Norada Real Estate Investments

Diversification in Real Estate

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You normally hear the term “diversification” from financial planners and stock brokers. But you don’t hear the term used so often when it comes to real estate investing. The goal of diversification, regardless of the investment, is to reduce the investor’s overall risk.

Diversification in real estate is easily achieved by purchasing income-producing properties in different markets around the country. In some cases, investors even purchase property in other countries. By creating a real estate portfolio of income-producing properties across multiple and separate markets, they reduce their exposure to risk.

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Real Estate Is a Business!

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Real estate is a business – plain and simple. You’ll need to plan, analyze, negotiate, write offers, manage, market, and sell just like any other form of business. A business does not stay in business for very long if it’s not producing a profit!

In real estate, there’s a certain level of commitment required, but that commitment pays off handsomely. And, unlike many other businesses, real estate allows you to control your hours and set your own schedule. You set the goals you want to achieve, and then you set out to make them happen.

As part of being a businessperson, the most important attitude any investor can have in this field is one of…objectivity! As human beings, we have a tendency to fall in love with certain houses or, conversely, hate them upon sight. Of course, this is a natural tendency since homes at their core represent security, safety, love, family, etc.

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Active vs. Passive Investing

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In real estate, there are two basic concepts of investing – active and passive.

Passive investing is typically your buy-and-hold form of investing. Simply put, once you’ve purchased a solid income property, you sit back and let it appreciate over time and have your tenants literally pay down your mortgage each and every month.

This form of investing usually combines most, if not all, of the advantages of real estate; that is, appreciation, leverage, cash flow, tax advantages, tenant pay-down of your mortgage, a solid asset, and freedom.

Passive real estate investing is where true wealth creation comes from. The majority of wealth that comes from real estate investing is created from buying prudent income property and holding on to it. This is how real wealth is created.

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Understanding Market Cycles

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In order to make profitable investments, it’s vital for you to understand the cycles of the real estate market because they directly affect the value of properties you may want to consider.

The first thing to understand that just like the weather has four seasons, so does the real estate market have four general cycles – an up market, a peak market, a down market, and a bottom market. In other words, just as temperatures fluctuate during spring, summer, fall and winter so do property prices in the residential real estate market go up and down in their cycles.

However, unlike weather seasons, market cycles tend to last longer – approximately seven to ten years. Keep in mind that these cycles are normal functions of dynamic markets and are affected by factors within those markets.

Now, let’s take a closer look at the four general markets and what goes on in each of them.

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The Roots of Appreciation

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Even during the Great Depression some people made money. The same holds true today despite one of the toughest economic environments in decades. The key is to understand the roots of appreciation or what causes real estate to go up or down in value. Because all real estate is local, it is entirely possible to purchase a rapidly appreciating property even in a declining industry… in fact, often the property is able to appreciate because of the decline in the industry.

Today we will examine the major elements that cause real estate to appreciate or depreciate in value. Once you understand these simple concepts, it's possible to use each to create your own working checklist when searching for target acquisitions.

  1. The level of motivation for both buyers and sellers. Although the real estate market as a whole is suffering a decline, there is a substantial need for housing for both buyers and sellers. Many sellers need another place to live and buyers are eager to take advantage of a once in a lifetime buying opportunity.
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5 Secrets of Successful Real Estate Investors

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Can anyone become a successful real estate investor? According to industry experts…the answer is a resounding “Yes”. Average Americans and heavy-hitting investors alike have historically embraced real estate as one of the most reliable methods available to generate real wealth. If anyone can succeed at real estate then it only stands to reason that there must be a series of steps or guidelines to be followed; a “formula” for success….and there is.

Research indicates there are five essential elements involved in becoming a successful real estate investor; steps available to almost anyone. Although they are not easy, they are very “do-able” with a bit of determination.

  1. Learn how to recognize real estate investing opportunities. Sounds simple enough but putting this into practice often requires the ability to think independently and go against the prevailing wisdom of the day. For example, tough economic times like those in the current fiscal crisis lead many to believe that real estate is a bad investment. Others see a major buying opportunity with historically low prices and the lowest interest rates in decades. Which are you?

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Real Estate Investing Tips

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Real estate investing makes people think of money.  You will see a lot of good reasons for this.  Real estate is something that is only available in limited quantities.  After all, manufacturing more land is impossible.  As a result, real estate is nearly universally thought to be a sound investment.

However, it must be acknowledged that conventional views on real estate are changing.  This certainly has something to do with the economy.  It is not uncommon to find people who are afraid of real estate investing.  They think there is no money there anymore.  They may also believe that they cannot succeed without investing large sums of their personal money.  Both of these beliefs are dead wrong.

Real estate investing is an ideal way to create wealth regardless of the market.  “Down” markets may actually be the rifest with opportunity.  If you are able to think creatively then real estate investing will be for you.

Here are some basic principles that you need to understand in order to succeed in real estate investing:

  • Stay creative. The best real estate investors can see potential profits everywhere.  Particularly when it comes to today’s market, the ability to see creative financing is key.
  • Always know every one of your options. Real estate investing is by nature a high stakes game.  Never make investments that you don’t really understand.  Knowing what you are doing is vital to your success.
  • You can get better returns by investing in your education. It is common for real estate investors to put money in properties that yield many times that investment.  Think of your education in this way also.  The ability to use a strategy correctly can yield serious returns.  Of course, if you do not use important resources you may experience loss.

Real estate investing represents a perennial opportunity.  However, the faces of real estate investing can be very different depending on the state of the economy and the real estate market.  As a real estate investor, you must be aware of every opportunity.  Keeping an open mind in real estate investing is vital to your success.

20 Million Underwater Mortgages by 2012?

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More than 14 million borrowers were underwater as of Q1 2010, and with a further 10.8% decline in house prices expected relative to Q4 2009 levels, another 6 million borrowers are likely fall into negative equity by the end of 2011, according to commentary today by Deutsche Bank.

The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.  The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences. The existence of recourse — when a lender is able to pursue a borrower's other assets — also acts as a disincentive against strategic default.

Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans.

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Toxic Asset Fraud… Does it Upset You?

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The other day, I heard an insane story on NPR (Public Radio), about an investigation that was done by the Sarasota Herald-Tribune, where they looked at 19 Million Real Estate Transactions in Florida and found that, “…more than 50,000 Florida properties flipped under suspicious circumstances from 2000 through 2008”, and they commented that, “Those flips artificially drove up housing prices and tax bills and contributed to the crush of foreclosures”.

NPR took a closer look at this investigation and purchased a piece of the bonds that are backed by these “toxic assets”, and with the help of the Herald-Tribune (and reporter Michael Braga), they were able to see some of the people behind their toxic purchase (as part of those 50,000+ suspicious deals).  This massive amount of suspicious deals included one attorney who defaulted on 5 loans totaling 3.6 Million dollars!  Additionally, some of the other loans were tied into a group of investors who lied to banks to get loans.  Overall, it was a frightening glimpse of what was going on under our noses.

Can this happen again?

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Mortgage Overhaul and What it Means for You

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By the time you read this, the new 2,300 page financial reform bill is likely to be making the headlines. The Senate has already approved the new bill and President Obama is expected to sign it into law this week – despite the fact that many of the provisions related to specific regulations have yet to even be written. If that sounds faintly disturbing, don't worry, your concern is noted and shared by many experts throughout the nation. However, there are sweeping changes that are already apparent despite the lack of specific details.

Although broad in scope, home buyers and sellers are likely to be among the first impacted by the new provisions. They represent one of the most comprehensive – top to bottom changes to the finance, valuation, types of mortgage products offered and how lenders are compensated to take place in decades.  In fact, there are even new rules for that provide capital for the purchase of mortgages.

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Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
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