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A guide to investing in real estate

By WTOP Staff

Investors are attracted to investing in real estate because the potential for profit is tremendous. However, the possibility of losing it all is always lurking in the back of investors’ minds because, as with any investment, there is risk involved.

Successful real estate investing is achievable at any point in time, despite the economic conditions. Although change is inevitable, the risk involved is manageable, as long as the investor continues to follow a few basic principles.

Here’s what a few seasoned real estate investors have to say about investing in real estate through different market conditions and types of real estate markets.

Tips for novices. The single most important first step for aspiring real estate investors is to determine one’s exit strategy, according to Andy Heller, author of “Buy Low, Rent Smart, Sell High.” There are quite a few options, but the two basic strategies are to buy and hold rental properties and become a landlord, or to become a flipper and hopefully make a substantial profit upon the sale of the property.

For Heller personally, his business has flourished over the years with 3-year lease options.

“You need to ask yourself what characteristics will make that exit strategy work. You need to buy the right property to be successful,” says Heller, who has specialized in the Atlanta real estate market for decades.

Like any investment, real estate investing requires an action plan. “Once you decide you want to scale it, it is important to look at the funds, the time, your credit and your long-term goals so that what you want to do is achievable and realistic,” Heller says.

His recommendation for novices is to join a local investor’s club and get to know the people there. “It’s rare that you can find somebody who can start up in real estate without some guidance. My advice to a new investor would be to join an association, find seasoned investors, buy them lunch and present your plan. Ask them to poke holes in it.”

Scott Mednick, president of OCRE forum, a real estate investor club, and founder of Marblehead Group Inc., agrees. But he also has a warning for novices looking for information on how to get started in the business.

“The other side of the fence in this business is that people get sucked into these $40,000 to $50,000 boot camps,” Mednick says. “Don’t do those. You’re going to end up buying things you don’t really need. If you’re new in the business, the best advice I can give is to go to a local bookstore and read through books on real estate investing. Find the best one or two books and buy those.”

Tony Alvarez has worked in the Southern California real estate business for decades.

Alvarez says all real estate investors are aiming for “that moment in time where we have accumulated enough income- producing assets to provide us with a comfortable standard of living, regardless of economic conditions or political nonsense.”

For people new to real estate investing, Alvarez advises first determining which type of real estate investing they want to get into and why. Then they should choose a specific target market and study it intensely. Next, set a goal, form a business plan and establish systems to achieve the desired goal. Lastly, investors should take small, common sense steps daily toward achieving that goal, such as talking with sellers, owners and local real estate professionals.

Tips for seasoned investors. As for veteran investors, these longtime professionals have some sage advice for them as well. Heller’s advice for seasoned investors may be surprising, especially since these people are already at the top of their game.

“It’s to stay humble,” Heller says. “Humility is a huge asset and a huge skill for any businessman. In real estate, I see investors all the time who think they walk on water. That hurts them sometimes in the buying process, and it definitely hurts them if they rent their properties. The lack of humility will eventually cost them money.”

Next, Heller says investors should have plenty of money put aside to act as a buffer of sorts. Once an investor has scaled out to a larger portfolio of properties, it is important to have enough cash on hand in order to rehabilitate 10 to 15 percent of those properties every year.

“Be prepared. Plan for the best, but prepare for the worst,” Alvarez advises. “Insurance is true asset protection. Investors should insure themselves as if the world is coming to destroy them and insurance is their only defense.”

In the end, Alvarez says true enemies to wealth creation include greed, procrastination, laziness, imagined fears and lack of information and education, to name a few.

From a flipper’s perspective, Mednick says seasoned professionals need to stay focused on location and price. “The best advice is don’t overpay for what you’re buying, because you’ll get squeezed on the back end by buyers,” he recommends. “If you overpay and overrehab, you’re not going to make the profit you need.”

Buyers still want a good deal in this market, so they are being pickier. They want to see more properties, and time is on their side so they are not pulling the trigger as fast. They want to make sure they have a good location.

“I work so many different angles. I have a few real estate agents I have built relationships with who call me when a deal comes in. That helps me quite a bit,” Mednick says.

In addition to building personal relationships with real estate professionals, potential deals can be found using online resources such as the RealtyTrac.com and Auction.com, as well as local and national listing services.

Advice for all investors. To Heller, the biggest appeal of investing in real estate is that there are many ways to make money by leveraging money — whether it’s the investor’s own money or someone else’s.

Be careful, however he warns, because the same qualities that appeal to investors can also be an investor’s undoing. With real estate, the investor stands to possibly lose more money than he or she invested. Still, Alvarez says deals are still available. “Forget the past and stop waiting. Learn to look where you never have. Think ‘creating’ a deal, not ‘finding’ a deal.”

Lastly, investors should not be afraid to adopt multiple exit strategies when circumstances call for it.

Joel Cone is a southern California-based freelance business writer who specializes in the fields of real estate, economics and law. His articles have appeared both in print and online for many publications including California Real Estate, OC Metro, GlobeSt.com and The Los Angeles Daily Journal. He is also a contributor to Auction.com.

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A Guide to Investing in Real Estate originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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