When you mention real estate investment in most areas of the country these days, all people talk about is how much value properties have lost. We became spoiled the last few years as the real estate values skyrocketed. We forgot the fundamental reasons of investing in property, long-term investment and equity building. We focused on the short-term value increases. Of course, no one wanted to face the fact that the increases couldn?t go on forever and eventually there would be a market correction. We certainly didn?t anticipate what has happened recently!

Now the dust has settled . . . it is time to go back to the fundamentals. Except for unusual circumstances, real estate investment is a long-term investment strategy, not a get-rich-quick scheme. Here are six fundamental principles to take into consideration when looking at property investment.

1. Income generation: Except for the home you are living in, when purchasing property you are looking for someone to rent or lease the property. The rental payments you receive are income that you then use to pay the mortgage and associated expenses for that property. Ideally, the rent you receive from a piece of property will cover all your expenses and have extra left over.

 

2. Equity build-up: As you receive rent payments from your tenants and pay the mortgage, a portion of each payment goes to interest on the loan and the rest goes to paying down the principle of the loan. By paying down the principle, you are building equity. That means you are increasing the amount of the property that you ?own.?

 

3. Tax advantages: Your rental property is considered a business. Therefore you can take business tax deductions associated with the property. For example, depreciation. The IRS allows an owner to depreciate buildings over time, and a good accountant will be able to help you take advantage of this law. Your accountant will also be able to show you other tax deductions you will be able to use in your rental business.

 

4. Leverage: You can have control of a piece of property without having to pay for the entire property upfront. You do this by using OPM – Other People?s Money. OPM allows you to leverage your investment and use the income generated to pay off the mortgage and gain equity. You will make much more on your money by leveraging your investment than if you owned the property outright. A drawback to this is the higher level of risk some people are not comfortable with.

 

5. Local Markets: Residential units, either single or multi-family, are bought and sold in every city and town around the world. You will never run out of possibilities. The key is to do your research for the area(s) in which you want to invest. Learn everything you can before you start investing, and don?t be afraid to talk to people who have knowledge about the area.

 

6. Buying Below Market Value: Now is a great time to find properties that are being offered below their market value. Unfortunately, the lending practices of the last few years have put people in a difficult situation, forcing them to sell their house below market value. Other reasons include job transfers, divorce, job loss, or change in financial condition. You may feel that you are taking advantage of people in a difficult situation, but if you are fair and equitable in your dealings with them, you will actually be helping them get out of a bad situation.

The six elements listed above are the foundation of most long-term real estate investors. There are great deals to be had for someone who is serious and is willing to do the work involved. Remember to always consult with your attorney and accountant before investing in real estate.

It seems like almost everyone I talk to has some “can’t miss” idea for a new business. Yet, I rarely see any of them actually following through on their idea. That used to puzzle me, until I started studying successful entrepreneurs versus “talkers.”

After spending several years observing all types of people, I came to the conclusion that there are four essential traits required for a person to be a successful entrepreneur. There is great satisfaction to being a successful business owner, but it is important to understand the personal traits that contribute to success.

Guts!

Some call it chutzpah, but to be successful as a business owner you have to be able to handle the ups and downs of running a business, especially a small business. It is inevitable that there will be troubles along with successes, especially in the beginning. The true entrepreneur is one who can stomach the bad times and contain the good times, keeping everything in balance. Someone who can keep their burning dream alive even during difficult times.

Flexibility

This is very important. Most successful business owners are very quick thinkers, and are able to change their plans on a dime if need be. There are times when a situation will arise where the best laid plans completely fall apart and the business owner will have to “wing it.” This skill is especially appreciated by customers and clients when things get dicey.

Another area where flexibility is important is when new products or services enter the market making existing products or services obsolete. The business owner must be able to anticipate and accommodate the changes in the market to keep the competitive edge. It is important to understand the difference between flexibility and the next essential trait, Focus.

Focus

This seems like a contradiction to number 2, yet it is important to understand the difference between the two. The successful owner has a single focus on the goal of creating and maintaining a profitable business. Ultimately, the overall focus of the business must remain relatively unchanged, even if underlying processes or products are changed. Continuity is important both to assure your customers or clients that the business is stable as well as your employees and vendors. The overall focus of a business can change, but the change should be well planned and orchestrated over a period of time to ensure everyone feels confident that they want to continue doing business with you.

Ability to see opportunity

How many times have you looked at a new service or product and asked yourself “why didn’t I think of that?” The successful entrepreneur can see what others can’t, which allows them to take advantage of new products or services early on. This gives them a competitive edge before others start jumping on the bandwagon of his/her success.

Another aspect of seeing opportunity occurs when a person identifies an improvement of an existing product or service. That person can then provide an existing and established product or service and set themselves apart by offering an improved version.

After a little self-assessment, you will have a good idea of whether you have the four elements required for success. If you are lacking in any of the areas don’t despair, you may be able to find a business partner with the trait(s) you are lacking. Combined, you could have the four traits covered leading you to business success.

To your success,

Swanie Brandt

If you want to receive the Powerimage.com Business Success e-zine go to www.powerimage.com/sign-up and subscribe. I welcome you to our Powerimage.com online community!