Investing
As a young investor you may be more focused on the rise in capital value; whereas someone in their golden years can be more focused on generating income. Property is one asset class that does both, rising in value and generating income. It is often referred to as the “IDEAL” investment. “IDEAL” is a simple acronym that highlights just some of the key benefits of owning real estate:
1. Income – One of the key benefits of property investment over many types of investments is its inherent ability to generate passive income. When investing in property the key thing is to focus on net income. Many real estate agents will quote gross yield figures i.e. the annual rent as a percentage of the property price. Whilst this is a reasonable indicator of your potential return on investment, I prefer to focus on net yield or net income. You absolutely must have net positive cash-flow otherwise you haven’t got an investment on your hands but a burdensome liability. The challenge in property investment is to minimise the down payment (which will maximise your mortgage) whilst at the same time generating positive cash flow each month.
2. Depreciation – A rental home is seen as a depreciable asset just like a car or piece of factory machinery. Rental properties with positive cash flow can show an accounting loss, granting the owner a tax deduction, or, as Robert Kiyosaki calls it, “Phantom Cash Flow”. Depreciation is an accounting loss and only shows up on paper. It can result in you being able to turn a small economic profit into a small tax loss. So, even though you could be “loosing” money on paper you could actually be making a monthly cash profit.
When people think of investment, they immediately think of stocks and shares, or perhaps even property. However, there are other options. In fact, anything that is likely to, or could be made to increase in value over time is a viable investment. Wine investment is a lesser thought of investment option that can actually pay enormous dividends, and people are beginning to wake up to that.
There are a number of reasons why investing in wine makes sense. The first is perhaps a little tenuous, but a popular justification nonetheless: if for any reason your investment does garner negative equity, you can still drink it. Just because it’s not going to make you a profit doesn’t mean you can’t still enjoy it. So in the end, what have you really lost?
The second, sounder reasoning, is that fine wine will almost always appreciate in value. Fine wine gets better with age, which means that its value increases. Not only that, but it is produced in fixed or at least limited quantities. This limited supply is then sent into a world of rising international demand for fine wine and ends up diminishing with time as more people drink it. By the time a vintage bottle of wine reaches optimum drinking age at around 15-20 years old, the supply of it will be so limited, with such a heightened demand that it can command price-tags like the bottle of Lafite Rothschild that sold for £15,000 at auction in Hong Kong last year.
Real estate investing will turn out to be as a nightmare for you if you have not dealing with right kind of person. It is a single investment which will give you a huge success. Risk is certainly involved in this kind of investment. However if it is planned out in a well manner the concept of risk will be eliminated.
The very first rule of real estate investing is to be very careful with the person with whom you are going to deal with. Even before selecting the type of land and the location for such you are required to be very conscious with the agents, brokers or any person who claims you to be as a dealer for property. If we look upon the activities of promotion today there are many agents who are claiming to make you as a millionaire person within a night’s time. This might be true only in few cases but not always. They try to lure innocent investors through such activities. The ultimate aim of such promotional activities is to brainwash the minds of investors and to cheat them once they have invested their hard earned money.
To safeguard yourselves and your investments it is necessary for you to avoid such situation. If you are serious about real estate investing it is very essential for you to update your understanding on the following issues:
Your success depends on how wise and how you handle your clients. Like all other businesses real estate investing requires definite skill, you must have the drive on it and be sharp. Though it is never taught in school it is one of the most prolific careers in real world.
Be systematic because it involves many different legal and interpersonal aspects.
In real estate deal, interpersonal skills are very important. To attain positive effects and result you must have the intellectual and communicative algorithms applied during negotiations with your clients. Establish trust and agreement to potential sellers and provide them the feel of worth and value in making deals with you, they might recommend their friends houses to sell it to you. Remember that selling is about solving problems, making win-win situations, honesty, integrity, knowledge, and creating relationships that serve everyone.
Do simple study of your monthly cash flow and make plans for longer term prospects on investing properties that you are interested in. You can approximate the house’s likely appreciation or augment the price over time and calculate ROI or the anticipated value of your deals. Analyze every deal so that you’ll know when to continue and when not to proceed with the transaction.
There are instance that you would want to improve the property you purchased. Always spare time to do the calculation on how much the renovation and repairs will cost you can bring a contractor or an architect to help you estimate. Upgrading your assets can eventually help you sell your home faster and at a better price.
Investing is about making your money work for you. For many of you the latter part of 2008 and the first five and a half months of 2009 have seen you trying to salvage the funds that you worked so hard to get rather than building your wealth.
Many people in the financial sector have undoubtedly been telling you not to panic. The economy is cyclical. It will recover and over time you will get the money back that you have lost. Look at the charts and graphs. They don’t lie. There have always been high and low cycles and recovery has always occurred. Holding the line probably will get you back to where you were. However, what is going to move you ahead and help you get to where you should have been through the months lost to the recession and recovery?
Loyalty to one’s financial planner, broker or banker is admirable. However, what would you do if you had a job where every payday your employer was to tell you he couldn’t pay you and then asked you to keep on working on the hope that someday you will get all of the money that is owed to you for the work completed? You need to be able to stay in your comfort zone and therefore you need to be proactive whether it is with your job or your investments. Working for someone who doesn’t pay you or having investments that are losing money is not acceptable, especially when there are safe alternatives available.
When you are learning the basics of stock market investing, you must first learn the most important concept of all, and that is what a stock is. A stock is a representation of a person’s small share of the company and is acquired by purchasing them in a stock market. The stock market works like a normal store wherein there is a seller of stocks and buyers who buys them.
Stock market investing is ever evolving because it encounters a lot of changes even by the minute. As with an actual market, the law of supply and demand also applies to the stock market as prices go up and down depending on how much are being bought and are sought after and how many are being sold by companies and individuals. One thing that you should know about stock trading is that if a stock is deemed expensive and is rising, this does not mean that it is always safe to buy and invest in them. Cheap stocks also do not mean that they are extremely unstable or volatile. Trading is actually quite a tricky endeavor so one should educate themselves constantly about the industry that they want to invest in for them to not waste their money. A lot of beginners are getting discouraged knowing this fact as there are lots of things that one should learn and master.