Graziosi - Be a real estate millionaire: secret strategies for lifetime wealth today

Making a Fortune in Real Estate

Real estate investment really is not rocket science. You simply have to understand how the market works from a real estate investing perspective. Once you have a basic understanding of the five basic building blocks of real estate, youre set to go.

Buying and selling real estate is a great way to increase your own net worth for a number of very sound reasons:

• Real estate is all around you. Its not an investment that happens in some specific place or location where you have to go. You can buy and sell properties wherever you live.
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• You dont need a license or years of education or training to invest in real estate. You can plunge in and get started whenever you like.
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• Real estate transactions can generate sizable chunks of cash. It isnt unreasonable for you to have the potential to make as much in one transaction as most people make in a year by working.
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• You can get started in real estate investment with little or no money down.
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• Real estate provides leverage. With only $10,000 in cash or less, you can gain ownership and/or control over real estate assets worth hundreds of thousands of dollars, if not millions.
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• Real estate investment is not at all difficult. Once you understand the terminology and the major players, youll be able to put together your own real estate deals quickly and simply.
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• Its generally easier to arrange finance for a real estate transaction than it is for other types of business deals. Lenders like lending on bricks and mortar whereas they are more reluctant to provide other types of business funding.

Overall, its accurate to say real estate is one of the fastest, easiest and safest ways to work towards your own financial independence. The trick is to know what youre doing and thats not hard you either learn from someone whos been there and done that or you learn how to do things yourself through hands-on experience.

Every day, youll have opportunities to take chances and to work outside your safety net. Sure, its a lot easier to stay in your comfort zone, but sometimes you have to take risks. When the risk pays off, thats when you reap the biggest rewards.

Dean Graziosi

Most people assume the only way to make money on real estate is to buy when the market cools off and sell later on for a large capital gain. Its true this is one of the ways to make money, but the truth is you can make money in real estate whether the market is going up or down. The key is to understand which way the market is heading and adjust your strategy to match:

• When the market is heading up, buy properties, fix them up and sell them quickly for a gain.
• When the market is heading down, look for distressed properties foreclosures usually and buy them cheap, rent them to pay your expenses and then sell when the market goes up again.

To make this choice, you need to know what your local real estate market is doing. Real estate prices alwaysrise and fall in a reasonably predictable cycle:

Most real estate investors typically start out by buying and selling residential properties first before moving on to commercial or other investments. This is a good idea. Youll probably be more familiar with residential properties and you dont have the hassle of finding someone to lease your property.

To invest in real estate profitably, you need a reasonable feel for the factors which determine which way the market will be heading in the near future. There are five national factors which impact on real estate prices:

1. Interest rates in particular the federal funds rate set by the Federal Reserve. When the Fed raises its rate, mortgage rates increase and less people want to enter into loans. Conversely, a lowering of the Fed rate will flow on to lower mortgage rates and a stimulation of demand. Once you know the general trend and direction of interest rates at the national level, you have a good leading indicator of the overall future market direction.
   
2. Inflation because as long as prices are going up or down in moderation, real estate will remain a great investment. The only time to stay out of the market is when prices leap up or down hyperinflation or deflation.
   
3. Flow of investment funds since prices typically rise when funds flow into real estate and fall when funds flow out of real estate and into other investments.
   
4. Business cycle whether the national economy is expanding or in a recession. The stronger the economy is, the more people have discretionary money to invest in real estate.
   
5. Cataclysmic events natural disasters like hurricanes or earthquakes will have obvious flow-on effects on real estate prices.

If you stay abreast on where each of these five factors are in their own individual cycles, youll then be in a good position to know which way the real estate market is heading. You wont know the future with precision but youll have a reasonable idea which way the markets are heading.

In addition to tracking the national factors, you should also look in depth at local factors which can influence the price of real estate. There are five worth analyzing on an ongoing basis:

1. Migration and job growth if an area has a sudden increase in jobs available, then you can be reasonably sure local real estate prices will go up in sync. Look at whether people are coming or going in your area.
   
2. Development plans new shopping centers, improved roadwaysand other types of development generally increase property prices.
   
3. New construction remodeling of current buildings, new subdivisions and general construction projects. Again, all of these have the potential to increase local real estate prices so stay abreast with whats happening.
   
4. Supply and demand the number of properties being listed for sale locally and how long they take on average to sell. You can estimate the balance between supply and demand by tracking the average time it takes to sell a house.
   
5. Neighborhood trends whether a neighborhood is growing or declining, showing signs of vibrancy or becoming slightly more run-down over time.

Note that a single local factor can outweigh the impact of all of the national factors combined so research your neighborhood thoroughly. This is why investing in residential properties where you live makes so much sense. You have a better feel for these local factors and the impact they will have on future real estate prices than any outsider could ever figure out in a hurry.

Note also the reason you study these factors is not to decide whether or not to invest in real estate. Real estate is a good investment at all times and under all conditions. Rather, youre trying to determine which real estate investment strategy will generate the most gains for you. If you can forecast with a reasonable degree of accuracy the general direction the local market will be heading in the foreseeable future, that will determine which investment strategy will be best: