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How to decide if a property is a good investment – Washington Post

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Using financing, especially in a low interest rate environment, is a great way to leverage the property while keeping the risk low. The downside is that it adds to the cost and reduces the profit margin. If you are looking at it from a pure investment perspective, the question is: How much can I make on the investment? Financing allows you to keep more of your cash (or use less) and diversify your investment portfolio. Financing also allows for the ability to build a real estate portfolio for long term income generation. Over time, the loans will be paid off and you can maximize the cash flow.

One popular formula to help you decide if a property is good investment is the 1 percent rule, which advises that the property’s monthly rent should be no less than 1 percent of the upfront cost, including any initial renovations and the purchase price. For example, if a property costs $300,000, it should rent for at least $3,000 a month. Analyze rental rates of similar properties in the neighborhood to determine a property’s likely rent.

Given the high real estate prices in the Washington area, it can be difficult to reach the 1 percent metric. In these cases, you will need to hold on to the property longer to build income over time and increase the amount of rent received. While time is not guarantee of growth, it allows for more opportunity.

You should have a clear goal in mind and understanding of the market. If the goal is to keep the property as an investment for income and to have a long time frame, purchase price is less of a concern as long as cash flow is positive and trending upward. Over a decade or more, the positive rate will grow with inflation and as costs decrease. If the goal is to maximize profit, the price you pay is important.

A second rule of thumb is the capitalization rate, also known as a cap rate, which helps determine the rate of return expected compared to alternative investments. To determine the cap rate, first calculate net operating income, which is the expected annual income from rentals minus costs for taxes and maintenance. When estimating the expected income from rentals, be conservative; there are likely to be periods of vacancy between tenants. Then, divide the net operating income by the current market value of the home.

For example, if the net operating income for a home is $30,000 and the property value is $300,000, the cap rate would be 10 percent. A cap rate between 4 and 10 percent is generally considered a good rate because it is comparable to other investments such as Treasury bonds or stocks. On average, Washington properties fall into the 4 percent range because purchase prices are high, and rents are somewhat stable. Although this is a reasonable cap rate, when you compare it to historical market returns of 8 to 10 percent, you would probably do better investing in a long-term, diversified portfolio.

Both of these formulas provide a general guideline to help you narrow down your options, but they do not guarantee success. The real estate market is extremely speculative and can fluctuate wildly.

Investment properties should be viewed as a complement to an investment portfolio and a way to diversify your investments. Capital appreciation is what many are after, but cash flow from rental income is a much more realistic benefit. To monetize the property for capital gain, time of ownership is very important. Typically, you want to own a property for 20 years or more to see significant capital gains, but because real estate is unpredictable, capital gains should not be part of your analysis. For example, many believe that Arlington will see an appreciation boost once Amazon builds its new headquarters nearby, but that is speculation. Assuming that a neighborhood will change is a risk that can cost you the value of your investment. Instead, talk with a real estate agent to find a location that has and is likely to remain desirable.

Potential tax write-offs can help make bottom line returns more attractive and help to keep more money in your pocket. But there is a downside to taxes when you sell the property because years of depreciation can create a large tax bill.

Reinvesting the income from the property can also play a significant role in maximizing wealth. If the cash flow is not needed to supplement current income, reinvest the money into a market-based investment or additional rental properties. This enables you to further increase long-term gains. To further maximize the investment, minimize the outflow of costs. Every additional dollar spent on high-end renovations and property management works against your profits.

It’s important to do your due diligence and understand the commitment of an investment property. You may need to invest a lot of time and effort to keep up the property, unlike other investments.

An investment property may be worth considering if you want to diversify your portfolio, can afford to own the property for a longer period of time and do not need to rely on it for liquid assets. Investment properties can have inconsistent income – there is no guarantee of renters every month – so if you will need quick access to the funds, it may not be a fit with your financial plan. To determine if an investment property fits into your portfolio, talk with a financial adviser.

David Mount is a director with the Wise Investor Group at Robert W. Baird & Co. Incorporated in Reston, Va. Baird does not provide tax, legal or real estate advice.

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Almost £10m has been lost to investment scams since March lockdown – Yahoo Canada Sports

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The Canadian Press

Montreal Impact use options on 10 players, including striker Quioto, ‘keeper Diop

MONTREAL — The Montreal Impact have elected to hang on to some of the club’s top talent, including striker Romell Quioto and goalkeeper Clement Diop, but may soon be parting ways with midfielder Bojan Krkic. The club announced Friday that it has exercised options for 10 players on its roster and opted not to pick up options for another four. Deals on five other players are set to expire at the end of 2020.“All of these decisions are about the financial and sporting sides, and we need to be better,” Impact sporting director Olivier Renard said on a video call. “We need to make the jump.”Some of the options weren’t picked because the club is looking to make space for new players, he added.“We have space to make movement and we will make that as soon as possible,” Renard said.In addition to Quioto and Diop, Montreal is keeping goalies James Pantemis and Jonathan Sirois, defender Karifa Yao, midfielders Clement Bayiha, Mathiew Choiniere, Tomas Giraldo and Amar Sejdic, and forward Mason Toye. The club previously extended loans for defender Luis Binks and midfielder Lassi Lappalainen through 2021.The club did not exercise options on four players, including Krkic, midfielders Steeven Saba and Shamit Shome, and forward Anthony Jackson-Hamel. The decision doesn’t necessarily mean Krkic won’t wear an Impact jersey next season, however. Renard said the club is interested in bringing the 30-year-old Spanish midfielder back, but decided not to pick up his option “for many reasons.” He said the Impact have made Krkic an offer, and the decision is now up to him.Krkic played in 17 regular-season games for Montreal this year, tallying four goals and two assists.Four other players will be out of contract at the end of December, including defenders Rod Fanni, Jukka Raitala and Jorge Corrales. A loan agreement for midfielder Orji Okwonkwo is also set to expire at the end of the year.Raitala, Montreal’s captain, and Corrales will not return next season, Renard confirmed, but the club is still waiting to see if Fanni, 38, wants to continue playing professionally. The moves come after the Impact finished ninth in Major League Soccer’s Eastern Conference (8-13-2). Montreal was eliminated from the post-season with a 2-1 loss to the New England Revolution in the play-in round. The Impact still have at least one game to play in 2020. The team is set to face Honduran club Olimpia in CONCACAF Champions League action on Dec. 15. Players who did not have their options picked up are not required by MLS to play in the game, but Renard said he is hopeful they will join anyway. This report by The Canadian Press was first published Nov. 27, 2020. The Canadian Press

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Brazil's Oil Giant Slashes Its Five-Year Investment Plan – OilPrice.com

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Brazil’s Oil Giant Slashes Its Five-Year Investment Plan | OilPrice.com

Charles Kennedy

Charles is a writer for Oilprice.com

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Brazil’s state energy giant Petrobras has cut its five-year investment plan by 27 percent to $55 billion, driven by the effects of the coronavirus pandemic. Reuters reported, citing a regulatory filing, that the company will focus its efforts on developing deepwater oilfields in the pre-salt zone that is estimated to contain billions of untapped barrels of oil. The pre-salt fields are Brazil’s main point of attraction for foreign energy firms, too.

Of the $55 billion Petrobras plans to spend over the next five years, most will go towards exploration and production. Still, at $46 billion, the sum to be allocated for exploration and production until 2025 is down from $64 billion planned a year ago.

The company also said it will only develop fields where it could break even at international oil prices of $35 per barrel.

As a result of the spending revision, Petrobras will produce less oil and gas next year, the company said, aiming for a daily average of 2.75 million barrels of oil equivalent. This is down from 2.84 million bpd this year. Related: EIA Sees WTI Crude Averaging $44 In 2021

However, going forward, production will increase, reaching 3.3 million barrels of oil equivalent in 2024. The boost will come from the pre-salt zone, which will also drive the company’s output this year. Petrobras said at the release of its third-quarter results in September that it had originally expected an output of 2.7 million bpd of oil equivalent for this year.

Crude oil production from the pre-salt fields marked a quarterly increase of 8.1 percent to 1.651 million bpd in the third quarter of this year, mainly due to higher operational efficiency of the platforms in the Búzios field and the ramp-up of production platforms in the Tupi and Atapu oilfields. Compared to the third quarter of 2019, Petrobras’ crude oil output in the pre-salt area jumped by 20.8 percent.

By Charles Kennedy for Oilprice.com

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Scammers fool Britons with investment firm clones, says trade body – TheChronicleHerald.ca

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LONDON (Reuters) – More than 200 British retail investors have lost nearly 10 million pounds ($13.4 million) in total to sophisticated investment scams since a government lockdown in March to fight the COVID-19 pandemic, a trade body said on Saturday.

Fraudsters cloned genuine investment management firms’ websites and documentation, and advertised fake products on sham price comparison websites and on social media, the Investment Association said.

Greater financial uncertainty and more time spent online have likely contributed to the increase in scams, industry sources say.

Losses amounted to 9.4 million pounds ($12.56 million) between March and mid-October, the IA said, based on information it got from member firms which had been cloned.

“In a year clouded in uncertainty, organised criminals have sought opportunity in misfortune by attempting to con investors out of their hard-earned savings,” Chris Cummings, chief executive of the Investment Association said.

The investment management industry was working closely with police and regulators to stop the scams, he added.

Britain’s Action Fraud warned earlier this month that total reported losses from all types of investment fraud came to 657 million pounds between September 2019 and September 2020, a rise of 28% from a year ago. Reports spiked between May and September, following Britain’s first national lockdown, the national fraud and cyber crime reporting centre added.

(Reporting by Carolyn Cohn; ediitng by Emelia Sithole-Matarise)

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