"Investing 101 in your 20s"

by T.Yeap

Created on: September 22, 2009   Last Updated: September 24, 2009

To most youngsters in their 20's, investing is still a foreign land yet to explore. However, it's crucial to start investing young because time is on your side, and if the investment return only yields a modest 6% per year, the compounding interest at the end of their retirement age will make a big difference compared to the individual that starts investing in their 30's. Are you wondering how to invest smartly in your 20's? Here are several tips that I obtained while I was in my early 20's from my mentor and family.

1) COMPANY RETIREMENT PLAN

Take advantage of your company's 401 (K) or other retirement plan that they offer, most company match 50% of your contribution up to the first 6% of your pay. It is also convenient that most of them offer direct deduction from your pay check and the deduction usually is before tax and therefore reduce your yearly income and less tax will be taken out each pay period. With the automatic contribution to your retirement plan each pay period, you will be able to invest in the market consistently. Also, make sure you review all the prospectus and pick 3 or 4 out of the bunch to enroll. If you are nervous about the investment, you can invest in things that you are familiar with as the prospectus of each funds will list out the major holding and their investment strategies.

2) INVEST IN IRA (INDIVIDUAL RETIREMENT ACCOUNT)

Besides the company investment, you should also open an IRA account with your own choice of brokerage firm. There's plenty to choose from and if you are more knowledgeable and you can manage your own investment, choose the online trading through Scottrade or E-trade. If you decide not to do it yourself, they also offer service to help manage the account for you. However, most IRA account required a minimum starting a mount of about $3,000 and then you can choose your own investment option either bimonthly, monthly, biannually or annually.

The smartest choice will be investing a small amount bimonthly or monthly until the maximum contribution of $5,000 at the end of the year. It's similar concept with the company retirement plan, as you will need to choose different type of mutual funds or stocks you would like to purchase. IRA offered more variety, therefore your investment portfolio will be more diversified. It is also advised by investment guru that during your 20's, your portfolio should reflect about 90% stocks and 10% bond as you are able to take the risk

3) CERTIFICATE DEPOSIT (CD)

It's is also wise to put aside some of your money in a CD for some stability as investment can be volatile at times. That's why many investment firms encourage people not to put all the eggs in one basket. Besides, most long term CD offers an average interest rate such as 3% for 5 year standard CD. But, you should only put the money in CD if you are not short in cash as this is not the best investment strategies for the 20's investor but it might be suitable for people that are not willing to take higher risk.

5) INDIVIDUAL STOCK BUYING

Investment requires knowledge, consistent monitoring and also patience. Time is moneyand while you are still young, you have plenty of time to make adjustment and diversify your portfolio from time to time. If you gain confidence throughout the years, you can start investing in individual stocks that are has good potential and yield good dividend that can be reinvested. Blue Chip stocks such as Proctor & Gamble (PG), Google (GOOG), Yahoo (YHOO), Kraft (KFT), Pepsico (PEP), and Coca-Cola (KO) will never go out of business and they will only strive to make their business better every year. Since the stocks are still relatively cheap at this time, it's a good chance that those stock will help you make a lot of money in the long run.

Invest wisely and you will be able to enjoy good life later on.

[Home Investors of America does NOT take credit for writing this article-

Investments: Concept Made "Easy"

by Brian Cody   via HELIUM

When you are considering investing your hard earned capital into purchasing residential rental property, you are taking risks in exchange of an expected reliable stream of income. The other purpose of investing your capital for purchasing real estate investment properties is for the expected capital appreciation of your property.

 Your goal should be to mitigate the risks of experiencing a negative cash flow or experiencing a long term capital loss of appreciation in your investment.  The following real estate investment tips will provide you with the common sense guidance to mitigate your potential losses. You want to develop a business plan as well as a property management plan for each of your properties that you want to purchase.  You also want to form a cash flow and financial plan to ensure that your investment properties will result in a positive cash flow.

 There are three things that an professional investor should consider when reviewing the purchase of real estate investment properties.  For each property you need to run a cash flow analysis.  You want to review the property condition of each unit.  You also need to consider the property location as well.

 There are a couple of cash flow analysis that you want to consider.  The first cash flow analysis is the capitalization rate analysis.  Let's say as an example you are considering purchasing a 4 family unit. The purchase price of a 4 family unit is $325,000.  The  rental income  will be $3,895 per month. The (PITI) Principle ,interest, taxes, & insurance is $1,807 per month.

 You will then take your rental income of $3,895 and subtract the (PITI) $1,807.  The result will be a net income of $2088 per month.  Your annual net cash flow will be $25,056.

 You will then take the property value of $325,000 and divide the net income of $25,056 and your capitalization rate will be 12.37% approximately.

 Some financial experts will also utilize a absorption rate analysis.  If you have an negative absorption rate analysis then your community that you are interested in purchasing investment property will show a contracting economy.

You also want to review the condition of the property itself.  Is the properties conditions' meeting local and state housing code standards?  Is the property free of lead paint?  Does the property have newer windows, roof, vinyl siding?  Is the properties heating and air conditioning units new or old?  Is there plenty of parking for your tenant?

 Ask yourself this question would you want to live in the property that you are considering to rent to Tenants?

 Review current macro economic statistics that are reported by the Bureau of Labor Statistics.  Contact your areas local chamber of commerce and the city/towns office of economic development for information on the local economic vitality.

 Does your town a robust big box retailers near by such as Best Buy, Home depot, Wal Mart, Target, Sears or JC Penny?  Is your community growing or contracting?

 Follow some of the ideas in this article  and you will mitigate your risks when it comes to real estate investment.  You want to ensure that you have an expected stream of reliable income as well as potential capital improvement.

Keeping It "Real" Estate     by Shelly Adams  VIA HELIUM

It's a buyer's market! It's a seller's market! The real estate bubble is about to burst! Housing prices are inflated! Fannie Mae! Freddie Mac! What does it all mean?

Investing in real estate can be very confusing, especially in today's economy. However, there may never have been a better time to invest. Hey, the stock markets not getting you anywhere.Now, forget what you hear on 2 AM infomercials on how to make $450,000 your first week. Those guys are trying to sell you a set of DVD's for $69.95.

The first rule of thumb is to decide what your goals are with investing. Are you wanting to buy a fixer-upper to rent or flip or are you looking at a single family home to live in? Perhaps a commercial building?

Then use some good ole common sense. How long has the property been on the market? How motivated is the seller? Where is the property? What type of renovations are you looking at? Do your homework.

A good market analysis will let you know what comparable properties have sold for, how long they were on the market, and how well the market is progressing in that area. If a similar property being used for the same purpose in the same neck of the woods sold for $100 per square foot after being on the market for 12 months and the asking price for your property is $120 per square foot, that might be an "I don't think so" property. Whatever you do, don't get swept away by one particular feature of that property. I once bought a fixer upper because it had a beautiful hand sculpted 12 foot ceiling in the living room. The property was in a terrible neighborhood and required more renovation than imaginable. It was a passion buy. Lesson learned.

Next, what type of renovations are needed and how will you get those done? If you're going to do the work yourself, you might save money, but do you honestly have the time? Time is also money, right?

Before buying, have a contractor come over and give estimates on the job. Make sure to check out the central heat/air and plumbing, check for termite infestation, mold problems, etc. If you're not sure about what to look for, you can hire a home inspector to check it all out.

How motivated is your seller? In today's market, many people are in real trouble for a number of reasons. Many people cannot afford their mortgage. It's unfortunate, but for investors, it can really make for a good buy. Banks or mortgage companies have lists of foreclosures and preforeclosures. Talk with them and let them know what you want. It is much easier for a lending company to offer the home to you at a discounted price than to go through the hassle of waiting for a traditional resale. If someone is in trouble on their mortgage, they might be willing to let you buy their house for their balance. It's better than letting their credit go in the tank.

And don't forget the three rules of real estate. Come on, you know what they are. Location. Location. Location. If you can't buy in a prime location, that's ok. Some of the best buys are actually in pre-prime location. Up and comings, if you will. Look for neighborhoods that are just beginning to get facelifts.

And last but not least. The most important thing to remember about investing is to have fun doing it.

by Stella Kaye    VIA HELIUM

First and foremost, real estate investment is not like any other investment; you must be prepared to tie up your money for a good number of years. It isn’t for those who may require instant access to their cash.

Buying an investment property is not like having your money sitting in the bank and earning interest; it won’t produce a passive income from day one (although it may do so eventually) and you will have to work hard to keep your property well-maintained in the meantime.Any real estate investment will likely cost you money in the short term. Even a new build will cost you in ongoing management fees. Can you afford the outlay and expenditure this will likely bring?

As with any other type of investment there are no guarantees; the small print will always warn you that your investments can go down as well as up.

You must leave yourself with enough spare cash for every eventuality when it comes to property investment. What if a boiler packs up in the depths of winter? What if the roof needs repair? What if the tenant withholds rent until essential works are done? You could soon find yourself in the unenviable position where your property is costing more money than you have coming in and you may thus stand to lose over the short term rather than gain  If you cannot secure the finance you need to put things right you will be in a whole lot of trouble.

Property investment will only prove lucrative after a good number of years so the essential part of the equation is time. Time + Bricks = Money. You must allow the time for your property investment to increase in value and produce equity.

The days of fast flips regarding property investment have long gone and speculators who managed to make a fast buck back then can rarely do so now. There is a vast difference between a property speculator and a real estate investor. The speculator takes real risks that may cause him to lose everything but a true investor takes a calculated risk that may leave him virtually penniless in the short term but will pay off over a longer period of time. Which one would you rather be?

Everything in life can be a bit of a gamble but to succeed in real estate investment nowadays you have to a true investor rather than speculator.

Your number one priority must be to meet all your financial obligations and commitments to banks and other financial institutions. Never mess up your excellent credit score and always treat it as if it were an entrance ticket to Heaven.

There are no hard and fast rules on how to succeed in real estate investment but you must have direction, determination and drive.

You will make mistakes and lots of them but the trick is to turn your mistakes around to your advantage, remain flexible and be prepared to change your strategies if they are clearly not working.

The motivation that prompted you to become interested in real estate investment in the first place must continue as a permanent part of your personality and you will need to have limitless amounts of entrepreneurial spirit.

Never forget that each day will present new problems which will serve as a continual learning process to make you stronger and if you have a long-term commitment to your chosen vocation as a real estate investor you will be very likely to succeed and reap the rewards of all your hard work.

Investment Property Valuation: Residential vs Commercial

A man and his realtor walk down the street and the man says “Realtor, I want to buy that house,” pointing to a beautiful 3 bedroom 2 bath home, “What should I offer?” The realtor responds, “Well, I’ve looked at the comparable sales in the neighborhood and it looks like another 3 bedroom, 2 bathroom home sold for $100,000 just last month. I would offer them $100,000.” The man agrees and buys the home.
The next week, the same man comes back up to his realtor and says “Realtor, I love my new home, but I had a great year at work and have some extra money that I want to invest. I heard that the retail center up the street is for sale. I saw the one across the street just sold for $500,000 and was identical. Should I offer $500,000?” The realtor responds, “Let me check the sale price.” The realtor makes a few calls and comes back to tell the man the news. “Well,” says the man, “Can I buy it?” The realtor then tells the man the news, “That retail center is for sale for $1,000,000. Maybe we should look at something else?”   The man, looking confused, thinks for a minute and then says, “how could that be? They are identical in size and just across the street. Why is that one worth twice as much?”
We’ll get back to the realtor’s answer in just a minute.
Before we answer his question, let’s take a quick look at how property values are determined.
Let’s first take a look at residential properties.
We define residential properties as single family homes. Homes are traditionally purchased as a place to live by their owner. They can also be purchased as rental properties. But, because the percentage of homes purchased as rentals is relatively small when compared to the single family home market as a whole, their valuation is based on the same methods.
Home prices are determined by using a few different comparable sale methods. These comparable sale methods are done by using cost per square foot, cost of construction, or floor plans.   These valuation methods are also applied for duplexes and four-plexes.
For instance, let’s say a home sells in your neighborhood for $100,000. It has 2 bedroom and 1.5 baths. It is similar in style and size to your home. When you go to sell your home, the realtor will probably tell you that it is worth $100,000 after looking at the comparable sale.
Determining residential home value is straightforward and relatively easy to do. You look at similar homes and what they sold for, then adjust for any differences, and you can quickly determine the value.

Commercial real estate is different.

We define commercial real estate as properties that produce income. They consist of apartment complexes of 12 units or more, or office, retail, and industrial buildings. These buildings are primarily owned by investors. These investors do not live there, but rent them out to tenants who pay rent each month for their space.
Commercial real estate value is determined by the income it generates.  Income is calculated by taking the rental income and subtracting out the operating expenses. You do not factor in loan payments or income taxes. The amount that is left is called the Net Operating Income.
If you want to invest in commercial real estate, you must know how to calculate the Net Operating Income.
Commercial property value is determined by how much an investor is willing to pay for the Net Operating Income. The investor trades their investment dollars for the property’s income. The rate that the income pays back to the investor for their investment is called the return on investment. The sales price is determined by how much the investor is willing to pay for projected Net Operating Income.
Value = Net Operating Income/Desired Return
Let’s look at a quick example.
Let’s say that an investor is considering purchasing a retail center or apartment complex that has a Net Operating Income of $100,000. In that area, investors are willing to buy properties like this for a 10% return on investment.
In this case, the property would be worth $1,000,000. The value is determined by taking the Net Operating Income divided by the desired return on investment ($100,000/10%= $1,000,000) for investors in your area. This means if an investor were to invest $1,000,000, he would expect to receive a 10% return on his investment each year ($100,000).
Now that you know how values are determined, let’s get back to the realtor’s answer to the investor’s question on how the two property’s values could be so different.
“The reason,” the realtor answered, “is because this property has better tenants and generates more income than the one across the street.”
What the investor initially failed to see is that he wasn’t just investing in the buildings as you do in residential real estate. The buildings were identical. He was actually investing in the tenants, the leases, and income that is generated by them, not the buildings themselves. Once he realized that, he looked again and it was easy to see why the values were different.
When he looked again, he noticed that the second building had higher quality tenants, a thriving restaurant, and was obviously doing more sales. “Oh, I see… because that retail center does more in sales, it can charge more for rent. When it does, it produces more income. Right?”
“Yes” said the realtor. “Why don’t we go grab some lunch and we can talk about locating the right property for you?

Housing: Mortgage Rates Fall to Lowest Levels in Years - CNBC

Housing: Mortgage Rates Fall to Lowest Levels in Years - CNBC:

"Mortgage Rates Fall to Lowest Levels in Years


The average rate on a 15-year fixed mortgage has fallen to its lowest level in decades.



Freddie Mac said the rate for the popular refinancing option dropped to 3.54 percent from 3.66 percent the previous week.
That's the lowest average rate since the mortgage buyer began tracking it in 1991.
The average rate on the 30-year fixed loan fell to a yearly low of 4.39 percent from 4.55 percent the previous week.
Mortgage rates tend to track the yield on the 10-year Treasury note.
A weakening U.S. economy has led many investors to shift money from stocks to bonds, which are seen as safer bets. That has pushed the yield on Treasurys to a yearly low.
Low mortgage rates have done little to revive the moribund housing market.

Advantages and Disadvantages of selling Your House To a Real Estate Investor. | Real Estate News & Information

Advantages and Disadvantages of selling Your House To a Real Estate Investor. Real Estate News & Information: "Real Estate Investors:
When you contact a Real Estate Investor, you are dealing directly with someone who wants to buy your house – not list it for sale. If you are looking for a very quick sale, or if your house is not in prime condition, this is often your best alternative. Once you call an investor, they will ask you about your house, the repairs that are needed, your current situation, and why you are selling your home. They’ll use that information to create an offer that works both for you and for them. Generally, they will close (buy your house) as quickly as you need, or stretch out the closing date if you need additional time.
The biggest advantage is that you are dealing directly with a buyer, so once you come to an agreement, your house is as good as sold. All you need to do is start packing. You don’t need to worry about if and when the house is going to sell. You won’t have a bunch of strangers walking through your house at unpredictable times. And you’ll have no repairs to make since an investor will buy your house in its current condition.
They have all of the necessary forms and will handle everything for you. You just need to show up to closing and collect your money.
If you decide to work with a real estate investor, you’ll want to find one who is concerned with your situation and is looking for a way to structure the sale so you both get what you want. Unfortunately, not every investor is created equal. A good investor has numerous techniques for buying your house, and can create flexible programs that meet your needs."

Here are some thoughts on Short Sales!

Short Sale Pros

Avoid Foreclosure – This is probably the biggest plus to a short sale – you can avoid foreclosure and everything that comes with it. There are still things that will follow you.

Credit Score – While there still may be an effect on your credit score, a short sale generally has less of a negative effect on your credit rating.

Short Sale Cons

Credit Damage – There is still going to be some damage to your credit, even with a short sale.
Possible Tax Consequences – If your short sale is approved, there may be consequences when it comes to your taxes.

As you can see, there are quite a few pros and cons to the short sale. Because it may be confusing for you (unless you happen to be a real estate wiz), it’s nice to know you can get FREE INFORMATION about short sale pros and cons. Or leave a question here and we’ll try to help. Thanks and good luck!

Update

Exciting new Short Sale information coming soon! Stay tuned in for details!
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