Real Estate investing is the source to build wealth - Antony Real Estate - Anthony Jeanty

Real Estate Investing 101: Why You Should Be Investing Your Money In Real Estate

 What Entrepreneurs Need To Know Before Investing In Real Estate...

Why should entrepreneurs invest in the first place? The answer is: to have enough money to live on when we no longer can or wish to work. To put that money aside, however, we have to accumulate enough to offset inflation and the taxes that erode our savings. And for that purpose, real estate is an excellent solution..

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The great thing about real estate is that even in a bad economy, it will usually fare better than stocks. Land, after all, is a finite resource. People need a place to live, work, shop, and play—so real estate is really just a matter of supply and demand. 

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What's more, real estate will continue to appreciate despite occasional slow-downs in the economy. In fact, it's proven to be the best way to create wealth, and an investor need not be a genius or a millionaire to succeed. Here are some tips, then, for entrepreneurs on getting started and succeeding in real estate investing:

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Plan your financial goals.

Before you buy that first property, or do your first analysis, determine what you expect from your investments. What are your financial goals?

You absolutely do need to learn some basics before venturing into investing. So, be sure to do some studying, but don’t let “buying and collecting” information become your endgame. Again, having goals in mind will make the process much more straightforward. It’s easy to get so tied up in the “research” phase that you never actually take action

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Look at plenty of properties. 

Don’t just grab the first property you look at. Too many investors buy properties because they “look nice,” or the investors don’t want to put the work in to look at what’s really out there. Remember, you won’t be living there, so don’t make your investment decision based on your personal preferences. While you shouldn’t fall into the trap of analysis paralysis, make sure you are thorough in looking through properties

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Plenty of beginning investors suffer from “a-better-deal-may-be-just-around-the-corner” syndrome. This can backfire in a big way, and you could potentially let a great deal slip just because you’re holding out for something better. Your task may feel difficult if this is your first property, but you must realize that the “perfect deal” rarely (if ever) exists. Better to execute on a deal that meets most of your criteria than wait for another that may never come.

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 Be wary of sellers that try to over-estimate the value of the property through pro-forma (estimated) data. While you can certainly use a pro-forma to start the conversation, make sure you know the real numbers before closing. Look at previous years’ tax returns, property-tax bills, maintenance records, etc. to get a good idea of the real income and expenses.

The most important figures you should know are: 

•    Net income (income/expenses) 

•    Cash flow (net income/debt financing payments) 

•    Return on investment (cash flow/investment)

•    Cap rate (net income/property price)

•    Cash-on-cash return (cash flow/investment)

•    Total ROI (total return/investment)

In each case, “investment” refers to how much you invest in the property. "Debt financing" refers to any loans you may have to take out to buy the property. And "total return" refers to cash flow, equity accrual (i.e., equity gained from your tenants paying their rents), appreciation and taxes.

Once you have understood these figures, you should have enough information to determine whether or not acquiring the property fits with your financial goals.

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Don't—try to buy property that the seller is not motivated to sell.

If the seller is motivated to sell, you’re not likely to get the price best aligned with your financial goals. So, how do you know if a seller is motivated? Look at the asking price. For example, If the property has been on the market for a year for, say, P5 million, with little-to-no price reduction, the seller is clearly not very motivated to move the property. However, if that same property has been on the market for a year and has had its price moved down considerably, the seller most likely wants to do whatever it takes to get the property off his or her hands

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 Attending open houses

•    Looking for vacant/unattractive properties that are for sale

•    Spreading the word about yourself and what properties you are looking for—truly

•    Going the old-fashioned route and looking in the classifieds of your local paper 

These are just a few ways to find sellers, but there are potentially dozens of other methods, depending on what type of property you’re looking for.

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know the difference between real estate investing and the business of real estate.

As an entrepreneur, you already have a business, and real estate investing is best used to support that business, not replace it—unless that’s your intention. In other words, don’t get so caught up in executing transactions that your core business falters. If that happens, you’ll be facing a bumpy road to get back to stability. Unless your business is itself real estate

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Real Estate Investing 101

Why You Should Be Investing Your Money In Real Estate

1. 

. Gain more leverage. Real estate is one of the few investment vehicles where using the bank's money couldn't be easier. The ability to make a down payment, leverage your capital, and thus increase your overall return on investment is incredible.

2. Grow, tax-free. Buying rental property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long-run is certainly realistic and at the least you should be considering a tax-deferred strategy. In the future, you may even consider a 1031 exchange, charitable trust, or an installment sale to lesson your tax liability further.

3. Tax free cash flow. It's no secret that because of depreciation and mortgage interest deductions (if you leverage your capital), your cash flow should be tax-free. That's right! The far majority of the time an investor will never pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future

4. The tax write-offs against your other income. Depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance your rental property will not only give you tax-free cash flow, but an overage of tax deductions you can use against your other income. With that said, this is something you want to discuss with your tax professional before investing so your expectations are realistic.

5. Increased tax deduction strategies. Rental property affords investors with another incredible opportunity to convert personal expenses to potentially valid business deductions. Don't forget that rental real estate is a business.

This means that travel expenses to check on your properties and payments to family members who manage your properties (such as students away at college) can be deductible and increase the tax benefits when it comes to cash flow and the future sale of the property.

6. Rental real estate is a forced retirement plan. Americans are terrible savers. We lack the self-discipline to put a monthly deposit into our IRA, SEP or 401k as small-business owners. However, buying a rental property is a significant commitment that you are required to commit to and maintain. You will always be grateful in the long-run when you don't give up on it and build future cash flow and wealth.

I meet with a lot of successful entrepreneurs, and almost every one of them has taken profits from their businesses over the years to invest in rental property. Based on this fact and the list above, I have consistently urged my clients to buy one rental property a year and already have clients with rental properties earning them money they never imagined they'd have.