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Real Estate Opportunities and Alternate Streams of Income for Investors

Real Estate Opportunities and Alternate Streams of Income for Investors

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By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

As the real estate market stabilizes and the stock market surpasses previous records, exceeding 12,000 for the Dow Jones Industrial Average, it is time to take a hard look at where money needs to be invested. The stock market is volatile and prone to the effects of shifting world politics and economics or even war. These hazards do not factor into the risk or the investment potential of most real estate investments. The success of real estate investments is driven by other factors, such as price, location, development and accessibility. Real Estate is still a far more stable investment to create residual income, a happy retirement, and with savvy choices -- even wealth. To produce a profit in real estate an investor must buy real estate strategically.

While they have sat on the sidelines of the real estate market for the past two or three years, during a virtual frenzy, investors are currently in the market again, looking for deals. With the recent trend towards lowering real estate prices in markets where property is sitting, and the predisposition of the seller to pay closing costs, it is indeed a time of opportunity for real estate investors.

On television shows where rehabbing is done on homes, producers make it look easy to spruce up a property and turn a profit quickly. Reality dictates different strategies in the current buyer's market in real estate. Real estate investors need to look outside the box and invest in property with the intention to hold for three to five years, or longer in some cases.

Here are some tips on what types of properties and locations to look for in order to produce alternate streams of income from real estate investments.

Commercial Investment Properties

Often when investors think of purchasing property, they think residential. Large real estate investors originating in the Northeast sector of the United States often have different strategies. Many look to invest in commercial buildings or strip malls, to lease to businesses.

When investigating urban commercial properties, research which neighborhoods the city has slated for development. Search in warehouse districts, which are being rehabilitated and developed. Attend city council sessions for a greater understanding of upcoming development projects. When purchasing property in an up-and-coming neighborhood there are several options: rehab and resell, rehab and rent, buy commercial property and lease it.

Purchasing a Business

REALTORS in some states, such as Virginia, are licensed to help investors purchase businesses. When purchasing a business through a REALTOR, always ask to see the expenditure accounts. Remember, in this type of transaction the buyer is purchasing the business, the equipment and good will, not the property. If the REALTOR you select is not well versed in this, find another REALTOR.

Agricultural Investment Properties

Sometimes real estate investors would be better served to find agricultural properties in rural areas, rather than focusing on urban centers. When purchasing lots and land, review the ground lease options for the land. Investors can purchase land and if it is zoned correctly, may house storage units there to produce income. Or, rural land may be used to store cars, boats, RVs, etc. If the area where the land is located has a community governed by a Home Owner's Assocaiton nearby, land might not be able to be leased for these purposes. Another option for a commercial property owner in a rural area is to build either a temporary or permanent structure to house a business.

Timing Residential Property Investment

For residential investment properties, the best deals can be found off peak season, during the winter months, especially near areas where tourism is high, such as Williamsburg Virginia. Many home sellers will list their properties in the spring with the hope of selling them by fall. Always look for a motivated seller, who needs to sell. They are willing to negotiate price. If the seller is not as motivated, they generally will not lower the price and the home or property may sit on the market instead. Make an offer to a motivated seller, and if they are not willing to counter, move on.

Be Creative With Investment Property

The real estate investor who thinks outside the box will be rewarded with handsome profits. For example, some investors convert old hotels into apartments or condominiums. Historic, old or exceptionally large spaces can be converted into shops or apartments. Remember the three keywords of real estate whether for investing or for personal use: location, price, and condition, with price driving it all.

Financial Matters With Investments

Make certain there is a financial cushion with real estate investments. Before reselling a home, there will be insurance and taxes to pay in addition to a mortgage. Do not attempt to 100% finance an investment property without a cushion.

When purchasing a property that is already leased, ask for rent rolls to determine if there is a positive or negative cash flow on a property. Also, ask for any expenditure sheets for the property for water, electric or heat.

As we head into 2007 and beyond, there will be plenty of motivated sellers and some great investment opportunities in commercial and residential real estate. Do not miss out on these opportunities. Real estate is still a great way to build wealth over the long term, and to shelter income from tax liabilities, too. So long as the real estate investor spends 40 hours or more per year on real estate matters, all expenses related to the purchase, rehabbing, or reselling of property is tax deductible.

For a multitude of reasons, real estate is still one of the most secure investments. Check the articles section on my web site for more articles on real estate investments. Contact me for specific real estate investment opportunities in Williamsburg and the greater Southeastern Virginia area, contact me at vomor1@cox.net or call 757-288-4685.