Real Estate is Crucial to Your Investment Portfolio: Here’s Why

buying real estateSource: ~ Author: Ken Corsini

Financial planners and investment advisors emphasize the importance of diversification in a portfolio of investments, as well they should.

Diversification reduces the impact of poor performance on the part of any particular company or sector. Diversification also helps the investor achieve balanced results by combining the equity appreciation from growth-oriented securities or funds with the current cash flow provided by income-oriented funds, utility stocks and bonds.

The particular mix of equity and cash flow can be adjusted to the financial needs and goals of the investor.

Similar logic can also apply to buy-and-hold real estate investment. Diversification can provide a cushion against a particular property that performs poorly, as well as balance the overall financial results for the investor.

Benefits of a Diverse Portfolio

First, holding just one property involves much more risk than holding a portfolio of 3, 5 or 10 properties since any given property can perform poorly from time to time due to tenant behavior or the need for capital investment (ex. HVAC system roof, etc.). With a portfolio, the income from the other properties can cover for the cash flow shortfall associated with the problem property.

Related: Real Estate is Better than Stocks – Fact, Not Opinion.

Beyond the obvious benefit of reducing individual property risk, diversification can also help balance the portfolio’s results according to the preferences and needs of the investor. Different cities, submarkets, levels of leverage and property types offer varying return profiles that investors can combine to achieve a balanced portfolio with a performance mix that matches the financial target.

Combining Diverse Property Investments

Low-cost properties in more modest neighborhoods may offer exceptional cash flow, but may not have potential to achieve any significant appreciation. Those properties may play a role similar to utility stocks that provide high dividend yields, but often do not promise great growth potential.

Other, more expensive properties in more affluent areas, particularly in cities with strong and growing economies, may offer better appreciation potential, but less substantial immediate cash flow results. Combining property types provides a combination of current income and future equity growth and also provides diversification against the risk of deteriorating property values in a particular submarket.

Related: Passive Real Estate Investments vs REITs

Many investors adopt a strategy of investing in the property type that they find most comfortable, but a diversified approach can provide a cash flow floor for the investor who is looking primarily for gains through property appreciation, or similarly a better inflation hedge for the investor that is primarily looking for current cash flow.

Optimizing the Use of Leverage

With a diversified approach, an investor may also optimize the use of leverage with some simple strategizing. With the current limitation of ten conventional loans, an investor can plan to use financing on the more expensive properties in the portfolio to maximize longterm borrowing capacity.

Leverage amplifies both appreciation and to a lesser extent cash returns. However, it is a mistake to focus on the effect of leverage only on a particular property because at the end of the day, the portfolio will perform as an aggregate.

The cash flow from all of the properties will be used to service all of the debt used to finance the purchase of any of the properties.


A diversified portfolio of properties can provide an investor with steady cash flow and healthy equity growth over time, while maximizing the benefits of applying leverage to amplify results.

Of course, the most important diversification step a savvy investor makes occurs at the first purchase of real property. As BiggerPockets readers well know, a real asset that generates income is a terrific hedge against inflation and almost completely uncorrelated to the volatile stock market.

If you are in the market to buy (or sell) a home in  Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.


3 Powerful Real Estate Investing Rules For Regular Folks

investing in real estateBy Brandon Turner, Courtesy of Century 21

I’m a fairly average guy. Average intelligence, average income, average lifestyle. I don’t have millions of dollars, well-connected friends, or an excess of free time. However, I do invest in real estate, which makes me a little different than the average Joe. The way I invest isn’t complicated, difficult, or time consuming. Sure, there are ways to invest in real estate which are complex, expensive, and extra-risky. However, that’s not my style and it’s probably not yours.

Therefore, today I want to share my thoughts on how to invest in real estate when you aren’t uber-rich, uber-connected, or uber-smart. This post is about investing in real estate for regular folks like you and me. So let me give you the three real estate investing rules for regular folks.

1.) Learn Selectively

Learning how to buy that first investment house or property can be overwhelming. If you search Google for “Real Estate Investing” you are given 217,000,000 results, or if you search Amazon for “Real Estate Investing” you are presented with 11,472 books on real estate investing


So how can you possibly consume that much information? Easy: Don’t.

When investing in real estate, there are a whole lot of different niches you can get into (like single family homes, multifamily properties, commercial retail stores, etc) but you don’t need to master them all. In the same regard, there are many different strategies you can choose (like long term buy and hold, house flipping, and more) but you don’t need to know them either.

You simply need to pick one niche and one strategy, and learn a little about those. That’s it.

For example, you might be interested in buying small multifamily properties, like duplexes or triplexes, and hanging on to them until retirement. Suddenly, the vast amount of information out there becomes a lot smaller, and it’s much easier to find the information you need. Searching Google for “how to buy a small multifamily property” will bring you far more targeted responses. This is a good thing!

Additionally, once you narrow your focus of learning down, it’s easier to find individuals who have experience in the kind of investing you want to learn more about. Using the same example as before, perhaps you can ask family and friends if they know anyone who is a landlord of small multifamily properties – and then take that investor out to lunch to learn.

Therefore, the first rule of investing in real estate for regular folks is to learn selectively.

2.) Start Small

The second rule of investing for regular folks is to start small. Yes, you may want to acquire millions of dollars in real estate to stock your retirement fund, but that million dollar portfolio starts with a single purchase. And that’s okay!

Perhaps it’s your goal to buy ten single family houses over the next five years. You do not need to buy all ten this year, or next. Perhaps you can buy just one this year, while learning how the process works. The year after you might buy two. Then three. Each year, you become more and more familiar with the process and can buy more and more properties.

The great part about this kind of learning is that it happens naturally. You don’t need to feel overwhelmed, because those other properties will come in time. The knowledge and experience will come slowly, so let it. Just start with the first deal. Starting small is not only necessary, but it’s also a good thing.

3.) Buy Only the Best Deals

Let me ask you a quick question… Would you rather buy ten homes that broke even each month, or one deal that made you $1,000 per month? Hopefully you picked the one one deal, because wealth is built buying great deals. So when you start shopping for your next real estate deal, focus intently on only buying the best deals. Remember these three simple words: Quality over Quantity.

Having hundreds of properties does you no good if you aren’t making any money from those properties. When you are a multinational corporation or large hedge-fund buying up property, you can wager your bets and buy thousands of properties, hoping that some turn out good in the long run. However, if you are a regular guy or gal looking to stock your retirement fund, you can’t afford to buy bad deals.

Keep in mind that just because you might be an regular person – doesn’t mean you should buy regular deals. Since you probably won’t be buying dozens of properties at a time, you can take the time to shop selectively for the best ones.

Look for properties in good neighborhoods that provide good monthly cash flow (the extra income you get to keep after paying all the monthly expenses.) Estimate the future potential of a property very carefully and conservatively:

  • If you think you might spend $50 per month on repairs, perhaps you should double that just to be safe.
  • Not sure how much the property will rent for? Aim low – and if it turns out better than you estimated you can celebrate.
  • Nervous about the potential tax increase in your city? Plan for the worst-case-scenario.

Buying the best deals will allow you to spend less time managing properties, give you less stress while owning them, and help you build wealth even faster. As I said, quality over quantity.


Look – you don’t need to be exceptionally brilliant, rich, or connected to invest in real estate. Instead, you just need to follow the three rules I’ve listed above. Learning selectively can help you get off the couch and investing with less hassle, starting small can keep you from getting overwhelmed, and buying amazing deals will help ensure you achieve your financial goals. Stop worrying about being average and start planning for an above-average financial future.


10 smart tips for remodeling your bathroom

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By Brett Martin of Popular Mechanics

Have everything on hand first

Big items such as the vanity top and special-order tile can take several weeks to arrive, so be patient. Before you take a hammer or sawzall to your bathroom, make sure everything you’re going to need — including the vanity, plumbing fixtures, any new lighting, the tub and the tile — is on hand. You might get frustrated waiting around for products, but it’s better than tearing up your fixtures and having an unusable bathroom until they arrive. Plus, when your new products are on hand, you’ll know if you need to do extra work, such as moving the plumbing lines for the sink location or running new cable for your lights.

Consider all your options

Home centers have a limited selection of vanities and tops in the store, and special orders can take four to six weeks for delivery, so take a look at other sources. Local independent suppliers who specialize in natural stone have a wide selection of tops in a range of colors and sizes. They can also custom-cut tops to fit unusual spaces and shapes. You may be surprised by how affordable the tops can be.

Or do what I did: shop online. I admit to being apprehensive about buying the centerpiece to our bathroom based on pictures and a written description, but I liked what I saw, including the price. I saved several hundred dollars compared with what home centers were charging and got attractive, top-quality products. A 48-inch-wide vanity, marble top, under mount sink and framed mirror cost us $1,300.

Plan for shower storage

You’ll want in-shower storage for your shampoo, soap, razor and body wash. But hey, you’re not in college anymore. Don’t settle for cheap plastic units that hang from the shower head or attach to rods that run from your tub to the ceiling; they look ugly and can ruin your attractive new design. A better option is ceramic tile shelving that’s installed in the corner of the shower. The shelves start at about $10 at home centers and tile stores.

An even better solution is to build in-the-wall shelving. Once you tear out the old shower, add framing between the wall studs for the shelves. The finished shelving, especially if tiled, looks attractive and doesn’t protrude into the shower, so you don’t have to worry about knocking off the shampoo bottles with your elbows when you’re singing karaoke into the shower head.

Rip up the under layment

Removing old flooring tile or vinyl can be time-consuming and difficult and can still leave behind stubborn pieces that refuse to come off. A faster, simpler way is to rip up the under layment along with the floor covering. Cutting the underlayment into small sections makes removal easier. Set the circular saw blade just deep enough to cut through the thin plywood underlayment without cutting into the underlying subfloor.

You’ll have to install a new underlayment, but quarter-inch plywood or cement board is cheap and lets you start with a clean surface. Starting from scratch also lets you get rid of underlayment that may be water-damaged, which is common around the toilet.

Use accent tiles

Mosaic or glass tile is expensive — mine cost $5 per 12-inch-square sheet — but you don’t need a lot of it to add some pizzazz to the bathroom. I used only a dozen sheets, yet it made a big impact. Using the special tiles as a border or sporadically in the tile pattern gives the design a punch of color and character.

Get a curved shower rod

A seemingly small detail, a curved shower rod adds a surprising amount of space to your shower. You’ll pay a little more, say $28 as opposed to the $6 starting price for common straight rods. In addition to the extra space, though, the curved models look nice and attach to the wall with screws instead of tension, so you don’t need to worry about them being pulled down.

Add a spacer to the toilet flange

Here’s a quick tip that will save you some trouble. If you replace a vinyl floor with tile, the extra height of the tile will probably raise the toilet enough to no longer fit snugly on the flange for the waste line in the floor. That means you’ll need to raise the flange. You can buy a wax ring extender kit at a home center or hardware store for $6. But if you need even more height, as I did, you’ll need a flange spacer that attaches to the flange with screws to give you the extra height. Once it’s in, you install the toilet normally, with the wax ring. Flange spacers are available in different thicknesses at home centers for about $3.

Update the lighting

Think of this as part of the remodel. You don’t want to end up with a new bathroom but outdated light fixtures. Plan your lighting early on so you’ll know if you need to run new cable. Consider recessed lighting over the shower for better illumination while you’re bathing. Just make sure the lights are rated for bathrooms.

Don’t be afraid to call a pro

If any part of the project takes you out of your comfort zone, call in a professional. You may need an electrician to help run cable for in-floor heating controls, or you might need a plumber’s help if the water or drain lines need to be moved. When you’re dealing with electrical or plumbing, do-it-yourself mistakes can be catastrophic.

During my remodel, I had to move the water-supply lines and the waste line in my wall to accommodate my new, wider vanity, which had a different sink location than my old vanity. I hired a plumber to handle that part of the job, and it cost me more than $500. Tradespeople aren’t cheap, but if they solve a problem, they’re worth the expense.

Splurge on something

Even a small bathroom makeover is a major expense. The urge to cut costs wherever possible is understandable, but pick your spots. Splurge on one feature you love that will define the look and feel of your new bathroom — a high-end plumbing fixture in the shower or sink, a special-order vanity top or a heated towel rack. Paying a little extra for fixtures will most likely reward you in the future. Cheap fixtures don’t last as long, and when they fail they can be difficult to replace.

I splurged in two areas, one big and one small. I upgraded my plumbing fixtures, and I also spent about $180 on a custom shower curtain from It’s the first thing people comment on when they see our bathroom.

Top Real Estate Articles of the Week; 9/7/2012

Investors Eye Profits From Single-Family Home Rentals


Institutional investors are raising billions of dollars to acquire distressed single-family homes and turn them into rentals. It’s a strategy fashioned on the idea that home “rentership” is increasingly replacing ownership following the housing market’s crash, amid stricter mortgage-lending standards and a struggling economy.

Renting out single-family homes has long been the province of mom-and-pop investors and traditional homeowners. But given the foreclosure crisis, institutional investors are now able to pay just pennies on the dollar for properties to amass thousands of homes. Read More at

What’s up with the Housing Market?

by Irwin Kellner

PORT WASHINGTON, N.Y. (MarketWatch) — As the U.S. economy rounds the Labor Day turn, it appears that, after several false starts, the long-depressed housing market is finally climbing out of the basement.

It is nothing more mysterious than supply and demand. For the first time in a number of years, the supply of both new and used homes available for sale has dropped below demand.

No matter what the product or service, whenever demand exceeds supply, rising prices are sure to follow. Housing is no exception. Prices are rising both quarter-to-quarter and year-over-year for the first time in two years. Read More at

Will Jobs Data Hurt Real Estate Recovery?

By AnnaMaria Andriotis

The most recent job numbers may be disappointing in more ways than one: Payroll numbers will need to more than double their current growth rate before a full housing recovery can occur, economists say.

Recent weeks have seen some upbeat news about the housing market. According to data released this week by CoreLogic, for example, home prices increased 3.8% in July compared with a year prior—the biggest year-over-year increase since August 2006.

But a lagging workforce is likely to hold back the recovery in home sales. Today’s jobs report indicates that growth remains sluggish: U.S. nonfarm payrolls increased by 96,000 in August, according to seasonally adjusted data released by the Labor Department. Economists expected a gain of 125,000. While the unemployment rate fell to 8.1%, down from 8.3% in July, that was largely because some people stopped looking for work. Read More at

Real Estate Now Tops Legal Malpractice Claims List, ABA-Published Study Shows

By Martha Neil

For the first time, real estate matters are now the most-frequent subject of malpractice claims against lawyers, a new study has found.

Results of a 2008-2011 survey of 53,000 insurance claims were announced Thursday by the ABA Standing Committee on Lawyers’ Professional Liability in conjunction with the National Legal Malpractice Conference in Chicago. In previous studies dating back to 1985, plaintiff’s personal injury matters were the biggest generator of malpractice claims.

The committee “has provided a one-of-a-kind, detailed overview of legal malpractice claims,” said ABA President Laurel Bellows in a press release about the study report. It can be purchased on the ABA’s website.

The report, she continued, “will give law firm risk managers, lawyers practicing in the field and legal malpractice insurers valuable insights into the areas of law, types of activity and other variables that give rise to malpractice claims.” Read More at

Good News for Real Estate Investors; More Foreclosures to Come

Foreclosure activity was down overall for 2011. In 2010 about 1 million homes were lost to foreclosure, and only 804,000 homes were seized in 2011 due to the legal scrutiny of the foreclosure practices slowed down by the documentation crises, known as robo-signing, that surfaced in October 2010.

The increase if foreclosure proceedings that began in the second half of 2011 will likely continue this year, which means that the number of home repossessions is likely to increase by about 25%.

In California there were 71,275 Notices of Default recorded at county recorders offices during the 3rd quarter of 2011, up 25.9% for the 2nd quarter. The defaults by price segment show that lower-cost neighborhoods are bearing the brunt.

California Counties with the highest probability of default were Sacramento, Madera and Stanislaus, while Marin, San Francisco and San Mateo counties mortgages were among the least likely to default.

Light at the End of the Tunnel

So what does all of this mean to the Real Estate investor? According to USA today, “Cash buyers are snapping up homes in markets nationwide, betting that deals won’t get much better.”

Elise Erwin, Sales Manager, Century 21 M&M San Jose

Elise Erwin, Sales Manager, Century 21 M&M San Jose

Elise Erwin, Century 21 M&M San Jose Sales Manager, when it comes to multiple offers on a property, “The cash buyer always wins!”

In the San Jose area, Elise says there are plenty of cash buyers available to buy homes at the lower price range; $200,000 – 250,000. In this price range, cash buyers are snapping up Condominiums and Planned Unit Development’s (PUD).

David Rivas, Realtor-Century 21 M&M Sunnvale

David Rivas, Realtor associated with Century 21 M&M Sunnyvale says, “I have 6 buyers lined up to buy REO’s. These buyers are also looking to buy home at the lower end of the price point. Homes in that price range just don’t become available that often.”

Marya Pimentel, Century 21 M&M Modesto Sales Manager says, “The banks prefer to work with cash buyers because there are ‘no appraisals’, ‘no conditions’ and ‘no required repairs’ with cash buyers. And, the banks don’t have to wait for the mortgage to close.”

Marya Pimentel, Sales Manager for Century 21 M&M Modesto

Marya Pimentel, Sales Manager for Century 21 M&M Modesto

“For that reason, the banks are like to accept a smaller offer from a cash buyer that can close in a few days,” says Marya.

“There are plenty of cash buyers available for properties in Stanislaus county for investment properties closing at the lower price point – under $100,000, upwards to $120,000”

According to Marya, “There is light at the end of this housing crisis…not a beacon, but at least a light.”

Do you have what it takes to be a Real Estate Investor?

do you have what it takes to be a real estate investorWith home prices at record lows, many people are jumping into real estate investing.

Donald Trump said on Fox News the other night that now is a really good time to invest in real estate, so he is buying and feels fortunate to be in a financial position to do so. But not all of us are Donald Trump.

Ask yourself these questions if you are thinking of becoming a real estate investor:

How much do I need to know about real estate investing ahead of time? Take the time to learn about investing before you pour your hard earned money into it. Surround yourself with books, research on the internet, join clubs and organizations.

What kind of personality does it take to be a real estate investor? It’s important that you are tolerant of risk and willing to commit time and effort. Beyond that, if you have an aptitude for learning, attention to detail and work well with a team, real estate investing might be a good fit for you.

How much capitol do I need? It turns out that there are people investing in real estate that are using other people’s money. However, once they sign the mortgage, they are still responsible for the debt. So ask yourself… how much debt can I carry and how much interest can I afford to pay?

What are my long term financial goals? If you are the kind of investor that wants a 10% ROI in a few weeks, real estate investing probably won’t work for you. If you are looking for a higher profit, real estate investing requires a long term commitment and you need to be prepared to wait it out for a year, sometimes longer.

Think about what types of real estate you want to invest in –

In other words, determine ahead of time what your buying criteria is, decide what types of property you are willing to risk you hard earned money on:

  • Property type (single-family, condo, townhouse, multi-family)
  • Number of bedrooms & baths
  • Approximate size (i.e. 1000 – 2500 sq.ft.)
  • Maximum purchase price
  • Retail Sales price
  • Construction Rehab costs
  • Expected profit, or income potential.

With this buying criteria in place you can objectively analyze a deal and make an informed decision on whether or not to move forward with the purchase.

With that being said, now is a good time to get into real estate investing. Home prices haven’t been this low in at least 7 years and mortgage rates are at record lows.

Call a Century 21 M&M agent in Northern California if you are interested in buying investment properties. Many of our agents specialize in working with real estate investors and would be happy to answer your questions and consider your buying criteria.

Commercial Real Estate in Northern California is Gaining Strength

Ernie Ochoa, Century 21 M&M Merced Office (209)386-1140 email-eochoa

Ernie Ochoa, Merced Office (209)386-1140 begin_of_the_skype_highlighting (209)386-1140 end_of_the_skype_highlighting email-eochoa

Century 21 M&M Realtors are seeing an increase in commercial real estate activity in Northern California. Ernie Ochoa, Realtor for Century 21 M&M in Merced says this is because rents are low. He is seeing an increase of Mom and Pop type businesses looking for commercial real estate space to lease.

David Lal, Century 21 M&M Hercules Office (510)306-5558

David Lal Hercules Office (510)306-5558

David Lal, Realtor for Century 21 M&M in Berkeley and Hercules says that he is seeing ‘first time investors’ looking for entry level commercial properties. According to David the “C” rated properties are actually showing some appreciation.

“Strip malls are still taking a beating, but office space and warehouses are ramping up, in part due to the fact that affordability is at its greatest,” says David. “Square footage for both commercial real estate sales and commercial real estate leasing has stabilized and in some cases, the cost per square foot is creeping up – especially in San Jose where internet technology companies are thriving.”

According to Ernie Ochoa, “Commercial Leasing is up, we are definitely seeing an increase in activity, but Commercial real estate sales just aren’t happening over here in the Central Valley.”

Sara Shipman Century 21 M&M Oakdale Office (209)844-1702

Sara Shipman Oakdale Office (209)844-1702

Sarah Shipman, Realtor for Century 21 M&M in Oakdale agrees with Ernie Ochoa, “Locally we are anywhere from 24 – 48 months behind the Bay Area in commercial real estate recovery. I have definitely seen an increase in phone calls from small business owners looking for properties to lease, but not much movement on the sales side.”

A new report from the Mortgage Bankers Association (MBA) shows that nation-wide commercial mortgages performed better than other types of loans last year. At the end of 2010, the 30+ day delinquency rate for commercial mortgages reached 5.33%, compared to 6.48% rate for all loans.

In fact, last year marked a turn around for commercial real estate in the United States. The national transaction volume totaled $120 billion in 2010, as opposed to the $54.6 transaction volume experienced in 2009. It appears that corporate tenants, particularly in large population areas, took advantage of the lower rents, especially during the last three quarters of 2010.

Century 21 M&M Commercial Realtors agree that the market environment over the next 24 months presents a favorable time to acquire commercial properties at discounted prices. During the recovery phase of this recession investors, purchasing commercial properties at significantly lower prices, should see a return on investment that exceeds historic averages.