James Kobzeff is the developer of a software solution for real Estate investment. Want to create cash flow, rate of return, and profitability analysis presentations in minutes? See ProAPOD at => http://www.proapod.com
Archive for Rate Of Return
Jan
06
Give Me Ten Minutes and I’ll Make You Better at Real Estate Investing
Posted by: | CommentsSafe High Return Investments Naples
Okay, ten minutes is a guess. You might absorb what I have to say and thereby become better at real estate investing in less time if you’re a fast reader.Shall we get stared?Acknowledge the BasicsReal estate investing involves acquisition, holding, and sale of rights in real property with the expectation of using cash inflows for potential future cash outflows and thereby generating a favorable rate of return on that investment.More advantageous then stock investments (which usually require more investor equity) real estate investments offer the advantage to leverage a real estate property heavily. In other words, with an investment in real estate, you can use other people’s money to magnify your rate of return and control a much larger investment than would be possible otherwise. Moreover, with rental property, you can virtually use other people’s money to pay off your loan.But aside from leverage, real estate investing provides other benefits to investors such as yields from annual after-tax cash flows, equity buildup through appreciation of the asset, and cash flow after tax upon sale. Plus, non-monetary returns such as pride of ownership, the security that you control ownership, and portfolio diversification.You’ll need capital, investing in real estate does have risks, and investment real estate can be management-intensive. Nonetheless, real estate investing is a source of wealth, and that should be enough motivation for us to want to get better at it.Understand the Elements of ReturnReal estate is not purchased, held, or sold on emotion. Real estate is not about love; it’s about a return on investment. As such, prudent real estate investors always consider these four basic elements of return to determine the potential benefits of purchasing, holding on to, or selling an income property investment.1. Cash Flow – This is determined by the amount of money collected from rents and other income less operating expenses and loan payment. Furthermore, real estate investing is all about the investment property’s cash flow. You’re buying income stream, therefore be certain that the numbers you use to calculate cash flow are truthful.2. Appreciation – This is the growth in value of a property over time, or future selling price minus original purchase price. The fundamental truth to understand about appreciation, however, is that real estate investors buy the income stream of investment property. It stands to reason, therefore, that the more income you can sell, the more you can expect your property to be worth. In other words, make a determination about the likelihood of an increase in income and throw it into your decision-making.3. Loan Amortization – This means a periodic reduction of the loan over time leading to increased equity. Because lenders evaluate rental property based on income stream, when buying multifamily property, present lenders with clear and concise cash flow reports. Properties with income and expenses represented accurately to the lender increase the chances the investor will obtain a favorable financing.4. Tax Shelter – This signifies a legal way to use real estate investment property to reduce annual or ultimate income taxes. No one-size-fits-all, though, and the prudent real estate investor should check with a tax expert to be sure what the current tax laws are for the investor in any particular year.Do Your Homework1. Form the correct attitude. Dispel the thought that investing in rental properties is like buying a home and develop the attitude that real estate investing is business. Look beyond curb appeal, exciting amenities, and desirable floor plans unless they contribute to the income. Focus on the numbers. “Only women are beautiful,” an investor once told me. “What are the numbers?”2. Develop a real estate investment goal with meaningful objectives. Have a plan with stated goals that best frames your investment strategy; it’s one of the most important elements of successful investing. What do you want to achieve? By when do you want to achieve it? How much cash are you willing to invest comfortably, and what rate of return are you hoping to generate?3. Research your market. Understanding as much as possible about the conditions of the real estate market surrounding the rental property you want to purchase is a necessary and prudent approach to real estate investing. Learn about property values, rents, and occupancy rates in your local area. You can turn to a qualified real estate professional or speak with the county tax assessor.4. Learn the terms and returns and how to compute them. Get familiar with the nuances of real estate investing and learn the terms, formulas, and calculations. There are sites online that provide free information.5. Consider investing in real estate investment software. Having the ability to create your own rental property analysis gives you more control about how the cash flow numbers are presented and a better understanding about a property’s profitability. There are numerous software solutions to choose from online.6. Create a relationship with a real estate professional that knows the local real estate market and understands rental property. It won’t advance your investment objectives to spend time with an agent unless that person knows about investment property and is adequately prepared to help you correctly procure it. Work with a real estate investment specialist.There you have it. As concise an insight into real estate investing as I could provide without boring you to death. Just take them to heart and you should be fine. Here’s to your investing success.
High Return Investments Naples
Dec
27
Investing for Income
Posted by: | CommentsSafe High Return Investments Naples
A friend asked me during the week where he could “park” some cash while he was tossing up possible renovation plans for his home. A similar situation might be faced by those saving for a home deposit or who already have a deposit and are waiting for home prices to fall before jumping in to buy.
The first suggestion that comes to mind would be to focus on removing volatility from any possible investment (and in doing so reducing risk). In particular, a serious look at investing for income is definitely warranted. So what is investing for income?
——————–
The most commonly understood way to earn income from an investment is through cash and fixed interest style investments. The common thread between these investments is that they pay regular interest payments over time while the initial value of the investment does not grow.
At the moment these style of investments are offering relatively strong returns. The Weekend Australian Financial Review provided a good summary of some of the better returning cash and fixed interest style investments. They firstly looked at cash accounts with the most compelling options those provided by online saving accounts. The top three were Bankwest 8.25%, RaboPlus 8.00%, ING Direct 8.00% (It should be noted that these are introductory offers but still great returns.)
The great benefit of cash is that it is easily converted into money that can be used to purchase goods and services. In financial terms these investments are highly liquid. You are also very confident that you will not lose any of the initial investment along the way. The major risk is that while this money is sitting in cash, alternative investments are providing a higher rate of return.
The next in the pure income line of investments are term deposits. For agreeing to lock your money up with a financial institution for a given term, the institution pays you a slightly higher return compared to deposit accounts. It was interesting to note in the AFR article that not until terms of at least 90 days were the rates above or equal to the rates offered by the top online savings accounts. Basically what the current rates are telling us is that an investor is not compensated for having money locked away for less than a 3 month term. The major risks with this type of investment is that you either need the money before the end of the term or interest rates in the economy increase meaning that your money could be yielding higher levels of income elsewhere (for the same level of risk).
The third basic category is fixed interest securities otherwise known as government or corporate bonds. Investors purchase these investments with the issuer promising to pay a particular rate of return over a given term with the initial investment being returned to the investor at the completion of the term. Bonds are traded and therefore once issued may move up or down in price. These changes are most likely caused by changes of interest rates in the economy or a change in the likelihood of the issuer meeting its repayments on the bond. The major risks therefore are that interest rates in the economy increase causing the price of the bond to fall in value also meaning you could get better returns elsewhere or the issuer is unable to make the payments as required. (More about this default risk later).
From here we move to less traditional cash and fixed interest securities.
In between the pure fixed interest investments and growth assets, like shares and listed property, are what are known as hybrids. These are bond-like offerings which provide regular income payments but have equity characteristics. Should a company collapse, holders of these securities are treated like shareholders and their claims come after the claims of debt holders (bond holders). You therefore should expect to be paid higher rates of income compared to bond holders. For more information on an example of this style of security take a look at Scott Francis’ recent Eureka Report article – Suncorp offering with a bonus.
The clear risks with hybrids are that the company will not be able to make the payments however one risk that is removed is that of interest rate movements. The products tend to have a floating rate tied to a relevant cash rate. At the moment the premium above the cash rate is high as the credit market is tight and companies have to pay more to secure your money.
Then we come to the property sector. Most people invest in property to hopefully see the value of the property grow. However, there is also the benefit of receiving rent provided by tenants. We access property exposure in our portfolios through listed property trusts. Latest figures put income from listed property at 8 or 9%. However, it should be noted that there has also been a significant depreciation in the value of listed property trusts over the past year, the worst year in history. Therefore the major risk of utilising property investments for income is that the price of the investment will fall in value.
Finally, the last major income producing investments are shares. Again, many investors get caught up in the growth side of the share return story while forgetting the income being provided through dividends paid by companies. This story is particularly attractive in the Australian context thanks to the dividend imputation tax system whereby companies are able to pass on dividends that effectively have already been taxed at 30% before reaching the investor.
The AFR article on the weekend provided some interesting figures regarding dividend yields. Historically companies in Australia have paid yields for industrial stocks averaging 5.2% since 1961. Goldman Sachs JB Were are predicting yields of 5.9% for the year up from 5.6% last year. Macquarie Research forecast 6.1% for the current year increasing to 6.4% in the following. This gradual increase in dividends being received by investors is a real benefit of these investments that is often forgotten. Of course the recent plunge in sharemarkets have detracted from shares as investments but if you are willing to hang on and wait for share prices to rise, this level of income being paid is nothing to be sneezed at especially given the tax benefits of fully franked dividends.
Across all of the income producing investments there is an underlying risk that the holder of your cash, including shares, will not be able to return it when required. i.e. they default on returning the money you have loaned them. The greater the risk of this occurring, the higher the return that should be expected by investors. Groups like Standard & Poors help determine this risk by providing ratings of the underlying products and companies. Having consideration of the rating of a product or company is key to assessing whether the investment is suitable for you. It is interesting to note that the best yielding income investment mentioned in the AFR article was the Babcock & Brown Infrastructure EPS (BEPPA) returning 23%. The recent news surrounding Babcock & Brown show that this is indeed a riskier style of investment.
For more information on this topic, Vanguard have produced a really clear explanation of Investing for Income in their Plain Talk library which is well worth a look.
Regards,Scott Keefer
Scott Keefer has been a partner in the business since January 2007. He has completed a number of degrees related to financial management including a Masters of Financial Planning and Bachelor of Commerce. He also holds a Graduate Diploma of Education.
Prior to joining the business, Scott was involved in secondary education where he held middle management positions in schools in Brisbane and Jakarta, Indonesia. Part of these experiences involved teaching Indonesian students about Business Management and Economics principles as relate to the Australian context.
Scott is a co-author of the book ‘It’s Time You Knew the Truth: Building Investment Portfolios That Work’. He also shares a passion to work with people at all different stages of the financial planning process helping them to build successful financial solutions through well structured investment portfolios. Scott is working towards authorised representative status which will be in place later this year. His current role in the business is to oversee administrative functions including initial preparation of client statements of advice and placement of investments.
High Return Investments Naples
Dec
22
Give Me Ten Minutes and I’ll Make You Better at Real Estate Investing
Posted by: | CommentsSafe High Return Investments Naples
Okay, ten minutes is a guess. You might absorb what I have to say and thereby become better at real estate investing in less time if you’re a fast reader.Shall we get stared?Acknowledge the BasicsReal estate investing involves acquisition, holding, and sale of rights in real property with the expectation of using cash inflows for potential future cash outflows and thereby generating a favorable rate of return on that investment.More advantageous then stock investments (which usually require more investor equity) real estate investments offer the advantage to leverage a real estate property heavily. In other words, with an investment in real estate, you can use other people’s money to magnify your rate of return and control a much larger investment than would be possible otherwise. Moreover, with rental property, you can virtually use other people’s money to pay off your loan.But aside from leverage, real estate investing provides other benefits to investors such as yields from annual after-tax cash flows, equity buildup through appreciation of the asset, and cash flow after tax upon sale. Plus, non-monetary returns such as pride of ownership, the security that you control ownership, and portfolio diversification.You’ll need capital, investing in real estate does have risks, and investment real estate can be management-intensive. Nonetheless, real estate investing is a source of wealth, and that should be enough motivation for us to want to get better at it.Understand the Elements of ReturnReal estate is not purchased, held, or sold on emotion. Real estate is not about love; it’s about a return on investment. As such, prudent real estate investors always consider these four basic elements of return to determine the potential benefits of purchasing, holding on to, or selling an income property investment.1. Cash Flow – This is determined by the amount of money collected from rents and other income less operating expenses and loan payment. Furthermore, real estate investing is all about the investment property’s cash flow. You’re buying income stream, therefore be certain that the numbers you use to calculate cash flow are truthful.2. Appreciation – This is the growth in value of a property over time, or future selling price minus original purchase price. The fundamental truth to understand about appreciation, however, is that real estate investors buy the income stream of investment property. It stands to reason, therefore, that the more income you can sell, the more you can expect your property to be worth. In other words, make a determination about the likelihood of an increase in income and throw it into your decision-making.3. Loan Amortization – This means a periodic reduction of the loan over time leading to increased equity. Because lenders evaluate rental property based on income stream, when buying multifamily property, present lenders with clear and concise cash flow reports. Properties with income and expenses represented accurately to the lender increase the chances the investor will obtain a favorable financing.4. Tax Shelter – This signifies a legal way to use real estate investment property to reduce annual or ultimate income taxes. No one-size-fits-all, though, and the prudent real estate investor should check with a tax expert to be sure what the current tax laws are for the investor in any particular year.Do Your Homework1. Form the correct attitude. Dispel the thought that investing in rental properties is like buying a home and develop the attitude that real estate investing is business. Look beyond curb appeal, exciting amenities, and desirable floor plans unless they contribute to the income. Focus on the numbers. “Only women are beautiful,” an investor once told me. “What are the numbers?”2. Develop a real estate investment goal with meaningful objectives. Have a plan with stated goals that best frames your investment strategy; it’s one of the most important elements of successful investing. What do you want to achieve? By when do you want to achieve it? How much cash are you willing to invest comfortably, and what rate of return are you hoping to generate?3. Research your market. Understanding as much as possible about the conditions of the real estate market surrounding the rental property you want to purchase is a necessary and prudent approach to real estate investing. Learn about property values, rents, and occupancy rates in your local area. You can turn to a qualified real estate professional or speak with the county tax assessor.4. Learn the terms and returns and how to compute them. Get familiar with the nuances of real estate investing and learn the terms, formulas, and calculations. There are sites online that provide free information.5. Consider investing in real estate investment software. Having the ability to create your own rental property analysis gives you more control about how the cash flow numbers are presented and a better understanding about a property’s profitability. There are numerous software solutions to choose from online.6. Create a relationship with a real estate professional that knows the local real estate market and understands rental property. It won’t advance your investment objectives to spend time with an agent unless that person knows about investment property and is adequately prepared to help you correctly procure it. Work with a real estate investment specialist.There you have it. As concise an insight into real estate investing as I could provide without boring you to death. Just take them to heart and you should be fine. Here’s to your investing success.
James Kobzeff is the developer of a software solution for real Estate investment. Want to create cash flow, rate of return, and profitability analysis presentations in minutes? See ProAPOD at => http://www.proapod.com
High Return Investments Naples
Dec
20
How to Start Real Estate Investing and Hit the Ground Running
Posted by: | CommentsSafe High Return Investments Naples
James Kobzeff is the developer of ProAPOD Real Estate Investment Software. Want to start working with rental property today? Discover how to create cash flow, rate of return, and profitability analysis presentations in minutes at => http://www.proapod.com
High Return Investments Naples
Nov
20
How Does Guaranteed Investment Certificate (GIC) Work in Canada?
Posted by: | CommentsSafe High Return Investments Naples
A Guaranteed Investment Certificate, or GIC is a type of Canadian investment in which the rate of return is guaranteed over a fixed period of time. Guaranteed Investment Certificates are relatively low-risk investments, and thus yield smaller returns than that of stocks, bonds and mutual funds. GIC’s are typically offered by banks or trust companies. These safe and secure Canadian investments earn interest at a fixed rate, variable rate, or based on a market-based index. Many Canadians view Guaranteed Investment Certificates an excellent choice for an investment portfolio that requires a measure of safety.
How do Guaranteed Investment Certificates Work?
With GIC’s, you will invest an amount of money (determined by you) for a period of time that is determined by the specific type of Guaranteed Investment Certificate that you choose. Typically these periods of time vary greatly and can tend to range anywhere from 1 day to 10 years. GIC’s with longer terms will earn more interest than short term ones. When your Guaranteed Investment Certificate reaches the end of its term (otherwise known as ‘maturity,’) you will be able to access not only your initial investment, but the earned interest as well.
Some Canadian Guaranteed Investment Certificates require that the amount of money you invest initially remain ‘locked in’ for a minimum period of time (30 days for example). Other GIC’s will allow you to access your money before the investment matures. There are even Guaranteed Investment Certificates that allow you to add to your initial investment amount by making weekly, biweekly or monthly contributions.
Redeemable vs. Non-redeemable
Guaranteed Investment Certificates can be redeemable or non-redeemable. As aforementioned, there are some GIC’s which allow you to access your cash during the term. This is referred to as ‘redeemable.’ With a redeemable investment, you will be able to withdraw your cash before maturity. Some redeemable GIC’s specify that you will earn less interest if you cash out prior to maturity.
Non-redeemable Guaranteed Investment Certificates do not allow withdrawals before the maturity date. Non-redeemable GIC’s may offer higher interest rates than redeemable ones.
Interest
Guaranteed Investment Certificates in Canada can be offer either fixed or variable interest rates.
Fixed Rate GIC’s
With a fixed rate GIC, your investment will earn interest at a set rate. That is, the interest that your investment earns will be consistent throughout the term of the investment. The benefit of fixed rate GIC’s is that you can predict exactly how much your investment will be worth on the maturity date.
Variable Rate GIC’s
Variable rate Guaranteed Investment Certificates are either linked to the Canadian prime interest rate or to stock-market performance. With interest-rate linked GIC, you are guaranteed that your money will grow, but you will not know at which rate until maturity. With market-linked GIC’s, you can earn more interest if the stock market does well, but your initial investment will be protected either way.
Benefits of GIC’s
The most important benefit offered by this type of investment is safety and security. Your initial investment will be protected. With fixed-rate GIC’s you can also enjoy guaranteed growth and an easy way to project value at maturity. GIC’s are also known to offer excellent interest rates. Finally, GIC’s are typically pretty flexible investments. You can enjoy flexibility in length of term as well as how often you receive payments.
If you live in Canada and are interested in investing your money in a safe instrument, a Guaranteed Investment Certificate may be right for you. To find out more about what is available in your area, visit your local bank.
Whether you are looking for a mortgage refinance, fixed, variable, open or closed mortgage loan, our financial Coaches can help you figure out which one is just right for you. We offer the most convenient GIC rates on the market.
High Return Investments Naples