Below are some interesting things about investing if you have not ever invested in real estate or have not in a long time. You might find it interesting.

Rates And Investment Properties Investing in real estate, huh? All the infomercials finally gave you the bug, didn't it? Surely if all those funny-looking people sitting on a beach chair flashing fake $100 dollar bills can make money in real estate then you can too, right? But this week's column isn't about touting a proven method for investing in real estate. It's about if you're thinking of buying investment property then why you should do it now and not wait for your "How To Get Rich in Real Estate" cassette tapes to arrive in the mail. Why? We're all aware of rock bottom rates. It's hard not to notice when nearly every other spam you get is wanting to refinance your mortgage. Is it getting all a little too redundant to read something like "Interest Rates at Historic Lows?" How many times can we make history, anyway? The problem with such headlines is that soon we become somewhat immune to the news. Low rates, yeah, what else is new? But let me remind you of something. Way, way back, say two years ago, rates were in fact about 2% higher than where they are now. That can mean more than just a small difference in payment. It can mean whether or not your rental unit will ever cash flow and how much real estate you can buy. Let's look at an example of a rental property selling for $180,000. It's rented, always has been. Great tenants. Shoot, the tenants even mow the yard and do minor repairs themselves. Property is immaculate. It's a nice little house and rent in the area for similar properties goes for about $1,500 per month. Now let's do some math. A 30 year fixed rate in January of 2001 of 7.50% (yes, rates were very high back then) on a $150,000 note gets you a mortgage payment of $1,050 per month. You're showing a gross monthly profit of $450. Factor in hazard insurance and property taxes each month and maybe you're walking away with a couple of hundred bucks. Remember, these tenants do all the repairs and never complain. Fast forward to today. A competitive investment rate could be found at 5.75%, the monthly mortgage payment drops to $878. This nearly doubles your net income. And this is a fixed rate for as long as you own the property. It will never change unless you tell it to. Lets' look at it another way. Instead of looking at that cute little house on the corner, you spotted a duplex closer to the college campus. A 2% increase in interest rate erodes your buying power. How much? By nearly 20%, that's how much. If you can afford a $250,000 loan today and rates go back up to 2000 levels, you may only qualify for a $200,000 loan. That's huge. And that difference is something no Real Estate Investing Seminar can ever change. This column is not an attempt to convince you to buy real estate of any sort. I'll leave that to you and your real estate agent. But if you have already decided to buy and are shopping, shop a little harder. You don't want your cost of funds to rise any more than they have to. ________________________________________ Written by David Reed

Real Estate Investments Can Balloon Net Worth by M. Anthony Carr Determining your net worth provides any tax-paying person a snapshot in time of how you're doing in building wealth. As one gets older, this snapshot becomes more and more important. Will there be enough money at the end of my life to pay for prolonged care and living expenses without having to work to the Last Day? Fortunately, we do have some control in the matter. Saving, of course, is a primary means of building this net worth, combined with reducing expenses. Getting out of and staying out of debt also serves as a great builder of wealth. The calculation of your net worth is actually pretty simple. In essence, you add up all your assets (home equity, personal property owned, savings accounts, investments, etc.) and reduce them by your liabilities (mortgage balance, credit card and other consumer debt balances, etc.) Several websites have charts and tools to use to calculate your net worth.
Below are a couple links to websites with charts you can download pretty easily:

Kiplingers or AARP

For most people, their home will be their largest asset AND their largest liability. However, with the way that equity grows in real estate (especially as we are entering a renewed economic boom) you can see with the sample below how owning investment real estate can build your net worth quicker than nearly any other investment. Owning a home in a market headed upward, even just by one or two percent per year, grows your monthly payment into a huge wad of wealth.

For example: the average home price last year was roughly $175,000 nationwide. Using an average down payment of 10 percent and adding in $200 per month for taxes and insurance, the average payment would then be about $1,144. While we may hate the mortgage payment, folks, it is probably the most effective forced savings plan out there. Going in, the homeowner of the above property has equity of $17,500. Doesn't sound like a lot, but look at what happens over the next five years with just seven percent growth -- the national average over the last few years.

First, the equity growth. At seven percent per year over five years, the value of the home will increase from $175,000 to $245,446 -- a gain of $70,446 in five years. Even if the growth was only 3.5 percent per year, you can see that your gain would still be quite a bit -- $32,845. Meanwhile, your equity is growing by the slow drop in your mortgage amount because of the monthly payment. Over five years, the mortgage amount would drop from $157,500 to $146,560, thus the equity in your home would now be $98,886. That's pretty impressive.

As you can see, real estate investing can grow your net worth slowly but surely over time. I'm always concerned about people who write me looking to make wads of money flipping properties. The true rich people will hang on to the properties and let the equity grow. When you consider investment property, the results are even more astounding -- especially when you consider that all the net worth growth mentioned above occurs using other people's money. With the average payment shown above, a rent payment of $1,200 per month would grow your net worth in an investment property over the next five years to $98,000 -- and all you've put into it was the down payment. While most people concentrate on income to grow their net worth, they really need to work on slowly reducing liabilities and increasing assets.

To do that, here are some simple, actually, boring -- but effective -- tips on growing your net worth and some online resources to help you plan your financial future:
Get out of debt. If credit card industry stats are accurate, this move alone would increase the average person's net worth by $9,000.
• Federal Trade Commission for the consumer Save more. Just $50 a week turns into $2,600 per year in savings before the interest kicks in. Reduce your mortgage. Adding a small amount per month reduces your interest payments and builds equity.
• Early payoff calculator Get your first investment property. This takes time and money. As you start saving, get with a mortgage professional to learn about various loan programs, then build your investment team with a professional Realtor to find your first investment property. The best way to build wealth is one month at a time. Simply spending less than you earn and applying the difference toward investments and debt reduction is the best way to start.

Published: July 16, 2004
Buying Houses is Just One Way To Invest In Real Estate. Most correspondence I receive inquiring about how to start investing in real estate start with the foreclosure. It's quite simply the easiest real estate investment strategy to figure -- buy low, sell high or buy low, rent high. Everyone generally understands that as a real estate investor, the concept is to let someone else's rent payments pay for your mortgage and to hopefully come out with a positive cash flow at the end of the month. There are plenty of ways to get started in real estate investing, and here are some one-line descriptions of how to do it and with the pros and cons listed.

Foreclosures How it works: Purchase the property at a courthouse auction -- hopefully for less than it's worth. Fix it up, sell it or rent it out.

Pros: This is a common sense approach to getting started in real estate investing. If you can get the property for a wholesale price and then rent it out for less than your mortgage, you're on your way to building wealth one month at a time.

Cons: You get into the property and find out it has major problems costing a lot more than you'll ever recover. Ever heard of concrete being flushed down the drain (usually out of spite from the former owner)? It means having to remove all the sewage drains. Hidden defects can run costs up and give you a red ink bath before it's done. Since the bank/note holder is selling the property as is, there's not much recourse.

Fixer-Upper How it works: Purchase a property that needs major repairs. This is not a property that just needs paint and carpet. This type of property usually has rot, flooring, roofing, basement and just overall problems. But that's what makes it so enticing.

Pros: For investors with their repair ducks lined up in a row, this can be a good money maker. The key here is to hammer on the seller early in the negotiating process. Get the house for as low as possible and know what your bottom line really is.

Cons: For those wanting to flip the property, if you can't make $30,000 -- $50,000 on the projected profit, then you may want to pass. Why? An unseen defect can run into the tens of thousands of dollars really quickly.

Retail Investment How it works: Keep your eye open for under-priced properties in an area where rentals are brisk. This would be a house that really does just need paint and new carpet. Be sure you know what the rents are before going into the property. You want a positive cash flow before you even walk into the property.

Pros: A house that is in good shape can rent for years without any major expenses if it was taken care of early on.

Cons: Good rental properties (say, in a college town or near a military base) don't come on the market often, so you could be waiting a while before you find one. (Experienced investors usually scoop these up before the novices even know it's on the market.)

Paper Real Estate How it works: This one is where you invest in the mortgages of real estate instead of the real estate itself -- financing second trusts, purchasing mortgages at a discount, wraparound mortgages, etc.

Pros: For those who have cash, this one can give major returns on your money. For example, if you can pick up a $20,000 note at 12 percent for $15,000, your return on the note jumps to 16 percent. This is not going to fluctuate like the stock market is sure to do.

Cons: Your mortgagee (the borrower) could skip town, leaving you to foreclose -- right behind the first-trust note holder who usually gets paid first in a foreclosure. These are just a few of the ways you can get started in real estate investing. For more education, find a good agent to start working with who can show you the ropes and help you avoid the pitfalls.

________________________________________ Written by M. Anthony Carr