Category Archives: Investment Advice

How to Quickly Determine the Value of Commercial Property for Sale

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The value of a commercial property for sale is determined by using some simple formulas that are based upon the amount of net operating income that the property produces each year. So when you are looking at a commercial property for sale, one of the first things that you’ll want to ask the broker for is the profit and loss statement.

Some brokers who have listed a commercial property for sale may refer to this profit and loss statement as an IPOD, or income property operating data sheet. Once you get the IPOD, or profit and loss statement, you can then compare the information provided by the broker or seller to your other sources to help determine what the real numbers are. The challenge when looking at any commercial property for sale is that the broker and/or owner will often tend to exaggerate the amount of income that the commercial property for sale produces while also trying to minimize the amount of operating expenses that are reported.

How to Determine the Value of a Property for Sale

The reason for this is simple. The value of any commercial real estate is based on the amount of net operating income the property creates each year. In fact, each additional dollar of annual income increases the value of the property by roughly ten dollars, depending on where the property is located, and how old it is. Note that this extra net income can come from either getting additional revenue in rents, or from reducing expenses by managing the property more efficiently.

Once you understand that owners of commercial real estate will tend to present unrealistic numbers in an attempt to get a higher price for their property you’ll understand better why it’s necessary when looking at any commercial property for sale to get to know the market you are investing in. When you know what the rental rates in an area tend to be or what the typical expense ratios are for a twenty-five year old apartment building then it’s much harder for the broker or owner of a commercial property for sale to attempt to pull the wool over your eyes.

Verifying the Income and Expenses

The first step in verifying the income of a commercial property for sale is to ask for the rent roll. The rent roll is a list of what each apartment, self storage unit, mobile home lot, or office space rents for. Make sure that you get the actual rent roll because the owner or broker of a commercial property for sale may try to give you a Pro-forma rent roll instead of the actual rent roll. Pro-forma means that there is an expectation, realistic or not, of getting higher rents than the property is currently getting. My response to this has always been, “If you raise the rents up to match the pro-forma, then we’ll use the higher income amounts, otherwise we’re going to base our valuation on what the property is currently producing in income.

When looking at the expenses from a commercial property for sale, remember that you’re trying to come up with the actual amount that it will cost you to operate the property rather than what the seller’s expenses have been. So while it’s helpful to know exactly what the seller’s costs have been, I’ve learned NOT to rely on the information provided by the seller when looking at a commercial property for sale because this information is almost always inaccurate.

A Simple Formula to Use for Expenses

The expenses will vary depending on the type and age of the commercial property for sale. For example, if you are looking at buying a Class C apartment building which is at least twenty-five years old, then the expenses will run between 45 to 50 percent of the collected income each month. The collected income, known as the Effective Gross Income, is what’s left after the cost of vacancies are subtracted from the total amount of rents on the rent roll from the commercial property for sale.

The final step in determining the value of a commercial property for sale is to divide the net operating income by the capitalization rate, which varies from about 6 to 12 percent depending on the type of property, the age, and the location of the commercial property for sale. The fastest way to get an idea of what capitalization rate you should be using when looking at a commercial property for sale is to ask another broker who is not involved in the transaction.

Using Escape Clauses to Limit Your Risk

Another way of protecting yourself when looking at any property for sale is to make sure that your purchase contract allows you a period of time to get out of the deal if you are not comfortable with anything that you find. Done properly, you can often tie up a property for 60 to 90 days so that you have time to accurately determine the real value. This makes it easier to look at commercial real estate, because you can get out if you have the right escape clauses.

Learn how to tie up any commercial property for sale for 90 days using a simple addendum when you get your Free Multiple Streams of Income Insider’s Guide at http://RealEstateInvestments.net/free-report

Peter Conti is a Wall St. Journal bestselling author who lives in Annapolis, MD with his wife, kids, and his dog, Snickers.

Article Source: http://EzineArticles.com/?expert=Peter_E_Conti

Retiring? What to do with your 401(k)

Retiring? What to do with your 401(k)

By Walter Updegrave

From CNN Money

(Money Magazine) — Question: When I retire, should leave my money in my company’s 401(k) or roll it into an IRA? –Mark, Plymouth, Minnesota

Answer: I hate to start with that overused phrase “it depends.” But the fact is that the right answer really does hinge on your particular circumstances, not to mention the characteristics of your 401(k) plan.

For example, two factors that can definitely influence your decision to stay or go are your age and how soon you’ll dip into your 401(k) stash for living expenses or other needs.

If you’re at least 55 when you leave your company, you qualify for an exception from penalties that apply to withdrawals prior to age 59 ½. That means you can pull money from your 401(k) account and pay only income tax on the taxable portion of the withdrawal. By contrast, if you roll your money into an IRA and begin pulling it out, you’ll not only owe income tax on withdrawals prior to age 59 ½, but a 10% penalty as well.

So if you’re at least 55 but under 59 ½ and you think you’ll need access to your 401(k) money over the next few years, you’ll probably want to keep at least a portion of your dough in your company plan, at least until you hit 59 ½.

(Yes, you can avoid the penalty on early IRA withdrawals by taking “72(t)” withdrawals withdrawals — that is, substantially equal periodic payments based on your life expectancy — but that can get kind of messy.)

Generally, though, I think most people who are retiring or already retired are probably better off rolling their 401(k) balance into an IRA.

For one thing, if you stay in your 401(k), you’re limited to the investment choices within your plan. That may not be so bad if your 401(k) has a broad menu of decent investments that are reasonably priced. (To get an idea of how your plan’s investment options stack up on price, check out the 401(k) fee reports available free from 401(k) ratings firm BrightScope.) But by rolling your savings into an IRA at a mutual fund or brokerage firm, you give yourself access to thousands of different mutual funds, ETFs and other investments.

Not that you need thousands of choices. I think most people are better off keeping things simple and making a diversified portfolio with just a handful of funds. But the point is that by expanding the roster of funds available to you, you may have a better shot at finding low-cost funds. With an IRA rollover you’ll likely be able to pick and choose from more index funds and more target-date retirement funds than your 401(k) presently offers.

Another thing you want to consider is how much flexibility you would have for drawing money if you remain in your 401(k). Can you set up a systematic withdraw plan or do you have to put in a separate request each time you need cash? Can you designate which funds draws will come from, or does the plan administrator pro rate the withdrawal amount across your holdings? Does your 401(k) allow for lifetime annuity payments? If so, are the payments competitive with what you can get outside the plan?.

With an IRA rollover, you’ll probably find you’ll have more maneuvering room. You can pull money out as needed. You can ask the investment firm handing the IRA to pay you a specific amount or a specific percentage of your account value each month. You can use some of your assets to purchase an immediate annuity that will turn that portion of your savings into guaranteed lifetime income. Or you can do all three.

Until recently, there may have been another reason to go with the IRA rollover even if you were partial to sticking with your 401(k) plan: only a spouse beneficiary had the option of rolling an inherited 401(k) into an inherited IRA and then stretching out payments over his or her life expectancy. A nonspouse beneficiary was required to take the 401(k) money (and pay tax on it) within five years of the 401(k) owner’s death.

So if you were thinking of leaving your 401(k) to someone other than your spouse, you would give that beneficiary a lot more flexibility on withdrawals and taxes by rolling your money to an IRA.

But the Pension Protection Act of 2006 eliminated that discrepancy. Actually, that’s not quite right. After the act became law, initial interpretations of the legislation said that it gave 401(k) plans the option of allowing nonspouse beneficiaries to roll over the inherited 401(k)’s assets into an inherited IRA. In short, 401(k) plans didn’t have to offer that choice.

But a subsequent notice from the IRS makes it clear (well, clear to people who read IRS notices) that starting this year 401(k) plans must make the 401(k)-to-inherited IRA option available to nonspouse beneficiaries. Be aware, though, that the beneficiary has to follow some very specific rules to do this correctly, including setting up a special inherited IRA to accept the rollover and doing the transfer via a trustee-to-trustee transfer.

Bottom line: before you make a decision, take some time to think about such issues as when you’ll need access to your money, how much flexibility you’ll have getting to it in your 401(k) vs. an IRA rollover and, of course, how much you’ll pay in expenses staying in your plan vs. doing a rollover. I suspect that most people will opt for the IRA, especially if they’re 59 ½ or older. But the only way to know which is the better choice is to think it through.

How recent grads can learn the investment ropes

How recent grads can learn the investment ropes

By Walter Updegrave

From CNN Money

(Money Magazine) — Question: I’m a recent college graduate who has a decent job that pays the bills. I also have around $10,000 in a savings account and contribute $100 a month to my 401(k). How should I begin to invest my money? Should I go to a broker? Manage it on my own? Help! –Sophia, New York City

Answer: Let’s see. You’ve managed to snag a job in an employment market that’s incredibly challenging, especially for recent grads. You’ve got a tidy sum tucked away in a safe place that can help you deal with emergencies and unexpected expenses. And you’re saving on a regular basis for retirement.

Hey, maybe you should be the one counseling new graduates.

Seriously, financially speaking at least, you’re off to a great start. The trick now is to build on the foundation you’ve already laid by assuring that the money you save throughout the rest of your career is invested in a way that gives you a reasonable shot at financial security.

Given all the turmoil in the economy, I can understand that you may feel some trepidation about venturing into the investing arena all alone. But if I were you, I’d at least consider going it on my own as opposed to working with a broker or other adviser.

Why? Well, assuming you’re not going to be investing big bucks, it’s unlikely you’re going to get much quality time and attention from an adviser. You’ll probably end up with a few perfunctory fund picks from some firm’s recommended list. That’s hardly the end of the world, but it’s not a very high bar for a reasonably intelligent and motivated person to match. And you could do worse, ending up with someone who does stay in touch, but only to move you from one investment to another, generating commissions in the process.

Besides, you’ve shown some pretty good instincts about your finances so far. So why not expand your repertoire of money moves to include some basic but effective investing strategies that can serve you well throughout the rest of your life?

The best-kept secret on Wall Street is that investing doesn’t have to be complicated. You don’t have to track the Dow every 10 minutes or pore over every pronouncement from the Federal Reserve. And you certainly don’t have to sift through each of the thousands of stocks, mutual funds and ETFs available to find decent investments. If anything, I’d say you’re better off keeping it simple.

What you do have to do in order to be a successful investor, though, is have a basic understanding of how the financial markets work and learn how to put together a portfolio of investments that can grow over the long-term without getting so obliterated every time the market takes a dive that you bail out.

There are a number of ways to gain that knowledge. A great way to start is by going to our Money 101 section, where you’ll find easy-to-read pieces on all the important aspects of personal finances. You can begin with theBasics of Investing, which will give you the lay of the investment land, so to speak. From there, you can move on to the lessons on mutual funds,stocks and bonds.

After that, you’ll want to turn your attention to the granddaddy of investing topics, Asset Allocation, which is a fancy term for spreading your money around so you don’t get wiped out should any one type of investment tank.

Other places you can go for a good grounding in investment basics are theUnderstanding Investing section of Mint.com and the Start Investing area of Morningstar’s site.

If you’re more into books, you might try The Little Book of Common Sense Investing by Vanguard founder and small investor advocate John Bogle;How A Second Grader Beats Wall Street by Allan “Dare To Be Dull” Roth; and That Thing Rich People Do by Kaye Thomas, whose Fairmark.comsite is also a font of sensible info on all things Roth.

What I like about this trio of authors is that, unlike many experts who spew out ultimately useless details on specific investments or tout some arcane strategy that works in hindsight, they actually inform you about investing principles. In short, they provide the proverbial net, not just a fish.

Of course, becoming a confident investor takes time and experience. So take it slow and move methodically. I recommend you start with mutual funds, and consider index funds in particular. If you’d like a few fund suggestions to help you get started, you can check out our Money 70 list of recommended funds.

You’re going to make mistakes along the way, so don’t get rattled when that happens. The key is to avoid making extreme moves, so that you’ll be able to recover reasonably quickly from missteps.

If you decide you prefer some help to going it alone, you’ve got several choices. Most major investment firms and mutual fund firms, including biggies like FidelitySchwab and Vanguard, have investment advisory divisions that will manage your investments for a management fee (say, 0. 5% to 1% a year) in addition to the underlying annual fees of the fund itself.

Or you might try hiring a financial planner on an hourly fee basis. The planner can help you create a basic portfolio and make some good low-cost fund recommendations. You can then take over from there. If you decide you need more help later on, you can consult the planner again for an hourly fee. At this point, only a small number of planners are willing to work under this kind of arrangement, but you can find some by going to theGarrett Planning Network or to an online service likeMyFinancialAdvice.com. The hourly cost for these types of services varies from planner to planner, but $150 to $250 is typical.

And don’t forget to check out your 401(k) plan for assistance. Most plans today offer some type of guidance, ranging from online calculators that show how different mixes of stocks and bonds affect your future retirement prospects to managed accounts, where you turn over your account to an outside investment firm that will create and manage your 401(k) money on an ongoing basis (for a fee, of course).

And if nothing else, many 401(k) plans offer the option of investing in atarget-date fund, which gives you a diversified portfolio of stocks and bonds in a single fund. These funds aren’t perfect. But they’re reasonable choices for investors who would do a lot worse on their own, and they’re certainly a decent place for someone like you to stash your retirement savings while you get your investment bearings.

So why not begin steeping yourself in the ways of the financial world now by checking out some of the resources I’ve mentioned? Even if you ultimately decide you prefer working with a pro to flying solo, the more you know about investments and markets, the more informed your financial decisions will be.

Stock Market Investment: An Overview

Stock Market Investment: an overview

by Mohamed Hossam

From SelfGrowth.com

Stock market investment is one of the best ways to protect your hard earned money. During recession most of the companies struggled to keep their heads above water and the majority of the regular citizens started to protect their savings from irreparable loss. Most of the regular stock buyers started to walk away from the share markets, but few people who are intelligent purchased the shares which were at an unbelievable lower price. When stock value of big companies fall you can purchase the stock at lower price and it is the best time to buy shares.

Stock market investment is no more a mystery, thanks to the era of internet which helps you to set up your own account from home and start a modern way of investing in the stock market. In the past, people have to run after the share brokers to know about value of shares and to have a look at their account details. But these days everything has become transparent and you can have a view at your account details and the recent prices of the stocks from being at home comfortably.

Here are few tips that help you to get more profits

(a) Follow the thumb rule “never lose money”, so you have to be cautious while choosing the stocks. Choose a stock which is worthy.

(b) It is always wise to have a margin of safety. The worth between the stock and its price is the margin of safety, if the price of the stock is 2 dollar and if you buy it for 1 dollar, then the margin of safety is 50%. Always purchase the stock at a lower price and maintain at least fifty percent margin of safety.

(c) Invest the amount on a long term; if you invest for a short term then there are more chances of encountering a loss. Long term investment adds compounding value to your investment.

(d) You must be well aware when to sell out and when to not sell your stocks, when price starts to increase you shouldn’t sell it immediately. You have to wait for a long period of time and watch until the stock reaches a higher value.

(e) It is wise to keep the cash with you when there are no good stocks to buy. In addition it is always good to buy a worthy stock otherwise it may cause you loss in course of time. Also keeping cash with you helps to buy stocks whenever the price decreases for a higher value stock.

Author’s Bio

The author of this article is a veteran Stock Market professional. With the knowledge on Stock Market the author has written many informative articles on the same. These articles are valuable references for anyone dealing with Stock Market Investment.

Silver and Gold Decorations on every Money Tree!

Robert  Kiyosaki  is an investor, businessman, self-help author, motivational speaker and inventor. Kiyosaki is best known for his Rich Dad, Poor Dad series of motivational books and other material.  Here he is interviewed by NewsMax.tv and explains how investors can protect themselves from inflation.  Silver is a bargain today he mentions.  He reminds us who is really controlling the country too and it isn’t Obama.  Goldman Sachs is discussed in his new book Conspiracy of the Rich.

Expand your Investment Horizons

Photo by Flickr
Photo by Flickr

Buy Real Estate in your IRA – Expand your Investment Horizons

Typically, people sock away things into their traditional IRA accounts including stocks, mutual funds and bonds. If you have the urge to save something other than these things and you are self directing your IRA investments consider real estate. Using your IRA retirement account to broaden your portfolio is possible with the purchase of raw land, condos, houses, commercial properties and mortgage notes.

An insurance company office manager in California, Ruby Barnett, has always wanted to invest in various properties. Barnett says, “I read a book a few years ago, and it mentioned you could self direct IRA in real estate investments. My goal was to buy properties and flip them – rehab and sell them. But I ended up buying income property, so I have tenants. The rent goes into the IRA.”

It is possible to use a traditional IRA account, or a Roth IRA, for investing in IRA real estate. It doesn’t matter if you are a hands-on person like Barnett, or if you are an investor who would rather rely on another person’s expertise. Most people who do invest in real estate through their IRA are very willing to learn. They prefer to be in the driver’s seat.

Simple Rules with Investing Real Estate

To invest in real estate through your IRA, you must be aware of the simple rules. You cannot buy real estate using your basic IRA. You must open a self-directed IRA. If you want to invest and need to open one of these accounts, banks, brokerage firms and insurance companies will assist you with opening the IRA. Generally, they will limit your options to the specific products they sell. In order to buy real estate, you may have to seek out an independent administrator that will serve as a trustee. There are companies that will help you find the right administrator for the self-directed IRA.

Administrators of Accounts

Administrators, who work fee-based, will charge each and every time they do something. For example, if they have to make weekly payments to your account, the administrator may charge $10 per payment.

An asset-based administrator would charge a percentage of the annual total asset value. For example, if you have a portfolio of $40,000, you may pay anywhere between 1 to 1.5 percent in fees. However, if you have a million dollar portfolio, the fee may be only .03%.

Most administrators seem to be going a different route, however. They are hybrid-based administrators, who will charge a little of both.

If you decide to find an administrator on your own, make sure you take the time to talk to several different administrators. As with any service you buy, the most expensive does not always mean it is the best, and the cheapest is not always the bargain you think it is. It is advised that you try to avoid administrators who are new to the business.

The act of avoiding new administrators is not to disqualify them. Many administrators come and go in the business. This doesn’t mean the client will lose their money, but it may get tied up until things are settled. This is the concern when dealing with new administrators. It is important to know their asset base, how much is under their control, and how much experience they have.

Make sure you talk to reps and ensure they understand what you are trying to do. Make note of their flexibility. Many administrators will not take real estate because they do not completely understand it. Be sure to ask questions and request an annual statement. Also inquire about all applicable fees.

When you finally choose an administrator, they will walk you through all the steps needed to open a self-directed IRA. It is possible to set up an account with new money, but you would only be able to fund it with the allowed maximum IRA annual contribution. However, you could transfer some, or all, of your assets from your traditional IRA account.

According to Hugh Bromma of Entrust Administration, a self-directed IRA is often the best option for those looking to invest in real estate. This type of IRA has the best advantages, especially for those who make a lot of money in their existing portfolio. Unlike a traditional IRA, the earnings are tax-free upon distribution. This is a great benefit. To exemplify the advantage, consider a traditional IRA that begins with $10,000 that parlays into a million dollars. With the traditional IRA account, you would be taxed on the million dollars.

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Should you Cash in your 401k?

If you have a 401K, you are probably worried about the fact that it continues to lose money. Many people with a 401K today are very upset over the plunge in the stock market that caused them to lose a great deal of money in these accounts. Some people wonder if they should cash in their 401K before things get worse.

Economists are mixed on whether or not the stocks will plunge again. The stock market has rallied during the last 40 days although has again dropped. Most economists are quick to say that the stock market is used to highs and lows. Most predict that things will drop again before they get better.

Leading economists are saying that they do not expect the economy to pick up before 2010. There are a number of variables that can affect the state of the economy that can make things worse. Right now, unemployment is nearing the double digits nationwide and there are a record number of foreclosures. The next market to fail is said to be the commercial real estate market, a market where many banks have their funds tied into.

If you cash in your 401K, you will have to pay a penalty up front on the interest. You will also have to pay a penalty when you pay your taxes next year. This can be sizable, so it is important for anyone who wants to cash in this retirement account to take notice of the penalty that they may face.

If you need to save your home or stop yourself from going bankrupt, you should cash in your retirement account rather than ruin your credit. A foreclosure and bankruptcy stay on your record for many years unless you get a credit repair service to help you remove them. A credit rewind can help those who have bad credit due to bankruptcy and foreclosure.

You have to weigh the pros and the cons when you decide to cash in your 401. If you are cashing in the account in order to save yourself from financial ruin, it may help you, although you do have to remember that you will have to pay taxes to the IRS the following year. This can end up causing you more financial loss in the future. IRS liens can be difficult to remove from your credit report, even by the most experienced credit repair service. Weigh the decision to get yourself out of debt with the risk of getting into more debt with the IRS before you decide to cash in retirement accounts.

Michelle Williams is a writer and consultant for http://www.creditinfocenter.com

Photo by Flickr
Photo by Flickr

Growth Stocks or Value Stocks: Which is Best?

analyzing_stocksIt is probably the oldest debate on Wall Street, the debate as to whether growth stocks or value stocks are the best way to invest in the stock market for the average investor. No doubt this debate will continue to rage on for many years to come as well, since there are many different mindsets about which types of stocks are the best investment.

A growth stock is the stock of a company that is expected to grow at an above-average rate relative to the overall market. Growth stocks typically pay little or no dividend, but generally bring a high return on equity and reinvests retained earnings into future capital projects that will help the company be even more profitable. A value stock is defined as a stock that is seen as trading at a low level versus its fundamentals and thus is considered to be undervalued by the stock market. Value stocks usually are more mature companies that pay a healthy dividend and have a nice amount of cash on their books.

Have growth stocks or value stocks performed better historically? Here is another strongly debated topic, because both growth and value stocks have had their years where they outperform in a big way, but in the long run it seems that the two seem to more equal than many would expect. During bull market periods a growth stock tends to outperform, but when the market and the economy contract the value stocks tend to take over as the leadership group.

The single most important thing that an investor should understand about deciding between value stocks and growth stocks is that you truly do need a mixture of the two. You simply cannot have a diversified portfolio without having both growth stocks and value stocks, and diversification is an absolute must in the stock market.

Some of the best investors of all time have decided to take a hybrid approach to investing in stocks, and have found great success in using such a method. Peter Lynch is probably the most successful mutual fund manager ever, and he is well-known for his growth and value hybrid investing style. In fact, one of my favorite investing terms was made popular by Peter Lynch. Growth at a Reasonable Price, or GARP, is all about finding stocks that are growing, but are still of value. The PEG ratio is extremely important to investors who want to find growth stocks that also may be trading at a reasonable price. Warren Buffet is typically seen as a value investor, but he certainly has added some names that are also growth plays through the years.

Depending on your own personal situation you may want to be skewed more toward growth or value stocks. For example, if you are young and retirement is 25 years away, you’ll probably want to take more risks and invest in plenty of growth stocks. If you have very little risk tolerance, or you are near retirement, you’ll want to stick to the most basic value stocks that pay a healthy dividend and allow you to sleep comfortably at night. In the end the investor who can build an impressive portfolio with a combination of value and growth stocks will likely be ahead of the pack.

[Article Source: Jacob Lindahl]