Income Finance

Posts Tagged ‘Investing’

The younger you are the better the time to start investing in stocks. That is not to say you cannot start anytime, but if you were successful when younger, the amount you would have earned would be much greater than starting out later in life. Probably the best place to start investing is through your job and a 401k. Some companies still match dollar for dollar in your investment in the 401k retirement fund. Always put in what your company is matching, it is free money. Matching means that if the company will put in $ 400 dollars a week into your 401k, you should not put in less. The 401k invests primarily in mutual funds, a basket of stocks in many sectors that spread the risk around. 

The stock market generally goes up over the years. You do not think the big players would put money into something that will go down. If you have some extra funds you can diversify by purchasing gold or silver.

This can be in the form of gold or silver bullion. Bullion means the price of the gold or silver is strictly based on its fineness or purity and its weight, according to market conditions. Many 401k funds will accept gold bullion into its portfolio for you. You might be wise to buy some gold or silver bullion coins and keep them in your home to hedge against a national emergency or something catastrophic. If that occurred your dollars would be worthless and you could use your coins to survive until things improved. A tank of gas or a loaf of bread might tide you over. 

As you become more sophisticated in your investing and have educated yourself, you can invest privately in addition to your 401k or IRA, if you are self-employed. Remember that every purchase or sale will cost you a commission.

You can start purchasing stocks of companies you believe will be successful after studying their economic reports. Choose a few across sectors. You would not want to buy only clothing stocks or only energy stocks, otherwise you are not spreading the risk. Dollar cost averaging is the way to go. You put the same amount of money into the stock, e.g. weekly and your purchases are made whether the stock is going up or down, hence dollar cost averaging. Have all the dividends (earnings) distributed to you put back into the company so as to earn more money.

This is a conservative strategy. There are more bold strategies like investing in foreign stocks and hedge funds, but that is primarily for experienced investors. As you become knowledgeable you will make a bit riskier investments which will bring you more profit.

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Investment brokers can determine the fate of an investor with in just a few minutes. Investors need to understand the broker is a salesperson working on a commission. The broker’s primary concern is how to get funds into their own pockets. In most cases the more the investor loses the more the broker makes. The flip side is that if the investor is not happy with the broker, the broker loses a client ergo easy money lost. The lesson here, “don’t rely on the broker for financial or money-management advice”. Go with your own investment strategies.

The classic investor’s losing scenario. The investor dabbles in investing and sets up an account with a broker. After a few rounds of loses the investor is discouraged and swears never to get involved with the stock market again. Watching the media he is again intrigued with great profits other investors are claiming and decides to go another round.

In most likely hood the investor got out of the market when things were in a downturn.

This is the actual time to get into the market. Maybe the investor bought a glamour issue on margin after a substantial fast advance. The investor is heavily slapped during the correction not knowing what action or signs to watch for. The key is not to follow the trend. The trend reflects what already happened and in most cases is published after it has peaked and no longer of value.

Advisory services are not the answer for investing strategies. Advisory services make a few good choices a year to build up a reputation of making good investment predictions. It may be 6 months or longer before a good prediction can be made from a stock they have been following on a whim. The pick is than publicized how brilliantly the selection was predicted.

What is not published are the many poor predictions made out numbering the good. The technical analysis is subject to chance as picking the next winning numbers for the lottery. Every so often somebody will come across a promising investment.

The winner circle. Keep emotion out of the picture. Let the facts determine the investing strategies or investing techniques to be instilled. Solicit your broker for information and not advice. Do your own homework before investing. Initiate your own investment decisions. You are the only one interested in your money affairs. Successful winners educate themselves and manage their own actions. Break away from trends and media prediction these are things that already happened. Don’t disregard the media and trends it could be a signal to dissolve capital and look for other areas to invest.

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It cannot hurt to take a course or two on complex subjects such as futures trading or foreign currency trading. Generally, one can get knowledge by beginning a self-study program, on the more general theory of stock investing. Someone who engages in self- study is an individual interested enough to learn without the reward of a good grade. Making lots of money might be the reward later on. Stock market investing training is more or less a self-taught subject, with a course or two taken to clarify the complex trades, if you intend you engage in them.

The first step is to start a reading program which will familiarize you with the terminology. This is essential. Words like common stock, preferred stock, futures, Dow Jones, Standard and Poors and very many others are essential to know. When these are second nature to you expand your reading on the financial markets in general.

Correlate all this by listening to hours of radio and television financial networks, along with the financial sections of newspapers or a business magazine or two. Internet sites too numerous to mention will also educate you. The more you listen and read the more you will learn or find out what you need to study more. Stock market investing training will lead to one of the most exciting fields. It must be an exciting field because serious traders sit in front of many computer terminals and follow the worldwide markets as the day opens and closes across the globe.

Start out by investing in mutual funds which are a basket of stocks. This can be in mutual funds in one sector or differing sectors. In the beginning a mutual fund investing in a variety of sectors is better. It will spread the risk. Sectors mean things like retailing, energy, consumer staples like soap, technology, etc. This is usually done through your IRA or 401k. Afterwards, you can add mutual funds in a sector that you like. Next you can purchase individual stocks you have been following closely. You should follow all the figures released by the company or any analysis by independent firms. This will tell you things like expected profits now and future earnings. Invest with your head not your heart. If you like motorcycles do not buy a motorcycle’s company stock just for that reason. Check their bottom line. Stock market investing can be lucrative for you if you do your homework.

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Part 1 of 5: Rehabbing Houses

This posing will mark the beginning of a 5 part series in which I will discuss 5 separate real estate investing strategies, along with the benefits and drawbacks of each. There are hundreds of ways to invest in real estate. It is very important in choosing your investing strategy that you consider the time, money, and effort you’re willing to invest. Also make sure to be realistic about your experience level, construction experience and ability to manage others.

After watching Flip this House, real estate investors think that rehabbing houses is the only real estate investing strategy out there. Although flipping houses can bring substantial profit, you can also loose a ton of money. Let’s look in detail at what’s involved.

So you have decided to step in to the big leagues and start flipping houses? First be sure to carefully evaluate your personal commitment to the projects, time available to invest into them and willingness to liability exposure. Having bought and sold over 150 houses, I am here to tell you that rehabbing houses is one of the most difficult investing strategies, but can also be one of the most lucrative.

Estimating Repairs– Okay, so you’ve heard about a great investment property that needs work. Now what? Even though your realtor or friend thinks it’s a great deal you need to run your rehab costs in details. If you’re not experienced in construction get a couple bids from some reputable contractors to give you an idea of rehab costs. Be sure never to get them out of the yellowpages, but instead use websites like servicemagic.com or get referrals from other investors. In generating rehab costs, there are some great repair estimate sheets online you can get to help in the process. In estimating repairs for house flipping it also helps to think about the 5 major systems that may need to be replaced! Roof, windows, plumbing, electrical, & HVAC. Also always make sure the foundation is in good shape as rehab projects with bad foundations are impossible to re-sell. Home buyers expect these major systems to be new, or fairly updated. If they are older than 15 years plan to update them. We have a standard cost for each based on our are. For example, we can replace HVAC systems for $ 5k or less and windows for $ 200 each.

Learning to estimate repairs can be frustrating but is an essential part of real estate investing. You’re not going to be perfect at it overnight, so have patience with the learning process. By utilizing contractors, you can learn to see things how they do and it will get easier with time.

Obtaining Financing

Getting financing to rehab houses is harder now than before the crash, but can still be done. The preferred method to buying houses for rehab is cash or using an equity line of credit. This way if you are dealing with a motivated house you can close right away without the hassle of jumping through a lenders hoops. If this isn’t an option, you can find a private lender to fund your real estate deals. By offering friends, family, and anyone you know 8-10% interest you should be able to raise the money. You can set it up to defer payments to them until the rehab is complete and you sell the property. You will give them a first mortgage and personal promissory note in exchange for the money. This means they get the house if something goes wrong and can come after you personally.

If you’re planning to get financed by a bank for rehab projects, you will likely need to contact at least ten in your area until you find ones, so don’t be discouraged at first. Don’t waste your time with big banks. Instead focus on the small community banks. If you plan to get financing for rehab projects and real estate investing in general, you will first need to assemble a loan package which lenders will request. It should consist of your last two years personal tax returns, personal financial statement (that shows all your assets & liabilities), a business plan, a cash flow statement (if you currently own property), & a brief description about yourself and the project you are applying for financing on as a real estate investment.

Managing the Renovation:

Flipping houses isn’t an easy job. The process of managing the rehab itself will require excellent organization & people skills. It is also very important that you learn how to estimate repair costs as quickly as possible.

The majority of beginner rehabbers that I know loose their shirt by overspending at the beginning of the job and over paying for the work. A lot of them also get ripped off by paying money upfront before work is done.

Follow these rules to insure you succeed at rehabbing houses:

1.)  Never use a contractor that isn’t recommended by an experienced rehabber or have great reviews online or references.

2.)  Never get a contractor for rehabbing houses out of the yellowpages.

3.)  Never pay money upfront to a contractor. (Instead you can pay the supply house directly for the material orders)

4.)  Always use a contract between you and the contractor that has a hard date that the job must be complete. This must include a per diem penalty for everyday that the job is not done. This penalty amount will be subtracted from what you owe the contractor at pay day.

5.)  Never pay a contractor more than 70% of what you owe him until the job is 110% done!

6.)  Get proof of workers comp & insurance before awarding the job. Keep this paperwork & call to make sure the policies are valid.

7.)  Never, ever break any of the above rules about flipping houses or you’ll be very sorry you did.

If you follow the above rules about rehabbing houses, you will be well on your way to doing a great job. You must have first gotten a great deal on the house. Make sure to join my email list here as I am always sending out new tricks to find houses not listed on the market with a realtor.

Project Management

In rehabbing houses, you or someone that works for you will need to manage the project full time. This means being on the job everyday, ordering materials, working with a designer, getting draws from the lender, paying contractors, keeping the job site locked up every night, ordering dumpsters, communicating with the neighbors, keeping the job site clean, getting bids from contractors, and much, much more.

In closing, rehabbing houses can offer a huge return, but also be a lot of work. You might make money, you might loose money. I offer a Mastery Fast Track Program for serious investors that offer a full rehabbing system and unlimited support throughout the process. You will more than make up for the cost with the money you save on the very first rehab. It’s critical to have a highly experienced partner on your side that can walk you through the process, that you can lean on anytime.

Don’t gamble. Insure your success and sign up today! Make the commitment to your career as a real estate investor and find out what it’s like to have the freedom to build your own house flipping business. Imagine showing your friends that 6 figure. Check that you made on your first rehab deal!

Stay tuned for part 2 next week – Rehabbing Houses for Rental!

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If you are just starting to get into rental property investing, the first thing you must do is to formulate a strategy. There are 3 main steps to do this:

• Determine your objective and time horizon
• Determine your targeted property type
• Determine your target area

STEP 1: DETERMINE YOUR OBJECTIVE AND TIME HORIZON

The first consideration is your objective and time horizon, both of which go hand-in-hand. Are you looking to turn a quick profit by holding the property for 1 year and then flipping it? Or is your objective to build long-term equity by holding and renting out the property?

Really, the only thing to consider here is your access to capital, which includes cash on-hand as well as access to non-bank loans. Unless you have access to a lot of capital, or you are operating in a white-hot real estate market, you’ll probably find it difficult to execute a short-term flip strategy because you must factor in holding and selling costs.

STEP 2: DETERMINE YOUR TARGETED PROPERTY TYPE

Next, you must choose your preferred property type.

You can be a real estate investor in a variety of ways, but for “small time” investors 2-4 unit multi-family properties generally make the best choice. This is because rental income tends to be substantially higher by virtue of having multiple units, yet overall expenses are only slightly higher than, for example, a single-family home. Plus, you will avoid commercial status as well as the extra inspection scrutiny that properties with more than 4 units must deal with.

Usually, old properties (50 or more years old) in older neighborhoods offer the most value. Additionally, you’ll want to focus on properties with multi-bedroom units.

Not only do 2-3 bedroom units command more rent, but they also tend to have a more stable tenancy compared to 1-bedroom units.

STEP 3: DETERMINE YOUR TARGET AREA

The third key factor to determine is where you will purchase your rental properties. You’ll want to focus on a town or a county that is no more than a 30-minute drive from your home. Anything farther than that is too difficult logistically and will consume too much of your precious time. I also recommend focusing on areas that are upper-lower class, as properties in these areas are relatively cheap, tenants are plentiful, and the “clientele” is better than middle-lower class areas so management is less stressful.

The best way to find your target area is to grab a map and drive through all the towns within a 30-45 minute drive from your house. As you drive around, look for lower-tier neighborhoods that are “in transition,” where houses are being fixed up and property values seem to be rising. Stay away from areas in complete disrepair.

This driving expedition should allow you to narrow down your choices to just a couple of towns. You can then look at multi-family listings within each area (use a site like www.realtor.com) and compare the list prices with those in other, nearby towns to get a sense of the affordability of investing in that specific target area.

PUTTING THE PIECES TOGETHER

That’s all there is to it. To sum up, the overall strategic framework is as follows:

• Determine your goal (monthly income, retirement, etc.), and how many properties you must acquire to achieve it. Plan to hold and rent each property for at least 10 years.
• Pick an upper-lower income town or county no more than 30 minutes from your house.
• Look for 2-4 unit non-owner occupied older rental properties with multi-bedroom units.

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Gold investing strategies will create huge profits. I like gold investing for the future because gold is real wealth. Here are a few gold and investing secrets that will serve you well whether you are investing in gold or pharmaceuticals. Always remember that these secrets for investing in gold work for both stocks and general equities.

Know what you are investing in. Do your due diligence and become very familiar with the company before you invest one dime in it. It is not that hard and after all, it’s your money that you are investing, so be thorough.
The next two are really sub headings of number one, but they will stay in your mind longer if they have their own numbers! Look through the companies financial reports and see where their money is going. This is like a doctor taking the pulse of a patient.
Call the companies investor relations department and talk to them. See what they think about the companies future and ask any questions about things that you don’t understand about their operations. It’s simple and you can learn a lot, and the calls are usually free because they are 800 numbers!
Check out the stock’s charts so that you get an idea of how it has been trading. You learn a lot about a stock by seeing how it has traded in the past.

These are simple gold and investing secrets that most investors fail to take advantage of. They most often prefer to go on a broker’s tip, or on advice from a friend. Those sources are fine and dandy if you have done your own research and it backs up their advice.

It is important to realize that the gold market is very small in comparison to the general equities markets and because of that, the market can swing wildly when large sums of money are dumped into it or taken out of it.

The more you know about the company that you are investing in, the better equipped you are to deal with changes in the market. You will know when to take profits, and when to exit the stock when the situation changes for the better or the worse. You will also know what percentage to put in a trailing stop when the stock takes off so you won’t lose money if there is a drastic turn during the day when you are unable to watch it.

If you just follow these basic gold and investing secrets for a couple of months you will see a dramatic change in your investment’s performance. They all boil down to forming a discipline in your investment philosophy that will change these gold investing strategies to just plain investing common sense that you use every day.

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Investing in real estate market involves less risk than many other types of investments. But investing in real estate without having sufficient knowledge on the market can be risky. A savvy investor can make large profits in the property market, despite the fluctuations. Similar to the stock market, investing in real estate can fluctuate widely, and there may not be rapid price declines of the night.

The economy is a key role in determining the property value. Because when the economy suffers, so property values ​​will also be down. When the number of properties have been offered a good price for the property market, so it’s a good indicator of changes in market trends.

If the number of properties listed on the market should be low, then prices will rise because of supply and demand theory.

Price fluctuations in the housing market occurs seasonally. The critical factor in the real estate investor is to be careful when making a decision about buying or selling a property. The investor should analyze the value of the property before he / she decided to buy the property. A real estate investor should plan the strategy for the purchase or sale in the housing market. There is no room for speculation in real estate.

The real estate investment strategies are:

• Pre-Close Features: This is a method of buying real estate where the owners are in arrears with their mortgages and the foreclosure process reported.

• Post-Execution Properties: These properties were officially seized and confiscated by the lender or the lending banks.

• Distressed properties, distressed properties are below market assessment are available on the market.

Be knowledgeable about the price of its labor market and the real financial costs, repairs, maintenance and sale before venturing into this type of transaction.

• Sale New Development: This is a strategy that involves buying homes early in the first phase of a new housing development. Again, this strategy will be to your advantage if you’re in a real estate market with rapid real appreciation.

• The purchase of land for construction: This method requires economic resilience and knowledge you can make big gains by buying land and then build a house. One of the best scenarios is to buy enough land to build and sell houses or apartments finished.

• Buy and hold: buying homes or more units and keep it long enough to be the strategy ensured the victory. But it is necessary to analyze the impact of the funding for the cost, the factors of messages, taxes, real estate, management, maintenance, etc.

• Flip Strategy: Buy a house for a quick return strategy is also a regular. With this method, you have the flexibility of a little cheaper; it will not be holding the property for a long period of time.

Although there are many strategies, not all real estate strategies to work successfully in all markets. You must arm yourself with knowledge and tools to implement the strategy for your particular market.

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Stock investing without an investment strategy doesn’t work. The question is: how to invest in stocks with less risk while earning good returns. Here’s a proven investment strategy, a tool that works but only if used properly.

You can use a tool called DOLLAR COST AVERAGING to lower your risk and improve overall performance if you invest in stocks periodically over time (like in a 401k plan). You can also use this investment strategy when you have a lump sum of money you want to invest in stocks.

Here’s an example of how to invest in stocks using this tool with a general diversified stock fund as the stock investment. Why we use this as our stock investing vehicle will be explained later.

Picture that you have $ 50,000 you want to invest in stocks, perhaps sitting in your 401k plan. The stock market is getting volatile and you want to decrease the risk of investing at the wrong time.

Solution: Use dollar cost averaging by investing the same amount of money systematically at predetermined intervals.

In this case our investment strategy will be to invest the $ 50,000 by investing $ 10,000 every three months, for 5 quarters, into a diversified stock fund. Watch what happens as we invest the same amount of money each time period as the fund price fluctuates over time.

1st stock investment: $ 10,000 at $ 20 buys 500 shares.

2nd investment: $ 10,000 at $ 15 buys 667 shares.

3rd investment: $ 10,000 at $ 10 buys 1000 shares.

4th investment: $ 10,000 at $ 15 buys 667 shares.

5th investment: $ 10,000 at $ 20 buys 500 shares.

Totals: $ 50,000 invested … 3334 shares purchased and owned.

Total value of stock fund investment: 3334 shares x $ 20 = $ 66,680.

Profit: $ 16,680.

The share price fell and then recovered to end at the same price it started at.

The same amount of money was invested each time, with purchases ranging in price from $ 20 to $ 10. Had you invested $ 50,000 upfront in a lump sum at $ 20, you’d have had a rough ride and been happy to just break even a year later. Instead you made a profit of $ 16,680!

When you invest in stocks by dollar cost averaging be careful. Do not use this investment tool with an individual stock, especially with a speculative one. This is poor money management. Why?

When you continue to invest in stocks and buy more shares in a declining stock market you are making an assumption: that stock prices (in general) will eventually recover in the not too distant future. This is a reasonable assumption, since it has always happened throughout the history of the U.S. stock market.

On the other hand, every year a number of individual stocks decline and never recover. Even major stocks can go bust … for example, General Motors.

Make dollar cost averaging a part of your overall investment plan. It forces you to buy more and more shares as stock prices get cheaper and cheaper. This results in a lower average cost per share.

Make sure that your stock investment is a bet on the U.S. stock market in general vs. an individual stock that could drop off the face of the earth leaving you broke.

Learning how to invest in stocks with an investment strategy that smoothes out the level of risk is key to being comfortable with your stock investing.

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Do you have an investing strategy? Is an investing strategy really worth it? How do you devise one if you do want to strategy? In many businesses and gains strategizing is the key. For example, if you play chess, you aren’t just going to start moving pieces around however you feel like. If you do this, you will most likely lose unless the person you’re playing is taking the same steps. On the other hand, if you have a strategy, you have a higher chance of possibly winning.
 
The same goes with investing. While the stock market is very volatile and unpredictable, you can come up with some sort of strategy to tackle it. For example, most stock professionals recommend using either fundamental analysis, technical analysis, or a combination of both. Study these types of analyses in order to understand them and take advantage of them.
 
Another thing to keep in mind is diversification.

By investing all of your money in one company, you are avoiding strategy altogether and you’re taking a big chance. You are not diversifying. Diversifying will mean investing in several companies. This way, you decrease the chance of loss because you are spreading out your risk among different companies. This is another type of strategy. This is the type of strategy that you should never ignore.
 
What kind of strategy should you devise? This depends on you and your investment goals. What works for you might not work for another person. What makes you a lot of money might make someone else lose money depending on the investments and choices you both make. Don’t take a chance on not having a plan and strategy.

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Bad retirement investing methods aren’t that easy to spot, as even some so-called retirement experts and investment planners advise many an unknowing worker on how to integrate these into his or her retirement planning. The worst offenders are the universal sustainable withdrawal rate, or the exact percentage of income replacement that supposedly work for all retirees. These concepts can contribute to your financial ruin, or can be useless, at best.

If you’ve reached the normal retirement age of 65 and have enough to add $ 40,000 yearly to your Social Security benefits for the same period, you may be able to survive on a million-dollar nest egg. If you don’t have the aforementioned figures, don’t expect a million dollars to last the rest of your life.

Also, a nest egg that can give you 75%-80% of your income while you were still working isn’t a sure thing for retirement, and so are the other recommended percentages. These serve as a very loose guideline to help you start estimating how much you should set aside, but the actual amount depends on your personal situation (which includes an overwhelming number of factors such as inflation rates, profit growth, investment losses, taxes, and so on).

To illustrate that there’s no such thing as an absolute figure for income replacement or sustainable withdrawal rates, for example, assume that you’re married and earning a joint amount of $ 100,000 yearly. Also assume that you spend about 50% of that yearly while living on the bare necessities. That estimated $ 50,000 in annual expenses is bound to change as some expenses (such as the costs of commuting) can drop when you retire, while others (like utilities) may shoot up dramatically. If you use credit cards, savings, or home equity to support a comparatively luxurious lifestyle, the financial situation changes even further.

Bad retirement investing and planning comes in all shapes and forms. While absolutes such as a specific sustainable withdrawal rate, percentage of income replacement, and an exact amount for your nest egg can be comparatively easy to spot and avoid, there are other strategies and methods out there that can erode your nest egg rather than boost it. Talk to your investment planner or financial advisor for more information.

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