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

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

---

Fixtures

Fixtures, related to real estate, are items that were originally... Read More

Basic Real Estate Valuation

Given the current interest (dare I say hysteria) associated with... Read More

Finance Your Real Estate Investment Properties

Unlike traditional residential real estate mortgages, real estate investment financing... Read More

Young Couple Buys Ranch with Government Money

Kirk and Tina Sczepanik had a dream. They wanted a... Read More

Achieving Positive Cash Flow from Your Real Estate Investments

Even if you're counting on rising property values to eventually... Read More

Important Facts For Home Buyers

If you are considering buying a home or have spent... Read More

Stopping Home Foreclosure with Bankruptcy

Bankruptcy Will Stop Your Sale - At Least For Now... Read More

How to Build A Rental Property Money Machine

If you are looking for a steady, income-producing investment that... Read More

Real Estate Investors: How to Get a Powerful Marketing Education for Free

I am a total geek.A few weeks ago, late at... Read More

Why is Now the Time to Buy in Turkey?

Turkey is a paradise of sun, sea, mountains, and lakes... Read More

Rehab Your Way to Wealth: The Quick Way to Fixer-Upper Success

Completely rebuilding a house is not necessary to make money... Read More

Investment Concerns for Selling Your Home

Besides the emotional upheaval of uprooting from your home, your... Read More

Selling Your Home Yourself ? Pricing It Appropriately

When you're selling your own property, whether it's a house,... Read More

Burn, Baby, Burn!

Luxury homes are lots of fun to inspect. Sure, the... Read More

Using Color Psychology to Sell Your Home

When painting your home for resale, choosing the right colors... Read More

Back To The Future - Big Changes Are Coming, Get Ready Now

The comments below are quoted from a recent speech by... Read More

Understanding the Escrow (Closing) Process

1. What is an escrow?Escrow is defined as a process... Read More

I Believe God Wants Me To Tell All In Real Estate

After years of experience in the real estate industry I... Read More

Best Time to Buy? Best Time to Sell?

When is the best time to buy? When is the... Read More

Reprint Rights and How To Use Them To Generate A Steady Income

I can't emphasize enough how important it is to have... Read More

Title Insurance Protects Your Financial Investment

You purchase homeowners insurance to protect yourself financially in case... Read More

Real Estate Appraisal - Do It Yourself

For single family homes, there are two basic methods used... Read More

Maximizing Curb Appeal and First Impressions to Sell your Home

We all know that a home or property of any... Read More

Appraisal vs. Market Value: How to Avoid Pitfalls in the Sale of Your Home

When you sell your home, appraisers use comps (comparable market... Read More

Customer Service ? The Real Estate Revolution

Traditionally, real estate has been viewed as a sales industry.... Read More

Home Buying: Things To Keep In Mind

So you've decided you want to own a home and... Read More

Notify Them When Youre Moving

One of your first steps, when you're getting ready to... Read More

Thinking About Selling Your Home?

Owning a home is the original American dream. It's the... Read More

Old House? New House? Weighing Your Options

Maybe it has something to do with a childhood home... Read More

Types of Listings with Agents

There are several different types of listing contracts. Few of... Read More

Why Use a Property Manager?

Most experienced property investors use property managers. Why? Because they... Read More

Property Auction & Why You Should Run A Mile From Them

That's A Funny Thing To Say About Property Auctions; They're... Read More

Reinventing Real Estate, Part 2: Online and Empowered Consumers Are Taking Charge and Paying Less

Demanding consumers"Internet buyers tend to be better informed on market... Read More