Real estate tips part I

Yes the waters are rocky, the mortgages may be harder to come by, but particularly if you're interested in buying rental properties with an eye toward becoming a bit of a mogul yourself, now is as good a time as any.

Get your credit in shape
True, you can probably purchase a property with a middle of the road credit score. But do you want to? A low credit score means a high interest rate on your mortgage, and that increased expense is going to cut into your overhead pretty dramatically.

So, take the next 12 months to improve your credit score before diving in. Pay your bills on time, turn down offers of new credit and reduce your outstanding balances. Based on prediction, you'll still have time to get in while the getting is good.

Study up
Jumping in without knowing the basics is the wrong move. Before you sign on any dotted lines, take the time to read a few solid (and up-to-date) books on real-estate investing. Once you feel you have a pretty good — albeit broad — handle on the subject, you can start scoping out the market where you plan to buy.

"You need to go out and see the area for yourself. Look at a lot of properties, get a handle on what they are renting for, and how much insurance and property taxes will be so you don't have any surprises," advises Thomas Lucier, an investor in Florida and author of "The No-Nonsense Real Estate Investor's Kit," (Wiley, 2006). Do it in person, but also check out the classified sections of your local newspapers to get a feel for the rents.

Real estates and properties

Welcome, my friend, to the world of real estate investing. When done the right way, investing in real estate can create for you an inflation-proof cash flow that will take care of you and your family forever.

Before I begin, I want to make one thing abundantly clear — this is going to take work. If you think you can just get started with your investing and wake up tomorrow morning a multimillionaire, you need to think again.

The general wisdom that real estate is all about location, location, location is flat out wrong. In the real world of investing, real estate is first and foremost about the motivation of the seller; secondly, it’s about the price and terms with which you can acquire a property; and then and only then about the location of the property.

The begining

Loans and mortgages are great!

Why? Because they make you rich.

How is that?

I hope that, reading this blog, you will learn:

a) what is the difference between poor, mid and high class
b) why is essential to buy real estates
c) how to manage properly your real estates and how to get the right people into your real estates so you get steady income every month
d) how to "read" properly balance sheets and cash flow
e) why is so important to become investor
f) why it is so important to get financial education
g) how loans actually help you get rich
h) why is so important to keep the right mind set to become rich.

Be rich

BOTH POVERTY AND RICHES ARE THE OFFSPRING OF THOUGHT.

The very nature of real estate owned for income and pyramiding is that:

AS EACH DAY PASSES, YOU MAKE MONEY.

You do not have to DO anything to create the income. It just happens by itself. Not that I am implying for a moment that it is entirely work-free. It isn't, of course. But it goes on making money for you, day in, day out, month by month, year by year, by itself.

When we are offered a bargain in real estate we must never forget that we are not buying something we are going to consume, we are buying WHAT we are going to be offering to the public.

If we are to avoid the unenviable position of owning a thing for sale and being unable to find a customer for it, we must devote our best judgment to the points about the property that will most influence the acceptability of our product (shelter) when we offer it for sale. And the most important single feature of ALL property is LOCATION!

What to buy?

For adults, keep your expenses low, reduce your liabilities and diligently build a base of solid assets. For young people who have not yet left home, it is important for parents to teach them the difference between an asset and a liability. Get them to start building a solid asset column before they leave home, get married, buy a house, have kids and get stuck in a risky financial position, clinging to a job and buying everything on credit. I see so many young couples who get married and trap themselves into a lifestyle that will not let them get out of debt for most of their working years.

For most people, just as the last child leaves home, the parents realize they have not adequately prepared for retirement and they begin to scramble to put some money away. Then, their own parents become ill and they find themselves with new responsibilities.

So what kind of assets am I suggesting that you or your children acquire? In my world, real assets fall into several different categories:

1. Businesses that do not require my presence. I own them, but they are managed or run by other people. If I have to work there, it's not a business. It becomes my job.
2. Stocks.
3. Bonds.
4. Mutual funds.
5. Income-generating real estate.
6. Notes (lOUs).
7. Royalties from intellectual property such as music, scripts, patents.
8. And anything else that has value, produces income or appreciates and has a ready market.

Mind Your Own Business

Remember this simple observation: The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets.

So how do I start minding my own business? What is the answer? Listen to the founder of McDonald's.

Mind Your Own Business

In 1974, Ray Kroc, the founder of McDonald's, was asked to speak to the MBA class at the University of Texas at Austin. After a powerful and inspiring talk, the class adjourned and the students asked Ray if he would join them at their favorite hangout to have a few beers. Ray graciously accepted.

"What business am I in?" Ray asked, once the group had all their beers in hand. "Everyone laughed," said Keith. "Most of the MBA students thought Ray was just fooling around." No one answered, so Ray asked the question again. "What business do you think I'm in?" The students laughed again, and finally one brave soul yelled out, "Ray, who in the world does not know that you're in the hamburger business." Ray chuckled. "That is what I thought you would say." He paused and then quickly said: "Ladies and gentlemen, I'm not in the hamburger business. My business is real estate."

Keith said that Ray spent a good amount of time explaining his viewpoint. In their business plan, Ray knew that the primary business focus was to sell hamburger franchises, but what he never lost sight of was the location of each franchise. He knew that the real estate and its location was the most significant factor in the success of each franchise. Basically, the person that bought the franchise was also paying for, buying, the land under the franchise for Ray Kroc's organization.
McDonald's today is the largest single owner of real estate in the world, owning even more than the Catholic Church. Today, McDonald's owns some of the most valuable intersections and street corners in America, as well as in other parts of the world.
Keith said it was one of the most important lessons in his life. Today, Keith owns car washes, but his business is the real estate under those car washes.

Most people work for everyone else but themselves. They work first for the owners of the company, then for the government through taxes, and finally for the bank that owns their mortgage.

Getting started

Rule One. You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between an asset and a liability.

"Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets."

All you need to know is what an asset is, acquire them and you'll be rich.

In most cases, the simplicity of the idea escapes most adults because they have been educated differently. They have been educated by other educated professionals, such as bankers, accountants, real estate agents, financial planners, and so forth. The difficulty comes in asking adults to unlearn, or become children again. An intelligent adult often feels it is demeaning to pay attention to simplistic definitions.

So what causes the confusion? Or how could something so simple be so screwed up? Why would someone buy an asset that was really a liability. The answer is found in basic education. We focus on the word "literacy" and not "financial literacy." What defines something to be an asset, or something to be a liability are not words. In fact, if you really want to be confused, look up the words "asset" and "liability" in the dictionary. I know the definition may sound good to a trained accountant, but for the average person it makes no sense. But we adults are often too proud to admit that something does not make sense.

An asset is something that puts money in my pocket.
A liability is something that takes money out of my pocket.

This is really all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities. It's not knowing the difference that causes most of the financial struggle in the real world.