Asset allocation is one of the first investment strategies that should be learnt. It is the way in which you divide your investment portfolio among three primary asset classes: stocks, bonds and money markets. This can boost your potential returns and ensure long-term investment success. It can also help you channel your investments. For example if your goal is to pursue growth and you are willing to take market risk, you would like to invest more in stocks. Asset allocation also helps you lower your investment risks, without diluting your investment goals.

As a first-time investor, you must also include the time frame and tolerance for risk in your strategy because your choice of investments depends upon these two factors. You must remember that every instrument has its own risk value.

Stocks are known to fluctuate frequently in value, carry a high level of market risk over the short term, earn high returns and normally outpace inflation. Bonds on the other hand have less severe short-term price fluctuations and therefore offer much lower market risk. Money market instruments are the most stable of all asset classes in terms of returns. They carry relatively low market risk but lack the potential to outpace inflation.

Diversification should be another part of your investment strategy. When you diversify your investments you reduce the risk level. It also helps you balance a fall in the value of one instrument with gain in the value of another.

Finally, you must plan for the long-term. The investors who benefit most are those who limit their short-term investments, and focus on long-term gains.

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Subject-Tos or “Sub2s” are deals where the buyer purchases a property subject to the existing mortgage. The buyer will obtain the property and continue to make the payments of the existing mortgage. The seller will often times just hand over the payment booklet to the buyer. There is no new mortgage. Sub2s are often used when the seller is behind on their mortgage, and typically the buyer will pay the seller a small amount to cover moving.

One thing to be aware of when buying a property Sub2 is the Due-On-Sale clause. Most mortgages have a due-on-sale clause that states the balance of the loan is due if the property is sold. Normally, this would mean the seller has to payoff the loan when the property is sold. However, banks rarely enforce this clause. As long as the mortgage is still being payed, the banks are usually happy. Remember: banks don’t want homes to go to foreclosure, as they are not in the business of buying/selling real estate. So, while you need to be aware of the Due-On-Sale clause, it usually isn’t an issue.

“Wraparound Mortgages” or “Wraps”

A Wraparound Mortgage is commonly used when you sell a property that you have an existing mortgage on and are willing to owner finance. You set the terms of the new loan so that the buyer is making you a monthly payment that is higher than your current payment on your existing mortgage. So the buyer is making you a payment which you will use to make your payment, thus the “Wraparound.” The difference between their payment and your payment is your monthly cashflow.

So the takeaway from this is, use Sub2 when you buy and use Wraps when you sell.

Braxton Beyer is a Realtor in Austin, TX. He focuses on helping his residential clients buy and sell their homes. He is also a successful real estate investor. Visit his Austin Real Estate website where you can search for your new home

Stocks of many public REITs are available on major stock exchanges and offer investors an efficient way of investing in real estate. Each shareholder earns a pro-rata share of the REIT profits. There are also private-owned REITs which operate in much the same manner.

Overall, these trusts are definitely a long-term investment strategy, but a good one for people who don’t have the time or inclination to be full-time investors. Within the public and private REIT categories there are several types of trusts:

Equity REITs. These trusts own and operate income-producing properties (e.g. shopping centers, apartments, office buildings, warehouses, hotels, etc.). They may specialize in a certain market sector and in a certain geographic location, or they may invest nationally.

Mortgage REITs. These trusts concentrate on the financing end of the business. They tend to be real estate property owners and operators or, they provide indirect credit through buying loans (e.g. Ginnie Mae mortgage-backed securities, etc.). The revenue from these latter trusts comes mainly from interest earned on their mortgage loans.

Hybrid REITs. These trusts combine the investment strategies of both equity REITs and mortgage REITs. Qualifications for Public REITs To qualify as a public REIT, a company must, in general: Pay at least 90% of its taxable income to its shareholders every year. Have at least 100 shareholders. Invest at last 75 percent of its total assets in real estate. Derive at least 75% of its income from rent or mortgage interest from properties in its portfolio.

Advantages of Public REITS.These trusts have several advantages: There is no required minimum. They have a lower risk compared to stocks. They are a good income source and provide a consistent stream of income. No public market fluctuations As of 2005, all REITs had produced a 10.68% return over a 20-year period. (Source: National Association of Real Estate Trusts) REITs provide good dividends, but they are taxable) They offer diversification and, thus, more safety. They offer high liquidity; it’s easy to enter and exit a REIT.

A REIT corporation or trust generally doesn’t pay corporate income tax to the IRS or to the state.

Disadvantages of Public REITs. A downturn in a specific investment area can seriously damage a REIT investment. However, this possibility can be reduced by investing in REITs that own diversified companies within a variety of industry sectors.

Another disadvantage of public REITs is that they generally don’t perform as well as the stock market on a long-term historical basis. Privately-Owned REITs These trusts possess all of the advantages of public REITs. However, they tend to generate higher income and pay out higher dividends (6-7% compared to a pubic REITs’ 5-6%.

In terms of disadvantages, the upfront fees can be higher than with public REITS and such trusts are also not as liquid. In other words, it can be tougher to cash out than with public REITs.

A third potential disadvantage is limited transparency; that is, investors may not know exactly what the trustees are doing on a day-to-day basis. Methods of Investing in REITs You can buy shares of individual companies, or you can invest in diversified REIT mutual funds. It’s very easy to invest through such vehicles as an IRA, Keogh, etc. You can also invest through borrowed money to buy REIT shares on margin.

Key Point: Use REITs for long-term investing strategy.

Jack Sternberg is a nationally recognized expert on real estate investment who’s been in the business for more than 30 years. Sternberg is the creator of the renowned “Buyers First” Program. His deals have totaled over $750 million and he’s been to the closing table more than 1,500 times. For more, visit http://www.askjacksternberg.com

However, 90 per cent of stock investors are losing money…

Most of them failed due to lack of investing strategy in the first place. Without firm investing strategy, you can easily get distracted and end up losing all of your initial capital. In this article, you will learn three things you must consider in structuring your best stock investment strategy.

Screen Profitable Stocks Quantitatively

Despite the fact that stock market is known as the most profitable gold mine, the truth is, 70 per cent of the companies listed in the stock exchange don’t deserve to be there. Although they should only consider their listing to expand their businesses operation, some of them aimed to make easy money out of it.

But, how to differentiate good stock with the bad one?

You can use key financial ratios to do that. Good companies normally have consistent trend but great stocks should have increasing pattern. EPS, ROE and ROA are some of the critical financial ratios you can use to filter them out. Make sure the stock you are about to buy have very good track record. Otherwise, don’t even bother looking at its ticker symbols.

Individual Stock Qualitative Analysis

Once you have some picture how good the company is, now is the time to finalise which is the best. Unless you have so much of money to invest, this will help you to prioritize which stock you should invest in first. At this moment, you might want to start with business you are familiar with.

First of all, you have to understand the companies’ source of income. Even though most of them reap profits by selling their own products, there are companies that make money out of advertisement or rentals. Each of those companies must have competitive edge so that their offers stand out than the rest. This is crucial so that the stock able to enjoy huge profit margins in the long run.

Historical Trading Trends

A historical trading trend is useful to understand how the price is moving. As some of the big companies can leave significant foot print in the price trend, you can easily track which factors affect investors’ sentiments. People can be interested in the stock now that they bought it as much as possible, but there will be times where investors pessimistic on the stocks’ future prospect.

This has a lot to do some breaking news in the financial media. However, you can study the price behaviour and predict what it would be in the coming trends. If you master these trading skills, chances are you will be reaping huge profits from time to time. Stock trading chart is something you can’t leave without in this situation.

If you managed to combine all in designing your best stock investment strategy, you are on your way to make money from the stock market.

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After all, the idea of a fast dollar on a stock is appealing. Buy low and sell high. Do this enough and you should come out on top, right?

Well, not exactly. Timing the market is almost impossible to succeed at. Eventually, you will lose. There are some that win using market timing, but you have a good chance that it won’t be you.

A study by the Financial Analyst Journal compared the results between market timing and buy-and-hold strategies. The authors looked at data from 1929 to 1999. They looked at all six major US asset classes to see if market timing is effective when compared to buy-and-hold investing.

The study looked at several different market timing methods. And what they found was that sometimes it does work. Two people out of every 1,000 will come out on top with market timing.

Ninety-eight percent of buy-and-hold investors will come out on top.

The trick to making money in stocks is not really found in buying and selling. It is found in investing for the long term. Do you know what your chances are in making money on a stock. You have a 70% chance that an investment in stocks will make money in any given year. If you leave your money in for the long run, you have a better chance of coming out on top.

However, I’m not saying invest and forget. You need to know why you invested in the first place. Before you invest, know what your objectives are. You need to make sure that your investments are goal orientated. You sell investments that become inappropriate for your portfolio and goals and buy ones that fit in. This is buy-and-hold in action.

If you want to protect an investment, don’t look at the individual stock price. Set yourself out points on the high and low side. You sell if it reaches this high or if it goes this low. If you don’t set these guidelines and realize a loss, what are you going to do? Do you wait it out or take the loss?

You start over with the money you have right now and choose a new investment. This time you will set yourself out points. There is nothing you can do about the money you have lost, but you can prevent losing even more.

Don’t hold onto stocks just to be stubborn. Realize when you made a mistake and start over. Change what you are doing so that you don’t return to this place again. Set goals. Know why you are investing. Know your top price and your low price. And don’t try to time the market, you have a 99.8% chance it won’t work.

Martin Lukac http://www.MartinLukac.com, represents http://www.RateEmpire.com, an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com.

These strategies are basic, but fundamental to your investment selection.

When evaluating any investment property you should ensure that it clearly meets one or the other criteria. In doing this you will ensure that you have a clear focus and investment rationale.

My winning strategies

The two winning strategies relate to the types of property you are investing in and the relationship between capital growth and income.

We are all aware that you derive a return form property investment in two ways.

Firstly, through capital appreciation and secondly from rental income.

Property investment is practically unique amongst investment products in that it is part funded by borrowing; in other words you employ loan capital to effect your investment. Traditionally property investors have utilised rental income generated from rent to repay their debt leaving them with an income and a property asset at the end of the loan.

My two winning strategies are derived from successfully focusing on the source of your potential returns: capital growth or through the maximisation of income & in order to repay your debt.

The danger is that you try and do both and in so doing lose your investment focus thereby failing to maximise your potential returns on either count. Therefore, when considering your investment you should first ask yourself; do I want to invest in either a:

* TROPHY ASSET or

* CASH COW

TROPHY ASSETS

A ‘trophy asset’ is a term used by many property investors to describe those properties that everybody wants to get their hands on. Examples of these would be the Oxford Street premises of Selfridges or the Lloyds of London building in central London. They are both iconic buildings, widely recognised and in prime locations, which means that what ever happens to the economy or the property investment market there will always be strong demand for them.

What’s this got to do with buying a residential investment property?

You are right; the term ‘trophy asset’ is normally associated with commercial property. However, the principles can be directly applied to residential investing.

All we are saying when describing a property as a ‘trophy asset’ is that it is in a prime location and that it is a building of a unique character, both potential features of residential property.

If you think of where you live in the country, there will be an area, a street even which everybody aspires to live in. There might even be one house that shines out above the others. These are all ‘trophy assets’.

The nature of property is that each parcel of land is unique. The very spot you are currently standing on cannot be replicated because part of its uniqueness is its location. Applying this principle to property means that there are only so many trophy houses, streets and areas. The supply of these is largely fixed.

Demand is however constantly growing as people aspire to live in the best areas. The result is that over the long-term these area and places will always appreciate more in value than houses in less desirable areas. Evidence of this is all over.

Look at London where prices in Kensington and Chelsea have rocketed 20-25% in a year whilst those in less affluent areas have risen at a much more pedestrian rate. Ok I know what you are thinking, this is London it’s different here because of billionaire Russians and city bonuses.

However, I bet you that the same is probably true in your local town or city. Think of the nice village, the posh part of town. I bet if you studied the figures they would show that despite other areas going up in value, these areas will have gone up by more and faster.

Just looking at my home town in Nottingham using www.upmystreet.co.uk to compare average prices in ‘posh’ West Bridgford with lowly Bulwell over an 11 year period. Whilst prices in Bulwell have risen by a respectable 3 times in West Bridgford they have shot up by over 3.5 times.

Simply put, at the end of the 11 years for ever £100 invested in property in Bulwell the same amount invested in property in West Bridgford would be worth £117.

It’s all about demand and supply and whilst demand keeps rising supply is largely fixed. Therefore if you want to maximise your long-term capital growth, buy a trophy asset. Tips on buying a trophy asset are:

* Find the best areas in your locality; they will have the best schools, the nicest parks the most affluent inhabitants.

* Always buy an older property with as much character as you can but don’t worry if there are no or few period interior features. These can always be replaced or added to.

* Remember your yields will be low. This is because capital values are likely to be high. Try to maximise incomes where possible by buying smaller units which tend to generate more rent per sq metre.

* Because your aim is capital growth and your income is less you will probably have to use an interest only mortgage and a loan to value of less than the maximum of 85% to enable you to meet the payments from your rent.

CASH COWS

The two big downsides with ‘trophy assets’ are one, they are expensive. Not everybody will be able to afford them and because of limited supply they are not always that available. The second is that they are potentially high risk, in the short to medium term.

This is because if there is a slump in the housing market, because you are relying on capital appreciation, the source of your potential returns will be wiped out. In the long-term though ‘trophy assets’ recover faster and more strongly but this may be of little compensation if you are nursing a large capital loss for several years.

Therefore, for most investors a ‘cash cow’ is more accessible and less risky. With these investments your primary focus is income generation. It is all about an investment that will maximise your income in relation to its cost and produce the most reliable income stream.

It’s no good having a place that produces a good yield when let but is empty for long stretches of time. What you want is an investment that consistently brings in rent so that you can pay down your loan. This is the primary difference between this type of investment and that of the ‘trophy asset’. Because you are not relying on the capital appreciation of the asset, you are less exposed to the risk of a market down turn. All you are banking on is that the value of the property does not fall and after the loan is repaid the asset still has a capital value; which can either be realised through its sale or that you decide to take your returns as rental income.

How to buy a ‘cash cow’

* For cash cows it is the yield that is most important. Look to buy properties with the highest yield and ‘rentability’.

* Use either a repayment loan or one with some sort of repayment vehicle. Remember your primarily goal is to repay the loan.

* Refurbishment projects often provide ideal ‘cash cows’ being cheaper and generating relatively high yields and being very ‘letable’ once the project is complete.

Investment scenarios

These two strategies should give you a basis for your investment decision making. Before you make an investment make sure that you are clear on what you want either a ‘trophy asset’ or ‘cash cow’.

For those people that are looking to buy an investment that will supplement their pension income, then a ‘cash cow’ is ideal.

If a ‘lump sum’ is your objective or an asset to pass on to your children then a ‘trophy asset’ could well fit the bill.

Remember, either way you should always be clear on your investment priorities before you start thinking about your property selection.

http://www.propertyhawk.co.uk

Any comments on this article or any other issues raised send them to the editor@propertyhawk.co.uk

Chris Horne (39) a qualified town planner and surveyor as well as being the author of the ‘Landlords Bible’ has been involved in all aspects of property from working as a planner in a local authority dealing with planning applications to being a consultant in the oldest surveying practice Drivers Jonas in the West End of London. In this role he advised Westminster City Council on the future development of the country’s largest retail areas such as Oxford Street and Covent Garden. He has worked as a Development Manager for the national regeneration agency English Partnerships being involved in the midlands in some of the UK’S biggest regeneration projects. He has also been a property investor and developer since 1990 and has built up and maintained his own property portfolio since that time. It was his experience at trying to manage his expanding property portfolio whilst maintaining a demanding professional life, which convinced him that there was a need for a new kind of management tool for busy property investors. He therefore set about the task of developing an online proper

Although this strategy is not really bad for the long term investor, it will not enable him to realize the type of return that is possible when investing in certain profit rich areas such as Utah real estate. The cyclic nature of the Economic Cycle presents a danger that the market will be on a downswing when you are looking to unload your investment and the years taken to reach your goal might tie up your investment capital so that other opportunities are missed.

In an area such as Provo real estate, where profit potential is so great because of the attractiveness of the area for investing in properties that can be converted to rental units, the hold on to it strategy is a poor choice for the investor who wishes to make a solid return. There are other strategies that make much more sense. Even the Bargain Purchase strategy is better. In this concept, only properties that can be purchased at below 20% their true value are considered. The 20% figure allows the property to be returned to the market at once at its full value.

Another strategy that is related is the Increased Value strategy. This is going to be more likely in an area such as Provo real estate. It involves purchasing at the actual true value and making improvements within the first six months that increase the value by 20%, and then returning the property to the market at the increased value figure.

When rental property is the thrust of your real estate strategy, the Double Digit Cap Rate plan is a good investment choice. It limits your property purchases to those that can produce a capitalization rate of at least 10%. The capitalization rate is the net operating income of the property. The percentage figures in these strategies are guidelines for making the investment practical. If these minimum figures are not met, the investment capital should be invested in other low return investments and the real estate market avoided unless the hold on until it goes up strategy is used.

Natalie Aranda writes about real estate. Buy-and-hold strategy is for the long term investor, it will not enable him to realize the type of return that is possible when investing in certain profit rich areas such as Utah real estate. The cyclic nature of the Economic Cycle presents a danger that the market will be on a downswing when you are looking to unload your investment and the years taken to reach your goal might tie up your investment capital so that other opportunities are missed. In an area such as Provo real estate, where profit potential is so great because of the attractiveness of the area for investing in properties that can be converted to rental units, the hold on to it strategy is a poor choice for the investor who wishes to make a solid return.