding interest may work more to your advantage. Investing in real estate may allow you to amplify the power of compounding interest.
Compounding interest - your advantage. Using the power of compounding interest - whether in the stock market or real estate investments ' will give you a many financial benefits. It is important to note that the sooner you are able to start saving and investing money the greater financial benefits you will experience.
So the next time you're thinking about dropping ten bucks on the lottery ' think again. Go for the sure lottery jackpot by investing that in your future.
By Vince Shorb
20 Biggest Investment Mistakes You Can Make
*Not starting early. Many people don't start their investing while they're young because they feel that they have a lot of time ahead of them. This is a big mistake. Because of the power of compound interest, they are losing hundreds of thousands of dollars.
*Taking unsolicited investment tips. Occasionally, you'll get a spam email or a telemarketing call offering investment advice. Don't take it. They are trying to drive up the prices of certain stocks so that they can make a profit. Do your own research or listen to your financial advisor.
*Not realizing that there are risks. Just because something is considered a "safer" investment, doesn't mean that there isn't a chance that you could lose your money.
*Being late to buy. You want to buy a stock as its price is increasing. If you are too late, you will buy it just as it's starting to turn down.
*Not reviewing your portfolio. While it's a good idea to automatically invest a portion of your paycheck each month, you should often review your portfolio to check for any mistakes and make sure that things are performing the way that you want them to.
*Having no plan. Good investing requires a solid plan. You should know your risk levels and what your goals are and invest in ways that reflect that.
*Not diversifying. You should strive to have a well-balanced portfolio. You don't want to put all of your eggs in one basket.
*Changing their portfolio often. Many people find it exciting to buy and sell their stocks. It's addictive. All addictions come with a price though, and you are paying a lot of money for each of those transactions.
*Succumbing to panic or excitement. You shouldn't always sell just because other people are selling or buy just because others are buying.
*Not participating in your company's 401k program. Many companies offer to match your 401k investments. If you are not participating, then you are giving away free money.
*Trying to take shortcuts. Proper investment should be for the long term. Taking shortcuts rarely pays off.
*Holding losers and selling winners. Many make the mistake of holding onto a losing stock because they are waiting for it to go back to the level that they bought it for. Others may sell their stock too early, only to find that the price continued to increase well past what they sold it for.
*Following recommendations in the media. By the time that an expert is talking about an investment on TV, it's already getting past its prime.
*Investing in individual stocks without financial knowledge. If you don't know much about investing or how to determine whether a stock is a good buy, you should stick to mutual funds.
*Falling for get-rich-quick schemes. There is no easy way to make money. Get-rich-quick schemes are rarely all they say they are.
*Being over-invested in their company. Some people become over-invested in the company that they work for. You should strive to have a balanced portfolio.
*Following your emotions. Your emotions can cause you to make mistakes. Investing should be something that's done with your brain.
*Making early withdrawals from your 401k. 401ks are meant to be a retirement plan. There are hefty penalties for withdrawing your money early.
*Not saving enough. Many people simply don't save enough money. You need to make sure that you are saving enough money now to reach your long-term goals.
If you can avoid these biggest investing mistakes, then you are more likely to be successful with your investing.
By Mark Crisp
*Taking unsolicited investment tips. Occasionally, you'll get a spam email or a telemarketing call offering investment advice. Don't take it. They are trying to drive up the prices of certain stocks so that they can make a profit. Do your own research or listen to your financial advisor.
*Not realizing that there are risks. Just because something is considered a "safer" investment, doesn't mean that there isn't a chance that you could lose your money.
*Being late to buy. You want to buy a stock as its price is increasing. If you are too late, you will buy it just as it's starting to turn down.
*Not reviewing your portfolio. While it's a good idea to automatically invest a portion of your paycheck each month, you should often review your portfolio to check for any mistakes and make sure that things are performing the way that you want them to.
*Having no plan. Good investing requires a solid plan. You should know your risk levels and what your goals are and invest in ways that reflect that.
*Not diversifying. You should strive to have a well-balanced portfolio. You don't want to put all of your eggs in one basket.
*Changing their portfolio often. Many people find it exciting to buy and sell their stocks. It's addictive. All addictions come with a price though, and you are paying a lot of money for each of those transactions.
*Succumbing to panic or excitement. You shouldn't always sell just because other people are selling or buy just because others are buying.
*Not participating in your company's 401k program. Many companies offer to match your 401k investments. If you are not participating, then you are giving away free money.
*Trying to take shortcuts. Proper investment should be for the long term. Taking shortcuts rarely pays off.
*Holding losers and selling winners. Many make the mistake of holding onto a losing stock because they are waiting for it to go back to the level that they bought it for. Others may sell their stock too early, only to find that the price continued to increase well past what they sold it for.
*Following recommendations in the media. By the time that an expert is talking about an investment on TV, it's already getting past its prime.
*Investing in individual stocks without financial knowledge. If you don't know much about investing or how to determine whether a stock is a good buy, you should stick to mutual funds.
*Falling for get-rich-quick schemes. There is no easy way to make money. Get-rich-quick schemes are rarely all they say they are.
*Being over-invested in their company. Some people become over-invested in the company that they work for. You should strive to have a balanced portfolio.
*Following your emotions. Your emotions can cause you to make mistakes. Investing should be something that's done with your brain.
*Making early withdrawals from your 401k. 401ks are meant to be a retirement plan. There are hefty penalties for withdrawing your money early.
*Not saving enough. Many people simply don't save enough money. You need to make sure that you are saving enough money now to reach your long-term goals.
If you can avoid these biggest investing mistakes, then you are more likely to be successful with your investing.
By Mark Crisp
Real Estate Investing Or Landlording?
Real estate investing is the classic wealth vehicle that has taken people from living hand to mouth to the pinnacle of wealth.
It's the vehicle of choice because it's accessible to all of us. Everone has a least rented a house or apartment, and most of us have bought a house. So knowing what it's like to be renter or homeowner we have first hand knowledge of our customers when we set out to be real estate investors.
The classic real estate investing model is buy a bunch of houses, rent them out and in 30 years the mortgages will be paid off, the properties will have at least doubled in value, the rents will be twice what they were when you started ... with no loan payment.
The goal sounds inspiring. Imagine having 10 properties you bought 30 years ago, each for $80,000, now be worth $350,000 apiece as a result of a average annual appreciation rate of 5%. You would have a portfolio worth about $3,500,000. Monthly rents, on the low side, of $1,200 per house would give you gross monthly rents of $12,000. After T&I you probably put $9,000 in your pocket.
I think you would agree this is an extremely modest goal, but what a payoff!!
What a payoff indeed ... for those who actually stick with it. You see there's a problem with the above scenario, and that is the early years are really tough.
Cashflow is slim, expenses are high, and most investors who take this on don't make it through.
They run out of cash.
The short-term solution is to change your focus from buying and holding to quick-turning houses for cash. Quick-turning houses, getting them under contract super cheap and flipping them to another investor for $5-20,000 or more will take care of your cashflow needs today while you hold your rental properties for long term growth. This is great ... money, cash!
But you are not out of the woods yet.
Your new short-term problem is management. If you are buying houses to hold for the long term you must be prepared for the fact that you will be managing them yourself, whether you take on that job as an individual or create a management company to do it. The fact remains that at some point your occupation will change from real estate investor to landlord.
And I'm afraid gentle reader, landlording is dirty, smelly business. One you do not want to be in.
There are worse things in life than being a landlord, most definitely, but that's not why you got into real estate. You got into real estate because you want the big dollars. The really big ones. The 'buy your own island' big dollars, the 'house on each continent' kind of dollars. The nine figure net worth.
Didn't you?
That net worth is available, in fact it's waiting for you to claim it, but you won't achieve the growth necessary to get there buying single family homes. As a growth vehicle they are very inefficient.
From a real estate investing standpoint the purpose of a single family home is to give you experience doing deals, and to take care of your immediate cash needs.
After you've paid off all your debts, have 12 months living expenses in the bank, and have a kitty of say, $100,000 to $200,000 there isn't much further use for single family homes.
Unless, of course, you want to be a landlord.
As soon as you are debt free and have some starting capital you should move straight into buying apartments.
There is all kinds of leverage to be achieved by changing your wealth vehicle from single family houses to apartment buildings.
- from a value standpoint when buying apartments you are dealing with much bigger dollars, so as the years go by, you make more through appreciation.
- apartments have a much higher rent per square foot compared to houses, so property management can be brought in take management out of your hands in a cost effective manner.
- apartment buildings make sense from a business standpoint so it is no difficult to attract partner capital. - there is an abundance of apartment financing available from lenders up to 80% loan to value.
- there are many profit centers, like repairing units and increasing rents, filling vacancies, that can be capitalized on to capture upside value.
Also, because apartments are not reliant on your personal attention and can be effectively managed by property management companies you are not restricted to buying in your own local market.
By becoming aware of market cycles and tracking them closely, you can buy quality properties in any market in the US at the bottom of a cycle, and ride the appreciation to the top of the market, where you sell (or exchange out) and take huge profits.
Of course, providing you live in a market (like CA) that appreciates rapidly in an up cycle, you can achieve this with single family houses too. But which property would you rather have appreciating at 15% a year, a $300,000 house, or a $10,000,000 apartment building.
After 10 years a $300,000 house will turn into $1.33M. Nothing to sneeze at. But during the same 10 years in the same market a $10M apartment building will turn into $44.4M.
Which would you rather have?
It's an easy choice, and one you simply need to make.
By Ben Ker
It's the vehicle of choice because it's accessible to all of us. Everone has a least rented a house or apartment, and most of us have bought a house. So knowing what it's like to be renter or homeowner we have first hand knowledge of our customers when we set out to be real estate investors.
The classic real estate investing model is buy a bunch of houses, rent them out and in 30 years the mortgages will be paid off, the properties will have at least doubled in value, the rents will be twice what they were when you started ... with no loan payment.
The goal sounds inspiring. Imagine having 10 properties you bought 30 years ago, each for $80,000, now be worth $350,000 apiece as a result of a average annual appreciation rate of 5%. You would have a portfolio worth about $3,500,000. Monthly rents, on the low side, of $1,200 per house would give you gross monthly rents of $12,000. After T&I you probably put $9,000 in your pocket.
I think you would agree this is an extremely modest goal, but what a payoff!!
What a payoff indeed ... for those who actually stick with it. You see there's a problem with the above scenario, and that is the early years are really tough.
Cashflow is slim, expenses are high, and most investors who take this on don't make it through.
They run out of cash.
The short-term solution is to change your focus from buying and holding to quick-turning houses for cash. Quick-turning houses, getting them under contract super cheap and flipping them to another investor for $5-20,000 or more will take care of your cashflow needs today while you hold your rental properties for long term growth. This is great ... money, cash!
But you are not out of the woods yet.
Your new short-term problem is management. If you are buying houses to hold for the long term you must be prepared for the fact that you will be managing them yourself, whether you take on that job as an individual or create a management company to do it. The fact remains that at some point your occupation will change from real estate investor to landlord.
And I'm afraid gentle reader, landlording is dirty, smelly business. One you do not want to be in.
There are worse things in life than being a landlord, most definitely, but that's not why you got into real estate. You got into real estate because you want the big dollars. The really big ones. The 'buy your own island' big dollars, the 'house on each continent' kind of dollars. The nine figure net worth.
Didn't you?
That net worth is available, in fact it's waiting for you to claim it, but you won't achieve the growth necessary to get there buying single family homes. As a growth vehicle they are very inefficient.
From a real estate investing standpoint the purpose of a single family home is to give you experience doing deals, and to take care of your immediate cash needs.
After you've paid off all your debts, have 12 months living expenses in the bank, and have a kitty of say, $100,000 to $200,000 there isn't much further use for single family homes.
Unless, of course, you want to be a landlord.
As soon as you are debt free and have some starting capital you should move straight into buying apartments.
There is all kinds of leverage to be achieved by changing your wealth vehicle from single family houses to apartment buildings.
- from a value standpoint when buying apartments you are dealing with much bigger dollars, so as the years go by, you make more through appreciation.
- apartments have a much higher rent per square foot compared to houses, so property management can be brought in take management out of your hands in a cost effective manner.
- apartment buildings make sense from a business standpoint so it is no difficult to attract partner capital. - there is an abundance of apartment financing available from lenders up to 80% loan to value.
- there are many profit centers, like repairing units and increasing rents, filling vacancies, that can be capitalized on to capture upside value.
Also, because apartments are not reliant on your personal attention and can be effectively managed by property management companies you are not restricted to buying in your own local market.
By becoming aware of market cycles and tracking them closely, you can buy quality properties in any market in the US at the bottom of a cycle, and ride the appreciation to the top of the market, where you sell (or exchange out) and take huge profits.
Of course, providing you live in a market (like CA) that appreciates rapidly in an up cycle, you can achieve this with single family houses too. But which property would you rather have appreciating at 15% a year, a $300,000 house, or a $10,000,000 apartment building.
After 10 years a $300,000 house will turn into $1.33M. Nothing to sneeze at. But during the same 10 years in the same market a $10M apartment building will turn into $44.4M.
Which would you rather have?
It's an easy choice, and one you simply need to make.
By Ben Ker
Wholesaling Real Estate - Success Factors For Real Estate Investor Club Meetings
Having buyers is one of the most important part of the real estate wholesaling success equation. One of the quickest ways to meet investors who can later turn into buyers is by attending real estate investment club functions. The fees to join your local real estate investment club will vary, but I can promise you that investment clubs are well worth the money.
To get the most out of attending real estate investment club functions it will be very important to step out of your shell and meet the other investors in the group. Here are a few thing to keep in mind when attending your local REI club meetings:
Remember that you have 2 ears and 1 mouth for a reason.-Try to listen twice as often as you talk. If you have not noticed yet, people love to talk about themselves, so let them.
Do not try to be right- Even if you here the "Old investing pro" say something wrong, do not jump into correct him. People do not like to be corrected, and will often lash out at you if you try to make them look bad.
Have your success stories ready- Now do not confuse this with bragging, or tooting your own horn. Instead subtly drop your past success stories into the conversation to spark interest. If you have made another investor a lot of money tell that story. Maybe, you have found some great deals for another investor, talk about those great deals.
Collect business cards- Many of the other attendees will be there to network as well. Instead of pitching their cards when you get home, save them and write them a short note and let them know that you appreciate having met them.
Ask a lot of questions- Try to get a feel for what the real estate market is in your area by talking to the other more experienced investors. Ask people what they would change about the way that they have done business, and what they would keep the same. The answers to those questions can save you thousands of dollars in mistakes down the road.
Remember names- When you learn somebodies name write it down along with a description of that person, and whatever else you have learned about them. Dale Carnegie said it best when he said "No sound is sweeter than your own name". In all of the meetings that follow, call people by their first names.
By Eric Medemar
To get the most out of attending real estate investment club functions it will be very important to step out of your shell and meet the other investors in the group. Here are a few thing to keep in mind when attending your local REI club meetings:
Remember that you have 2 ears and 1 mouth for a reason.-Try to listen twice as often as you talk. If you have not noticed yet, people love to talk about themselves, so let them.
Do not try to be right- Even if you here the "Old investing pro" say something wrong, do not jump into correct him. People do not like to be corrected, and will often lash out at you if you try to make them look bad.
Have your success stories ready- Now do not confuse this with bragging, or tooting your own horn. Instead subtly drop your past success stories into the conversation to spark interest. If you have made another investor a lot of money tell that story. Maybe, you have found some great deals for another investor, talk about those great deals.
Collect business cards- Many of the other attendees will be there to network as well. Instead of pitching their cards when you get home, save them and write them a short note and let them know that you appreciate having met them.
Ask a lot of questions- Try to get a feel for what the real estate market is in your area by talking to the other more experienced investors. Ask people what they would change about the way that they have done business, and what they would keep the same. The answers to those questions can save you thousands of dollars in mistakes down the road.
Remember names- When you learn somebodies name write it down along with a description of that person, and whatever else you have learned about them. Dale Carnegie said it best when he said "No sound is sweeter than your own name". In all of the meetings that follow, call people by their first names.
By Eric Medemar
Guide To Property Investiment In The United Kingdom
Why The UK?
There are several reasons why we believe investing in property is, has been, and always will be as good a place for your money as there is out there! Firstly, the worldwide housing market is limited in supply and the population is ever-increasing at an exponential rate. This is true with most local markets as well as demand for housing continues to outstrip supply, pushing prices up and causing cities to expand. Simple supply and demand tells us that as demand grows faster than supply, prices must rise! Of course, investing in the right market and at the right time are integral to your success in property investment. Not all markets are rising, or have good rental returns; but if you are able to find the ones that are, you will do very well in the world of property investment!
Another factor making property investment so attractive for me is the use of leverage. Leverage refers to the use of borrowed money to increase your profits in an investment. Building sustainable wealth and income through property investment will require the use of leverage. Essentially, leverage is the ability to use little money to buy a comparatively expensive asset. Assuming you put down £7500 on a £50,000 investment property. If your property appreciates by just 7% in the first year, it will be worth £53,500 after 12 months. If you now decided to sell this property you will have made a return of £3,500 or 47% in a year - a return you will struggle to find at your local bank or elsewhere! Of course, you would have faced some buying costs - but if investing wisely 6 months rental income should more than cover these. The above is for illustrational purposes only - I would probably have kept the property for a few more years if it was in a good growth area and rental demand was strong. That is unless my money could be working harder for me elsewhere. I would recommend taking a look at our 'Example Investment Properties' page for a more precise calculation of how your money can work for you.
Basic Principles
Picking up the basic principles of investing in property is very easy. There are numerous courses that you can attend that range in price anywhere from a few hundred pounds to thousands for week long courses.
There is also a wealth of information on the internet and in books these days. Property investment knowledge is not something that is taught in schools or at university - most successful investors we work with and know are self taught. I would recommend learning and investing in the way you feel most comfortable with. Some investors are self taught and find their own deals, and others have taken crash courses and pay companies extraordinary fees to find the right deals. Both can work very well, but a reliable source of information is vital. You must also be very careful which firms you are working with - I have come across many firms that offer poor deals, make promises they cannot keep, and have poor levels of customer service.
Strategy is also all important whatever stage of investing you are at. You must define your goals clearly, and stick to looking for deals that can help you achieve those goals. For example, you must decide whether you are looking to build equity or a stream of cash flow. Some investors primarily invest in a holiday home for self use and others will buy scores of properties a month and not visit one! Some investors prefer to invest only in their local market, while others will buy in several high growth areas overseas. Other investors we work with prefer the hands-off approach and invest in funds and syndicates; there are many different possibilities out there. Whatever your goals, I strongly recommend taking the time to define these before starting to invest. One of our team will be happy to talk through your situation, and point you in the right direction.
Types Of Return
Investors can expect two different types of return when investing in property; income and/or growth. If investing for growth or capital gains, investors generally take a longer term view rather than needing more immediate access to capital. During your investing days, your priorities may change depending on your salary and other sources of income. It is likely that you will require income from your investments more so later in life as you work less and less. Planning for income, growth, or a combination of the two, often stems from your tax position, your immediate requirements for cash, and your longer-term plans. Many people construct a property portfolio of investments which offer a combination of income now and future growth. At Bueno Investments we emphasize the importance of income as well as growth as a determining factor in a successful property business.
Taxation
Taxation is also a factor that you must take into account before considering any investment. Unlike other forms of taxation, property taxation is a very complex subject and I would recommend speaking with a property tax specialist if there is anything you are not sure about. For UK residents, the main taxation areas are Capital Gains tax, Income tax, and Inheritance tax. There are also several non-standard Taxes that you must be aware of and new laws being passed all the time which can be a lot to keep on top of. Our advisors will be happy to talk through anything you are not sure about or recommend a property tax specialist.
Using A Good Team
Along with a good tax specialist, it is vital that you have a mortgage broker and solicitor that you are happy with, are competitively priced, and that you work well with. Having a good team in place can save you time and money later down the line, and let you rest assured that they are acting in YOUR best interest. We have several mortgage brokers and solicitors that we can recommend for any UK or overseas deals. We only recommend firms that have been tried and tested and that we work with ourselves.
Specifically, Location, Location, Location
In terms of the UK, there are several locations in the North of England that we are currently very confident offer good value. Growth fuelled by local development is continually pushing up prices in the majority of cites we target. More importantly, high yields are still achievable in certain parts of these areas as the rent-purchase price relationship is favourable for investors. As mentioned earlier, it is imperative to know where to invest locally, and to have a good management / refurbishment team there.
By Scott Goodall
There are several reasons why we believe investing in property is, has been, and always will be as good a place for your money as there is out there! Firstly, the worldwide housing market is limited in supply and the population is ever-increasing at an exponential rate. This is true with most local markets as well as demand for housing continues to outstrip supply, pushing prices up and causing cities to expand. Simple supply and demand tells us that as demand grows faster than supply, prices must rise! Of course, investing in the right market and at the right time are integral to your success in property investment. Not all markets are rising, or have good rental returns; but if you are able to find the ones that are, you will do very well in the world of property investment!
Another factor making property investment so attractive for me is the use of leverage. Leverage refers to the use of borrowed money to increase your profits in an investment. Building sustainable wealth and income through property investment will require the use of leverage. Essentially, leverage is the ability to use little money to buy a comparatively expensive asset. Assuming you put down £7500 on a £50,000 investment property. If your property appreciates by just 7% in the first year, it will be worth £53,500 after 12 months. If you now decided to sell this property you will have made a return of £3,500 or 47% in a year - a return you will struggle to find at your local bank or elsewhere! Of course, you would have faced some buying costs - but if investing wisely 6 months rental income should more than cover these. The above is for illustrational purposes only - I would probably have kept the property for a few more years if it was in a good growth area and rental demand was strong. That is unless my money could be working harder for me elsewhere. I would recommend taking a look at our 'Example Investment Properties' page for a more precise calculation of how your money can work for you.
Basic Principles
Picking up the basic principles of investing in property is very easy. There are numerous courses that you can attend that range in price anywhere from a few hundred pounds to thousands for week long courses.
There is also a wealth of information on the internet and in books these days. Property investment knowledge is not something that is taught in schools or at university - most successful investors we work with and know are self taught. I would recommend learning and investing in the way you feel most comfortable with. Some investors are self taught and find their own deals, and others have taken crash courses and pay companies extraordinary fees to find the right deals. Both can work very well, but a reliable source of information is vital. You must also be very careful which firms you are working with - I have come across many firms that offer poor deals, make promises they cannot keep, and have poor levels of customer service.
Strategy is also all important whatever stage of investing you are at. You must define your goals clearly, and stick to looking for deals that can help you achieve those goals. For example, you must decide whether you are looking to build equity or a stream of cash flow. Some investors primarily invest in a holiday home for self use and others will buy scores of properties a month and not visit one! Some investors prefer to invest only in their local market, while others will buy in several high growth areas overseas. Other investors we work with prefer the hands-off approach and invest in funds and syndicates; there are many different possibilities out there. Whatever your goals, I strongly recommend taking the time to define these before starting to invest. One of our team will be happy to talk through your situation, and point you in the right direction.
Types Of Return
Investors can expect two different types of return when investing in property; income and/or growth. If investing for growth or capital gains, investors generally take a longer term view rather than needing more immediate access to capital. During your investing days, your priorities may change depending on your salary and other sources of income. It is likely that you will require income from your investments more so later in life as you work less and less. Planning for income, growth, or a combination of the two, often stems from your tax position, your immediate requirements for cash, and your longer-term plans. Many people construct a property portfolio of investments which offer a combination of income now and future growth. At Bueno Investments we emphasize the importance of income as well as growth as a determining factor in a successful property business.
Taxation
Taxation is also a factor that you must take into account before considering any investment. Unlike other forms of taxation, property taxation is a very complex subject and I would recommend speaking with a property tax specialist if there is anything you are not sure about. For UK residents, the main taxation areas are Capital Gains tax, Income tax, and Inheritance tax. There are also several non-standard Taxes that you must be aware of and new laws being passed all the time which can be a lot to keep on top of. Our advisors will be happy to talk through anything you are not sure about or recommend a property tax specialist.
Using A Good Team
Along with a good tax specialist, it is vital that you have a mortgage broker and solicitor that you are happy with, are competitively priced, and that you work well with. Having a good team in place can save you time and money later down the line, and let you rest assured that they are acting in YOUR best interest. We have several mortgage brokers and solicitors that we can recommend for any UK or overseas deals. We only recommend firms that have been tried and tested and that we work with ourselves.
Specifically, Location, Location, Location
In terms of the UK, there are several locations in the North of England that we are currently very confident offer good value. Growth fuelled by local development is continually pushing up prices in the majority of cites we target. More importantly, high yields are still achievable in certain parts of these areas as the rent-purchase price relationship is favourable for investors. As mentioned earlier, it is imperative to know where to invest locally, and to have a good management / refurbishment team there.
By Scott Goodall
The Current Buy to Let Mortgage Market Explained for Novice Landlords
The buy-to-let mortgage industry has gone from nothing in 1997 to an industry that in the first 6 months of this year saw loans being taken out of £21.2 billion. The stock of buy-to-let loans taken out is now £108 billion equating to 10% of all mortgage balances.
The good news for landlords is that the UK buy-to-let mortgage market is probably the most competitive and innovative in the world resulting in around about a thousand different buy-to-let mortgage products on the market at any one time.
The numbers have however been cut back recently as buy-to-let lenders have responded to the credit crunch by reigning in the more risky buy-to-let mortgage products. The other bad news for buy-to-let borrowers is that buy-to-let lenders have also repriced the risk premium within the costs of these buy-to-let loans. This means that the margin banks & buy-to-let lenders charge over the Bank of England base rate has risen by between 0.25%-0.5% as well as individual buy-to-let lenders tightening their lending criteria. At the same time the product fees charged by most buy-to-let lenders have also risen.
The bad news is largely a function of the good news. This is that the huge choice of products means that there is also the potential for landlords to get confused. Not only are there nearly a hundred providers of buy-to-let mortgages but there is also a large range of different type of buy-to-let mortgage products. The main ones are:
* Fixed rate - the interest rate charged is fixed for given period or up to a given date
* Discount - the rate of interest charged is reduced during an initial period then reverts to buy-to-let lenders standard variable rate
* Tracker - these buy-to-let mortgages track one of the recognised key mortgage rates such as Bank of England base rate or LIBOR (London Inter Bank Offer Rate)
Which type of buy-to-let mortgage product should I choose? The type of buy-to-let mortgage product that is suitable for you as a landlord will very much depend on a landlord's personal financial circumstances and also a landlord's attitude to risk.
Landlords who are concerned that if interest rates should rise, that their buy-to-let payments may become unaffordable may want to consider a fixed rate buy-to-let mortgage product. This type of buy-to-let mortgage will give a landlord the certainty of a definite mortgage payment each month during the period of the fixed term regardless of what happens to interest rates.
A landlord who may be presented with a short term problem; perhaps where a variable buy-to-let mortgage payments will be greater than a landlords rental income may want to consider a discounted buy-to-let mortgage product. In this way a landlord can make lower than normal buy-to-let mortgage repayments whilst their rental income rises and / or the general interest rate drops. However, a landlord needs to be cautious about this approach. This is because if interest rates rise further or a landlord overlooks the fact that their rate and therefore their cashflow is only on a temporary footing the ending of the discount rate would cause them even more financial hardship.
A variable rate or tracker is often the safest and cheapest over the term of the buy-to-let mortgage as the landlord frequently avoids paying an 'insurance' premium to the buy-to-let mortgage provider by not taking out a buy-to-let mortgage product that insulates landlords against an unexpected interest rate change or that gives them a preferential repayment rate.
Things for landlords to look out for
Landlords seeking a buy-to-let mortgage product should always look out for the APR attached to any buy-to-let product. An APR or Annual Percentage Rate is the true cost of the loan worked out for the entire term of the loan. This annualised rate reflects the true rate of interest any landlord & buy-to-let borrower will have to pay on a landlords loan advance over the entire term of the buy-to-let mortgage. This figure will therefore take into account any fees or charges incurred in setting up the loan as well as the rate of the loan once any initial discount or special term have ended.
Where should landlords go to find out about buy to let mortgages?
There are a number of routes for landlords to use to find out about buy-to-let mortgages and find a buy-to-let mortgage product suitable for a landlord's needs. The first one is for a landlord to approach their bank directly to see if they provide buy-to-let finance. The problems with this is that a landlords choice of mortgage product will be small and therefore a landlord is unlikely to be able to secure the most suitable buy-to-let mortgage for them.
The other is for a landlord to go on Google to see if it is possible to find a buy-to-let mortgage provider or product that suits them. This can be a bit of a 'hit or miss' affair. There are many mortgage companies that are on Google or advertise there. However, the lending criteria and restrictions that a buy-to-let mortgage provider puts on their product means that not all will be suitable for a landlord's requirements. The other point is that a landlord will not get the biggest choice of buy-to-let mortgage products by just accessing one bank, building society or buy-to-let mortgage provider.
Whether landlords should use a to mortgage broker?
The other alternative is for a landlord is to source a loan through a buy-to-let mortgage broker. Brokers act on a landlord's behalf to find the best deals in the market place. A buy-to-let mortgage broker does this by having access to most buy-to-let lending products through an online database. A buy-to-let mortgage broker should therefore pick up the best buy-to-let mortgage deals that match a landlord's specific requirements. For this service a landlord should expect to pay a fee of between a £200-£500+, payable only if and when the buy-to-let mortgage is approved.
Landlords may ask, why use a buy-to-let mortgage broker at all when you can find so much of this information over the Internet for free? There are a couple of reasons. First of all, there is the matter of time. As long as a landlord is specific with their selection criteria; a good buy-to-let broker should be able to come up fairly quickly with a number of suitable buy-to-let mortgage products. This can save a landlord a considerable amount of work by not having to check through all the mortgage products, their interest rates, conditions and limitations. Secondly, where a landlord's financial circumstances are straightforward it should be fairly easy for a landlord to find a suitable buy-to-let mortgage. However, when a landlord's circumstances are more complex the time taken to source the right buy-to-let products can be considerable. In this situation buy-to-let mortgage brokers can easily earn their money by finding buy-to-let lenders that provides a buy-to-let mortgage product that fits a landlord's very specific requirements.
Not all buy-to-let landlords are aware that by using a buy-to-let mortgage broker that they can access preferential buy-to-let mortgage rates and deals not available to all landlords. Therefore it's always worth checking with a buy-to-let mortgage broker first to see what exclusive buy-to-let mortgage products they have access to, after all this will cost a landlord nothing.
Finally, the other benefit of using a buy-to-let mortgage broker is that they take care of most of the administration work involved in a buy-to-let mortgage application. Also many buy-to-let lenders look more favourably or less suspiciously on buy-to-let mortgage applications made through a buy-to-let broker or intermediary making it more likely that a landlord will have their buy-to-let mortgage application approved
By Chris Horne
The good news for landlords is that the UK buy-to-let mortgage market is probably the most competitive and innovative in the world resulting in around about a thousand different buy-to-let mortgage products on the market at any one time.
The numbers have however been cut back recently as buy-to-let lenders have responded to the credit crunch by reigning in the more risky buy-to-let mortgage products. The other bad news for buy-to-let borrowers is that buy-to-let lenders have also repriced the risk premium within the costs of these buy-to-let loans. This means that the margin banks & buy-to-let lenders charge over the Bank of England base rate has risen by between 0.25%-0.5% as well as individual buy-to-let lenders tightening their lending criteria. At the same time the product fees charged by most buy-to-let lenders have also risen.
The bad news is largely a function of the good news. This is that the huge choice of products means that there is also the potential for landlords to get confused. Not only are there nearly a hundred providers of buy-to-let mortgages but there is also a large range of different type of buy-to-let mortgage products. The main ones are:
* Fixed rate - the interest rate charged is fixed for given period or up to a given date
* Discount - the rate of interest charged is reduced during an initial period then reverts to buy-to-let lenders standard variable rate
* Tracker - these buy-to-let mortgages track one of the recognised key mortgage rates such as Bank of England base rate or LIBOR (London Inter Bank Offer Rate)
Which type of buy-to-let mortgage product should I choose? The type of buy-to-let mortgage product that is suitable for you as a landlord will very much depend on a landlord's personal financial circumstances and also a landlord's attitude to risk.
Landlords who are concerned that if interest rates should rise, that their buy-to-let payments may become unaffordable may want to consider a fixed rate buy-to-let mortgage product. This type of buy-to-let mortgage will give a landlord the certainty of a definite mortgage payment each month during the period of the fixed term regardless of what happens to interest rates.
A landlord who may be presented with a short term problem; perhaps where a variable buy-to-let mortgage payments will be greater than a landlords rental income may want to consider a discounted buy-to-let mortgage product. In this way a landlord can make lower than normal buy-to-let mortgage repayments whilst their rental income rises and / or the general interest rate drops. However, a landlord needs to be cautious about this approach. This is because if interest rates rise further or a landlord overlooks the fact that their rate and therefore their cashflow is only on a temporary footing the ending of the discount rate would cause them even more financial hardship.
A variable rate or tracker is often the safest and cheapest over the term of the buy-to-let mortgage as the landlord frequently avoids paying an 'insurance' premium to the buy-to-let mortgage provider by not taking out a buy-to-let mortgage product that insulates landlords against an unexpected interest rate change or that gives them a preferential repayment rate.
Things for landlords to look out for
Landlords seeking a buy-to-let mortgage product should always look out for the APR attached to any buy-to-let product. An APR or Annual Percentage Rate is the true cost of the loan worked out for the entire term of the loan. This annualised rate reflects the true rate of interest any landlord & buy-to-let borrower will have to pay on a landlords loan advance over the entire term of the buy-to-let mortgage. This figure will therefore take into account any fees or charges incurred in setting up the loan as well as the rate of the loan once any initial discount or special term have ended.
Where should landlords go to find out about buy to let mortgages?
There are a number of routes for landlords to use to find out about buy-to-let mortgages and find a buy-to-let mortgage product suitable for a landlord's needs. The first one is for a landlord to approach their bank directly to see if they provide buy-to-let finance. The problems with this is that a landlords choice of mortgage product will be small and therefore a landlord is unlikely to be able to secure the most suitable buy-to-let mortgage for them.
The other is for a landlord to go on Google to see if it is possible to find a buy-to-let mortgage provider or product that suits them. This can be a bit of a 'hit or miss' affair. There are many mortgage companies that are on Google or advertise there. However, the lending criteria and restrictions that a buy-to-let mortgage provider puts on their product means that not all will be suitable for a landlord's requirements. The other point is that a landlord will not get the biggest choice of buy-to-let mortgage products by just accessing one bank, building society or buy-to-let mortgage provider.
Whether landlords should use a to mortgage broker?
The other alternative is for a landlord is to source a loan through a buy-to-let mortgage broker. Brokers act on a landlord's behalf to find the best deals in the market place. A buy-to-let mortgage broker does this by having access to most buy-to-let lending products through an online database. A buy-to-let mortgage broker should therefore pick up the best buy-to-let mortgage deals that match a landlord's specific requirements. For this service a landlord should expect to pay a fee of between a £200-£500+, payable only if and when the buy-to-let mortgage is approved.
Landlords may ask, why use a buy-to-let mortgage broker at all when you can find so much of this information over the Internet for free? There are a couple of reasons. First of all, there is the matter of time. As long as a landlord is specific with their selection criteria; a good buy-to-let broker should be able to come up fairly quickly with a number of suitable buy-to-let mortgage products. This can save a landlord a considerable amount of work by not having to check through all the mortgage products, their interest rates, conditions and limitations. Secondly, where a landlord's financial circumstances are straightforward it should be fairly easy for a landlord to find a suitable buy-to-let mortgage. However, when a landlord's circumstances are more complex the time taken to source the right buy-to-let products can be considerable. In this situation buy-to-let mortgage brokers can easily earn their money by finding buy-to-let lenders that provides a buy-to-let mortgage product that fits a landlord's very specific requirements.
Not all buy-to-let landlords are aware that by using a buy-to-let mortgage broker that they can access preferential buy-to-let mortgage rates and deals not available to all landlords. Therefore it's always worth checking with a buy-to-let mortgage broker first to see what exclusive buy-to-let mortgage products they have access to, after all this will cost a landlord nothing.
Finally, the other benefit of using a buy-to-let mortgage broker is that they take care of most of the administration work involved in a buy-to-let mortgage application. Also many buy-to-let lenders look more favourably or less suspiciously on buy-to-let mortgage applications made through a buy-to-let broker or intermediary making it more likely that a landlord will have their buy-to-let mortgage application approved
By Chris Horne
Saturday, June 23, 2007
Making Big Money By Looking At The Seasons Of Investment
When it comes to investing, many people focus their attention solely on finding the "perfect" strategy. What many people fail to recognize, however, is the fact that all forms of investment markets have "seasons" just like the very predictable weather patterns of spring, summer, fall and winter.
For example, it is fairly well-known that election year stock markets perform very well. If we step back, and analyze the performance of the stock market through out its documented history, we will see a very predictable pattern of performance.
For example, years ending with 0 through 5 are poorly performing or negative stock market years. Years ending with 6 are generally transition years, with years 7 through 9 being strong to extremely strong. There are, of course, other factors affecting investment seasons, such as interest-rate cycle and peak spending cycles, and there are no guarantees that any particular year will achieve a specific performance target. However, rather than simply looking for a strategy (which obviously would have worked for the author during an appropriate cycle), it is important to match strategy with the broad trends.
While it is obviously no guarantee of success, your odds will increase that a long stock strategy will be successful in the last part of the decade, while selling options or purchasing money market instruments may be a better strategy for the early part of a decade.
I have found this over the years to be the most effective way of managing the markets. Regardless, always keep in mind the protection of your capital, and always invest accordingly.
by Kevin Mulholland
Investing - Managing Risk With Warrants, Options & Leaps
Regardless of what the markets are currently doing, now, more than ever is the time to take action to protect your portfolio.
Over the last few weeks investors have been very very surprised at the performance of virtually all of the markets with the big initial shock coming from the 9% decline in the Shanghai markets overnight. Many analysts have had some great insight into what the problems are, the effects of them and how investors should approach the markets. Unfortunately, we have many different opinions from these analysts. While differing opinions are great to read it can and does create much doubt in the mind of the average investor. This is truly a time that you, the investor, must firmly believe in your investment philosophy or at a minimum attempt to protect yourself in the event you are wrong.
We at Precious Metals Warrants (preciousmetalswarrants.com)personally follow many of the top analysts and also read as much as possible on websites for information and conflicting opinions. While, yes, we have our own opinions much is based upon the collective views of some of the top analysts in the world. When our favorites are not on the same path we attempt to evaluate the risk of our investments and how to manage this risk with long term warrants, options or Leaps.
Recently Jim Rogers, which I like to refer to respectfully as Mr. Commodity, was quoted as, predicting "a real estate crash that would trigger defaults and spread contagion to emerging markets. You cannot believe how bad it's going to get before it gets any better. It's going to be a disaster for many who don't have a clue about what happens when a real estate bubble pops....the crisis would spread to emerging markets which now faced a prolonged bear run. This is the end of the liquidity party. Some emerging markets will go down 80 percent, some will go down 50 percent, some will most probably collapse."
Dr. Marc Faber says, "most investors are heading for huge losses...but gold to outperform."
Richard Russell says, "gold looks fine. Stop worrying."
Chris Laird speaks of a, "World Liquidity Crisis Emerging."
Another analyst writing on these websites which I respect is Adam Hamilton. Adam sees the possibility of a 2 year bear market in the equity markets similar to the 1973 - 1974 with a drop of approximately 45 - 50% in the Dow by the end of December 2008. On the other hand he sees gold, silver and the commodity sectors increasing as eventually the fear and the fleeing money in the equity markets will find a new home in the commodities. He sees this commodity cycle, by historical standards, as being only about half over with much more excitement to come.
Short-term we did have all markets recently going down together - equities, gold, silver, mining stocks, etc. This has now scared many precious metals investors into thinking that if the equity markets collapse, then so will gold, silver, and the mining shares. This we believe, however, will be only a short-term disconnect before the money goes into the commodity sectors.
A few of the mine fields in the investment arena today:
* World Liquidity
* Yen Carry Trade (and the unwinding thereof)
* Derivative markets
* U.S. Sub-Prime mortgage market
* U.S. Dollar
* U.S. Deficits
* Iraq and Iran
Any of the above could bring down the entire house of cards as we know it today. Scary times? You bet. I personally suspect one day an event will occur in the derivative markets or with the unwinding of the Yen carry trade. These are areas of which the average investor has absolutely zero knowledge other than perhaps hearing the terms mentioned in the financial press or on CNBC. Think about it, investors would not even know what hit them nor be able to explain it. Like being hit by a truck and not even seeing it coming at you. At least it will be quick but the financial pain could easily last a lifetime if you are not properly positioned.
With the above gloomy backdrop, what is the level of risk you are willing to accept?
Remember as investors, each of us must make this decision each day in the financial markets. The decision of risk is ours and ours alone, not our brokers or advisors. The ultimate responsibility lies with each of us. At the end of the day, if our investments do not perform, we must take responsibility for the losses ourselves.
Should we as investors be concerned about unfolding events? Should we be fearful? Should we be running for the exits? Maybe all of the above are appropriate as this is surely a time for immediate reflection on our investments and the protection thereof.
Allow me to address briefly how two different classes of investors could address this financial dilemma:
1. If you are an investor still primarily investing in traditional equities and perhaps the emerging markets:
* Liquidate all your stocks or positions
* Liquidate enough to be comfortable
* Use Puts, i.e. Leaps on the Standard & Poor's 500 for downside protection
* Invest in precious metals, the bullion, mining shares, long-term warrants, call options,
* Leaps or ETF's on gold or silver.
2. If you are an investor heavily involved in the precious metals sector, mutual funds, mining shares or long-term warrants:
* Liquidate enough of your positions to be comfortable holding the cash in Euros
* Increase exposure to the bullion or ETF's on gold or silver
* Purchase Leap Puts on an index, i.e. Standard & Poor's 500 for downside protection
Will the current storms pass without incident? Perhaps, but financial well being and decision making are now front row center.
by Dudley BakerInvestment Strategies That Can Generate Income
Millionaires have millions of dollars but don't have the time to spend them. A common man has tons of time but doesn't have the money to spend it. Every person on this planet is looking for strategies to maximize his wealth. But is there one best strategy to maximize your income? Everyone's on the hunt for the answers. The very prospect of making money draws people of all ages. Yet none of them has figured out the one best tactic to do it. Yet, one thing to be kept is mind is that there are a heap of options offered in the market. One can guarantee himself, safer returns through various investments present in the market. These can add value to your personal finance. Here is a list of valuable options a person can invest in:
Invest in stocks Investing in initial public offers and open market shares can turn out to be handy. The primary step is to hire a broker who can help you. If you have sufficient knowledge of finance you can study the company you wish to invest in, all by yourself. You can earn from their dividends of by trading them in the stock exchange. If you want to shoe away the broker online trading can prove helpful.
Invest in mutual funds Mutual funds being a pool of stocks can turn out to be less risky. These days various banks offer mutual funds for as low as Rs 50 and Systematic investment plans (Sip’s) are a good way to maximize your earnings. These plans come with guaranteed returns that may have a lock-in period of 1-5 years depending on the plan chosen by you. Some of them guarantee a 30-50 % return.
Invest in real estate Real estate is one of the most promising assets one can have in his portfolio. Real estate prices keep increasing with time. The value of real estate usually never depreciates. There is also a huge chunk of profit to be made from its trade. Successful real estate stories have been made here.
Invest in life insurance contracts Life insurance is a contract wherein a person close to you is compensated by the insurance company on the event of your death. You are required to pay a monthly premium and are asked to fill in the names of your successful nominees who will have the right to the money that the insurance firm will have to compensate in case of your death. This policy is of low risk and will keep your loved ones safe even if you happen to die suddenly.
Investment in bullion Gold, silver and other metals are the most popular ones to deal and invest in. These are ever green investments and can ensure a steady income to a person trading in these. Various other options Various other options like treasuries, corporate bonds, securities, depository receipts, preferred stocks, municipal bonds, common stock, etc can be invested in. These investments are low-risk investments and can generate huge incomes for you.
by Charles SmithstonHow to Invest in Stock- 7 Stock Market Investing Basics
When you are new to investing it’s wise to get some good stock market investing advice before you attempt your first online stock trade. You’re in luck, because there’s all kinds of information for the beginner. Investing stock market books, forums, and newsletters are abundant. However, the best stock investing advice is the simple tips that are often overlooked in the heat of making trades.
Therefore, here’s your first stock investing tip: Read the following 7 stock market investing basics until you have them memorized. Keep them handy for times when you are feeling extremely good or bad about your investments.
Three mistakes to avoid when investing:
Putting all your investment eggs in one basket: I’m sure you’ve heard it said by financial experts and other investors, but it’s worth repeating again – DIVERSIFY. This one word can save you from losing all your money in a market segment that suddenly takes a turn for the worse. It’s tempting to stick with one market segment or one type of company when the prices are going up, up, up, but this is a very risky strategy. Never invest in just one industry. Learn to diversify your investments so you will still have steady earnings even if one of your segments goes down the tubes.
Attempting to time the market on your hunches: Knowing when to buy and sell is one of the hardest things to learn about investing. Even the experts get it wrong on a regular basis. Don’t assume you know when it’s best to buy or sell without expert guidance. Many average investors have lost their shirt when they got their timing wrong. A few people seem to have a gift for timing the market just right. If you find one of those people, treat them like gold.
Not reinvesting profits back into other investments: A key reason why some people get extremely wealthy from investing in stocks is the fact that they discipline themselves into putting that money back into other investments, where they can earn even more money. The concept is called making your money work for you. When you cash out, your money stops working for you. Yes, you can put it in your checking or savings account, but that’s when you’ll be tempted to spend a lot of it. The best thing to do with your profits is get some expert financial advice on how to keep reinvesting a big portion of your money into other stocks.
Four investment truths you must follow for success:
Buy low and sell high: I know this seems like such common knowledge, but you’d be surprised at the people who will buy an expensive stock because of its sudden popularity. The sad fact is that these people have already missed out on the big profits that others made when they bought the stock when it was cheap.
What goes up must come down: Some high flying stocks seem like they will never come down to earth. It’s fun to watch a stock double, and even triple in value. Wow. This could last forever, you may be tempted to think, but stock market history will prove you wrong. At some point every stock will go down – the question is when?
When it starts taking a dive will you be prepared to sell quickly in order to avoid taking a big loss?
Don’t try to figure out why: Stocks move up or down for a variety of reasons. The sky is blue and the grass is green is as good of an explanation as any as to why your stocks are behaving the way they are. Quit navel gazing and get back to working your investment strategy. Most successful investors don’t worry about why their stocks are going in any particular direction. They are too focused on the mechanics of making money.
Be aware of early trends: You get a tip about a big new trend that’s coming into the marketplace six months from now. The recommendation is for you to buy stock in this market now. You hesitate and then forget about it. Nine months later your uncle, brother, cousin and friends all know about this new trend and are jumping in the market – and so are thousands of others – driving the cost of the stock up.
Now you’ve missed your opportunity to take real advantage of this trend and get in while you could still buy low. Smarter trend watchers are now making big money. All you can do is think about how you could be rolling in dough right now. You could kick yourself for not acting sooner.
If you take the time and do some solid stock investing research, you’ll find that remembering the above 7 stock market investing basics will be enough to keep you grounded and making money for years to come.
by Star Smith
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