Means for Investing in Real Estate

After knowing about the basics of Real estate investment in the previous post, its time to learn the means for investing in real estate. It is not easy to obtain funds from banks or other financial institutions for investing in real estate. Some of the financial bodies do not even recognize real estate as an industry because the whole concept has been recently developed. Some of the fraudulent practices adopted by real estate agents and traders are also attributed to this cause.Some of the means of investing are as follows:

Down Payment
Down payment refers to the method of settling the whole transaction in by paying at a stroke. If you have adequate resources you may choose to go for down payment. However you must keep in mind that the purchase should not exhaust your funds completely. You will later have a difficult time in maintaining it and may even be forced to sell it at a price quoted by the buyer even if it means low profits.

Hire Purchase
If financial resources are your constraint you may choose to buy the properties by using hire purchase method. However this method has got other limitations.The terms of some hire purchase agreements may be too stringent and some will even ask you to return the property if you are not able to pay the stipulated amount in time or rather impose heavy penalty in the form of heavy interests.

Invest only after Analyzing Market Conditions (real estate boon)
The real estate market is highly fluctuating like the stock market. You must have a strong knowledge of the market information before making any investments. It is better to invest in places that are less explored but where the chances of new ventures are very bright.If you decide to invest in an overcrowded place you will have to face severe competition and no amount of marketing strategies can help you to make profits like in an unexplored place.

Buy Land for a Cheap Price and Negotiate
The art of making profit is a real estate lies with this. Your investment on landed properties should be less whereas your investments on other assets like land and furniture should be high. This way when the price of the land increases you will automatically be able to make profits. When you invest more on other assets their cosmetic value will bring more consumers.

Real estate investment is becoming very popular all over the globe. There are lots of professionals in this area of investment and exclusive studies are conducted to understand the latest trends. The only caution to the aspiring investor is that he should not be carried away like what happens in a stock market. Similarly real estate is not an easy place to make money and hence investors should calculate well before investing in real estate. They can start with by collecting information on creative real estate investing, real estate residential investment, real estate investing training and commercial real estate investing. Real estate investing e-books also help them by providing certain information on real estate.

Real Estate Investment

What is real estate investment
Real estate is basically defined as immovable property such as land and everything permanently attached to it like buildings. Real property as opposed to personal or movable property is characterized by the right to transfer the title to the land whereas title to personal property can be retained. The investment in real estate essentially depends on the risks associated with it, that is to say, even if the venture succeeds when the future stream of income will accrue to the investor and the alternative investment opportunities. Real estate investment can be attractive if viewed as a business opportunity; it can generate rental income, using it as collateral to secure a loan for a business venture, to offset otherwise taxable income through cash savings on tax-deductible interest rate losses, or simply from the profits garnered from its resale. Notable, in this context is the gains reaped by real estate speculators who trade in real estate futures (by buying and selling purchase options).

Common examples of real estate investment are individuals owning multiple pieces of real estates one of which is his primary residence and others are occupied by tenants from where the rental income accrues. Real estate investment is also associated with appreciation in the value of property thereby having the potential for capital gains. Tax implications differ for real estate investment and residential real estates. Real estate investment is long term in nature and investment professionals routinely maintain that ones investment portfolio should have at least 5%-20% invested in real estate.

A Real Estate Investment Trust (REIT) is a corporation or body investing in real estate that has the property to reduce or eliminate corporate income taxes. In return, REIT’s are required to distribute 90% of their income among the investors. These incomes are often taxable. REIT’s provide a similar function as does Mutual Funds provide for stocks in the share market. The key statistics to study about the REIT’s are the NAV (Net Asset Value) and AFFO (Adjusted Funds From Operation).

Real estate investment has attracted lot of people. The prospects are increasing day after day. At the same time it needs to be understood there are lot of risks in the real estate market. Real estate market has the same hype of a stock market. Therefore you should be very careful in making your investments. Some of the tips mentioned below will be helpful to you in this regard.

How to Invest on Real Estate
You should not follow the principles of investing in a stock market for a real estate market. In a stock market you generally take wild risks and invest blindly on the basis of some speculations. When you are planning to enter the real estate market you must have adequate cash at all times because the investment is very huge and moreover the returns are generally reaped in the long term. Similarly you will have to posses adequate reserves to maintain the properties for a considerable period of time. This is a prerequisite when it comes to real estate investment. You must carefully consider these factors before investing in real estate.

Have an idea on your Budget (Self Determination)
You must have a clear idea of how much you are going to spend and the rate of expected returns. You can approach your financial consultant for more guidance.The budget should not only reflect on the actual and anticipated revenues and outlays but also substantiate how you will meet unexpected situations because the long term financial implications are not always predictable. Even if they are predicted they won't stand true by all means.

Investment on a Prime Property
A prime property is called so by nature of its location and marketability for e.g. in the heart of the city and is easily accessible to all and has all basic facilities nearby like transport and restaurants and above all priced at a very high rate. If you are planning to invest in a prime property you must possess adequate resources to purchase and maintain it.

Commercial Area
The prices of prime properties in commercial areas are always on the rise. This upsurge is mainly due to the increasing economic activities and business transactions all over the globe. You need to be extremely cautious because many sellers try to woo real estate agents and buyers by making unrealistic promises and inflating the prices. Therefore unless you are confident that a prime property in a commercial locality can fetch you the income it is not advisable to invest.

Investment on a Non-Prime Property
Non prime properties are those which are not located in principal centers and are promising in terms of business opportunities. You need to give equal importance to non prime properties because a non prime property may become a prime property later by virtue of many factors like sudden demand, or some other resources available in the place.

Residential Area
Properties in residential areas also show an upward trend with regards to increase in price. However it is not profitable to invest in these because you may be able to gain profits only in the long run. Short term profits will only be marginal. Moreover the returns may not be definite as the prices of residential properties may not even increase over a period of time.

DRIP or Dividend ReInvestment Plan

A dividend reinvestment plan (DRIP) allows shareholders to reinvest their dividends in additional stock rather than receiving them in cash. These plans are offered directly by companies or through agents acting on behalf of the corporation. In the former case, a company issues new shares in lieu of a cash dividend.

You also have the option of purchasing additional shares from the company. The advantage is that you pay no brokerage fees, although some companies charge fees for this service. The other type of plan is offered by agents, such as banks, that collect the dividends and offer additional shares to shareholders who sign up for the plan. The bank pools the cash from dividends and purchases the stock in the secondary market. Investors are assessed fees that cover the brokerage commissions and the fee charged by the bank.

Advantage of DRIPs
The advantage of DRIPs to shareholders is that they act as a forced savings plan; dividends are reinvested automatically to accumulate more shares. This method is particularly good for investors who are not disciplined savers.

Disadvantage of DRIPs
A disadvantage of dividend re-investment plans is that shareholders need to keep, for tax purposes, accurate records of the additional shares purchased. When additional shares are sold, the purchase price is used to determine whether there is a capital gain or loss.

These dividends are considered taxable income whether they are received in cash or reinvested automatically in additional shares. Another disadvantage of DRIPs is that the fees charged to participate in the program can be high.

How is Investing different from Saving

In simple economies, there is little distinction between savings vs investments. Saving and investing are two unique concepts, and it's important to understand the difference between them. One saves by reducing present consumption, while he invests in the hope of increasing future consumption. Therefore, a fisherman who spares a fish for the next catch reduces his present consumption in the hope of increasing it in the future.

Most of the people probably have savings accounts with ATMs to access their hard-earned cash and be able to store away any extra cash in a place a little safer than a mattress. A few of you may even have some stocks or bonds. Let me explain why while a savings account in the bank may seem like a safer place than the mattress to store your money, in the long-term it is a losing proposition!

If you open a savings account at the bank, they will pay you interest on your savings. So you think that your savings are guaranteed to grow and that makes you feel extremely good! But wait until you see what inflation will do to your investment in the long-term. The bank may pay you 5 percent interest a year on your money, if inflation is at 4 percent though, your investment is only growing at a mere 1 percent annually.

In order to achieve the best possible results, it's crucial that you match your saving or investing goals with the proper financial tools. Saving and investing are often used interchangeably, but they are quite different and is essential to know the key differences.

Saving
Is storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies. Typically, you earn a low, fixed rate of return and can withdraw your money very easily.The risk for savings are often lower than for other forms of investment. Savings are also usually more liquid. That is, you may quickly and easily convert your investment to cash.

Investing
Taking a risk with a portion of your savings such as by buying stocks or bonds, in hopes of realizing higher long-term returns. Unlike bank savings, stocks and bonds over the long term have returned enough to outpace inflation (roughly 10%), but they also decline in value from time to time so the risk factor for investing is generally higher then savings.

Investments may produce current income while you own the investment through the payment of interest, dividends or rent payments. When you sell an investment for more than its purchase price, the profit is known as a capital gain, also called growth or capital appreciation.

The decision about which investment to choose is influenced by factors such as yield, risk, and liquidity.

What is Investing

Value of investing
No matter what the current stage of your life is, the direction you are heading or what the future holds for you, investing will be a key factor in developing both your financial security and your financial freedom. Whether you are purchasing a house, a car or even beginning a business, investing is inevitably something that everyone should undertake throughout their lives for the benefit of themselves and future generations.

Factors
There are many factors involved in investing and why it is done. Many of these factors are related to individuals and their own specific personal situation, objectives, the current period their of lives and their investing personality. These factors can be discussed with a financial planner who can look at your own personal situation and advise on the four main areas:

• Wealth creation - Superannuation, Negatively geared shares, Property
• Asset protection - Insurances - Life, Health, Property, Professional, Income protection and Key personnel
• Retirement planning - Retirement income provision, Tax
• Estate planning - Disposal of assets - during life, on death, willed assets, non-estate assets

While it is not essential to understand all these areas, it is important to realize that they are fundamental in ensuring that your financial future remains economically stable and has the potential to grow to where you want it to. The most important realization by visiting this web site is that investing is, or will, be fundamental to your life and by even reading this section you have taken the most important step - the first.

Trading Rules

Some useful tips for you before you invest in the market. These are general trading tips which everyone should know

1. Don't blame the market. You must take responsibility for your financial security and all of your actions.

2. Study and learn all you can. Choose one market to trade, BSE or NSE, and become an expert in your area.

3. Be prepared for problems. Have a back-up phone ready with your brokers information in case of problems.

4. Have a notepad, pencil and calculator at hand to record trades.

5. Know the days and times when economic data is released.

6. Never let a winning trade turn into a loss.

7. Start with a little capital. Only place small stakes or paper trade if you are relatively new to trading.

8. Have a trading strategy and stick to it. It is no good saying one thing and doing another.

9. Always keep records of all your trades. Analyse these weekly or monthly to see if you can improve you performance.

10. Don't be greedy. You can soon build up considerable wealth with just 1% daily profits.

11. Never trade if you are tired. Any medications that could affect your responses or you have a headache or you are worried about something.

12. Wherever possible always try and obtain value when placing a bet.

13. Never trade on tips or what experts say. Invariably throughout the day there will be several experts with opposing views. Trade what you see happening.

14. Vary your stakes. If market movement is a little slow use lower stakes.

15. Look for reversals in the market and trade with this new trend.

16. Do not over trade.

17. Try to make a small profit every day and be happy with that.

18. Don't let the market get away from you. As soon as you can get out.

19. If you are losing just get out.

20. If in doubt GET OUT!

Filing your Income Tax Return Online

A good new for all those who are paying the agent for filing their income tax returns. Now you can file your income tax returns online.

Steps to file income tax online

• Visit the incometaxindia website (www.incometaxindiaefiling.gov.in/portal/index.jsp) and register as a new user.
• Fill your personal details and your permanent account number (PAN) inside the box provided on the form and click on the 'Register' button.
• Once you click on the 'Register' button you will be taken to a form that will automatically have your address and other details (as submitted by you for getting a PAN). You will just have to put your own password, telephone number, e-mail and click on the 'Submit' button.
• And you will be taken to a page that has links for e-filing your tax returns for the assessment year 2006-07 and 2007-08. Assessment year is a period of 12 months starting from April 1 and ending on March 31 the following year. Previous year is the financial year immediately before the assessment year.
• Income earned in the previous year is taxable in the assessment year.

Let's take an example to make it simple.
Let's take April 1, 2006 to March 31, 2007 as the assessment year. The previous year corresponding to this assessment year will be April 1, 2005 to March 31, 2006.

So the income earned in the previous year April 1, 2005 to March 31, 2006 is taxable in the assessment year starting from April 1, 2006 to March 31, 2007.

Similarly, income earned in the previous year April 1, 2006 to March 31, 2007 is taxable in the assessment year starting from April 1, 2007 to March 31, 2008.

• Now let's say you click on e-filing for A.Y. 2007-08. You will be taken to a page from where you can download an excel utility that helps you file online income tax returns.
• Choose which category you belong to (salaried employees with only salary income will have to download ITR-1).
• Fill in the required data asked for in the excel sheet.
• Save the excel file on your local machine.
• Click on 'Submit return' link in the middle on the left hand side to upload the saved excel file to the income tax of India's server.

After uploading excel file successfully a form will pop up in your computer's window. This is in acknowledgement that you have filed your returns online successfully. Take a print out of this form and fill in the verification part which duly needs to be posted to your nearest local income tax office.

Take due care that if you upload the file today then the income tax department should receive the verification form duly filled and signed in the next 15 days by post. If not you will have to go through the entire procedure again.

If you are already raising your eyebrows then here's a solution to it: digital signature. This is something that will make your e-filing income tax returns really paperless.

Digital signature is like your electronic identity that confirms that the person who has submitted all the details is really 'YOU'. Companies like Safe Scrypt (http://www.safescrypt.com/solutions_and_services/digital_certificate_services.html) will do it for you, again online and for a fee. As per the IT Act 2000 they are legally as valid as physically signed documents in any Indian court of law.

Filing your income tax returns is now really possible at the click of a mouse.