Real Estate Investing
Tips & Techniques
From the Money Mastery Team
Residential real estate investing is one of the main wealth creation vehicles that most people can access almost immediately.
Many people have a vague understanding of the concept of buying for the long term, but few really take the time and learn how to do things in order to maximise their efforts and income in real estate investing.
While it’s difficult to write about all the subtleties involved in the property industry, I hope the following information
goes some way to understanding the processes.
Market corrections, or crashes, represent wonderful buying opportunities for smart real estate investing.
At the moment there appears to be greater risks to the down side in entering the stock market at this time than there
are in the residential property markets.
However every situation is different and as Money Mastery Online is not a licensed adviser or financial planner please seek independent advice for your particular situation...
In essence, in terms of capital growth, the residential property market should out perform the stock market over the short to medium term.
This does not mean that you should sell your share portfolio, especially if you have a long term horizon.
It just means shares are in for a bumpy ride. No doubt there will be some great buying opportunities in shares during the correction process of the financial crisis as panic sets in and shares get driven into over sold territory.
Research your Real Estate Investmenting Market...
A factor you need to take into consideration when buying property is who will buy your property when and if you decide
You need to choose properties that can sell relatively easily in the event that something goes wrong and you need access to your finances.
Bearing in mind that real estate investing is usually a long term activity you still need to plan for the worst case scenario so that you have all your options covered.
To begin the property accumulation phase of your wealth creation journey, buy when the stock market begins to reach its peak or closely after the crash.
Prices in some areas begin moving before the property cycle actually begins because smart players take their profits out of the stock market early and invest in residential real estate.
Search for areas that are moving early as they should continue growing in the cycle.
Before deciding to invest you must thoroughly research your market. We cannot stress this enough...
Knowledge is power and will reduce your real estate investing risk greatly!
Get to know good real estate investment agents because they generally know their areas very well. Look for properties in well located areas
that do not present well, 90% of buyers will dismiss these for emotional reasons leaving great profit opportunities
waiting for savvy investors such as yourself you have taken the time to build their knowledge base and skills.
Quick to dimiss average investors pass up great opportunities based on superficial problems such as
- The property is too dirty
- It needs a paint job
- The gardens are messy
- The front fence isn't attractive
On average people only take 8 minuets to dismiss a property that produces negative emotions.
Keen investors look through different eyes. They look for structurally sound properties that with a few minor renovations
can be brought back to life and be extremely well presented.
Professional real estate investors have a thorough understanding of property values in the area in which you wish to invest. You must be disciplined in your research. You need to know
- what the median price is for the area
- what unrenovated houses are selling for
- and what renovated houses are selling for
These two figures are important because they will establish your buying price.
If you are a prospective property investor or if you are looking to start creating wealth in the property market you must download the FREE E-book titled....
"Common Mistakes Made By Inexperienced Property Investors"
Click Here to gain Access to you FREE 'Common Property Mistakes' E-Book
Creating Property Equity
You must purchase in areas where prices are already rising. For wealth creation purposes it’s a mistake to mak real estate investments in areas that are not rising in price because what you want is instant equity.
Apart from putting your own capital into a deal and thus creating equity, the other two main ways to create real estate investing equity are simple and straight forward...
- You can allow market forces to drive prices up
- Or you can renovate...
For wealth creation purposes the more equity you have, the more you understand what you’re doing, which in turn provides you with more opportunity to borrow from financial institutions, the more you can lend the more you can purchase additional property.
The higher the quality of these properties and the longer you hold them, the more you’ll have in terms of net worth.
It’s not a strategy for the faint hearted and you must know what you’re doing.
You can never do too much research and you must get to know your areas very well.
You must know what fair market value is, what unrenovated value is and what renovated value is.
Median Priced Housing Strategy....
The type of buying the team at Money Mastery Online likes to participate in is referred to as Median Priced Housing.
The theory goes that you don't want to buy properties too far above the median price for the area you are interested in.
This is because if things go wrong you want to be able to offer your property for sale to the widest audience to
enhance the potential for a quick sale.
When researching an area you must have extensive knowledge of prices and know what the median price is for the area you
are interested in.
Make sure you purchase properties that are no more than 10% above the median price for the particular
The more expensive a property is in relation to the median price, the less effective rental returns are in
relation to gearing.
This will increase the holding costs if you are intending to negative gear your investments.
They must also be growing at a rate of 10% or above.
Anything below this mark means you are not working your money as hard as you can or you will be speculating
on future increases. Speculating is OK if you know what you’re doing and you can afford to be wrong.
Another reason for buying at or below the median price, and in areas that are already moving in price, is that if you
ever find yourself in a position to have to sell your property in a hurry, you don’t want to be too far over the median
price after you have completed your renovation work.
In addition let’s assume you didn’t get around to your renovations you’ll still want prices to be moving so that at
least you can recover costs after a quick turn around.
The further you are over the median price the fewer buyers there