There are a astounding variety of different investment opportunities that are accessible to investors today. There are varying risks and rewards that go along with each one. One can feel that in order to comprehend each type requires a university degree, but you can improve your chances of success by doing your research.

You may have heard some investment advisers or institutions talk in regards to having a diversified portfolio. The thinking goes that to hold different types of investments better safeguards your money and maximizes your profits. You can think of it as being a multi-legged approach to investing. One leg or type of investment may be composed of stocks, bonds, and savings.

Commodities comprise the second type of investment product. These are goods such as oil, gold and silver. They can result in very high returns but high returns are accompanied by higher risk. Commodities are generally left to the experienced investor who has time to closely evaluate the market since they are quite volatile.

Historically real estate has been a great investment but because of its cost it is not available to everyone in the usual ways. As an example Toronto residential real estate has an average value of well over $300,000 and commercial properties may be even more. But there are other opportunities to invest by using Real Estate Investment Certificates or REITSs.

These are companies that go out and buy property or interests in hotels, office buildings, shopping malls and even mortgages. As an investor you are able to choose which type of REIT you want. REITs that are invested in actual real estate are called Equity REITs.  They make money by charging rent. Going back to Toronto as an example shopping areas that have a Canadian Tire, EB Games, and an Old Navy store all leasing buildings from a property owner. The rents collected from tenants on these Toronto properties makes money for the REIT investors. The next type of REIT involves the lending of mortgage funds generally to developers or property owners. If you can’t decide which one you prefer you can opt to get a hybrid REIT which is a mix of the two.

One risky type of real estate invest is called an option. This is simply a buyer is making what’s called an “option for consideration”.  The option comprises of an offer to buy a property if certain conditions are fulfilled such as financing or inspections. A relatively small amount of money is given as good faith and the property is taken off of the market during this time. There is a risk that if the conditions are not fulfilled the potential buyer may be forced to forfeit their deposit. The reward is that the buyer could try to sell their option to a third party and make a significant profit in a very short time. Accomplishing this successfully requires a thorough knowledge of the market and a good amount of research.

It can be complex in the beginning but the more you know the better off you will be. Long term investing is the key and real estate has been shown to be a great option for investors and even with the many As real estate has proven in the past long term investing is the goal and when put up against other forms of investment products, real estate carries the least amount of risk. This makes it is an important component of any portfolio.

The past several years have been very profitable for many real estate investors. But the market is changing and it may be time for many investors to be on the lookout for a new strategy. For those who own rentals, the trend was to buy a rental property, see it appreciate, and buy another rental property using a 1031 tax-deferred exchange to eliminate current capital gains taxes on the profits.

However, there simply aren’t as many solid investment properties available in today’s real estate market. The sharp increase in real estate prices hasn’t remained in balance with rental income. If you’re thinking about selling your investment properties now, you probably are concerned about the large tax bill you’ll face.

Low net rent income, demanding tenants, and a large amount of equity at risk have caused almost all real estate owners to consider selling their real estate. But there are countless investors who feel they are “stuck” with property right now that they’d rather sell. Many are hesitant to reinvest in a new 1031 exchange property because of low rental rates, but are unwilling to cash out on the property out of fear of paying hefty capital gains taxes. The good news is that for many owners and investors, the Private Annuity Trust offers a way to defer paying capital gains taxes, create a lifetime income and protect your assets as well.

With the Private Annuity Trust, real estate investors have a safe and legal way to exit from the labor of property management, the aggravation of dealing with tenants, and the anxiety of wondering how property values will fare in the current real estate market. With the Trust, there’s no pressure to reinvest right away to avoid paying capital gains. Instead investors can avoid making hasty decisions, feel out the market, and decide whether or not they even want to stay in real estate.

How the Private Annuity Trust defers capital gains taxes

Before the sale of the property is final, the property is transferred into the Private Annuity Trust. When the property is ultimately sold, the Trust can begin providing a lifetime stream of income, with taxes deferred over the seller’s lifetime. The Trust assets are protected from creditors and lawsuits, and the assets in the Trust can eventually pass to the seller’s beneficiaries without worry about the current 46% estate tax rate.

Many investors are concerned that due to significant property appreciation over the last several years, they are now too heavily invested in real estate. They just want to sell some of their assets and place their money into a more diversified, completely protected, lower maintenance investment vehicle with predictable cash flow. At the same time, they don’t want to fork over up to 30% of their investment profits in the form of capital gains tax payments if they don’t find a suitable investment in time.

The current Internal Revenue codes and strategic implementation of Private Annuity Trusts make avoiding this predicament a reality. Payments from the trust don’t need to begin right away-not until age 70 ½. If no money is paid from the trust, taxes are further deferred until the payments actually are received. The money can sit and accumulate interest until the seller needs the income.

If you began investing in real estate because of the freedom to earn on your own terms, you may be wondering why you now feel stymied by tax codes, volatile markets, and aggravating property management responsibilities. Perhaps its time to take back the control you deserve over your real estate investment career and begin investing on your own terms. If you’re ready to take back the reins on your investment vision, talk to a professional today to explore how Private Annuity Trusts may benefit your particular situation.

cle covers six dynamite real estate investing tips intended to help anyone just getting started in real estate investing to successfully launch and hit the ground running with real estate investment property.

1. Develop the Correct Attitude

To stand a chance of succeeding at real estate investing, foremost, you must understand that real estate investment is a business, and you will become the CEO of that business.

As your first order of business, then, it’s crucial to develop the correct mind-set about investment real estate and be able to make this distinction between buying a home and investing in real estate:

“You buy a home to live and raise a family; you buy real estate investment property to pay for the home, live comfortably, and raise your family in style”

As one very successful real estate investor said, “Only women are beautiful, what are the numbers?” In other words, you will not succeed at real estate investing until you acknowledge that it’s not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; what counts most is the property’s financial performance.

2. Develop Meaningful Objectives

A meaningful set of (realistic) objectives that frames your investment strategy is one of the most important elements of successful investing. Yes, we may all desire to make millions of dollars from real estate investing, but fantasy is not the same as expressing specific goals and a method on how to achieve it.

Here are some suggestions:

How much cash are you willing to invest comfortably? What rate of return are you hoping to achieve by making the investment in real estate? Are you expecting instant cash flow, looking to make your money when the property is resold, or merely looking to achieve tax shelter benefits? How long are you planning to hold the property before you dispose of it? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? What net worth are you hoping investing will help you to achieve, and by when would you like to achieve it? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

If you’re new to real estate investing, you undoubtedly know little about investment real estate in your local market. So, do market research to learn as much as you can about income property values, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal when you see it.

Here are some good resources:

(a) The local newspaper, (b) A local appraiser, (c) The county tax assessor, (d) A qualified local real estate professional, (e) A local property management company

4. Run the Numbers

I can’t stress enough the importance of running the property’s cash flow, rates of return, and profitability numbers. Remember, real estate investing is a business, and as the CEO of your investment enterprise, you’ve got to know what you’re buying, especially if you’re trying to determine which of several investment opportunities would be the most profitable.

You have two options:

(a) Invest in real estate investment software. This will enable you to discover for yourself the investment property’s cash flow and rates of return, and create your own analysis reports. Plus, by running the numbers yourself, you gain a broader understanding of real estate investing nuances, and in turn might be less likely to fall victim to the wiles of someone with little concern about how you spend your money.

(b) At the very least, work with a real estate professional that has invested in real estate investment software and can calculate, present, and discuss the property’s financial data with you.

5. Develop a Relationship with a Qualified Real Estate Professional

Working with a qualified real estate professional is a great way for beginners to get started with rental property investing because an astute professional can acquaint you with local market conditions, recommend a property that meets your investing objectives, and discuss strengths and weaknesses about specific property performance.

Here’s a warning, however: Work with a real estate person who understands investment real estate.

Be sure the agent has a firm grip on key financial measures inherent to real estate investing, knows how to measure profitability and rate of return, has the ability to present the data you need to make wise investment decisions, and, most importantly, shows a genuine interest in how you spend your money. The last thing you want to do is to get involved with a real estate agent that would throw you under the bus just to make a commission.

Here’s a good way to interview for an agent. Ask them for the property’s cap rate and then request an APOD. If their response (even to these basics) is to stand there looking at you like a deer into the headlights of a car, find another agent.

6. Start Investing

Hopefully, this has given you some insight into real estate investing, highlighted a few things to make you a more prudent real estate investor, and perhaps alerted you to a couple of things that should be avoided.

Okay, that does it for us, now it’s time for you to get started. Here’s to your success.