Think back, or read a history book, about how families in the ’40s and ’50s used to buy homes. Young couples lived with Mom and Dad during the “courtship” prior to getting married, until they had saved 20% to put down on their “dream home”.  They made an investment in America, (i.e. the American dream). In the years that followed we have devalued that investment in lieu of credit and the easy access to it. Property values rose artificially and our nation became addicted to credit.

The value of the dollar has been demolished due to the same principle. When we place value in assets based on their ability to be easily bought and sold versus the value that has been invested in the asset, we devalue its worth. For example, two years ago I could have bought an $800,000 house (and I assure you that I cannot afford a house that expensive). The owner of that asset (the $800k house) placed value on his asset based on the availability of buyers like me who could buy the home. The problem is, this homeowner probably had less than 5% invested in the home. Where do you think that homeowner is today?

Had he put 20% down on his home, he would then own a valuable asset in which he has a real investment. This outlay of cash forces him to buy and sell his home in the same manner he would move an $800k investment around in the stock market – very carefully. Thus, the home has REAL value. However, having bought the home with little or no money down, the asset became disposable and so follows the real estate market.

So, as I said earlier, I cannot predict when the real estate market will bounce back, but I can tell you what needs to happen before it does. America needs to reinvest in herself by getting back to solid buying and selling principles. This strengthens home values, which encourages investors who employ builders who employ carpenters, painters, real estate agents, loan officers and so on. America was built on the “American Dream” which has turned into the “American Nightmare”; she can only be rebuilt by hard working Americans, not by Wall Street.

Aubrey Clark is a Syndicated writer, author and editor for Direct Banc, a low interest rate credit card directory.His current project outlines how to choose the best Airline Miles Credit Card and how to maximize the benefits when using it.

This is understandably one of the most desirable places in which to own a property in Italy. Yet with prices of apartments in St Mark’s Square, for instance, routinely changing hands for US$9.75million, many investors have shied away from buying real estate in Venice. As have many locals, in truth, and since the 1950s the city’s population has shrunk by two-thirds to its present 60,000.

Yet there are highly affordable and profitable investment opportunities to be snapped up here – if you look in the right parts of the city. One such area is Dorsoduro, one of Venice’s six sestieri (districts) and a short vaporetto boat ride from St Mark’s Square. Here, just US$360,000 can buy a small, well-appointed apartment. Dorsoduro lacks nothing in upmarket chic as it is home to the Accademia art gallery, the Peggy Guggenheim Museum and a recently opened Punta della Dogana Museum, a major collection of contemporary art on the site of an old 17th century customs house.

Yet it is also a lively, vibrant area – the Ca’ Foscari University is here – and after dark Dorsoduro’s bars and cafés form the centre of Venice’s nightlife. To get more bang for your investment buck, head for the even more affordable Castello, Venice’s largest district, which lies just to the east of St Mark’s Square but is slightly off the well-trodden tourist trail. Here, expect to pay around US$415,000 for a two-bedroom apartment of around 75-80sq m.

The rental yield of property in Venice remains huge. Some 20 million visitors a year beat a path to the city, for its historic architectural splendour as well as popular events such as the carnival in February/March; the Biennale arts festival in summer and autumn; and the Venice Film Festival in August/September. It means there is demand for rental properties almost all year round. In high season, a one-bedroom apartment can fetch from US$1,700 a week, a two-bedroom property around US$2,600 and the most prestigious properties US$8,000-plus.

Alternatively, look farther afield to the outlying isles among the 118 that make up the Venetian archipelago. In Burano, six miles outside the city centre, US$625,000 can secure a house rather than just an apartment. The nearby islands of Tellestrina Chioggia and Torcello are also worth a look. Bear in mind that rental yield will fall the further away from the centre of Venice in which you are.

Another popular option is to look beyond Venice and to the historic towns and cities within the Veneto region, some 45 minutes away by train. They include Verona, one of Veneto’s principal tourist and cultural destinations; Vicenza, a Unesco World Heritage Site; Padova, a lively, attractive and historic university city; and Treviso, renowned for its wine and cuisine. In Treviso and Vicenza, expect to pay around US$350,000 for a two-bedroom town centre apartment.

Padova is possibly the priciest of these towns and an 80sq m two-bedroom apartment will frequently come with a price tag of around US$550,000. Obviously the price falls considerably if you are prepared to take on a restoration project. Explore the surrounding countryside, where in places such as the spa resort of Abano Terme US$350,000 can stretch to a spacious three-bedroom home.

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AUTHOR BIO
Adriana Giglioli works for Homes and Villas Abroad.com, which showcases 2,500 properties for sale in Italy. Her specialist area is property in Calabria.

For those of you not familiar with Tremblant, it is located about one and a half hours northwest of Montreal, Canada. It’s a large year round resort and Mont Tremblant is best known as a ski destination, but also features a lake suitable for swimming, and a golf course in the summer months. The name of the mountain, Mont Tremblant, means “trembling mountain” in French.

For Mont Tremblant Real Estate to be an attractive place to invest, the prices need to be in an affordable range. After doing some searches online I found a nice site which lists all types of Mont Tremblant Properties. Some of them are rather high which are out of most people’s price range ($1 million +) but this site also lists Mont Tremblant Condos in the $175k + range. These are called condo/hotels which is a fairly new concept.

Condo hotels are usually large, high-rise, luxury hotels operated by big names including Fairmont, Westin, Four Seasons, Ritz-Carlton, and more. Condo hotels have condos that are sold to individual investors who may use their unit as a vacation home whenever they like. When they’re not using their unit, owners have the option of placing it into an organized rental program. Rental revenue, which is shared with the operator, helps defray the owner’s expenses.

This is a wonderful way to own real estate and that’s why I started looking for vacation-type locations that offer condo hotels. The best way to better understand how it works is to actually visit one. That’s exactly what I did in Lake Tahoe and toured the Marriott Grand Residence condo hotel. It was a wonderful property in a great south shore location and I almost ended up buying a one fourth share. I’ve also been tempted to explore by the Italy real estate market but the distance alone (I live in CA) might be too much of a barrier for me.

What stopped me you ask? Well, at the end of the day when I ran the numbers, it just wasn’t coming out cash-flow positive. In most cases it probably wouldn’t anyhow but I didn’t want to lose $500+ a month especially when I thought the prices were a bit high at the time (2007). I’m glad I didn’t buy b/c the prices have dropped so I might reconsider again. What really gets you is the fee the Marriott takes out each month. Of course they rent it out for you but at a steep cost.

UPDATE 10/14/09: It’s been one year since I went and looked at the Marriott Grand Residence and I’m very glad I didn’t end up buying back then. I was up there two weekends ago and the prices have fallen roughly 40%! I would’ve taken a huge hit if I purchased one last year and I was thinking about buying now but decided against it. I spoke with a time-share agency up there and they said it’s tough to rent them out. Also Marriott takes 40-50% of your rental income if they market and rent it out. Most weeks it would be vacant with no rental income and I wouldn’t use it that often myself. It’s a great idea for someone who works non-traditional shifts like on the weekends who could use it during the week, and then rent it out on the weekends.

So if you’re interested in this condo hotel concept of real estate investing, I recommend checking out a location near you. I really love the pictures of Tremblant and will hopefully get a chance to buy a place out there soon!

For a Caribbean property to be tailored for investment, there are two important principles which must be followed.

• Firstly, setup costs must be minimized to allow investment opportunities to be a viable option to most investors. Also, the less your setup costs are in comparison to profit, the higher your return on investment will be.
• Secondly, profit must be maximized. To maximize profit on your Caribbean property, there are several factors which must be given due care and consideration.

For example, many investors would require that their Caribbean property be fully managed to provide a healthy rental income. Therefore a management agency or company would ideally be setup to maximize rental occupancy, room rate charged and to fully manage the day-to-day running of the Caribbean property and surrounding land/site.

A favorable way for this to be setup is to buy a Caribbean property within a hotel or resort which is run by a well known and respected operator. This added brand name can greatly benefit the rental potential of your Caribbean property from day one.

Capital growth is also an important aspect to consider. Investors ideally need to conduct research to ensure that they are buying a Caribbean property which will experience sufficient demand for rental and for re-sale. This ongoing demand will ensure that property values will continue to increase and generate a substantial capital profit if and when the investor wishes to sell their Caribbean property.

There are many tax breaks to benefit from on your chosen Caribbean property. On some islands, there are no capital gains or inheritance tax to pay, making buying a Caribbean property a very attractive proposition compared to buying in other countries.

With due care and consideration, investors will be able to buy a Caribbean property which should adhere to all the above aspects and prove to be a profitable long term investment.

This guest post was written by Dan Chamberlain. If you have any questions or responses to this article, please post a comment below.

I know there are plenty of overseas opportunities out there which give you 30 days free use a year, but how strong are these as investment opportunities and should you be governed by this or not?

I think the first thing to look into is what you expect to gain out of overseas property investment?

• Medium to long term capital growth
• Rental Yield
• Buy to sell opportunity
• An investment to holiday in as well

Now if your overall aim is to make money from this overseas investment then you should probably take it that if you can get an element of “free holiday” a year it will be a bonus. As far as looking into the individual overseas investment opportunities available I will not go into specific countries now.

What I will say is that I have been investing in the UK for the last 4 years and can tell you that the tried and tested methods of spotting a good opportunity are really not that different wherever you invest. Look at the historical capital growth, the comparables in the area, rental comparables, speak to rental agents about the occupancy rate for these overseas investment opportunities.

All of these are points which are very easy to do in the UK but I think a lot of investors feel it is too hard to do the same on overseas property. If you start your due diligence with a list of points that you need to satisfy before you proceed, and not stopping until you fulfil all of these points then you shouldn’t go far wrong.

English is 2nd most widely spoken language in the world so you should be able to find someone that can help you with most overseas investments. Dig as far as you can into the history of the site you are looking at, if possible look on forums where overseas investors have purchased.

You really can do the same level of due diligence on overseas property as you can in the UK, it may take longer but it is possible. Don’t take any other person of companies word on the overseas opportunity you are looking at, remember due diligence is key!

This guest post was written by Dan Chamberlain. If you have any questions or responses to this article, please post a comment below.

Property investment

It is plain to see how just one of the above factors would be sufficient to stir great interest in property investment.

No matter what your reason is for choosing property investment, there are several crucial factors to consider before searching for the right property.

There are many methods which can be applied to property investment, dependent on your goals and what you want to achieve. Without going into further depth and variation, this can be broken down into two general aims:

1. Buy to Sell – Buying and selling investment property within the short term for profit.
2. Buy to Let – Buying and letting to achieve a rental income and accumulate equity, normally over the mid to long term.

It is important to decide which route to go down, as this will very much depend on the property most suitable to invest in and how best to set this up.

Property investment can be extremely rewarding but should only be entered into with due care and consideration. There are many crucial factors to consider which will determine which direction you will move in when considering the endless property investment possibilities.

Careful consideration must be given to location. You must decide if you wish to invest in your local area which you may be more familiar with, or invest in a current “hot spot” which may provide more attractive investment options.

The more adventurous investor may be interested in overseas property investment. A great deal of care and research should be given to any investment property proposition, particularly when looking overseas where the purchase process, tax liabilities, etc. could be very different to the UK.

Property price must also be considered, with widely varying properties available at all levels of investment. Investors tend to be guided by the capital they wish to invest in any one property.

A mortgage broker or lender will be able to advise you on how much you can borrow to invest in property, along with any further costs or fees involved. A Solicitor can also advise you on the legal costs, disbursements (local search fees, etc.) and stamp duty cost if applicable.

Once these factors have been considered, the next step in property investment would be to search for suitable properties and undertake the essential research to minimize risk and maximize profit.

You can never do too much research. Speak to local agents to get feedback from the perspective of property professionals.

Properties which are ideal for investment will inevitably sell quickly. Time consuming research can unfortunately result in astute investors missing out on some great investment opportunities. The internet can be a great place to carry out a large portion of the required research in a fraction of the time.

The above serves well as an introduction to property investment and the first steps which should be undertaken. By gaining a good perspective of your goals and aims and by not deviating from your chosen investment plan, you should form a solid basis for successful property investment.

This guest post was written by Dan Chamberlain. If you have any questions or responses to this article, please post a comment below.

Flipping

The first method I’ll cover to invest in Real Estate is a shorter term option called “flipping”. Basically, flipping a property is buying a property at a below market price and then selling it at a market price. The property may be purchased below market value because it needs repair, or because the sellers have a need to sell the property quickly. The advantage of flipping a property is that it creates a shorter term profit compared to holding a property.

The disadvantage of flipping a property is that one needs to sell it to recapture their expenses. A mortgage or Home Equity Line of Credit (HELoC) may also be used to bring cash back out of the property, but may reduce the overall profit from the sale. When flipping a property, one needs to be very aware of not only the purchase price, but also the full cost of acquisition, renovations, selling the property, and cost of carrying the property.

Keep in mind that loan costs for this type of venture are generally more that of a primary residence. Taxes and insurance will also be higher. An investment scenario might look like this:

$165,000- purchase price
$ 1,650- acquisition costs (about 1% of purchase price)
$ 10,000- renovation budget
$ 11,700- carrying costs (budgeted as $1950/mo for 6 months)
$ 18,000- selling costs (6% for real estate commissions, and 2% for other costs)
$225,000- projected sale price after renovation
$ 18,650- projected profit

One thing to keep in mind is that the Return on Investment (RoI) is actually higher than it first appears. Initially, it would appear to be a 10% profit (about $186k invested to return about $18,650). Over a six month span, that isn’t bad. However, the return is actually much higher. Generally, the loan requirements for this type of property will only require 20% down (or less, but at a higher loan cost). So, that means the actual cash investment is closer to $55,000 ($33k down + $10k rehab + $12k carrying costs). This makes the RoI almost 34%. Not bad, but remember this isn’t like owning a stock, there is a lot of work that goes into making this happen. One also needs to be in a position to “carry the property if it doesn’t sell as fast as planned. The bottom line is that if one is realistic in their expectations, a lot of money can be made pretty consistently.

Buy and Hold

Another tool in the bag of the Real Estate Investor is the “buy and hold option. Buying and holding a property is a longer term strategy. In this case, one is using the increase in values over time, generally in conjunction with rental income, to increase their personal wealth. The renter is the key to this being a hugely profitable strategy. An example of this would be:

$200,000- purchase price ($40k cash, $160k mortgage)

$485,000- selling price (after 30 years at a conservative 3%/yr.)

$1,500/mo.- carrying cost (this will go up slightly as taxes and insurance increase)

$1,600/mo.- rent (first year)

* A note about the rent: I would rent to the “right tenant at a discount to keep them longer term. Also, the rent, which will increase around the same as property values over time will go from $1600 in the first year to $3900 in the 30th year. Keep in mind that while the carrying cost will go up, they won’t go up nearly at the same rate as the rent.

While there are a few things to plan for, such as repairs, upgrades and time without renters, if one held the property for 30 years, they would have a property worth almost $500,000 with no mortgage. I would feel confident in saying that the cash flow from the rents (especially as they increase) will cover any expenses in the long term. Compare this to a 6% return on the down payment from a mutual fund, and the $40k down payment would possibly yield $230k.

Shifting classes

Either of these strategies can be used with both commercial and residential properties, as well as undeveloped land. The property may also be shifted from one class to another. Land can be flipped by building a home (residential) or shopping center or warehouse (commercial). A warehouse type of building may be renovated into loft apartments (B&H, and residential) or sold as loft condos (flipped). A home on a busy street may be renovated to offices and be re-zoned commercial and either rented or sold. Obviously there are a lot of variations that can be employed.

But what about for a different budget?

Also, the price and financial commitment can be varied as well. Condos ready to be flipped often come on the market at prices well under $100k, and occasionally as low as $50k. A $15k investment may be able to yield a $25k or $30k return. Also, one can partner with others looking to do the same type of investment and form a partnership. This arrangement adds complexity, but also spreads the risk.

Lastly, remember to talk with your accountant and/or tax preparer about the tax ramifications of these types of investments. One may be able to employ deductions and credits to lower their tax liabilities from their investments. If you have any questions, or would like to get started in real estate investing, please feel free to contact me.

Written by Lane Bailey

Lane Can be contacted through http://www.LaneBailey.com

One of the reasons you still find good deals on HUD homes – even though they are supposed to sell at market value – is that they are sold “as is.” These are houses that have been foreclosed on and repossessed, so the previous owner may not have had the means nor the motivation to properly care for the home. They often have enough problems to scare away most home buyers.

What does this mean? It means that due to the condition, the market value may be low compared to properly-maintained homes. This can mean an opportunity for an investor who is willing to fix a few things. For example, to the general public, a “problem house” can be worth $40,000 less than surrounding homes, while it may take only $10,000 make it look good again.

Buying HUD Homes

What is a HUD home? It is a house that has a HUD-insured mortgage loan on it. When the owner doesn’t make the payments, HUD pays the lender what is owed, and then takes ownership of the home. They try sell it quickly, and at market value. Virtually anyone who can pay cash or get a loan is eligible to buy these houses. (HUD employees and relatives of HUD employees are eligible, but must receive written approval from the Director of HUD’s Office of Single Family Asset Management in order to purchase a HUD-owned single family property.)

HUD homes are found in all sorts of neighborhoods, although most are meant to be affordable to low-income and moderate-income families. These are homes that generally sell for the same as surrounding homes (except when they need work). To find HUD homes in the price range you want, then, you simply look for neighborhoods with homes in that price range.

If A HUD house need fixing up the asking price will reflect that. HUD may offer special incentives such as an allowance to upgrade the property, a moving expense allowance, or a bonus for closing the sale early. The houses are sold “as is,” but HUD will allow you to get professional inspections prior to making an offer. The cost of these will be yours, however, whether or not you make an offer or buy the home.

On most sales, you can request that HUD pays all or a portion of your financing and closing costs. Essentially you just make an offer as you would on any property, except that HUD homes are typically sold in an “Offer Period,” at the end of which all offers are opened and the highest reasonable bid is accepted. If not sold in the initial Offer Period, you can submit a bid any day of the week, including weekends and holidays, until the home is sold. If your bid is accepted, your real estate agent will usually be notified within 48 hours.

HUD doesn’t loan on these homes, although they do offer mortgage insurance programs that can help you get a loan. Contact a HUD approved lender for more information.

Investing In HUD Homes

HUD gives priority to owner-occupants purchasers. However, if there are no acceptable bids during the priority period, unsold properties are then available to all buyers, including investors. Your real estate agent should have the necessary details.

There are a couple ways to find out what HUD homes are available in your area. You can visit the HUD web site online and see the listings there. A better way is to find a participating real estate agent. He or she will know what is for sale, but also may know what HUD homes will soon be for sale. In any case, your real estate agent must submit your bid for you – HUD generally doesn’t accept offers directly from buyers.

When you make an offer, your real estate agent should help you with any paperwork. The settlement date (if your offer is accepted), will normally be within 30-60 days. You need to arrange financing and close the sale within this time, or forfeit your earnest money deposit (or you may be able to pay for an extension of your sales contract). The selling agent’s commission will be paid by HUD but only if you make this a condition of your offer.

Of course, when buying HUD homes, you have to analyze them like any other investment. If it will be a rental, you have to do the math to see if you’ll have positive cash flow. If you plan to fix it up and sell it, be sure there is a profit after all expected and some unexpected costs. Just because it is a HUD home doesn’t men it’s a great deal.

Another thing to remember is that the Real Estate market moves in cycles. It never stays low or high for too long. Eventually things reverse and go back to the way they were in the previous half of the cycle. With a little bit of knowledge you can come close to predicting the cycles and making a killing in the market. The market is also unpredictable with the leading experts unable to always buy low and sell high. Most of the time it is just educated guesswork that may or may not work so you there is no point in waiting for the ideal time to invest in the market.

The Real Estate investor that always makes money is the one who makes it a habit of buy and hold. While it is true that their money is tied up it is equally true that a sluggish market or slow economy does not do them any harm. They simply have to hold on to the property and eventually when the upside of the cycle comes around they can sell it off. In the meantime they can continue to make money by renting or leasing such property. “Buy and hold” investors are very patient and they usually have more experience watching the market than short term investors. This means they are that much better at predicting the cycles. They know when they can expect peaks and valleys and they can plan their actions accordingly. They are much better at reading the signs and making the right buy or sell decision. Being active in the market for a long time also means that they have a thorough knowledge of what is available where, and they can move in and get working.

The Real Estate market is currently going through a sluggish period all over the world, apart from a few spots like Dubai and some locations in China. This turned out to be bad news for those investors who thought that the market will continue to go up indefinitely. The good news here is that since the prices are falling down it is the right time to buy. You cannot wait too long or the cycle may reverse again by the time you are done deciding and you will pay more than you ought to.

If you are looking to buy ownership property instead of investment property then there is no point in looking at the market condition. Just go ahead and buy.

Written by William King

Due Diligence

Due diligence should always include a look at the books. Review the last 24 month’s income and expense statements, and watch for anything unusual, like expenses that are too low or income that seems higher than usual. Look at the rent roll, and investigate whether rents are over or under the market rates for the area you are in. Check the payroll records if there are employees, and watch for surprises, like accrued vacation time that you’ll have to pay as the new owner.

Always verify income. You want to see rental agreements signed by the tenants, as well as rental histories, which might show if there are any problem tenants or late payments still due. Documents for rental deposits should show amounts and where the deposits are (which bank).

Look at the service contracts and agreements. Ask if they transfer, or if you are free to change to better (possibly cheaper) services. Among others, you’re looking for property management, landscaping, snow plowing, pool cleaning service, and heating and cooling system maintenance agreements.

Do your initial exterior inspection. Walk around with pen and paper, and note anything unusual or in need of repair. Arrange for professional inspections where needed. Be sure that the electrical and plumbing systems are up to date and meet current codes. Estimate of how many years of use the roofing has left, and look at driveways, landscaping, and the condition of exterior paint.

Your due diligence should include an interior inspection. Meet some of the tenants if you can. Look for any problems you’ll have to fix in the coming years. Watch for water damage or fire damage, pest problems, and obvious “problem tenants,” or “problem apartments.” Are there empty units that are listed as occupied? Get the necessary pest inspections and safety inspections. Some Fire Marshalls will do a free inspection to verify that the building meets current codes.

Call local authorities. Ask about any zoning or encroachment issues, or permit problems. Have there been any fire code violations, and were they fixed?

It is usually best to use professional help when doing your due diligence. Your accountant can decipher the books better than you, and notice anything that doesn’t add up. A lawyer can review your offer and other documents. She can also tell you what other things you should be doing.

Take notes. Do something about serious issues (have them fixed or adjust your offer). Most problems you’ll run into when buying income properties are not entirely unforeseeable. They can be avoided or resolved if you use your due diligence checklist diligently.