Quinlan Mortgage and Financial would like to wish you a happy and successful 2007! In

the current article, we will offer some suggestions for investing in real estate in the new

year. Because rates are still low and there is still a large inventory of real estate on the

market, 2007 may be a good time to do some bargain shopping!

Successful real estate investors take time to educate themselves on a wide variety of

factors, including (but not limited to) current and pending legislation, community and

neighborhood trends, and macro-economic issues (e.g., interest rates, unemployment

rates, population rates, housing supply and demand, etc.). Information regarding these

types of factors can be found at government sites like www.census.gov, or financial sites

like www.bloomberg.com.

When evaluating a specific property, you should find out as much as possible about the

property, including the seller’s motivations and previous activity on the property. The

sales history of the property (whether it has been flipped several times, whether it has

appreciated well) and the purchase price paid by the current seller can be obtained by

searching through public records (see www.netronline.com). In addition, information

regarding recent property and surrounding neighborhood sales can be found at

www.zillow.com. Why is this important? Current trends indicate that more and more

people are putting less money down on purchases. This may mean that if you know the

current seller bought the property a couple of years ago (during the inflated market), there

is a good chance that they are carrying a high balance on the mortgage that must be

covered to make the sale worthwhile. Bottom line, do not waste too much time

negotiating for a property that you know the sellers cannot sell for the price you want to

pay.

Some savvy investors choose to create a legal investment entity (such as a Limited

Liability Company or LLC), enabling them to pool resources with other investors to

begin purchasing real estate. This is particularly helpful for those who are limited on

cash but want to get started in real estate investing.

This method is mostly relevant to purchasing commercial real estate, since residential

lenders are less apt to lend to a LLC. However, it is much easier than you probably think

to purchase commercial real estate and this can be a GREAT investment choice. Some

investors prefer to establish an LLC for each commercial property that they buy in order

to limit their liability to each individual property. (In other words, if someone sues you

Because of the wide variety of expertise required to truly augment an investor’s success

in real estate, building a cohesive team and expanding your resources may be something

to seriously consider in the new year. Quinlan Mortgage and Financial specializes in

working with real estate investors, offering an extensive network of highly qualified

professionals, including 1031 Exchange specialists, realtors, contractors, CPAs, and

engineers who can assist you in every step of your real estate investing career.

In addition to creating an investment team, it is also a good idea to join an investment

club where you can share ideas with other investors. The most obvious benefit to doing

this is that you expand your horizons on investment strategies and gain access to more

resources. Further, investors often give club members first dibs on an investment

opportunity before offering it to the public.

Often people assume that because a property has potential to appreciate over time, it is

acceptable to pay a higher price up front and wait for the return down the road. However,

as an investor, you should always strive to buy at the right price so that you start off with

some equity. Do not be surprised if you look at a dozen properties before finding

something that comes even close to meeting your expectations.

securities and most bank CD’s are currently yielding approximately 5%, you should

expect your real estate investment to yield a much higher return to compensate you for

Any successful investment strategy requires proper diversification. In other words, don’t

keep all your eggs in one basket. It is a good idea to have a well-balanced investment

portfolio consisting of residential and commercial real estate spread over a variety of

geographic locations. This way, if a specific municipality experiences a natural disaster

or major economic downturn, your investment portfolio will be less affected.

In addition to diversifying property types and locations, it is also a good idea to have a

good mix of exit strategies. For example, to avoid being cash poor and equity rich, have

a mix of flipping and wholesaling to generate short-term cash flow and also a broad mix

of properties held for long-term appreciation.

Additionally, do not forget other investment opportunities (e.g., IRA’s, pension plans,

and stocks).

Begin planning to improve your credit score well in advance to your property purchase.

This will help you get a better financing package and rate. Now that 2007 is here, you

may be entitled to another free annual credit report from www.annualcreditreport.com.

You can use this as a tool to begin improving your credit score (e.g., reducing credit

inquiries, lowering credit balances, removing incorrect items).

Take advantage of some of the new financing options available to investors, particularly

new programs offering low down payment/longer terms on commercial real estate, and

opportunities for no down payment on non-owner occupied, multifamily residential

properties.

Also, 80/20 loans, which were quite popular in 2005 and 2006, may be even less

beneficial in the upcoming year. Private Mortgage Insurance (PMI) fell under review by

future years. Consult with your tax advisor on these issues.

It is always a good idea to engage in proper tax planning, particularly if you are selfemployed

or an avid real estate investor. Although capital gain tax rates have declined in

recent years, investors continuously seek ways to defer tax liabilities and keep their cash

in play when striving toward building a healthy real estate portfolio. As a result, the tax

benefits provided by tax-deferred exchanges of investment real estate under IRC Sec.

1031 (also referred to as a “1031 exchange”) still attract many real estate investors.

However, those investors that began the process of an exchange during the latter part of

2006 need to pay special attention to the timing of both the completion of the exchange(s)

and the filing of their 2006 tax return. Please consult with a tax advisor regarding these

issues and how they pertain to you.