Real Estate Investing:
Are you ready to start making serious money in real estate?
If you aren't getting the financial results you want, you MUST try something new. Working harder with the wrong formulas won't get you better results. Don't work harder, make your money work harder!
With real estate values up 38% and the stock market down $7 trillion, ask yourself, "why am I still doing the same old thing?"
Corporate downsizing and the stock market meltdown are leading people back to the inescapable conclusion that there is only one reliable road to financial freedom: real estate investing! No other investment has created so many consistent financial success stories. Multi-level marketing, home-based businesses and corporate franchises come and go, but real estate has stood the test of time.
"With the stock market looking ugly, pouring money into real estate is looking pretty smart"
This, according to a recent article in Fortune Magazine's. "Since the major housing organizations began keeping records in the 1960s, there has never been a year in which the average existing U.S. residence lost value."
Retire? Retire with Real Estate investments?
Why should you believe this?
You don't have to believe right now... However, the time you spend here looking around will help you become wiser in your quest to retire. Retire early. Retire young (if you are younger -- if you happen to be getting along, then perhaps this is your only option!)
What if you don't like or agree with this theory?
If you don't like this stuff, then you will have only wasted time...
So Why Real Estate Investments?
Easy... No Money or Credit required... The pulse quickens in anticipation. You can qualify for that!
Is that you? If so, welcome!
Why use real estate as the vehicle?
Because banks will loan you money on real estate. Try that on stocks! Go to see your banker and ask him if he will loan you some money to buy Enron shares...
Because there are tax advantages in real estate that are not available in any other investment vehicle.
Because a large percentage of people in the United States do not own their own home and therefore HAVE TO PAY RENT! And guess who they pay this monthly cash flow to...
Why Real Estate as Your Retirement Vehicle?
Investment real estate possesses attributes that address many of the problems inherent to acquiring a nest egg solely through the use of equities. One important advantage is that the total return derived from real estate is not limited to appreciation alone. This is important to investors in the accumulation phase, as appreciation is the least predictable component of total return. The real estate investor also derives returns from equity buildup, cash flow, and tax savings.
To counter the common misconception that the only returns available from real estate investing are derived from appreciation, I offer the following:
There are four kinds of returns which are available from a typical investment in income-producing real estate. Depending on how the deal is structured, some or all will be present to one degree or another.
1. Cash Flow. This is basically the money that still remains from the gross rent receipts after all expenses are paid.
2. Equity Buildup. This occurs incrementally with each and every mortgage payment made on the underlying debt. A portion of each payment goes to reducing the principal value of the loan. The shorter the loan amortization period, the greater the percentage of the payment that applies to principal reduction. As the debt is reduced, the amount applied to the principal balance gradually increases.
3. Tax Savings. There are very few legitimate tax shelters left for the average Joe. The federal government encourages ownership of real estate. One of the biggest carrots is the favorable tax treatment of such investments. The real estate investor is allowed to pretend that the improvements (but not the underlying land) wear out in a set number of years. Currently for residential rental property, the applicable time period is 27.5 years. This "wearing out" is refered to as depreciation. The annual depreciation of the improvements is allowed to be deducted as an operating expense during each year of the depreciation period. This deduction combined with all other
deductible expenses frequently allows the real estate investor to claim an operating loss and get tax monies refunded even though he may actually have cash flow from the property and has accumulated equity. In this event, you pay no current tax on the rental income whatsoever and actually get money back. This loss (within limits) can be used to offset taxes owed on other income which would otherwise be subject to taxation. The more real estate you own, the greater the tax savings.
4. Appreciation. Appreciation cannot be predicted with any accuracy. I usually assume when evaluating a real estate investment, that there will be none. I am frequently pleasantly surprised to find that it has occurred. The rate of appreciation is dependent upon may factors, including supply, demand, and inflation rate. Usually properties will appreciate at a rate equal to or better than the prevailing rate of inflation.
When contemplating an investment in real estate, you should structure the transaction to obtain the types of returns which are most advantageous for your particular situation.
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