Residential investment property is how an overwhelming majority of the world's millionaires made their millions. Think about it - it's a demand that's always going to be there, no matter how the market changes. There's only so much land in the world, and everybody needs somewhere to live!
This is an investment that carries a low risk, not like investing in commercial property where you have to worry about the business doing well or badly. In addition, investment property loans are not as hard to get as other types. There are lots of benefits that come with residential real estate investing.
Before dropping a single penny, or even shopping around, you should talk to others who have invested in residential real estate. Find someone who has done it before, and use them as your source of information. You can also check out real estate investing forums to get advice.
Don't go to a bank for advice. This is a mistake lots of first-time investors make. The bank has a vested interest, and they won't give you impartial advice that is beneficial to you, the investor.
With residential real estate investing, it is all about protecting your venture. You want to buy properties at a low price that you can eventually sell high. Look for properties to buy that are undervalued within their market.
How do you know if a property is undervalued? The best way is by looking around the neighborhood and comparing prices. A little bit of research on the specific area will go a long way toward getting you a good deal on an undervalued site.
Look for houses that have been on the market for a while. This is another great way to find something at a lower price than it is worth. Also, look for sellers that are looking to sell quickly. This will give you some leverage when negotiating.
When getting investment property loans, look for low interest loans. This way, you will be making smaller payments and keeping much more of the cash flow that comes in from your rental properties.
No matter how low the price, always negotiate. You may be able to save a little bit initially, and that can make your investment more valuable. Remember, it is all about the money!
If you are renting out your residential investment property, get familiar with landlords' and tenants' rights in your state and city. Also, make sure that the lease is as specific as possible, and clearly states rent charges, late fees, deposits, and everything else regarding money from your tenants. If there should be a conflict that goes to court, this will save your neck.
If you decide to renovate your property, do it according to current trends and not your specific tastes. Remember that this is an investment. You don't want your quirky decorating ideas to potentially lower the value.
Always keep an eye on your budget. If you go overboard and can't hang on to your residential property, it's all for nothing!
The best thing is to do your homework. The more you know about the market, the better able you will be to find a good investment. Real estate investing is an area where knowledge really is power. Give yourself a college education in residential real estate investing!
Commercial Property Market Value Directs Investments
When looking at an investment, it is important that you consider its commercial property market value. Market value is a very slippery term, and can differ widely depending on how you compute it. Opinions of marketable value can vary greatly. The realtor may think a location has a certain value, but the appraisal might be completely different.
If nobody is willing to pay the amount you have placed on a property, then that is obviously not its true business worth. Additionally complicating things, you can expect the projected business worth to change almost constantly.
Generally, the market value can be defined as the maximum amount that a property will sell for in a "regular" transaction - with both parties fully informed and knowledgeable, and no outside issues affecting the transaction.
Frequently, though, if someone is buying real estate, they have a variety of factors affecting their decision, and a lot of different mental processes that lead them to the final decision. The best real estate agents are able to fully understand these mental processes to facilitate smooth transactions between the buyer and the seller.
But if you are not dealing directly with a buyer, you will have to do your best to estimate the commercial property market value. You can use a number of tools to do this for you. In fact, many companies offer property analysis services that will tell you how likely an investment is to make profitable returns. They will require some basic information about the property, and you may have to find out some information about the local real estate market, but once you have that information, the process will be very easy. You can quickly determine if a commercial property market value will lead to returns on your investment, or if the demand is too poor to merit investing.
While it is impossible to get an exact amount that will guarantee a lucrative sale, it is definitely worth it to attempt to estimate a figure. Once you have a basic figure that you expect to earn from a commercial property, you will be able to plan the future of your investments more accurately. Whether you earn more or less than you expected, you are still likely to make a profit near your estimate. This is very helpful, particularly if you want to decide what you will be doing with the returns on an investment – i.e. if you decide to re-invest the money into different properties.
If you want to get into the real estate business, you should carefully plan how you are going to figure out the commercial property market value of your prospective investments. You can estimate it on your own, or you can pay for expensive appraisals on properties that you haven not even decided you want yet. Or, you can use a property analysis service, and make it easy to estimate the commercial property market value. You can use formulas, software, guides, and any other tools that are offered. It makes the process easier, and it definitely pays for itself.
If nobody is willing to pay the amount you have placed on a property, then that is obviously not its true business worth. Additionally complicating things, you can expect the projected business worth to change almost constantly.
Generally, the market value can be defined as the maximum amount that a property will sell for in a "regular" transaction - with both parties fully informed and knowledgeable, and no outside issues affecting the transaction.
Frequently, though, if someone is buying real estate, they have a variety of factors affecting their decision, and a lot of different mental processes that lead them to the final decision. The best real estate agents are able to fully understand these mental processes to facilitate smooth transactions between the buyer and the seller.
But if you are not dealing directly with a buyer, you will have to do your best to estimate the commercial property market value. You can use a number of tools to do this for you. In fact, many companies offer property analysis services that will tell you how likely an investment is to make profitable returns. They will require some basic information about the property, and you may have to find out some information about the local real estate market, but once you have that information, the process will be very easy. You can quickly determine if a commercial property market value will lead to returns on your investment, or if the demand is too poor to merit investing.
While it is impossible to get an exact amount that will guarantee a lucrative sale, it is definitely worth it to attempt to estimate a figure. Once you have a basic figure that you expect to earn from a commercial property, you will be able to plan the future of your investments more accurately. Whether you earn more or less than you expected, you are still likely to make a profit near your estimate. This is very helpful, particularly if you want to decide what you will be doing with the returns on an investment – i.e. if you decide to re-invest the money into different properties.
If you want to get into the real estate business, you should carefully plan how you are going to figure out the commercial property market value of your prospective investments. You can estimate it on your own, or you can pay for expensive appraisals on properties that you haven not even decided you want yet. Or, you can use a property analysis service, and make it easy to estimate the commercial property market value. You can use formulas, software, guides, and any other tools that are offered. It makes the process easier, and it definitely pays for itself.
Pre-ipo Investing: Expert Advice For The Professional Investor
This article takes a look at the pros and cons of investing into what is called Pre-IPO capital.
What is Pre-IPO capital? Well it’s exactly that, capital that is raised prior to an IPO.
So to make things clear, an IPO, or initial public offering, refers to the time when a company is about to list on the stock exchange, and they have issued a prospectus in order to attract investors funds. The amounts sought vary greatly depending of the size of the company and the need for capital. So if you invest into an IPO, you get the prospectus via a broker or online, fill in the application form and post it in along with a cheque. About 3 to 4 weeks later the company lists and you get your shares which you can immediately sell if you want to.
You are usually limited by the maximum number of shares you can subscribe to. It may be $10,000 for example. There will also be a minimum subscription. This varies from float to float of course.
The other thing that is common with an IPO offering is that there is a defined time period in which you must respond. - usually about 3 weeks. This allows the company and their broker to coordinate the float with the exchange. It also creates urgency for the investor by giving you a deadline in which to make a decision by.
The basics on Pre-IPO…
Pre-IPO is much different to this, although it sounds similar. Pre-IPO is raised anywhere from 3 months to 18 months prior to the company listing onto the ASX. It is usually done without a prospectus and in most cases is done at a time when there is no stock-broker representing the company or underwriting the float.
At the pre-IPO level, there is no guarantee that the company will make it to the actual IPO, what the share price will be, or even which broker will do it. Also, because it may take up to 2 years before the company floats, your money is pretty much tied up until then.
As you can see, there is higher risk involved. To reflect this, pre-IPOs are usually offered at a considerable discount to the anticipated IPO price. For example, if company X believed that they will list for $1, they may offer shares in a pre-IPO capital raising at $0.25. Should they end up listing for $1, they you make 4 times on your money at the IPO.
Most investors have not even heard of pre-IPO investment opportunities. This is because they are only usually marketed to wholesale investors, high net worth individuals, professional investors and investment funds. So to gain exposure to one, you sort of need to know the right people. Even high net worth individuals do not often get exposed to pre-IPO opportunities simply because they are not connected to the company or the broker/advisor managing the offer.
Most opportunities are restricted to “wholesale” investors however limited opportunities are sometimes available to some “retail” investors.
Key strategies for reducing investor risk in Pre-IPO opportunities…
There is no safe way to invest into pre-IPO opportunities. Simply because there are many factors that may prevent the company from reaching the stock market. So the key is to invest into companies that are fairly close to listing. Some of the indicators for this are:-
• Estimated listing timetable stated in Information Memorandum document (ideally within 12 months)
• Board of directors in place
• CEO in place
• Key management and staff in place
• Lead broker in place (or at least short listed)
• Legal team in place (for IPO)
• Accountant in place (for IPO)
• Advisor in place (for IPO)
• Financial projections completed
• Profitable
• Market opportunity clearly defined
• Share capital structure in place
• Value entry level established
It’s not necessary to have all the above criteria ticked, but the more the better as each criteria lessens the risk for you, the investor.
How do you know the company is going to list? The short answer is you don’t. Even some IPO’s have been pulled at the last minute. The bottom line is investing into Pre-IPO is risky, so be sure to only invest what you can afford to lose. And only invest a maximum of say 10% of your investment portfolio.
However when they work, the returns can be quite staggering. I know of a recent float where the pre-IPO investors bought in at $0.10 per share, less than 4 months before the IPO. The company floated at $0.20 and within 6 months, the shares rose to over $0.60. That’s 6 times your money within a year. However bear in mind that this was relatively speculative, and the pre-IPO investors could just have easily been left holding the stock for a couple of years.
In terms of Due Diligence, it’s wise to spend about 20 minutes on the phone to the CEO or better still, meet with them. Get them to answer any questions you have about the company and its ability to deliver on its promises. If you are investing $100,000 or more, it’s time well spent. If you were to spend a similar amount on a car, I’m sure you would take it around the block a couple of times, so make sure you do some homework when looking at a pre-IPO investment.
So how do you gain access to pre-IPO opportunities? Speak to your broker or get to know an advisory firm who specialises in pre-IPO capital raisings. From time to time, you will also see them advertised in the Financial Review. It’s free to enquire and even if you don’t invest, it’s good to get a feel for this type of investment prior to writing a cheque.
What is Pre-IPO capital? Well it’s exactly that, capital that is raised prior to an IPO.
So to make things clear, an IPO, or initial public offering, refers to the time when a company is about to list on the stock exchange, and they have issued a prospectus in order to attract investors funds. The amounts sought vary greatly depending of the size of the company and the need for capital. So if you invest into an IPO, you get the prospectus via a broker or online, fill in the application form and post it in along with a cheque. About 3 to 4 weeks later the company lists and you get your shares which you can immediately sell if you want to.
You are usually limited by the maximum number of shares you can subscribe to. It may be $10,000 for example. There will also be a minimum subscription. This varies from float to float of course.
The other thing that is common with an IPO offering is that there is a defined time period in which you must respond. - usually about 3 weeks. This allows the company and their broker to coordinate the float with the exchange. It also creates urgency for the investor by giving you a deadline in which to make a decision by.
The basics on Pre-IPO…
Pre-IPO is much different to this, although it sounds similar. Pre-IPO is raised anywhere from 3 months to 18 months prior to the company listing onto the ASX. It is usually done without a prospectus and in most cases is done at a time when there is no stock-broker representing the company or underwriting the float.
At the pre-IPO level, there is no guarantee that the company will make it to the actual IPO, what the share price will be, or even which broker will do it. Also, because it may take up to 2 years before the company floats, your money is pretty much tied up until then.
As you can see, there is higher risk involved. To reflect this, pre-IPOs are usually offered at a considerable discount to the anticipated IPO price. For example, if company X believed that they will list for $1, they may offer shares in a pre-IPO capital raising at $0.25. Should they end up listing for $1, they you make 4 times on your money at the IPO.
Most investors have not even heard of pre-IPO investment opportunities. This is because they are only usually marketed to wholesale investors, high net worth individuals, professional investors and investment funds. So to gain exposure to one, you sort of need to know the right people. Even high net worth individuals do not often get exposed to pre-IPO opportunities simply because they are not connected to the company or the broker/advisor managing the offer.
Most opportunities are restricted to “wholesale” investors however limited opportunities are sometimes available to some “retail” investors.
Key strategies for reducing investor risk in Pre-IPO opportunities…
There is no safe way to invest into pre-IPO opportunities. Simply because there are many factors that may prevent the company from reaching the stock market. So the key is to invest into companies that are fairly close to listing. Some of the indicators for this are:-
• Estimated listing timetable stated in Information Memorandum document (ideally within 12 months)
• Board of directors in place
• CEO in place
• Key management and staff in place
• Lead broker in place (or at least short listed)
• Legal team in place (for IPO)
• Accountant in place (for IPO)
• Advisor in place (for IPO)
• Financial projections completed
• Profitable
• Market opportunity clearly defined
• Share capital structure in place
• Value entry level established
It’s not necessary to have all the above criteria ticked, but the more the better as each criteria lessens the risk for you, the investor.
How do you know the company is going to list? The short answer is you don’t. Even some IPO’s have been pulled at the last minute. The bottom line is investing into Pre-IPO is risky, so be sure to only invest what you can afford to lose. And only invest a maximum of say 10% of your investment portfolio.
However when they work, the returns can be quite staggering. I know of a recent float where the pre-IPO investors bought in at $0.10 per share, less than 4 months before the IPO. The company floated at $0.20 and within 6 months, the shares rose to over $0.60. That’s 6 times your money within a year. However bear in mind that this was relatively speculative, and the pre-IPO investors could just have easily been left holding the stock for a couple of years.
In terms of Due Diligence, it’s wise to spend about 20 minutes on the phone to the CEO or better still, meet with them. Get them to answer any questions you have about the company and its ability to deliver on its promises. If you are investing $100,000 or more, it’s time well spent. If you were to spend a similar amount on a car, I’m sure you would take it around the block a couple of times, so make sure you do some homework when looking at a pre-IPO investment.
So how do you gain access to pre-IPO opportunities? Speak to your broker or get to know an advisory firm who specialises in pre-IPO capital raisings. From time to time, you will also see them advertised in the Financial Review. It’s free to enquire and even if you don’t invest, it’s good to get a feel for this type of investment prior to writing a cheque.
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