Finance Your Real Estate Investment Properties

Unlike traditional residential real estate mortgages, real estate investment financing is way more creative and offers more options than you think. The golden rule in real estate investment is OPM (Other People’s Money).

I have enough money; shouldn’t I buy my real estate investment for cash? No, I absolutely advice against investing large sums of cash into a single real estate investment. There are two reasons why not. First, you give away most of your profits by not leveraging your real estate investment. Second, it is far too risky to put every egg into one basket.

Let me explain the leverage issue for a moment. I will give you an example of a $100,000 investment property that typically increases its value (appreciates) by 7% average a year. Maybe more, maybe less depending where you live. Paying all cash for this property will yield in a 7% appreciation profit plus the net profit from renting the place. Now you’re looking at roughly 15% of returns.

If you’re conservative with your investments you might be satisfied with this kind of a return. These days you might get equal or better returns with other conservative investments minus the hassle of being a landlord. But you don’t mind being a landlord, because you understand and utilize the leveraging method with financing your real estate investment.

With the example above you will make roughly $15,000 a year in profits from your investment. Now let’s take a closer look at what leveraging can do for you. Today a typical real estate investor can get financing as high as 95% - 97% of the purchase price. Occasionally 100% financing is available as well. But this would be totally unfair in this example to compare this with all cash purchasing.

15% return sounds like a lot, but wait till you see this. Let’s assume that the rental income will cover all your expenses including the mortgage payments. Taking the same example from before your net return would be the 7% appreciation profits of your property. This would translate into a $7,000 a year profit. With a 95% financing in place you would get $7,000 return on $5,000 (your 5% down payment) invested. This is a whopping 140% return on investment.

With the same $100,000 you can go out there and get 20 investment properties, finance 95% of it and make an amazing $140,000 profit a year. This beats the projected $15,000 profits with an all cash transaction any day.

Of course you will have a lot of trouble to get financing for 20 properties in a single year. Typically 5-6 new rental property mortgages are the maximum lenders will allow these days. This is the signal to get creative with your financing structures.

In this case sellers financing would be your key to achieve your goal of maximum leverage of your investment dollars. Despite the message from all these late night infomercials, seller financing is harder to get than they want you to make believe it is.

It all depends on the seller’s ability to offer seller financing and the seller’s motivation. Only about 1 out of 20 properties for sale are able to get seller financing. That means that there’s no mortgage balance on the property. From this narrow selection the seller must be motivated to sell under these conditions. This could be tax reasons, time constraints, personal reasons and many more.

As you can see this translates into a lot of work to achieve your goals. But let me tell you one thing. This separates the tire kicker real estate investors from the real go-getters. Wouldn’t you agree that a little bit of hard work and determination is well worth it to build a real estate empire?

I think it is well worth the trouble and hard work. At the end of the day you keep building your real estate investment portfolio and sooner than later you will be able to cash in.


Sincerely,
Peter Dobler
(c) 2005

 

About The Author:

Peter Dobler is a 20+ year veteran in the IT business. He is an active Real Estate Investor and a successful Internet business owner.
Learn more about real estate investments at http://www.suncoastrenttoown.com or send a blank email to mailto:suncoastrenttoown@getresponse.com

 

Hot Links

Latest Marketing News A Superb Advertising Resource For More Traffic  Here&39;s A Superb Way To Boost Your Advertising!Text ad exchanges are serious advertising resources of guaranteed traffic for yourwebsite. In ... The NEW element of PTC world The NEW element of PTC world http: www.power blog.com affiliate.php?program=Cashium&alink=health ... Earn & Upgrade FREE Earn & Upgrade FREE http: www.power blog.com affiliate.php?program=Buxify&alink=health ... EMC Is Your Latest Mailer Craze! Gotta Have It!  The latest Instant AlertPay cash mailer EMC is a sensation you need to join!Don&39;t miss the chance to jump in and make some cool cash all... TripleQUIKads Has Launched... Grab Your Spot Today You have a chance to get in on the ground floor of an exciting new opportunity that is taking the online advertising industry to a Whole NEW... Product Review: Viral Traffic Central Viral Traffic Central is a new site that says it guarantees more web visitors and online advertising with very little effort or cost.  More imp... The 1st PTC that really works ! International PTC in 12 languages The 1st PTC that really works Better than NeoBux ! http: www.power blog.com affiliate.php?program=AdPTC&ali... Traffic Power Control is NOW LIVE! (Go!,Go!,Go!,)  Brand new traffic software :  http: www.trafficpowercontrol.com Its sad, but over 99% of the visitors who come to your website will NEVER ... THE RACE IS ON!!! The Faster You Are. The BIGGER YOUR LIST! The Race Is ON! List Speedster is UNIQUE in Online Marketing. You get an instant mailing list, PLUS... As soon as you sign up, you will see a rac... Cash Solos is Here All Aboard the Cash Train!!   Cash Solos is Here All Aboard the Cash Train!! Loaded with Features including cash solos, mega solos, paid to click ads, button ads, brow...

 

Home Search | About Home Biz Forum Sitemap | Add URL IM Newsletter Blast Your Ad To 50,000 Free Classified Sites Directory Resources

More Information

Supersize Your PIPS for FREE Already on MegaPIPS? Brand it!