Are you a speculator or investor? Great fortunes can be made and lost in real estate Certified Mortgage
Planning Specialists professionals are committed, qualified and equipped to help you implement the
seven keys to profitable real estate investment:
Determine Level of Liquidity - liquidity is the ability to quickly convert an investment into cash,
without losing any of the principal that you've invested. For example, a savings account is highly liquid.
In contrast, real estate is considered to have low liquidity because of the time it takes to sell the
property and the unpredictability of the market value at the time you are ready to sell. The greatest
real estate fortunes have been lost by those who overextended themselves and didn't have enough
liquidity to weather to ups and downs in the real estate market. CMPS professionals help you
implement strategies to maintain high levels of liquidity to be able to weather the storms in the
marketplace and take advantage of profitable investment opportunities.
Determine Level of Marketability - marketability is the ability to convert an investment into cash
quickly, at any price. For example, stocks can be sold anytime on an organized stock exchange at the
prevailing market value. However, the price at which the stock is sold can produce a loss for the
investor who is selling the stock. With real estate, not only will you need to deal with market
conditions, there will be real costs to consider whenever you sell a property such as brokerage fees,
marketing fees and title insurance. CMPS professionals help you invest with a business plan and
avoid the marketability risks associated with real estate speculation.
Determine the Impact of Leverage - leverage is the use of borrowed funds to finance a portion of the
purchase price of an investment. The ratio of borrowed funds to the total purchase price is known as
the loan-to-value (or LTV) ratio. A high LTV would result in high leverage, while a low LTV would result
in low leverage. Real estate investments can be more leveraged than most other types of
investments. Sometimes, mortgage debt results in 'negative leverage'. In this case, you should avoid
mortgage debt or sell the investment. Other times, mortgage debt results in 'positive leverage' and can
enhance your rate of return on investment. CMPS professionals help you avoid the trap of negative
leverage while maximizing the benefits of positive leverage.
Evaluate the Investment Management Issues - there are really two levels of monitoring and
managing a real estate investment:
1. Asset Management - this is where you monitor the financial performance of the investment and
make changes as needed. With stocks and bonds, you consult with an investment advisor, and/or a
CPA to determine when to buy and sell investments. With real estate investments, CMPS
professionals are qualified to serve as 'real estate investment advisors' and give you solid advice in
2. Property Management - involves the overall day-to-day operation of the property and the physical
maintenance of the building or buildings. Property management can include rent collection, paying the
taxes, insurance and utilities, the exterior maintenance such as landscaping, snow removal and roof
issues, as well as interior maintenance such as plumbing, painting, flooring, walls, kitchens, etc.
Property management can become a huge trap for you if you don't give it the proper evaluation prior to
purchasing an investment. Obviously, unless you want to fix leaky toilets and gets calls from tenants
at all hours of the night, you should seriously consider engaging in a professional relationship with a
management company. Remember, time is money. If you want to make money in real estate, don't
waste or lose your time, because if you waste or lose your time, you are in effect losing money.