Category Archives: Investing
Modified Internal Rate of Return: Predicting Your Investment Profits
How do you know if your real estate venture will make money? You’re dealing with a considerable amount of money, and you don’t want to waste a single penny. A real estate investment is not something you want to dive into blindly, which is why the modified internal rate of return is so useful.
The modified internal rate of return, or MIRR, is a calculation that gives you an idea of how much your real estate venture will make you. In the end, the modified formula tells you whether the deal is worth it or not.
Before you can understand the MIRR, you need to be familiar with the internal rate of return.
Internal Rate of Return
The internal rate of return, or IRR, is basically the expected profit on a real estate venture. There is a difference between the two figures. Knowing which is which can help you master these somewhat complex formulas. The results of this type of calculation have been used by big companies for years to predict if a project is worth financing.
Basically, this calculation tells you the expected yield of a venture or project. This yield should add to the company’s (or investor’s) wealth, and is measured against other possible projects. It is also sometimes measured against existing projects. For example, when a corporation is considering several different investments, it may use this calculation to decide which is most profitable.
The IRR Gets Modified
What makes the “modified” rate of return different? This second formula takes into account not only the expected yield, but accounts for the yield after reinvesting in the initial project. This is the goal with commercial real estate ventures; to reinvest some of that profit into the business so that it continues to increase in profits.
The MIRR is a great way to predict how much your possible project will make, but with real estate ventures, it is not always so easy. The first step for any real estate investor is to pay back the property loans that funded the project in the first place. Very few people can start a career in real estate investment without first taking out a hefty loan, and you won’t see the profits until afterward.
Advantages of the MIRR
This calculation is a better predictor of how much profit a project will make, because it assumes that the money will be reinvested at the same initial cost. If you work out the same problem using both methods, you will sometimes find that the profit balance comes out positive with the IRR and negative with the MIRR. This is dangerous, because the IRR may be misleading profit-wise.
Basically, the modified calculation is the better of the two because it allows you some flexibility. You can enter whatever amount you deem appropriate. The IRR has a tendency to overstate the amount of money you will make, so the modified internal rate of return is safer to use for long term projects.
Once you know how to use this calculation, you will be able to safely predict whether a particular real estate investment is worth doing or not.
Share Trading Techniques
Share Trading Techniques.
While perusing through one of my trading books, I came upon some fascinating facts that were very thought provoking, so I will pass them on to you.
The author is “Daryl Guppy” a well established author and successful trader as well.
He stated, that over time he noticed that once a share magazine was published that the stocks that were recommended by the magazine went into an uptrend, because the readers took notice of the tips given and bought them. Here are the statistics.
1. One month after publication 90% of the stocks mentioned were still in an uptrend.
2. Two months after publication 80% were still in an uptrend.
3. Three months after publication only around 45% were still in an uptrend.
Obviously it pays to buy the magazines each month and buy the shares mentioned.
But I personally would be watching them very closely and would be hanging on to them only till my preset profit level had been reached and I definitely would be out after a 5-6 weeks.
They would still have to qualify to my buying strategy in the first place if not I would not touch them at all.
Now a hint for you here, How I trial my” New Ideas” out is by “Paper trading.” That way I am not risking any of my money in something that I am not 100% sure of.
If you want to paper trade the places I use are www.asx.com.au and www.sharecafe.com.au both are free sites and you can find free information there as well.
Becoming a “Dividend Stripper.”
An interesting thing I found out was that apart from being share trader I have also become a “Dividend Stripper.” I shall explain this further as to what I do occasionally.
A dividend stripper is a trader who buys shares to qualify for the oncoming dividend and then sells shortly afterwards.
You buy before the “Ex Dividend” then you can sell the next day. Making sure of course you have the dates right in the first place.
But to qualify for the “Franking Credits” you need to own them for 45 plus 2 days.
1day for buying, 1day for selling plus 45 days = 47 days. Anything less and you miss out on those franking credits.
An interesting thing to note is that a stock’s share price invariably falls usually by the amount of the dividend paid after the ex dividend date expires.
Another trick is to buy the stock 2-3 weeks earlier in the hope that the share price goes up prior to ex = dividend.
A Warning About IPO’s.
The market seems to be inundated with IPO’S (Initial public offering) these new companies all seem predominately to be in the mining sector.
All eager to get in on the current “minerals boom”
A few opened up higher than the initial entry price. Most seem to be exploration of some sort or other. The flavors of the month are usually oil or uranium.
These are of course classified as “Speculative Stocks.”
Which can mean that once the cash has dried up and they haven’t found anything, they then have to either raise more cash or shut shop? And your cash has gone with them.
The rags to riches stories are many, but the road is littered with the crushed hopes and dreams of the unwary investors.
All are searching for that elusive pot of gold at the end of the rainbow.
So be wary, do your research, and don’t jump in blind. Be an informed investor.
If it looks to be too good to be true then it usually is.
Three Reasons to Start Trading Online Today
We couldn’t always trade online
There are many reasons to start trading online today and I’d like to address three of them. Trading online has been around for a number of years now. Prior to online trading, people would have to phone their broker for each individual trade. This, for the active trader was a time consuming process and probably kept most people out of active trading. With the creation of the web, access to trading grew exponentially.
The reasons you want to start trading online today
Lower Cost – Online trading is less costly than speaking with a broker. Less people involved in any transaction is going to bring down the cost. Typically if you trade by speaking with a broker you are going to pay on average between $20 and up to $50 for the trade. The range of price depends on the broker, number of shares, and type of order. Online trades can be as low as zero (usually with a minimum balance or minimum paid trades) to about $10 for larger orders.
Faster Executions – Speaking to a broker is fine and from my experience they will get your order in fast but not as fast as you can do it yourself. Think of it like this. When you’re speaking to a broker what do you think they are doing? That’s right, they are looking at a screen that is probably a lot like yours and inputting the same order you would have input yourself.
Access to After Hours Trading – What happens to the broker at the end of the day? Many of them go home and while there may be a night shift why take the risk. Having online access means you can get in and out of positions round the clock. So if news comes out you will be able to shift your positions around right then. One caution here though is be sure the online broker offers after trading and don’t just assume it’s there.
Brokers Like Online Traders
Another reason that commissions are lower for trading online is there is less risk to the broker. You see if you all a broker and input an order verbally there is that chance that he is going to make a mistake. If that happens and the market moves they have to pay for any losses you may suffer but cannot keep any gains. This is the biggest thing brokers fear because one mistake can wipe out an entire years worth of commissions. Online trading reduces this risk substantially.
It’s a no brainer
So as you can see moving to start trading online today make a lot of sense. It’s a win for you as the trader with lower costs, quicker executions, and after hour’s access. So get out those web browsers and start looking into how you can start trading online today.
Buying a Rental Property
Buying a property which you intend to rent out is a great way of building on your wealth. However, if it’s your first time, like many others in the same boat, it’s difficult to judge whether or not you’ve found yourself a bargain or whether you’ll end up regretting it after your purchase .Thus, we have created a number of rules to perhaps use as a checklist to help you decide on whether or not the investment is a good one.
- Location, location, location. There is a reason why they use that term 3 times in a row. If the location is good, and traffic is high, then renting it out will be easier. Not only that, it will also fetch a higher price. A sign outside your property is a good idea, especially if your rental is in a desirable area. You may also prefer a property which is closer to amenities.
- Look at the numbers, hire an accountant if you’re not good at it. Make sure you factor in all costs so you can make the best purchasing decisions. Use these figures to weigh up opportunity costs of comparison properties.
- Average home price. Once again referring to location. If the area is a good one and property values are high, this usually means that there is great demand in the area. Usually this translates into higher rental prices.
- Strong buildings. The last thing you want to find out right after you make a purchase is that the building needs extensive repairs. Make sure you bring in a professional building inspector to your property to ensure you know all its problems. If there are problems, it doesn’t mean you look the other way. Add up the costs of the renovation – you may have a bargain on your hands
- Is there a rental history already? If there is and the renters are planning to stay there, thats great – they are more likely to be reliable payers – which reduces the headache of not having someone paying your rent.
- If the rental property is below market value, this is a good thing as it means you have the opportunity to raise rent.
- Is your building a newer building? In general one can say that the newer your building is, the less likely you’ll have problems.
- Neighbourhood trends. If the property is cheap at the moment due to neighbourhood issues, but you can see a trend towards improvement, this is a great sign as it says you’re getting yourself a bargain and when the neighbourhood improves, so does your rental.
This article was brought to you by Gumtree.com.au. If you’re looking to list your rental property in melbourne, rental property in Sydney or rental property in Perth, look no further.
Community Association Management
Community association management companies specialize in managing small to large community associations. This would include communities that have home owner’s or property owner’s association. Community association management companies work side by side with the homeowner association in performing all the tasks necessary to have the community running smoothly and within budget. A management company will typically perform annual budget reviews, coordinate all common area maintenance and upkeep, facilitate homeowner’s board meetings, collect association dues, and make sure all residents are within compliance with the CC & R’s of the community. This can be a very demanding job and should only be perform by companies with the experience and expertise to take on these types of properties.
Community association management is becoming an increasingly more challenging and highly competitive field. With per capita population growing in the mid-size to large cities in America, millions of new condominium and residential housing units and developments are being built to accommodate this growth. So why not outsource your community property needs to the experts? The level of professionalism and need for technology your property management company should deliver makes selecting the best more complicated than simply choosing a name and address from the phone book.
Some duties of a Community Association Management team
Usually hired by a volunteer board of directors of the association, they administer the daily affairs, and oversee the maintenance of property and facilities that the homeowners own and use jointly through the association. The management team will prepare financial statements and budgets for the community as a whole. They interact with homeowners and tenants on a daily basis, and can help resolve complaints amongst resident. Collecting association dues or assessment payment from property owners is a common duty of a management company. They will also assist the board of directors in making sure everyone within the community is in compliance with association and government rules and regulations.
In addition to administering the associations financial records and budget, the management companies may be responsible for hiring and coordination of contractors for any major renovation or repair to exterior buildings and common structures. This could include maintenance of community pools, golf courses, community centers, and for the maintenance of landscaping, street lighting, snow removal and parking areas. These types of property management companies also may meet with the elected boards of directors to discuss and resolve legal issues or disputes that may affect the owners, as well as to review any proposed changes or improvements by homeowners to their properties, making sure that they comply with community guidelines.
Things to look for in a community association management company:
* Proven track record of managing planned community properties
* Years in the business could show reliability and a proven track record
* This is a very specialize facet of property management and requires specific qualifications and training
* Is their current portfolios within budget and running smoothly, or are there major issues such as financial problems or rundown communities under their management
* Accurate bookkeeping and records
* Timely response in dealing with issues that may arise
* Enforcement of Covenant, condition and restrictions (CC and R’s) for the community they manage
* Enforcement of HOA dues collection
These are just a few important criteria’s to gage the success of a community association management company. A thriving planned community will be in harmony, beautifully aesthetic and an asset to all that live there as well as for the surrounding neighborhoods.
Karen McDaniel
Principal/CEO
Property Management Profile LLC
Property Management Profile offers the most up-to-date listing of full-service property management companies nationwide. We have become a wealth of information and resource for the first-time landlord as well as the seasoned investors. We should know what we’re talking about, as owner and creator of Property Management Profile, Karen McDaniel, has owned and managed many of her own properties. Today, all are managed by professional property management companies, so she now has more time to continue her work educating and helping others make better choices when it comes to finding a qualified property management company.
For any property management company that is looking to gain national exposure by capturing the attention of out-of-state investors or be found by local clientele, http://www.PropertyManagementProfile.com is the place to showcase their business model and expertise to these prospective clients. We offer an opportunity for all property management companies to list their company on our website, whether you specialize in residential, commercial, vacation or community association management. We accept small to corporate size management companies. We also offer a Free basic listing.
Learn About Mutual Fund Investments – Investing and Making Money
There are many opportunities when investing in mutual funds. If you do not have a lot of time to research specific stocks then let somebody else do it for you. When you purchase this type of investment a fund manager will handle researching and investing in specific stocks for you. There are a large number of mutual funds that you can invest in so you want to do a little research to see which one fits your needs the best. Basically a mutual fund is a combination of stocks in one portfolio that is handled by a manager. The benefit is you do not have to research individual stocks yourself.
How to: Trade Mutual Funds
A mutual fund is a great way to invest in the stock market but let somebody else handle the research side of it for you. Before making your initial investment you want to check and see what the mutual funds investment objective is. Also it’s a good idea to see what their track record is over the past five years. Once you have found a mutual fund that you feel comfortable with you should invest with confidence that you will be making a great investment. It is important to remember that with this type of investment there are always ups and downs in the market so you have to determine if you are in it for the short-term for the long haul.
You Can: Get Rich Trading
Remember that investing in mutual funds can be a very profitable way to make money. It is important that you do your research before choosing which fund you want to invest in. There are many options available to you so make sure you check out the fund’s past performance over the last five or 10 years. A mutual fund is a great way to invest in many stocks in a certain sector so that you hedge your bet and make a lot of money.