Company Liquidation – Pros and Cons

On one hand, company liquidation definitely comes with some advantages, especially when it comes to your current situation.

Leases are cancelled

Terms on lease and hire purchase agreements are generally terminated at the date of liquidation, meaning that no further payments need to be made. If any arrears are owed, the company leasing the goods may be able to claim from the insolvency practitioners along with other creditors. It is worth noting here that personal guarantees are often given upon signing a property lease agreement; you should check your documentation carefully so you know whether you are likely to be made personally responsible for the remainder of the lease. 

Avoid court processes

By voluntarily choosing to liquidate the company, you can avoid being petitioned through the courts and be able to demonstrate to the public that liquidation was a company choice rather than a result of hostile creditor action.

Staff can claim redundancy pay

Members of staff will be made redundant by the liquidator, and if eligible, they can start their claim for redundancy pay and other statutory entitlements. If monies realized from the sale of company assets are not sufficient to cover redundancy payments, staff have an alternative route by which to claim what is owed. The National Insurance Trust Fund(NSITF) pays out for redundancy, unpaid wages and holiday pay should the company not be able to do so using its own funds.

Legal action is halted

Any legal action against the company is stopped when the company is in liquidation. Again, as long as you have no personal liability for a company debt, creditors will be unable to take action against you.

Having identified some of the advantages of this type of liquidation, let us now look at the main disadvantages of the process.

Personal liability for debts

Becoming personally liable for company debts can happen if a director has made a personal guarantee against debts of the business. A creditor can enforce the debt if they are unable to reach an agreement for repayment.

If it comes to light that the company has been liquidated quickly, with the sole purpose of avoiding debt repayment, directors may be held personally liable for company debts due to their improper actions.

All assets will be sold

All existing assets will be sold off in order to provide a dividend to creditors where possible, and for the insolvency practitioner to collect their fee.

Staff will be made redundant

As liquidation bring about the end of a company, any staff employed by the business will be made redundant and be forced to look for employment elsewhere. However, depending on their length of service with the business, they may be able to claim statutory redundancy pay following their dismissal.

A History of Insolvency Law

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Early insolvency law was dominated by punitive approaches and it was not until the early eighteenth century that notions of rehabilitation gained force. Insolvency was seen as an offence little less criminal than a felony and was punishable by detention in person at the creditor’s pleasure in debtors prisons. The prevalent view was that it was not justifiable for any person other than a trader to ‘encumber himself with debts of any considerable value’

Prior to this revolution, common law offered no collective procedure for administering an insolvent’s estate. A creditor could seize either the body of a debtor or his effects – but not both. Creditors, moreover, had to act individually, there being no machinery for sharing expenses.

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The idea that creditors might act collectively was recognised in 1542 with the enactment of the first English Bankruptcy Act which dealt with absconding debtors and empowered any aggrieved party to seize the debtor’s property, sell it and distribute the proceeds among other creditors ‘according to the quantity of their debts.

During the 19th century, attitudes towards trade credit and risk of default changed. This was due to the rise of joint stock companies and the resulting de-personalisation of business and credit.

The key statute was the Joint Stock Companies Act 1844 which established the company as a distinct legal entity, although it retained unlimited liability for the shareholders. the modern limited liability company emerged in 1855, to be followed seven years later by the first modern company law statute containing detailed winding-up provisions.

The House of Lords in Salomon’s case confirmed that a duly formed company was a separate legal person from its members and that consequently even a one-man company’s debts were self contained and distinct. However, every insolvent business went into liquidation or receivership automatically. It was the kiss of death for them and the creator of unemployment.

Plunging into Bankruptcy - Financial Speedometer

An insolvency system was later created to administer the range of new procedures be introduced as alternatives to outright bankruptcy or winding up, which would deal with individual cases on their merits. These involved recommendations that private insolvency practitioners should be professionally regulated to ensure adequate standards of competence and integrity; that creditors be given a greater voice in the choice of the liquidator; and that new penalties and constraints be placed on errant directors. This represented a movement towards stricter control of errant directors but also in favour of an increasing emphasis on rehabilitation of the company.

The rationale behind the culture of business rescues was expressed by Sir Kenneth Cork as follows: “When a business becomes insolvent it provides an occasion for a change of ownership from incompetent hands to people who not only have the wherewithal but also hopefully the competence, the imagination and the energy to save the business”.

The current attitude towards insolvency is to carry out much more work on corporate problems before any insolvency procedure is entered into. This places a new emphasis on managing insolvency risks proactively rather than after troubles have become crises.

In this series, we will explore the life cycle of insolvency from financial distress and default, to corporate failure and business rescue. We will also investigate different approaches to managing insolvency, along with their strengths and weaknesses.

Sexual harassment 101: what everyone needs to know

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The aftermath of the Harvey Weinstein revelations has unearthed a  depth of ignorance around the whole issue of sexual harassment. There has been the routine conflation with assault and then panicky addition of “alleged” to the end of every sentence, along with wild assumptions about its rarity and triviality. For the avoidance of doubt, this is the harassment 101.

What is sexual harassment?

The UK Equality Act of 2010  defines it as:

“unwanted conduct of a sexual nature which has the purpose or effect of violating someone’s dignity, or creating an intimidating, hostile, degrading, humiliating or offensive environment for them.”

It covers indecent or suggestive remarks, unwanted touching, requests or demands for sex and the dissemination of pornography. This legislation is often portrayed as murky or ambiguous, on the grounds that it’s hard to tell the difference between a bit of banter and a humiliating remark.

 The humiliation or intimidation of sexual harassment lies in making someone feel that their physical attributes are their main value to the workplace, which undermines any skills or talent or insights or hard work they may also have brought. So saying “you’ll do well in the organisation because you have big boobs” is harassment, even if

a) you think it’s true,

b) you personally are not a boob man,

c) you didn’t mean it as an overture and

d) everyone laughed.

The test “how would I feel if it were said to me?” isn’t necessarily helpful, since there is context you may have missed, such as what it’s like to be routinely ignored in meetings until your point has been corroborated by three other men, and then congratulated on your big boobs. Sex-based harassment relates to the sex of the target but isn’t necessarily sexual in nature.

How common is it?

A report conducted jointly by the TUC and Everyday Sexism found that 52% of women had experienced some form of sexual harassment at work, nearly a quarter had been touched without invitation, a fifth had experienced a sexual advance. An earlier study by the law firm Slater and Gordon found that 60% of women had experienced inappropriate behaviour and nearly half of respondents had been warned to expect problematic behaviour from a particular person when they arrived.

Why don’t women report it?

About one in five women do report it. Their outcomes are poor: 80%, according to the TUC report, found that nothing changed; 16% said that the situation worsened afterwards.

Many women never report harassment because of the cultural context they are stepping into, one in which, says the writer and feminist activist Beatrix Campbell, “there’s a knowledge of and tolerance of sexual harassment, that makes women’s journeys through public space always a little bit hazardous. I think the people who talk about this stuff as if it’s nothing forget how heartbreakingly sorrowful we feel about that and how ashamed. The other structural conversation to have about this, apart from power, is shame. I am overwhelmed by hearing these women’s stories. The politics of humiliation has been erased from the discourse. It can’t be underestimated, because you were in that room, he did put his hands on your body. Even if you escaped, the point is that you were there.”

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Why would a woman end up alone in Harvey Weinstein’s hotel room?

A few practical reasons: for instance, she had been lied to, told there was a party there or started off in a group that had then evaporated; meetings are routinely held in hotel rooms in the entertainment industry; the junior party in any given business meeting rarely has a decisive say over where it’s held. But really, the slide from civilised interaction into threatening behaviour is all in the hands of the aggressor. There are no formal waypoints, where consent is understood before moving to the next waypoint. Harassment isn’t like a date with a communication failure. However, the fact that this question is asked contributes to the shame and builds the wall of silence.

Is there a typical target, or a typical harasser?

Often the target of the harassment has low power in the workplace, whether by dint of a temporary or precarious contract or being young. The Equal Opportunities Commission (as was) found in 2002 that the majority of harassment cases taken to tribunal were by people who had been in the workplace for less than a year. Research suggests a clear association between harassment and women who are on zero-hours contracts who will just not get offered work again if they kick up a fuss. That is crude power operating in the workplace.”.

Powerlessness has no single source – Terry Crews has recounted his harassment by a senior Hollywood executive, as has James van der Beek; the operative vulnerability was race and age, respectively. The harassers are overwhelmingly male, and in a position of authority over the target.

 

How easy is it to bring a case of sexual harassment to an employment tribunal?

Juliette Franklin, a senior associate at Slater and Gordon, says that “unfortunately, it tends to be one person’s word against another, because if you’re setting out to intimidate, you do that when there’s no one else around”. Then it will be a case of looking at corroborating evidence. “Has any of this found its way into email correspondence? Can you keep a diary or some kind of record, perhaps send yourself an email so you’ve got something contemporaneous. Have you contacted HR and raised a grievance?”

Companies may have lots of procedures in place that nobody ever follows: they may have a big push on equality training, but nobody has been trained for 10 years.

“An awful lot of cases settle before they get to court, a level of compensation might be paid, other measurements might be put in place,” says Franklin. “That can be biggest benefit of it, making sure someone is taken to task for their behaviour.” The civil system is adjudicated on the balance of probabilities: is it more likely than not that this has happened, and for this reason? It is not a notoriously difficult area in which to secure a victory, but “there’s a great deal to be gained from resolving it as soon as possible”.

Michael Newman, from the solicitors Leigh Day, says “it’s easy enough [to bring a case] as in, the law is there. It’s quite hard for people to decide to do it while they’re still employed by the company. What I typically see is someone bringing an unfair dismissal case, and they’ll reel off a series of harassment incidents which, on their own, they never would have gone to a lawyer about, they’ll just have put up with it. They’d have found it pretty awful, but they couldn’t see a way of reasonably bringing a claim. It’s a very nuclear option.” Sometimes the HR department is inadequate, but often “the individual is so senior that they can operate in relative isolation”. A small employer may not have an HR department. “A garage in Scunthorpe with three people in it … I wouldn’t say it’s particular to any sector, or any large or small employer. Sadly, it’s pretty universal. And often I’ll get a bundle of cases: ‘Not only did you make me redundant while I was pregnant, you also did this a year ago.” The problem with that is the event has to be within the past three months.

Who should solve this?

We’ve got lots of policies on sexual harassment, we’ve been churning out guidance, giving training, we have a couple of hundred thousand elected workplace reps who are trained on how to tackle discrimination and harassment at work. But it really does come down to employers, unions and government. It is now the job of the institutions to take responsibility for this. It’s about women saying: ‘I didn’t do this, you allowed him to do it.’ It’s our problem and their fault.

Investing in Renovating and Selling homes

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Balogun is  a banker approaching his 55th birthday. After a 30 year career as a banker, and seeing several people make their fortunes in real estate, he has decided to become a real estate investor.

His plan is to invest in underpriced property, with the objective of renovating the buildings and selling the individual units at a higher value than the amount at which he purchased the property.  Balogun is interested in understanding the risks and opportunities of this business and he comes to us for advice.

Some things to note:

  • Using this strategy, you purchase a building that needs fixing up for N2,750,000 and then you invest N500,000 in improvements (paint, landscaping, appliances, decorator items, and so on) and you also invest the amount of sweat equity that suits your skills and wallet. You now have one of the nicer homes in the neighborhood, and 2 years later you can sell this home for a net price of N4,000,000 after your transaction costs.

 

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  • Be sure to buy a home in need of that special TLC in a great neighborhood. With most properties, the long-term appreciation is what drives your returns. Consider keeping homes you buy and improve as long-term investment properties.
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    After
  • This strategy is clearly not for everyone interested in making money from real estate investments. It is not advisable if you’re unwilling or reluctant to live through redecorating, minor remodeling, or major construction;

Before

After

  • You may not be experienced or comfortable enough with identifying undervalued property and improving it; so always make sure you get a professional opinion on each property .

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  • You should either have the budget to hire a professional contractor to do the work, or you should have the free time or the home improvement skills needed to enhance the value of a home.
  • You also need a financial cushion to withstand a significant downturn in your local real estate market, as this investment can be very cost intensive.
  • Mange your risks as much as possible!!! Make sure you do deep due diligence on the property in order to ensure that you have good title to transfer to a third party, especially since it may not make financial sense to perfect your title if you are not going to hold the property for a long period.

 

 

Managing Creditor Risk through Inter-Creditor Agreements

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James is the CEO of  HOC Global Logistics, a company which provides shipping solutions to large organisations. Having become tired of leasing cargo ships from large vessel owners, the company desires to purchase its own ships which they can use and also lease to 3rd parties. James approaches Lakeside Bank for a Term Loan to finance the $50 million transaction.

The Bank after reviewing the loan proposal filed by HOC Logistics, informed James that the transaction was larger than Lakeside bank could comfortable handle. However they are able to loan him $20 million on the security of the purchased ship. James accepts the terms and applies for loans from Cityscape Capital Ltd , HSCB, Shanghai Bank  and Union Finance Ltd. The individual loans have different terms, interest rates and security interests. The complexity of the transaction is so mind boggling that James sets up an appointment with his Lawyers to advise him on how to manage the relationships between the multiple creditors in such a manner as to enable the company satisfy all its loan liabilities. He is advised to structure and negotiate an intercreditor agreement among the several creditors, thereby ensuring he has a more convenient financing process.

An intercreditoragreement seeks to govern the relationship between a range of creditors providing finance to the same borrower. An intercreditor agreement entered into by senior and junior creditors can be expected to rank the senior and junior security, subordinate the debt of the junior creditors to that of the senior creditors, restrict the junior creditors’ rights of enforcement for a specified standstill period and impose payment freezes on the junior debt in prescribed default situations.

In highly leveraged transactions such as leveraged buyouts and certain acquisition finance transactions, funding may be structured into a number of different tranches of lenders who stipulate slightly different lending terms and interest rates for the funds they advance. Senior lenders and mezzanine lenders usually take security over the assets of the borrower, over shares acquired and over the target group’s assets. In addition, guarantees will be given by the borrower and may also be given by the target group.

The senior creditors tend to have a stronger negotiating position than do the junior creditors, so it is usual practice for the senior bank lenders and mezzanine lenders to appoint a single security agent (or security trustee) to hold the security package on trust for the benefit of all the secured creditors. The intercreditor agreement contains provisions dealing with enforcement of the security, usually requiring the junior creditors (the mezzanine lenders) to desist from enforcement for the standstill period so as to leave the way clear for the senior creditors (the senior lenders and any hedge counterparties) to instruct the security agent as to when and how to enforce their right to the secured assets.

 

The Biggest Mistakes Entrepreneurs Make when Hiring Business Lawyers.

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I do not pay my lawyers to tell me what I cannot do, but to tell me how to do what I want to do.

J.P.Morgan

Ikenna is a brilliant programmer and all round tech whiz. in 2015, he designed a classified listings website called TRUGG, which drew public attention and commercial success due to its  user centered design  and simplicity of use, as well as its global reach.

However, As his company grew rapidly, so did the rate of lawsuits filed against the company. Aggrieved users, competitors and random individuals would file cases against the company, costing the company millions of Naira in time, legal costs and settlements. After a few years of fielding these cases, Ikenna decided to seek advice from Joe, a fellow successful tech entrepreneur,  on the desirability or otherwise of retaining a commercial lawyer for his business.

A good business attorney, when fully embraced  and informed, guides the company and its management on all touch points- products, services, communications, investor relations and customer service. Your lawyer will provide vital assistance in almost every aspect of your business, from formal business incorporation to basic compliance, copyright and trademark advice, and civil, contractual, or criminal liability arising from the activities of the company.

Most small businesses put off hiring a lawyer until the sheriff is standing at the door serving them with a summons. Bad mistake. The time to hook up with a good business lawyer is before you are sued. It’s easy to get into court, but very difficult and expensive to get out once you’ve been “trapped”. Once you have been served with a summons, it’s too late–the problem has already occurred, and it’s just a question of how much you will have to pay (in court costs, lawyers’ fees, settlements and other expenses) to get the problem resolved.

A good commercial law firm should be ideally able to handle your lawsuits, negotiate your lease of office or retail space, file a patent or trademark, draft a software license agreement, advise you on terminating a disruptive employee, and oversee your corporate annual meeting.

For many entrepreneurs, the idea of consulting a lawyer conjures up frightening visions of skyrocketing legal bills. The fee a lawyer will charge to keep you out of trouble is only a small fraction of the fee a lawyer will charge to get you out of trouble once it’s happened. When you hire an attorney, ensure you draw up an agreement (called an “engagement letter”) detailing the billing method to be applied and also specifying what expenses you’re expected to reimburse. This saves from conflicts arising from billings and requests for reimbursements.

Your lawyer should tell you what the law says and explain how it affects the way you do business so that you can spot problems well in advance. However, you should note that no lawyer can possibly know everything about every area of law. If your business has specialized legal needs (a graphic designer, for example, may need someone who is familiar with copyright laws), your attorney should either be familiar with that special area or have a working relationship with someone who is.

You should be able to communicate openly and freely with your attorney at all times. Good looks and a dynamic personality are not as important in a lawyer as accuracy, thoroughness, intelligence, the willingness to work hard for you and attention to detail. Look out for a lawyer who believes in your business and who is willing to go above and beyond the call of duty in managing the risks of your business and resolving any issues that may arise before they start.

Investing in Lagos Real Estate Companies: The Pros and Cons

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Okeke trades in furniture and fittings at a major market in Onitsha. In addition to his business, he owns a substantial number of houses within Onitsha and environs.  One day whilst attending an exhibition in Lagos, he was approached by a young marketer for a real estate company; the marketer had been tasked to sell some real estate located around the Lekki Free Zone and Okeke looked like the perfect buyer.

The marketer launched into a seductive pitch about the prospects of the area and the opportunity for amassing immense profits, especially due to the development of a refinery in the area by a major investor and industrialist. As a businessman with an eye for profit, Okeke was intrigued by the opportunity to multiply his capital, but he requested for time to seek advice from his lawyers before investing the substantial amount required, especially having heard horrible stories of the dreadful omonile and their penchant for violence in land matters.

There has been a boom in investment in vacant real estate over the past decade; however this boom seems to be driven by certain misconceptions which have been fed by advertising campaigns and the mass media. This misconception is that land values appreciate at a rate which exceeds rates of return on alternative investments such as treasury bills, stock or other asset classes. These misconceptions have led to the growth of a speculative bubble which seems to have driven the costs of real estate beyond reasonable levels.

In general, by investing in developing the land you may destroy an option and at the same time you may create other options. Vacant land represents an option of retaining it in its vacant form and expecting an increase in value of the land, or turning the vacant land into a development, thereby increasing its intrinsic potential for value creation through the injection of capital. The computation of the value of land requires the calculation of current and future construction costs, as well as current and future market prices of real estate in the area where the land is located.

Prior to purchasing land, it is pertinent to have an idea of the use to which the land is to be put, including the proposed structures which are to be constructed upon the land and the market prices or rental values such structures would fetch in the future based on the surrounding properties in the area. In calculating the values of the property, provision should be made for the probability that the property may fall in value in the future.

It would be wise for Okeke to first conduct a search on  the title of the sellers, especially since a number of real estate marketing companies do not perfect their title before commencing the sale of the properties, a situation worsened . This will protect him from any nasty surprise which may arise from defects in the title of the seller. These companies sometimes acquire their holdings by sponsoring the perimeter survey or excision (popularly known as gazette) of property belonging to a community. This implies that several of these properties have defective title from the beginning and should not be purchased if possible.

After ascertaining that the sellers hold good title to the property, Okeke should ask for all the charges and costs arising from the purchase of the property. This is because a number of real estate companies add certain fees and levies to the cost of the estate, ostensibly for the development of the estate, although several fail to use the funds for any such purposes. Their  refusal to develop the estate often slows the  pace of development within the estate, as well as the rate of appreciation for properties within the estate

 

We hope these tips will prove useful to you as you begin to navigate the world of real estate investment. For further information and consultancy, we may be contacted directly on +2348036258312, or by email on : info@miltoncrosslexng.com.

Your Landlord must give you a rent receipt!

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Chinyere came into Lagos in 2008 with dreams of getting a good job with a juicy pay package. She started out staying with a friend in Akoka, until she was able to rent a miniflat in Bariga in 2010. After taking several low paying jobs, Chinyere got a marketing position with a new generation bank in Lagos Island and began preparing to enjoy life as a banker. She sub-leased a room in a 2-bedroom apartment located at Ikoyi from her co-worker Adenike. it was agreed that in consideration of the use of the room and common areas in the apartment, Chinyere would pay Adenike an annual rent of N500,000 to the existing tenant, being 50% of the N1 million charged on the property

Things went relatively well until Chinyere had a minor disagreement around 18 months after Chinyere moved in. After the disagreement, Adenike became hostile and and disagreeable towards Chinyere with the object of making her uncomfortable in the house. At the end of the tenancy, Adenike informed Chinyere that she would not be renewing the tenancy and as a result, Chinyere would be required to quit the room she was occupying with immediate effect.

Chinyere was shocked beyond belief! This possibly could not be legal. From her little knowledge of the law, an annual tenant was entitled to 6 months quit notice. She confronted Adenike with this information, and Adenike bluntly informed her that she was not  tenant but a mere occupier who could be summarily required to quit the premises, asking her to present any proof of rent payment or a tenancy agreement between the parties. At this point Chinyere was flummoxed! it appeared she had been hoodwinked by her friend; she sought out legal advice to understand whether she had any rights against Adenike, or if her rights were extinguished by the lack of a rent receipt.

Chinyere’s case is special, because amongst other provisions, Section 1 of the Lagos State Tenancy Law 2011 provides that the Law would not apply in the Ikoyi Area- However, this does not preclude her rights as a tenant.

It has been severally stated by the different courts that a tenancy relationship is deemed to exist where exclusive possession of a premises or a portion of a premises are granted by the landlord/sub-lessor to a Tenant/Sub-Lessee, for valuable consideration-no matter how small such consideration may be. This implies that the rent must have been paid in cash for this provision of law to apply.

Furthermore whilst Section 5 of the Lagos state Tenancy Law expressly criminalizes the non- issuance of a tenancy receipt, the law stipulates that once the tenant can prove that a rent has been paid, a tenancy will be deemed to have commenced in favor of the tenant and the Landlord cannot claim that a tenancy does not exist, even though a written tenancy agreement may not exist in the circumstances. Thus it is advisable for the tenant to always have proof of payment of the rent, either in form of a teller, an acknowledged photocopy of the cheque used in the payment of the rent, or any other proof of payment.

Consequently, having received monetary consideration, Adenike is precluded from evicting Chinyere without following the due process of issuing the statutory 6-month and 7-day notices. In this situation, Chinyere may take the matter to the Citizens Mediation Centre to facilitate the amicable resolution of the matter, or she may proceed to the courts to enforce her legal rights.

More Real Estate Investment Strategies that will Make you Rich 2

Flipping Real Estate

Flipping

Outside Nigeria, flipping houses is one of the more popular tactics for making money in real estate, due largely to the numerous shows on cable TV that promote it.  House flipping is the practice of buying a piece of real estate at a discounted price, improving it in some way, and then selling it for a financial gain. In reality, the flipping model is quite similar to the “buy low, sell high” model of most retail businesses.

The most popular type of property to flip is the single family home. Following a rule of thumb known as the 70% rule, an experienced house flipper will buy a home for 70% of its current value less any rehab costs. For example: Home A should be worth N1,000,000 if it were in good condition, but it needs N200,000 worth of work. A typical house flipper will purchase the home for N500,000 (N1,000,000 x 70% – N200,000) and seek to sell it for the full N1,000,000 when completed. This is simply a rule of thumb, and actual numbers must be verified by a qualified construction expert and adjusted to ensure a successful and profitable flip.

Flipping is not a “passive” activity, but instead is just like an active day job. When an investor stops flipping, they stop making money until they begin flipping again. Many investors choose to use flipping to fund their day-to-day bills, as well as provide financial support for other, more passive investments.

More Real Estate Strategies that will make you Rich

Continued from Yesterday’s post….

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Now that we know the various types of real estate investments an investor can undertake, it is time to look at the different strategies an investor can use to unlock value from his real estate investment. While you can use any of the investment vehicles discussed yesterday in your career, you must next learn an investment strategy that you can apply to that niche. As an investor you will use a variety of strategies when dealing with these investment niches to produce wealth.

This article series explores three of the most common strategies that you can use to make money in real estate.

Buy and Hold

Perhaps the most common form of investing, the “buy and hold strategy” involves purchasing a property and renting it out for an extended period of time. It is probably the most simple and purest form of real estate investing that there is. Essentially, a “buy and hold investor” seeks to create wealth by renting the property out and either collecting monthly cash flow or simply holding the property until it can be sold for a gain in the future. the advantage is that the investor may receive cash flow from renting out the property.

By far the most common mistake that we see new investors make with this strategy is buying bad deals because they simply don’t understand property evaluation. Other common problems include underestimating expenses,making bad decisions on tenant selection, and failing to manage properly.

These mistakes can all be avoided, however, if you simply learn the business; jumping in without proper education can be extremely costly financially and sometimes, legally.To properly carry out the buy and hold strategy, an investor should learn how to properly identify the ebbs and flows of the market that a property is located in. Ultimately, when they perceive the market and the properties they are interested in to be at a low point (prices low, inventory high), the buy and hold investor seeks to purchase properties. When the market becomes over-heated, an experienced buy and hold investor will usually stop buying until they see things settle back down. During these slow periods, they may sell or simply continue to hold their properties.

Real Estate Cycle