Deadly Mistake No. 4 is another common mistake people make when buying real property. In fact, in Africa, this mistake is rarely committed. WHY? Not because the majority of the people in Africa are aware of it BUT because most of them are NOT educated enough in real estate matters.

However, in the western world such as the United States of America and part of Europe, most people there take the initiative of deliberately and intentionally educating themselves in such matters with a view to enhancing and expanding their individual real estate investment portfolios. WHY? Because many of them have realized that an Educated Mind is an Enlightened Mind and therefore helps reduce the levels of loss or risks associated with investing through proper and informed decision making processes!

Of the many that have taken deliberate steps to educate themselves in matters of real estate investing, some of them for one reason or another have ended up committing Deadly Mistake No. 4 I'm discussing today. And I'm NOT in any way suggesting that my fellow African brothers and sisters are not educated enough but simply stating the fact that this deadly mistake no. 4 is rarely committed by them BUT commonly committed by our learned western world brothers and sisters who have taken the time to learn these things and due to one reason or another, have found themselves committing today's deadly mistake.

WHAT THEN IS THIS DEADLY MISTAKE NO. 4 I'M TALKING ABOUT?

Well, the particular deadly mistake no. 4 I'm talking about is simply this :

Financing Agreement Not Containing Non-Recourse or Exculpatory Clauses!

WHAT EXACTLY DO I REALLY MEAN BY THIS?

You see, dear blog reader, when it comes to buying real estate, most people do not KNOW that they could actually purchase real property by turning the seller into a Lender and therefore buy the property from him! In other words, you could obtain what is known in real estate matters as "Seller Financing". This, like I earlier on alluded to, can enable you - the buyer - to agree with the seller and turn him or her into a long term lender say twenty years and then pay for the property using monthly payments until the whole amount agreed upon by both parties is fully paid.

This arrangement is good for both the seller and buyer.

It is good for the seller who finds himself or herself in a pinch and badly needs cash to help him or her sort out some immediate personal and family problems. Instead of the seller selling his property for a full upfront cash payment which normally takes time, he or she can sell his property via what is known as 'Seller Financing' and allow the buyer to pay for the property in question through monthly payments at a good rate of return for say a twenty year period. And besides, it provides the seller with some Passive Income for the period of the loan until the full amount is fully settled. This strategy is best suited for a seller who owns a number of real properties and therefore wishes to convert one or two of them into passive income via intelligently calculated and reasonable monthly payments over a period of time in order to avoid the daily encumbrances associated with tenant/lord relationships!

This strategy is good for the buyer in the sense that it enables him or her to buy the property of his or her dreams affordably without having or possessing colossal sums of money. With just a small amount of cash or anything in kind used in lieu of cash, a buyer can own property whilst still paying for it. And if the buyer wants, he could easily rent it out so it can help him or her pay for itself!

Such a technique of acquiring real property is known as a "Creative Finance Technique". I talk about this very technique in detail including many others HERE. So, if it's your desire to learn more of such creative finance techniques, then please click HERE to have access for FREE to such detailed information!

Therefore, when I talk of committing deadly mistake no. 4 which is "Financing Agreement Not Containing Any Non-Recourse or Exculpatory Clauses", I mean and refer it to a real estate deal structured with a Seller Financing Agreement in place. It is in such an agreement where you - the buyer - MUST be very careful.

In such kinds of Purchase and Financial Agreements, you must make sure that as a buyer, you incorporate in such agreements what are known as "Non-Recourse or Exculpatory Clauses". WHY? Because  these limit or reduce your loss via foreclosure to the property or asset pledged as security (Your Collateral). Moreover, such clauses also enable you - the buyer - to back out of the deal or contract should there be some misrepresentation or problem of some kind in the near future whilst performing and fulfilling the terms of the agreement.

However, it may NOT be possible to secure this kind of an agreement when negotiating a loan with a bank or any financial lending institution, but it must be a part of any agreement that specifies an Owner Financed Deal.

Therefore, as you've probably read and seen for yourself, very few people KNOW these THINGS and you'll DO yourself a GREAT favor by Learning and Knowing about these Things HERE and so avoid this very deadly mistake no. 4 discussed herein today including the past ones!

So, dear blog reader, the next time you go out and settle for a certain piece of real property, you MUST ALWAYS make sure that you avoid committing this particular deadly mistake discussed herein including the previously discussed ones as well as the upcoming ones to be discussed later right here on this very property blog.

So, until next time, go well in your real estate searching endeavors!

NOTE: Read Deadly Mistake No. 5 -> HERE

I love to hear your comments. Both positive and negative ones are all welcome.

Therefore, go right ahead and drop a comment below.

P.S: Looking for Real Estate Property to Buy, Sell, or Rent? Then click on the highlighted words right in this very sentence to have a look.

 There are several compelling reasons why any shrewd person or investor must consider Real Estate Investing as part of his or her own long term overall investment strategy.

Real estate, like this investment opportunity HERE, is an investment opportunity that enables One to work Only ONCE and continue ENJOYING the financial rewards FOREVER without tying Oneself to a regular everyday JOB every time. Talk about Wealth and Time Freedom indeed at the same time!

And when I talk about real estate investing, I mean 'Income Generating Real Property' as opposed to just building or rather investing in your own home where you intend to live or are currently living in. WHY? Because like Robert Kiyosaki, author of the most popular and influencial personal finance book of all times entitled "Rich Dad, Poor Dad" says and I quote him below:

"Your own house that you've built and/or bought and are currently living in happens NOT to be an Asset no matter what your Banker tells You!"

And I quite agree with him 100%!

_You see, dear prospective real estate investor, your own house that you currently live in is NOT really an asset no matter what your banker or anyone else advises you! It is a terrible liability! Period.

_Well, before I talk about what makes your own house that you currently live in as NOT being an asset, let's hear what an asset is in Robert Kiyosaki's own definition. According to him, he defines an asset as anything that puts money in your pocket to be an asset. And he defines a liability as anything that takes money out of your pocket as being a liability.

However, I must hasten to state here that though in Economic terms, your own house that you currently live in, saves you quite some money in terms of opportunity costs if you happened to be renting as opposed to living in it when it comes to rental fees, it still remains a liability according to Robert Kiyosaki's definition.

But, according to the concept of 'Opportunity Cost' found in the subject of Economics, your own house you currently live in, saves you money in the sense that the money you were supposed to be paying in terms of house rental fees, you're now able and free to spend it on other things or rather simply save it. Thus the concept of opportunity cost states in economics!

But strictly and technically speaking, your own house that you currently live in is NOT really an asset.

And this now brings me to the question of how does my own house that I currently live in NOT qualify as an asset?

You see, dear prospective real estate investor, your own house you live in entails you paying monthly commitments or expenses such as electricity bills, water bills, cabbage collection bills, including various other taxes related to property such as property taxes. These by themselves do not make your own house as an asset in terms of Robert Kiyosaki's definition. They take money out of your pocket even though you may be saving in terms of opportunity costs as we've heard in one of the previous paragraphs above. That is why a person who has retired and happens to have no other regular source of income ends up finding himself or herself in financial problems because they eventually reach a point where they can no longer afford to pay for such vital monthly services due to the fact that they have no regular source of income to continue paying for such services.

And this is the very reason why Robert Kiyosaki says your own house you live in is NOT really an asset. It is a terrible liability unless you happen to have other sources of incomes from somewhere like this one HERE for instance to help you continue paying for such monthly commitments. And I agree with him totally.

And moreover, this is another reason why some home owners have ended up loosing their own properties to Uncle Sam, that is to say - The Local Authority or Government - due to accumulated property taxes such as land rates! The end result is that the government takes over their properties due to accumulated unpaid land rates and ends up selling their houses or real properties to other savvy real estate investors who understand the secrets behind real estate investment and indeed any other kind of investment portfolio.

_Well, having stated the misconception and mistakes average real estate investors have and make in the world of real estate investing, real estate still remains the BEST INVESTMENT ALTERNATIVE compared to other ways of investing! When I talk about real estate as being the best investment alternative, I mean investing in Income Generating Real Estate as opposed to investing in your own home as earlier on alluded to in the previous paragraphs. Yes, investing in your own home has it's own benefits but these benefits can NEVER be compared to someone owning a piece of income generating real estate! The benefits and/or advantages are far much more better than anything else. And yes, income property has it's own disadvantages but these disadvantages cannot outweigh the advantages or benefits.

_Perhaps the following 5 Factors of Profitability of Income Generating Real Estate will help drive the whole point home:

_Where can you find an investment opportunity that pays and enables you to receive income in very predictable and for the most part controllable installments, month in and month out? Try of course investing in other investment opportunities like the stock market and speculate on the ability of the stock prices or even any other kind of business venture and see for yourself whether you'll receive a predictable and controllable return on your investment. With these other investment portfolios, You give up total control over your money except for going in and coming out. And sometimes with these other investment portfolios even when you attempt to come out, you may find it hard to get back your initial capital invested.

But by contrast, when you happen to have a solid piece of income generating real property in place, and of course with the application of proper management controls in place, that income stream like our very own Zambezi River, just keeps on flowing in, in a predictable and controllable manner. Yes, some certain other investment opportunities have performed well and may even continue to do so. But in the order of NEEDS, housing is BASIC! Everyone needs a place to live in. You either sleep under a roof or simply under a tree!. And the fact is, No One ever wants to spend a night or day outside.

_When you treat your income generating real estate as a pure and strict business venture, you also happen to enjoy the tax benefits enjoyed by many other legitimate and registered big businesses. You'll have the opportunity to treat certain expenses occurring in the normal management of your property as tax deductible expenses from your total gross rental revenue or income thus giving you the chance to recoup your investment expenses. Lawful expenses such as interest on loans acquired from the hard money lenders, property taxes, insurance premiums, property management fees, advertising/marketing costs, legal fees, accounting fees, including repair costs can be deducted from your total rental revenue to enable you get back the money you spent when managing your property.

_When your tenants make their monthly rental payments, part of this money goes to pay the interest on the loan you may have gotten from the bank, and part of it goes to repaying the principal amount. This great and unique feature entails that every payment you make causes your capital (equity) status in the property in question to improve. As the loan is being serviced, your networth also increases. This simple feature of real estate investing makes it very unique indeed. You earn cash while you slumber because someone else, that is to say, your tenant is liquidating your loan in exchange for the comfort or priviledge of using your property.

_Appreciation is one of the key advantages or benefits of investing in income generating real estate. Land almost ALWAYS increases in value due to the fact that land is a resource that is never manufactured on a regular basis but is constantly and regularly being used up or developed on a rapid rate. "They aren't manufacturing any more land" is a phrase that real property investors are fond of quoting. And I totally agree 100% with that line of thinking. Truly, there is only so much land to be developed the world over.

And yet to be fair, there are times when land/real property depreciates in value. But such are rare times indeed because even though land depreciates, it ALWAYS appreciates in value in the long run as long as one has that staying power! Moreover, housing happens to be a very necessary and inevitable NEED which in the long term will result in most income generating real property to increase in value after such market downfalls.

If you live in the Republic of Zambia, there are certain regions of the country where the value of real estate seems to be always appreciating at a good rate as opposed to depreciating. For instance, places like Lusaka Province, Eastern Province particularly Chipata District, and most recently the Copperbelt Province where we've witnessed a serious increase in mining investments or activities including the North-Western Province, Solwe District in particular where we've also seen and witnessed a high level of mining activities as well thus making this particular region attractive to shrewd real estate investors!

Therefore,the secret to success when applying this very factor of profitability of appreciation in your real estate investment portfolio, is to employ combinations of creative acquisition techniques that make it wise for you to invest in certain regions of the country inspite of a lack of appreciation. The key is to balance your real estate investment portfolio so that even if one region was experiencing fluctuations, you would still be indemnified in another region of the country where there is an unprecedented property appreciation.

Leverage is the one most important feature or factor of profitability which makes investing in income generating real estate to be more attractive to the savvy investor. The word "Leverage" when used in real estate terms, simply means having control over a piece of real property and benefitting from it full throttle in terms of cash returns viz-a-viz rental fees even when you haven't yet finished paying for it in full. In other words, you can borrow and make use of other people's money without using your OWN hard earned money and purchase or build income generating real property which in turn pays for itself through tenants' rental fees. This very feature alone makes real estate investing highly attractive to a savvy investor. And besides that, the hard money lenders, like the banks and building societies, find it very easy to lend out money when it comes to real estate compared to any other kind of investment. If you think this is not so, try asking your bank to lend you money to invest on the stock market or to simply start out a brand new business entity and see if that will be possible without the bank asking for this or that. I'm not saying the banks can never lend you money for such investments. No. No. That's not what I'm suggesting. All I'm saying is that the hard money lenders find it easy to lend out their money when it comes to real estate compared to other investment opportunities. WHY? Because their money will be highly secured through what is known as "The Ultimate Paper Out". If you don't know what that means, then please look out for my future blog post where I shall be discussing such topics.

Therefore, as you have seen and read above, real estate still remains one of the best investment alternatives available to the ordinary individual or investor. WHY? Because with real estate, an ordinary everyday person can sit on the throne of profit without having royal blood flowing through his body! In fact, real estate still remains the poor fellow's ONLY opportunity to make it big in life without having too much money in his pulse or wallet!

And yet to be fair, real estate also has it's own minuses just like every other investment opportunity. But these minuses cannot be compared to the many pluses that go in tanderm with real estate investing. They are far too many to make one NOT to WANT to Invest in it.

In conclusion, these Five (5) Factors of Profitability, that is to say, Stable Income Generation Potential, Tax Benefits, Capital Build-Up, Appreciation, and Leverage, still make real estate investing as one of the greatest and attractive investment opportunities available to the general masses, provided that these people have the necessary skill set and follow with extreme care an Action Plan for success in  real estate investing.

However, I do not have the space here in this very blog post to discuss in greater detail what this Action Plan is and how one may apply it to work profitably for himself or herself. Space does not allow me here. This is probably a topic of discussion for another time in the near future. For now, I end here!

P.S : Looking for a House to Buy, House to Sell, Plot to Buy, or simply a Piece of Rental Property? Then click on the highlighted words right in this very short paragraph.

I love to hear your comments. Both positive and negative ones are all welcome. So, go right ahead and drop a comment below.

NOTE: Look out for my next blog post entitled "How To Buy Real Estate Using Very Little Or None Of Your OWN Money At ALL". Interested? Then check out this very space here on this very website and for an email alert from me via your personal in box. If for any reason whatsoever you're not yet subscribed to our Property E-Newsletter, then you're totally FREE to subscribe yourself  HERE or  via one of our website contact forms right here on this very website.
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