I've been investing real estate now for over ten years and have learned some amazing financial real estate lessons from the recent real estate boom and bust. Many small investors flooded the market after learning that professionals like me were making 50% and 100% returns flipping residential real estate properties. While I used heavy leverage and tax advantages to the hilt, nothing I new then would have made me more money today than these simple strategies. This is the financial real estate advice I needed in the summer of 1998.

Financial Real Estate Advice, 5 TIPS

1. Always offer 20% below the asking price on a home, even if you plan to move into it yourself. Keep yourself emotionally unattached to a potential home. Keep your eye on the finances of it. Especially in today's market there are thousands of homes in you area, do not get stuck on one in particular. Bid low and play the market. Search for the crack in the armor. As a smart investor, you will find that you always fall in love with a good deal.
2. Do not bid out of your affordable range. The days of the lavish American life style are over for a while. Purchase in the range that you can afford, and NEVER borrow more than 80% of the price of the home, its not good financial practice. There are the same tax advantages borrowing 80% that there are when you are borrowing at 95% of 100%. And the interest rates at the lower leverage level are more favorable.
3. Pay down the debt to less than 50% as soon as possible. Use a good percentage of any extra income that you have to make additional payments on your mortgage. Get the debt down to 50% of the homes value so that you can weather any financial storm that might hit you in the future. You can take a short term credit line out on the home if things get rough, but stick to the 50% rule and pay it down as soon as possible. Your home is the one long term investment that you can control. Forget Wall Street when it comes to your first $1 to $200,000 of personal wealth; keep it close to your side in your home where it is safe in the long term.
4. Don't over-improve the home. Many of the additions that you would like to make simply won't bring value when it comes time to sell. Look down the street at the "unique" things your neighbors have done. They won't add a dime when it comes to selling your home. You are better off putting the money in your savings account.
5. When you get the home paid down to 50% or less, buy another smaller sized home in the nearby area as a rental home. You will gain great tax advantages with any improvements you make and you can keep a close eye on the tenants while you are commuting in the area.

I think back to when I owned 68 homes in late 2004. What a difference it would have made to sell off 50 of them quickly to pay off the entire debt on the remaining 18. Even today's horrific real estate crash wouldn't have done a nickel of damage to my long term plan as the $900 in rent that I would make from each of the debt free homes, would have brought in a nice $16,000 per month to live on, nearly expense free.

Think about it..........

..........and thanks for reading my financial real estate advice.

Kallen Kildea

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