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Posts Tagged ‘Estate’

Of all possible investments that are within the reach of the average investor, none ofter the combination of outstanding benefits that are available to real estate investors. And, do you want to know something, banks and life insurance companies recognise this fact!

So they invest your money in real estate. While they pay you 1 to 3 percent for the use of your money, they are making 10 to 20 percent on it.

Why is real estate such a good investment? It offers the investor at least five different returns or ways of making money, on his investment.

Gross spendable income – cash flow

Investors also refer to this as “cash flow” or how much money that you can spend at the end of the month or year after all the operating expenses and mortgage payments have been made. We also call this as “gross” spendable because we have not taken income tax consequences into consideration at this point.

We always purchase properties that cash-flow. It takes time to find them, but it is well worth the effort. The simplest definition of positive cash flow is that you collect more revenue, usually in the form of rent, than it takes to pay for and operate the property.

A big advantage of real estate over other investments is that it can produce cash flow on a monthly basis. The cash generated by a real estate investment will always be a much larger percentage cash-on-cash return than any other investment.

The beauty of a cash-flowing real estate property is that it can help you become financially free. We discussed two real life examples of such real estate property in “How to know if a property investment is worth investing?”

Equity income

This is also referred to as equity buildup or principal reduction. Anyone who has had a mortgage on a home or car recognises that each time a payment is made, a certain portion of that payment is for the interest charged by the lender and the balance goes toward reducing the balance on the loan.

In a real estate investment, this equity income can be a sizeable amount. Although you cannot spend it each month, when the time comes to sell your property, you owe less on the mortgage, so you will receive more money at closing. It’s like putting money in the bank each month.

Making inflation work for you instead of against you – appreciation

Like inflation, you do not see it but it’s there. Only now, it’s working for you instead of against you. How does it work? Each year, because of inflation, your real estate is appreciating in value. Those of you who own a home, for example, would you sell it today at the same price you paid for it five or ten years ago?

We keep on having babies but God quit making land a long time ago. The supply is limited.

What does this mean in terms of existing land values? It means that existing land is becoming more and more valuable each year. It explains why investment real estate, whether in single family homes, apartment buildings, office buildings, shopping centres, ware houses and even vacant land, has become the most secure and profitable way to beat inflation. Existing land in most parts of the country, is appreciating at a rate greater than that of inflation.

How real estate stacks up against other investments – leverage

Leverage is an interesting thing about investing in real estate. It’s more than likely you have heard the term Other People’s Money, or OPM. The concept is simple and powerful.

The OPM concept is using money generated from someone or something other you in order to start a business or acquire an asset. While it is true that you can do this to an extent with stocks through buying on margin, the fact is that there is no investment where the application of this tool is more powerful than in real estate.

In real estate the leverage is based on the asset itself and you can get a bank to loan you the money up to 90 percent, and sometimes even 95 to 100 percent, of the total asset value. Why do banks do this?

Because they can repossess the physical asset itself should you default. Buying stocks on margin, however, allows you to borrow no more than 50 percent of the stock portfolio value. Just try to get bank to loan you the money for buying stocks – let alone your margin! Instead, you have to buy through a brokerage – at a high interest rate. In other words, when you buy stocks on margin, you are taking the risk. But when you take out a loan to buy real estate, the bank is assuming the risk.        – Ken McElroy in “The Advance Guide to Real Estate Investing”

You can see the power of leveraging demonstrated by real life cases in our article “Why you want to take up a loan for your real estate investment?” No other form of investing allows an investor the opportunity to control so much with a small amount of his own cash.

We further discussed in “How to finance your real estate investment for maximum return?” the ways to structure a mortgage loan in order to get the maximum return from your cash investment in real estate.

An investment that allows you to control

A unique advantage to real estate is that you can control it. In other types of investments, you give your money to a financial advisor and they place it for you in a company’s stock, a bond, or a mutual fund. What happens after that is completely out of your control. You have no ability to make operating decision for the company you have invested in; you are at the mercy of its managers.

Similarly, you have no control over financial markets when you purchase bonds or futures. You make a calculated guess, and then you sit back and watch. With these types of investments, the only control you have is choosing whether to buy or to sell.

Real estate is different. You purchase a tangible asset and you manage it. While there are still external market conditions that affect your investment, the difference is that you have the ability to manipulate the operations of your investment to respond to those conditions. Instead of being reactive (buying or selling), you are being proactive.

For example, if you are a landlord, you have the ability to manipulate rents based on changing market conditions in order to maximise income. This doesn’t always mean raising rents. The goal is to maximise income. Since it is a dynamic process, that might mean lowering rent or offering an incentive. A property’s occupancy comes into place here.

If you have the highest rents in a market, chances are potential tenants will rent from a direct competitor. Then all your high rents become lost potential income. The dynamic of real estate require you to keep occupancy, as well as rents, high.

You have the power in real estate to control the operational performance of your asset more than any other investment.

Romania – famous for its beautiful palaces and castles, wonderful liquors and food, Dracula, dazzling women is a beautiful country located in central-eastern Europe. It is the 12th largest country in the Europe. The economy of Romania has shown potential growth in the past few years. Since 2000, Romania has shown a rhythmic growth of 4.5% raised by 8.3% in 2004.

The current economy statement in Romania is steadily increasing the levels of GDP and significantly high levels of Foreign Direct Investment (FDI). The economy investment grade has recently been upgraded by Fitch and P&S. Romania benefits from the rising FDI flows due to the privatization process, and the advantages of its big internal market

Romania is also having a great geographical location at the intersection of some great trade routes joining the Far East with the Western Europe. With population of more than 20 million people, Romania has a large domestic market. After having such great property investment opportunities, Romania is continuously attracting more and more foreign investors to invest in Romania. Stable and encouraging government of Romania is the other reason which is creating great investment opportunities in Romania. The Real estate market in Romania is growing at a rocket speed. Following are some best reasons for investing in Romania.

Reasons to Invest in Romanian Real Estate Property:

1. With strategic and visionary efforts by Romanian government, the economy is becoming stronger and stronger over the years. Romania is one of the fastest growing economies in Europe.

2. Falling inflation and increasing employment are two other boosters of rapidly growing economy. Inflation has dropped to 7.5% low in 2005 from 22% high in 2002. Unemployment rate also fell to 6.2% in 2006 with less than 3% in capital Bucharest which is far lower than the many other developed European economies. With under control inflation and falling unemployment rate Romania is confidently creating the strong property buying opportunities over the country.

3. Foreign investment in Romania is increasing drastically. From 2001 to 2005, foreign direct investment in Romania has reached over 5000 million euros and more 8000 million euros added in 2006. With 55% of FDI in capital city Bucharest, major companies from all over the world are coming to invest in Romania.

4. Along with capital city of Bucharest, other cities in Romania like Brasov, Transylvania, Craiova, Constanta and Iasi are also attracting investors. Transylvania is the Romania’s biggest tourist asset and the expected to attract more investment with immense number of investment opportunities. One more golden opportunity where investors want to invest is in Brasov, the most visited city of Romania. Having facility of international airport, Brasov is also linked with new motorway for fast transportation.

5. Report given by investment experts says that house prices in Romania are expected to increase by 4 times higher over the next 10 years. In past few years, property prices are already raised by 25%. Even such a great rise, property price in Romania are still 20-30% lower than the other eastern European countries.

6. After accession to the EU in 2007, the real estate market in Romania has been influenced dramatically. EU funding to Romania has been invested into the infrastructure development in road, hospitals, schools, bridges etc. EU funds will help to create more jobs and therefore potential customers seeking to buy/rent properties.

7. Low tax rates are the other main reason to invest in Romania. Romanian government has set up a flat rate of only 16% for corporation and income tax. Such low and fixed rate of tax is powering Romania to draw more foreign investors seeking for new business places.

Some other secondary factors are also responsible for great investment opportunities in Romania. Romania has great network of international airports with two in capital Bucharest. Developed and fully facilitate ports in Romania is also boosting its economy drastically. Romania has huge network of telecommunication systems equipped with modern telecommunication equipments. Also there are nearly 48 industrial parks.

As far as it looks, the boom is yet to come! Buying property in Romania will be great ROI in near future. So what are you waiting for? Invest now in Romania for your better future.