People who are on the upper level of this pyramid promote this brand to bring in more investors with the help of people below them because gains are directly proportional to number of investors.
But as the pyramid grows bigger, it becomes challenging to bring in more investors to form a layer each time.
So, people who are in the lower layers fail to bring in investors and can’t make any gains. And apparently as there is some initial investment of 2–3 lakh made to be a member of this organization the money is stuck with them.
All in all, the whole scheme profits only those who are on upper layers of the pyramid. And to my knowledge there are so many investors already. So for every new investor it must be really hard to bring in investors to make money.
Apart from all this, the already existing investors brag so much about their satisfactory life just to lure in people to invest. The truth being most of them don’t make any money.
They will even prove you that if this were a scam why didn’t Government of India has not taken any action to stop it. Well, there is no any legal framework in India to act against such scams where few other countries has already banned it.
I’ve had an experience with such a stranger who became my friend in a journey of one hour. Exchanged numbers. Showed so much concern over my financial issues. Bragged extensively about his abroad trips, bank balance and tried to entice me to join him. Fortunately I learned about it even before I invested a penny.
It’s not just waste of time but as well money. It partially depends on the investor. Some kinds of real estate are good for some, but not good for others. It depends on your knowledge and experience in real estate; your net worth and liquid assets; your risk tolerance; the amount of time you have to devote to your real estate activities: are you seeking a passive investment or are you capable of being very active and putting in a lot of time into your real estate efforts. It also depends on your income tax situation: do you seek income, as a retiree might, to help live on; or are you a high earning person who seeks growth in the capital of your investment and the income aspect is not so important to you.
Think about these factors in deciding what you want to do in real estate.
Right now, interest rates seem to be starting a climb. As interest rates go up, the value of real estate tends to come down. Why? Because mortgage financing will cost more, and therefore an investor’s income will go down. So it’s certainly a time to be cautious.
Prices have in most areas, climbed to the point where the rent/price ratio is out of whack. Prices are so high related to the rent you can get, that the yields are miniscule. Very high prices mean that affordablility is also very difficult for the average family. That means that if you buy a house to flip it, your market of potential buyers is shrinking. By the time you mark up the house, a lot of wanabee buyers just won’t be able to afford it. As long as you hold a house like that, with some rental income being generated, your income is lousy, and your ability to sell is shrinking.
Commercial property is riskier. The saying is: “with commercial you eat better, but with residential you sleep better.” If you have a plaza with some retail stores, these bricks and mortar retailers are being crushed by amazon, as well as Walmart, and all the other online retailers, etc. You’ll get store tenants that go out of business. Then vacancies can be really tough to fill. Of course, a small well-located convenience plaza will always do well. But to buy one, they only sell overpriced.
Office space is dangerous, because tenants always seem to move up to higher class space. You get vacancies in office space that are hard to fill.
Industrial real estate is actually undergoing a revival, because of all the logistics needed for online shopping. The goods have to be stored and shipped, after all.
but that industrial logistics game is one for deep pockets who can afford very large often specialized space.
Vacant land is tricky, because you don’t get any revenue from it, you have to cut grass and weeds, or else the municipality will and then they’ll tack it onto your tax bill. So you pay for landscaping, realty taxes, mortgage payments if applicable, and public liability insurance. This protects you against somebody getting injured on your land and you get sued.
Mulit-family buildings have potential. But if you’re paying for utilties, like heat, hydro, water, then you are exposed to the inevitable rise in cost that is hard to pass on to your tenants. Landlord and tenant law is pro-tenant in most jurisdictions, so your tenant there stay, while you spend time and money to get them evicted. Also, tenants in smaller buildings tend to be more transient. You get a lot of turnover, and each one is expensive. Usually you need to freshen up the unit, with paint, repairs, supplies like tiles. YOu also have advertising costs, showing cost, etc to get a unit re-rented.
So what is the answer?
I think it lies in being more creative in your investments in real estate.
- can it’s income might be boosted, by using AirBnB.
- you might buy a house with several bedrooms, near a campus that has had shortages of accomodation for students. Eacj room is rented to a student, and they share common facilities including large screen TV in a living room, with lots of seating.
- self storage in the right place, is a good use for industrial land. Make sure you collect all relevant data to ensure that a specific area is underserved with self storage.
- industrial zoning does tend to have several interesting permitted uses in it’s zoning bylaw. In many industrial zonings, you can build a restaurant or a motel. You just need land that has good traffic and exposure
- There will always be room for a rundown, outdated, or damaged house to get fixed up and sold. But you really have to know your figures. Many newbies pay too much, spend too much renovating, and take too long to complete the rehab, thus escalating the carrying cost, to make any profit. But this process can be profitable. It just can be time consuming, and therefore only really useful as a core technique by someone who can spend the time.
- I believe that big profits can be made in trailer parks. Every trailer park owner that I ever met, was a multi-millionaire. The hard part is dealing with municipalities who so often hate trailer parks.
- Rent to Own (RTO) has terrific potential. YOu buy, then rent it to a tenant who might want to own it, if they can get financing they need. For the option to buy, they pay extra every month to build up a decent down payment. You can sell to them if they qualify for a mortgage, and perhaps you can take back a second mortgage. Most rent to own deals never close the sale. Most of these people don’t qualify, even after three years, and even though you set them up with a credit repair expert. Meanwhile you’ve collected a higher monthly income than would be otherwise maintainable. If they do exercise the option to buy, you’ve still made money from them because of the higher rent you collected. In addition you’d write into the deal that you get a deposit on the option; and your lease should provide that the tenant is responsible for all repairs except major ones, like roof or furnace. There are many other variations of RTO. You might rent with an option to buy, and then turn around and do the same, at a higher option price and a higher monthly rent. It’s called a “sandwich” RTO. If you decide to hold paper and enable the tenant to exercise the option to buy, then you need to use a wrap-around or all-inclusive mortgage as a takeback. That way you can leave on your existing mortgage, give a deed, and take back the wrap around. If your mortgage is non-transerable, provide that you’ll arrange the primary mortgage and the tenants need to sign from time to time on your request.
- You might specialize in tiny houses. There’s a lot of keen interest in this. Find land which is suitable, check the zoning, planning dept, engineering, etc to see what they want. Find small plots of land and build a tiny house. Rent or sell.
9. A good opportunity might arise by simply sitting on cash and building up your war chest. Experts predict a downturn, at which time you can take your warchest and put in offers to buy at bargain prices. Warren Buffet has $100 Billions of cash sitting right now waiting for bargains.
10. There’s a real crisis by way of shortage of residential accommodation in crowded big cities. Study the niche and figure out a creative solution, or even better, something disruptive (like AirBnB; and Uber). It might involve putting up prefab manufactured houses into laneways; It might involve parking winterized travel or camping trailers in industrial or commercial lands, having made a deal with the landowner. After all, Walmart allows overnight parking of RV’s in a lot of its large parking lots. People spend the night living in their RV. So why can’t they do that on other industrial or commercial land.
In other words, I’m saying that it’s a tricky, dangerous real estate market. You need to be creative to protect your capital and to get a good return on it in real estate. However, as in the past, the right combination can be immensely profitable.
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