Southeast Austin just claimed the title of "next big spot" in town. The Austin Business Journal for September 24 includes a profile of the $250 million Formula 1 race track going in on the SH-130 corridor. That's exciting, but what's more exciting are all the big developments planned for the surrounding area to take advantage of the economic boom that will accompany the 417-acre facility.

 

 

From San Antonio to Georgetown, this whole metropolitan valley, over the next decade is going to explode with new developments both residential and commercial.The implications for Austin are enormous. The city is going to be recognized around the world.We're headed into a vibrant period of expansion with exciting opportunities for real estate investors. Read…

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All real estate investors need an education in location. Where do you want to buy and why? And what can you reasonably expect to be involved in the purchase, ownership, and ultimate sale of that property? There are four primary "rules" about buying:

- Go where vacant land is scarce,
- the demographics are good,
- the rents are $800 and up, and
- turnover will be low.

You can find areas with little vacant land in Austin near downtown, around the University of Texas, Town Lake, the Capital, or close to the better school districts. When you make a purchase in these spots, you're buying:

- location, and
- customer base.

One of the biggest draws to properties in these neighborhoods for me is a solid exit strategy. When these properties sell, they will…

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The type of property in which you invest determines the terms of your financing. If you buy a duplex or four-plex, you'll still be able to take out a residential loan. Five units and above moves you into commercial lending. Does that make a big difference? Yes.

Residential lending requirements are less restrictive. You'll benefit from:

- a lower interest rate,
- a lower down payment,
- less required reserve,
- greater lender competition . . .

and you won't be held back if your experience with real estate investing is reasonably limited.

Of course, the first question investors ask is, "Why would I want to fool with a duplex or a four-plex over a single-family home?" Good question, and one that bears exploring.

The percentages may run in your…

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In looking for sources of investment funding, you need to get one thing straight . . . cash is just cash.

Even if you don't qualify for institutional funding, which is possible, due to your credit score or your debt-to-income ratio, you most likely have a source of cash that can be used in innovative ways -- you just don't know it.

Most people are not aware that a Roth IRA can be transferred into a self-directed IRA and used for investment purposes.

That's right. You will be in control of where the money is invested and all proceeds of the investment will go back into your IRA.

When used to invest in real estate, the IRA owns the investment property. You can actually partner with your IRA.

(For that matter, your IRA can partner with…

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Forbes blogger Francesca Levy, in her popular real estate column "Crib Notes," has named Austin one of her top picks for "best bet" housing markets for residential real estate investors. Specifically, Levy cited:

- strong pre-recession population growth,
- a slowing of home-price drops, and
- jobs weighted toward growth in areas like government and education.

Now, here's what's exciting in light of our previous discussions about cash flow and appreciation.

The list was compiled by the real estate research firm Local Market Monitor and the basis for selection was . . . .

. . markets with the greatest chance for price appreciation.

Here's how they ran the numbers for Austin and they support our basic assertion -- now is the time to buy!

- Q2…

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In the journey to discover where your money will work best for you, start with these questions:

 - What are my investment goals?

- Do I need "cash flow" or appreciation?

- How much cash do I have to invest?

- How much cash do I have in reserve?

- What's my experience / comfort level?

So, out of that, when the seminars are planned and the books are written, where does the emphasis fall? Cash flow. Nobody goes to a seminar to learn about negative cash flow and positive appreciation. They pay $99 to learn how to get "cash flow."

And yet, at the end of the day, those investors that buy in areas that have good appreciation do better than those who concentrate exclusively on cash flow. Let's explore that.

Can I get both, you ask --…

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Let's begin with a basic consideration in real estate investing: leveraging.

Leveraging simply means using other people's money to purchase a property. It's a two-edged sword, but one that right now can cut very much in your direction.

Here's the situation you're trying to avoid. -- Falling on your sword. If you go into a purchase without enough down payment, you may not get enough cash flow out of the property to cover issues like:

- vacancies,

- regular maintenance,

- and management expenses.

Word to the wise:

- If you can't afford to actually own the property -- to own the expenses that come with it and to endure periods of vacancy -- don't buy!

And never buy a highly leveraged property unless you are:

- prepared to be a…

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