Property Versus Shares

If you did not ask, you probably heard that up - "So what is the best investment, property or shares? Forum is typically a backyard barbecue with friends and family and of course it will be interesting to some ardent supporters of one asset class to another, is added to the mixture of its two hundred dollars turned home wisdom.

After hearing too many uninformed answers to this question, I decided to write this short article describing my views on the subject. As an investor of real estate investors and qualified financial planner I hope to give you a more intuitive than what you may have heard in the previous answer.

First let's take a look at the reasons for investing in real estate and stocks, respectively.

Reasons to Invest in Property

Easier to understand 

- Property investment is generally easier to understand that social investment. While real estate investing requires a certain level of sophistication, which does not require the same level of expertise that share investment.

Tangibility 

- Property investment provides tangible evidence that your hard earned money goes. It is much more rewarding hike through property investment in the aisles of a Woolworths store in which you are a shareholder.

Control 

- Investing in property offers investors a greater level of control over your investment. When making investment decisions influence property has total investment compared to stock investor whose influence is as great as their right to vote.

Potential to add value 

 - The property offers an investor the opportunity to improve its value is the renovation or development. This feature is not available for actions short of becoming a board member or create your own publicly traded company.

High gearing 

- Property that relatively small amounts of money to investors to gain exposure to relatively large assets. The property is a unique form of security for banks and in some cases can be fully funded without recourse beyond the property. Shares on the other hand are usually funded up to 70% and the lender has recourse through margin calls against the investor in the LVR is violated.

Low volatility

  - The property has always provided low volatility relative to equities, despite the rarity of valuation bias the results.

High long term returns

  - The property has always provided high returns over the long term, especially compared to fixed interest and cash.

Tax efficiency 

 - The property has a high degree of tax efficiency for a number of reasons. First, the returns are composed of a growth component that can be imposed on preferential terms (if held for more than 12 months) with the reduction of capital gains taxes. Second, the property can be strongly oriented resulting in a high deductible interest component. Third, the property allows the deduction of depreciation of a component for the construction of the slab and equipment that improves performance after taxes.

Reasons to Invest in Shares

High liquidity 

 - Stocks often provide greater liquidity to the property. While a line of credit secured by a property can help with the problem, which is not always desirable to increase loans when you need the money.

High Divisibility 

- A stock portfolio is much easier to divide a property portfolio as well as small amounts of cash requires an investor can sell shares for a similar value of shares when a real estate investor is forced to sell a property.

Low minimum investment 

- Stocks offer the opportunity to invest small amounts of money from the property. If you only have $ 5,000 to invest you will not have trouble finding stocks to buy, but good luck finding an investment property for that amount of money.

Low transaction costs 

- Actions involve transaction costs well below those assets. The only costs involved in intermediation shares are traded both in the acquisition and disposition. Property change involves stamp duty, statutory inspections and in relation to the purchase and sale commission legal advertising, agent.

Low ongoing costs 

- Actions involve significantly lower cost of ownership. Indeed, direct participation involves no ongoing costs, while the property may involve community costs, insurance, property taxes, rental costs, maintenance costs, management fees, rates and repair costs.

Diversification 

 - Due to the decline in share price in relation to the property, it is possible to achieve greater diversification by investing their money in stocks. For example, if you have $ 100,000 to invest, you can choose to issue $ 5,000 in packs of 20 companies from 20 different market sectors. For an equivalent amount of money you would have the opportunity to buy a property without a team.

Timely performance appraisal 

 - The shares of listed companies allow investors to make a rapid assessment of the quality and performance of your portfolio. The investor of action may simply call your broker or see your portfolio value online when the real estate investor has to obtain market valuations and appraisals or all of their property before assessing the performance and value of its portfolio.

High long term returns 

 - Like the real estate stocks have historically provided higher returns over the long term, especially in comparison with fixed interest and cash.

Tax efficiency 

- The shares have a high degree of tax efficiency for a number of reasons. First, the returns are composed of a growth component that can be imposed on preferential terms (if held for more than 12 months) with the reduction of capital gains taxes. Second, actions can be relatively buoyant resulting in a relatively high deductible interest component. Third, many Australian stocks offer dividends franking credits that can be used to compensate investors with tax obligations. In other words, income per fully paid share dividends provides a tax free income to investors of the action in the marginal tax rate of 30%.

The Returns

At the end of the day you can have all the benefits we have spoken, but the bottom of most investors yields. Although we all know that past performance is no guarantee of future results, we are still interested in how they played the asset classes in the past. So now let's turn our attention to the property and share the historical returns.

Over the years, I have seen both sides of the ardent supporters of research in the air waving camp support its assertion that the preferred asset class has always offered the best performance. Some have shares owned and some have slightly exceeding slightly surpassing shares or property taxes on or before the tax base station.

How is this possible you may ask? Well, back to the period of evaluation of research. As with all other asset classes, real estate securities and stocks move in cycles. It is therefore logical that the measurement period that incorporates more peaks and valleys less provide superior performance for the period. Due to the property and generally actions do not move in harmony with each other, each have peaks and valleys at different times of the cycle. Different periods of measures that capture and therefore can provide significant variations in the results.

These are the results of a report commissioned by ASX Perrin Cities. The evaluation period is only one year apart and used for a considerable amount of time to provide the most relevant information.

10 Years To December 2003

Property 12.7%

Shares 8.0%

20 Years To December 2003

Property 15.1%

Shares 11.7%

10 Years To December 2004

Property 11.6%

Shares 11.7%

To December 2004

Property 12.9%

Shares 13.2%

Source: ASX Investment sector performance report Perrin Cities

So what can we do with these results. Okay, enough with that property and shares each provided a long-term relatively high beyond all other traditional asset classes provide.

Conclusion

Property or shares? Given the comparability of historical returns and the many benefits they have everything it should be obvious that the question should not be owned or actions, but rather how and what parts of the property.

So next time you're at a barbecue and misinformed friends pipes up near the property or shares is far superior to the other, be kind to them their ignorance and encourage them to seek professional help finance!

Oh, and when it comes to buying merchandise for your portfolio, do not pay the retail price as everyone else, to acquire property intelligently by extending absolute costs developers. It's easier than you think .

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Mistakes to Avoid when Buying or Rental Property

If you are looking to invest in a vacation? With the housing market in the dumps, many entrepreneurs looking to buy cheap rent. Indeed, in this market, tight credit, if you have cash available, you can pick up a small house or even a duplex at a decent price, you can rent.



However, for those of you looking to jump for the first time, you must understand the risks of owning a rental. This is a true friend Jay knows that covers some of the mistakes that many novice investors make horror story of my good rental. This is not to scare you. However, it is intended to inform you about the risks with the intention of making a smart investor. If you know what to look for, you can avoid these mistakes that made ​​my friend.

In late 2004, Jay was desperate to get into the real estate game. I had read about real estate investment in the last year and was ready to go and start. As we all remember, was the height of the real estate market.

Mistake ( 1 ):

 - Do not choose tenants carefully. It is imperative that steps are taken to protect your investment by paying attention during the hiring process. While you must comply with the laws of landlord / tenant in its anti-discrimination, you have the right to require a good credit history and rental references.The inspection report indicates that the repairs were necessary for roofing, siding and furnace. However, my friend assumes that none of these elements was urgent and would be able to take care of them later down the road. In addition, the owner sold "as is" no negotiations. One day after closing, Jay received a call from a tenant in a panic saying that your oven is dead. The average estimate of HVAC contractors to replace the furnace is $ 3,000.

Mistake( 2 ) and ( 3 ):

 - Allow the seller to make all decisions in the negotiations and not be educated by the high cost of some repairs. Make sure you know what are the typical costs and if you can afford it. Never pay full price for the property has deferred maintenance. Remember you can always walk if the seller is willing to work with you, if the market is high or low.The ownership of Jay and the adjacent triplex used to be on a parcel tax. Before the sale, the former owner divided the property, which is more common than people realize multifamily properties. Neighborhood with an easement granted to the adjacent triplex was recorded with the county. The easement is for the use of parking. Jay and lot owner is responsible for their maintenance (keeping clear the snow and ice in winter and fixing potholes). However, the adjacent landowner and his tenants free use of the land and tenants Jay often struggle for a place to park. No maintenance of the common elements of the contract or covenants, conditions and restrictions (CC & Rs) in place governing the use of the parcel. There are no restrictions on the shelves of tenants, is synonymous with clients or maintenance required contributions for adjacent lot. Jay has all the responsibility without anything in return.

Mistake ( 4 ):

- Not due diligence in the special conditions of the property. Each time you find a property that has been subdivided into an adjacent property, or any property or equipment shares common characteristics, to ensure that maintenance of the common areas necessary agreements are in place before the sale. Ask the seller to provide all documents and agreements should not have been recorded and carefully inspect the report title.In the fourth year of ownership, the property does not charge flow. There are many turnovers housing, rents are difficult to maintain and reserves are depleted. Jay also thought I would be able to manage the property yourself to save money. Shortly after the purchase, he soon realized that he had to hire a manager to collect rent and eviction process for tenants who do not pay. Management fees significantly eat into their monthly rental collections and Jay is out of pocket to cover part of the mortgage and property taxes.

Mistake( 5 ):

- No analysis of projected cash flows of the property. You can avoid paying too much for creating a proforma adequate cash flow. When you buy an income property, you should analyze income and expenses of the property from the actual data provided by the seller, and then make adjustments to take into account the loss of vacancies and potential credit repair. You must also take into account the management fee, because if you're new at this, chances are you're not ready to be a property manager. If rents are not sufficient to cover these expenses, ask yourself if you are really willing to pay the bill every month.There is one last error that Jay has done and that is what has caught much in this crisis.

Mistake ( 6 ):

- Taking the wrong mortgage for investment. Get adequate funding is so important to any investment you are considering, whether it is an investment in real estate or a new business. The issue is larger, then this article may be covered. Furthermore, very few innovative financing options are dangerous these days. However, obtaining financing is crucial to your cash flow and stability of your investment.***Jay still struggling to dig its way out of your investment. He appears as a short sale for $ 49,000 less than they paid for it. He had already lost thousands of dollars in repairs, legal fees and lost rents. If this is the case, is likely to sell another hit $ 20,000 to $ 30,000. It would then be facing a potential deficit judgment if the lender decides to sue you for the difference between the outstanding loan balance and the sale. At a minimum, you should expect to pay taxes on the "gain", the amount remitted by the lender in a short sale.When Jay heard his friend speak to benefit from low prices and jump into the game, you will be invited to enjoy a coffee or a beer to share their experiences in hopes of discouraging. My hope is, however, not prevent, but we urge anyone considering buying a rental caution and perform due diligence. Familiar with landlord / tenant state laws, property management companies and research to know what cash flow you can expect. Holiday apartment can be a great investment and good way to get into the property set. Make sure you do not pass after the first roll of the dice.

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Property Investment as a Business

 How to Plan and Start

 

PropertyInvestment Business Plan

Property Investment: a Business

If you plan to invest in the property of one of the key concepts to remember is that you are, in effect, to go into business. Buying a property is not the same as buying stocks and putting them in the top drawer. The investment property is much more active, even if you hire a professional property managers and maintenance that you should always consider your investment property as a company staff. Your customers are your tenants and their actions are your rental properties. Any book small business will tell you that if you do not plan you plan to fail. You need to start your career in real estate investment not hang open houses and real estate offices, but with a business plan.

Your Property Investment Business Plan:

What are your goals with your real estate business? Many people, after deciding that the property is for them, jump to take a look at the local level "for sale" lists of websites, newspapers and magazines property. This is not a good place to start. Instead, you must decide what you want your new business. Every good business begins with a business plan. What is your goal: to create a source of income for retirement? Would you buy an asset to live or to sell? Want to access tax benefits? A good goal is a SMART goal is: 

Specific 
Measurable 
Achievement 
Realistic 
Time -bound. 

So, from an idea - I would invest in real estate, through the exercise: Specific: This type of property, apartments, houses, you want captial gains, rental returns at once? Who will know when you have achieved your goals: measure your income tax, capital gains, how? The plan is feasible - can not afford the payments without compromising your current lifestyle? What if you lose your job, get sick - you have the proper insurance in place. What is your schedule? When do you want your plan implemented in five, 10, 20? Is it realistic, feasible?The whole process is circular - you can start at the end - you could X million worth of goods in the year Y - but if it is going to require a capital increase twice the average of the last 10 years required to commit 50% of your current income? Do not return to work, tips take more than one iteration - even if you install on a plan that should not be a static document gathering dust in the bottom drawer. Instead of reviewing at least annually, if not quarterly - is still working - has changed the real estate market? Is this your family situation?

Create your team:property investment business plan

Although it probably will not now be used you will definitely need some professionals to be on your team. Try to develop relationships with professionals who can relate and most importantly understand your real estate goals. Professionals that you should look at the development of relations with are: accountant, attorney, property manager, mortgage broker, maintenance experts, Realtors.

Now Implement your plan: property investment business plan

Although many into investment properties without considering the plan, others are trapped in the planning and suffer "analysis paralysis" - but not always planning act. Fear that the best returns are missing and too late on the market for profit. There is some truth in the old real estate remained "Now is the best time to buy" - but they would say no!

    How ever, now has a plan that you know in which direction - it is easy to focus on what you want: if your goal is to acquire a student flat you know the suburbs to buy in. If you want to buy a property and then just renew search "renovator's delight." It is not easy, but at least you have a plan to work with.

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The Right Property And Investment Style

Choosing the Right Property

Out of the properties that you might find, which one(s) do you actually purchase? In short, the ones where the figures stack up.

To explain this further it is essential that you view your property investment as a business and not just some form of gambling, although the property market contains a number of elements of risk, as do most types of investment. Just like in any kind of business you need to know that you will be making money and not losing money, it is the bottom line that tells you if you are running a profitable business or not. However, there are at least two different high level categories of ways to profit from investment in property, these are explained here.

Investment Types

Capital Growth - Appreciation

This is the more common method than people think to make money from the property, mostly because it is the property they own and live in. This type of investment is through the act purchase a property at a price and sell it later at a higher price, the difference is often referred to as the gain. This method is usually to save time during which the value of the property increases. However, you can add value to the property, to a kind of work for the renewal or extension. In other cases, you might be lucky enough to buy something for less than it's worth and sell it the next day by market value, make a profit on the "back" or "flip". You usually have to pay tax asset value of the property increased when sold.

Positive Cashflow - Income

This type of benefit is usually made ​​by the owners in the overhead of owning and renting a property is less than the income generated by itself. This means that if you add the mortgage payments, administrative expenses and total cost of repairs should be lower during the same period, the rent paid by the tenant. For example, if you pay £ 500 a month in expenses, which would remain in place for at least 550 pounds, to make a profit or positive cash flow. You may have to pay taxes on the profits of the lease.
Both types of prior investments are not the only and are not necessarily mutually exclusive, which means you can find a property that represents the two types of investment. In fact, most property will be a kind of satisfaction, but there are areas that have experienced zero growth in recent years and, in fact, some regions have experienced negative growth, this means that the value of goods actually declined.

Similarly, Positive Cashflow is variable and can rise and fall with market conditions, you can only make your best, informed decision on the day, for the day, with all the available information. Historical trends may point towards a potential future, but this is not any kind of guarantee.

Plan for Voids

Must generate gaps in their structure or overheads. Empty periods, called simply as Voids, are the times when your aircraft is not left, but you must continue to pay the mortgage and associated costs such as service charges, in the case of property transferred. This is why the most common Buy to let mortgage is made by a factor of 130%, the lender expects that the holes and incidentals and built a simple protection for their financial exposure for you. To anyone's standards factor 130% is a good rule of thumb, meaning that their real income should be 130% of your mortgage payments.

Many investors and owners were arrested for ignoring empty and suddenly run out of money when they have to pay their mortgage without rental income to balance the outflow. In highly competitive areas of your property may be empty for several months. It's a good idea to have about three months of mortgage payments for the purchase for the property when it is empty.

Other properties you have in your rental portfolio is less likely to run out of cash to pay the mortgage, juggling empty risk throughout the portfolio, not only in a single property. However, this assumes that has wisely allocate their rental properties different regions to prevent the loss of income if a certain area is affected for any reason. For example, if you have five apartments in a building, all suffer the same local market conditions. In periods of low demand and strong competition, you will not only five empty fighting. If you had five rental properties in various suburbs of the same city, then reduce your chances of having five empty houses at the same time. Better yet has five properties in different cities in total. As the old saying goes, do not have all your eggs in one basket.

 It is important to remember that no matter how many properties you have and spread what they are, there is always a small chance that all of them may suffer periods of nowhere at the same time. You must have a plan in case it happens, but it can reduce the risk of this happening by spreading their rental periods so that has no beginning and end of the month. This will normally occur anyway, several tenants come and go, sometimes

Yields and Profits

There are many methods that people use to calculate what they call performance. Yields are essentially the proportion of the income generated by a property in relation to the initial capital contribution and the costs associated with obtaining and leave the property. Yields are generally represented as a percentage, depending on the area and the person requesting it, you get a different story about how performance is interesting. Some people estimate that the revenue potential of a property through a series of complex calculations and come to the percentage of return, they already know your personal limits and can accept a yield of 11%, but reject a yield of 10%.

But when you look at the bigger picture performance calculations are really a waste of time because the conditions in which they have based their calculations on change tomorrow. Moreover, the idea of business is to make money and not lose, so that, in general, any income is good income, even if it is only 5%. Obviously, there are practical considerations, but you have to remember that these figures can change from one day to another and depend entirely on how to calculate your return.

The preferred method for determining the feasibility of a kind of positive cash flow investment method is merely observing the amount of benefits it has its costs. If your course costs € 500 per month then execute an income of 490 € per month cash flow is negative, but an income of £ 550 positive cash flow. It comes down to what you are comfortable with and how much you need to establish a buffer zone Void as mentioned above.

  

Try not to tangle with the hair between the percentage is wrong when 10% and 11% is good, focus instead on real income and what it means for your business property.
One way to improve your income is to have an interest only mortgage, unlike a standard repayment mortgage. This can mean lower monthly payments, but beware, the end of the mortgage will repay the loan in full. This is often an ideal method when you are planning to have a property to say 5 to 10 years of a 25-year mortgage, as when hope is sold to pay the mortgage, in principle anyway, but meanwhile, you have to pay less each month. If the capital growth in property is good, then the end of the mortgage term, you may be able to refinance or sell and pay the principle back with enough left over to reinvest in something else. Much depends on what your long term plans are, but interest only mortgages can be a valuable tool for real estate investors and owners.

Different Deal Types

There are probably an infinite number of ways to structure a real estate transaction, in fact, there are very few rules and you can be as creative as you want, provided that operates in the forced lending criteria if using mortgage financing. So there is no way that we could list and define the various options, but chose to highlight some of them here to show the type of options that are out there and the pros and cons of each.

No Money Down

C'est le type le plus commun de la recherché pour les investisseurs immobiliers qui sont nouveaux sur le marché ou qui veulent investir aussi peu que possible de la capitale. Si vous considérez cette option avec prudence, devient bientôt méthode très appétissante de l'investissement immobilier. À l'avant, qui semble prêt à obtenir quelque chose pour rien, puisque nous savons tous que c'est une chose très rare dans la vie, surtout dans les affaires.

Pour commencer, le nom de ce type d'opération est un peu trompeur, car il implique que vous pouvez posséder une propriété de ne pas mettre tout l'argent dans l'affaire, si cela était vrai, alors tout le monde serait restituer les biens rien. Habituellement il y aura une sorte de dépôt pour garantir votre intérêt dans le domaine choisi. Transmissions de temps verseront des frais et éventuellement d'autres frais accessoires. Mais même si vous parvenez à obtenir les droits d'acheter des terres sans laisser un sou, si votre propriété est construite et prête à prendre sa valeur peut avoir considérablement changé. Cela peut être bon, mais c'est souvent le contraire.
When new developments are pre-evaluated (assessed before they are built) the developer often has little intention of selling the most properties for investors and press for a greater value to their assumptions seem very attractive discounts. But when the properties are on the market your investment may soon become a nightmare. This is because the standard purchase for the mortgage is based on the ratio of 130%, as explained above, which may result in the mortgage lender offering much smaller than expected. The end result is that you are contracted to buy something you do not have the money. At this point, you have some options:

       Option 1: Try to find the money deposit and additional funds to complete the purchase, that often means taking a loan from somewhere or borrow money to cover the purchase and then find that you have to make mortgage payments on something that will not leave out either. This can lead to a downward spiral of Finance.

       Option 2: Accept that you must pay the security deposit, but can not pay the balance to complete, so that the loss of property and your deposit.

       Option 3: Try to find someone to buy your contract. Even if your contract is transferable, is like the blood of sharks, once someone is against the wall, attach it to an absolute minimum and you can always walk away from the box poorest few kilos.

       Option 4: You may be lucky, given the short time to complete, to find a buyer before going according back-to-back, but it is unlikely and rare.

Back-To-Back

This type of operation has several variations, but the basic concept is where the line of a purchase of a property and the subsequent sale of the same property, and the purchase and sale of filled out the same day. The idea is to make a profit to buy low and sell high.

While operations back-to-back are more easily accomplished in new build properties, allowing a good time to find a buyer, in many cases, the properties set can be bought and sold in this way too. Sometimes it is due to good fortune and sometimes it is good management. If you can exchange early and take a long time to finish, you may have time to find a buyer, but you obviously need to have something that is in demand and bought cheap.

Cash Back

This type of operation is quite simple, however, still has some inherent dangers. The basic concept is to find a property that has a market value higher than the purchase price and you get a mortgage based on market value. For example, if the property is valued at 100,000 pounds, but can be purchased for £ 75,000, its 85% buy to let mortgage will result in a loan of £ 85,000 £ 10,000 giving cash at the end of the purchase . Some lawyers do not like this kind of operation, because I think it is misleading the lender, make sure your lawyer is going to do before you start. You must remember that your lawyer has a responsibility to ensure that there is no fraud mortgage lender.Most lenders will not lend on the purchase price, it is called a loan to buy (LTP), so you need to find a lender that will lend on value, this is called a loan to value (LTV ). The other method is to find a lender to lend more than the value or purchase price of the property in the first place. Some lenders offer from time to time, up to 125% of the property value. Sometimes they will release the funds to complete as part of the basic mortgage, other times they will release the funds to pay for the work or improvements to property. In the case of improvements usually want to see the invoices or receipts and can make the payment directly to the provider of goods and services.The only point to note with respect to this type of mortgage is that the real estate finance will be what is called "highly concentrated". This means that you have the maximum amount of shares evicted. The problem with this is that usually means that your mortgage payments will be higher which can cause problems for you to generate positive of this particular property cash flows. It can also mean that it takes much longer to achieve capital growth in the property.Lea Beven Property Expert has 14 years in the purchase and sale of goods and exposes the secrets of both parties for his benefit.As described by the ITV Trevor? S Tonight with Trevor, property tycoon Lea Beven lost and made millions in real estate. She shares openly the problems, difficulties and the deep secrets of real estate investment with the public, including personal information about your own business. He now works part-time with the regulars who really want to make money, she prefers to keep a small business and personal.

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