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Inves&ng in  Real  Estate

           Real  estate  investment  is  lucra&ve.    It  is  an  investment  in  an  illiquid  asset  and  the  risks  are  high.  You   need  to  make  some  smart  choices  upfront  when  buying  investment  property.  

Real estate  investment  sta&s&cs   •

U.S.A.  was  ranked  in  the  number  1  posi&on  with  global  commercial  real  estate  investors  in  2012.  

• 12% of  all  adult  Americans  are  actually  real  estate  investors.   • 3%  of  the  U.S.  popula&ons  of  adults  are  ac&ve  real  estate  investors.   • 3.5  million  people  will  buy  5  or  more  houses  in  a  year.   • 65%  of  the  3.5  million  people  will  con&nue  to  invest  in  real  estate.   • $  9.2  billion  is  spent  on  renova&ng  real  estate.  

Ways to  invest  in  real  estate

Office Property:  Inves&ng  in  office  property  is  the  “flagship  investment”  for  many  real  estate   owners.  The  demand  is  directly  propor&onal  to  the  increase  in  white  collar  jobs.
 Risk:  Office  buildings  have  high  opera&ng  costs,  so  losing  a  tenant  can  have  a  substan&al  impact   on  the  returns  for  the  property.

Retail Property:  Retail  proper&es  range  from  large  enclosed  shopping  malls  to  single  tenant   buildings  in  pedestrian  zones.  Loca&on,  visibility,  popula&on  density,  popula&on  growth,  and  rel-­‐ a&ve  income  levels  play  a  crucial  role  in  the  demand  for  retail  spaces.
 Risk:  Inves&ng  in  retail  property  has  a  lower  return  than  office  buildings.  The  subsequent  risk  is  

also lower.

Industrial Property:  Includes  buildings  used  for  warehousing,  manufacturing,  research,  and  de-­‐ velopment.  Lower  opera&ng  cost  than  above  two  counterparts.
 Risk:  Risk  is  lower.  Losing  a  tenant  can  have  great  impact.

Mul&-­‐family residen&al  property:  Most  stable  return.  Loss  of  a  single  tenant  has  a  minimal  im-­‐ pact.

Risk:  An  increase  in  building  opera&ng  costs  has  to  be  borne  by  the  property  owner  for  the  dura&on  of   the  lease.  

Tips for  inves&ng  in  real  estate  

Real estate  investment  is  a  business:    Treat  it  as  such.  Start  by  developing  a  good  business  plan,   detailing  the  nuances  of  star&ng  and  running  your  business,  with  realis&c  goals  over  &me   frames.

Check your  financing  ability:  Determine  your  ability  to  finance  investment  property.  Make  sure   that  your  total  debt-­‐to-­‐monthly-­‐income  ra&o  is  low.

Find a  good  bank  or  mortgage  broker:    A  good  bank  or  mortgage  broker  is  needed  if  you  plan  to   finance  your  investment.  Advice  from  real  estate  agents  or  other  investors  are  good  sources  of   informa&on.

Look for  the  best  area  to  look  for  proper&es:    Don’t  make  the  mistake  of  limi&ng  the  search  to   areas  close  to  home:  expand  it  further  where  you  might  get  a  beber  bargain.

Talk with  other  investors  about  local  real  estate:  Join  a  real  estate  club  in  your  area.  They  are   great  places  to  network  with  other  investors,  lenders,  and  repair  service  providers.  You  can  oden   pick  up  helpful  advice  about  your  local  market  from  other  club  members.    Consider  joining  an   online  inves&ng  forum  if  there  isn’t  one  for  real  estate.

Find a  good  realtor  to  help  you  locate  proper&es:  Choose  a  realtor  who  has  sold  a  large  number   of  investment  proper&es,  and  also  understands  concepts  such  as  return  on  investment  (ROI),  net   opera&ng  income  (NOI),  and  debt  service.  

Sources: hbp://­‐estate-­‐investor-­‐sta&s&cs-­‐episode-­‐263/
 hbp://­‐things-­‐that-­‐make-­‐a-­‐great-­‐real-­‐estate-­‐invest-­‐ ment/

by Tyson  Rhame    


Investing in real estate by tyson rhame  

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