THE RISKS INVOLVED WITH REAL ESTATE

THE RISKS INVOLVED WITH REAL ESTATE

Posted on January 18, 2015 by REDDOG Advertising & Marketing Strategies
My Property Coach
Author - Antonio Sawlwin  - Santolo

All things to do with making money carry with them some degree of risk.

The same holds true with real estate investing.

Despite the promise of high rewards you should be aware that plenty of people loose substantial amounts investing in Real Estate, just as people lose money investing in the share market or on the currency markets.

Unfortunately there are occasions when peoples ambitions do not match with the reality of the risks involved and the potential losses can even be just as high as the potential rewards.

For this reason you need to take every possible precaution in order to insure that you minimise your exposure to risk and whenever possible are prepared, financially for a worst case scenario. You need to also be in a position with your thoughts that mentally and for peace of mind you learn understand the risks involved and be in a position to manage the consequences of those risks if the time comes.

It Wont Happen To Me

Unfortunately, most people will have the “it won’t happen to me mentality” and often it is these people who make critical mistakes that can’t be recovered from. Whilst you may be a good money manager and budgeter you cannot control what other people do. What if your tenants are always late paying the rent, what if the areas suffers a natural disaster and property prices plummet. No matter how much you plan these things are generally out of your control.

What Are The Risks Involved

The most obvious risk when it comes to real estate investing is the immediate risk of losing money, your assets and your equity that you’ve built up in other assets.

A mistake for a couple in their 50’s can be a huge blow to their lifestyle, not only know but in their retirement as well.

Depending on on how large your investment was to begin with and how much other debt you carry but the worst thing that can happen during the course of a real estate investment gone wrong is finding yourself in a position of little control with banks and creditors deciding your fate.

While I’m certainly not trying to talk you out of investing in real estate all together it is a good idea to have a realistic view of the risks and the potential rewards.

Obviously the main risk you need to think about are your income and how secure this is, the possibility of tenants not paying rent or damaging the property and what if you cant find a tenant for an extended period?

Then there is the risk of making the wrong investment decisions, unfortunately this is a lot more common than people realise. Picture mum and dad living in the suburbs, over the past 10 -15 years they have been paying off their home and at the same time the property has grown in value providing equity to use for investment purposes.

They discuss investing and decide Real Estate is the safest and most common way to build wealth and therefore look at purchasing an investment property. They buy the paper and begin looking through the masses of real estate listings – this is where the trouble begins, very often people will choose an area close to their own home to invest in, after all they have done very well over the last 10 -15 years and they can also keep an eye on the property.
The problem is the area may have been a good buy 10 years ago but the growth may have already occurred. Remember there needs to be a growth driver ie, new jobs, new transport corridors, urban sprawl etc.

The second problem is that buying a property for investment purposes is a far different criteria than purchasing a home to live in. After all you are investing in an asset to make money, not to admire the gardens. As an example the tax benefits alone can be as much as $20,000 per annum different when comparing an old property with a new property.

The appliances you have can also have a large effect on the outcome ie, ducted air conditioning compared to a split system.

Another risk common to real estate investing is the fact that stuff happens. Market trends tumble, companies go out of business leaving towns and the local real estate market in shambles, accidents happen during the course of the work, natural disasters occur, and buyers change their minds and pull out at the last minute. Each of these things can have devastating consequences and are almost always events that are completely beyond your control as a real estate investor.

If that wasn't enough many investors fail to have a proper inspections conducted and find out when it is really too late that there are serious structural problems and other sorts of things wrong with the property.

These things cost money to repair and cut into profits, occasionally resulting in a loss. The thing is that once you find out something is wrong with the property you are honor bound to either reveal the problem to potential buyers or fix the problems before selling the house.

Do not allow the risks of real estate investing prevent you from taking the plunge.

They are spelled out here to remind you that prudence and caution are wise when investing in real estate not to talk you out of this potentially lucrative field of investing. If you are interested in real estate investing there is no reason on earth you shouldn’t take the time and make the effort to learn more about its potential.

Be A Little More Savvy

A savvy investor will look at property just as any other investment, first and foremost the figures need to stack up, do not ever purchase potential is a good rule of thumb – remember if the the current owner is asking a higher price as the property has potential and you agree to pay a premium on the potential you may be in fact giving away the benefit and return of that potential from day one if and when it eventuates.

Accept the fact you may have to purchase in an area that you do not know or may be purchasing a property that would not suit your requirements as a home. These are all emotional ties and just as you would not question the location of BHP’s smelters if you had shares you can not let your emotions or fear stop you from looking at the best investment option rather than what makes you feel more comfortable, sure you don’t want to be in a state of constant fear either.

Accept The Risk

There’s an old saying in business that if you are Going To Be In The Business- Then Be In The Business, as an example a shop owner who only half fills their store will soon realise that an empty store does not make a conducive buying environment. So saving money by only holding half a shop of stock is in fact a poor decision.
With Real Estate the business has risks, just like any other business, as mentioned previously some of these things may be out of your control.

So what is the answer?

You need to assume that the risks involved are going to happen and not might happen and therefore you need to have contingencies in place. You also need specialist help in setting up your finance structures to minimise your exposure and a professional adviser to work out the what if strategies.

Most people would consult advisors before spending over $300,000 on the sharemarket – property is no different

Exposing the risks of Real Estate investing and understanding how the majority of people make mistakes is not meant to put you off investing, in fact armed with the understanding that you are not an investment expert this will help you make that decision to obtain independent advice prior to investing.

Just like most things we undertake – Failing To Plan is Planning To Fail

For more ideas on how to avoid mistakes when investing in Real Estate Visit our Blogs & Forums

My Property Coach Forum-100% Free Real Estate Advice, Tips & Referrals

Rental Property Investment Help Forum

Mortgage Tips & Tricks

Pay Off Your Mortgage Fast

How About 54% More Leads?

Fast fact:  Practicing inbound marketing results in 54% more leads than outbound marketing, according to HubSpot. But what exactly is inbound marketing, and how does it differ from the way most small businesses market themselves?

If you’ve ever been to one of those networking events where small business owners mingle and make contacts, you’ll probably know this guy: the “pusher.” The pusher shoves his business card in your hand, makes idle small talk that somehow revolves entirely about him, and disappears only when he detects a new victim he can push his card to.

Luckily, this type of event also happens to be the natural habitat of the “puller,” the one who earns your attention by taking an actual interest in your business. She offers tips and advice to overcome your challenges, and volunteers to send you some useful info if you give her your email address.

Those two characters, ladies and gentlemen, are the best examples of outbound marketing and inbound marketing. The first refers to traditional marketing that’s based on pushing and “interrupting” consumers via cold calling, flyers, and emails (as well as billboards and TV/radio spots for big companies). Problem is, studies show that consumers are becoming more and more resilient to that type of marketing: They throw away flyers, ignore mails, and even worse, don’t even see banners anymore, let alone click them.

So what does affect consumers these days? Well, according to a study published last year, 81% of customers go online and read before they make purchases. That’s where inbound marketing comes into play.

Inbound is all about pulling (instead of pushing) current and prospective customers with valuable online content they are already on the lookout for. This content could be text-based like a blog post, or visual like a video or infographic. The basic goals you’ll want to keep in mind are providing quality info to the consumer and finding the right way to connect to your product through that content.

For example, when you think about marketing ideas for restaurants, coupons and print ads usually come to mind. But why not use the best types of content these businesses can offer? For instance, recipes are some of the most popular online attractions, so it’s only natural for a restaurant owner to open a blog with unique recipes—and then use that blog to encourage readers to visit their restaurant. A beauty salon owner, on the other hand, can easily create helpful videos that teach viewers how to create certain hairstyles. That way, when a potential customer searches online for a specific look, they are more likely to discover the video star’s beauty salon—especially if the video is particularly popular.

Of course, if you have a mobile app, inbound marketing is a great way to get people to download it. When consumers read your useful content and then want to stay in touch, it can help to suggest that they download your app to access even more quality content. You can also add content channels like a newsfeed, Facebook, and Instagram to practice inbound marketing within your app.

Now that you understand the value and meaning of inbound marketing, here are eight simple steps you can take to start off on the right foot:

  DEFINE 
As many successful entrepreneurs will tell you, the key to success in life starts with defining what you want to achieve. Answer the following questions:

• “What is my goal? Do I want to raise sales, get more app downloads, or get more reviews?”
• “Who is my target audience? What are their age, gender, and hobbies?”
• “What types of content are they looking for online? What content will bring them actual value?”
• “What sort of content can I provide to offer that information to them? Should I write a guide, shoot a short video, or publish a blog post?”

Have a pen handy? Go ahead and write your answers to all those questions now!

  CREATEOnce you’ve defined your goals, your audience, and the topics they’ll be interested in, you can start producing valuable content! A great way to start is by creating your own blog, as blogs are often considered to be at the heart of inbound marketing. You may want to use WordPress, a free do-it-yourself tool that allows you to create a blog, embed it in your existing website, and even get stats and data about your blog readers. If you don’t feel you have the skills to pull off strong written content, consider alternatives that show your expertise, such as instructional videos and product reviews.

  SHOWIf you choose blogging as a core part of your inbound strategy, keep in mind that too much text could become tiresome for the average consumer. Use interesting and relevant images to spice up your post and make it much more attractive. If you’re a good photographer, you can use images you took yourself, but you can also use free images from sites like Wikimedia Commons (just remember to give credit where needed).

  CONNECTOne of the biggest challenges businesses face is not creating the inbound content itself, but figuring out how to convert readers into paying customers. The key is offering an effective call to action (CTA)—that short sentence that directs your readers to click, sign up, purchase, or otherwise act on the content they’ve just read. To make your CTA successful, keep these two factors in mind:

• Style: Your CTA should be actionable and answer the consumer’s eternal question: “What’s in it for me?” For instance, if you’re writing a product review and your goal is to increase your app downloads, you could end with a message like, “For more professional product reviews that save you time and money, click and download our app,” followed by a hyperlink.

• Position: Your CTA should be placed in a logical place within your content. For example, let’s take a health food shop owner who set out to increase orders through his website. He decides to write a post about the best types of food for energy throughout the day, including relevant products from his shop. At the end of the post, after reviewing the products, it’s only natural for him to close with, “For all the products listed here and many more that’ll give you an energy boost, click here.”

  SPREAD
Now that you’ve created your content, your major mission is to spread it to your customers.Remember your social media channels? Now is the perfect time to post your content on Facebook and Twitter. Not only will you reach your fans directly, but you’ll also supply them with valuable information they long for, the stuff social media marketing gold is made off. Make sure to ask your fans to share the content posted in your updates and tweets.

Got a newsletter or a mailing list? Take this opportunity to grab your customers’ interest by offering them useful content in their inboxes!

  NURTUREInbound marketing is a lot like parenting: It takes time, care, and learning from mistakes to make the best of it. Just like a parent wouldn’t expect their child to start running in their first month, you shouldn’t expect to see significant results immediately. Sure, some of the customers will click your CTA, but most customers will come, read, and go—and that’s OK. Inbound marketing is about creating long-term relationships. Even if they haven’t bought your product on their first visit, if they now know you supply quality content, ultimately they will be more inclined to read your next piece. Provide useful content, and you are bound to see the results on your platform’s statistics page.

  PERSISTInstead of getting discouraged if the statistics say certain types of content do not click with your customers, take it as a learning experience and continue to experiment. Choose a different topic, place the images in another location, or make subtle changes in the CTA. In the end, you’ll find the perfect formula that suits your clients.

  COMBINEInbound marketing is an amazing tool, but that doesn’t mean you should rely solely on it. Instead, combine outbound and inbound techniques to create a killer strategy that customers won’t be able to resist. For instance, send an email with a free how-to blog post and a promotional discount to help drive sales. The key is to always offer actual value and then top it off with a tempting promotion.

If the past couple of years are any indication (and I think they are), inbound is only going to become a more powerful force in online marketing—increasing profits, boosting app downloads, and creating customer relationships. For those businesses still living in the outbound-dominated past, now is the time to start using inbound techniques to better reach customers.

What are your inbound marketing tips? Share them—or any questions—in the comments below

Mobile Business Is Booming—Miss it and Miss Out! - POSTED BY INNA KUBOVSKI IN SMALL BUSINESS MATTERS

For anyone still dubious about mixing mobile with business, it’s time to get used to the new reality: Mobile is no longer the future. It’s the present. Everywhere you look, the signs point to more and more growth for mobile—and we haven’t even seen the wearable device movement take off yet. The numbers speak for themselves:

• According to The New York Times, the mobile industry is now valued at more than $1.6 trillion. It’s expected to spike to a multi-trillion dollar industry in the next ten years.

• Almost a billion smartphones were shipped in 2013, according to Business Insider.

• On average, we spend one hour each day on our smartphones.

• Perhaps most important of all, mobile devices are the only media devices growing with regards to how much time we spend using them. Time spent on mobiles increased another 8% in 2013, while time spent on desktop, radio, and print all decreased. Amazingly, over a fifth of all Internet traffic is now happening via mobile devices.

And we’re not just using mobiles for fun and games anymore. Mobile devices now account for about 25% of e-commerce traffic and 13% of e-commerce sales. PayPal witnessed $30 billion in mobile transactions in 2013, while Starbucks saw a billion dollars. Apple, meanwhile, earned $10 billion in app revenue last year.

Let’s also remember that the great mobile boom is changing small businesses just as much as big ones—if not more so. A recent survey commissioned by AT&T and the Small Business & Entrepreneurship (SBE) Council found that small business owners save some $67.5 billion a year by using mobile apps, tablets, and smartphones in their day-to-day business activities. “Apps offer small businesses a means to increase revenues and visibility, as well as enhance the customer experience,” Marla Tabaka explains in Inc. “Whether you own a restaurant, offer a service, write a blog, run events, or manage a DIY platform, you can grow your business just by adding an app.”

The revenue is expected to just keep coming. In her recent State of the Internet talk, Kleiner Perkins Caulfield & Byers partner Mary Meeker predicted use of mobiles will keep growing. Meeker sees a $30 billion opportunity in U.S. mobile advertising alone, as consumers spend more and more time on the channel.

Those in the marketing industry take note: Mobile app revenue now accounts for 68% of mobile monetization, making it the biggest opportunity for marketers. What’s more, Gartner predicts that global revenue from app stores will further increase 62% this year to $25 billion.

One vertical that will especially benefit from the mobile boom is the travel industry, with PhoCusWright estimating that by 2015 mobile will make up a quarter of U.S. online travel sales and a fifth of bookings in Europe. This is up from 2% of U.S. online bookings in 2011.

With this kind of growth, it’s no wonder that the Mobile World Congress trade show is such a huge event—this February there were a record 72,000 attendees. As the Times puts it, the event has “evolved from a networking event for industry insiders to a convention where companies from all corners gather to introduce new gear, services, and partnerships to gain attention in an increasingly crowded market.”

It comes down to this: Mobile has become a key channel for reaching customers and sparking sales, whether or not those sales actually occur on a phone. If you’re running a business—big or small—and mobile is not a central part of your strategy, you’re missing out. Big time.

Do you agree? How do you see mobile impacting your business? Share your thoughts!

 - POSTED BY INNA KUBOVSKI IN SMALL BUSINESS MATTERS

Buyers looking for other finance options

Rent to own agreements have been given a bad reputation.

 A few bad landlords who got desperate people to agree to shady transactions made rent to own agreements look like dodgy real estate transactions.

 Today, however, with a shift in the lending market, and the challenging financial climate, rent to own agreements, also called lease options or lease purchase agreements, are returning as a mainstream home buying option.

Rent to own got a bad name for a variety of reasons.

Perhaps first and foremost, these agreements were only entered into by those with extremely poor credit. As a result, they generally ended poorly, with the transfer of property from one owner to another not being completed, but instead with an enormous amount of hassle for everyone involved. Today however, demographics with fair credit have looked to owner financing as a feasible alternative credit option. Both buyers and sellers have experienced significant benefits from these agreements.

The global economy and changes in lending policy in Australia, the United States, and Europe have forever altered many families' ability to get a mortgage. Those who have even small blemishes on their credit history, who have other large loans, or who are self employed may find it especially hard to acquire traditional home financing.

People are transferring from city to city searching for gainful employment, and lower cost of living. Those who wish to accrue interest in a property, who are not interested in renting, but are also not prepared to take out a mortgage with a traditional lender, are increasingly looking at homes with a rent to own option.

With housing prices near their all time high, one of the greatest struggles for those interested in home ownership is saving up a down payment. Banks require a minimum of five or ten percent, and as much as 20 percent down at the time of purchase. Saving this large a sum can limit most families' ability to buy for years.

With rent to buy options, there is no down payment required. Instead, renters agree to a rental period of one to two years, with the option to purchase the home at the agreed upon price at the end of the lease period. Then, each month, a portion of the rent is deducted from the agreed upon purchase price.

With Rent to Buy you basically agree to rent the property for an agreed period, usually 1 -2 years with an option to purchase the property for a price agreed upon today. Usually the seller will ask for an option fee that is taken off the purchase price if you proceed to purchase the property. Further a portion of the rent is usually also credited off the price of the property. These credits can then take the place of a traditional down payment when the buyer is in a position to take out a traditional mortgage on the property.

Generally, those who engage in a lease to purchase agreement get all the benefits of home ownership from the day they sign the lease, but understand that they will not truly own the property, or that the title will not transfer into their name, until they get a traditional mortgage for the purchase balance from a bank, or pay off the agreed purchase price in full.

Rent to own purchase options are a serious transaction, and should be entered into with sincerity. Talk to a lawyer when setting up a lease option to ensure that it is legally binding and written in a manner that is fair to both parties