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23 En 2017 
This post appeared first on Make Money Your Way.

After a decade of saving and investing, I think real estate is one of the best ways to make money and build wealth.  Here is why.

There are many ways to turn a profit with real estate.  When you buy a stock, the only way you can make money is if the stock appreciates in value, and you sell it at the good time. With real estate you can make money in many ways, I can name those 12 off the top of my head, and there are many more.

Rental income. That one is the main source of profit investors are going for when buying a rental, and doesn't need an explanation.Buying low. You turn an instant profit if you manage to buy a property for under market value. Think foreclosures, quick sales, and awesome negotiation skills.

Selling high. You can make extra money if you stage the property to attract buyers over market value. With stocks, you always buy and sell at market value. With real estate, you can try to beat the market.

Increasing equity. If you take a mortgage to finance a rental, you are increasing your equity with every mortgage payment. I put down 25% on my last rental and with mortgage repayments am around 33% equity at the moment, those 8% of the property value were paid by rents and are increasing my net worth every month.

Leverage increases returns. If you put 20% down on a property, you will still receive rental income based on 100% of the property value, making it a great return for your 20%. Say your property is worth $100,000 and you charge $750 in rent with $500 in mortgage, taxes and fees. You have a $250 profit on $20,000 down. That is $3,000 a year, or a cool 15% return on your deposit. Good luck trying to get an almost guaranteed 15% on stocks.

Leverage makes you profit on the full selling price. If that same $100,000 OC property you bought with $20,000 down sells for $120,000 a few years later, you get your $20,000 plus principal payments back, and a $20,000 profit. It is only a 20% profit over the full value of the property, but thanks to your leverage, you are making a profit of 100%, minus principal payments to the $80,000 mortgage. The bigger the leverage, the greater the return.

Renting smaller units. I rent three rooms by the room, to three tenants. I can charge more Gin's page than if one family was renting the whole place. You can divide your family house into a duplex or a triplex and increase the rent.

Renting to businesses. Businesses are a different type of tenure and rents are generally higher. They are also safer if you choose a well known business to rent to.

Tax benefits on interest. Depending on your country of residence, you can often deduce the mortgage interest from the rental income, and create a tax free profit.

Tax benefits on improvements. You can also deduce the cost of the improvements from the rental income, while the added value to the property is yours to keep.

Profit from a lump sum on a refinance. So you bought your $100,000 place, and put $10,000 worth of improvements, that the tenants paid back with rents. The property is now worth $125,000 Gin because your contractor did a great job, you can refinance to get the $25,000 cash and put 25% down on your next $100,000 rental!

Profit from extra cash flow on a refinance. If you are able to refinance the property to lower your mortgage bill payments while the rent stays the same, you are generating more cash flow every month. You can build a cushion for maintenance, save up for a deposit on a new rental, or have more passive income to live off.    

There is less risk in real estate leverage than in stock leverage

  Stocks are volatile. Penny stocks and currencies even more so. Some trading companies will allow you to trade on leverage. That means if you buy 1,000,000 shares of a penny stock valued at $0.05, the trading company will not require that you fund your account with the full $50,000, it will let you buy the shares with only $5,000, BUT if the share goes down to $0.045, which it almost certainly will, you will get a margin call and your whole account balance will be wiped out.

With real estate, you can put the same $5,000 as a deposit on a $50,000 or even a $100,000 house, and rent it. If you have a renter, you don't really care about the ups and downs of the market, as you are able to meet your monthly repayments. If the property sits empty for a while, all you have to do to keep it is pay the mortgage yourself. It isn't fun, but it is much better than seeing your whole trading account annihilated by a margin call.    

Real estate is what you do with it

I bought my first rental cash when I was 22, let the property rot and did not invest a dime in repairs in 10 years. The result? A low rent and quite a bad tenant. He was there before I bought the place and I wanted to have him out before renovating, but he beat me to the game, stayed for 10 years, died, I had to evict his widow, and managed to sell the place a few months later for double the money.  

My last rental is a different story. I bought a brand new property, furnished it nicely, set up rental prices that are not outrageous but will drive away the worst tenants, and positions the place as an upscale flatshare for young professionals, instead of a bottom range share for first year students.

What you plan on doing with the property should determine the area you buy in, the type of unit you buy, the state of the property, and all details about said property. If you are not handy and hate to renovate, buy a new place or somewhere you can afford to hire out the renovation without tanking your operation. If you want to rent to families only, buy a nice family home in a good school district. For young professionals, find an affordable studio or 1 bed that is an easy commute from a dynamic zone of employment.

The same thing applies to managing the place yourself or not. Property managers will happily do the job for a fee, and if you are busy, that fee will be worth your time and then some. It will however decrease your profit. Choose to do it yourself, and you will have all sorts of headaches, and a source of income you can no longer call passive.

How you profit from real estate depends on YOU. When you buy a stock, you never know, for as much as you study the company, if its CEO isn't about to leave and the next one will run the company to the ground, if there is a merger with a less profitable company in the pipeline, or if an earthquake will destroy the production plant in China. Your real estate investment will be a result of your own efforts to renovate a place, promote it, screen a proper tenant, and keep it up over the years. And real estate is tangible. When all the markets tank, you are trying to hold to your losing positions in hopes they will go up in a few months, or hurrying to sell at a loss before it gets worse. Real estate will bring you a monthly rent to cover the mortgage, even if you have negative equity. And in periods of economic turmoil, when people lose their houses to foreclosure or first time buyers are denied mortgages by the banks, you will have more potential renters than ever. When things go back to normal, home prices will increase and you can make a nice exit, sit it out until the next crisis, and go back in the game to buy low. Don't want to time the market? Just buy. Now is as good a time as any, for all the reasons mentioned above.

http://www.huffingtonpost.com/pauline-paquin/why-real-estate-is-one-of_b_9223400.html
11 En 2017 
DENVER The drumbeat of hammers echoes most mornings through suburban Denver, where Jay Small, the owner of company that frames houses, is building about 1,300 new homes this year.

That's more than triple what he built a few years ago, when "you couldn't buy a job" in the residential construction industry, he said.

Now, builders can't buy enough workers to get the job done.

Eight years after the housing bust drove an estimated 30 percent of construction workers into new fields, homebuilders across the country are struggling to find workers at all levels of experience, according to the National Association of Homebuilders. The association estimates that there are approximately 200,000 unfilled construction jobs in the U.S. - a jump of 81 percent in the last two years.

The ratio of construction job openings to hiring, as measured by the Department of Labor, is at its highest level since 2007.



"The labor shortage is getting worse as demand is getting stronger," said John Courson, chief executive of the Home Builders Institute, a national nonprofit that trains workers in the construction field.

The impact is two-fold. Without enough workers, residential construction is trailing demand for homes, dampening the overall economy.

And with labor costs rising, homebuilders are building more expensive homes to maintain their margins, which means they are abandoning the starter home market. That has left entry-level homes in tight supply, shutting out many would-be buyers at a time when mortgage rates are near historic lows.

Nationwide, there are 17 percent fewer people working in construction than at the market peak, with some states - including Arizona, California, Georgia and Missouri - seeing declines of 20 percent or more, according to data from the Associated General Contractors of America.

The labor shortage is raising builders' costs - and workers' wages - and slowing down construction.

Small, the Denver builder, estimates that he could construct at least 10 percent more homes this year if he had enough workers. But he remains short-staffed, despite raising pay to levels above what he paid during the housing bubble a decade ago.

"It's getting to the point where you're really limited in what you can deliver," Small said. "We lost so many people in the crash, and we're just not getting them back."

HIGHER COSTS

The average construction cost of building a single family home is 13.7 percent higher now than in 2007, even as the total costs of building and selling a house - a figure that includes such items as land costs, financing and marketing - are up just 2.9 percent over the same period, according to a survey by the National Association of Homebuilders.

The problem is accentuated by strong demand for newly constructed homes, with sales reaching a nine-year high in July.

Private companies say that they are having a hard time attracting workers, and they are often forced to give employees on-the-spot raises to prevent them from going to competitors. Carpenters and electricians are often listed as the most in-demand specialties.

Tony Rader, the vice president of Schwob Building Company, a general contractor in the Dallas area, said his company has started handing out flyers at sporting events, churches and schools in hopes of luring more people into the field.

"The biggest problem I face every day is where are we going to find the people to do the work," he said, adding that it's becoming increasingly common for his company and others to turn down projects.

Dallas contractors are fighting over the limited supply of workers as three major mixed-use projects are going up right next to each other on the so-called "$5 billion mile" in Frisco, a northern suburb. Meanwhile, the metropolitan area is adding about 30,000 newly built homes annually.

With fewer workers, contractors are becoming wary of signing new work contracts, especially as many of them include fines for not completing a job by a designated date.

"I've got two lawsuits right now where it may cost us mid-six-figures because there's not enough labor out there to get it done," said one contractor in the North Dallas area who declined to be identified.

Lawyers in hot residential markets say that it is becoming increasingly common for construction companies to try to negotiate for more time.

"Subcontractors are having a hard time staffing up," said Edward Allen, a Denver attorney who said he has seen more lawsuits over project delays in the past two years.

GUARANTEED WORK, FEW TAKERS

Colorado alone will need 30,000 more workers in the construction field in the next six years, a number that does not account for those who will retire, according to a study by the Association of General Contractors.

The state passed a bill last year pledging $10 million over three years to fund free training for plumbers, electricians and carpenters.

Yet Michael Smith, who heads a Denver-based nonprofit that administers the training, said that he can't fill the seats. High schools are focused on preparing students for college, ignoring those that may be better suited for vocational work. Students may be put off by construction's reputation as a dangerous, cyclical field, he said.

"We've so demonized working with your hands in this country," he said. "We've got a booming economy, and we can't keep up with the pace of growth."

Students who go through the four-week program are all but guaranteed a job paying $16 an hour or more immediately, with the possibility of commanding $80,000 or more in annual income after five years without taking on any student debt, he said.

On-the-job training is also a common path for new workers. Eduardo Salcido - a 25-year-old concrete finisher working at a 232-home Toll Brothers subdivision going up in the Denver suburb of Broomfield - said that he received on-site training after entering the construction field as a painter.

He has earned one raise since beginning the training two years ago and is now certified as a semi-skilled finisher.

"The money's not bad," he said.

Homebuilders are increasingly desperate to bring back in fully skilled laborers such as Greg Lewis, a 43-year old journeyman carpenter in St. Louis. After struggling to find work in 2010, Lewis started making leather goods at home and selling bags, belts and wallets online. He now operates his business fulltime under the name Made Supply Co.

Even though he's making less than he did in construction, Lewis is not tempted to go back into a field that is marked by job insecurity, he said. His former co-workers have gone on to work in warehouses or a local General Motors plant, and most are choosing not to return to their old jobs even as contractors offer higher wages.

"Guys couldn't wait around for their next job, and now they don't want to go back to a field that could turn on them," he said. "It's either hot or cold, and you just can't trust it."

(The story was refiled to correct typo in the eighth paragraph to change "may" to "many")

(Reporting by David Randall in New York. Additional reporting by Keith Coffman in Denver. Editing by Brian Thevenot.)

http://www.reuters.com/article/us-usa-housing-labor-idUSKCN11C0F7