Real estate investing is a fast, safe method of wealth creation; buying property has always been popular. For various reasons, it’s a good time to own a second home or invest in real estate. Some folks desire a second home in a more moderate climate while others, wishing to diversify their income, are considering real estate investment because of the increased foreclosure rates brought about by the recent sub-prime mortgage fiasco.

Whichever option you choose, the process will be simpler and smoother if you factor in your lifestyle needs and your plans for the acquired property. Generally, if you're looking for a place to spend the winters or take weekend getaways, then you're considering the purchase of a second home. If, however, you're looking to generate income or diversify your investments, you fall into the real estate investing category. In either case, you're entitled to different tax deductions depending on how the property is used.

The criteria defining a second home are fairly loose. A second home doesn't necessarily mean a house — it could be a condominium, a recreational vehicle or even a boat. For your property to be a second home by IRS standards, it needs to have sleeping accommodations as well as cooking and toilet facilities.

A second home qualifies for an annual home mortgage interest deduction, just like your primary residence if you're also using it for personal use. You can still rent it out, providing that your personal use exceeds 14 days or 10 percent of the time it was rented — whichever time is greater. Also, if you rent your home for fewer than 15 days a year and live in the home for more than 15 days a year, you do not need to declare the rental income. As everyone's real estate investing circumstance is unique, you should be sure to consult a tax professional.

You'll probably want to work with a local Realtor^® to help with your real estate investing transaction, especially if you're considering an out-of-state purchase. A knowledgeable real estate professional can advise you of any factors that might limit the use of your property — such as having it be located in a historic-district where the strict design, remodeling or building code enforcements would affect your development options. If you're not willing to take on property maintenance hassles, you should either hire a property management professional or consider buying a condominium.

It may seem counterintuitive to search for a property when the housing market has deteriorated but, in fact, it may be the optimal time for real estate investing. Real estate investors are finding bargains everywhere, particularly in the formerly hot housing markets of Florida, Nevada and California.

The real estate investing horizon is flush with opportunity for those with the money and know-how to snap up a property and flip it, but to make money you must:

These days, many folks are also turning to investing in commercial retail properties. To get started, you should attend a local real estate investing meeting and make it known that you’re an active investor. Someone may be able to direct you to the perfect property or, failing that, you may obtain a referral to a commercial real estate agent who can provide further assistance.

Today, it's not hard to find a promising piece of Commercial Real Estate (CRE); the hard part is getting the real estate investing deal financed. Any loans available are being underwritten much more conservatively — Loan-to-Value (LTV) ratios are much higher and lending parameters much tighter. CRE property sales transactions have dropped off dramatically with the financing being more costly and difficult to obtain. Although CRE markets will continue to weaken, they should avoid the kind of collapse seen currently with residential real estate.

Thousands of borrowers with excellent property proposals have had their loan requests rejected. Consequently, many a frustrated real estate investing borrower has turned to the private commercial mortgage lenders who have stepped in and filled the void created by the credit crisis. Privately owned, commercial mortgage lenders are not subject to State or Federal banking regulations — their loans carry higher interest rates and more origination points, but these “hard money” brokers can be more flexible in their lending decisions and can close and fund multimillion dollar deals quite quickly.

You should be aware, with commercial loans:

• There is no such thing as 100% financing.
• If you have a FICO score below 600, you can expect much higher interest rates (if a lender can even be found for your project).
• If you want a construction loan, you will need to be able to fund at least 30-40% of total project cost. High leverage construction loans are only available if you have high net worth and are an experienced developer.
• Small loan amounts are often the toughest to obtain and have the most problems — don’t waste your time on loans under $200,000.
• Apartment loans normally take 45-60 days from receipt of a signed Letter of Interest (LOI).
• Lenders order the appraisal — the typical turnaround is 3-4 weeks.
• Always review the purchase contract. If the time involved is short, you need to insure that an extension is possible. Many a deal has collapsed because a seller has not extended a contract when the buyer assumed that they would.
• Commercial loans generally take 45-60 days to complete.
• When talking about LTV, every deal is based on the cash flow (net income) of the property.

Commercial Finance lenders hold the loans that they make in their own portfolios; this means that they are not dependant on the secondary mortgage bond market for liquidity and are largely unaffected by the current credit squeeze. Hard money lenders typically charge interest rates in the mid to high teens with 3 or more origination points. Today, private lenders are fulfilling an important role in the real estate investing marketplace — without their lending activities, the liquidity crisis and our country’s economic problems would almost certainly be worse.

The upshot for borrowers is that they'll have to pay more. The real estate investing challenge today is access to capital rather than the cost of capital. Interest rates are at historically low levels (meaning that money is inexpensive), yet lenders aren't lending and borrowers aren't borrowing — this indicates that the market is frozen due to liquidity concerns.