MG / REAL ESTATE & INVESTMENT

The Investment Selection Matrix

Once you select your market and decide whether debt or equity investing is appropriate, it becomes apparent what type of security to buy or investment to make. Take a look at the following diagram:

If you choose quadrant A, Public Equity, you should purchase real estate securities such as standard equity REITs or publicly traded real estate operating companies.

If you select quadrant B, Private Equity, you should buy direct, ownership interests in real estate properties.

If you choose quadrant C, Public Debt, you would purchase a mortgage REIT, a mortgage-backed securities (MBS) or (Commercial Mortgage-Backed Securities (CMBS).

If quadrant D, Private Debt, is most appropriate, then you would lend money to purchasers of real estate, thereby investing in mortgages.

 

Avraham

martinezglobal@gmail.com

Equity and Debt Investments

In addition to choosing your market, you need to choose whether to invest in debt or equity.

When you invest in debt, you are lending funds to an owner or purchaser of real estate. You receive periodic interest payments from the owner and a security charge against the property in the form of a mortgage. At the end of the mortgage term, you get back the balance of your mortgage principal. This type of real estate investing is quite like that of bonds. (To read more about mortgages, see Shopping for a Mortgage, Understanding the Mortgage Payment Structure and Paying Off Your Mortgage.)

An equity investment, on the other hand, represents a residual interest in the property. When you are an equity investor, you are essentially the owner of the property. You stand to gain a lot when the property value increases or if you are able to get more rent for your building. However, if things should go wrong (for example, all your tenants vacate and you can't make your mortgage payment) then the mortgagee, who has a priority interest in your property, may foreclose and you must forfeit your equity position to satisfy their security. In that sense, the risks of an equity position in real estate is much like that of owning stock.

The choice of whether you want to invest in equity or debt will depend upon your risk tolerance and your return expectations. The riskier choice is investing in equity, but you can also make a lot more money! As the greater the risk, the greater the reward. (To find out where your risk tolerance lies, see Determining Risk And The Risk Pyramid.)

Avraham

martinezglobal@gmail.com

Are you Planning your Real Estate Investment?

When you are planning your real estate investments, one of your first tasks is to decide what kind of exposure to the real estate market is appropriate for your situation. Different exposures produce varying levels of risk and return. Your choice will also influence the means by which you will acquire the real estate.

The first type of market you could participate in is the private market. In the private market, you would be purchasing a direct interest in one or more real estate properties. You would own and operate the piece of real estate yourself (or through a property manager), and you would receive the rent payments and value changes from that investment. For example, if you were to purchase an industrial building that was leased to one or more tenants who pay you rent, you would be participating in the private real estate market. You could also participate in this market by purchasing properties with any number of partners - this is known as a pool or syndicate.

Alternatively, you could choose to invest in the public real estate market. You would be participating in the public market if you purchased a share or unit in a publicly traded real estate company, such as a real estate investment trust (REIT). If you buy a real estate security, you are investing in a company that owns real estate and manages it on behalf of the shareholders/unit-holders of the company. As a result, your exposure to the real estate market is more indirect. A real estate security usually pays a dividend or distribution in order to send the rent payments that it receives from tenants to its shareholders/unit-holders. Any price appreciation or depreciation in the assets owned by the company is reflected in its share or unit price.

 

Avraham

martinezglobal@gmail.com

What Is Real Estate?

By Ian Woychuk, CFA

The most basic definition real estate is "an interest in land". Broadening that definition somewhat, the word "interest" can mean either an ownership interest (also known as a fee-simple interest) or a leasehold interest. In an ownership interest, the investor is entitled to the full rights of ownership of the land (for example, to legally use and transfer the title of the land/property), and must also assume the risks and responsibilities of a landowner (for example, any losses as a result of natural disasters and the obligation to pay property taxes). On the other side of the relationship, a leasehold interest only exists when a landowner agrees to pass some of his rights on to a tenant in exchange for a payment of rent. If you rent an apartment, you have a leasehold interest in real estate. If you own a home, you have an ownership interest in that home. Some jurisdictions recognize other interests beyond these two, such as a life estate, but those interests are less common in the investment arena.As a real estate investor, you will most likely be purchasing ownership interests and then earning a return on that investment by issuing leasehold interests to tenants, who will in turn pay rent. It is also not uncommon for an investor to acquire a long-term leasehold interest in land, which then has a building constructed upon it. At the end of the land lease, the land and building become the property of the original land-owner.

Avraham

martinezglobal@gmail.com

Exploring Real Estate Investments

By Ian Woychuk, CFA

Chances are, when you think about investing in real estate the first thing that comes to mind is your home. For many people, their home is the single largest investment they will ever make. But have you ever stopped to consider that once you purchase a home it becomes part of your overall portfolio of investments? In fact, it's one of the most important parts of your portfolio because it serves a dual role as not only an investment but also a centerpiece to your daily life.

Though a home is one of the largest investments the average investor will purchase, there are other types of real estate investments worth investing in. The most common type is income-producing real estate. Large income-producing real estate properties are commonly purchased by high net-worth individuals and institutions, such as life insurance companies, real estate investment trusts (REITs) and pension funds. (To read more about REITs, see What Are REITs?, Basic Valuation Of A Real Estate Investment Trust (REIT) and The REIT Way.)

Income-producing properties are also purchased by individual investors in the form of smaller apartment buildings, duplexes or even a single family homes or condominiums that are rented out to tenants. (To find out more about being a landlord, see Tips For The Prospective Landlord, Tax Deductions For Rental Property Owners and Investing In Real Estate.)

In the context of portfolio investing, real estate is traditionally considered an "alternative" investment class. That means it is a supplementary investment used to build on a primary portfolio of stocks, bonds and other securities.

One of the main differences between investing in a piece of real estate as compared to stocks or bonds is that real estate is an investment in the "bricks and mortar" of a building and the land it is built upon. This makes real estate highly tangible, because unlike most stocks you can see and touch your property. This often creates substantial pride of ownership, but tangibility also has its downside because real estate requires hands-on management.

Avraham

martinezglobal@gmail.com

Real Estate Investment Trust - REIT

Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. An additional benefit to investing in REITs is the fact that many are accompanied by dividend reinvestment plans (DRIPs). Among other things, REITs invest in shopping malls, office buildings, apartments, warehouses and hotels. Some REITs will invest specifically in one area of real estate - shopping malls, for example - or in one specific region, state or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market.

A.Martinez

martinezglobal@gmail.com

What's the Best Way to get Started?

 That's probably one of the most common questions asked by people wanting to begin real estate investing. Another common question is, "How do I find a mentor to work with?" Of course there is no one perfect answer for everyone. It depends on a number of factors including; money available, goals and current skill level. But, for my money the answer to both questions is bird dogging or as I call it Real Estate Jobbing.

  A Real Estate Jobber is a person who finds qualified leads for professional Investors, through a variety of sources using a systematic process.

  Why Real Estate Jobbing?

• You can start in your spare time.
• There is absolutely zero financial risk.
• There is practically no start up costs.
• You don't need money or credit.
• You can gain hands on experience without risk.
• You can find out if real estate investing is really for you, before spending hundreds or thousands on books, courses and other learning aids.

  Your job is simply to supply quality leads and it's the Investor's job to handle the rest of the process.

  You earn while you learn

  For each lead that an Investor is able to close on, you will be paid a referral fee. There are several types of referral fee arrangements that can be made including:

• A flat rate.
• A percent of the purchase price rate.
• A net profit rate.
• Rates that combine more than one method.

  Build mentor relationships

  There is no doubt that mentoring is the most efficient way to learn, but it can be difficult to find a mentor to work with. Do you really think seasoned Investors have time to mentor everyone that asks? Separate yourself, and bring something of value to the table. By supplying good, quality and qualified leads you are saving your Investors time and helping them to make money. Now an Investor will be more willing to help.

  Start in your spare time

  You can easily start out as a Jobber in your spare time. You don't have to quit your job; in fact I would not recommend that. You work from home, and you may be able to do much of the lead finding research on-line.

  Anyone can become a Jobber. There are no special qualifications, education requirements or specialized experience required. Your age, gender, race, background, geography or current occupation does not matter.

  The skills you develop will carry over. As you gain experience you will work closer and closer with your Investors, and learn the business first hand. When you are ready to take the next step, you will know how to find profitable leads. As an Investor you must be able to find motivated sellers, that's one thing that will never change.

  What Makes a Successful Jobber?

  You must know your Investor's needs. Know what types of properties, what price ranges and what locations they are looking for, and prefer to deal with. The Investor is your customer, and you must give him or her what they want.

  The successful Jobber is like a real estate detective. The client is the Investor, the case is to find motivated sellers, the reward is the referral fee and leads represent clues. A good detective will investigate as many clues as necessary to solve the case. Likewise a good Jobber will generate and investigate as many leads as necessary to find the truly motivated sellers.

  You must provide complete information to your investors. It takes much more than an address and phone number for an Investor to make a decision. The Jobber goes the extra mile and uses the public records and other sources to provide as much information as possible for Investors.

  You must be (or learn to be) organized. Jobbers use a systematic approach for generating and qualifying leads. If you are disorganized it will be very difficult to stay on top of your business. Anyone can learn to be organized.

  It all boils down to providing good, quality information, which saves the Investor time and helps them to make money, that's the goal of a Real Estate Jobber. If you achieve this goal, then your Investors will be more than happy to help you learn the business, and pay you very well for your efforts.

  It's Not Easy

  Real Estate Jobbing is a great, risk free way to start your Real Estate Investing career. You earn money while learning the business first hand. But, it's not an easy get rich quick program.

  You will have to put forth some effort to be successful. You will need to generate hundreds of leads, which takes some time and commitment. You will need to look up the property information for each lead and present the leads regularly to your Investors. You must be able to motivate yourself to keep finding leads, even when it seems like none of them are panning out.

  Real Estate Investing is not for everyone. Jobbing is an inexpensive way to find out if it's for you, before you spend hundreds or thousands of dollars on courses, books and other materials. Find out what's involved first hand, experience the challenges as well as the rewards.

A.Martinez

martinezglobal@gmail.com

Real Estate As Liverage

A key to successful real estate investing is leverage. Leverage allows an investor to use a small amount of cash to generate large returns. Here is an example of how it works: A hypothetical investor purchases real estate worth $100,000. The investor puts down $20,000 cash and borrows the difference ($80,000). If the investor later sells the property for $120,000 (a 20% gain) and pays off the $80,000 loan, he or she is left with $40,000. This represents a 100% return on the original $20,000 investment. A 20% gain on the sale of the property was leveraged into a 100% gain on the cash invested. Of course, this is an oversimplified example used to illustrate the meaning of leverage. We did not discuss income and expenses as well as other costs, such as real estate transaction fees, loan interest, commissions, or the holding period (one year, two, or more), but the concept is accurate.

Leverage works better with real estate investments than other kinds of investments because it is easier to borrow money against real estate than other assets.

Leverage works better with real estate investments than other kinds of investments because it is easier to borrow money against real estate than other assets. Leverage also works for stock investments using a margin account, but the rules are very stringent because the stock is not a tangible asset. Land (real estate) will always be there, and they are not making any more. Creditors are eager to lend money to borrowers for real estate purchases because such loans are secure.

Not everyone who invests in real estate is successful. It has been known for real estate values to fall rather than rise. Like other investments, real estate values move up and down and in market cycles. When investing in real estate, it is important to have a long-term strategy because you may have to be in it longer than anticipated in order to realize your investment goals, if at all. Leverage works both ways. If the investor above had sold the property for $90,000, they would have suffered a 50% loss on their $20,000 investment despite the fact that the decline in value was only 10%. Furthermore, the lender was paid in full for the loan—despite the real estate loss.

This article provided by The Educated Investor and powered by CalcXML.

Avraham Martinez

martinezglobal@gmail.com

Leverage Real Estate Using Options

By Derek Pierce

What if I told you there was a way to profit from deals with no liability, no risk of money, no credit required, and no obligation on your part?

Sounds good right?

Well, it`s not totally true...

You could risk a whopping $10 bucks.
Yep, that`s all it takes to get into a profitable real estate deal and you`re not asked once about your finances, about your credit, nope, none of that...

The method is using Options.

Yes, Options are a powerful way to leverage real estate to get paid mega bucks without any financial obligations on your part.
Options simply give you the right to purchase a property at a set price for a certain amount of time. The Option to buy does NOT obligate you to buy, it simply gives you the option.
Now, on the flip side, if you`re the seller giving the Option, you are obligated to sell the property to the buyer if they exercise their Option within the allocated time frame.
Now, imagine for a moment, the potential by simply getting Options on properties in your own area, then reselling them for enormous profits and the only time you go to the bank is to deposit or cash your check...

Why would someone, give me the option to buy their house?
Well, until you`ve been a motivated seller yourself, it`s hard to explain. When people have some underlying situation, they need you and they need your help.
It`s all about how you position yourself. If you go into the deal thinking, "Boy, if I could just get this option" then you`re going to be eaten alive.

You`ve got to be confident and realize the seller needs you more than you need them. If the seller is in any way motivated, they`ll want you to do everything you can to get the house sold so they can move on with their lives.
Do options work for everyone?
Absolutely not.

You`re looking for the handful of motivated sellers it will work with and the others may need some other creative method to getting rid of their house.
What`s great about options is you could have as many deals in the works with literally no liability and minimum money on your part, all while you crank up your marketing to find buyers for your deals. This method works regardless of area, regardless of appreciation, and regardless of the price of the property if you`re getting leads from sellers that are motivated.

Now, why I did I say you could risk $10? Well, $10 is all you need to give your seller to make the deal legally binding. It`s called legal consideration and without it the seller could later claim they didn`t get any consideration for the option. So, whenever you get an option to any property, be sure to give the seller $10 to seal the deal.

Abraham Martinez

info@martinezglobalonline.com

Basic Rules For To Negotiate

There are times when that seems not to exist a way out of the negotiations. There is a need to change his position and see the problem from another angle to find an alternative solution.

The strategy of penetration can be this alternative. With it, you can climb the balcony and watch his difficult negotiation in a new light. You penetration when neutralizes the resistance of his opponent, approaching indirectly and acting contrary to the expectations of him. We must emphasize respect for the other person, should not be pressed to get the negotiation, it must persuade. Instead of changing the thinking of the other person through pressure, you change the environment in which it makes decisions. Let the opponent draw their own conclusions and choose. Its goal is not to win only you but win-win.

To accomplish this goal, you must resist the temptations of human and natural, and do the opposite of what is desires to do. You must suspend your reaction cundo want to sit back, should listen when would like to respond, when asked feel the urge to give reply to his opponent, reconcile differences feel when you win to assert their point of view, educating want to feel when attack.

The negotiation of penetration is difficult. Negotiators who triumph are patient and persistent. Progress usually arrive gradually. Each small penetration can lead to greater. In the end, until the negotiations that seemed impossible may also lead to an agreement satisfactory to both sides.

It takes two to fight, but only one person is needed to unravel a tangled situation. In you is the power to solve even the most difficult relationships. The more power you have is going to change the game from a meeting face to face to a cooperation together to solve problems. The biggest barriers to obstruct the path are natural reactions you, the emotions of hostile opponent radicals their positions, their strong dissatisfaction and their power games. You can overcome these barriers by implementing the negotiating strategies of penetration. You do not have to accept no for an answer.

This is precisely the aim of the strategy of penetration: breaking the opponent to make it a partner in the negotiations.

 

 

 

Abraham Martinez

Ocean View Int'l Realty, Inc.