With the economy down and jobs hard to find, one of the best ways to combat the recession is to start your own home based business. Starting a successful home based business requires following a few simple steps to insure that the business you start is one that is not only legitimate but also one that you will find an interest in and will be willing to work on to grow the business. In order for your business to succeed you need to like what you do.1. The first thing you want to do is to figure out what your talents are. Everyone has things they are good at such as creativity, attention to details or communication. Whatever your talent is you want to make it the base of your successful home based business. This will be the foundation of your business and you want to make sure that it is your strongest point.2. Next examine your skills. Skills are the things you can do, they are active where your talents are passive. Your skills are learned from your talents. There are free training on YouTube.com where you can go and learn the the web skills you will need on your own, also set a realistic time to reach your goals and stick to it.3. Third take your talents and your skills and put them together. Determine what businesses would utilize both the talents and skills that you are best at. Ask yourself what kind of successful home based business could you start with your talent and skills. List all ideas, no matter if they seem like they won’t work.Once you have your list, go back over it and mark off any that wouldn’t work as a home based business. Now that you have your list, determine the profit angle of the one you are most interested in.
Figuring out the profit angle is where you figure out how much people would be willing to pay for your product or service and if you can make a sufficient income from it. It won’t matter if people will buy it, if you don’t make sufficient income from it. A business is about making money and without sufficient profit you won’t be able to pay the bills. Once you have determined that a business could be profitable it’s time to make your business plan and get your successful home based business up and running today.

The real estate development industry has created a negative impact on today’s economy. Throughout the United States real estate developers are experiencing many concerns with their development projects. These concerns are mostly related to the lack of financing available and lenders unwillingness to extend or restructure current obligations. Whether you are a residential developer, homebuilder, commercial developer, or any other related real estate development professional without the proper financing terms and structure the projects will remain stagnant or be sold.

The news has hit Wall Street and Main Street that real estate developers and homebuilders require financing, restructuring, and more time to manage through this cycle. Lenders, investors, and other financial institutions have scaled back their lending programs to developers and builders due to the risk associated with real estate development. Many real estate developers rely on financial leverage to make their respective projects successful. In today’s economy the term “leverage” has been a word many people feel has created this current crisis.

The impact has created partially built stagnant projects filled with graffiti, damages, and hazards facing the immediate communities. The citizens of these communities are demanding that police patrol the projects, fire departments monitor access to water, and local municipalities ensure that the integrity of the community. The cities are also being negatively hurt because they relied upon projections of tax revenue created by these real estate development projects.

The real estate development industry has developed alternative contingency plans to adapt to the current real estate environment. Some of the most successful alternative strategies include; raising equity, developing joint venture partnerships, negotiating with their current lenders, and to secure additional debt. Real estate developers that can raise equity can reduce their leverage position and can satisfy lenders needs for paying interest or paying down principal. Real estate developers in turn give up equity into the project. Joint venture partnerships entail teaming up with other real estate development partners or investors to provide additional equity or relationships that create value for the project. Negotiating with lenders has also proven to be successful; however, many lenders are having a tough time with how they restructure the loans. Finally, securing additional debt to either refinance the entire project or pay down the existing debt and hold funds for interest carrying costs has been a strategy for real estate developers.

There are other issues and concerns facing real estate developers besides financing such as finding homeowners, builders to develop projects, and end tenants to occupy the projects. The residential mortgage industry has been experiencing an enormous increase in bankruptcy filings, foreclosures, and lack of funding available to create mortgages to buyers of new homes. The government has been creating programs and ideas to help keep homeowners in their homes and to also stimulate new buyers to the market.

The retail sector of commercial real estate has seen retailers scale back their operations in terms of growth and expansion. The retailers are also struggling to secure financing for tenant improvements for their locations. One of the most troubling concerns for retailers has been the lack of consumer spending. Office tenants have also had to scale back their operations, reduce staffing needs, and cut expenses as much as possible. Office tenants are also experiencing opportunities to move into more desirable locations at more affordable prices causing vacancies in many submarkets.

The recent economic indicators and stock market trends are showing some signs of strength in the economy while others believe that the economy is still due for a slow recovery. As the credit markets start to thaw out and lend to real estate developers the projects will start to get back on track and create momentum. There will be many learning experiences real estate developers will take away from this current real estate market and hopefully will not repeat in the future.

Real estate has traditionally been an avenue for considerable investment per se and investment opportunity for High Net-worth Individuals, Financial institutions as well as individuals looking at viable alternatives for investing money among stocks, bullion, property and other avenues.

Money invested in property for its income and capital growth provides stable and predictable income returns, similar to that of bonds offering both a regular return on investment, if property is rented as well as possibility of capital appreciation. Like all other investment options, real estate investment also has certain risks attached to it, which is quite different from other investments. The available investment opportunities can broadly be categorized into residential, commercial office space and retail sectors.

Investment scenario in real estate

Any investor before considering real estate investments should consider the risk involved in it. This investment option demands a high entry price, suffers from lack of liquidity and an uncertain gestation period. To being illiquid, one cannot sell some units of his property (as one could have done by selling some units of equities, debts or even mutual funds) in case of urgent need of funds.

The maturity period of property investment is uncertain. Investor also has to check the clear property title, especially for the investments in India. The industry experts in this regard claim that property investment should be done by persons who have deeper pockets and longer-term view of their investments. From a long-term financial returns perspective, it is advisable to invest in higher-grade commercial properties.

The returns from property market are comparable to that of certain equities and index funds in longer term. Any investor looking for balancing his portfolio can now look at the real estate sector as a secure means of investment with a certain degree of volatility and risk. A right tenant, location, segmental categories of the Indian property market and individual risk preferences will hence forth prove to be key indicators in achieving the target yields from investments.

The proposed introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) will boost these real estate investments from the small investors’ point of view. This will also allow small investors to enter the real estate market with contribution as less as INR 10,000.

There is also a demand and need from different market players of the property segment to gradually relax certain norms for FDI in this sector. These foreign investments would then mean higher standards of quality infrastructure and hence would change the entire market scenario in terms of competition and professionalism of market players.

Overall, real estate is expected to offer a good investment alternative to stocks and bonds over the coming years. This attractiveness of real estate investment would be further enhanced on account of favourable inflation and low interest rate regime.

Looking forward, it is possible that with the progress towards the possible opening up of the real estate mutual funds industry and the participation of financial institutions into property investment business, it will pave the way for more organized investment real estate in India, which would be an apt way for investors to get an alternative to invest in property portfolios at marginal level.

Investor’s Profile

The two most active investor segments are High Net Worth Individuals (HNIs) and Financial Institutions. While the institutions traditionally show a preference to commercial investment, the high net worth individuals show interest in investing in residential as well as commercial properties.

Apart from these, is the third category of Non-Resident Indians (NRIs). There is a clear bias towards investing in residential properties than commercial properties by the NRIs, the fact could be reasoned as emotional attachment and future security sought by the NRIs. As the necessary formalities and documentation for purchasing immovable properties other than agricultural and plantation properties are quite simple and the rental income is freely repatriable outside India, NRIs have increased their role as investors in real estate

Foreign direct investments (FDIs) in real estate form a small portion of the total investments as there are restrictions such as a minimum lock in period of three years, a minimum size of property to be developed and conditional exit. Besides the conditions, the foreign investor will have to deal with a number of government departments and interpret many complex laws/bylaws.

The concept of Real Estate Investment Trust (REIT) is on the verge of introduction in India. But like most other novel financial instruments, there are going to be problems for this new concept to be accepted.

Real Estate Investment Trust (REIT) would be structured as a company dedicated to owning and, in most cases, operating income-producing real estate, such as apartments, shopping centres, offices and warehouses. A REIT is a company that buys, develops, manages and sells real estate assets and allows participants to invest in a professionally managed portfolio of properties.

Some REITs also are engaged in financing real estate. REITs are pass-through entities or companies that are able to distribute the majority of income cash flows to investors, without taxation, at the corporate level. The main purpose of REITs is to pass the profits to the investors in as intact manner as possible. Hence initially, the REIT’s business activities would generally be restricted to generation of property rental income.

The role of the investor is instrumental in scenarios where the interest of the seller and the buyer do not match. For example, if the seller is keen to sell the property and the identified occupier intends to lease the property, between them, the deal will never be fructified; however, an investor can have competitive yields by buying the property and leasing it out to the occupier.

Rationale for real estate investment schemes

The activity of real estate includes a wide range of activities such as development and construction of townships, housing and commercial properties, maintenance of existing properties etc.

The construction sector is one the highest employment sector of the economy and directly or indirectly affects the fortunes of many other sectors. It provides employment to a large work force including a substantial proportion of unskilled labor. However for many reasons this sector does not have smooth access to institutional finance. This is perceived as one of the reasons for the sector not performing to its potential.

By channeling small savings into property, investments would greatly increase access to organized institutional finance. Improved activity in the property sector also improves the revenue flows to the State exchequer through-increased sales-tax, octroi and other collections.

Real estate is an important asset class, which is under conventional circumstances not a viable route for investors in India at present, except by means of direct ownership of properties. For many investors the time is ripe for introducing product to enable diversification by allocating some part of their investment portfolio to real estate investment products. This can be effectively achieved through real estate funds.

Property investment products provide opportunity for capital gains as well as regular periodic incomes. The capital gains may arise from properties developed for sale to actual users or direct investors and the income stream arises out of rentals, income from deposits and service charges for property maintenance.

Advantages of investment in real estate

The following are the advantages for investing in Real Estate Investment Schemes

• As an asset class, property is distinct from the other investment avenues available to a small as well as large investor. Investment in property has its own methodology, advantages, and risk factors that are unlike those for conventional investments. A completely different set of factors, including capital formation, economic performance and supply considerations, influence the realty market, leading to a low correlation in price behaviour vis-à-vis other asset classes.

• Historically, over a longer term, real estate provides returns that are comparable with returns on equities. However, the volatility in prices of realty is lower than equities leading to a better risk management to return trade-off for the investment.

• Real estate returns also show a high correlation with inflation. Therefore, real estate investments made over long periods of time provide an inflation hedge and yield real returns

Risks of investment in real estate

The risks involved in investing in real estate are primarily to do with future rental depreciation or general property market risk, liquidity, tenancy risk and property depreciation. The fundamental factors affecting the value of a specific property are:

Location – The location of a building is crucially important and a significant factor in determining its market value. A property investment is likely to be held for several years and the attractiveness of a given location may change over the holding period, for the better or worse. For example, part of a city may be undergoing regeneration, in which case the perception of the location is likely to improve. In contrast, a major new shopping center development may reduce the appeal of existing peaceful, residential properties.

Physical Characteristics – The type and utility of the building will affect its value, i.e. an office or a shop. By utility is meant the benefits an occupier gets from utilizing space within the building. The risk factor is depreciation. All buildings suffer wear and tear but advances in building technology or the requirements of tenants may also render buildings less attractive over time. For example, the need for large magnitude of under-floor cabling in modern city offices has changed the specifications of the required buildings’ space. Also, a building which is designed as an office block may not be usable as a Cineplex, though Cineplex may serve better returns than office space.

Tenant Credit Risk – The value of a building is a function of the rental income that you can expect to receive from owning it. If the tenant defaults then the owner loses the rental income. However, it is not just the risk of outright default that matters. If the credit quality of the tenant were to deteriorate materially during the period of ownership then the sale value will likely be worse than it otherwise would have been.

Lease Length – The length of the leases is also an important consideration. If a building is let to a good quality tenant for a long period then the rental income is assured even if market conditions for property are volatile. This is one of the attractive features of property investment. Because the length of lease is a significant feature, it is important at the time of purchase to consider the length of lease at the point in time when the property is likely to be re-occupied. Many leases incorporate break options, and it is a standard market practice to assume that the lease will terminate at the break point.

Liquidity – All property investment is relatively illiquid to most bonds and equities. Property is slow to transact in normal market conditions and hence illiquid. In poor market conditions it will take even longer to find a buyer. There is a high cost of error in property investments. Thus, while a wrong stock investment can be sold immediately, undoing a wrong real estate investment may be tedious and distress process.

Tax Implications – Apart from income tax which is to be paid on rental income and capital gains, there are two more levies which have to be paid by the investor i.e. property tax and stamp duty. The stamp duty and property tax differ from state to state and can impact the investment returns ones expected from a property.

High Cost Of Investment – Real Estate values are high compared to other forms of investment. This nature of real estate investment puts it out of reach of the common masses. On the other hand, stocks and bonds can now be bought in quantities as small as-one share, thus enabling diversification of the portfolio despite lower outlays. Borrowing for investment in real estate increases the risks further.

Risk Of Single Property – Purchasing a single – property exposes the investor to specific risks associated with the property and does not provide any benefits of diversification. Thus, if the property prices fall, the investor is exposed to a high degree of risk.

Distress Sales – Illiquidity of the real estate market also brings in the risk of lower returns or losses in the event of an urgent need to divest. Distress sales are common in the real estate market and lead to returns that are much lower than the fair value of the property.

Legal Issues – While stock exchanges guarantee, to a certain extent, the legitimacy of a trade in equities or bonds and thus protect against bad delivery or fake and forged shares, no similar safety net is available in the property market. It is also difficult to check the title of a property and requires time, money and expertise.

Overall keeping an eye on market trends can reduce most of these risks. For instance, investing in properties where the rentals are at market rates, also, investing in assets that come with high-credit tenants and looking for lease lock-ins to reuse tenancy risk are simple guidelines to follow.

Future Outlook

The real estate market is witnessing a heightened activity from year 2000 both in terms of magnitude of space being developed as well as rational increase in price. Easy availability of housing loans at much lesser rates has encouraged people who are small investors to buy their own house, which may well be their second home too.

High net worth individuals have also demonstrated greater zeal in investing in residential real estate with an intention of reaping capital appreciation and simultaneously securing regular returns.

In the wake of strong economic growth, real estate market should continue to gain momentum resulting in falling vacancies in CBD areas and more development in suburbs; it is unlikely that commercial property prices will rise or fall significantly, beyond rational reasoning.

As the stamp duty on leave and license agreements has been further reduced, it should further attract to deal in this manner encouraging the investors and the occupiers.

With current budget focusing on infrastructure, it will attract quality tenants and add to market growth. Heighten retail activity will give upward push for space requirement.

Further, the proposed introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) will boost these real estate investments from the small investors’ point of view. These foreign investments would then mean higher standards of quality infrastructure and hence would change the entire market scenario in terms of competition and professionalism of market players.

Looking forward, it is possible that with evident steps of the possible opening up of the REMF industry and the participation of financial institutions into property investment business, it will pave the way for more organized investment in real estate in India, which would be an apt way for retail investors to get an alternative to invest in property portfolios at all levels. Overall, real estate is expected to offer a good investment alternative to stocks and bonds over the coming years.