Category: Investing Page 1 of 3

Mr Buffett

Buffetology

Now let us switch the gears and talk about the master investor, Warren Buffet.  A man of simple tastes, Buffet relies very heavily on fundamental analysis.  I cannot recall who told me this about Buffet, either a friend or a relative, that Buffet is confident about all the companies in his portfolio, so much so to the extent that he would not flinch if a stock lost 1/3 of its value overnight because its financials and fundamentals dictate it to be in fact a solid company.  I cannot say that the following information is absolutely verified by Buffet as I have not had a sit-down with him yet, but after reading a biography of his, I do believe it captures his investing philosophy.

warren-buffett

Buffet believes that when investing in a company, the ultimate goal of that investment is to completely own that company.  So under ideal conditions, you would have enough money to own 100% of that company and your money would be safe in this.

Following are some general guidelines and prudent factors to keep in mind, which Buffet follows with his investments:

1.) The company in mind must be able to reasonably predict its earnings

2.) A company with predictable earnings has good economics, which leads to lots of free cash flow, which can be used to by businesses or buying back shares.

3.) These good economics are shown by a combination of the following:

– Consistent improvements on the company

– High returns on shareholders’ equity

– Strong earnings

– A consumer monopoly (which will be discussed later in detail)

– Good management

4.) Always invest while the price is low in order to increase return

5.) First choose which company to invest in, and then let the price and the required rate of return determine when or if to buy.

6.) Investing at the right price in a good business should produce a minimum rate of return of 15%.

Along with these rules are some more specific codes Buffet follows:

Investing should always be approached with a business mentality – i.e. All emotion should be purged from investing.

Always attempt to learn and master one industry, and then do not stray from this industry.

Stocks do not represent so much a market price, as much as a distinct company with certain operational standards behind it.

Dividends are best utilized when reinvested into the company.  This is due to tax avoidance on these payouts.  Also, corporations can often reinvest this money at a higher rate than can an individual, although they must be reinvested prudently.

Holding a stock is better than withdrawing from it, for tax-avoidance reasons.

One topic Buffet especially cares about is the capability of a company to reasonably predict its earnings.  Encompassed in this area is the company’s EPS (earnings per share) and the EPS annual growth rate.

EPS

Buffet is a large advocate of deciding on what company to buy before it hits a favorably low price, that is, “don’t aisle shop!” This idea of knowing the company you will be investing supports the idea that one should be knowledgeable of the industry in which it operates.

According to Buffet, there are two types of businesses: commodity type businesses and consumer monopoly types.

In commodity type businesses, the price of the product is the single most important factor and as a result, significant cash is spent on manufacturing improvements.

Commodity type businesses are often recognized by:

– Low profit margins

– Low return on equity, often less than 15%

– Difficulty with sustaining name brand loyalty

– Many competitors in the industry

– Excess supply

– Erratic profits

Consumer monopoly type businesses on the other hand are stable with predictable earnings.  One key indicator of a consumer monopoly business is to ask whether another fictional company, with a huge amount of cash could compete with it.

These companies often have a high wealth in intangible assets, not in PPE (property, plant, and equipment) and   other fixed long-term assets.

These companies are also nearly debt-free most of the time.  This idea of NOT being leveraged is why Buffet is a large opponent of derivatives and why Buffet steered clear of the CDO and subprime market during the mortgage crisis.

Aside from many other guidelines and rules Buffet adheres when investing, there are 9 specific questions Buffet asks when investigating companies:

1.)    Does it have a strong consumer monopoly?

–       Does it have strong recognizable products?  Does it have to be carried by the distributor, lest he lose money in opportunity costs?

–       If involved in an acquisition, is the acquired company also a consumer monopoly?

2.)    Are the earnings strong and rising?

3.)    Is the company conservatively financed?

4.)    Does it have a high return on equity?

–       ROE should consistently be at least 15%

–       A healthy ROE indicates good management

5.)    Does the company reinvest its earnings?

6.)    How much money is spent maintaining current operations?

–       If a company must use its money to constantly update operations, this is a sign bad sign as that money could be going towards share buybacks or acquisitions

7.)    Does it reinvest money in new opportunities?

–       Good management will often use excess capital to buy back shares

–       One of the most important aspects of management is how profitably it employs its retained earnings

–       Warren prefers minor expenses into research and development

8.)    Can the company adjust prices for inflation?

9.)    Will the value added by retained earnings increase the market value of the firm?

–       Personally, this is the most important question for me.  I am interested in the relationship between the inherent value of a company and its effect on the stock price.

Buffet believes that one sometimes discovers these companies as “conceptual toll bridges.”

1.)    Businesses with products that are used up quickly and with brand-name appeal.  These are sorts of products that effectively lose money for the merchant because they are always bought.  Trademarks and copyrights have immense carrying power.  Some examples of companies that carry these sorts of products are:

Coca cola, Hershey’s, Wrigley’s gum, Advil, Gillette, Hanes, etc.
Pharmaceutical companies often have these characteristics
A good way to identify these products is to walk through a supermarket and identify popular products.

2.)    Communication businesses

Advertising has created conceptual toll bridges in today’s environment
Newspapers work similarly

3.)    Typically these conceptual toll bridges apply more to services than products

As I mentioned in my last post, I would like to thank ALL of you who have been reading and commenting on this blog.  Initially, I did not know where I would go this or who it would cater to but with your support and ideas, I know that we can cultivate a great atmosphere where we can exchange ideas and whatnot.  Keep posting your comments and let us stir our minds towards greatness!!

Gold_Bar

Different Ways Of Investing In Gold Safely

For years, investors have known gold to possess intrinsic value and safe investing features. Since properties, currency and shares are prone to inflation as well as their prices may go up and down with the market, it is far better to invest in gold and silver like gold since the prices will always be expected to increase. Gold, as a commodity, not only has long-term store of value but also provides a hedge against inflation. In last one 10 years, the price of 1ounce gold has shown a dramatic increase from $300 to $1,500 and is likely to raise much more. This makes gold investments very profitable.

Are you interested in making safe investments in gold in gold but don’t know the tips for doing so? Simply check out the tips mentioned here.

Strategies for Investing In Gold Safely:

1) If you’re keen on possessions then you can certainly purchase physical gold in the form of bars, coins and bullion. Gold bullions are made from 100 percent pure gold and they are sold in increments of just one oz. hence they are popular type of investments with regards to purchasing physical gold. Various nations sell bullion coins that are denominated in local currencies. American Golden Eagle is the local bullion currency in the usa which is easily available at local outlets as well as on online websites.

gold-is-money

2) Women especially prefer to purchase gold jewelry. This is due to the fact most jewellery pieces are marked and priced based on the weight and quality (pureness) of metal used in it too as the cost of labor included in making it. You will get the rarest ornament pieces from jewelry auctions and online websites (they offer discounts top). However, purchasing ornaments online will need focus on your part because you will have to determine the purity and price of those items, think about the interest in brand and find out the shipping cost of gold. If you buy excellent quality jewelries, you can make profits by reselling it.

3) Exchange Traded Funds (ETFs) are second most popular types of investments after physical gold. In the event you can’t figure out what to know about gold investing, you are able to seek advice from an ETF expert and invest your hard earned money in it. Look for an online brokerage firm and open up an account there. Evaluate the current market prices of gold ETFs by making use of symbols like SGOL and FLD. They possess ETFs prices at 1/10th the price of an ounce of gold whereas PHYS and IAU have their ETFs costing 1/100th of the cost of an oz of gold.

Firstly, determine the amount of ETF shares you want to purchase and appropriately, divide neglect the amounts. You may make use of the online screen of your brokerage account to purchase ETF shares. The process of buying ETFs is just like purchasing stocks or shares. The broker may offer discounts of $5 to $10 on share trades. Here you must remember that gold ETFs don’t supply you interest amounts or dividends because the profits or losses incurred by investors depends upon the fluctuating selling price of 1 ounce of gold. Thus, you should use ETFs for either short term trading of gold belongings or for making long term savings.

4) If your luck is at peak, you can consider investing in stock exchange and mining companies. You can invest in shares of Barrick Gold (ABX) the largest gold mining company. One benefit of purchasing stocks is you can easily sell or buy them with little fuss.

5) Lastly, there are gold mutual funds which are ideal for group of businessmen. Mutual funds directly track the cost of gold and cost of shares of gold mining agencies and are collectively owned by some people. Look for company that offers lower investments and lets you invest in an automated monthly schedule. Put smaller amounts in gold investments for a long period of time to be able to gain maximum profits. If you are a first time investor, you should collaborate along with other experienced traders of the market to stop losses.

6) You can also buy possessions on monthly installments. You can set up an automatic investment scheme that deduces money from your banking account and directly transfers the profits incurred by you there. This will prevent you from going out of budget.

If you would like more information regarding shipping cost of gold, please check at well-known dealers or visit trusted websites to find opinion from the specialists.

If you want extra information on topic “payday loans“, then you are welcome to check out the author’s website Febs2010– in which you’ll find all types of specific information on the said topic.

ETFs

How to Invest in ETFs

As you start earning, it is good practice to invest the money. Investments provide good financial security for the future. However, when there are so many different types of investments, it may be confusing. Today, let us learn about ETF, which is a simple means of investing to obtain good retains.

What is an ETF?

ETF stands for Exchange Traded Fund. Here, you can buy several bonds/stocks at the same time. An investor can buy shares of ETFs. The ETF share prices can fluctuate throughout the day. They are listed and traded on an exchange. ETFs hold multiple underlying assets.

ETFs offer good alternatives to individual stock picks. While services like Motley Fool make it easier for investors to choose stocks (read the full review here), many investors prefer the simplicity of ETF investing.

ETF Investing

ETF Jargon

There are certain concepts to understand before you can invest in ETFs.

  • Expense ratio – The fee that ETFs charge is called the expense ratio. For beginners, it is recommended to go with smaller expense ratios.
  • Types of ETFs – There are two types of ETFs – passive ETFs and active ETFs. Passive ETFs (also called index funds) track an index and update the portfolio from time to time. If you are new to this, start with passive ETFs. In an active ETF, an investment manager manages the portfolio of securities.

Investing in ETFs

There are 2 ways to buy/sell an ETF. Three points to note before investing in an ETF –

  • Ensure that you have a Demat account. It is needed to hold the ETF units.
  • Open a broker account with a broker/sub-broker.
  • Complete your KYC. You will need documents for proof of identity, proof of address and your bank account details.

You can now use the registered bank account for your ETF investments. You will need the current price of a single share to start investing. Check whether your broker is registered with the stock exchange. Now, there are two ways to buy and sell ETF shares.

  • The first way is to call your broker. You can tell the broker about your trade specifications and buy/sell ETF units through the broker.
  • The second way is to use an online trading terminal. You can place your order on the terminal.

Why should one invest in ETFs?

ETFs are considered as the ideal investment for youngsters. This is because they provide a host of benefits. Some of the benefits are discussed below.

  • Reasonable transaction charges – Compared to other index-tracking products, you incur lesser transaction charges on ETFs
  • Diversification – Diversification is a mantra that the majority of investors swear by. With ETFs, you can spread the risk over several securities. Stock-specific risk is minimum in this case. In a single transaction, you are exposed to a variety of stocks, sectors and commodities
  • Liquidity – ETFs provide ample liquidity. They can be traded throughout the day. If you have limited capital, you can immediately exit a losing investment.
  • Tax-benefits – If you are an ETF investor, the dividends you gain are tax exempt. To sell an ETF unit within 12 months, a short term capital gain tax is levied.

ETFs have the potential to produce great investment growth over a long period.

Real-Estate_resized

Financing Real Estate Investments Using Leverage

How to obtain investment property financing is one of the first things you must figure out as a new
multifamily

investor. Assuming you’re not yet equipped to pay cash, your total acquisition costs boil down to 3 primary components:

The mortgage or loan (traditional bank, mortgage broker, private lender, etc.)
Your down payment (can be out-of-pocket or financed)
Your closing costs (can be out-of-pocket or financed)

THE MORTGAGE
Of course, this is the largest of your investment property financing components, and the specific type of mortgage you get may depend on the nature of the property you are
buying.

For a functional, fully occupied multifamily structure, a standard
property mortgage

will fit the bill.

A
fixer upper,

on the other hand, may require a different funding source, because banks do not like the added risk associated with a rehab job. Additionally, the “non-functional” nature of this type of property makes it difficult to get an accurate
real estate appraisal.

Real-Estate_coin

In fact, most times these appraisals are undervalued, which could result in a bank-mandated reduction of the loan amount, or even a voiding of the deal by the lending bank.

Although I am partial to fixer-upper projects, I did not start out this way. My first few acquisitions were of the more traditional, already-functional type, using regular bank mortgages. And unless you have access to a boatload of cash or to a private lender, you will probably have to start out the same way I did – purchasing currently occupied rental properties.

Although you’ll miss out on the “fixer-upper discount,” an initial focus on fully occupied properties will allow you to learn the ropes before “graduating” to the more advanced fixer-upper stuff. This will also give you time to find a private lender you can trust, which will enable you to execute the rehab strategy.

YOUR DOWN PAYMENT

The largest out of pocket expense associated with investment property financing is usually the down payment. Down payment requirements are more stringent with a traditional bank compared to a private, non-bank lender. For example, many private lenders will finance 100% of the purchase price (not to mention closing & rehab costs), especially if the term of the loan is short (like 6- or 12-months).

But if you need to go with a traditional bank mortgage, a down payment of some sort will almost always be required. The bank’s down payment requirement is defined by the “loan-to-value” ratio (LTV). For example, an 80% LTV loan requires a 20% down payment.

Luckily, the days where lenders required a 20% down payment are long gone. As long as you have good credit, most mortgage brokers can hook you up with a 90% or even 95% LTV mortgage (i.e., you put down 10% or 5%, respectively).

Of course the upside compared to traditional 80% LTV loans is that you put less money down out of your own pocket, which also drives up your cash-on-cash ROI when you sell. However, high LTV mortgages do have downsides:

Interest rates tend to be higher
You may have to pay for points at closing (calculated as 1% of the mortgage amount)
The appraised value must be higher because there is less of an equity cushion
Any down payment that is less than 20% of the purchase price triggers
private mortgage insurance (PMI).

Because of these issues, I would avoid straight-up high-LTV bank mortgages if at all possible. A much better investment property financing alternative is to get an 80% LTV loan, and use a secondary financing source for the 20% down payment. And luckily, you do have a few
zero down options

for the down payment.

Obviously if you cannot find a secondary funding source for the down payment, then you will indeed have to pursue a high LTV loan even though this is not ideal. That said, this can be viable as long as your projected
rental property income

is enough to cover the higher payments. Then, in a few years, you should have enough built-up equity to
refinance investment property

into a standard 80% LTV, 30-year fixed-rate mortgage.

CLOSING COSTS
Unfortunately, closing costs are a necessary evil in terms of investment property financing, even when using a private lender (although bank fees will usually be higher). Click for more info on
closing costs.

FINAL THOUGHTS
The bottom line is that – in most cases – you’ll want to get an 80% LTV fixed-rate loan using a secondary financing source to fund the 20% down payment.

This gives you the best of all worlds…you minimize your out-of-pocket expense while at the same time minimizing your largest go-forward expense item as well as your risk. This maximizes the odds that you will optimize your profit when you
sell

years down the road.

So, investment property financing is not overly difficult, but it does take some time to figure it all out and find the best deal. Just follow the advice on this site and do not waver. Keep moving forward. Yes, you CAN do this!

Return from Investment Property Financing to Homepage

SBA Loans

How To Convince an SBA Loan Provider To Finance Your Business

The number of small businesses is the exact opposite of its size, which comprise the majority of businesses in the USA. According to the US Small Business Administration, small businesses account for 99.7% of all businesses in the USA, or a total of 28.8 million. These small businesses currently have 56.8 million employees and covers 48% of the total for USA.

The numbers speak the same with small business funding. Many financial institutions are taking advantage of the large market resulting in more small business funding solutions available. The same Small Business Administration (SBA) report said that there are about 5.2 million small business loans (valued at $ 73.6 billion) released by US lending firms in 2014.

SBA Loans

The market for small business lending is robust, and one can always find a solution that can fit any need and preference. A business will always have the answer on why get a small business loan. Here are some of the available small business lending solutions, and what you need to know about them:

Conventional Bank Loans

This is usually the first option when it comes to any kind of financing, whether for personal or business purposes. Small businesses, however, find its loan eligibility hard to achieve, and its requirements difficult to secure. They also deploy stringent terms and compliance measures.

The reason why most businesses flock around banks is because the bank’s loans carry smaller interest rates and they can also be generous with the amount as long as the eligibility criteria have been met. The disadvantage would have to be its strict requirements and the need for a collateral.

Alternative Lending Firms

They appeal most small businesses because of lenient terms and flexible repayment options. It is also more convenient to secure alternative funding because most providers can process your application online. This is most especially valuable for emergency cash needs.

Another advantage in dealing with alternative lending firms is their lenient terms and eligibility criteria, a lower requirement for credit score, and its faster processing and approval. The downside, however, is the excessively high interest rates and other additional upfront fees.

SBA Loans

A U.S. Small Business Administration (SBA) loan system is a funding solution backed up by the US government, which aims to support its citizens with the means to build and expand their own businesses. The SBA doesn’t provide the loan itself but serves as a guarantor to the loan coming from both private and public financial institutions that include banks and alternative lenders.

Small Business Administration partners with these financial institutions to offer a wide range of loan types that can suit the different funding needs of small businesses. It has a regulated set of guidelines, which all partners follow, in order to protect the interest of both the borrower and the lender. SBA guarantees for a percentage of the amount of every loan approved, which is about 70–90%. This minimizes the risk for the lender. On the other hand, the fact that a government small business loan is enough to know that the borrower is protected under its own laws and regulations. SBA loans offer lower interest rates than other alternative lending institutions.

The downside of an SBA loan is its long process, and it requires more paperwork. There are also top up fees to be paid when you avail.

Questions To Answer Before Getting an SBA Loan

Before approaching an SBA loan provider, make sure that you have the answer to the following questions:

  1. What is your borrowing intent?
  2. How urgent is your need?
  3. What are your business’ risks?
  4. In what stage of development is your business?
  5. How much do you need?
  6. How long can you pay the loan back?
  7. What is your business plan?
  8. How long have you been operating your business?
  9. What is the cycle of your business? Is it seasonal or consistently producing revenue?

By answering the above questions, you can help the SBA loan provider to assess your capacity and risk tolerance. It can also determine if you are eligible or not.

Reasons Why You May Be Denied From an SBA Loan

Small Business Administration loans are attractive to small businesses because of its advantages like low interest rates, flexible repayment terms, varied loan types, and primarily because it is government backed-up. Most alternative fundings compensate the higher risk involved with their grants by imposing higher interest rates, which can go as high as 80% APR.

Unfortunately, not everybody that applies for it are automatically approved. Many businesses have varied problems with small business loans that can hinder their growth, and here are the most probable reasons why you may not be granted with an SBA Loan.

Yours Is a Startup Company

An SBA loan requires for a business to be operating for at least 2 years.

You may opt for other funding options like angel investing or to a venture capitalist. There is also an online community-based funding solution like crowdfunding, which can cater to start up entrepreneurs. Cash flow based funding like merchant cash advances is also viable. There are also alternative lending companies that specialize in giving capital for startups, but the grant is not that big.

Yours and Your Business’ Credit Score Is Low

Like with conventional bank loans, SBA loans require a strong credit score, which is the most prevalent reason why most borrowers get denied.

A credit score, which most people might probably doesn’t know, is the numerical equivalent of your commitment to paying off your debts. It is computed based on your debt and credit histories with banks and other financial institutions. For example, you own a credit card. When you use your card, you will be billed on a designated cut off. If you diligently pay on time and in full amount and you are consistent with this for a long period of time, then, generally, your credit score will be high. When you do the other way around, say you don’t pay the full amount or you pay late, of course, your score will be low. But having no credit history can equally hurt your credit score because basically, there will be no means for a lender to assess your willingness and responsibility to pay.

There may be a lot of reasons why a business, or you, have a low credit score, and other alternative lending agencies are not too particular with these. Find one that can grant a loan for someone like you, which is also an opportunity to build your credit score again.

You Do Not Have Enough Collateral

Small Business Administration loans like bank loans do require a collateral. This collateral is being shared with the lender and the SBA because they share a part of the guarantee with the loan. Because of this, it may also require you a personal collateral too. This is also the reason why SBA loans cannot cater to startups because most of them doesn’t have more assets that can serve as a collateral.

Your Company’s Industry Is Part of the Grant’s Exclusions

Aside from startups, SBA loans won’t approve the loan applications of businesses in these industries:

  1. Businesses that are engaged in lending
  2. Life insurance companies
  3. Businesses outside the USA
  4. Businesses engaged in networking or any incentive-based model and pyramiding
  5. Businesses that get a third of its gross revenues from legal gambling
  6. Religion-based businesses
  7. Lobbying or political organizations
  8. Speculative businesses like oil explorations

You Don’t Want the Risk for a Personal Guarantee

Small Business Administration loans will need your personal guarantee, which meant your car, your home, and other personal assets. When you give this to the bank as a collateral, you give it the power to sell those when you cannot pay back your loan anymore.

There are other small business loan with no personal guarantee to ask from you, which may be viable if you are intolerant with this kind of risk.

So how to convince the best SBA loan providers to grant you that loan? You’ve got to be positive when it comes to these 5 C’s:

  1. Character – this implies your managerial skills or the strength of your management team. Your team should exemplify a strong sense of responsibility when it comes to their roles in your business.
  2. Credit Score – this is one important factor that SBA loan providers do look for, and it is also one of the hardest to repair. Even though you may be denied with an SBA loan, there is a lot of room in getting another small business loan provider that will fit your eligibility and needs.
  3. Capacity – a strong business plan and a steady cash flow are strong indications of your capacity to sustain in paying your liabilities.
  4. Capital – before getting an SBA loan, you should know how much additional capital you really need to finance your venture. This also includes information about the nature of your intent and the specific reason/plan for the grant.
  5. Collateral – there are different assets that can serve as collaterals other than real estate like personal assets (house, car), accounts receivables, and credit cards. When the cash flow and profits are good, it is best to slowly build up your assets, which can also help you for your unexpected future additional funding needs.
how-invest-real-estate

Real Estate Investing 101: A Beginner’s Guide To Investing In Real Estate

Investing in real estate is not a groundbreaking or new thing. It is a true, tested and legitimate business that can certainly earn you a great wealth if you play it right. Like any other investment, real estate investing also demands understanding of the basic concepts on your part. When you learn it right, buying property, generating rent and avoiding bankruptcy become as easy as playing monopoly. This article will help you understand the real estate investing basics in the simplest way.

❖ Getting Started In Real estate Investing

Generally, the new investors are more comfortable with real estate investing. It is simple to understand and offers plentiful opportunities to earn good fortune. But before you invest your money into this wealth-building vehicle, it is important that you find out the right properties and understand the real estate community well. Make sure that there is no scope left for making mistakes because if you make them, you will lose everything that you have ever had.

❖ Why Invest in Real Estate?

There are many reasons why real estate investing is considered very fruitful. Here are some of the ways you can benefit from this investment:

➣ Appreciation: Real estate appreciation refers to increase in the value of a property over time. When the land around your property becomes busier or scarcer or if the real estate market changes, your property becomes more valuable. But it is completely unwise to invest in real estate to make money only on the basis of appreciation.

➣ Tax Benefits: You can deduct the operating costs of your property from your income. These costs include:

Repairs and maintenance
Interest on loan
Agent’s fees
Insurance
Rates and taxes
Building depreciation
Travel to and from your property in order to facilitate repairs

invest-real-estate

These deductions can be claimed on your tax return.

➣ Rental Income: Rental income that you get through your property can be a means of positive cash flow. You can rent your property for a specific period of time. When this rental income covers all the expenses like insurance, taxes, mortgage, fees with nothing left over, you become break-even. Positive cash flow is when the rent exceeds the expenses. You can also earn through rent appreciation that is increasing your rental income every year.

➣ Improvement:  You can earn better price and more profit from your property by improving its functionality and appearance. Keep upgrading your property from time to time to help retain its value.

➣ Leverage:  You can use Other People’s Money (OPM) to invest in real estate. You get enough time to pay back the mortgage and you can also structure your deal in such a way that no money is invested from your pocket but the benefits are all yours.

❖ Types of Real Estate Investments

After understanding how beneficial real estate investment is, let’s find out how many ways are there to invest in it:

➣ Commercial Real Estate Investing: These are mainly the office buildings. You can lease out the individual offices in the building to small businesses or companies and collect rent.

➣ Residential Real Estate Investing: These buildings include houses, townhouses, apartment buildings and vacation houses that are rented by a family to live.

➣ Retail Real Estate Investing: Strip malls, shopping malls and other retail stores are included in these types of buildings. Along with getting the base rent on these properties, you can also collect a percentage of sales from the tenant store that is used in maintenance of the property.

➣ Industrial Real Estate Investing: These are the properties that generate sales from the customers, who use the facility for temporary use, for example – car washes and storage units.

➣ Real Estate Investment Trusts (REITs): You can invest in real estate through these trusts also. They own a portfolio of underlying real estate and trade like stocks.

❖ Models of Real Estate Investment

There are 3 different ways through which you can generate money for your real estate investment. You can rent or lease your property to a tenant or can sell it. Here is how these models work:

➣ Leasing and Renting: When you rent a property, you allow a tenant to live in the property. In return, they give you a monthly fee. When you lease a property, you give it to the tenant on rent for a guaranteed amount of time that is decided with a prior contract.

There is just one drawback of this model that in spite of giving it on rent and allowing someone else to live in there, the maintenance of the property is your responsibility. If you have more than one property and you rent all of them, the amount of maintenance can be huge. Also, you may have to get the property completely repaired or maintained before selling or renting it again to get it into good condition.

On the advantageous side, you can earn good fortune through rental income if you have more than one property.

➣ Flipping: This means selling your property to earn net profit. With this model, you buy a low priced property, improve it and then sell it for a profit. Though it yields the most reward, it can be very risky for a beginner investor because you will have to predict which property would be sold for profit in the minimum time.

To get the deal right, it is important that you find out the right property that can be flipped for profit. Then you will have to invest in its repairs and remodeling. For this part, it is important that you have sufficient money in your hand so that the repairing work can be completed in the shortest period of time. Since the property is still owned by you, you will have to make the monthly payment on it. That’s why it is important that you complete the remodeling work in the shortest period of time.

Thus all these approaches work efficiently for generating money from your real estate investment. If you are ready for dedicated and hard work, you can definitely make decent profit through real estate investing 101.

❖ In The End

Though investment in real estate can bring you huge profits but if you are a beginner in this field, you should be very careful when you actually put your money into it. Never enter this world with stock market mentality, which is assuming that the past trends will be repeated in the future. Refrain from buying real estate blindly by following everyone’s advice. Always accumulate cash reserves before investing in real estate, especially if you are renting your property. This will save you from unnecessary pressure of shoddy repairs, accepting unqualified tenants and giving into their demands.

You can do well in this business only if you act rationally and don’t assume that real estate is a way to get-rich-quick. Consider it as a business that will take good amount of time to flourish and only then you will be able to reap the maximum benefits out of it.

Overseas Investing

10 Things You Need to Know Before Buying Property Overseas

Did You Know?

Spain, France, and Nova Scotia are favorite destinations among Americans looking to invest in a property overseas.

You are on a vacation to a European or South American destination, and you love everything about the place. The weather is nice, food is great, people are hospitable and friendly, it is not crowded like New York or London, plus the prices are comparatively low by American standards. You like the place so much, that you’ve considered living here. If not that, at least buy a decent apartment or a condo, so that you can visit whenever you like.

Purchasing a property overseas is exciting, but only after you are clear about one rule – the heart should never rule the head where money is concerned. Also, it is essential that you follow the right procedure, and avoid using any unfair means in securing real estate. Consider doing all the things you would do if you were buying real estate in your homeland. Here are some tips that you can follow.

Know the Market Thoroughly

Be aware of rising and falling trends of the market. Knowledge about the rates can be helpful if you want to buy when prices are down, and sell as soon as the market sees an upward trend. Also, some countries have strict rules that prevent or limit property ownership to foreigners. Hence, it is good to know whether or not you have the legal right to purchase property in that country, to avoid any scams or disappointment. It is important to do your homework before stepping in the market of an alien country.

Beware of Impostors

The global real estate market is filled with impostors who con people, and often get them involved in a financial and legal mess. Even so, this doesn’t mean that everyone you come across is a thug, but being aware of what is right and wrong is a smart move. If you are dealing with a real estate agent who does not carry business cards, and does not have an office, he/she is probably someone you should avoid. Also, there are certain countries that don’t regulate their real estate industry; hence, agents don’t even require a valid license. Be extremely careful here, and proceed only after doing thorough research.

Only Purchase What You See

Real estate agents are idealists. They will make you dream about well-built roads, world-class amenities, and other facilities that are nowhere in plain sight. The catch here is, once you have signed the contract, you are the owner of the area and the illusions surrounding it. I have nothing against agents here, but it sounds risky to invest your hard-earned money for just barren land. Consider all the things that can go wrong here. Hence, only buy what you see.

Always Seek Professional Assistance

Great deals at an affordable price can be achieved if you buy a property directly from the owner. Nevertheless, don’t forget that you are in a foreign land, and taking the help of a reliable professional can be useful to avoid various pitfalls when buying property in a foreign land.

Signing a Contract

Never sign a contract that you don’t understand. Always ask for two versions of the contract – one in English, and the other in the local language. Bring along your legal adviser to confirm that the English version is a true translation, and does not contain any errors, extras, or omissions. Read the contract thoroughly, and ensure that you and the seller both agree to the different terms and conditions decided.

Try to Pay Cash

If you really like the property and know that this is the final deal, try paying the owner cash. It is a tough decision to take, but it is important to understand that financing mechanisms, like mortgages, aren’t as stable in foreign countries as they are in the US. In most European vacation spots, property transfers are mostly done in cash. For those who can’t do without a mortgage, seek the help of your real estate agent and lawyer to know more about such destinations.

Overseas Investing

Verify the Title

In the US, if you acquire a property you get a warranty title that states you are the legal owner. However, in countries outside the States, this title can create quite a problem. This is highly possible in European countries. You see, World War II had created many boundaries in the world, and it is quite possible that once you purchase the property, a recent descendant of the family can suddenly appear to claim his/her property. The situation sounds dramatic, but it can surely happen. This crisis can be avoided by taking the help of a notary. A notary can help verify legal documents, and also ensure that there are no gaps in the property’s history, and you are the rightful owner.

Knowing the Native Language

Relocating to a country without knowing its native language can get quite difficult. The best thing to do is to join a language course, and get things in motion soon. However, if you are not up for this challenge, a better idea would be choosing a country where English is spoken in large numbers.

Valuating the Property

Property valuation is an important step, especially in a foreign land. You need to know all the pros and cons of the property before signing the papers. Hence, ensure that an independent valuation of the property is carried out in your presence.

A Local Bank Account is Necessary

You will have to open a bank account in the country where you have chosen to live, and apply for a Certificate of Importation, so that bringing in money from your home country won’t be a problem. Also inquire about online money transfer facilities, so that you can pay the bills and taxes associated with the house from time to time.

Try to bargain if you are good at it; chances are you might get a great deal at a low price. Also, don’t shy away from seeking professional services that can ensure a smooth transaction overseas.

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Real Estate Business 6 Deadly Mistakes

Investors in the real estate business can make mistakes when the market is up as well as when the market is down. When the market is down the results of those mistakes tend to be even worse.  Just because you have all cash or plenty of back-up does not mean that you cannot make mistakes.

The investors with the least money tend to “hype it up” when trying to get others into their deal.  Every person that has something to do with the deal needs to have some “skin in the game”.

Here Are 6 of the Most-Common Deadly Mistakes Investors Make

1. Violating the Securities and Exchange Commission laws:  Wanna get in Hot-Water with your real estate business? Many investors get so caught up in trying to make a big profit that they try to get a number of other people involved in their deal.  The SEC violation comes when you promise a Guaranteed Investment yield on real estate.   There are people in jail right now for making this deadly mistake in their real estate business. There are ways to involve others in your Real Estate business financially and one of those ways is to have all parties have some sort of direct ownership in the property. It’s called getting Private Money investors. They’re good for the Real Estate business, but there are certain govt. regulations about how you go about finding them. Read more on Private Money Investors

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2. Not Doing Adequate Due Diligence: You can lose your shirt by omitting one little piece of real estate business information.  Zoning and Environmental laws can be a big issue, so do not ignore finding out about these potential restrictions, regulations that may affect you as the new owner. Many current owners are ‘grandfathered in’ and so newer laws might not apply to them, but as soon as ownership changes hands, the new laws / regs come into play. Don’t miss this one.  A few years ago I found a property where I wanted to build a small apartment building. Everything seemed to be going well then I found out that there was an endangered bird near the property so I would not be able to build. (of course I sent an angry Tweet to all my investing buddies:) Lesson: If you’re going to get into the Real Estate business, do your proper due diligence and be mindful of these 6 deadly mistakes.

3.Building-Renovating-Or Making Additions Prior to Permit Approval: Many building departments will allow you to start building your structure when you get the site plans approved, even before all the plans for the project are approved.  Don’t expect one department of the government to actually talk to another department.  You may have as little as a 50% chance that everything about your plans will be approved. A contractor friend of mine got a permit to install 150 windows.  In the middle of his project the county changed the requirements and he had to change all the windows he had already installed. Seasoned contractors and investors have all learned that this little part of the real estate business is one to keep a close eye on.

4. Not Getting a Survey Done Before You Buy: Wow, this is a huge problem-area for properties that have not changed hands in a long time, where a ‘good-ole-boy’ hand-shake deals were the norm. These days any easements or special arrangements regarding the property are recorded at the courthouse. But years ago, they weren’t. This is also still true in many small-country-towns have not come into the 21st Century and stuff is still not recorded. Be sure to get a current survey, including all easements, utility crossings, etc.  The real estate business has a way of making the un-prepared lose their shirt. But you can avoid that by getting up to speed.   Here’s How

Property lines is another issue, they need to be established clearly before you purchase. Any possible disputes or problems need to be handled before you take the next step. The former owner may tell you that there is enough land for you to build your mini storage unit complex.  He could be right about the past zoning, but the property laws may have changed since he last checked. The zoning laws may now require a lot more land to build your complex. Sellers are not usually out to take advantage of you but it is not their responsibility to do your due diligence. This is one good way to kill your real estate business permanently, dont’ leave this out.

5. Expecting Someone Else to Do Your Due Diligence:  This is especially a problem when you get involved in an investment in another state or out of your area.  Keep in mind that no one cares as much about your money as you do, its’ YOUR real estate business…treat it as such!

 You may know the laws and problems in your area or state but you may not know the laws in the state you are looking to invest.  If you have a partner who lives in the other state then send him a very long list of things that you want answers to before you take the next step.  Never assume that someone else, even a partner, will get all the answers you need and want.  For larger purchases, I’d want to lay my eyes on the property before closing at some point, even if my team did allot of the pre-work. (Several of the Niche Videos we have cover this in good detail. See Nich Video Series in the right hand column)

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6. Not Properly Analyzing the Local & Regional Economy:  Just because your area population can continue to support an apartment building does not mean that the area where you are looking to invest can continue to support all of the apartment buildings in that local area. Find out about the unemployment rate, other properties that are selling, plans in the county, growth trends in the area and much more.  What good is it to own an apartment building if there are no renters? This can result in a huge drain of money. Notwithstanding  all the other problems that come with a low occupancy rate. Believe me, this is no way to run a real estate business if you actually plan to make money.

You can make the transition from single family investing to commercial (or start with commercial) and many of the same rules apply. However, there are key differences and you need to make yourself aware of them.

You cannot imagine the problems that you can encounter, especially when you are not prepared.  When you go into the real estate business prepared for all

 kinds of things, you will do a lot better, make more money and not have a heart attack in the meantime just because you did not cover all your bases.

The more you get up to speed on how to safely invest in commercial real estate for a profit, the better you will be prepared.  Just because you have all the education, experience, money and experts to help you there is no guarantee that you will not run into problems.

Here are 5 easy steps to making good profits from commercial property. Learn these critical must-dos through our Free 7 step email series. 7 Steps to Profits

The Real Estate Business can be fun and profitable, but as with anything, there are deadly mistakes and it’s important to know how to avoid them

venture-capital

The Flora and Fauna of Venture Capital

I have found that many entrepreneurs are confused by the differences between the various flavors of angel and venture capital. This is not surprising since the categories used are overlapping and are often used inconsistently by different investors. However, there are some broad generalizations that can be drawn – typically based on the timing of the proposed investment and the typical purpose of the investment in the company’s lifecycle. Depending on the timing, you can also draw some basic conclusions as to the type of investor that will be involved and, in each category, generalizations can be made as to the type of security the company will sell and the magnitude of return the investor will seek.

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The earliest stages of investment are usually characterized as seed rounds, proof of concept investments or angel investments. These investments usually do not occur until after the investor has tapped out his friends and family (in what is often characterized as the “friends and family” round). The money invested is intended to allow the founders of the company to do their initial research, to complete the initial programming or to apply for the initial patent(s). Companies at this stage usually do not have a saleable product and do not have very many employees, other than the founders/inventors. The investors are almost always NOT traditional venture capital funds. Rather, they consist of wealthy individuals or groups of individuals that are willing to invest their own money and take the extreme risk involved in making equity investments into companies that often only have a good idea. Alternatively, the investor may be a government or university funded incubator that was established to help entrepreneurs or scientists get their ideas off of the ground. In this stage, the amount of the investment is typically relatively small – e.g. $100,000 to $500,000, seldom more than $1,000,000 in total. Also, the investor usually takes common stock in the company – the same stock that the founders get. Alternatively, the investor will take a convertible note that allows them to have the protection of debt at the beginning and also allows them to convert at the valuation established by later investors. Investments at this stage are extremely risky and are subject to significant dilution when new investors come in during later stages. Consequently, angel investors look for returns of at least 10x their initial investment, and sometimes as high as 20x or 30x their initial investment. The next stage of investment in a typical company’s life cycle is early stage venture capital. This type of investment usually is not available to a company until it has a proven product and a business plan. However, it is not necessary that a company be profitable or even be producing its product. The funds the company raises will be used to mass manufacture the product, market the product, build a sales force and further develop the product. For this investment, the company will be able to attract early stage venture capitalists. These venture capitalists often have smaller funds which are more suited to making the relatively smaller sized investments found at this stage of a company’s life. In this stage, the amount invested is typically in the $1,000,000 to $5,000,000 range. The early stage venture capitalist will almost always be investing in Series A preferred stock of the Company. This security will be superior to the common stock held by the founders and any angels and will typically come with dividend rights, liquidation preferences, some form of anti-dilution rights and a right of first refusal on stock sales by the founders and angels. Sometimes it may also come with pre-emptive rights, redemption rights and drag along rights and other rights and preferences. The venture capitalists at this stage will look for returns of at least 5x their initial investment and would gladly accept higher returns. There may be multiple additional rounds of equity financing after the Series A round. These types of funding are often called growth capital or mezzanine financing. Usually, the company will either be close to profitability or will have a clear path to profitability and the funds are meant to allow the company to expand its sales force and marketing efforts and ramp up its revenue growth.

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The money may also be used to develop additional products or to research expansion ideas. These investments are usually made by the larger size venture capital funds and the amount invested can range from $1,000,000 to $25,000,000 or higher – depending on the company and the market opportunity. The investment will typically be made for additional rounds of preferred stock – for example, Series B or Series C preferred stock – and each successive round will generally having superior rights and preferences to the prior rounds. Venture capitalists at this stage of investment may still look for 5x investment returns, but depending on the opportunity and the trajectory of the company, will often settle for 2x or 3x returns. Occasionally, a company in the growth phase of its life cycle, or that is on the cusp of the growth phase, will raise bridge capital. This is typically debt that “bridges” the gap in funding between rounds of venture capital financing. Usually, it takes the form of a convertible note that will automatically convert into the next round of preferred stock, sometimes at a discount. The lender may be an existing investor in the company or it may be a new venture capital fund that is contemplating making the follow on round. Another type of financing that is available to companies in their growth phase is venture debt. This is a loan from a bank that is often securitized by the company’s accounts receivable, inventory or equipment. The venture lender will take warrants in the company to help increase its return on the loan. Typically, these lenders seek combined returns in the 12 to 18% range. The final type of financing that a company may seek can be characterized as acquisition or buyout capital. This type of capital is used to purchase the assets or stock of other businesses that will then be adsorbed into or added onto the company. The investor may be the company’s existing venture capitalists or it may be a private equity fund that is building out a platform in the company’s industry. In the later case, the investment may come with a right to purchase the company outright in the future. This type of financing also occurs when a company’s venture capitalists start planning their exit strategy. By putting together the right pieces it may make the company more attractive as an acquisition candidate or perhaps more eligible for an IPO.

Collectible Coins

The Advantages of Owning or Buying Gold or Silver Graded Collectible Coins

Are there major advantages of owning or buying gold or silver graded collectible coins over that of bullion or bars? Most definitely there is. The following is not an exhaustive list, but does include several things to consider. Coins cannot be beat as an investment opportunity.

Coins are extremely easy to handle and store, in contrast to bars or bullion, which is not. They are manageable in size. They are easy to hide for the sake of security, and they are not heavy, so are easy to carry from place to place. This makes their sale much easier than bullion.

Coins are also very easy to buy. The buyer only has to check the karat and percentage. These should be 24 k and .9999 percent, respectively. When buying or selling bars, they must be assayed. This means involving transport and a third party, all which make for a security problem. This is not true for coins. Collectible gold coins are not only a beautiful acquisition; they have a history behind them. They have been in circulation for some period of time. The following coins are not all that are collectible, but are the major ones.

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American Gold Eagle Coins These coins are beautiful, one of their pluses. They are considered possibly the most beautiful of all coins. A nest of eagles is on the reverse side, and a walking liberty on the obverse side. They were minted and issued as with a face value. They can be bought directly from coin dealers or at auction, such as at Ebay. Of all coins collected and traded, they are the most traded. They consist of 91.67% gold and are 22K. This is below the desired standard, but because of their beauty they are still much desired.

Canadian Gold Maple Coins These coins rival the Gold Eagle coin for beauty, and are even considered the most beautiful in the world by some. They are the most pure, consisting of .9999% 24 karat gold. They are inscribed on the obverse side with a bust of Queen Elizabeth II and the maple leaf on the reverse side. They are legal tender in Canada, and can be purchased from most coin dealers.

Gold Krugerrand Coins The South African president, Stephanus Johannes Paul Kruger is the figure depicted on this coin. Due to several adventure movies featuring the coin, it became very famous. It contains a full ounce of gold, one of the first to do so. It can also be obtained in one-fourth, one-half, and one-tenth ounce sizes. Though they are not beautiful like the Gold Eagle and Maple Leaf, they are nevertheless at a premium due to their popularity. They can be gotten at most coin dealers, but demand a high price.

Silver Collectible Coins These coins have all the advantages of gold coins, except the beauty. Most of the silver coins are not considered nearly as beautiful as the gold coins. Most investors actually collect the junk dime, because it is so cheap, readily available, and result in the best investment. Silver has risen in price much more lately than has gold; making these silver coins the better investment. Still, the beauty of the gold coins can’t be discounted. Collectors tend to collect them for their beauty as well as their investment. In a time of great economic catastrophe, though, beauty might not be such a consideration.

In summary, the advantages of coins are that they are relatively easily obtained and have almost nonexistent buying and selling costs. They can be stored locally and handled with ease. They are readily available to the collector to admire. Coins are also easily recognizable and can be assumed to have certain known traits, though if they have been tampered with, this won’t hold true. Tampering will probably be evident, however.

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