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Alone you have NO leverage. Alone, you have only YOUR money, YOUR experiences, YOUR time, and YOUR work efforts.

We all have limitations. Unfortunately, too many real estate investors just starting out never learn how to get beyond their limitations by exploiting the power of leverage. No matter how hard they work and how smart they are, they are destined to fail from the get go. You see, people rarely get rich based solely on their own efforts.

But don’t let this happen to you.

Leverage remains a secret to so many investors not because successful real estate investors keep it a secret, but because too many investor wannabees truly don’t understand the power of leverage. Or if they understand the principles of leverage, they fail to properly apply them in their real estate business.

And just to make sure you don’t become another has-been investor, let’s be clear about what leverage is so you can truly harness its power to empower you to get rich fast.

Leverage is anything you can use to multiply your efforts as an investor. When you have leverage, you have the power to control a lot with only a little. You can do more with less effort. This is one of the most important aspects on your path to riches and financial freedom.

There are essentially four “golden principles” that govern the application of maximum leverage in your business as a real estate investor.

1. The leverage of Other People’s Money (OPM).

Even if you’re brand new to real estate investing, you have probably heard about this financial principle before. Using other people’s money - borrowing - is one of the most common forms of applying leverage.

But why it’s popularity?

In real estate, when you buy a property for nothing down, you are able to pay nothing (or use none of your money) and LEVERAGE 100% control of the property.

Not a bad deal! But it gets even better because leverage gives you the ability to magnify the return on your investment. Here’s a simplified illustration of how it can truly propel your real estate investing business to an incredibly higher level and get rich fast.

Just think about what’s happened! You can use your $50,000 (in cash) to buy a single house to earn a 20,000 profit from the sale of the property. Or you can choose to take advantage of the remarkable power of leverage by using the same $50,000 to buy 20 houses by paying $2,500 down on each of 20 properties. Imagine what your bank account would be like if you made the same $20,000 profit on the sale of each of the 20 houses?

Can you do the numbers in your mind?

It was Napoleon Hill who said “If you don’t see great riches in your imagination you will never see them in your bank balance.”

Successful real estate investors make it happen repeatedly and it can happen to you if you apply maximum leverage.

2. The leverage of Other People’s Experience (OPE).

It takes too long to learn everything on your own so borrow from others what they have learned.
The best way to be successful in your real estate investing business is to find someone who has already achieved success and then learn from them what they did to get to that point.

It’s not rocket science!

You can accomplish this task in many ways:

a. Get a mentor

b. Read books by successful investors

c. Attend investment seminars

3. The leverage of Other People’s Time (OPT).

There is a set amount of hours you can work each day. Even if you could do without sleeping or eating, still you would have only 24 hours each day like everybody else. There is only so much time that you personally have to get all the things done that you need to do.

So you must create a duplicable system that is essentially usable by anyone. A duplicable system will help you advance faster and increase your profits while reducing your work.

Your system must be so simple that you could literally teach it to anyone of average intelligence, but yet so effective that once you have taught that someone to use your system, it operates efficiently without you.

4. The leverage of Other People’s Work (OPW).

You can use other people’s labor by outsourcing all of your rehabbing tasks. You must assemble a team to include a plumber, an electrician, an HVAC technician, a foundation specialist, a roofer, a flooring specialist, and a rehab specialist. And don’t forget to include a CPA, a real estate attorney, an escrow officer, and a realtor that specializes in foreclosures.

Here, leverage really starts to kick in because with your team you’ll get a lot more done a lot quicker than you could ever do alone. Assemble several teams simultaneously and you will be on fast-forward in your journey to achieve financial freedom.

Find a way to take advantage of other people’s work to accelerate your real estate success… Just do it!

If you do it all on your own, or said another way, if all the money you receive is directly proportional to the efforts that you make, then you are not using leverage. In fact, the author of Rich Dad, Poor Dad believes that “If you’re working hard physically and not getting ahead financially, then you’re probably someone else’s leverage!”

As one shrewd observer put it, “Wealth is when small efforts produce large results. Poverty is when large efforts produce small results.” Some people predominantly produce a lot of hard work and effort that doesn’t accomplish much. Others do some relatively simple things that make much bigger things happen. That is maximum leverage

To become financially free through your real estate business, you must master each of the four principles that control the use of maximum leverage.

Lee Salinas, CPA, MBA became a corporate refugee when he was blind-sided by a layoff in 2002. But Lee discovered life outside the corporate rat-race when he became a real estate investor. In four years, Lee has purchased over 180 properties. Additionally, Lee has created a real estate business plan that helps investors get all the private money they need to fund their deals. Lee’s business plan is available at http://www.realestatebizplan.com.

[tags]Leverage, Other People’s Money, Real Estate Investor, Other People’s Experience, Work[/tags]

Landlords and tenants alike just want a pleasant relationship, so that each can live in peace. No landlord should ever allow a tenant to move into their rental property without first requiring the prospective tenant to completely fill out a rental application.

Among the important questions that should be answered on the application are:

- Place of current employment?
- Length of employment?
- Name of bank?
- Social Security number?
- Do they have pets, if so what kind?
- Number of vehicles?
- How many occupants will live on the property?
- Ages of occupants?
- Name and address of current and prior landlords?
- Have you been convicted of a felony?
- Have you ever been evicted?
- Are you currently engaged in criminal activity?
- Have you been arrested and charged with a crime, but not yet convicted?
- Are you in bankruptcy or plan to file for bankruptcy?

A bold notice on your rental application form should read: Falsification of this information is grounds for a ten day Notice to Move if discovered later by the landlord or management.

With the information found on the rental application the landlord can begin the screening process. It is the landlord’s responsibility to be sure the tenant is the right person to occupy the home or apartment… and that the home or apartment is right for the applicant.

A qualified tenant is one who can afford the rent and has the characteristics necessary to coexist with the neighbors or other tenants. On the other hand a landlord should not rent a one bedroom unit to a four member family.

The screening process includes checking the tenant’s credit rating. Someone who has a long list of late payments and unpaid debts could immediately become a problem tenant. Solve that problem before it begins by forthrightly explaining to the prospect why he or she is not eligible to occupy the property. The best eviction is one that occurs before occupancy.

Along with a good credit history you must check prior rent history and search public criminal records for indications of behavior problems. You can ask the tenant’s prior landlord to fill out and return a written questionnaire on the tenant’s length of tenancy, payment history, violations of lease terms, etc. Yes, you can ask buy few landlords will answer. If they do reply they will avoid any negative report for fear the tenant might see the report and bring legal action against them. More practically, you might just call the present or prior landlord and learn what you can verbally.

Many people who have a criminal record have reformed and are leading exemplary lives. However, even for a sympathetic landlord to rent to a felon is playing with fire. If the felon shoots a neighbor or another tenant and it comes out in the police report that the landlord was aware of the criminal record, it is probable that someone will sue the landlord.

Make no mistake about it… fair housing laws require you to treat all prospective residents the same. Make sure you have your rental criteria in place and that it is reasonable.

Mark Walters is an investor who offers free real estate investing videos at http://www.CashFlowInstitute.com

[tags]Landlords, real estate[/tags]

On a day to day basis, I deal with many individuals who want to purchase property in Israel, though they do not live here. The following ten points were written based upon their experience in purchasing real estate in Israel.

1. Be careful. Be prepared. Be informed. - It cannot be overstated or said enough. You, your agent and your lawyer should all do the homework on price, taxes, ownership of any piece of property you are interested in.

2. Understanding Property - Your agent should understand and have seen the property they are representing and be in tune with your needs and requests. Always ask about why a property is costing X even if you feel it is fairly priced. Dig for information just don’t accept it. Get a complete picture, one which will make your decision more informed and knowledgeable.

3. Time - Don’t let an agent waste your time by dragging you around from place to place without understanding your specific needs. A good agent can save you a great deal of time because they invest the time before they ever heard from you. They scour the market for new and good deals, and meet with owners and plan out time-schedules. They try to prepare as much as possible for your request way before you even knew you would call them.

4. Knowledge of Market Availability - Agents should know the properties available. Not only those which appear in the paper, but those which are never advertised along “normative” routes.

5. Price - A good brokerage firm can often get you a better price than you can get by yourself as they are aware of the “true” market value. And often they can be instrumental in making an owner understand that what you have offered is the best deal all around. It is in the best interest for both sides to be happy, even if the agent represents only one side of the transaction.

6. Positive & Negative Aspects - Because a good agent does research before ever showing you a property, they can warn you of possible problems even when you fall in love with the property. An agent, should without hesitation, list those aspects which they feel may be viewed in a negative light as well. To sing praise is always easy, to be honest and forthright, and warn you that there may be too many stairs, or though the bathroom was just renovated it will still need more work, or the synagogue across the street may prove to be a bit noisy, or during the school year you will hear the chimes from the school down the block - even when you are “in love” is the difficult part.

7. Making Sure You See All The Factors - You should always view the prospective property more than once. At the very least, once during the day and once during night time. This is critical for you to get a sense of the apartment and neighborhood.

8. Real Property Worth - Find out through your agent and lawyer the “real” worth of the property. Do not accept just any figures thrown from a hat to impress you. Find out what other properties in the neighborhood sold for. If the property is appreciating in price. Who the neighbors are and who is buying.

9. Ethics - Agents must be licensed and are subject to laws and a rule of ethics. If you catch an agent in a lie, seek out another agent.

10. Staying Within Your Budget - Do not let an agent push you, nor attempt to talk you into spending more than your budget allows.

In future articles I will discuss taxes, broker fees, and what documentation is required of you.

Ted W. Gross owns Virgin Earth, a real estate brokerage firm in Jerusalem, Israel. Virgin Earth represents residential and commercial real estate all over Israel. The web site for Virgin Earth is: http://www.virginisrael.com.
Virgin Earth also maintains an RSS Feed on its current properties which can be found on most pages in the web site of Virgin Earth. Ted Gross can be reached at: teddy@virginisrael.com
Ted Gross is also a published author and maintains a web site for his works. This can be found at: http://www.virginisrael.com/twg/iw.html

[tags]real estate in israel, real estate in jerusalem, israel real estate, jerusalem real estate,[/tags]

In Real Estate price is not everything. It is important, of course, but not everything. Were price to be everything, then only low-priced products would sell and there would be no reasonable explanation as to why all those multi-million dollar mansions sell as well. When it comes to purchasing a house, other factors must be taken into consideration to understand the rationality - or lack thereof - of the Buyer’s decision-making process. Buyers are typically a nervous bunch, and understandably so. It is not easy to consider an investment that runs into the thousands of dollars, and any time you commit yourself to sixty months of $2,000 or so monthly payments your palms tend to perspire. Such factors as heritage, education level and risk-absorption and management play a pivotal role as well. More exotic relationships between money and nominal wealth in the minds of people - whether such relationships are clearly understood or merely hearsay - are even more important.

There is something impliedly strange in making decisions and humans, for a reason or another, tend to shy away from them. They like to stay in their comfort zones of blissful indecision. “Nothing ventured, nothing lost” is the way many people look at making any kind of move that might be to their benefit. And the purchase of a home or other real estate is one of the most beneficial decisions that can be made in our society, even at the wrong price. Making decisions is not easy, so people more often than not decide not to decide. This can be very frustrating, especially in retrospective. There is such a thing as Buyer’s remorse in reverse: how many times we real estate professionals hear comments the likes of ‘why didn’t I buy it myself’ or ‘why didn’t I think of it’ from prospective purchasers referring to properties that have already sold - and which they themselves could have bought instead of someone else.

I call it Buyer’s “alter ego”, which is a reflection proximately caused by the misinterpretation, whether effective or subjective, of what economists refer to as ‘the money illusion’. In Economics the term “money illusion” refers to a tendency to think in terms of nominal rather than real monetary values. Which tendency can be in part explained by the fact that the average consumer thinks and does things by reflection. A real estate purchaser will very well decide to buy a loft as opposed to an apartment not necessarily because he likes lofts more or because he thinks they are a better investment, but because his very close friend has just bought one or because his very dear girlfriend has stated that she likes them more, or merely because it is trendy to purchase lofts. And the fact that lofts are typically more expensive or that, ultimately, this particular consumer will end up living in a refurbished warehouse have little weight on his rationalization of the purchase.

Some colleagues in the industry are quick at resorting to statements the likes of “Buyers are Liars”. Personally I have never quite subscribed to such oversimplified, somewhat derogatory qualifications and, in fact, have found them to be untrue more often than not. Buyers are not liars to the extent that they normally tell up front which product they are looking for. Where, however, confusion lies is in the fact that economic transactions, particularly as large as real estate acquisitions, can be represented either in nominal or in real terms. The nominal representation is simpler, more salient, and often suffices for the short run, yet the representation in real terms is the one that captures the true value of the transaction. People are generally aware that there is a difference between real and nominal values, but because at a single point in time, or over a short period, money is a salient and natural unit of measurement, people often think of transactions in predominantly nominal terms. Consequently, the evaluation of transactions often represents a mixture of nominal and real assessments, which gives rise to money illusion.

As an example, consider a Buyer that purchases real estate in a downward market deflating at the rate of, say, five percent a year, and that he is able to purchase his real estate assets at a price eight percent off asking. This consumer will focus on the nominal discount of eight percent without, in fact, realizing that his real term savings consists only of three percent. Likewise a Seller, even if aware of the true value of comparable houses, may anchor on the historical price he paid for the house and will be reluctant to sell for a price less than the nominal anchor. Which, then, explains why so many listings are brandished as ‘overpriced’ in a downward trend: in times of shifting relative prices people’s reactions will be determined by the change between an item’s current price and its historical, nominal anchor. And which, in ultimate analysis, denotes a lack of experience and sophistication of many market participant and decision makers which affect their personal reactions to changes of price and market conditions.

Luigi Frascati

Luigi Frascati is a Real Estate Agent based in Vancouver, British Columbia. He holds a Bachelor Degree in Economics and maintains a weblog entitled the Real Estate Chronicle at http://wwwrealestatechronicle.blogspot.com where you can find the full collection of his articles. Luigi is associated with the Sutton Group, the largest real estate organization in Canada, and is based with Sutton-Centre Realty in Burnaby, BC.

Luigi is very proud to be an EzineArticles Platinum Expert Author. Your rating at the footer of this Article is very much appreciated. Thank you.

[tags]real estate,homebuying,economics,money illusion,real value,nominal value[/tags]