Investors Lounge Online

Have the planets lined up to create perfect timing for you to purchase that piece of property you always wanted? That is the million dollar question that has been asked repeatedly this past year. Part of that question can be answered with a resounding yes, if and lets specify "if" you do your research and make sure it is the right purchase in part based on current economic trends.

There are many properties on the market that some buyers feel like they can blind-fold themselves then throw a dart and land on the bulls-eye target of property. This is not a game of "Price Is Right" where you are a contestant and when it's your turn to spin the wheel you hope it lands on something good. There are no consolation prizes for picking the wrong property and making the wrong decisions relating to timing. With an economy that keeps tripping over its feet and can't seem to stand up straight just yet, one has to go further in making sound decisions when it comes to buying property because of the unpredictable state of economy right now.

At a time where it seems like the mass media wants to re-release "The Day the Earth Stood Still" as to how our future will be based on the economy, true investors and economists know what a difference a day can make and that the 5:00 O'clock news prime slots need to be filled with stories that hold the public in panic to keep their attention. The economy has been as reliable as the seasons that change. An economic downturn always recovers in time the same as spring comes every season. Seeds planted where there is nothing but soil will bring about strong healthy growing grass so when buying property you are planting a seed that you intend to nurture the best you can in anticipation of it growing in due time. We are always making use of the upward green arrows on financial graphs and charts so it's pretty safe to say you won't have to put away that green marker for very long as the red at some point starts to dry out.

If you are purchasing income property based largely on the investment success it may bring, the rebounding with that may not be as reliable as if you were playing alongside Shaq in a playoff game, however, based on various data and research factors if the property is handled and maintained effectively over time, your property will work for you. There is always a demand for property that is a necessity such as single family housing, n-plexes, office buildings, apartments, and grocery stores and while some of these properties are currently experiencing what a boxer getting knocked down several times in one match experiences they are expected to stabilize and recover to where your wallet though lean at times will remain filled.

There is a formula to help prepare for success with buying the property that is the right match at the right time. Don't sweat it is not an economics quiz from school again but one key area to look at is purchasing at the right rate of capitalization along with having tenacity. It is very useful to identify and validate cash flow, itemized operation costs, capital expenditures, and economic prospects of the area where the property is being purchased.

In this case it is a good thing to be nosey and find out some information about nearby property since you can look at the operating income of another similar property and its recent sale price to help determine the rate of capitalization. Yes, you divide net operating income by sale price to get your percentage of rate of capitalization. Driving around looking at property after property might scare the neighbors who think you are preparing to sell them something they don't want to buy, but it will help you get a comparison of potential property value where you might intend to buy.

Another step is to determine what your expenses will be in relation to the property and how much you will turn a profit after purchasing. Are you buying the property to rent out or sell for a higher value? Will you offer free WI-FI or will that eat in to your profits like a mouse eats cheese? What type of fees will you have to pay such as maintenance or property management? Will there be universal fees that you don't understand such as the ones you see on your cell phone bill every month that mysteriously always add up to more than five dollars no matter what. Expenses including the amount of your mortgage payment, insurance, and taxes must be factored in before you can determine the amount of cash flow you will have and if the investment may or may not be worth it in the long run.

Yes the accounting courses you took certainly come in to play here and apply when it comes to operating expenses of the property that you are interested in purchasing. It's like that teenager that was so excited when their parents bought them their first car only to have reality set in when they were told they would have to pay all the expenses to operate the vehicle including gas, maintenance, and repairs well operating expenses related to income property can be looked at no different. Your operating expenses will include expenses that vary monthly like electric or heat and fixed expenses such as insurance and property taxes.

Fixed is a term many people have grown to appreciate in the past couple of years relative to the housing market. Everything has room for improvement so what kind of upgrades, enhancements, or repairs will you consider making to the property to increase its overall value over time, in other words what will be your capital expenditures in reference to the property you are interested in purchasing? You must also look at the potential of economic growth in the area surrounding the property such as new businesses relocating or building there, if there are a high percentage of homes for sale but lacking new homeowners moving in, if there is new retail development in the area as just a few of the areas to help you determine the economic prosperity of the property.

All of the above techniques will assist in helping you determine the length of time to keep your property and give you an idea of what your estimated return on investment might be so you can stop vigorously shaking the crystal ball risking breaking it to see what the future will be. Using the formulas mentioned above will help you gain a realistic ideal of what the purchase of your property may produce down the road.

The United States is the Mecca of Capitalism. Although lately it has seemed only like the Law of Diminishing Returns is dictating how our country is run stability shall return as the market begins to adjust itself. The market is what fuels our economy and property owned by private citizens driven by profit is a staple of our very being. Legacy and ownership have been and will remain key components to our drive for success as well as sustaining to our economy.

The economy adjusting itself is the operative term as the government in recent years leans towards providing assistance to struggling companies but in the long run that process can sometimes hurt more than help as with a baby who continues to fall down while trying to learn to walk it eventually learn to avoid falling as much as possible by balancing and holding on to things to help them learn to walk freely. In economics those things held on to can be knowledge and research as well as a back up plan to implement during pinching times.

Supply and demand is constantly changing so the government must learn to let the economy cleanse itself and start new again as it has for many years. Some major areas to consider when looking at purchasing income property are location, structural integrity of property, functionality, amenities offered, capitalization rate, mortgage rates, and leverage the property provides. Again is the area you are looking to purchase your property and area that new jobs and retail markets will come to? The property should be structurally sound in terms of what type of construction the building is made with and is it sturdy. How much money will you put down on a property to see how much your rate of return will be or what leverage it will give you? All the areas listed above will help you calculate the value of return that your property purchase could potentially yield.