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Both the stock market and private money lending have similarities as investments. The risk to reward of each type must be analyzed before the investment is made to determine what the investor or lender is willing to risk.

In the stock market an investor can pick his poison from different industries, growth and blue chip or income stocks just to mention a few choices. Once the investor has purchased stocks or bonds he is at the mercy of market forces that could severely impact his single stock or the entire market.

In the final analysis, the value of his stock is dependent on the belief of every other stockholder in that company. If the stockholders should all decide to sell, the stock could plummet 40% or more in a day. Same thing with the stock market in general – when investor confidence falters, the market can drop in a spectacular manner in a very short time and erase gains that took years to accumulate.

In real estate investing the investor buys a tangible asset that can be analyzed more easily than any stock. Except in “overheated” real estate markets, the property value will decline more slowly than the stock market and increase more slowly than individual stocks. However, for people looking to be conservative with their investments, the vast difference is the velocity of the decline in stocks versus real estate.

Stocks (equities) offer an investor maximum liquidity because they can be sold in minutes rather than weeks or months as with real estate properties. This same liquidity for equities causes them to rise and fall more sharply than their illiquid cousins, real estate properties. Equities can give income to their holders in the form of dividends, but so can rental properties and usually rental properties give higher yields and additional tax benefits that stocks do not.

The Sub-prime Mortgage Crisis and the subsequent decline in real estate values was an exception to the fundamental nature of the real estate market. This huge loss of property values has actually helped private money lenders by their being able to loan on properties with little downside and providing them with higher interest rate returns on their money.

Common costs to borrow private money vary widely but in general the interest rates can be between 6% and 10%, and the closing points can be from 0 to 3 points versus similar hard money loans of 12% to 15% and 4 to 6 points on the closing. Similar yields for income producing stocks mimic CD rates and currently are in the range of 2% to 3% paid quarterly.

There is also flexibility for the private lenders who can get an interest only return on a monthly basis or all his accrued interest and principal at the closing. This allows the borrower to have no out-of-pocket interest costs until the closing. The private lender may even fund a property that gives him a partnership interest in the profit in lieu of charging interest. Common stocks do not offer any flexibility of how they are paid or how frequently they are paid.

In summary, stocks have similarities to lenders of private mortgage moneys and both should be treated as investments. For private money lenders, the ease of evaluation of a property (appraisal), the property’s stable value (real estate markets move slowly), and the higher yields than competitive investments such as CDs and dividend stocks, make lending money on fully-collateralized real estate an excellent alternative to CDs and the stock market.

To finalize any loans, private money lenders should always get an independent appraisal, both a mortgage and a promissory note, a title policy and carry hazard and liability insurance on the property, all of which should be paid by the borrower and properly reviewed and closed using an attorney.

The following are the main types of real estate investment properties that are suitable for beginner investors:

• Preconstruction Investment Property: These types of investment properties are acquired directly from a developer before the construction or renovation is completed. In return for commitment to buy even before the construction is completed the developer will give you a price discount and/or other financial incentives.

• Fixer Upper Investment Property: These types of investment properties are the ones which are in ugly condition and need renovation. These properties are acquired by real estate investors to flip them after fixing-up. In majority of the cases these properties are in foreclosure, or are bank owned properties (called REO which stands for Real Estate Owned). Some beginner investors also wholesale distressed properties to other investors without fixing them up. Real Estate Investors who wholesale make a smaller profit but are able to exit the deal fast and with low risk.

• Foreclosure Investment Property: These types of investment properties are the ones which you buy from sellers who are behind in their payments and may lose their property to the bank via foreclosure.

• Income or Cashflow Investment Property: These types of investment properties are the ones which generate rental income for the real estate investor. These are mainly apartments buildings and rental houses. This type of investment property is sometimes also called Income property, Rental Investment property or Cash Flow Property.

• Investment Property with Flexible Terms: These types of investment properties are the ones which can be bought with no money down or with very little money down. Seller of such properties are very flexible with their contract terms and are willing to make the sale easy for the buyer. Land Contract (also called Contract for Deed), Owner Financing, Lease Option (also called Rent to Own, Lease Purchase, Lease to Own, Lease to Buy etc) and other similar strategies fall under this category.

Most other types of real estate investment property deals are not suited for beginner investors. They are too risky or too complicated for beginners. My recommendation is to choose the type of deals beginners want to do and become very good at it. Master all the steps from finding the deal to exiting it, and become the best. If starters can follow this simple principle I definitely see them more likely to be successful in real estate investing.

Real Estate Investing as a Financial Vehicle is based on the simple principle of buying something for less and selling it for more. You can buy low sell low or buy low sell high. Of course, without this factor, sinking your money in real estate assets wouldn’t be much of an investment, would it? All the factors mentioned above however make the game a bit more complicated. But armed with the right initial idea of how to make money in the real estate business, anyone with enough capital, enough determination and enough perseverance to learn this business have a shot at becoming successful in this world. So what are the key principles of real estate investing?

Value vs. Price. As with any other business, having an idea of the real value of a property is one of the key factors in becoming successful as a real estate investor. Take note however that a property’s value is different from the property’s market price or selling price. Value comes from the worth of the property regardless of whether the real estate market is booming or in a slump.

Most people who start out in real estate investing bases their buying decisions on the ongoing trend of the real estate market. Rising prices for properties in a certain area are the only green light these people are waiting for before they buy. Some real estate gurus refer to this as the “bigger fool theory in real estate investing” that is selling off the property a few months later to someone willing to buy it for that price in order to sell it himself for a profit a few months later. This strategy is also known as wholesaling. You can make a lot of money with it. In the tune of several thousands dollars a year. While this method is still consistent with the basic principle of making money, the key is to know your value and your market. Spend time to know the area before venturing in the wholesale business.

Risk vs The Learning Curve Information is half the battle, look before you leap and pre-warned is pre-armed are all apt idioms for those taking their first steps in this line of business for the learning curve of real estate investing is pretty steep and those unaware of the dangers are fodder for the predators in this jungle.

So respect the value of experience and stock up on this as you move your way up to the top. Always keep your risks proportional to what you know. Remember that the risks in any venture are only proportional to the amount of information you don’t have. That is why, when starting out in this line of business, take the time to choose the properties with less risk and lower capital outlay first. Flex your muscles and learn from the mistakes you will make along the way because believe me, you will make some. This way, the price for learning the ropes and getting your education in real estate investing will not be too high as to take you out of the game.

The following are the main types of real estate investment properties that are suitable for beginner investors:

• Preconstruction Investment Property: These types of investment properties are acquired directly from a developer before the construction or renovation is completed. In return for commitment to buy even before the construction is completed the developer will give you a price discount and/or other financial incentives.

• Fixer Upper Investment Property: These types of investment properties are the ones which are in ugly condition and need renovation. These properties are acquired by real estate investors to flip them after fixing-up. In majority of the cases these properties are in foreclosure, or are bank owned properties (called REO which stands for Real Estate Owned). Some beginner investors also wholesale distressed properties to other investors without fixing them up. Real Estate Investors who wholesale make a smaller profit but are able to exit the deal fast and with low risk.
• Foreclosure Investment Property: These types of investment properties are the ones which you buy from sellers who are behind in their payments and may lose their property to the bank via foreclosure.
• Income or Cashflow Investment Property: These types of investment properties are the ones which generate rental income for the real estate investor. These are mainly apartments buildings and rental houses. This type of investment property is sometimes also called Income property, Rental Investment property or Cash Flow Property.
• Investment Property with Flexible Terms: These types of investment properties are the ones which can be bought with no money down or with very little money down. Seller of such properties are very flexible with their contract terms and are willing to make the sale easy for the buyer. Land Contract (also called Contract for Deed), Owner Financing, Lease Option (also called Rent to Own, Lease Purchase, Lease to Own, Lease to Buy etc) and other similar strategies fall under this category.

Most other types of real estate investment property deals are not suited for beginner investors. They are too risky or too complicated for beginners. My recommendation is to choose the type of deals beginners want to do and become very good at it. Master all the steps from finding the deal to exiting it, and become the best. If starters can follow this simple principle I definitely see them more likely to be successful in real estate investing.

when is the right time to get started in property investment? Should you wait until you are more financially established or should you postpone buying your first home and buy an investment property instead?

These and many other questions face the first time property investor, but the fact is there are no simple answers to any question. The answer really lies in a more comprehensive approach to property investment as a whole. The fittest and healthiest members of our community do not get their advice out of magazines and newspaper articles, they consult medical experts, dieticians and other health-related professionals and put a plan in place that incorporates a healthy diet and regular exercise.

It is the same in the case of property investments. You should start by consulting experts in the field before you buy your first investment property. This may include a one-stop shop investment advisory service or consoling with a range of professionals including accountants, property strategists, solicitors, mortgage brokers and quantity surveyors. Collectively, these experts provide you with the full suite of products you need to make successful and profitable decisions.

To get down to the nitty-gritty however, it is impossible to pinpoint any time in history when purchasing property may or may not have been a good decision. The most important thing to consider is your personal circumstances, because whilst you might be able to afford to purchase a property at a certain time in the cycle, other investors may not be so fortunate. The decision is really based around your personal circumstances and priorities.

Some pundits say that the best time to buy property is when there is limited stock on the market and not many buyers. This is a simple case of supply and demand and any economic theory will tell you this is true. However, if you are not in a position to borrow sufficient funds or to have the comfort in terms of cash flow to service a loan in the absence of adequate rental income, then the circumstances are certainly not right for you.

That’s why it is always important to take professional advice at any stage of the market cycle to ensure that you are in the best position to proceed with the purchase. The best financial plans lay out a long-term strategy with constant reviews so that adjustments can be made for psychical economic conditions as they develop. There is no point having a ‘purchase at any price’ mentality simply because you think it is a good idea; you should only proceed when you have sound professional advice to back you up, coupled with independent research. It is not just about when you buy, but more importantly where and what you buy.

You can buy an investment property at any time and make a profit, over a reasonable time frame, considering you take care of what and where you buy.

Never try to second-guess what the market will be doing in the future. Base your property investment decisions upon well researched professional advice and be prepared to adapt your strategy to suit changing circumstances including your own as well as what’s happening on the world stage.

If you have been looking at real estate as a great way to make profits, it is indeed a good business that you can venture into. In fact, if you have just bought your own home and you still have a few resources to get a cheaper one and turn it into something more profitable, you can indeed make good money selling it.

Although a real estate business involves lots of risks, you can however learn how to make money in real estate by learning how to tackle the risks and come out successful. Of course, one common rule in investing your money into something is to know everything about the business and make sure you are well-versed on the said business. Knowledge and information can be your weapon and can help you make money in many ways as well.

If you are looking for a great venture where you can invest and make profits, or if you are a real estate agent who wants to make more profits in buying and selling estates and properties, it is important to learn a few tips on how to make money in real estate. Of course, this venture is not for everyone, so after you have learned about all the this business, and you think you have what it takes to be a profitable real estate agent, then you can actually move on to learn more and make profits.

- Make your business plan. In any business, you need to have your business plan laid out before you risk your money on a business. It will not only guide you on what to do and how to run your business, it will also make you feel confident that you have something to check out to refer to in case you come across some hurdles and challenges in your business. Make sure to define your target market, your pricing, marketing and advertising, as well as your financial plans.

• Find some investment tools that will help you make your investment a little manageable and updated. Indeed, if you are in this business and if you want to make money in real estate, you have to be updated with where to find homes that you can sell, particularly those foreclosed properties as well as bank listings. Of course, with the help of the internet, you can also find foreclosed property listings that can help you find the best deals on real property as well.
• Get a certification and license. Of course, it helps a lot to be a certified real estate specialist than get into the this kind of business without being certified. Of course, this will help you a lot in moving up into the high-paying levels of this business and can even help a lot if you decide to put up your own business buying and selling properties.