November 19th, 2008 — Investing, Long Term, Money, Personal Finance, Real Estate
Right now, if there was a market that had bad news written all over it, it would be real estate. The housing crisis has made investors jumpy, the economy appears to be tanking and home values are plummeting across the country. Would you believe that this is actually a good time to get into real estate? With the proper choices and management, this is absolutely true.
Down markets are a speculator’s dream come true and they can easily change your entire fortune. While we certainly don’t recommend sinking your life’s savings into a bunch of dead end properties this instant, this is a good time to think about investing in real estate the smart way. Never overextend yourself and always take the time to make smart investments that will pay off in the long term.
Let’s look at that statement a little more closely, especially the last two words – long term. Yes, right now, an investment in real estate is not going to do very well. In fact, it may even lose some value over the next few months. But, what goes down will go back up. Property values cannot stay low forever, and although they may not reach the insane heights they recently attained, it’s easy to make a good chunk of money with the right house.
Instead of looking at an investment in real estate in the tangible form, let’s compare it to an investment in a stock. You purchase a stock at $4 today and while it’s been steadily going up over the past few years, it’s still a pretty cheap buy. However, in eight months, the company takes off and the value of your stock increases exponentially. This would be considered a good investment. How is investing in real estate right now any different?
In fact, in some ways, you can do quite well with an investment in real estate right now. Consider the fact that foreclosures are at an all time high. What does this mean? Thousands of families need a place to live and they’re not going to be able to get a new home loan right away. This means that thousands of new renters have flooded the market and they have to find a house to rent.
Investing in real estate is always risky, but sometimes, the best returns come from taking a chance in a down market. You can easily pick up a property for pennies on the dollar, earn money from renting it out right now until the market changes and then sell it for a profit in a few years.
Remember – if you are going to jump into the real estate market, never purchase a property without first getting an inspection. Some homes that have been foreclosed on will be wrecked by the old owner or may have fallen into disrepair. Never accept anything on face value and insist on seeing the property in person. Pick properties that are solid, located in good neighborhoods and likely to go up back in value once this crisis passes.
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October 8th, 2008 — Debt, Income Streams, Investing, Leverage, Personal Finance, Real Estate, Stocks, business, good debt
If you are thinking about putting into practice debt leveraging in order to start creating more than one stream of income, it can seem like there are thousands of avenues open to you. For those just starting out, this can be very confusing and it is all too easy to pick the wrong thing to focus on. Let’s go over a few of these options and discuss their pro’s and con’s.
1. Real Estate.
Leveraging debt to buy an investment property sounds very good on the surface. You’ve got the ability to either rent that property out or turn it around for a profit. In a perfect world, this is a pretty sound investment, but as you know, our world is far from perfect. Markets crash, property values plummet and renters trash your investment. If you are considering investing in real estate property, you need to have many ducks lined up in a row, from property maintenance and management, to making sure you can keep making those loan payments, even if you have no additional income coming in. This is a medium to high risk investment for debt leveraging and can either pay off big, or you can lose your shirt.
2. The Stock Market.
This is a very risky proposition indeed. While you can make great returns on investing in stocks and bonds, it can also take a very dramatic turn for the worse. Those that have no experience in this type of investment are better served by finding another way to leverage their debt. Only those familiar with the markets and their fluctuations are advised to consider this high risk opportunity.
3. Starting Your Own Business.
If you have always had a dream of running your own business, leveraging debt to make it a reality is very rewarding. However, without careful planning, this too can cause financial ruin. Some businesses never take off, others will take six months to six years to turn a profit. Investing in yourself is never quite a sure bet, but if you have the fortitude and the financial resources to carry it off, it is well worth the effort.
4. Small Investments With Small Returns.
For those just getting started out with leveraging debt, the best answer is typically starting very small and working your way up. You’ll learn a lot about investing, debt and managing risk, but you won’t stand to lose as much when you go the safe route. Your returns will be smaller, but until you have the hang of it, this is probably the lowest risk route you can take. The lessons learned here will be worth far more than your original investment and can last you a lifetime.
Leveraging debt is not for everyone, but when used properly, it can be the key to unlock financial security. As with any investment, proper caution, research and due diligence are vital if you want to succeed. Start off slowly and work your way upwards and you’ll find it much easier to get off on the right foot.
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