As I’m sure you already know, real estate is one of the best ways to protect and accumulate wealth…if done correctly. The problem with many would be real estate investors is that they get lured into the industry by unscrupulous snake-oil salesmen that promise fast riches with little to no money and even less effort and hard work! After being sold a “bag of goods” many aspiring real estate investors simply give up and move on to other opportunities.

This may prove to be a detrimental mistake for many as we are currently in one of the best real estate buying opportunities in decades. Savvy investors are making the most of this opportunity and acquiring properties for rock-bottom prices. These same opportunities are available to every investor that is diligent and armed with the correct knowledge and insight.

When it comes to real-world real estate investing knowledge, the BiggerPockets community is the place to be and if you haven’t heard, they are hosting their first real estate investing conference in Denver, Colorado on March 23- 24, 2012. The cool thing about this conference that is sure to set it apart from other real estate conferences is that it will be strictly a “No Upsell” real estate investment conference. Finally, investors have a place to network and learn from active real estate investors without the worry of being “sold” product after product.

Now, there is nothing wrong with paying for quality education. The Bigger Pockets REI Conference will run you about $200 if you register early, but this investment is minuscule in comparison to the quality of education you will receive. I have had the privilege of working with Josh Dorkin and the Bigger Pockets community as a whole and these guys are the REAL DEAL. If you want to learn about real estate investing and the strategies that are most effective in today’s market, you need to be at this conference!

This conference is NOT a “get-rich-quick” seminar, but rather a group of credible and qualified investors from both the residential and commercial real estate investing sectors. The list of speakers is literally a “who’s who” of successful investors who are dedicated to providing the best information to new and experienced investors alike. If you are serious about your real estate investing education, you can not afford to miss this event.

You can check out more details about the conference on the Conference Website. Just Click the Link Below

BiggerPockets Real Estate Investing Summit and Expo

A big question that many apartment owners ask themselves is do I need to hire a management company or property manager? It depends on several factors such as how many units and buildings you own and your budget. Although a good property manager can be worth his or her weight in gold, if you live within close proximity to the apartment building or you plan to reside on the premises and rent the other units out, it does not make sense to hire a property manager.

You may need a handyman and list of contractors and repairmen if you are not handy and cannot make repairs yourself. Also, if you only own one small building, you probably don’t need to hire a management company.

Advantages of Hiring a Property Management Company or Property Manager

Hiring a management company or onsite manager makes sense in the following instances:

· You live out of the area.

· You own multiple apartment units.

· You are too busy with other investments, family or your career.

· You have partners that can share the costs.

The advantages of using a property management company or onsite manager are:

· Your don’t have to be bothered with screening tenants, collecting rents and answering calls from tenants at all hours of the day and night requesting repairs or making complaints.

· You can spend time on more important matters and let the management company handle the day to collections of rents and repair issues.

· The management company keeps current on local rental law changes so your building is in compliance.

· They take care of unpleasant evictions.

It’s well worth the money to hire a management company or manager for these reasons.

Management fee costs vary so check around. Fees can range from 3% to over 15% of the monthly gross rent. Other companies charge a flat fee ranging from $50.00 to over $300 per month. It depends on the company, the services rendered, and the size of the building and number of units and how many buildings you own. Interview a few companies so that you can compare their fees and the services they provide. Get recommendations from other apartment owners, friends or family. Your real estate agent may be able to recommend a good property management company/manager as well.

Disadvantages

The following are disadvantages of using a property management company:

· Loss of tenants if your property manager does not take care of tenant requests and repairs quickly.

· They don’t keep you informed about serious matters regarding your property.

· Don’t return your phone calls promptly.

· Use inexperienced and unlicensed repairmen that don’t fix items properly.

Most people that own multiple apartment units and hire property management companies or onsite managers are happy with the services these companies or individuals offer. Although, there are occasions when you may have to go through a couple companies before you find the one that works for you. Using a property management company/manager makes life easier for you and gives you the freedom to spend more time with your family and concentrate on other important matters in your life.

Check out our recent podcast with Mitch Stephen the author of:

My Life & 1000 Houses: Failing Forward to Financial Freedom

In this episode we will discuss Mitch’s motivation for writing the book, the wisdom that comes with investing in 1000 houses, the current real estate market conditions and what investors need to do today in order to capitalize on the current real estate market.

You can connect with Mitch here:

1000Houses.c0m

http://mitchstephen.wordpress.com/

Comments are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to retweet this post on Twitter or share on Facebook.

Check out our recent podcast with Priscilya Hawkes from Hawkes Law Group and let me know your thoughts. This episode will give you an inside look at what you should expect from your Real Estate Attorney and a few of the due diligence items that you must pay attention to in every commercial real estate transaction.

You can connect with Priscilya here:

Linkedin.com

Twitter.com

Comments are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to retweet this post on Twitter or share on Facebook.

This is our first podcast for our on-going interview series. We hope to be able to offer this podcast series on a weekly basis.

So now, The Sophisticated Investor presents…”The Sophisticated Investor Show”.

Check out our first show with Rob Oryl from Valuation Nation and let me know your thoughts.

Comments are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to retweet this post on Twitter or share on Facebook.

Real estate and stocks are two popular investment vehicles. It is always important to have a balanced portfolio, therefore it is worthwhile to invest in both. However, if you are trying to decide between the two, you might find that real estate provides the better returns more consistently.

I believe that real estate serves as a better investment than the stock market for a number of reasons. Most importantly, real estate generally is not as volatile as the stock market. Stocks can plummet for any reason at any time, leaving investors at the mercy of things beyond their control. Global events, such as terrorist attacks, natural disasters, corporate bankruptcy, and high-profile white-collar crimes, can all negatively affect the value of stocks. The reality is that many things can determine the daily value of stocks, far beyond the fundamentals of a company’s financials.

Here are the top 3 reasons I believe real estate is a better investment than stocks:

1.) Real Estate is a Tangible Asset. It is a physical investment that you can see and touch. Shares in a company are nothing more than a piece of paper giving you an interest in the underlying company. Although a company’s shares can be valuable, because real estate is tangible it generally provides more value because people can use it in everyday life, and more importantly it is essential!

People must have homes to live in and businesses must have places to operate from. You can live in a house or an apartment, but you cannot live in a share of stock from Google. You can operate a business in a retail shopping center or an office building, but you cannot open and operate your business just because you own stock in Wal-Mart (unless of course you bought the stock way back when and your capital has increased 20X!).

2.) Real Estate allows for Leverage. Now leverage can be a double-edged sword, and over-leveraging a property can cause your asset to become a “money pit” faster than you can say “Bubble”. The over-leveraging of properties coupled with greed is the primary reason why we are experiencing the effects of the recent real estate market crash.

However, responsible leveraging can allow an investor to put up 20-30% of the purchase price of a property and borrow the remaining 70-80% of the purchase price. This leverage will generally allow the investor to realize gains much higher than that of the stock market. For example if you have $100,000 dollars to invest in real estate, you can generally leverage that into a $500,000 property. So your $100,000 will serve as a 20% down payment on a $500,000 property and you will get a mortgage for the remaining $400,000.

If the property appreciates at 5% ($25,000) over the course of a year, that is an unrealized gain of 25% on your invested capital of $100,000. In addition, if the property was generating a positive income, which is always advisable, then your returns would be greater.

Now just to be straight forward, this is the broad view of the investment. It doesn’t take into account closing costs, loan costs, illiquidity of the investment, etc. So there are more costs that would be associated with this investment that would take away from that 25% return and you would still have to sell or refinance the property to realize that 25% return, however, over the course of a few years with responsible leverage, real estate returns far outpace stock market returns. Feel free to contact me if you would like me to justify that claim in more detail.

Stocks can generally only be leverage at a 50% – 100% ratio if you are trading on margin. So if you have $100,000 to invest, you can generally purchase $150,000 – $200,000 worth of stock. Assuming you purchased $200,000 worth of stock and it appreciated 5% ($10,000) over the course of a year, that is an unrealized gain of only 10% on your invested capital of $100,000. And similar with the real estate investment you still have additional fees that will take away from this gain, primarily brokerage fees and interest on the borrowed capital in your margin account.

3.) Real Estate allows for more Control. When you invest in real estate, you generally have control in how that investment is to perform. You can implement strategies to operate the investment more efficiently in order to maximize returns. Unfortunately, with stocks you really don’t have any control in how the company operates in order to maximize your returns on your investment. At best you can submit suggestions to the board of directors, and maybe they will implement some of your suggestions….MAYBE!

Real Estate also provides other advantages for the risk averse, and in terms of how gains are realized and in terms of the overall volatility and manipulation of the markets, which I just don’t have enough time to delve into with great detail in this post, but we can always carry the conversation over into the comments below so please let me know your thoughts and comment below.

Comments are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to retweet this post on Twitter.

Just a quick video discussing the common mistakes new apartment investors make.

When you invest with a private real estate syndication, you are pooling your capital with that of other qualified investors for the purpose of investing in larger and more lucrative real estate projects.

This affords the lone investor an opportunity to participate with an organized group of like-minded investors in the ownership of a piece of income producing property that is too much to handle individually from a financial or risk aversion stand point.

Real estate syndicates own income-generating residential or commercial real estate and are secured by these tangible and quantifiable assets as collateral. This characteristic is untrue of many other investment vehicles and provides added security for your investment. Additionally, investing in private real estate syndicated deals gives the individual investor the ability to achieve extraordinary profits, generally, with no liability for debt.

Although the legal structure of a syndication can take many forms, it is generally accepted that a Limited Partnership (LP) or Limited Liability Company (LLC)  is one of the best forms of group ownership of real estate investments. It offers all of the financial rewards and tax benefits of individual ownership without the burden of management responsibilities, liability for principal debt (in many cases), or large individual cash investments.

Real Estate Syndication in a nutshell

A Limited Partnership or Limited Liability company is formed by a group of investors to purchase and control a specific property. Each investor contributes what he or she wishes toward the purchase, usually in easy-to-divide units, such as 10% percent.

If the structure of the syndication is that of a limited partnership, then one of the members of the group, normally the developer or the investor who put the deal together, becomes the General Partner for the group and the investment.

The General Partner is granted all decision-making powers for the investment. This includes management, though he may hire a professional management company rather than handle it himself.

Everything that happens to the investment is at the sole discretion of the General Partner. He decides when major expenditures are needed, but will usually attempt to get a group opinion first. He determines the optimum time to sell or trade, and establishes the selling price. A good General Partner must always keep the goals of the group in mind and always act in the best interest of the other investors.

A General Partner also assumes total liability for the investment. Were a property to get into major financial difficulties, the cost (or loss) is his responsibility. The remaining partners in the group are Limited Partners. Their financial obligation is limited only to their initial investment. If the whole investment goes bad, the most they stand to lose is their initial investment.

Now you might be thinking, “Why would anyone in their right mind want to be the General Partner?”

The reality is that, if each investment is acquired with a strict set of investment standards, thorough due diligence is completed, and the property is managed properly, then the likelihood of a property going bad, is GREATLY reduced.

Although there are cases of this happening in today’s current economic environment, most of these toxic assets were caused by greed and not fundamental investment principles.

Additionally, the General Partner is usually paid for his services, and also has an interest in the income and future appreciation of the property, therefore, it is in his best interest to make the venture as profitable as possible.

Hopefully you were able to get a better understanding of real estate syndication and how they operate. If you have questions or if I failed to mention something in the post, please let me know in the comments below.

Better yet, let me know your thoughts regardless, leave a comment below and let me know what you think.

Comments are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to retweet this post on Twitter.

You have to check out the awesome post by Bryan Hancock on his Bigger Pockets blog about the Solution For The Destructive Accumulation Mindset. It is a series of post, and Part 2 gives a very detailed look into how to analyze your returns in commercial real estate. Check it out.

Commercial real estate values have declined, and a number of apartment owners have been unable to make their monthly mortgage payments. Lenders have had to institute foreclosure proceedings against these apartment owners. Opportunities to buy foreclosed apartment buildings and low interest rates have created favorable investment conditions for investors to buy these buildings. If you have cash, all the better.

There are three kinds of foreclosures that you should be aware of:

· Pre-foreclosures or short sales

· Foreclosures that have gone through a non-judicial foreclosure sale or judicial foreclosure sale at public auctions

· Bank owed real estate (REO’s) listed in the local MLS with Realtors and offered for sale

You can find pre-foreclosures and REO’s listed with local Realtors, on Internet sites, in the newspaper or by driving around the neighborhood you are interested in looking for signs. Foreclosure auctions are listed in the newspaper, advertised on Internet sites or notices are posted at local courthouses or at the properties.

Judicial and Non-Judicial Foreclosure Process

Each state has different foreclosure processes. Some use judicial proceedings that require court approval while others use non-judicial private trustee sales or both depending on the language contained in the mortgage. A foreclosure proceeding can take about three to six months depending on various factors such as state laws, how many other foreclosures are keeping the court calendars full and government prevention programs and borrower’s attorneys that stall the process.

The foreclosed apartments are auctioned at a public foreclosure sale. In order to bid, you need at least a 10% deposit of the purchase price you are hoping to purchase the property for in the form of a cashier’s check. The sale may be conducted at the courthouse steps or some other public place. Usually a notice of the sale is published in the newspaper in the county where the property is located with the sale date, time and place and contact information. If your bid is selected, you will need to either pay cash for the building at the end of the auction or make payment arrangements. Each auction has different rules. Title to the property will be transferred to you and recorded with the county recorder’s office. The only difference between a judicial foreclosure and a non- judicial foreclosure is that the court must approve the sale after the auction in a judicial foreclosure proceeding.

If no one bids on the foreclosed apartments, then the bank buys them back and they become bank owned real estate (REO’s). The REO’s are listed with local Realtors, and you must make an offer to purchase through the listing real estate agent or your buyer’s real estate agent.

Advantages and Disadvantages of Buying Foreclosed Apartments

Advantages

· Opportunity to purchase a discounted property

· You have built in equity because properties are sold at or way below market prices

· REO’s and short sales offer less risk because they can be inspected, and you are able to obtain title insurance

· The bank may pay the buyer’s/investor’s closing costs up to 6% of the purchase price if you negotiate that in your contract. Typically, they will pay closer to 3% of the purchase price towards your closing costs.

· You are able to obtain your own financing

· You receive the property quickly, except for short sales which take 3-6 months or longer to get approved unless they have already been pre-approved because another buyer backed out

Disadvantages

· Must pay cash to purchase the property

· Properties are sold in an “as is” condition without any warranties

· You cannot hire a home inspector to inspect the property so you don’t know what type of repairs it is going to need

· You don’t get title insurance

· Some states allow the former owner to redeem the property after the foreclosure sale within a statutory redemption period, which means if that happens you lose your money

· You are responsible for the costs of evicting former owners or tenants that are occupying the property.

· Pre-foreclosures take longer to purchase because they are still owned by the borrower who must get their lender’s permission to sell the building for less than what they owe their lender on their mortgage.

For new investors, it is recommended that you get some experience and investigate your state laws first before you buy a property at a foreclosure auction. If you don’t know what you are doing, buying the wrong apartment building can be disastrous, and it could take you many years to recover from your bad investment. It is recommended that you work with a mentor or an experienced investor on a couple foreclosures first so you can to know how they work and what to avoid.