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Dubai: When Bernd Skorupinski came to Dubai by way of Germany six years ago, he had no idea he would leave his job to become a fulltime trader. Foreign exchange currency trading, commonly referred to as forex, is a market where banks, businesses, investors and traders come to exchange and speculate on rising or dropping currencies. But to Skorupinski, the appeal to trade came from not only investing in an open market that requires little to feed and leverage, but also investing in himself. According to Abu Hantash, forex trading is more popular in the UAE than ever before, citing the number viet jet ipo brokers that have sprang up.

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Investing in real estate young

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The biggest caution that I could give is about taking on massive debt to buy property at record highs. I implore you, friends, not to put yourselves in that position. As you can see in the chart below, we hit an all-time high in real estate transactions in June of Over transactions took place and at the worst possible time for investors. So please, be smart about when to buy. Data courtesy of the US Census Bureau. What I can say is that my long-term real estate clients that buy various types of real estate have been systematically liquidating for some time now.

We have a sign hanging up in our office that features a quote from Warren Buffet. If the market is at an all-time high, — and others are greedy — we may consider liquidating. Conversely, when others are fearful because the market has bottomed out, we should be taking advantage of the low-cost of investments. Basically, we as investors must focus on cash-on-cash returns. What is a cash-on-cash return and why should we care about them?

In simpler terms, cash-on-cash returns measure the annual return the investor has made with the actual money they have invested into the property. To calculate our cash-on-cash returns, simply divide our annual pre-tax cash flow by our total cash invested. Simple, right? During the first year of payments, I have some closing costs, insurance, and some maintenance costs. Now, I still have to pay taxes but I have made a profit. Putting the math aside, the key thing to take away from cash-on-cash return is that, more often than not, the less money we put down on a real estate investment, the greater our cash return will be.

Conversely, the more cash that we put down, the lower our return is. The real estate is most likely going to appreciate in value even if there is a debt to be paid on it. I have personally utilized this strategy many times over. In fact, if I am able to purchase a property with zero money down, I do it. A popular trend in real estate is to pay for the property in cash. There are three very good reasons why cash-on-cash return is so important.

The next reason is that it allows us to select only the best properties for us to purchase. Finally, cash-on-cash return is important when we settle on financing. Far too often, investors choose a mortgage by looking at its interest rate. In my opinion, the terms are more important than the interest rate. For example, if the interest rate were a little higher but the loan had no closing costs, it might be better than a mortgage with a lower interest rate that had closing costs.

Similarly, we might find a mortgage with higher interest but allows us to float the rate and value down. These things matter when choosing the right mortgage. There are mobile home investors that demand a 70 or 80 percent return before they will consider purchasing a property. However, what it really comes down to is the amount we choose to finance. It just means that it was the best option available to us at that moment. A good cash-on-cash return is nothing more than a comparable status to that of other real estate investors.

There are other factors that determine whether a cash-on-cash return is good or bad, as well. What investment strategy are we using for the property? Is it a rental property? Is this a long-term purchase? All of these must be considered when assessing our cash-on-cash return and whether or not it is a good return. I am of the opinion that we should be calculating our cash-on-cash returns a couple of times throughout the investment process.

We might do it three or four times if we need to, but we must be absolutely certain of our strategy and our return before we sign on the dotted line and go into massive debt. After our initial calculation, should we decide to go through with the investment, I recommend looking at the cash-on-cash return on an annual basis. Doing so can help to decide if we should refinance or, perhaps, pull some equity out of our property.

As equity builds, our cash-on-cash return will decrease. So an annual cash return calculation is something I strongly suggest. What I mean by that is when we begin to calculate our cash-on-cash return over a longer period of time, we find that the return is not as good as we think. This is important to know because we can see where we did really well or very poorly during that investment.

Then we can recreate the successes while hopefully avoiding a repeat of our mistakes. When we look at real estate, we have five main categories: residential, commercial, industrial, land, and special purpose. Now, most of the people I know, choose to invest in residential real estate which, as the name implies, is a property that people make their homes in. For several years now, crowdfunding has given entrepreneurs a way to raise money without having to seek out venture capital. The crowdfunding movement has since expanded to real estate.

As an investor, crowdfunding opens up investment opportunities that may have previously only been available to the extremely wealthy. With the rise of this new branch of the investment industry, several crowdfunding companies have taken the lead in providing investors with real estate investment options. Fundrise launched in and was founded by Ben and Dan Miller with the hopes that the average Joe would have the opportunity to invest in the same real estate projects as corporate institutions.

Fundrise offers a diverse selection of potential investments: investors can invest in a single-family home project, a multi-family condominium building or even a mixed-use manufacturing building. The platform pre-funds all deals upfront so investors start accruing interest as soon as their investment settles. Prodigy offers investment options in most major cities for multi-family, office, retail and hospitality properties. The company only partners with experienced developers that have a track record of success.

This company was founded in with the vision of making it easier for individuals to invest in real estate. Investment periods can last six to twelve months, and investors start earning a return within a few weeks of the period. Realty Mogul gives its investors a wide variety of investment options ranging from multi-family apartments to medical facilities.

RealtyShares aims to provide quality real estate investments to accredited investors. The platform is hoping to bridge the gap between project sponsors and the developers behind each project. Investors can choose to invest in several different types of properties, including residential, commercial, retail, and mixed-use. With crowdfunding, real estate investing has become wholly accessible to the average Joe.

These positions allow for tax deferrals, dividends, and portfolio diversification. So talk to your financial advisor to see which one is right for you and your needs. I was recently asked about using your IRA to purchase real estate and whether or not you can do so. The answer is, yes. You can purchase real estate through your individual retirement account, but I think the better question to ask is, should you buy real estate property through your IRA?

The first thing to look at is the fine print. In fact, I have a client who used his solo k to purchase an eligible piece of property but, in doing so, has totally messed up the tax savings of the solo k. Even worse, he could potentially be facing a fortune in back taxes and penalties, as a result. They were advised to do so by a popular, low-cost custodian who now wants to settle a formal complaint lodged by the client.

So there are some risks involved in investing in this way. So what are some of the rules and regulations tied to investing in real estate through your retirement account? Basically, you can look at your own relationships and draw a cross between you and the people that are deemed ineligible. The line going up and down connects you to your grandparents and to your children or grandchildren.

The horizontal line connects with fiduciaries, self-directed companies, and custodians. What is an indirect benefit? Likewise, you cannot rent an office space for your business that is in a building that your self-directed IRA owns. The purpose of the IRA is to provide for your retirement at some future date. Your investment must be titled under the name of your IRA, along with any other documentation related to the investment. It is possible to purchase real estate without funding the entire purchase through your IRA.

You typically have a few options where financing is concerned. These other options include using undivided interest and partnering with others. You can also finance the investment with your IRA, but it must be structured properly. Unrelated business income is any income that is derived from trade or business.

Business activity is not always related to exempt status. Your self-directed IRA can purchase real estate using financing as long as the loan is non-recourse. If you do use financing, unrelated business income tax UBIT applies. We all know that real estate ownership comes with some expenses beyond the initial purchase price, but how do we handle those expenses when investing in real estate through our IRAs?

In short, All expenses related to property owned by your self-directed IRA, including maintenance, improvements, property taxes, condo association fees, and general bills must be paid from your IRA. Paying the expenses out of pocket is considered a contribution and causes a myriad of tax issues. All income from the property must be returned to your IRA. From a philosophical standpoint, I would say no. You see, one of the greatest advantages of real estate is its ability to create tax deductions.

Why would we give up the very things that make real estate investment so lucrative in the first place, only to also add on a huge tax bill to our revenue? So, again, should we invest in real estate using our IRAs? I still think the answer is no. No, because we lose the tax advantages and the cash-on-cash return. I say no because it is contrary to what we are often trying to do when we invest in real estate.

Perhaps, most importantly, I say no because we are business owners. Just as important, is knowing how to pay for your real estate investments. We have several ways that we can pay for our investments, each with their own unique nuances that make them better or worse for different situations. The first and most obvious way to pay for our property investments is through conventional loans. It really is as simple and straightforward as it can be.

We come up with a down payment and the bank puts up the rest of the cash in exchange for a lien on the property secured by a mortgage. Conventional loans are a good solution for buy-and-hold investors building a portfolio of income-producing rental properties.

FHA loans are sponsored by the government in order to convince people to buy homes. Because the FHA sponsors the loan, they are guaranteeing the loan for the lender, giving lenders the confidence to approve buyers they might not ordinarily approve and allowing them to offer a competitive interest rate. They offer an option for the buyer to put down just 3.

Like the FHA loan, a k loan is designed with the homeowner in mind, rather than the investor. Qualifying for VA loans is one of the best perks of military service. The quality of an investment group depends entirely on the company that offers it. In theory, it is a safe way to get into real estate investment, but groups may charge the kind of high fees that haunt the mutual fund industry. As with all investments, research is key.

A real estate limited partnership RELP is similar to a real estate investment group. It is an entity formed to buy and hold a portfolio of properties, or sometimes just one property. However, RELPs exist for a finite number of years. An experienced property manager or real estate development firm serves as the general partner.

Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners. Real estate mutual funds invest primarily in REITs and real estate operating companies. They provide the ability to gain diversified exposure to real estate with a relatively small amount of capital. Depending on their strategy and diversification goals, they provide investors with much broader asset selection than can be achieved through buying individual REITs.

Like REITs, these funds are pretty liquid. Another significant advantage to retail investors is the analytical and research information provided by the fund. More speculative investors can invest in a family of real estate mutual funds, tactically overweighting certain property types or regions to maximize return. In general, the real estate market is one of low volatility , especially compared to equities and bonds. Real estate is also attractive when compared with more traditional sources of income return.

This asset class typically trades at a yield premium to U. Treasuries and is especially attractive in an environment where Treasury rates are low. Another benefit of investing in real estate is its diversification potential. Real estate has a low and, in some cases, negative, correlation with other major asset classes—meaning, when stocks are down, real estate is often up. This means the addition of real estate to a portfolio can lower its volatility and provide a higher return per unit of risk.

Because it is backed by brick and mortar, direct real estate also carries less principal-agent conflict , or the extent to which the interest of the investor is dependent on the integrity and competence of managers and debtors. Even the more indirect forms of investment carry some protection.

The inflation-hedging capability of real estate stems from the positive relationship between gross domestic product GDP growth and demand for real estate. As economies expand, the demand for real estate drives rents higher, and this, in turn, translates into higher capital values.

Therefore, real estate tends to maintain the purchasing power of capital by passing some of the inflationary pressure onto tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation. With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. Leverage means to use debt to finance a larger purchase than you have the available cash for.

If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order—unless you are buying on margin. And even then, the percentage you can borrow is still much less than with real estate, thanks to that magical financing method, the mortgage. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, the size of your mortgage affects the amount of ownership you actually have in the property, but you control it the minute the papers are signed.

This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage, or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value.

Home prices tend to rise along with inflation. This is because homebuilders' costs rise with inflation, which must be passed on to buyers of new homes. Existing homes, too, rise with inflation though. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments become effectively more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation.

Because real estate is such a large and costly asset, loans must often be taken out to finance their purchase. Because of this, interest rate hikes make mortgage payments more costly for new loans or on existing adjustable-rate loans like ARMs. This can discourage buyers, who must factor in the cost to carry the property month-to-month. Real estate can be a sound investment, and one that has the potential to provide a steady income and build wealth.

Still, one drawback of investing in real estate is illiquidity : the relative difficulty in converting an asset into cash and cash into an asset. Unlike a stock or bond transaction, which can be completed in seconds, a real estate transaction can take months to close. Even with the help of a broker , simply finding the right counterparty can be a few weeks of work. Of course, REITs and real estate mutual funds offer better liquidity and market pricing.

But they come at the price of higher volatility and lower diversification benefits, as they have a much higher correlation to the overall stock market than direct real estate investments. As with any investment, keep your expectations realistic, and be sure to do your homework and research before making any decisions. Mortgage lending discrimination is illegal.

If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. Federal Reserve Bank of St. Bureau of Labor Statistics. Federal Trade Commission. Securities and Exchange Commission. Consumer Financial Protection Bureau. Real Estate Investing. Your Money.

Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. Historical Prices. Rental Properties. Flipping House. Real Estate Investment Groups. Real Estate Limited Partnerships. Real Estate Mutual Funds. Why Invest in Real Estate? The Bottom Line.

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The thought of that life terrifies me. Just thinking about buying a home for the first time brings waves of emotion. Over one-third of all Americans are considering buying a home in the next five years. I simply did something remarkable for my age. A significant distinction, but an important one.

The sooner you get into the real estate game, the sooner you can succeed. Rental properties build equity over time—and the more time they have to appreciate, the larger your portfolio will be. After all, passive income is key to life-long wealth. You can then use that equity to buy additional investment properties, accumulating cash flow and appreciation.

If you want to build wealth through rentals or other long-term real estate investments, the more time you have, the better. Unfortunately, I have some bad news: Y ou are getting old too. But being young comes with a few significant disadvantages. Of the 7 billion people on earth, less than 20 million are millionaires.

This ultimate guide explores the only three ways anyone becomes rich—and demonstrates how anyone can reach millionaire status if they only follow a few simple rules. Obviously, your first investment depends on your situation.

Besides investing in yourself through books, podcasts, blogs, and forums, I believe that most people should start with their primary residence. As I see it, you have two great options:. Yes, real estate costs money. However, both options above allow you to start with a low down payment. Even better, the FHA has another program called the K loan, which allows you to incorporate needed repairs into the loan itself and still only pay 3.

In addition, you can use the K loan on small multifamily properties as well, combining the benefits of the live-in flip and the small multifamily strategy into one feasible plan. Whatever the reason, it is a fascinating and powerful phenomenon. Use this to your advantage! Build relationships with older investors who have graduated from the school of hard knocks. Let their failures teach you how to avoid or fix your own.

There are two great places that you can start building these relationships today: locally and online. As with all investments, research is key. A real estate limited partnership RELP is similar to a real estate investment group. It is an entity formed to buy and hold a portfolio of properties, or sometimes just one property.

However, RELPs exist for a finite number of years. An experienced property manager or real estate development firm serves as the general partner. Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners.

Real estate mutual funds invest primarily in REITs and real estate operating companies. They provide the ability to gain diversified exposure to real estate with a relatively small amount of capital. Depending on their strategy and diversification goals, they provide investors with much broader asset selection than can be achieved through buying individual REITs.

Like REITs, these funds are pretty liquid. Another significant advantage to retail investors is the analytical and research information provided by the fund. More speculative investors can invest in a family of real estate mutual funds, tactically overweighting certain property types or regions to maximize return.

In general, the real estate market is one of low volatility , especially compared to equities and bonds. Real estate is also attractive when compared with more traditional sources of income return. This asset class typically trades at a yield premium to U. Treasuries and is especially attractive in an environment where Treasury rates are low. Another benefit of investing in real estate is its diversification potential. Real estate has a low and, in some cases, negative, correlation with other major asset classes—meaning, when stocks are down, real estate is often up.

This means the addition of real estate to a portfolio can lower its volatility and provide a higher return per unit of risk. Because it is backed by brick and mortar, direct real estate also carries less principal-agent conflict , or the extent to which the interest of the investor is dependent on the integrity and competence of managers and debtors. Even the more indirect forms of investment carry some protection. The inflation-hedging capability of real estate stems from the positive relationship between gross domestic product GDP growth and demand for real estate.

As economies expand, the demand for real estate drives rents higher, and this, in turn, translates into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital by passing some of the inflationary pressure onto tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation.

With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. Leverage means to use debt to finance a larger purchase than you have the available cash for.

If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order—unless you are buying on margin. And even then, the percentage you can borrow is still much less than with real estate, thanks to that magical financing method, the mortgage. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value.

Of course, the size of your mortgage affects the amount of ownership you actually have in the property, but you control it the minute the papers are signed. This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage, or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value.

Home prices tend to rise along with inflation. This is because homebuilders' costs rise with inflation, which must be passed on to buyers of new homes. Existing homes, too, rise with inflation though. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments become effectively more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation. Because real estate is such a large and costly asset, loans must often be taken out to finance their purchase.

Because of this, interest rate hikes make mortgage payments more costly for new loans or on existing adjustable-rate loans like ARMs. This can discourage buyers, who must factor in the cost to carry the property month-to-month. Real estate can be a sound investment, and one that has the potential to provide a steady income and build wealth.

Still, one drawback of investing in real estate is illiquidity : the relative difficulty in converting an asset into cash and cash into an asset. Unlike a stock or bond transaction, which can be completed in seconds, a real estate transaction can take months to close.

Even with the help of a broker , simply finding the right counterparty can be a few weeks of work. Of course, REITs and real estate mutual funds offer better liquidity and market pricing. But they come at the price of higher volatility and lower diversification benefits, as they have a much higher correlation to the overall stock market than direct real estate investments.

As with any investment, keep your expectations realistic, and be sure to do your homework and research before making any decisions. Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take.

Federal Reserve Bank of St. Bureau of Labor Statistics. Federal Trade Commission. Securities and Exchange Commission. Consumer Financial Protection Bureau. Real Estate Investing. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. Historical Prices. Rental Properties. Flipping House. Real Estate Investment Groups.

Real Estate Limited Partnerships. Real Estate Mutual Funds. Why Invest in Real Estate? The Bottom Line. Part of. Real Estate Investing Guide.

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The ULTIMATE Beginner's Guide to Investing in Real Estate Step-By-Step

Multifamily rental properties can be another great option for those wondering how to invest in real estate at a young age. This strategy involves purchasing a. Investing in real estate is one of the fastest ways to generate long term wealth. The sooner you start, the sooner you can learn what it takes. One reason to invest in real estate young is that it gives you the option to hold the properties for decades, allowing them to appreciate. In.