Investing in Real Estate Through REITS
Real estate has long been a safe haven for investors when the market falls and tough economic times set in. Investing in real estate as part of your overall investment portfolio does not necessarily mean owning an actual property. A real estate investment trust or REIT can be thought of as a mutual fund of real estate.
There are various types of REITs: equity REITs that invest in and own actual properties like hotels, shopping malls, office buildings, and healthcare facilities; mortgage REITs that invest in and own property mortgages; and hybrid REITs that invest in both properties and mortgages. REITs typically offer investors above average dividends since REITs are required to pay out most of their earnings to shareholders. For the investor looking for steady income, REITs are a good investment option.
REITs are an effective way to add diversification to your portfolio. Real estate is a hard asset that can (but not always) act as a hedge in bad times. Why? When the economy tightens, interest rates tend to fall. Property owners are able to refinance at lower rates, which leaves more room for profit for the REIT. It is important to note that not all classes of property do well during downturns in the economy. Office property and hotels can suffer for example. Office property can lose tenants. Hotels can see a decline in income, if business and leisure travel slows.
Unlike real property, having money in a REIT is more liquid, again making it an effective method to invest in real estate. Just like buying stock in a single company, individual REITs carry more investment risk. The good news is that like mutual funds, you can get in the game through a REIT index fund. This way you can invest in a basket of REITs spreading over different classes of property. Passively managed, REIT index funds also have lower fees.
REITs are often characterized as a shock absorber to guard against market swings. Like bonds, they have a place in every portfolio. Read about asset allocation.
Investment Clubs
If you are someone who would like to know more about investing, joining or starting an investment club can be a rewarding and educational experience. Many people feel more comfortable about learning about investing with other average folks when compared with talking to an “expert”.
Is it a good fit for you?
If you have been putting off learning about investing and setting any money aside, the discipline of a club could be ideal. Many people join a club to have a group that they can talk to about investing and apply what they learn to their own portfolios. If you have $20-$50 a month to set aside and invest through a club, you might find membership is for you.
Even experienced investors use a club to gain information about stocks that they do not have the time to research. Many hands make light work. All members benefit from the work of other members. Work? Yes you need to contribute more that cash. Don’t think that you can take a free ride. The pooled account may not be significant when compared to your 401(k) but everyone has a stake and needs to commit.
How Do These Things Start?
Groups of friends, neighbors or co-workers start talking about investing and find that a starting an investment club is the next step. Setting up a club takes some work but the National Association of Investors Corporation (NAIC) has all the information you need to get started.
How Do They Work
Successful investment clubs focus on learning as well as investing. Guest speakers, like a local broker or investment analyst, may be invited from time to time. Most people join a club to explore new ideas and discuss investing issues. In the early sessions of a club’s life, education might be very introductory, covering how to read a balance sheet, an earnings report and the club’s financials. Soon the club might be learning new ways to value stocks or discussing a book about Warren Buffett.
Clubs Are Work: Why Not Try a Money-Free Club?
Many clubs have fallen by the wayside when members realize that the time involved is significant. Often the treasurer feels this first. Because of this, groups that want to get started but are a bit intimidated at the paperwork, try a “money-free” club.
Some money-free clubs will focus on education only. Others will set up fantasy portfolios on a web site and buy and sell and do all the work, but with no real money in.
Advantages
No monthly contributions.
No need for a treasurer.
No accounts to keep and taxes to pay.
Great for people who are hesitant to commit to a regular club.
Disadvantages
People often lose their discipline if they’re not bound together by pooled money.
Often people take a money-free club less seriously.
It’s less fun and exciting for some people, if there’s no real money involved.
Tips for Applying for a Mortgage
In order to find the best mortgage rate with the lowest cost that doesn’t end up being a mortgage nightmare, there are some tips to follow that will ensure those beneficial results are reached.
Learn about the Home Loan Process. Buying a home is a complicated process that involves terms and procedures that are specific to the mortgage lending industry. Take your time and learn all you can about buying real estate and how the mortgage process works. Be aware of what’s happening in your local real estate market. Be aware of the conditions and mortgage rates in the mortgage market. The more you know, the easier it will be for you to get a good deal on your mortgage and not be sold on a mortgage product that is not in your best interest.
Get the Facts. Study the various mortgage loan programs available and review the general underwriting conditions needed to qualify for the type of home loan that best meets your qualifications and needs. Learn about the specific type of loan you’re getting and its conditions, as well as all cost you’ll incur. Not be surprised by the process and procedures of your mortgage lender by remaining in the dark regarding what they do after you submit the loan application. Be sure to ask about costs over the life of the mortgage, not just at closing. Different types of mortgages can vary subtly, but small differences can mean large amounts of money, so take the time to educate yourself before you sign.
Work With a Reputable Mortgage Lender or Bank. If you’re shopping around for a mortgage lender, try to choose a mortgage lender that has been referred to you or has references that can be easily checked. This makes it more likely that you’ll find a home loan program that works for you without unpleasant surprises. Especially if your credit is less than perfect or your qualifications are not quite up to par.
Research your Mortgage Lender and Stay in Touch. The most common reason that real estate transactions fall through is due to the mortgage lenders failure to close the deal. To be sure your mortgage makes the cut, ask your mortgage lender about their closing performance numbers and what are the common delays found in closing home loans at their office. Don’t sign any forms guaranteeing payment or fees until you are satisfied. Shop and compare mortgage lenders and mortgage rates.
Be Honest. Don’t try to hide any aspect of your financial history from your mortgage lender. They’ll find out anyway, and it’s better for them to know what they have to work with from the beginning, instead of finding out about credit blemishes midway through the process. Work with your mortgage lender to help them secure the best mortgage rate possible for you by disclosing your full credit history and any issues regarding employment or assets that will ultimately come to light and do more damage later if they are not properly disclosed.
Be Aware of Your Finances. Take the time to review your credit report and know where you stand. Use the mortgage calculators to check qualifying ratios and down payment figures. If your credit is poor, act to restore it now. Keep all your monthly payments current, and pay down credit card payments. Take steps to make sure your credit is in order before you attempt to get a mortgage loan – it will make the process easier.
Avoid Large Credit Purchases. If you know you’ll be purchasing a home, don’t make any large credit purchases before you apply for a mortgage. Your total debt is a large part of the credit application process, and your total monthly payments cannot be above a certain percentage of your gross monthly income.
One often overlooked aspect of the home loan process is the mechanics of the home loan approval. Potential home loan borrowers should strive to make sure they have the best mortgage rate with competitive costs while working with reputable mortgage lender. Work with the mortgage lender from beginning to end to ensure you have a trouble free home loan experience.
Taking Advantage of Credit Card Cash Back Offers
The proper strategy in using your credit card with a cash back offer can ensure that you are earning the absolute maximum cash back possible. To just touch on a few things to include in that strategy:
Use your credit card cash back card to pay off your monthly bills. A large portion of most people’s expenses are these steady monthly bills like phone bills, utility bills, cable and internet, and mortgage payments. These offer a great opportunity to earn some extra cash back on expenses that have to be paid whether you use the credit card or not.
Make sure that everyone in your household is using a cash back credit card so that all money going out from the household is earning cash back. Be mindful not to abuse the credit card services and try to obtain additional credit card rewards by running up a larger credit card debt that is unnecessary and unwise.
Find credit cards that offer extra cash back in areas you spend most on. Credit cards that offer extra cash back in stores that you frequently spend money in should be your priority.
You can also find credit cards that offer extra bonuses at particular locations if you have a large ticket purchase to pay for in the future. If you have renovations obtaining a credit card that gives more than the regular amount of cash back at a lumberyard or renovation specialist store would be particularly practical for someone with that need.
Small business owners can try to find credit cards for use by the business to give more than the low 1% rate on things that are regular expense of the business. Any workers that have to make purchases for the company should use the business credit card as well. The more you can use the business credit card with cash back rewards the better, business credit cards have the edge over the personal credit cards in that they don’t usually limit how much cash back the account holder can earn monthly or annually.
Don’t let a credit card balance carry over when you’re using a cash back credit card, otherwise you’re completely negating the cash back that you’ve earned since you’re paying more than that back in credit card interest each month. You want to make the credit card work for you not the other way around.
If you do have to carry a credit card balance you should try and have two credit cards. Use the credit card with bonus cash back at the locations that you earn more than the standard 1% on, and try to find a credit card with a lower standard interest rate or credit card apr for any purchases you have to make at any other locations.
Always try to manage your credit card transactions to gain the maximum credit card rewards with least cost.