Investing in Real Estate Vehicle for Wealth Building

Real estate is one of the best vehicles of building wealth. Historically real estate has outperformed other asset classes like stocks or bonds, and is reasonably predictable and less volatile. There were times when real estate went down and there were times where it went up but on an average it has given a sizeable annualized return Development report, the price of an average single-family home has gone up from $22,300 in1968 to $206,100 in 2003, an increase of 824% in a span of 25 years

There are many ways to invest into real estate. With 100 percent financing options, low interest rates and good credit it's fairly easy to get started. Numerous articles and books have been written about investing in real estate and success stories are a plenty.

Here, in a nutshell, are some of the most important reasons for investing in real estate.

Appreciation. Traditionally real estate has been viewed as a "buy and hold" type investment vehicle. Real estate has recovered from cyclical declines and regional corrections and it may continue to do so in future, primarily because of tight supply and demand. Land is finite and housing is a necessity. According to the U.S. Census Bureau: the nation's population is projected to increase to 392 million by 2050 - more than a 50 percent increase from the 1990 population size. These factors presents a bright outlook for real estate investors. The fact that land is finite, and population is growing will cause most real property to rebound even if there is a market decline.

Properties can be bought and held for appreciation provided one has the staying power. To avoid occasional declines, a smart investor should buy properties below market value by using creative acquisition techniques and realize a gain by quickly turning around and selling for a reasonable profit. Of course, properties bought below market value can be held for cash flow and long-term appreciation as well.

Leverage. Leverage in real estate means making money on borrowed money. The power of real estate resides in using "other people's money." One can buy a property with zero down (100 financing) and make a profit upon sale as if it had been paid off entirely. Let's assume you decide to buy a duplex worth $500,000 with 100 financing. Income properties have been appreciating at an average of 7 percent per year. With a 0 percent down your property at the end of the first year is worth $535,000. At the end of the second year, it's worth $572,450. By using leverage or borrowed money to purchase a larger income property, you have increased your profit by $72,450 in just two years. A 14.49 percent return on a borrowed amount of $500,000. This is the power of leverage. Leverage coupled with appreciation can yield high profits.

Tax Benefits. There are numerous tax benefits of owning real estate, gains from sale of primary residence up to ($250,000 for single, $500,000 for married filing jointly) is tax-free. IRS allows taking deductions for depreciating real estate assets. Legitimate expenses like interest, depreciation, insurance premiums, management fees, legal fees, repairs etc are all tax deductible. You only pay taxes on net profits.

Real estate investing is an extremely rewarding process, but it needs perseverance and knowledge to achieve success. There are several proven techniques to make quick money but the key to success resides in buying properties below market value and selling them at the market or higher market price. Great deals can be found in foreclosures, fixer uppers, distressed properties and auctions etc.

Happy Investing!

Srini Saripalli is an entrepreneur, direct marketing expert and real estate investor. He is also a business development consultant to Fortune 500 companies. He is based in San Jose, Calif. Srini can be reached at http://www.srinisaripalli.com

More than 40 states signed onto a proposed $25-billion deal with major mortgage servicers over faulty foreclosure practices. New York, Nevada and Delaware joined California in holding out for better terms.

More than 40 states signed onto a proposed $25-billion settlement with major mortgage servicers over faulty foreclosure procedures, but California, New York and other key states were still not among them.

California has until Monday to share in a multi-state deal with banks to obtain mortgage relief and reforms. Atty. Gen. Kamala Harris, who walked away from talks last year, says the door remains open.

With a Monday deadline at hand, California officials have resumed direct talks with the Obama administration about joining a multibillion-dollar, multi-state mortgage settlement with the nation's largest banks, a source said Sunday.

The talk show host pays $12 million for the 4,088-square-foot house with four bedrooms and four bathrooms. The ocean-view home sits on 1.26 bluff-top acres with beach access.

In one of the more talked-about transactions in town, actors Brad Pitt and Angelina Jolie have sold their Malibu beach house to daytime host and comedian Ellen De Generes for $12 million.

The four-bedroom, five-bathroom house built in 1920 for industrialist James Wigmore lists for $2,875,000.

A decorative cast stone entrance opens to this restored Spanish Colonial Revival-style house in Pasadena's South Orange Grove area. Built in 1920 for industrialist James Wigmore, the house retains such original details as coffered wood ceilings and arched doorways.

They don't believe they can sell their property for what it's worth, so they're spending money on making their homes more comfortable.

Do you fit any of these descriptions?

A biennial research report by the National Assn. of Realtors indicates that a handful of real estate agents and brokers and their clients either don't know the law or don't care to follow it.

When it comes to lawsuits, real estate agents and brokers tangle mostly among themselves.

The president aims to help about 3.5 million people with good credit who are unable to refinance at historically low rates because their homes are worth less than their mortgages.

 

The White House hopes to help millions of homeowners lower their monthly mortgage bill with a $5 billion to $10 billion plan to set up a streamlined refinancing program for people who are current on their payments.

The Standard & Poor's/Case-Shiller index of 20 large U.S. cities fell 1.3% in November from October as foreclosures continue to drag down the housing market.

Three straight months of home-price declines in the biggest U.S. cities showed that foreclosures remain a significant drag on a housing market that is entering its fifth year of deterioration.

L.A. Clipper Chris Paul may be quick down the court, but he moves pretty fast when it comes to buying multimillion-dollar real estate too.