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If you are looking to private investors for business funding, then you better be ready to answer some serious questions. The following ten questions will always be asked by savvy investors, so make sure you can rattle off these answers on demand.

1. What type of products or services will your company provide? Give them a quick summary of your company and its business model.

2. Why would someone use these products or services? When they ask you this, they are trying to find out if there is an actual need for your services. Is your company providing a solution to a problem? Or are you hoping it?s a solution to a problem that doesn?t really exist in the first place?

3. How much capital are you looking to raise? They?re really saying, why do you need this much money? Make sure you can back this up with accurate financial forecasts.

4. What kind of return can I expect and when? This is the one question that you can never answer with any certainty. You need to be honest with them right off the bat. If you give figures that are too high and you don?t reach your goals, you will lose credibility. However, aim too low and you won?t attract many investors. It?s a very thin line to walk. A savvy investor will look way beyond just financial figures anyway. They generally will invest in the better overall package rather than a mediocre operation with only high financial projections.

5. How much profit will your company make? This is a relatively easy question to answer, right. Only if you?re an existing company with a steady customer base. Profit = unit price times quantity sold minus expenses. This is very simple math to calculate. It has no fancy formulas in it and is virtually foolproof. That is, only if the figures injected in the formula are true. Most novice entrepreneurs over estimate the units sold portion of this formula and under estimate expenses. The end result is over inflated profits. When these are not met, someone will have some explaining to do. When preparing financial statements, under estimate sales and over estimate expenses. This will give you more accurate profit numbers. It will lead to a lot less headaches later.

6. How much money do you have invested in your venture? This is a question that can be embarrassing to answer if you don?t have any money invested in your own project. Having money at stake in your venture shows that you truly believe that it will be successful. Even if it is only a small amount, having your Read more…

Owning investment property is a tremendous wealth building strategy. Thousands upon thousands of individuals have amassed great wealth by investing in rental properties.

Unfortunately, few investment property owners learn how to leverage equity in a way that maximizes tax deductions while creating and locking in equity gains. Instead, they leave themselves open to price fluctuations in the residential property market. These fluctuations can wipe out or severely reduce equity positions in property.

Housing Boom To End?

There is little doubt we are coming to the end of a huge boom market in residential properties. For the last four years, properties have appreciated at unheard of rates. The question, of course, is what happens when the market cools off? Will we simply see a price plateau or an actual drop in prices? While nobody is sure, the clear consensus is property owners should move to preserve equity while they can.

Protecting Equity Gains

Protecting equity gains in your investment property requires careful planning. This leveraging strategy is fairly simple, but can sound complex. Please keep in mind this is just an introduction to the investment property tax strategy. You will need to contact us to learn more.

The investment property tax strategy protects your equity gains by separating and leveraging them. The leveraging process is best explained with an example.

Scenario 1 – Without Tax Strategy

Assume you purchased a rental property in 1999 for $250,000 with nothing down. As of July 2005, the combination of loan payments and appreciation has resulted in a gain of $250,000. You have amassed wealth, but all of it is at risk. If prices drop twenty percent over the next year, you will lose $100,000 of your equity in the rental property.

Scenario 2 – With Tax Strategy

We are going to use the same exact scenario. It is July 2005, you have $250,000 in rental property equity, but all of it is risk. You decide to implement the investment property tax strategy and the following occurs.

Our goal is to protect the $250,000 in gain on the rental property while also maximizing tax reductions. The first step is to refinance the property with, typically, an interest only loan. A percentage of the equity gain is taken out of the property and placed into an equity index insurance product. The equity percentage is arrived at by determining the payment amount you can afford on the loan. Typically, it is tailored to match your current loan payment amount.

Going back to our scenario, what happens if property prices pull back 20% over the next year? You do not suffer the loss of $100,000 because the gain is sitting in your equity index insurance product. Essentially, it is a wash and you have protected the capital gains while capturing a stock market-based rate of return.

Ah, but it gets better.

Equity Index Insurance

The investment grade insurance product isn’t just any policy. Instead, the policy we use is tied to a stock market index. What if the stock market suffers a loss? Not to worry, this policy carries a guarantee that you will never lose a dollar, even if the market crashes. If the stock market did crash, the policy would simply credit you with nominal growth for the year in question. In all other years, the policy would grow with the stock market. On top of all of this, the money in the insurance product grows tax-free.

So, what has been accomplished? First, you have protected your rental property equity gains from home price fluctuations. Second, you have leveraged your equity into two growth channels, the stock market and appreciating house prices. Third, you have converted taxable growth [property appreciation] into tax-free growth [insurance].

With housing markets ready to cool down, this strategy effectively locks in your profits. Preserving equity gains should be a primary goal of any investment property owner.

Equity investing refers to an investor or perhaps a fund buying a share of stock and then holding it. This is done with the expectation that the stock will provide some form of income whether it is from dividends or capital gain due to rising stock value. Equity investing can also mean partial ownership of a private company not listed on the stock exchange. In some cases the companies are fresh startups. This is called venture capitalism and is a substantially higher risk then investing in an established company with an established track record.

Most equities that an individual investor holds are in the form of mutual funds as part of a pool of investors. Mutual funds are professionally managed funds that allow a diverse portfolio to minimize risk. To identify a good stock for the purpose of holding, there are two methods used. One is Technical analysis and fundamental analysis is the other.

Technical analysis is a study of the price history of a share compared to the price history of the market as a whole. Fundamental analysis involves the study of all financial data to forecast trends in relation to stock market activity. Once a good stock has been determined, they are usually held in order to receive a dividend or the value from capitol gains. The additional appeal of a mutual fund is in the fact that as more of an investor’s money is put into the fund, the more the investment will be affected by market increases.

Dividends are payments that a company will make to shareholders when the company is making a profit. Normally a board of directors on a quarterly basis decides the dividends. Even if a company posts a loss for a quarter, dividends can still be issued based on previous earnings. Since shareholders are part owners of a company their primary interest is that the business provide a profit.

Dividends can be issued by paying out cash to shareholders based on the number of shares they own. Stock and property dividends are also other ways a profit can be paid out to share holders. For a stock dividend additional shares are issued to owners based on a predetermined percentage. Property dividends are paid out by issuing assets from either the issuing or the subsidiary corporation.

Some companies avoid paying out cash dividends in order to reinvest the money into the company. This allows companies to expand, increase budgets and invest in other ventures. In some cases this can serve as a protection for shareholders since they could possible be taxed double because of income tax laws.

A common way for investors to deal with cash dividends is to enroll in a dividend reinvestment plan. This allows the holder to continuously buy small amounts of stock without a commission. Increasing the ownership in a company increases equity.

There are certain tax ramifications due to capital gains; a professional tax specialist should be consulted in order to properly prepare for the taxes that may be necessary due to an increase in capital assets. IRS tax laws are very clear when it comes to defining an asset. Basically anything a person owns can be considered a capital asset, by selling capital assets at a profit, that profit is considered taxable.

Just after the end of the Carter housing boom, Jimmy Napier wrote a best selling book he titled “Invest in Debt”. His timing was perfect. In most areas of the country, interest earned on money loaned exceeded by far the profit earned on equity appreciation. It’s pretty easy to figure out why: Suppose you bought a house financed at 8%. Every $100,000 of loan would earn $8000 per year. A $300,000 loan would pay the lender $2000 in income per month in interest with little or no effort on his part at all; and virtually none of the liability associated with real estate ownership.

Suppose an “interest only” 8% loan were written with the balance due at the end of ten years. During this time, let’s assume that the lender had been able to collect all payments on time, and had immediately invested the payments so that they would continue to earn 8%. The 120 payments of $2000 each would have compounded to $366,000 in addition to the return of his principal.

The price paid for this income would be loss of depreciation, which would be recaptured at the 25% tax rate if the house were sold; and loss of appreciation. On the other hand, there would be no property taxes, maintenance, or insurance to buy. The borrower’s house would have to appreciate at 8% per year — plus $2000 per month, plus the costs of holding the property in excess of income –to produce the same net return to the owner as it did to the lender; and it would have to have no other expenses.

To keep everything equal when comparing profits, we’ll assume that the lender was a Pension Plan, IRA, or Tax-free Trust that paid no tax on its investment profit. Let’s look inside the numbers: If the house were the personal residence of the borrower, it couldn’t be depreciated. Other than providing shelter, the only benefit of ownership would be tax free appreciation. The cost would be the loan payments. The $2000 per month cost of interest plus property taxes, insurance, HOA fees, and maintenance would increase the investment. These would have to be repaid prior to any profit being realized. Using the same figures as before, these are as much as $375 per month for some people not counting maintenance. This could easily add yet another $200 per month. Over a decade, if everything remained constant, about $309,000 would have been spent on this house. If it were sold tax-free, net profit over the mortgage would have to be about $366,000 in excess of $308,000 in expenses just to keep pace with the profit the lender would have realized.

If both lender and borrower paid federal tax only on their profit, assuming each paid 25% of their income out in taxes, the lender would have only been able to re-invest $1500 per month at 8%. This would have totaled a little over $274,000. Ignoring Alternative Minimum Tax and selling costs, the borrower would have had to be able to net about $777,000 before tax to match this.

The essential difference between the investment yield of the house and the mortgage is the speculative gamble on appreciation and liability versus regular monthly income from a secured loan. When leveraged appreciation compensates for risk and possible negative cash flow, it pays to buy houses; but when it does not, it makes a sense to consider being a lender. When a house is your residence, there is little tax shelter per se. For rentals, at best, only $25,000 per year expenses in excess of income can be deducted against non-passive income. Any excess expenses must be carried forward until the house is sold. This could amount to many years.

There are many ways to become a lender, even when you have very little cash to work with. The essential requirement is that you find houses you can buy by combining existing financing with seller financing; then to sell them on wrap-around contracts or on wrap-around loans at higher prices and interest rates

Here are some of the important aspects of what you should know about home equity loans. Home equity loans are one of the most attractive borrowing tools for homeowners. The interest rates of home equity loans are tax deductible. The interest rates of home equity loans are much lower than other types of loans and they are easy to acquire.

The other important aspects of what you should know about home equity loans is that the borrower can loan up to eighty percent of the equity of their home. However like everything else, there are risks with home equity loans.

One of the most important factors of what you should know about home equity loans is that if you obtain a home equity loan you are putting your home as collateral. In order to understand the complex details of what you should know about home equity loans, you must first understand the basics terms of home equity loans.

Equity is one form of a secured loan. In the case of home equity, the loan is secured through the borrower?s property and equity is the amount of your home value that you can borrow.

One factor of what you should know about a home equity loan is that you can not sell the portion of your home that is covered by the home equity loan. You can get hold of the money through a home equity loan through a second mortgage or refinance your home equity loan. The good thing about a home equity loan is that you can do whatever you like with the money.

If you are thinking of doing some home improvements, applying for home equity loans is advisable. Also if your home is worth a lot more than you will be paying for it, a home equity loan is a great way of taking advantage of a financial opportunity.

The 3 Types of Home Equity Loans

There are three ways to make the most of the equity of your home:

* By refinancing your first mortgage and taking advantage of your equity possibilities, for example, debt consolidation program or cash out option.

* By adding a home equity loan and leaving your first mortgage in tact.

* By opening a home equity line of credit.

Through those ways, different types of home equity loans can possibly be chosen for whatever suits your financial situation.

1. Through refinancing, you are shifting the debt from various bills (with all the different rates, payments, and due dates) to one lender at a lower interest rate with a Read more…

How much financial bloodshed is necessary before we realize that there is no safe and easy shortcut to investment success? When do we learn that most of our mistakes involve greed, fear, or unrealistic expectations about what we own? Eventually, successful investors begin to allocate assets in a goal directed manner by adopting a realistic Investment Strategy… an ongoing security selection and monitoring process that is guided by realistic expectations, selection rules, and management guidelines. If you are thinking of trying a strategy for a year to see if it works, you’re due for another smack up alongside the head! Viable Investment Strategies transcend cycles, not years, and viable Equity Investment Strategies consider three disciplined activities, the first of which is Selection. Most familiar strategies ignore one of the others.

How should an investor determine what stocks to buy, and when to buy them? Will Rogers summed it up: “Only buy stocks that go up. If they aren’t going to go up, don’t buy them.” Many have misread this tongue-in-cheek observation and joined the “Buy (anything) High” club. I’ve found that the “Buy Value Stocks Low (er)” approach works better. A Google search produces a variety of criteria that help to identify Value Stocks, the standards being low Price to Book Value, low P/E ratios, and other “fundamentals”. But you would be surprised how the definitions can vary, and how few include the word “Quality”. In the late 90’s, it was rumored that a well-known Value Fund Manager was asked why he wasn’t buying dot-coms, IPOs, etc. When he said that they didn’t qualify as Value Stocks, he was told to change his definition… or else.

How do we create a confidence building Stock Selection Universe? Simply operating on blind faith with one of the common definitions may be too simplistic, particularly since many of the numbers originate from the subject companies. Also, some of the figures may be difficult to obtain quickly, and it is essential not to get bogged down in endless research. Here are five filters you can use to come up with a selection universe of higher quality companies, and you can obtain all of the data inexpensively from the same source:

1. An S

Do you know what the top tips are for picking stocks are? No one can tell the future, but we have compiled three of our top tips to getting your investment portfolio to make some real returns in the future. Just because a stock is hot, it doesn’t mean that it’s a really good long term pick for your portfolio. The front page of the New York Times can tell you what is hot, lets take a look at some different tips for the investing world in general are.

1. Do your research. Just because something is trading at 5 times earnings, doesn’t mean it’s an incredible deal. In fact, just the opposite might be true. If its really supposed to be trading at something like 10 times earnings, why do you think it’s so low? The old adage: ?if it’s too good to be true, it probably is? holds firm in this situation. Big Wall Street investment houses spend years trying to run various numbers and calculations on different scenarios to determine what the exact valuation of a stock might be. If a stock’s valuation is too low, there is a good chance, that the stock might have some problems associated with it, like impending competition, government inquiries, or even litigation problems.

2. Go with what you know. If you are a computer software engineer, you might be best Read more…

The term financing is commonly used to explain the acquisition of loans from banks or other financial institutions. Financing is usually provided to business owners, either to be utilized as start-up capital or to support an on-going business. Some businesses may require financing to help them through a rough patch, or simply to provide some liquidity until more current assets are turned into cash. Additionally, financing is also given to companies who are expanding their businesses rapidly and require the money to support their new operations and facilities.

Due the high interests and high risks that come with financing, small business owners are often compelled to evaluate their situation from all angles before making a financing decision. This is because there is a full range of loan types available in the market, each of them for different purposes and with different interest rates, repayment terms and loan terms. Apart from that, business owners do not want to miscalculate their loan amounts, as obtaining a greater loan value will mean a higher liability to the company, while getting a smaller loan will produce a situation of inadequate financing.

Inversely, banks or financing institutions function to provide financing facilities in order to make profits from the interest payable by the borrowers. In return, they obtain a monthly repayment amount from the company, including interests. Banks usually provide loans through the pledge of fixed assets to the banks as collateral. In the event of payment default, the lender will sell the assets to recover your debt to them. However, there may be cases that lenders provide loans without the need for collateral, but with a higher interest and more stringent qualifying procedures.

Apart from obtaining financing from lenders, small business owners are also eligible for loans from government fund agencies such as the U.S. Small Business Administration (SBA) or the local state governments. These agencies provide financing to help spur the growth of small businesses in the country, and usually impose criteria that are more flexible as compared to banks. In the Small Business Loan program run by the SBA, they act as a guarantor for the borrower in order for them to obtain loans of a longer term from SBA’s lending partners.

All the financing sources mentioned thus far are generally known as debt financing. This type of financing would be ideal for companies that have a high equity to debt ratio, which means that the owners of the company has invested more capital as compared to the amount of debt obtained. However, in cases where the equity to debt ratio is low, it may be difficult for a company to obtain debt financing. Therefore, the alterative to this Read more…

It has been said that the way to earn the most from your investments is to keep careful track of them. But be very cautious before accepting this advice at face value; it may very well create more problems than you realize.

The more you pay attention to your own investments, the more you become psychologically vested in their performance. There is a proven tendency to keep an investment after a loss to avoid the pain associated with that loss, or to sell an investment after a gain to experience the feeling of a ?winning choice.? This is known as the disposition effect. Either action would be an example of using the wrong criteria for an investment decision, and most often, it leads to lower overall performance.

Perhaps you?re saying, ?Not a chance! I don?t sell my investments because they?ve done well, I keep them because they?ve done well!? In that case, you have just brought up another psychological pitfall?forming expectations of the future based on events of the recent past. This is one example of a concept known as herding, and it?s potentially hazardous. In the market, there is actually a reverse correlation between the recent past and the near future. In other words, if a segment of the market has done really well in the last three months, it is more likely to under-perform in the following three months, rather than continue its Read more…

It is simply getting ridiculous the charges credit card companies are imposing on consumers who are late making payments. Yes, creditors have a legal right to do what they are doing, however ethically speaking that is certainly open to debate! Let’s look at some ways you can avoid costly credit card late fees:

1. Pay your bills on time. This one is obvious. When you get your bill, open it up and pay it right away. Waiting means forgetting or hoping that your payment arrives on time.

2. Pay online. Paying via your computer is faster than mail services, but there is still some lag time from when you authorize a payment and when the payment is finally credited to your credit card account.

3. Automatic payment. If your credit card provider permits it, have them automatically deduct a set amount from your account every month. That way they’ll get their funds well in advance of their due date.

4. Fight it. Just because the Read more…