How to make money from Buy To Let in a property crashWritten by Peter Parsons
Over last few years, most investors who have tried 'buy to let' (buying additional properties in order to rent them out) have profited spectacularly as property market in most of world boomed like never before. Historically unprecedented property prices in USA, UK, Australia and most of Europe have made concept of becoming a landlord look like an easy route to riches.Of course, there really isn't any 'free lunch', and situation now, as property markets start to crumble around globe, isn't looking quite so good for amateur property speculators. Historically, booms of this magnitude are followed rather predictably by equally large crashes, and smart property landlords evacuated market over a year ago, selling at peak to amateurs lured in by prospect of easy money. These amateurs have typically paid way over odds for their rental investments, and are in many cases having to subsidize their tenants (i.e. rent doesn't cover interest-only payments on mortgage!). They did this on promise that future property price appreciation would justify monthly losses they make by subsidizing tenant (Ed's note - a pro landlord would NEVER subsidize a tenant in ANY circumstance - yield is everything). So what's a newbie Landlord to do? Paid too much for a property, tenant's rent not even covering interest on mortgage and property prices likely to slip a dismal 30% or so over next 5 years... is it harakiri time? No! There IS a way out, a way so obvious you have probably overlooked it. Sell property. Simple, huh? In theory yes, but not in practice. Right now, NOTHING is selling. Solution? DROP THE PRICE. You may have to take a 15% or 20% loss on property now in order to get rid of it. Why on earth would you do this, I hear you ask, after all, aren't you in it for long term? of course you are. But you must also treat it as a business, so let's look at business case for justification. The property market has begun downswing. Like an ocean going tanker, market is slow to change direction, but when it does, it's going opposite way, and for some time. The market ALWAYS punishes 'irrational exuberance' - that's almost a definition of a market. It could be anywhere between 3 and 5 years before this downswing bottoms out, and over that time, a 30% correction is probably 'best-case' fall one can expect (this would take prices back to long term mean. In reality they may even undershoot and fall further). After that, it may be another 3 to 5 years before prices once more claw their way back up to highs of 2004.
| | The Top 6 Ways to get Home Business FinancingWritten by Daegan Smith
Once you have identified ‘big ticket’ business idea that is going to work for you, it starts raining fire to get appropriate financing for your project. The keystone to building a successful business is your ability to raise hard cold cash. You may be planning a shoestring budget for your start up but even then every business needs some working capital for building inventory, registration fees, insurance, for buying office equipment, maybe even space. For a smart home business owner there are several ways to raise capital for start-up. We have summed up some of most obvious ideas for funding and some not –so-obvious ones as well. If you have a robust business plan at hand and can identify what is best source of raising capital for you, it shouldn’t be all that difficult to get someone to show you way to vault. 1. SBA Loans: The Small Business Administration is a government organization working towards promoting small and home business segment in US. Though SBA doesn’t issue grants or make loans directly, it is still one of best sources of funding for home business owner. The reason is that SBA guarantees loans made by private lenders to you as a home business owner. One of biggest problems you will face as a home based entrepreneur looking for funding is trying to prove you are not a fraud and have capability to return investors’ money. So SBA guarantee reduces or eliminates risk inherent in a new business venture, gives credibility to your business and makes it easy for moneylenders to forward money to you. For more information visit SBA site at: http://www.sba.gov http://www.sba.gov/financing/index.html 2. Commercial banks: Taking a loan from a bank is a good option because banks don’t require you to turn over equity or company control. However, you must have confidence and a strong plan to make your business start making profits regularly or else it can get sticky paying bank loan back. To get access to bank loans you have to have collaterals and must be able to prove your capability in your start up area. 3. Personal Saving: This is a favorite with a large percentage of first time entrepreneurs because it is easiest way to get money (if you have it!), and you have no liability to any outside lenders. So if you’ve been planning for your home business all along and have set some money aside, use that to kick start your venture. An ex-colleague who turned a home business owner recently decided to have a garage sale of all stuff they didn’t need in house anymore. I kid you not…they raised a sizeable sum in just one weekend!
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