Real Estate Investment Tutorial

This is an excerpt from my book: Turning Myths into Money; An Insider's Guide to winning the Real Estate Game.

Buying an investment property can not only provide monthly income, but also serve as a retirement vehicle. But you do need a certain level of knowledge to become an effective investor. Learn everything you can.

The worst real estate investment is one unit (a house); the next worst is two units, and so on. The reason for that is the return on investment and the risk. If you have four units and one is vacant, you still have income from the other three units. But if you have a house (one unit) and it is vacant, you have no income. Also, the income from four units will be proportionately higher than one unit—a house—which will give you a better bottom line.

A lot of commercial properties are rented triple net(NNN), which means the tenant pays the property taxes, insurance, and maintenance costs. That also makes for ease of management.

Following is a summary of investment property types:

1. APARTMENTS:

Disadvantages: Very expensive to maintain.
• Very management-intensive. The magic number is 20 units,
when it becomes economically feasible to hire a full-time
resident manager
• Rehab costs when tenants move out

Advantages: People always need a place to live, so you have fewer
vacancies.
• Easier to finance. If you buy two to four units, and live in one,
you can obtain favorable owner-occupied financing
• Depending on price, you may be able to obtain a low down
payment FHA loan on a two to four unit building if you
occupy one unit.

2. INDUSTRIAL – Typically a tilt-up concrete warehouse building with some office space. Can be single-tenant or multi-tenant.

Disadvantages: Single-tenant buildings have more risk.
• Difficult to rent if the building was modified to suit a particular
tenant.

Advantages: Leases are generally triple-net, so you have no expenses,
other than property management.
• The most stable of all property types
• Least management-intensive of all property types. You can
basically lease it and forget it.

3. OFFICE – Fully improved building with drop ceilings, heating and air-conditioning, private offices, and lobbies. Can be single-tenant or multi-tenant.

Recently a new trend has emerged: office condominiums. However, these are usually owner-occupied.

Disadvantages: Difficult to lease. Typically has the highest vacancy rate of any property type.
• Single-tenant buildings have more risk.
• More difficult to finance
• Landlord usually pays expenses

Advantages: The exception is the medical office building, which is easier to rent and finance.

4. RETAIL – Can be a single-tenant building (like a restaurant) or a multi-tenant building (like a neighborhood shopping center).

Disadvantages: Difficult to keep rented in bad economic times.
• Need to spend money to maintain exterior appearance

Advantages: Leases are NNN, tenant pays expenses.
• Less management-intensive than offices or apartments

There are also MIXED-USE projects, a combination of office and retail,or apartment and retail, which turn out to be the worst of all worlds. You get high maintenance, high expense, and high vacancy.

And then there is LAND, which usually generates no income and is considered an “alligator” because you have to keep feeding it. This is generally not good for most people, especially first-time investors, because you have nothing but negative cash flow.

Some people say that land is good if you keep it for the long term. If you believe that, look what happened to land between 2009 and 2010. Land prices went down more than 80 percent. You couldn’t give it away.

In some cases, residential land values were less than zero, because the falling house prices wouldn’t even support a land acquisition price of zero! Even if the builders could get the land for free, they would still lose money.

To learn more, read my book: Turning Myths into Money.

Note: If you buy the book before June 1st, 2011, (Launch Date), you will receive FREE bonus gifts worth over $3,000, including the "Self-improvement Treasure Vault," an awesome collection of 100 self-help e-Books, designed to fully enhance your life.

First, buy the book, go to: http://www.tu
ingmythsintomoney.com

Then, after you purchase the book, go to:
http://www.tu
ingmythsintomoney.com/launchbonuses.html to download the bonuses.