by Darren Mitchell
Choosing the right IRA real estate investments requires having a lot of knowledge. That is not the idea of this article though. Do you know how to use an IRA real estate investment to manage, purchase or sell in today's volatile market? Do you have any knowledge of the positive and negative aspects of lending your IRA vs. purchasing rental property turnkey or by completely looking after it by yourself?Our goal is to help identify which particular plan is the best option for you as a real estate investor, regardless of whether you have experience or not. Many people are not aware that either they can start a self-directed IRA to their advantage by collecting the rewards of tax-free or tax deferred IRA real estate investments. It is a great way to build wealth in the current economic climate. The advantage involves the ability to leverage the IRA by making cash offers to the bank. Therefore, the IRA owners are able to purchase properties at huge discounts. The difference between the property's fair market value and the purchase price is called equity wealth. In addition, your IRA real estate investment has the ability to produce rental income from these purchases. The reason this happens is that the homes that the IRA has purchased are offered for rent to people who cannot acquire financing due to credit issues or any issue for that matter.As you can see, this is a wonderful opportunity. You are using equity to secure property and rental income is paid to your IRA and thus your IRA is growing tax-free or tax deferred. The best part of this type of IRA real estate investment is the advantage of its turnkey nature.If you chose to lend to an investor using a promissory note for example, you would still be getting the rental income but you would not have the equity profit. Lending is still not a bad option but you will always be wondering when your money will be returned. The decision on which kind of IRA real estate investments is best suited to you is completely up to you. As mentioned before, lending the money is a good idea but you could always be worrying about when you will get it back.Purchasing your own IRA real estate investment gives you more control and gives you the opportunity for much higher profits. To do this with little or no effort you must find the right opportunity for it to be as turnkey an operation as possible. The idea is to give you a nice income for little effort along with the time to enjoy your profits.
You've looked up the information on thousands of apartments in catalogs and online. You've located the pictures, floor plans, maps, amenities, and details of the places you're interested in. You've compiled the data for 10 communities to finally narrow the field and now comes...The phone call.
The dreaded phone call to find out about specific rental rates and to address all of those "call for specials" that you've gathered.
The key to success is in the phone call. The amateur apartment shopper begins the call cold, unprepared, fidgety, and nervous. "Do you have a one bedroom?" or "How much is your two-bedroom?" Apartment Home Living is here to help you be successful at finding the right apartment home by knowing what to ask.
Question 1: What size and when? Begin the questioning any way you like, but your most important question is do they have the apartment you're interested in available at your target move-in date.
It's a common misconception that apartments are simply sitting empty, waiting on you to show up to lease them. This is frequently untrue. To work out for you, the community must have the apartment you want in the timeframe you need to move. If it isn't available, unless you have some move-in date flexibility, you should go on to your next call.
Question 2: Do they take Fluffy?If you have a pet, this question is as serious as a parent asking if this community will take their child. (By the way, all apartment communities will ALWAYS take actual children. Those little balls of energy are protected under the Fair Housing Act).
Unfortunately though, Fluffy isn't protected under any laws and it's completely up to the community if they'll accept your dog, cat, sugar glider, or monkey. They set the rules regarding pets.
They also set the price to pay for the opportunity to keep your child-pet. Don't choke if it's over $300 per pet plus monthly pet rent. That can be a starting point for some properties. So be sure to check and see if you'll be bringing Spot, then see if someone's going to have to "spot" you some cash to pay the fees.
Question 3: What's the #1 reason people love to live here?This is the best and most straight forward way to find out what makes a community special. Is it the walking trail behind the property? The social atmosphere? The famous pork roast every July?
This question can be a key in setting one apartment community apart from another. The answer may be something that really peaks your interest or may unlock hidden potential in a place you wouldn't be able to see from a picture or driving-by.
Question 4: How much?Initially, it's human nature to stop listening if we hear the price is remotely out of our budget. And yet, seeing an awesome apartment in person may actually sway us that it's worth the extra cost.
Think about this: Have you bought a car that was more than you set out to spend? Have you paid more for that purse you just had to have (but didn't know you had to have it until you saw it)? Gone on a vacation where you blew your budget?
Was it worth it? Nine times out of 10...Absolutely. So give cost an open mind before you say no to a place for breaking the bank. You might find it's perfect in the end and well worth it.
Question 5: Do I qualify?Asking the price question and overshooting your budget goals won't matter if you don't qualify for the apartment anyway.
What is the general qualifying criteria? Making about 3x the rent, having a clean criminal record (no felonies or crimes against persons), and no prior evictions.
What do you do if you don't meet their criteria? You could keep looking for a place with less strict qualification restrictions or take the gamble of losing your application fee and/or deposit just to see if you qualify anyway.
Question 6: Do you have any specials?Specials can change from day-to-day, so make sure to ask this question close to last. Remember to keep in mind that some of the best communities don't have the best specials because they don't need them. They're special just for being so awesome.
Question 7: Can I set an appointment to come in?Don't you still need to visit to make the final judgement call? Yes you do.At the end of all the other questions, if you're still interested, ask to set an appointment to come in and take a tour. Seeing your possible new digs in person more than likely will be the best way to make a decision.
Now you have a little guide of the right questions to ask a leasing professional over the phone, so what are you waiting for? Hop on Apartment Home Living , find a some places in your area, and get on that phone!
Author: The Apartment Dude
I believe we cannot run away from the contagion effects of the credit crunch in the West and like it or not when our economy is affected, so will the property market.
However, we will pull through especially given our conservative and well-regulated banking system.
The good thing is we are not faced with a property “bubble” as in the early 1990s and also, banks have reduced their construction loans since end of last year to avoid an over-supply situation.
Fear, uncertainty and even panic have gripped many investors who have dumped their shares in the local bourse.
We must remember that it’s not the global credit crunch that is worrying but soaring inflation caused mainly by spikes in crude oil prices. Although crude oil price has dropped recently, it may go up again.
Our property market has been affected by the high construction costs, inflation and a perceived over-built situation especially of high-end homes.
However, I am confident that if one has extra money and can afford to service a loan, investing in property especially in a good location is still a safer bet and will yield better returns in the long run.
This is not to say that one should not save money in fixed deposits. It is always prudent to have sufficient savings but with fixed deposit rates hovering around 3.7% to 4.2% for 12- and 60-month tenures respectively, it is still a negative return when compared with the current inflation rate of over 7% (for many people it is more like 30%).
What about the stock market? Punters have been nibbling at some bargains in the hope of making a tidy profit in the event of an upswing in price. Trouble is many of us are unsure of when it will hit bottom and how long it will take for it to recover, not to mention a bull-run which seems unlikely in the near future.
Unlike property, which is solid brick and mortar, share prices are often determined by sentiments and, currently sentiments are very weak. Many property counters have taken a beating.
My advice for those wishing to buy their first home is to do it now. Don’t fool yourself that prices of new launches will come down because developers cannot afford to reduce prices anymore as their profit margins are already cut to the bone.
In fact many developers I talked to said they were either withholding launches or increasing prices by 20% to 30%. This is also a good time to go bargain hunting in the secondary market and snap up unsold units of upmarket residential homes before developers are forced to increase their price.
Those who can afford homes priced above RM1mil may hold back on their purchase because of the prevailing global financial and local political uncertainties. There are already reports of some high-end projects having problems pushing off their units.
Times are indeed very challenging.
Even established companies such as Sunrise Bhd has seen a 50.6% drop in property sales from RM1.182bil in 2007 to RM583mil for its financial year ended June 30, 2008.
Sunrise executive chairman Tong Kooi Ong in the latest annual report said the current environment was extremely hostile to property developers in launching new properties, even if they could secure financing.
“We face many of the same challenges as other developers. The most critical currently is the sharp rise in construction costs. With a weaker demand condition, gross margins of future projects will likely fall.
“Projects launched earlier face shrinking profits due to higher costs now. Sales will also likely be slower in the months ahead affecting cash flows and profits negatively.
“With two major future projects on the basis of build-then-sell, our gearing is expected to rise substantially and our interest expenses is likely to be much higher,” he said.
Tong said the sudden and substantial rise in costs had severely damaged the construction industry’s capacity.
“This will affect timely completion of projects and will reduce the availability of suppliers and contractors. The industry is further challenged by the increasing shortage of professionals due to the attraction of overseas markets,” he added.
He warned that construction costs for new projects were expected to rise even further in the months ahead.
“The weaker demand means developers will not be able to adjust prices upwards, leaving little, if any, profit margins,” he said, adding that problems faced by contractors, with mounting costs and shrinking cash flow, would further burden developers.
Wednesday, Oct 15, 2008 @06:34pm CST
