H.J. Chammas's Blog, page 5

How To 10X Your Results With The Help Of A Mentor

 

How To 10X Your Results With The Help Of A Mentor

Need advice and mentorship for your next career step, investment, or entrepreneurial start-up? Make sure you follow the steps of someone who’s been there, done that.

We’re living in one of the most blessed times in our entire human history. We have the freedom to completely study anything we want, where we want, and whenever we want with few clicks on our screen or voice commands on our devices. To put things into perspective, that was quite impossible a few decades ago, even to the most influential people, the royalties, and the people with the highest education level.

This big opportunity also comes with its challenges of a large number of "claimed experts" pitching their services for a fee. So, there’s so much information clutter out there, and everyone is getting extremely confused and overwhelmed. It's becoming harder to realize what’s real and what’s not, and that’s a problem by itself, which leads you to block everything around you and eventually miss on the real opportunity of having the right mentor guiding you.

Unfortunately, there are so many scammers out there, with clever marketing campaigns bombarding you on social media and even on Google! It’s becoming almost impossible to avoid them popping up on your screen. The thing is, many of those impostors are getting rich by just making you feel good and motivated, but with no actionable lessons at all.

How to find a mentor that’s right for you

Ready to get started? Here are the top tips for finding a mentor who can help you 10x your potential.

Go for the “been there, done that” type of mentor

When choosing a mentor, it pays to go with the “been there, done that” type. Go for someone who has had a good share of mistakes and failures, but has eventually emerged as a winner.

The role of a mentor is to share valuable lessons from previous experiences - the good, the bad, and the ugly - and attempt to instill a sense of drive from which you can learn to improve your career, life, or business. This will definitely speed up your personal growth.

A mentor should be someone who truly cares for their students by making them kind of stand in front of a mirror and understand their true strengths and weaknesses. Mentors would help their students leverage their strengths and acknowledge their weaknesses, then overcome those weaknesses.

Mentors should have a track record similar to the one they would like to achieve. Their background (before their success), their failures, and their success should inspire you, yet impress you.

This makes you admire and respect them, thus pushes you to follow their guidance.

Choose a mentor who challenges you

Good mentors should challenge their mentees to get out of their comfort zone. You won’t learn anything new and exciting if your mentor can’t make you see things from new and different perspectives.

Before making your final pick, make sure the one you’ve chosen shares similar experience threads with you - whether there are challenges they managed to overcome or mistakes they’ve learned from in the past.

Mentors not only provide technical and experimental support but should aid in asking you the right questions … and this, in turn, will help you get the right answers.

A mentor’s job is to help you overcome challenges in a completely new and unique way - a way that they’ve used for themselves or their students, and worked well for them.

This means that they have a bulletproof strategy and process, which you can trust and follow without being exposed to unnecessary risks! Without losing time and money on trial and error.

The more their process or their system is documented or published, and the more their process is acknowledged by 3rd party critiques, with testimonials from other students, the more legit is their process.

Find that special someone you admire and relate to

In general, a mentor should be someone who considers you a colleague and who will listen and help you achieve your own career goals.

It should be someone:

you can talk openly about your ideas, without any red tape,who will celebrate your successes, andwho will and mitigate your fears.

Mentors should help you in achieving skills away from the bench. They will push you to go out and network with others from your industry so that you will find the help and support you might need before you need it.

All good mentors are also willing to be mentored themselves and understand that there is always room for improvement in training others. I see this as a two-way highway, where a mentor helps and guides others, and with an open mind, they would perfect their style and kind of hold your hands and walks you through all the steps and the hiccups you might encounter until you achieve the goals that you have set.

Find a mentor who puts themselves in your shoes

There are many cases where great mentors have done a poor job for their students, despite the fact they had the knowledge, experience, and process required to make them fit as great mentors. The missing ingredients were the art of teaching, the art of being patient, and the art of listening, which all boils down to the fact that they could not relate to their students, despite the fact they were in the same hole at one point of time.

This is one of the most important, and at the same time, the most ignored aspect by people when they’re looking for mentors. They then end up disappointed and confused because they realize that they can’t relate to their mentor's way of teaching and coaching.

So make sure that you will consider this as well when you get someone to become your mentor. Take a look at their content, observe their way of teaching, check their behavior, and see if they have patience and time when it comes to explaining the same thing over and over again - each time from a slightly different angle - until they make sure you grasp a certain concept.

Pick a mentor who is interested in your advancement

One of the first signs that show whether a mentor is a good fit for you and whether they really care about you can be observed in the same moment you first meet them face to face, through a phone call, or on a video call.

Pay attention and see if they are going to ask you the right questions and if they want to find more about you - your current situation, your ambitions, your motivations, and why you want to achieve what you want to achieve.

The next step, which would give you a clear STOP or GO signal, will be to find out if they have ever refused anybody. If they refused people, that means they are true and honest with their work and their students. If they claim and think they can teach everyone all the time, I tell you that’s not possible and that a sign for you to run away from them immediately!

An informal, but structured, relationship works best with a mentor

People respond better, feel better, look better, and understand better when they can be themselves without being obliged to act in ways different from their natural behaviors.

It’s better to have a mentor with whom you can be open and discuss everything you have in your mind. A good connection with your mentor is going to improve everything, and results will come faster than you can expect!

Similarly, a great mentor will make you feel relaxed, open, and close to them due to their positive attitude and their lack of fear of sharing their failures.

This kind of close relationship allows mentors to openly guide their students, push them to find their own answers at times, keep them on track, and highlight the negative stuff that goes in their heads and behaviors.

Make sure you are a coachable person

It doesn’t matter what mentor you choose, you can have the best in the world, and it will be useless unless you're coachable.

I want to tackle this topic since few seem to talk about it. There are some situations when you are being the problem and not the mentor! Being coachable is one of life's most important skills and attitudes, whether or not you're an athlete.

If you're any kind of person who wishes to grow, learn, improve, excel or peak perform, you should care about whether or not you're coachable. In other words, being coachable relates to a happy, productive life.

It means you're ready to do what it takes to change, transform, improve or excel … whatever that means for you and your situation.

Being coachable means you're open to listening to feedback, able to receive constructive criticism without taking it personally, willing to take a look at your own performance to improve it, and generally, a super-badass-enthusiastic go-getter type of person.

It’s very important that you respectfully listen to your mentor, and most of all avoid the tricky mindset of “I already know this”.

To make sure you get the most out of your coaching and take the right amount of action I have some important advice:

Avoid The Syndrome of “I Already Know This”.

I used to think “I already know this”!

Whenever you feel you are lying to yourself with thoughts such as “I Already Know This”, ask yourself those 3 questions:

#1: Am I Doing It?#2: Have I Mastered It?#3: Do My Results Prove I Am Doing It & Have Mastered It?

If you have answered “No” to any of the above questions, then obviously you haven’t mastered this topic yet, and your results do prove that.

Every one of us, irrespective of where we fall on the success ladder, still needs guidance, mentorship, and coaching. CEOs of the largest corporations have mentors and coaches... in fact, they need them.

Big egos get the hardest punches from life because there’s no other way for them to learn or realize how toxic this is for them and the people around them. Being coachable while leaving your ego at the door is about awareness and the ability to take the golden nuggets from a situation and use them to your advantage.

There's wisdom in being coachable. It means you're paying attention to other people and their experience, wisdom, skills, and knowledge.

It pays to listen and learn from others, irrespective of how developed your skills are and be willing to listen close enough to see what might help you on your own journey.

The mentor-mentee relationship is all about give and take. Make sure you listen and more importantly, put their advice into action. A good mentor will hold you accountable and push you to succeed, so don’t waste their time. This will be key to a good long-term mentoring relationship that works for both of you. 

Now that you know how to find a mentor, go on and start looking for the right mentor for you.

Having a skilled mentor can get you closer to your goals.

When You Can't Get A Home Loan, Here's Your Plan B

When You Can't Get A Home Loan, Here's Your Plan B

Most homebuyers require a mortgage to finance the purchase of their home. However, for some, the traditional route of homeownership may not be an option, since they might not qualify for such home loans due to their bad credit or insufficient capital to pay for the down payment.

This is where the lease-to-own model becomes a great alternative solution where you lease a home for a certain period, with the option to buy it before the lease expires.

Rent-to-own agreements consist of two parts:

A standard rent agreement; andAn option to buy.

The lease-to-own process is more sophisticated than the standard rental agreement; and therefore, it requires you to take extra precautions to decide whether it's a good option for you and then to protect your interests.

Before I explain how lease-to-own works, here are key highlights of the process:

A lease-to-own agreement is a deal in which you commit to renting a property for a specific period of time, with the option of buying it at a predetermined price before the lease runs out.You pay a lease option, which could vary between 10 - 15% of the property price. This lease option allows you to lock in an agreed purchase price throughout the lease period. You can exercise your option to purchase at any time within this period.You pay rent throughout the lease, and in some cases, a percentage of the payment is applied to the purchase price. In that way, you are accumulating equity every month the lease is paid.

How Does the Lease-to-Own Process Work?

There really isn’t a standard lease-to-own process; however, most transactions involve these components:

Purchase price

The lease-to-own agreement will specify the purchase price, which is often based on the home’s current value, and in some cases on an estimated future price. The buyer has the option to purchase the property, throughout the duration of the lease agreement, at the agreed purchase price, even if the property will be worth more in the future.

Lease payments

As part of the contract, you’ll agree to pay a certain lease (or rent) amount each month. These payments are usually higher than rent prices in the area because a percentage of each payment is set aside as a credit (equity accumulation) for your future purchase of the home.

Maintenance and Other Fees

In a lease-to-own agreement, the costs of repairs and maintenance are typically covered by the tenant. The same applies to service charges, utilities, HOA fees, and property taxes while you’re leasing the property.

Lease Option Fee

You’re required to pay the seller a one-time upfront, non-refundable fee, which is often referred to as the lease option fee. This allows you to buy the house at an agreed price, and in some cases, the seller will agree to put this amount toward the buyer’s equity in the home. The lease option fee typically ranges between 10% and 15% of the purchase price.

Lease term

You and the seller will agree to a specific lease term in the contract, which is typically 5 years. On the expiry of the lease term, the following options might play:

You will exercise your option to purchase: You will need to pay the balance of the purchase price after deducting the accumulated equity paid throughout the period of the lease. The purchase will expire: This happens when you either decide not to move forward with the purchase or you’re unable to qualify for financing. In that case, all accumulated equity will be forfeited and all lease payments made (as well as the lease option fee) will be considered as made towards renting the property.

Exercising Your Lease Option To Purchase The House

At the end of the lease term, and if you decide to exercise your lease option to purchase the house, you will need to secure funds to pay for the balance. This means you should have evaluated your options of having those funds either through conventional financing or from other sources when you first signed the lease-to-own agreement.

Once you're ready with the balance payment, you will set a closing date where you’ll be given ownership of the property as the buyer. Depending on the terms of the agreement, the percentage of lease money set aside for your purchase and/or option money will be credited to you.

Related: The Simple Way to Invest in Real Estate with Little Capital

What Are the Lease-to-Own Pros and Cons?

Sounds like a great low-risk alternative to owning your dream home, right? Well, lease-to-own agreements have their pitfalls to watch for.

Pros for Buyers

You accumulate equity over time. Instead of having to put a 20% down payment (as is the case with conventional home loans), you put about half of that for the lease option when you move in, and then you build equity over time with each monthly lease payment you make.

You can lock in the purchase price at today's prices. At the end of the lease-to-own agreement, you won’t be up against other buyers who might be bidding for higher prices for the property. It's yours at the previously agreed price when you exercise your purchase option.

You don’t have to qualify for a mortgage right away. You may be drawn to a lease-to-own program because you can’t avail of a home loan yet. Moving into a house without qualifying for a mortgage may seem like the answer to your problem today, but you need to have a reasonable level of certainty that you can pay the balance of the purchase price by the date of the expiry of the lease agreement.

Cons for Buyers

Your lease will be more expensive than the rent. When your lease-to-own contract is set up so that part of your lease is going toward equity in the home every month, your rent prices are expected to be higher because of that.

You’ll pay a nonrefundable lease option fee. You will have to pay a percentage of the home’s price to have the option to purchase the home down the road. This a downpayment you won’t get back if the deal doesn’t work out.

You have to pay for repairs and maintenance. In lease-to-own agreements, it's usually the potential buyer's responsibility to pay for all repairs and maintenance.

Home values could go down. With a lease-to-own contract, you are locking in a purchase price from the date you sign the agreement. No one could predict where the real estate market or local economy could be heading few years down the line. Sure, your home value could go up, but it could also drop. If it drops, you could end up paying more than the property is actually worth in the future.

You could decide not to exercise your purchase option. Let’s say you still can’t qualify for a mortgage at the end of the contract term or just decide this house isn’t for you. If you’re in a lease option agreement, you can walk away from the contract, but all accumulated equity won't be paid back to you. Some sellers allow you to sell the property to another party at the agreed purchase price so that you can get back your equity.

Defaults in payments could terminate the lease. Defaults in lease payments or in case you break the agreement could trigger the landlord to terminate the contract. In that case, you will lose your accumulated equity.

Lease-to-own agreements are a great solution for you to buy your dream home, but you need to fully understand how it works and stick to the plan.

Making Room For Gratitude Can Determine Your Altitude

 

Making Room For Gratitude Can Determine Your Altitude

Before we dive in, I would like to ask you a question, "Are you grateful?"

Almost every one of us, deep in our heart, will respond, “Yes! I’m very grateful for everything God has done for me!”

I would like to ask you to reflect on your answer if my question is tweaked, “Are you still as grateful in the tough times?”

I bet you will take some time to really think about that question. After some soul search, many might respond, "Well, no."

If we’re honest with ourselves, gratitude doesn’t always come naturally to us, particularly when we experience tough times.

When the covid-19 pandemic hit the world like a tsunami, almost every family has experienced a family member hit with the disease, and their first response was not "Thank you, Lord."

If you have lost your job in the 2008 global financial crisis or the 2020 pandemic, I am sure you didn't say, "Thank you, Lord! What can I learn from this ordeal?"

When we are facing tough times, our natural response is to ask questions and feel unrest. However, when we learn to focus on being grateful and not on our problems, we strengthen our faith in the midst of what we face. It is only at this stage that we can redirect our focus away from our "big problem" to our "better alternative".

Please pause and reflect...

First, as part of this pause, I want to thank you for reading this article, as well as my other articles, for giving me comments and suggestions, and for inspiring me to share more. I am grateful to be connected with all of you.

In fact, that’s what this “pause” is all about — being thankful and having an Attitude of Gratitude. This is something all of us should make a conscious effort to practice multiple times every day — to be grateful for the smallest things in our lives. It’s yet another way of building inner energy and vitality for us to use in our quest for personal development.

In my opinion, the healthiest human emotion is "gratitude", because if we learn how to be thankful in the valley, imagine the magnitude of our celebration on the mountain top.” Gratitude is the best attitude that takes us to the next altitude!

Here are powerful concepts, if well practiced, that can transform your attitude from an "Attitude of Self-Absorption" to an "Attitude of Gratitude".

Appreciation

Appreciate everything for what it is (and not for what you would like it to be), and appreciate it “at the moment.”

That means being thankful for the smallest little things that we usually take for granted — our family, our friends, our health, our career, nature, and even those tiny rays of sunshine through the clouds on a stormy day.

While it is not usually our default attitude, learning to cherish anything and everything we experience in our daily life can go a long way toward alleviating our daily problems and challenges. Once we have this inner piece of appreciation, the magic happens when we get into the habit of expressing our appreciation for such joys to everyone around us. Just imagine the positive energy we will be transferred to people around us.

Approval

Many of us lose energy on the endless process of seeking approval of others, whereas we should have had the inner piece of feeling good about ourselves, without the need for anyone else's approval.

When we have self-belief we appreciate, value, and accept ourselves; we have self-confidence. But, when we believe that nothing we do is ever good enough, it takes its toll on our mental and emotional well-being. It can lead to emotional stress.

Stop comparing your successes and achievements to others. Stop despairing right now. Remember: you are unique and you have special qualities.

To help you recognize your worth, here are 5 steps to follow:

Get focused on what you are doing right and what you do have, instead of what you are doing wrong and what you don’t have.Ask a close, trusted friend to help you identify what makes you unique. Just remember, what you do well can be small or large.Stop putting everyone else above you, so that you don't end in an endless quest for approval of others.Ignore all destructive criticism and make your opinion of yourself the most important one. Do not internalize anything that negative people say about you. Their opinion is just that - an opinion, not a fact.Do not let other people weaken your spirit or ridicule your ambitions. Work on your ambitions and then let your results speak for themselves.

Once you have mastered self-approval, it will always pay off to convey approval — “believing that someone or something is good or acceptable”. You can start doing by making a mental list of those whose contributions to your own life you value, and then making a point of openly expressing it back to them. Just imagine the positive impact you will make in their lives!

Admiration

Expressing admiration is like the next level of appreciating others. It is about being generous with your praise for all the great things going on around you.

A simple gesture of paying simple compliments to everyone you think deserves them — from the waiter who served your meal to the janitor cleaning the office, to the barista preparing your coffee, to the person who smiled at you in the elevator, and all your colleagues who make your ability to do your job so much easier. Compliment them and let them know just how much you appreciate them and what they do. Look for genuine reasons to compliment people and watch the positive responses you get in return.

Attention

Giving attention in this busy world full of distractions could be a tough task. Let's face it, you try to give your undivided attention to someone talking to you or to this article you are reading, and then you get a notification from your social media, a message on your phone, an ad pops out on your screen, a sales agent calls you, or your mind is worried about something else at home or work.

We all know that we have to give others the attention they deserve by not only listening to what they are saying but most importantly processing that and acknowledging what is being said. There is no greater sign of respect for the other person than listening intently to them and understanding them.

Another component of attention is having awareness of all what's going on around you, realizing how the most seemingly unimportant, inconsequential, or trivial things can really impact your life, either positively or negatively, and can even lead to big opportunities if you show gratitude for them. But to do that, you have to pay attention, or you’re liable to miss out on them entirely.

An Attitude of Gratitude Determines Your Altitude

We all have challenges. We all have struggles and face hardship at different times in our lives. How we face those unpleasant life situations will impact our lives. We can either allow them to knock us down or positively face them, pick up the pieces, learn from the experience, and move on.

Of course, hard times can be emotionally draining, however, if we reflect on the situation, we can always find the lesson in everything that happens to us (and for us). The question is, are you willing to look for it?

Related: What is Your "Big Why"?

Life is filled with lessons, each allowing us to learn something from it and improve ourselves. When we choose to have an attitude of gratitude and be grateful for even the smallest things, we can change our lives.

“An attitude of gratitude will determine the level of altitude at which you are able to soar.” - Tomyka Washington

You become what think about all the times. If you allow yourself to procrastinate and surrender to fear on every downfall you will face, the more those negative attitudes become your reality. On the other hand, when you have an attitude of gratitude and can find the positive even in the midst of trials, you become available to receive the lessons life wants to teach you.

Step-By-Step Guide to Real Estate Investing

 

Step-By-Step Guide to Real Estate Investing

Real estate is generally considered one of the most stable and tangible assets. If done properly, real estate investing could be the most effective and reliable way to generate income. Sophisticated investors diversify their portfolio with cash flowing real estate to benefit from rental income, tax advantages, leverage, and appreciation.

Although this is common knowledge, very few do get into real estate, and from those who take the step, not everyone becomes successful. There are numerous reasons for this; however, much of it boils down to a lack of education on the secrets and hacks within this niche.

If you’re planning for financial independence by earning residual income from rental properties, you should begin by learning the basics of real estate investing for beginners. In this article, we’ll cover exactly that. So keep reading.

Before You Invest, You Shall Leverage The Resources Available For You

To become a successful real estate investor, you need to harness the power of leverage. I am not talking here about only leveraging OPM (Other People’s Money), but equally importantly OPK (Other People’s Knowledge), OPT (Other People’s Time), and OPC (Other People’s Connections). Most of the time, people who rush into buying an investment property before doing these things end up making costly mistakes that sabotage their real estate career.

We will go through leveraging OPM later in this article, let’s start with the most important form of leverage, OPK.

Educate Yourself… Leverage OPK

If you are wondering how to get started in real estate, real estate education is the key to doing it right. Give yourself a reasonable amount of time to learn the basics of real estate investing before you get started. Various sources of information like articles, books, podcasts, online courses, masterclasses, seminars, and YouTube videos are available out there. Better still, consider having a mentor. It’s probably the fastest and best way to expand your knowledge and avoid the common mistakes made by beginner real estate investors.

Once you have educated yourself on the basics, commit yourself to take action. Don’t just keep learning endlessly without taking any concrete action.

Related: Schedule Your Free "Strategy & Discovery Call Session"

Assemble a Team... Leverage OPT and OPC

You may not realize it, but real estate investing can be very challenging if you are not a team player. There are so many steps that are crucial to every real estate transaction. Successful investors understand that it’s impossible to do everything on their own. That’s why they always have a team of professionals to help them with the different aspects of their real estate transactions.

Irrespective of your level of experience (highly experienced to no experience at all), you will maximize your return on investment potential by having a competent team around you. For a start, your real estate team may include a real estate agent and mortgage brokers. As your portfolio grows, you may need to bring on board more real estate professionals, such as a home inspector, accountants, real estate attorney, property manager, etc.

You will be outsourcing the services of your team members, each for their respective expertise, and compensate them for successful transactions. This type of leveraging other people's time (OPT) and other people's connections (OPC) will not only enable you to increase your success but also it will compensate for your lack of experience. Just make sure that you are working with competent and trustworthy people.

Related: Free Masterclass Revealing The Steps of Building Your Dream Team

Get The Capital You Need To Fund Your Investments... Leverage OPM

As a starting investor, you don't need too much spare cash. Your job allows you to borrow what you need to start investing in real estate. If you grasp this concept, you will agree with me that it’s an advantage to be an employee.

Lenders like to lend to people with a regular income, a good track record of paying their debt obligations, and a sensible plan for investing what they’re borrowing. Banks like secure investments. And the property is a secure investment, which can be put as collateral to secure the underlying loan.

With this principle, you can borrow from 80% up to 90% (and even 100%) of the price of the property. This means you put a little cash from your pocket (bank account) and you leverage the bank's money to invest in a property that will pay you passive income from the rent. How powerful is that!

Related: Decoding The Process of Financing Your Real Estate Investment

Have a Plan and Stick To a Process

After educating yourself about the basics of real estate investing, you will need to surround yourself with a competent team, and then secure a loan pre-approval from your lender. What happens next?

Related: Why Is It Important To Get Pre-Qualified For A Loan Before Prospecting For Rental Properties?

At this stage, you need to come up with a game plan. As a real estate investor, if you fail to plan, you are planning to fail. Having a plan is the best way to ensure you keep on track and are prepared to mitigate any hiccup along the process.

Having a plan means establishing your investment goals (long-term and short-term), assessing different real estate investment strategies, and then following a proven process to successfully invest in properties that would best help you achieve your goals.

Related: How and Why to Invest in Real Estate: The Basics

Find Profitable Cashflowing Properties

To find an investment property with a good rate of return, you first need to select the right real estate type and location. Since location has a significant impact on the return on investment of a rental property, it’s crucial that you perform a thorough real estate market analysis even before you begin your property search.

Related: What Does "Location Location Location" Really Mean in Rental Properties Investing?

A positive cash flow property is generally the type of real estate wealth builders invest in and add to their growing portfolios. A rental property gives you access to a monthly income stream and lowers your real estate investing risk.

The Bottom Line

If you have been looking for a dependable and less risky way to generate passive income and build wealth, investing in rental property could be the way to go. However, it’s important that you first learn about this niche before you get started.

Want to get started with a free strategy session with a mentor who will put you on the right track, book your free session now.

Want to get started with a free strategy session with a mentor who will put you on the right track? book your free session now.

Understanding The Current State Of Your Finances

 

Understanding The Current State Of Your FinancesBefore you can start the process of building wealth, you need to have a very clear picture of where you are financially, right now. To determine this, you will need to understand some basic financial calculations and assessments.
The Current State of Your Finances – Your Personal Financial StatementAs you begin to build your investment portfolio or your business, financing will be a crucial enabler to getting you started. Any bank or financial institution makes money by lending money and earning interest on this money. However, the financial institution requires reassurances that the party borrowing the money has financial stability (or good economic position) as well as a steady income to repay the loan and its interest. The two key measures of a person’s financial position are net worth and cash flow. Those two measures determine the creditworthiness of the person borrowing the money or simply said, how likely the person will pay their debt and interest on time.

Net worth is the sum of a person’s total assets, including cash, less the sum of a person’s total liabilities. The amount by which the individual's assets exceed their liabilities is considered the net worth of that person. In short, net worth measures an individual’s economic position. Negative net worth can occur because a person borrowed too much money as compared to their assets, which may indicate that the person’s income may fall as their debt payments rise. Net worth tells only half the story, a lending institution will also have to look at the person’s cash flow position.
Cash flow is the sum of total income minus total expenses. It measures the net amount of cash moving into and out of a person’s finances. A positive cash flow means that the person earns more than they spend and that the person has some money left over from that period, which will enable him or her to settle debts and provide a buffer against future financial challenges. On the other hand, a negative net cash flow shows that the person spends more money than they brought in, which will make the financial institution examine the person’s balance sheet to determine their net worth.

Any bank or financial institution will definitely require the examination of an individual’s personal financial statement, which consists of two interrelated statements:Balance SheetIncome StatementA balance sheet is a statement of the individual’s assets and liabilities. It determines their net worth by subtracting total liabilities from total assets.
An income statement lists down all the sources of income of an individual as well as all types of expenses. It determines the net cash flow of an individual by subtracting total expenses from total income.
Related: Free Course On How To Fill Up A Personal Financial Statement In Under One Hour Determining Your Financial Health - Your Finacial KPIsOnce you fill your personal financial statement, using the templates offered with the free course (mentioned above), you need to carefully examine the following areas of your finances:

A- Income ProfileB- Expenses ProfileC- Net Cash FlowD- Assets ProfileE- Liabilities ProfileF- Net WorthG- How Wealthy You Are

Let’s go through each of those financial KPIs and measure how they will impact the financial status of any individual.
A. Income ProfileWhen examining your personal finances, looking at your income profile requires you to answer two main questions:What is the percentage of my earned income to total income?What is the percentage of my unearned income to total income?The higher the contribution of earned income to your total income, the harder you are working for money. Whenever you start to accumulate income-producing assets that will generate passive and portfolio income, the percentage of earned income contribution to total income will go down progressively since unearned income contribution to total income starts to increase at the same rate. Inversely, the higher the contribution of unearned income to total income, the harder your money is working for you. If you are serious about becoming financially free, you will need to keep on increasing your unearned income to a level that exceeds your total expenses.
Related: Learn How To Invest In Income Producing Assets That Pay You Passive Income
B- Expenses ProfileAny bank or financial institution that examines your creditworthiness will look at answers to the following questions:How much do you pay for income taxes?How much do you pay for housing?How much do you pay for discretionary expenses?How much do you pay for loans?This article is not intended to cover the topic of income taxes, which can be referred to in much literature and many books according to the country where you live.
My simple advice is for you to understand how much you do pay in income taxes and to keep track of how much it contributes to your total income. Over time, when you start to accumulate income-producing assets, which will, in turn, start generating unearned income, you will experience a decline in the income taxes as a percentage of total income. The reason is due to the tax advantages of unearned income.
When it comes to how much you spend on housing, it’s always recommended to limit the amount you pay on a personal home, be it a mortgage or rent, to a maximum of a third of total income. The more your total income will increase over time, the more you can afford a larger or better personal residence.
How much you spend on discretionary expenses is always a sensitive topic. As mentioned earlier, discretionary expenses are optional expenses that are not necessary for survival and are hence referred to as discretionary. Early in my investment career, when I was in a financially disastrous situation, my mentor, Papa Joe, taught me a lesson that did me quite well: “Being frugal on how you spend your money is a prerequisite for saving money that can be invested in the future on income-producing assets. The advice was never to spend more than 10% of total income on discretionary expenses in the wealth-building process. The more unearned income will increase the total income, the absolute value of the 10% allocated to discretionary expenses would increase. Then you could afford to enjoy spending on more goods and services that are non-essential. 
C- Net Cash FlowTwo most often asked questions are: “How much money do you keep?” and “When the end of the month approaches, do you end up with more month at the end of your money or more money at the end of the month?” The answer to such questions is determined by knowing your net cash flow.
What you will do with the saved money will make a big difference in your finances. Money saved monthly as a result of a positive net cash flow can either go into non-income-producing assets or income-producing assets. It is the latter that will accelerate the path to wealth.
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D- Assets ProfileThe prudent investor would like to track the contribution of both income-producing assets and non-income-producing assets to his or her total assets. The higher the income-producing assets, the better the person is set to producing wealth and unearned income.
The wealthy always ask themselves, “What is the return on my invested capital?” This is commonly referred to as ROI (return on investment). It is measured in percentage, and it is computed by dividing the unearned income generated from those income-producing assets over the capital invested from the investor’s own funds.
E- Liabilities Profile
Investors who plan on acquiring income-producing assets, such as rental properties, often ask themselves whether they are better off purchasing such assets on an all-cash basis or through the use of leverage. There is no right or wrong answer here. It all depends on their financial objectives. If an investor is seeking a certain absolute amount of money to depend on as passive income, then an all-cash basis term could be the right option for them. On the other hand, if an investor’s objective is higher returns for their invested money, then buying rental properties on leverage (i.e. with a mortgage loan) is then a better option for them.
Wealth builders understand the importance of accumulating income-producing assets with the use of leverage by following the mantra: “The road to wealth is good debt.” Good debt acquired to purchase income-producing assets will accelerate the road to wealth.
Related: The Employee to Millionaire Secrets
F- Net WorthThe objective of any responsible person who wishes to seek wealth is to keep on increasing income-producing assets to enjoy better cash flow and increased net worth. The more a person accumulates assets, especially income-producing assets, the more the person’s net worth will increase, and the wealthier the person becomes.
G- How Wealthy You AreWealth is a measure of the number of days forward that an individual can survive without working. To compute wealth, we need to go through the below process:
Divide Total Unearned Income over Total Expenses.If the resulting value is over 100%, the individual is Financially Free or Infinitely Wealthy.If the resulting value is under 100%, wealth can be computed by dividing the net value of Total Assets over Total Monthly Expenses. The resulting number is the number of months a person is wealthy.Here is a summary of how wealth can be computed:
Wealth = Unearned Income divided by Total Expenses.If > 100% →  Infinitely wealthy.If < 100% → Net value of Total Assets divided by Total Monthly Expenses = Months wealthy.This for me is the most important KPI on the financial KPIs dashboard. When a person’s financial performance improves on each of the KPIs discussed in this section, that person’s wealth is automatically increased.
Once you invest the required time to complete your Personal Financial Statements and then analyze your financial situation with the help of the Financial KPI’s Dashboard, you can determine your current financial situation. At that stage, the main question, “Where Am I Now?” would have been answered. This step is a prerequisite for any person seeking financial freedom. It is a preamble for both setting new goals (Where Do I Want to Be?) and creating a strategy to reach them (How Do I Get There?). If you don’t know where you are and why you are where you are, you can’t expect to get where you want to go.
Related: Should You Buy An Investment Property With Cash Or Mortgage?

How Can I Spread My Risk With Real Estate Investing?

How Can I Spread My Risk With Real Estate Investing?In any asset class, investors diversify their risk in their investment portfolio by not having all of their funds in a few picks. In a stock portfolio, diversification is achieved by owning many different stocks in different industries that are not correlated.
When it comes to real estate, this is often a challenge! In the conventional way of investing in the property market, an investor needs to have his skin in the game, which is translated into a large downpayment of 20% of the property price.

Is there a way to diversify your property portfolio without having to invest in a large downpayment for each of those properties within the portfolio?

Historically, real estate investors could only invest in real estate by buying a physical property or investing in REITs (real estate investment trusts). However, crowdfunding has opened up a whole new method for investing in real estate.
With real estate crowdfunding, an investor can buy into a property and become a shareholder. The investor does not need to buy the entire property. Instead, the investor can own equity in the property and earn a portion of the profits generated from the real estate investment.

Real Estate Crowdfunding is an exciting place to invest, however as with any asset class you need to be mindful to diversify your portfolio. In a stock portfolio, diversification is achieved by owning many different stocks in different industries that are not correlated. In a similar fashion, real estate crowdfunding facilitates real estate diversification by any combination of the methods explained below.

PlatformThe first and simplest way to diversify your real estate crowdfunding holdings is through multiple platforms. There are currently almost a dozen different platforms you can invest in. Some specialize in debt, others equity, and others a combination. By utilizing different platforms, you are giving yourself access to a differentiated group of opportunities to invest in. To have maximum diversification in this area you really want to be invested on at least 3-5 different platforms.

GeographyA very effective method of diversification within your real estate crowdfunding portfolio is by choosing properties with different geographic footprints. You can think of it as having properties in your portfolio that are located in either different cities within the same country or in different countries. By having a diverse global footprint, you can weather the storm easier should a specific geographic area have a downturn in the local market. Professional real estate investors usually invest in at least 3 different geographic locations to start, but as they grow their portfolio, a larger diversification can really help shield their portfolio from lower than expected returns.

Property TypeAnother great way to diversify your portfolio is through different property types. There are so many different property types available within either residential or commercial real estate. By having your investments stretched over several different types of properties, you are protecting yourself should any one particular property type start having issues with lower than expected returns, attracting new tenants, etc.
The best way to start diversifying your portfolio with property type as you begin is to make sure that each one of your first investments is in a different type of property.


While there are other ways to diversify in Real Estate crowdfunding, the above three methods are the most simple and effective for a new investor. By using several diversification strategies you will be protecting your portfolio so that you maximize your returns.
Diversify your real estate portfolio with CasaBayt and start earning from 4 - 13% return on investment.
Browse a list of properties in diversified geography and a diversified property type.Check the estimated return on investment for each of the listed properties.Start owning equity in the properties that match your search criteria, starting with as low as $500 per property.

Check Out CasaBayt

Which Assets Build Wealth – Stocks, Bonds, or Real Estate?

In their quest to build wealth, any person needs to acquire assets that pay them unearned income (or passive income) as long as they hold or control those assets. The golden question is which asset class will be the best income-producing asset?

Your mind might be wondering right now whether paper assets (in the form of stocks, bonds, or mutual funds) will outperform real estate. Let’s examine the different asset classes by comparing them from different angles, which are:

·       The use of leverage.

·       Capital gain or loss.

·       Cash Flow.

·       Control.

·       Liquidation of profits.

The Use of Leverage

Financial institutions make money by lending money to borrowers and earning interest on those loans. They are quite eager to lend money on properties. In fact, they tend to lend anywhere from 80% to 100% of the property’s value. On the other hand, not all paper assets are eligible for margin borrowing, and the available leverage for those that are eligible varies by market from 30% to 60% of the value of the stock. With the evolution of online trading platforms, which are becoming more and more aggressive, the available margin on selected paper assets has reached above 90%, leading the novice to suffer catastrophic losses.

But when we consider the ease with which a loan can be obtained, real estate is definitely a winner. Banks and financial institutions will be constantly competing on interest rates and offering lower financing costs to make their loans more appealing to real estate investors. This makes us conclude that banks and financial institutions consider properties as a safe and secure investment.

For the sake of like for like comparison, let’s compare a 90% leverage for both $100,000 worth of rental property and $100,000 worth of paper assets. Starting with cost comparison, you will incur a 3% to 5% interest rate on borrowed money for the rental property, whereas you can expect a 10% interest on the borrowed money for the paper asset. But this is still a minor difference as compared to our second comparison related to swings in the market.

Related: You Can Almost Never Become Wealthy Without Incurring Good Debt!

Capital Gains and Losses

If the market goes up, both assets will be winners; however, the major difference is when the market goes down. In the case of paper assets on margin, when they go down in value, the financial institution lending you the money will make a “margin call,” which is forcing you to top up your capital to pay a portion of the plummeted value in a way to go back to the agreed leverage. If the investor couldn’t top up the invested capital, all the investment will be lost. To manage such disastrous risks, the investor in paper assets ends up putting almost the entire purchase price in cash.

Before opening a margin account to trade paper assets or securities, keep the following in mind:

You can lose all the money and even more money than you have invested.You may have to deposit additional cash or securities in your account on short notice to cover market losses and avoid margin calls.You may be forced to sell some or all of your securities when falling prices reduce the value of your securities.Your brokerage firm may sell some or all of your securities without notifying you to pay off the loan it made to you.

On the other hand, in the event the value of the rental property goes down, the bank will not make a “margin call,” you will not be obliged to add more funds to avoid losing it all, and you are not obliged to sell the property to satisfy the loan. In essence, this is called “paper loss,” which is an unrealized capital loss in an investment. Losses become realized only when the asset is sold at their lower price.

Related: Why You Might Get Hit By Recession, If You Buy On The Promise of "Price Appreciation"

Cash Flow

You will certainly be wondering why anyone would hold on to a rental property that has lost its price. The answer is cash flow. The primary reason why the rental property is bought is because of its cash flow. In other words, a real estate investor carefully selects rental properties to be bought on the premise of generating positive cash flow, which means the rental income shall outweigh the property expenses including the mortgage payments.

Why would anyone sell a property that is producing unearned income to its owner? The prudent investor buys rental properties on the basis of their cash flow, and not the promise of a future capital gain. For the prudent investor, the capital gain is an added advantage that could be very rewarding; however, decisions are never made on the basis of future capital gains. Markets can go up, down, or sideways. Those cycles in the market are always there. If the rental property generates positive cash flow, the investor can weather any storm and survive any downside in the market until such time the cycle reverts, and properties prices pick up again.

Control

This takes us to the topic of control. When you buy $100,000 worth of dividend-paying stocks, you do not have any control over the initial purchase price, amount of dividend, whether dividends will be paid, when dividends will be paid, or on the future value of the stock. At best, you can count on luck with a little bit of praying combined with some anxiety. It doesn’t take much convincing here, to agree that the investor will have no control at all over the current and future prices of stocks and other paper assets.

In contrast, when you buy a $100,000 worth of rental property, you could have paid way more or way less of its worth, depending on how well you negotiate with the seller and the level of motivation of the seller. Most successful real estate investors who I have studied manage to buy properties at a 20% discount versus their market value. They know how to negotiate and also, they know how to look for motivated sellers who want to get rid of a fine property for personal or family reasons.

Real estate investors will always buy properties with money borrowed from banks or financial institutions. Those lending institutions will always ask you for an appraisal of the property to be done by a certified appraiser. This, in fact, acts as a protection for you not to overpay for a property, since the bank will not lend you money for something overpriced. The bank will happily lend you money for the appraised value of the property, which will act to your advantage when you buy a property at 20% discount versus its appraised price.

This is quite an important point that I would like to make sure you grasp. Let’s look at a scenario where you found a $100,000 worth of property that can easily be rented out. With good negotiations from your part and with good reasons that the seller is quite motivated to close the deal, you have both agreed to close the sale at $80,000. You go to the bank and ask for a mortgage loan. The bank will send an appraiser to evaluate the property, and the report shall reflect the market price or very close to it, which is $100,000. Responsible banks will land you not more than 80% of the value of the property, so with 80% LTV (loan-to-value), the bank will happily lend you $80,000. As a conclusion, you would have bought this property with zero or little money down. Your cost will be limited to the agent’s commissions and other closing costs. Isn’t that great? From there, you will rent out the property and generate unearned income for yourself after paying all expenses.

If you are a responsible investor who looks after the investments you make, you will make sure the property is always well maintained. A combination of a good location, a well-maintained property and positive cash flow will bring the property price higher. It will become easier for you to sell it with a proven track record of performance; and therefore, this puts you in control in improving the future value of the property. The message I was trying to share here is that you do have control over the purchase price, the rent, the expenses, and the future selling price.

 

Liquidation of Profits

Let’s imagine a scenario where you bought both a $100,000 worth of dividend-paying stock and a $100,000 worth rental property, both with a 90% margin. For the sake of comparison, let’s assume that after some time both investments have doubled in value. This means the current value of both investments is currently at $200,000 each. With a 90% margin on your initial investment, you would have invested $10,000 from your own cash to purchase each of the $100,000 stock and rental property. This means the $100,000 capital gain for each investment will result in a handsome 1000% return on your invested capital. Those profits are called “paper profits” if not realized with the sale of the assets. So, the main question you will be asking yourself is which asset is faster to liquidate to enjoy the profits? It will be a no-brainer to say definitely selling stocks is way easier and faster. In fact, with a click of a button or with a simple phone call asking your broker to sell, your stock will be sold instantaneously at market price. You will think that paper assets are definitely a winner when it comes to the ease of liquidation of profits, and I would totally agree with you.

In the case of paper assets, you can also have the choice of selling the entire portfolio or a portion of it. After paying the capital gain taxes, which depends on your country, you will still walk away with a handsome profit; however, you will lose any future dividends from this stock, which is counterproductive to achieving financial freedom. Remember that to be financially free, you will need to increase your unearned income to a level it exceeds your current expenses. By selling the appreciated stocks, you would have gained money now, but lost all the future unearned income in the form of dividends. You might be wondering right now on how rental properties can differ? The short answer is “you do not need to sell your rental property to enjoy both tax-free profits and cash flow”. In case you thought it is a mistake, I will repeat: “you do not need to sell your rental property to enjoy both tax-free profits and cash flow”.

It is as simple as approaching the bank, asking for a new appraisal, and asking for a new mortgage on the new appraised value. The new mortgage will pay off the previous one, and the beauty of it all is that the investor will cash in the profit without any burden of capital gains tax. At the end of the day, the profit will be liquidated in the form of a mortgage and not in the form of a capital gain. To add more excitement, there is also a long-term benefit, the investor can still enjoy the rental income.

This goes against the conventional wisdom of “you cannot have your cake and eat it too”. Real estate, in the form of rental properties, has the magic that allows you to have your cake and eat it too … and keep on eating from it for life. The wise investor, one who is determined to achieve financial freedom, can use this $100,000 and purchase with it 5 and even 10 properties (each worth $100,000) with the use of leverage at 80% and even 90%. In that way, the wealth-building process will be accelerated at rates not imagined by the investor before embarking on the journey of building wealth and achieving financial freedom. This virtuous cycle can be carried on and on with each appreciation of the price of the properties.

Related: How to overcome limiting beliefs, set up a clear investment plan, and building generational wealth without leaving your day job.

 

3 Reasons You Should Invest in Real Estate Crowdfunding

3 Reasons You Should Invest in Real Estate CrowdfundingReal Estate Investment can be intimidating to newbie investors. Most wannabe investors become anxious about the idea of investing in real estate due to the high initial capital required for a down payment, as well as the complexity of managing a rental property from both sides: property operations and tenants management.
Those are on top of the list motives for investors to become Passive Investors and invest in property syndication where an experienced real estate investor would finance, purchase, rent, and manage rental properties on behalf of the investors for equity in the property and a cut from the returns.
With the evolution of the online world and the emergence of crowdfunding technology, investing in real estate has become much easier than ever imagined before. Any person can become a Passive Real Estate Investor, starting with small capital and no knowledge. All that is required is to track a dashboard that details the investor's equity in a given property and their returns paid based on the investment performance.
With this level of transparency, Real Estate Crowdfunding is unlocking access to small investors by starting with as little as $500 to become a Passive Real Estate Investor.
There are three main reasons why investors shall get started with Real Estate Crowdfunding.

1. You Can Start Investing With A Small CapitalMany people don't have access to real estate investing due to the large down payment required, which is around 20% of the total property price. Such a large capital to be invested is not readily available for most people; and therefore, becomes one of the largest barriers for entry in this niche.
As Real Estate Crowdfunding platforms are reaching out to investors with little savings, so that they form proof of concept for future investors, they’re allowing investors to pitch in as low as $1,000. The platform CasaBayt even allows new investors to enter investments with as low as $500. This low level of investment practically unlocks access for anyone to enter the private real estate market, which was reserved for the rich and wealthy.
Some other RE crowdfunding platforms are allowing investors to start with even $100 for the simple reason they know that investors will be happy with the return on investment and then increase their invested capital with the platform over time.

2. You Don't Need To Have Experience In Real EstateFor those who could usually afford a down payment of 20% to purchase a rental property for investment purposes, their biggest nightmare is being called in the middle of the night to fix leaking toilets! This is indeed scary for an investor with no experience in real estate.
RE crowdfunding has removed this second barrier for entry in real estate investing. The management company running the platform will take on all the tasks related to property management, which range from finding tenants, collecting rent, repairs, maintenance, paying all operational expenses, paying taxes, evicting tenants, customer service, handling legal issues, and doing the needful to make sure the property is producing positive cash flow to its investors.
As passive investors, all that is required is to fill up an investor profile, pick the investment model that's better suited for their financial objectives, select the good deals listed on the platform, and track the returns from their personal dashboards. 
The hack to being a successful passive real estate investor is to spread the risk among multiple properties on the platform, instead of putting all the capital in only one property. In that case, if one property risks low rental returns due to being vacant for some time, the other properties will compensate for this temporary reduction in income.


3. RE Crowdfunding is a Gateway Investment.REC makes real estate investment incredibly simple. It's a matter of a few clicks to select those deals that are the best fit for you. The data on the platform is dynamic and transparent. This level of transparency makes investors more at ease in knowing what they're getting themselves into.
Each of the listed properties will have all its criteria updated live on the platform, with access to its historical data. Each of the investors has a profile with a dashboard to track their investment and to withdraw or reinvest the profit as they wish. 
In SummaryReal estate crowdfunding is a great entry-level investment type. Investors can enter the real estate investment market with small capital and no knowledge. They can track their investments with transparent dashboards.
Investors can get their feet wet in real estate and continue to diversify their portfolio over time. It's a great way to learn the ropes of investing and make money at the same time.
Register your interest with CasaBayt, the first peer-to-peer real estate crowdfunding platform in Lebanon. Save time and be in control of your investment shares at CasaBayt.

Why Flipping Properties Is Like Winning The Roulette

Why Flipping Properties Is Like Winning The Roulette
Smart real estate investments can be quite lucrative and build your wealth. The keywords here are "smart" and "wealth".
There have been creative and "smart" strategies, being adopted by many real estate investors, that have made them profit and increased their net worth, but did not necessarily build their "wealth". Please take a moment and reflect on this statement!
Related: Why and How to Invest in Real Estate: The Basics
With their ambition to get rich quick, many investors jumped on the bandwagon of flipping properties, which is basically buying undervalued properties, rehabbing them, and then hoping to refinance or sell those properties at their appreciated value to pocket the capital gain.
While this strategy is indeed "sexy" and has a good potential of forcing up the value (aka forced appreciation) and pocketing those capital gains through refinancing (or selling), the caveat is that making this profit is never guaranteed.



To finance the purchase of the undervalued property, flippers use short-term financing such as private money, hard money, a home equity loan, or cash to acquire and rehab. Then, after the property has been fixed up, the owner obtains a refinance on the property to pay off the short-term loan and either sell the property for a profit or turn it into a stable, long-term, cash-flow positive property.
For this strategy to work, there are important variables that need to work in the investor's favor:The investor needs to be hands-on and follow a tight budget and schedule for the rehab. This requires both time and experience to follow up with contractors and make sure they stick to the budget and finish the rehab project within the agreed period. Any delay in the rehab will entail high-interest payments on those short term loans for a prolonged period.The ARV (After Repair Value) has to be worth at least 25% more than the original purchase price and the cost of repair. This 25% margin could be either a profit for the investors in case they sell the property or the equity needed to obtain a home loan refinancing at a standard 75% LTV (loan to value).For example, let's say you bought a property for $60,000 and you paid $15,000 to fix it up. Your total cost of $75,000 could have been obtained from a short-term loan. Then, you'd the property with a new loan from a lender. If the new lender's appraisal came in at $100,000, they might give you 75% of that amount in a new loan, which is $75,000. This would pay back your entire short-term loan, get you most of your rehab budget back, and give you a stable, long-term rental property with $25,000 of equity at the start.
The above is definitely exciting and looks like a great deal, but the problem is that it has too many if's... which might cause your "flip" to "flop".What if the contractor did not stick to a budget and schedule?What if the property did not appreciate to its targeted ARV?What if the property market sent down and the property lost value?What if you did not qualify for a long-term loan to refinance the property?What if you couldn't sell the property at its appreciated value?What if... what if... what if?
To be fair to flipping properties, we're going to cover the Pros and Cons of property flipping.

Pros of Flipping PropertiesPotential No Money Down On The Long TermAs mentioned in this article, if the numbers work and the investors managed to buy, rehab, refinance, and rent the property, then they could own the property with little to no out-of-pocket money.High To Infinite ROIWhen everything goes in your favor and the numbers work, there is a good chance that you'll end up putting little to nothing from your own capital into the deal. This means your ROI can become astronomical. In the extreme case when you pay nothing out of your own pocket, and you either make a sale for a profit or you rent the property for positive cash flow, your ROI will be infinite (any returns divided by zero invested capital from the investor's own funds yields infinite returns).Equity BoostThe hard work you put into rehab a property and force its value up becomes automatically your equity built up right off the bat. That's a good reward for the work done on increasing the value of the property.Rental IncomeAfter the full rehab has been done, and the property is rent-ready, you could rent the property for the right tenant and at the right rental income. If the property is well managed the rental income shall increase the property's operating expenses and any loan installment for the property to generate positive cash flow to its owners. The good upside of a recently fixed property is that it has much lower risk of having hidden flaws and the need for high repair and maintenance fees, which will make landlording more hassle-free.

ConsDealing with a RehabWhen investors flip properties, they have to deal with the complications of a large rehab project. As you can guess, rehabbing a property is not easy. Dealing with contractors, unknown problems, theft, delays, and the rest of the headaches that come with rehab is not fun.The Short-Term LoanThe short-term loan you get at the beginning can be expensive, especially if you are using a hard money loan or a personal bank loan. As long as the property is still under rehab, it cannot get rented out, and this means the high cost of those short-loans has to be carried by the investor. This will definitely mean a negative cash flow as long as the property is being rehabbed and until it gets rented to a tenant.The Possibility The Property Doesn’t AppraiseOf course, if after the rehab, the property doesn’t appraise high enough, the investor will end up with a serious problem. This is why doing the correct math going into the deal is imperative, but the right math is only half of the equation.
The other half of the equation is out of the investor's control. For example, what if the property market or the economy started suffering?
Related: How Not To Get Fooled And Lose It All To The False Promises of Capital Gain? SeasoningThe refinancing bank will likely require the investor to wait between 6 - 12 months after the original purchase before they will refinance the property. This period of time is known as “seasoning,” and it is required by most conventional and portfolio lenders. This means the investor will need to pay high loan installments for the short-term loan for up to 12 months. This has a big negative impact on the property cash flow.
Related:  Decoding The Process of Financing Your Real Estate Investment

Why Flipping Properties Is Not The Right Strategy In An Economic DownturnAs of the writing of this article, the world is still suffering from the COVID-19 pandemic and its impact on the world's economy. It's becoming even tougher to find the right contractors and to stick to a budget and schedule with all the restrictions being imposed across the world.
Lenders are also becoming more cautious and financing is becoming more tricky. This means an investor might not get a property refinanced after the short-term loan has been obtained and the rehab is done. This will leave the investor stuck with high monthly payments to service the short-term loan, which leads to a property with negative cash flow.
Property prices are being hit with the economic downturn. This leaves any investor gambling on the promise capital gain lose, whereas buy and hold investors (who buy property for cash flow income) remain winning.
Related: How Not To Lose Money With Rental Properties During An Economic Downturn
In summary, flipping properties can be a quick net worth accelerator, but it comes with its own risk. On the other hand, buy and hold strategy, with sound strategies and clear purchase criteria, generates wealth to investors with passive income generated from the rent for years to come.

Learn More About Real Estate Investing

Why and How to Invest in Real Estate: The Basics

Why and How to Invest in Real Estate: The Basics


Investing is a vital approach to begin your journey to financial independence. Not everyone with a nine-to-five job can earn the type of salary that would make them rich. So, you may need to get an extra source of income, which is where real estate investments come in handy. Real estate investing is uncharted territory with great returns.

Smart real estate investments can be quite lucrative and increase your net worth. A survey indicated that real estate accounts for about 60 percent of the global mainstream assets, and adds considerably to the overall national, commercial, and individual wealth. You can reap huge rewards without necessarily buying properties.

Investing in real estate properties can also add diversification to your portfolio. This can be quite easy, once you understand the basics, the risk involved, and the economics. You can make informed decisions regarding whether to invest in real estate or not, when and where would be most lucrative when you carry out your due diligence report.

Investing in real estate could be quite simple, but it does not necessarily mean it’s an easy venture. Still not convinced? This article will provide you with basic knowledge about everything you need to know about how to invest in real estate.
A Broad Outline of Real Estate Investing?What comes to mind when you think "real estate"? If you think of houses, lands, and other landed properties, then you’re not far off. Although these are vital components of real estate, real estate involves improvements of anything permanently fixed to the land. These improvements are known as real estate developments. This will not only cover the buildings and other structures on the land, but the fence, trees, roads, and other utilities affixed to the landed property.

Real estate can be generally considered as an asset that is capital intensive. This capital may, however, be obtained via mortgage leverage.

Real estate investing simply means the acquisition, sale, proprietorship, or lease of land or other permanently affixed buildings and structures on the land mainly to make money. Real estate investing involves several categories of investments with the aim of making profits such as owning residential, industrial, commercial properties, or parcels of lands, renting out these properties, or purchasing these properties in order to develop and resell them for a profit. Although, these categories of real estate have diverse lending conditions when applying for a mortgage.
Residential real estate investments are the most common forms of real estate investments including condos, single-family homes or multi-family homes, as well as townhouses that can be rented out or resold for a profit.Industrial real estate investments are properties that cater to industrial operations including power plants, factories, and shipping or storage warehouses.Commercial real estates are properties used for commercial purposes. These include business offices, retail space such as restaurants, cafés, farmlands, and large apartment buildings or multi-family homes. Homes that are often more than four units are usually categorized as commercial real estate.Lands encompass undeveloped properties with no buildings or any structures affixed to them. Profits can be made from owning parcels of land by selling the lands or using them for agricultural purposes.
Who Should Invest in Real Estate?Real estate investment is an appealing concept with vast potentials for making money. However, not everyone can venture into real estate. You need to have a strong financial foundation and an understanding of what real estate investment entails. The reason is that unlike most investment ventures, real estate investments require cautious calculations and constant tracking of your market. Before you begin purchasing your properties, ensure you consult a reliable real estate expert, and conduct a thorough real estate market analysis. If you must reap any benefits at all from any investments you must make smart real estate decisions.

You may need to ask yourself these magic questions: “Do I have the right skill(s) to invest in real estate? Are my resources enough for a real estate investment? Do I live in a favorable market or do I need to look outside my area for a more favorable option? And finally, Can I make necessary commitments that come with investments? 


Why Invest in Real Estate?Now that you know what real estate investing involves, you’re probably still wondering what the potential benefits of investing in properties are. Although no investment method has been able to guarantee a sure profit or even the safety of your principal, real estate has proven to be the safest category of investment with huge returns of profits.

Most of us are aware of the benefits that come with investing in real estate. Most of these benefits outweigh the cost of purchasing properties, as you can realize a steady flow of income that will ensure your financial freedom in the long-run. Depending on the location of your property, you could be earning a substantial amount of income that would cover most of your expenses and still leave you with extra cash to with as you please.

Other benefits include:
You enjoy the benefits of having a diversified portfolio.You enjoy long-term financial security.You enjoy tax benefits that accompany depreciation.You make decisions on your own.Real estate appreciates with time.Real estate outpaces the returns that come with conventional investments.You can build equity for your future and cash flow for your retirement.You generate wealth and it can be an alternative source of income.It’s easy to finance and you get leverage.Real estate investments help to lessen risks.
The Five Basic Methods of Benefiting from Real Estate InvestmentsYou can benefit from investing in properties through five basic methods such as tax benefits, leverage, interests, appreciation, control.

Tax benefitsWhat most people don’t consider are the tax benefits of investing in real estate. The government considers the profits from real estate as capital gains. As such, they are taxed lesser in comparison to employment income. Another plus side of investing in real estate is that the tax basis of your investment properties decreases over time since tax codes permit you to depreciate your real estate annually.LeverageAnother advantage of investing in properties is that as an investor you get to leverage your capital several times over. This means you can use borrowed funds to invest in other properties that you would ordinarily not be able to buy and still get all the benefits from the ownership of the property. How cool is that!InterestsReal estate investment companies and private equity firms are often the beneficiaries of this benefit. For instance, a bank can give out loans for real estate to an investor or a real estate developer to buy properties and then charge an interest depending on the amount borrowed and the duration of the loan, in order to bring in revenue.

AppreciationProperties appreciate over time and convert into sizeable amounts of profits. When you make long-term investments in the real estate market, your properties will appreciate over the years. People can make money just by purchasing and holding the property for long periods of time.

ControlMost people enjoy the increased control they have over their investments when they invest in real estate. Unlike most types of investments where you wait passively for your investments to increase, with real estate investment you can enjoy control over almost every variable involved. You decide when and how to improve your property, you decide how to generate more income, and you acquire the negotiating skills and knowledge needed to secure a good deal.

How to Invest in Real Estate?There are different ways of investing in real estate depending on the amount of money you have, capital, your expected return, your time commitment, risks, and investment horizons. Some investments come with only income, while others come with both income and appreciation. You can decide to do a hands-on-investment, which would require more of your time and commitment. This way you practically bear the responsibility alone. Examples include house flipping or wholesaling, fixing and reselling properties, and renting out properties.

You can also decide to invest in a hands-off-way. This method allows just about everyone looking to invest in real estate to invest, whether you have a vast knowledge of real estate investment or not. Examples of this passive form of investment include investing in REITs, ETFs, Mutual Funds, Opportunity Funds, Crowdfunding, and private equity funds. This article explains the passive or hands-off method of real estate investing.

Invest in REITsReal Estate Investment Trusts (REITs) are real estate companies that function like a mutual fund. They pool the capitals made by investors to acquire real estate, either for resale or generating continuous income. They typically specialize in one or more classes of property such as retail spaces, hotels, business office buildings, and apartment complexes. REITs usually pay higher dividends, making them a good investment option. You can make small investments in REITs particularly when you don’t have upfront capital.

Invest in Real Estate Online PlatformsReal estate online investment platforms link real estate developers to investors who want to finance projects, either through debt or equity. They invest in property investment opportunities, which may be hard to locate or out of reach for an individual. Some online platforms provide access to merely the debt investments, some provide access to both the debt and equity investments, whereas others concentrate on certain locations and some focus across different locations within the country. Examples include Fundrise, CrowdStreet, Housers, CasaBayt, Patch of Land, and Realty Mogul.

Mutual FundsYou can invest in real estate mutual funds just as you invest in REIT and ETF. Mutual funds are investment securities. They give you access to invest in several bonds and stock portfolios with a single transaction. This makes them the perfect choice for new investors. Unlike other types of investments, mutual fund companies usually invest in openly traded assets that yield great levels of liquidity.

The flip side is, unlike REIT that require minimum investment, with mutual funds you are expected to make an initial deposit of $500 to $5,000. This may be somewhat discouraging. However, some mutual fund companies will provide options for automatic monthly investments ranging from $50 to $100, and would waive off your initial minimum deposit if you agree to an automatic investment.

Exchange-Traded Fund (ETFs)Exchange-traded Funds or ETFs, are collections of bonds or stocks in a particular fund. ETFs are perfect when you’re looking to diversify your investments. Ensure you carry out a careful market survey before selecting which ETF to invest with.

Private Equity FundsPrivate equity fund is an alternative investment category, which allows investors to pool their resources together in a single fund to make investments into the private market, or companies that engage in acquisitions of public companies, leading to the delisting of public equity. They include capitals that are not listed on a public exchange. Private equity funds are mostly illiquid, and thus restricted to investors who have enough money to tie up huge amounts of money for prolonged periods.

ConclusionRemember that you don’t need to have a staggering amount of money before you can invest in real estate properties. No matter how small your income is, you can always find an investment plan that will work for you. The trick is to cultivate a habit of investing your money and making it work for you. Start with a small amount of money you won’t miss, then sit back and watch your wealth growing.

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