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Foreclosures, foreclosures: Not for everyone

As foreclosures continue to mount throughout the United States, I have seen an increase in the amount of information out there concerning these properties as viable and profitable investment opportunities.

But are they really?

In the shortest answer, yes they can be a good real estate investment opportunity for seasoned investors, but rookies are probably better off getting their feet wet in real estate investing with another type of property.
This is because although foreclosed properties can usually be purchased at deep discounts, they can also come with a host of problems that are big profit drainers.

I found a great article in this week’s Real Estate Journal from The Wall Street Journal, “Buying foreclosure properties has its rewards, but also risks,” by Jeff D. Opdyke, that discusses how amateur investors should be weary about starting out in foreclosure investing.

The reasons are stated clearly here:
“Novices face a host of risks. Foreclosed homes can come with hidden debts. Homeowners generally won't let you inspect the home before you try to buy it out from under them. Not knowing the local rules, which vary from state to state, can also cost you big.”

But of course there are exceptions to every rule…
So let’s here your stories.
Have you bought a foreclosure as a rookie that resulted in tremendous profits?
Got any advice for anyone looking to get started?
Share your stories and experiences below.

Who would’ve thought…

As I get the ball rolling with my new focus for The Real World to be on real estate investing I have had to take some time out to do some research on the subject; and like I have said before, there is A LOT of information out there on the subject.

Some good, some a lot of nonsense; so I’ve taken it upon myself to do the dirty work for you and weed all of the information out.

This brings me to my latest finding on the subject, which came from the Sunday edition of The Los Angeles Times. The article, written by Lew Sichelman, “Number of college kids is rising: They have to live somewhere,” looks into how property specifically designated to house college students could be one of the most profitable endeavors for real estate investing in recent history.

Who would’ve thought a bunch of beer-drinking co-eds could be the secret to building wealth?

The logic behind this thinking is simple: The demand for higher education as a mandatory preresiquite for the workforce will only become bigger as the years go on; meaning the number of students enrolled in college will only continue to grow.

Investment Opportunities:
The article recommends Real Estate Investment Trusts (REITs) as the simplest way to put your real estate investment dollars to good use.
“REITs are companies that own and often operate income-producing properties. To be a REIT, a company must distribute at least 90% of its taxable income to shareholders in the form of annual dividends. Because investors own stock rather than property, they can jump in and out of the market at will.”

But, if you prefer a more hands on approach with your investments, purchasing single-family houses or small apartment units near campuses to rent out to students can be a great alternative.

Of course if you want to go the more “hands-on” route you will have to think of all of the negatives that could go along with renting to college students (i.e., loud keg parties, music blaring at 2 a.m. and unusual wear and tear on the property: no offense to any students out there).


All in all, whichever route you choose to go when it comes to cashing in on this niche, you are probably going to see some nice profits if you play your cards right. Start by researching the college town you may be interested in to get started.
Here’s the link to the full article:
http://www.latimes.com/classified/realestate/news/la-re-lew4feb04,0,2779302.story?coll=la-class-realestate-news

The Ad EVERYONE is talking about

Word has been buzzing about The National Association of Realtor’s new $40 million ad campaign to renew consumer interest in buying homes, and I was lucky enough to see it with my very own eyes last night.

The campaign, which includes radio, print advertisements and one TV commercial, has been getting a lot of criticism from people who claim they are just trying to rake in more money. Others say it’s a good way to stimulate the market, encourage home sales and raise public awareness….


What do you think?


Here’s an excerpt with a little more information about the ads from Mortgage News Daily:
"The NAR blitz is targeting a number of audiences; buyers, sellers, FSBOs, owners of commercial real estate and those looking for commercial space or property. Hispanics will come in for a good deal of attention as will real estate agents themselves; a group which may or may not be in need of a bit of morale boosting by mid year.”
“The one television ad available for previewing on-line, A Good Time to Buy, was straightforward and covered a lot of ground in 30 seconds: ‘When you have a family it is always a good time to buy; prices are favorable; every real estate market is different; there are a lot of options; working with a Realtor took all of the guesswork out; it's a great move up market; it's the best market in years in terms of choice; if we didn't buy now we would have missed the opportunity.’ It all makes sense when you see it with quick cuts from one of the speakers of the above lines to the next. All of course were attractive and covered the spectrum of ages and races. $26 million of the NAR campaign budget is targeted to television ads.”


It was definitely an interesting ad to see airing on TV, especially since I have read various articles, blogs and discussion boards with input from both those who are opposed and those who think it’s a good cause.
I just wish I had Tivoed it.
Leave me your feedback, and let’s see what readers of The Real World think.

Is it "hot" in here?

As the housing market continues to stall throughout many local markets, I have noticed a renewed interest in real estate investing across virtually every type of media.
The timing could not have been better.
Just last week, there were a few different articles published on the subject in The Wall Street Journal alone. Analysts, writers and real estate professionals are all saying the same thing: Yes, you can still profit in real estate investing even when the market is not “hot.” I put this in quotes since many buyers would argue that it is indeed “hot” right now.

The renewed interest in buying real estate for profit is probably due to the fact that we are in the midst of a full-blown buyer's market right now. Buyer’s markets occur when there is more than a 6-month supply of homes for sale on the market; which is what we are seeing in many areas across the United States.

This new state of affairs gives many potential investors the opportunity to get their hands on a piece of property for what is probably below market value; always a key to success in any real estate investing transaction.
But as with any investment, there are some inherent risks involved; the biggest one in this situation being that your property depreciates in value and you sell at a loss.

If you are warming up to the idea of real estate investing, there are some important things you should know in advance to minimize risk and maximize growth and earning potential.
A January 10, 2007 article by David Crook of The Wall Street Journal Online, “Think small: Getting started as a real estate investor,” gives some pointers on the best properties to start out with if you are a newbie to R.E. Investing.
The article notes that would-be investors should start investing in the following order:
Start property investment with an in-law unit or guesthouse, next is vacation or weekend homes followed by single-family homes. You then enter the big leagues of real estate investing by purchasing multiple units such as apartment complexes and the like.
“Even in today's uncertain climate, novice real-estate investors can make money, especially in smaller properties that are easy to acquire and manage. A buyer with cash can drive a hard bargain and make out very well. And the worse the market, the better for the buyer. But don't get carried away. If you simply take over an existing 90% or 95% note, you won't make any money. Let the lender foreclose and take over the place. Then lowball the lender.”
So if you are like many other savvy professionals who are feeling the temperature rise in this niche, then it’s time to get started. There are countless resources and information out there to get you started on your journey.
If you have any stories about your days as a beginning real estate investor or any tips for all of the newbies out there, feel free to leave a comment.

New Year, New Mission

Tomorrow marks my sixth month “Anniversary” of my career as a copywriter here at LEI Financial, and looking back on the past few months it’s interesting to see how much I have learned and grown.
Just a few short months ago I can honestly say I knew little to nothing about the industry and now I can talk about an adjustable-rate mortgage and current market conditions for hours.
I’ve covered the basics in the mortgage and real estate industries for a while now, and I feel it’s time to move on to some more specialized information.
As I’ve gathered more and more information about the industry, I have become increasingly fascinated with the real estate side of the equation.
Although we are definitely seeing a correction in the single-family and condominium housing markets; opportunity abounds throughout the real estate investing sector.

Real estate investing has been a time-tested strategy to build wealth for years. Look at two of the richest men in America; Warren Buffett and Donald Trump.
Where did the majority of riches come from?
You guessed it, REAL ESTATE!


If you have surfed the Internet lately or picked up any trade publications, you have probably been bombarded with a lot of information about how you can get rich quick with real estate investing.
Well sorry to disappoint, but there is no “get rich quick” scheme involved with real estate investing.
That is why I am here to guide you through the art of real estate investing by weeding out all of the bogus information out there and finding all of the pertinent, interesting and exciting information that concerns this industry.
I’ll take a look at the hottest spots to invest, featured properties and just general advice when it comes to real estate investing.

So be prepared to make “The Real World, LEI Financial,” your one stop place for finding the most relevant and informative information about the “Real World” of Real Estate Investing.

To Own or to rent: That is the question

Searching for a place to live; whether you’re renting or buying is never the easiest or most enjoyable task.

I know this all too well.

My quest to find the perfect post-college place of dwelling has finally ended after what seemed like decades of searching with lots of dumpy places along the way. Along with two friends, I found a great three-bedroom, two bath place on the outskirts of Pacific Beach. Perfection.
For me, the decision on whether to rent or buy was obviously easy. I have just landed my first job after school and have learned extensively of the financial commitments involved with owning property – especially in pricey S.D.
But for others, the decision can be a lot more difficult. Sometimes there is a very fine line on whether it makes more financial sense to buy or rent.

Owning a home
Obviously, if you have the finances, owning a home has a lot more benefits than renting. Not only do you get to build up equity (which can be used for future investments or other funding needs), but you can paint the walls purple and have as many cats as you want!
In addition to all of this, the tax benefits that come with homeownership are also something to smile about.

So with all of these perks, why would someone with the money want to rent instead of buy?

Renting
Well, there are various reasons as to why it sometimes makes financial sense to rent for a while and then take the plunge into homeownership. First of all, if you are not in a job that is extremely secure (meaning you basically have a 0% chance of not being fired), then you should consider renting for a while. Continuing with finances, you should also have some cash saved before you think about buying a home, even if you don not put any of it towards the down payment. There are countless other costs associated with home ownership, such as closing costs, furniture and general maintenance; the list goes on.
Also, if the market is in a rollercoaster state (think right now) and you are just unsure about it in general, you should hold off for a bit.
For people who are a bit more on a lazy side, they may find renting favorable in that if something breaks, they can just call maintenance or their landlord to come and fix it.
The same cannot be said for owning a home.
Although the sooner you buy a home, the sooner you can start accumulating equity and building wealth, you do not want to get into a situation where you cannot afford the home you just bought.
With the increasing amounts of mortgage foreclosures and delinquencies lately, it is much better to have an adequate amount of money saved up before buying a home.

All in all, it comes down to a person's individual situation. If you have any helpful tips on how to better decide to rent or buy; feel free to share them in a comment.

This link: http://buyvsrent.movingavg.com/calculate.html, provides a helpful calculator for people deciding on whether it is better to rent or buy. You can enter the amounts you would pay in both situations and see which one comes out more financially favorable.