How To Invest One Million Dollars – Getting The Best Possible Returns

First, you need an idea what sort of return you are looking for. For this exercise, I have established 27% percent after costs as the goal of this annual result. 27% is huge by today’s standards, although I think we are on the cusp of an inflationary period and getting over night cash rates in the double digits may occur. A possible repeat of the 80′s

For now however, in the current climate, 27% percent is quite a good result. To invest one million dollars effectively, it is always wise to diversify and not put all your eggs in the one basket as they say.

The bulk of that million should be put into quality real estate assets. The trick is to find a bargain. The less you pay for a property, the higher the appreciation will be over the year and the higher the rent will be in terms of a percentage value. For example, a 3 bedroom family home in good condition with a garage and established gardens may have a value in any particular area of $300,000 It is your job, to invest one million dollars for 27% returns, to find that property for a lower price tag. You will of course not find that property for $200,000 or $250,000 but you may find it for $270,000 that is a 10% percent discount.

If we rely on the historical average of what rents return of 7% and apply it to the lower figure, we will find that our real return on rents is more like 10% to 12% percent. Also, making small and cheap repairs and improvements as simple as maybe a shade offering more privacy from the neighbor or some simple adjustments designed to make the house more appealing to renters, this can even increase the rent return to 15% if done correctly.

So the purchase of 4 rental properties at around $270,000 is where the bulk of the million dollars will be parked. Also the minor adjustments and rehabbing you did to each home would have added a percentage value to the home itself, increasing your equity. The historical appreciation figure is 7% however you may be looking at around 10% to 12% percent.

Lets see what we have done, we purchased 4 homes worth $300,000 for $270,000 each.

If things go to plan we have added 10 to 12% percent value to the ultimate worth of those homes by doing small adjustments which make the properties more desire-able. Costs for each home was around 10% including escrow fees, lawyer fees and rehab costs.

At the end of the financial year, after all costs, those 3 properties returned 15% in rents. The properties appreciated, even after costs, by 12% percent. This is a total return of 27%

Also, because the renters now have a solid rental history and they have just signed a new 5 year lease, they are considered as prime lease holders. This has a re-sale value too and many buyers of your homes, will want to pay a premium to secure these types of tenants. This 5 year lease to prime quality tenants could be worth up to 5% more on the re-sale of the homes purchased.

Rehab Projects Are Often Great Investment Opportunities – Why Can They Become Huge Disasters?

A rehab project is easily seen as a great investment opportunity. You are able to purchase the project at a fraction of the replacement cost. After all the cash is invested, the total cost per square foot is far below the competition. You can see an easy path to much greater cash flow after the vacancy is filled and after the rents are increased. Unfortunately, there are a ton of issues that can throw the plan off of the expected course.

A rehab project did not get in the current condition because the owners wanted a run down dilapidated apartment complex. While the situation can be and often is the result of extended neglect, the buyer must consider that neighborhoods change, crime problems develop, basic infrastructure issues become insurmountable.

Where to begin?

First, is the property in a rentable location? Spend time understanding the schools that service the property. Look at access to employment and shopping. Find out what the crime issues are on the apartment complex. Determine what crime in the surrounding area is. Check out the demographics of the area and check with local merchants, consumer, and other sources about the reputation of the area. If too many red flags begin to develop, then you may have identified a project that could resist your best efforts to rehabilitate.

Next, if the property demonstrates solid performance, look at the physical issues with the project. Are the kitchens unable to meet expectations for today’s consumers? Is the foot print to small? What changes are required to meet utility cost expectations? Does the project require central AC? Is parking inadequate? Do the units require washers and dryers in the market and for the demographic the project will serve. What about dishwashers? Are the amenities inadequate? Are the floor plans positioned wrong for demand in the market?

In the case of infrastructure issues like those suggested for review above, the right rehab plan may well be able to resolve the issues. The key considerations are putting together a detailed rehabilitation plan that resolves the issues thoroughly for rentability. If the costs begin to rise to high for the project to be viable, you will know to abandon this prospective project. However, if you can meet the project well below your affordability considerations you have identified a potentially strong performing asset.

While the considerations above can protect against a bad decision because a rehabilitation requires repositioning the project the risk is much greater because rentup may not occur as expected. Renting costs can be too great. Rehab costs may over run. Rent rates may be weaker than expected. Management issues may be greater than anticipated. In all cases, the project can become continually more challenging and lead into failure.

What Should You Look For in a Home Based Business?

If you are planning to start a home based business and wondering where to begin, it is important to understand the basics of an online business first. There are various aspects that should be considered when you are choosing a home based business. Let us examine these in some detail.

You will find plenty of home business opportunities to choose from online; a search engine will show hundreds of results and give you plenty of ideas. You can either start your own online business or be a part of a pre-existing online enterprise. How do you choose amongst these numerous options? You should look for the following aspects when you are selecting an online home based business.

The first, and most important aspect, is stability. If you are thinking of joining an online business or MLM network, seek one that has been in operation for a reasonable length of time. The business you choose should have a good reputation, and offer products and services that are likely to sell. Ideally, the organisation you enter into partnership with should also offer you training, so that your chances of success are maximized. At the very least, there should be some basic training tools. A good online business opportunity will also offer you use of the company’s own promotional material so that you can reach a wider audience.

The product or service you will be helping to sell also deserves serious consideration. You need to believe in what you are offering; unless you are convinced of its quality, you will not be able to sell it effectively.

You should also consider the amount of investment you will be putting in to your online home based business, both of time, and of money. You will definitely need to allocate a certain amount of time if you want to make a success of your home based business – make sure that you have that much free time. The money angle should be carefully analysed – how much are you going to invest? What about other expenses such as marketing and advertising costs? How long will it take before your business starts showing a profit? These are all factors that should be taken into consideration so that you can choose an affordable yet profitable home based business.

Examine the business potential of a particular online opportunity in order to determine whether or not it makes sense for you. Your fundamental objective here is to earn significant profits, and unless the online business you are considering has the potential to be lucrative for you, do not consider it.

Taking all these factors into account will help you choose the ideal online home based business that will bring you a good stream of revenue.