Real Estate Has Created More Wealth Than Any Other Type Of Investment Vehicle

By Chris Temps


Real Estate has created more wealth than any other type of investment vehicle. I have been investing full time for 6 years. I have bought in 4 different states within the United States. I have purchase single family homes and multi-unit apartment complexes. With the slow down in the housing market it has become more difficult in making deals happen, but there are still many deals out there. In fact, you want to buy when everyone else is selling. This is the concept of contrarian investing. You don't follow the crowd or the masses. You have to be creative. There are so many aspects to real estate that I only know a fraction of what there is to know about real estate investing. I know enough to make a comfortable living for myself. Just like any other business, it takes time to learn, understand, and implement the different strategies to become successful investor.
There are many different types of investments such as land banking, single family homes, multi-units or apartment complexes, and commercial. Within commercial there are many several subcategories such as storage facilities, commercial development, multi-units, retail, warehouses, etc. Most people start out in the single family home investing. This is the easiest to get in to and most understood by people.
You make money in real estate when you buy. You receive the money when you sell. Buying right is everything. The formula for buying property for single family homes is 70 cents on the dollar, or in other words, at a 30% discount or margin. For example, if a house retails for $100,000 your maximum offer should be $70,000 (70 cents of the dollar). Obviously the lower the better, that is, if you can purchase the property at $50,000 you are in much better shape. There are a lot of fees associated when you buy and sell a house that novice investors forget to consider. There are closing costs, agent fees, holding costs, insurance costs, repairs and maintenance costs, utilities, taxes, legal fees, and more. Also, most rookie investors purchase retail. Buying property from the Multiple Listing Service (MLS) is retail. You need to purchase directly from motivated sellers, but that will be a whole new discussion another time.
Another tactic that I have learned from the infamous Robert Allen, guru in real estate investing since the 70s, is the 1% rule. The 1% rule is when you buy a rental property you need to earn a minimum of 1% of the sales price to break even. Did you catch that? For example, if you purchase a property for $100,000 you need rental income of at least $1,000 to breakeven; knowing this strategy will enable you to avoid most pitfalls in real estate investing. Most people don't know this and that is how they can get into negative cash flow situations and get into trouble. That is why most single family homes or properties are not true rental properties. In California, where I live, most properties will not cash flow due to the high home prices ranging from $200-$600K in most metropolitan cities of California. To breakeven in a property that costs $400,000 you will need $4,000 (1% of sales price) in rent just to break even. It's just not going to happen. You see how this can be a big problem for most real estate investments? The good side to all of this is that there are homes in several other states that are under $100,000. There are homes even under $30,000. That is what I have been investing in. I have been buying foreclosures for under $20,000 in several states. Since I live in California this is called out-of-state-investing where the real money can be made.
Chris Temps
[http://www.MyGuruReviews.com]
"It's a Matter of Knowing Versus Not Knowing"

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