You continually hear about people who made fortunes investing in the stock market, and you also hear about other investors who lost everything in the same market. In the Real Estate investment arena, you hardly ever hear about those who go bankrupt because of two reasons: First it’s such as lucrative business, and Second, only the success stories are spread around – not the horror stories.
Those people who learned how to invest correctly in Real Estate many years ago are living a very comfortable lifestyle. By wisely investing in Real Estate you can definitely harvest lots of money and achieve financial freedom. If you’re just getting started or are considering investing in Real Estate, you need the following information.
Take the jump and embrace the risk.
You never hear how much money can be made by investing in Real Estate. This secret has got to be the best kept secret. If everyone knew, everyone would be doing it, right?
Wrong. Everybody knows the wealth and fortune that can be had. Most people also realize that when you make the decision to invest in Real Estate it requires very special skills and vision. There are those who begin without any of these skills and absolutely no vision and fail miserably. People know this and this is why everyone is not jumping into this increasingly popular movement known as Real Estate Investing.
The majority are not willing to take the added risk that Real Estate investing entails. This group of people is the one who can make you rich – they are called tenants. There are tens of thousands of people for each one person like you who are willing to jump in get educated, set clear goals, and begin to invest in Real Estate.
What’s your future?
When most people get started investing in Real Estate – and this included me – they don’t have a clear vision of the future. All we want is financial freedom and have heard of others achieving this using Real Estate as the platform. I have learned, of course by paying the price in many ways and on many different levels, how to be successful. I realized that I needed to set goals and develop a plan of action. I had to have a vision that showed me where I was headed and take the necessary steps toward that vision then true success arrived.
Investing in Real Estate requires commitment to the business which in turn requires a lot of time. You need to deal with an infinite assortment of tenants – good ones as well as bad. You have to operate like any other successful business dealing with operating and fixed expenses including heating and electrical bills, as well as acquisition and renovation costs.
Advantages include scheduling your own hours, and in most cases getting rid of the suit and tie because you set your own dress code. Being in business for yourself has so many rewards such as not having to deal with a bossy boss, or others who are on the road to nowhere.
You get to choose great vacations or get away for weekends and while your gone the money keeps coming in, rents keep accumulating 24 hours a day 7 days a week. The mortgages keep getting paid down. Your Real Estate business becomes passive.
Endless benefits abound when you become a Real Estate Investor.
Other than being your own boss, having a business that can be passive, enjoying the freedom of enjoying the luxuries of life, increasing your net worth, and if you don’t already – having a place of your own to call home there are even greater benefits to being in this great Real Estate Business.
1. Cash Flow – Cash flow is generally considered the amount of cash left over every month after paying all the expenses on your income producing property. In other words, cash flow is the difference between your income and your expenses. However, cash flow could also be a negative number.
Many people who do not understand the time value of money prefer to reduce debt by paying off their mortgage as fast as possible taking all the “extra” cash and deepening either a negative cash flow or zero cash flow. I suggest you take in the extra cash and reinvest it into other properties. Also having extra cash will open up more opportunities and provide more options.
2. Appreciation – Property values have always gone up in value when held for long term investment. You also have the opportunity to “force” the appreciation by making strategic improvements to the property.
In its most basic definition, appreciation is the increase in value of a property. There are two kinds of appreciation. The first is economic caused by factors such as inflation that occur in the market that are beyond your control. Real Estate ownership has always been a major hedge against inflation for its owners. The second is the forced appreciation such as you are improving through renovation or increasing the rental income of the property. This second method is what most investors accomplish in a very short timeframe, allowing them to either refinance with cash out or resell the property for great profit.
3. Leverage – Leverage is based on the unique ability to finance the acquisition of a property. One of the best advantages of Real Estate investing is controlling the investment by ownership, while borrowing the funds to purchase it from other people. This is known as OPM (Other People’s Money). The ease at which money is available for Real Estate offers a high degree of leverage compared to any other investment. This also makes Real Estate the best investment one can have.
Most buyers can put down as little as five percent of a purchase price. That means that only $5,000 could control a $100,000 property. If the property increases by only five percent each year the owner realizes 100% return on his $5,000 cash down payment! I don’t think you’ll see that much return on your Certificate of Deposit at the local bank!
4. Amortization – There is a repayment schedule when you use Leverage (OPM) as described above. Typically, each month when you make a payment on the loan the amount is divided into two parts. The first goes to pay interest on the loan, and the other goes to your outstanding balance (principal) which reduces the debt. Over the course of time the loan is completely paid off – usually by your tenants. What a great business – someone else pays off your loan and you get all the benefits.
5. Tax Advantages – There are numerous tax advantages that go along with owning investment Real Estate. You can typically deduct the interest payments and all other expenses on your taxes. One of the best parts is that the Internal Revenue Service states that you can take the price paid for the buildings and other improvements on the land and receive a portion of this back every year. The IRS basically is saying that the property is going to fall down and be worthless at some future date. Currently for Residential rental property they think it will turn to dust in 27 ½ years, and if it is commercial property it will fall down in about 39 years. Is this unbelievable or not! It’s TRUE! Talk to your tax preparer.
Owning Real Estate investment property is definitely a great way to accomplish financial freedom. There are many who have made money in other businesses, then placed it into Real Estate to find that they begin to make more in this great business than they did in their other businesses. Then there are those like me who have made the money in the Real Estate business and keep it there.
Beware: There is a learning curve to investing properly. Go to all the local investment meetings you can. Learn from the mistakes and successes of others. Take seminars and read books on the subject. Then jump in and begin the greatest thrill of your life.
-Yours in Real Estate Success, I’ll See You Over the Top,
Alan David Kosinski, Life Extraordinaire AlanDavidKosinski.com