Establishing Investment Goals

As a new investor in real estate you should develop a well planned approach in the acquisition of your first investment property. Get started with a minimum of doubt and anxiety, and assure a margin of success in your new real estate portfolio. Arm yourself with a user friendly, affordable real estate investment analysis software program.

• Analyze your present financial position ... the amount of available capital you have to invest.
• Establish your personal financial goals... determine when you want to reach them. Continued below

Ask yourself how much investment income you want to have in 10 or 20 years, in order to provide for such milestones as the cost of college tuition or perhaps to provide for a comfortable retirement. Once you have established where you are financially, and where you want to be and when, together with your CCIM counselor you can determine a pre-requisite after-tax return on your invested capital that will enable you to realize your financial goals.

Meet with your real estate investment advisor to discuss your present financial position as well as your goals. Conduct this meeting with your advisor as a learning session, not simply a yes or no advisory meeting. Together with your advisor, develop a sound investment strategy in which real estate becomes a well balanced part of your investment portfolio. Real estate can provide cash flow, tax advantages, and equity build-up through mortgage reduction and appreciation in value.

Develop a degree of risk philosophy. Do you want to invest simply for cash flow? Will you consider the risk in "turn around" properties where value can be enhanced through capital additions and improved management strategies?

When you have located a property/properties that interest you, meet again with your real estate advisor. Have your advisor provide a ‘business plan’, an in-depth analysis of the financial details relating to each property. Examine leveraging as well as financial structuring alternatives that will maximize your after tax return and accumulation of wealth. Determine the before and after tax consequences of ownership, and how each property conforms to your financial goals.

Once you have selected a property that best supports your investment goals, review the available financing possibilities, be sure they are realistic and available. Determine whether the seller will provide a purchase money mortgage (seller financing). If so, what is the interest rate, what are the terms? Keep in mind that the terms of a purchase money mortgage are often negotiable and that the availability of favorable terms can often make or break a potential transaction...and can save considerable dollars in closing cost's.

Among the many benefits to investing in real estate is an investor's ability to participate in an investment property as an individual, or as part of an investment group. Often, limited capital creates the need to participate in a real estate investment as part of a group. Frequently family members, or a circle of friends, will invest together pooling capital enabling them to acquire larger investment opportunities. The group approach to investing in real estate can be every bit as successful as long as the initial planning stages are not overlooked. Make certain that the decision maker, or influencing party for the group, is skilled at in-depth real estate investment analysis, financial structuring, and tax planning.

Don't allow yourself to fall victim to the ego trip of a group spokesman with a Degree in some field completely unrelated to real estate. Seek the counsel of a CCIM...the Ph d of Commercial/Investment real estate.

Maintain a policy that every real estate investment you enter into is evaluated by a specialist skilled in every facet of investment real estate. And, be sure to arm yourself with a cost effective/user friendly software analysis program. . . the proper tools will go a long way toward your becoming your own expert in time.

About the author: Stewart L. Mac Donald, CCIM, is President of Real Estate Assets, Inc., a consulting services company focused on maximizing wealth through Asset Management in the real estate portfolio. Mr. Mac Donald has counseled on and has been an active participant in a wide range of investment real estate projects. He has written and presented seminars on "Strategic Planning in the Investment Real Estate Portfolio" before bar associations, financial planning and investment groups.
http://www.real-assets.com
http://www.real-estate-assets.com

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