Capital Improvements to Increase Value

The addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property's overall value or increases its useful life. Although the scale of the capital improvement can vary, capital improvements can be made by both individual homeowners and large-scale property owners.

For example, if Carlisle buys a new roof and converts the garage to an apartment garage, both would be considered capital improvements to his house. Similarly, the creation of a new public park in the downtown area would also be considered a capital improvement for the city. In both these cases, the new additions would make the properties more valuable.

Your Objective Should Determine Your Strategy

"Of course, objectives are not the railroad timetable. They could be compared to the compass bearing by which a ship navigates. The compass bearing itself is firm, pointing in a straight line towards the desired port. But in actual navigation the ship will veer off its course for many miles to avoid a storm. She will slow down to a walk in a fog and heave altogether in a hurricane. She may even change destination in mid-ocean and set a new compass bearing toward a new port. Perhaps because war is broken out, perhaps only because her cargo has been sold in mid passage. Still, four fifths of all voyages end in the intended port at the originally scheduled time. Without a compass bearing, the ship would neither be able to find the port nor be able to estimate the time it will take to get there." ~Peter F. Drucker

All investors invest for some reason, with some objective in mind. Although objectives may change, they always exist.

As an investor it is important to stay focused, especially during times of market volatility. For best results your objective should determine your strategy.

For more information on investment objectives visit us online at Carlisle Mitchell - Real Estate Tips for Investors.

Multi-Family Investment Property

Multi-Family Investment Property is a type of home or building with multiple units owned by one or more parties. Condo buildings and duplexes can be considered multi-family residences; but with a duplex, both the property and the land are recorded on one deed. Whereas with a condo, the owners only own their individual units, not the common space or land, and each have their own deed.

Multi unit residential apartment buildings include multi family investment property of five or more residential units. This type of property can also be owner occupied (although not as common) or all units can be occupied by tenants.

Strategies for investing in multi family investment properties include buying properties at prices below market value and then leasing to tenants.

The investor can rent, refinance or sell for rental income, appreciation, capital gains and tax deductions, depending on the investors goals and objectives.

Income Property for Investors

Income property is property bought or developed to earn income through renting, leasing or price appreciation. 

Income property can be residential or commercial. Residential income property is commonly referred to as "non-owner occupied". A mortgage for a "non-owner occupied" property may carry a higher interest rate than an "owner occupied" mortgage as it is viewed by lenders as a higher risk.

A common practice during periods of home price appreciation is for investors and speculators to purchase residential income properties with the intent that rents will cover their monthly expenses for a period of time until the property can be sold for a large capital gain. As with all markets during times of fast price appreciation, and as with all market bubbles, those that enter the market first and get out first usually do well. Those that enter the market later, and get out last usually don't do as well.

Carlisle Mitchell - Realty Investor - Income Property

8-Ways to Make Money On Investment Properties

The key to building true wealth in real estate is through buying and holding. A good tenant can create wealth for you by paying for the mortgage, insurance, taxes and monthly fees through their rental payment to you. In addition, you have an asset leveraged for a fraction of the value.

For example, let's say you purchased a condo at $150,000 for $15,000 down payment. If it grows at 5 percent per year ($7,500 first year, etc.) you're making more than 50 percent on the money you invested -- which beats most traditional investments.

Real estate investing allows investors several ways to make and/or save money that other investment tools will never allow or have the ability to provide.


Successful investors don't just look at appreciation to make money. Here's how you can build wealth through your real estate investing:

1) Positive cash flow
This is simply what it sounds like -- the rent covers the mortgage, taxes, insurance, fees, etc., and once all that's paid, you have money left over at the end of the month. A wise investor will also have enough money in reserves to cover all these expenses for a few months in case the property goes vacant.

2) Pay down in principal
As the mortgage shrinks from the mortgage payments, your equity grows (and so does your net worth). This is one of the most powerful means of wealth growth -- using OPM (other people's money) to build your net worth. The tenant is providing the investor with hundreds or thousands of dollars per month to pay off debt, which turns into equity for the landlord.

3) Improvements
This is the fixer-upper that most people think about when investing in real estate. Purchase a property for $50,000, put in another $25,000, and voila, the house is now worth $125,000 ($50,000 more than the initial investment).

4) Wholesale purchases
The most effective way to build net worth and equity is to buy a house for a bargain price. These properties would be the pre-foreclosure, foreclosure, tax sales, etc., where the investor buys the property well below market price. In essence, you make your money when you buy the house at such a low rate.

5) Tax deductions
One of the greatest benefits about real estate investing is all the tax breaks allowed for these type investments. Uncle Sam allows many tax deductions, tax credits and other government-sponsored programs connected with real estate investing that cut the investor's tax bill, thus, increasing the bottom line and equity growth.

6) Asset Management
Many novice real estate investors lose money simply by not managing the asset wisely. For instance, painting properties before the wood is actually peeking through will keep the asset in good shape, seal the wood, and protect it from more expensive damage. Managing the asset is just as important as buying smart and cash flow. The real estate investment is a commodity, not a money machine, and must be managed and protected to maintain future growth potential.

7) Value appreciation
As your property increases in value, so does your wealth. This is the old fashioned principle of buy and wait. Buy at today's prices and with time, your asset will grow in value due to appreciation. In addition, your equity will grow along with the amortization principle mentioned above.

8) Rent appreciation
As the cost of living increases, so, too, should your rent cash flow. Increasing your rental income per month by 5 percent could result in hundreds of dollars of cash flow per year -- year after year.

Margin of Safety - Value Investors #1 Rule of Investing

Margin of safety (safety margin) is the difference between the value of a property and its market price.

Application to investing
Using margin of safety, one should buy property when it is worth more than its price on the market. This is the central thesis of value investing philosophy which espouses preservation of capital as its first rule of investing.

The margin of safety protects the investor from both poor decisions and downturns in the market. Because fair value is difficult to accurately compute, the margin of safety gives the investor room for error.

A common interpretation of margin of safety is how far below market value one is paying for a property. For high demand property, value investors typically want to pay no more than 90 cents for a dollar (90% of market value) while more speculative property should be purchased for up to a 50 percent discount to market value (50 cents per dollar).