Title

What Everyone Ought To Know About Investing In Real Estate.

Why are income properties the best investment??

1. Cash Flow
2. Control.
3. Appreciation.
4. Leverage.
5. Refinance.
6. Asset Protection.
7. Hedge Against Inflation.
8. Physical Asset.

Cash Flow

A positive cash flow means you collect more money (rent) than it takes to pay for and operate the property. This happens every month as long as the right property is purchased. A big advantage over other investments. Leverage means that the cash generated by a real estate investment will always produce a much larger percentage cash on cash return than any other investment.

Control

Real estate is something you can control.  I became very fed up giving my hard earned money to a financial adviser who invested it where he or she thought best but with no real accountability. The investment was completely out of my control. A bad decision by the adviser can ruin the portfolio. Even blue chip companies are not safe; think Enron. The only decision you have control over is whether to buy or sell. Real estate is tangible and as owner/landlord you manage it.

Appreciation

Someone once told me that a bad real estate investment is like a bad haircut; it will grow eventually. With some research it is possible to find areas where appreciation should be higher than the national average. High employment growth is one indicator.

Property will go up in value and this is the icing on the cake when you have a positive cash flow and are receiving income each month as well.A 10% a year increase will mean the property doubles in value over just 7 years. Now you cannot guarantee 10 % per year but this figure illustrates how quickly equity can increase.

Remember over time the property is appreciating while the tenant is paying down the loan. Plus the rental income grows.

Leverage

Other People’s Money

There is no other investment where leverage can be used so powerfully.

By working with an experienced mortgage broker you can get a loan for up to 95%. The bank have a physical asset to loan against.

To use a simple example, imagine a house is bought for $200,000 with 10% down. Not including closing costs the investor puts $20,000 into the deal. If the house increases by 5% over the first year that is an increase of $10,000 or 50% return!! 5% per year for 5 years equals $255,256; $55,256 profit or just over 450%. Plus the positive cash flow each month bringing in an income. I have not even included how much the tenant has paid down the loan by!!

If $20,000 is invested in stocks and share and IF that increases by 10% per year, then the profit over 5 years is only $32,210. No monthly income and no tenant paying down the loan.

Refinance

This is a huge tax free benefit that other types of investments do not have.

I would normally recommend refinancing a property rather than selling it. The money is tax free, the asset is still owned and can be refinanced again in a few years. The increase in rent can take care of the extra mortgage.

Asset Protection

Real estate can be insured. If disaster strikes then you can claim for the value of the asset. With the proper insurance you can also claim for loss of income etc.

With stocks and shares for example if the company you invest in has a bad year then hard luck. This type of investment cannot be insured.

Hedge Against Inflation

The traditionally “safe” investments, saving accounts for example, only produce a small percentage increase each year. This yield can be canceled out by inflation. If inflation exceeds the increase then the gain is wiped out by the rising cost of living; you are actually losing wealth.

Real esate is tangible, it can viewed as a product. At the very least it will rise at the rate of inflation, normally it is much higher.

Physical Asset

You can see and touch your investment:) It is not some virtual investment traded in hyper space by the click of a button.

Due to its physical nature, changes in real estate value do not happen that fast. There are downs as well as ups but with right information at hand these downs can be predicted and premptive action taken ( a decrease in rent for example to keep void periods low.) Stocks and shares can loose their value almost instantly. they can go into free fall.

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Most people are worried about their financial futures, whether it be retirement or the cost of college education for their children. A  real estate portfolio can build significant wealth. Please do contact me with any questions about building such a property investment portfolio. I am more than happy to discuss how my wife and myself have built a portfolio now worth several million dollar

Related posts:

1. How Come Everyone Is An Expert On Investing In Real Estate?
2. How To Achieve Financial Freedom
3. Want To Invest In Real Estate But Worried By Inexperience Or Lack of Time?
4. The Positive Effect Of Using Other People’s Money To Purchase An Invesment Property
5. Investing In Canadian Real Estate “If Not Now,When?”

Want to be notified when there is new content to read on WasagaBeachTalking? Just enter in your email address and we’ll shoot you an email when there is new content for you to read. Don’t worry, I promise not to spam you or share your information with anyone else.

This entry was posted on Tuesday, May 5th, 2009 at 6:57 pm and is filed under Investment Opportunities. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Who Else Only Wants To Rely On Their Pension? | Wasaga Beach Talking said at May 9th, 2009 at 6:10 pm

   [...] would you rather invest in an income property or rely on your [...]

2. Are You Prepared To Profit From A Boom In Real Estate?? | Wasaga Beach Talking said at May 10th, 2009 at 7:03 pm

   [...] Logically we all know that investing in real estate makes sense. We all feel happy with the equity in our home. Why not invest in an income generating property? [...]

3. Do You Recognise The 12 Key Factors That Drive Real Estate Values Up? Part 1 | Wasaga Beach Real Estate-Wasaga Beach Homes For Sale-Wasaga Beach News said at May 30th, 2009 at 7:08 pm

   [...] investors make the mistake on investing in a city or town based on past performance. The successful ones [...]

4. How To Achieve Financial Freedom | Wasaga Beach Real Estate-Wasaga Beach Homes For Sale-Wasaga Beach News said at January 29th, 2010 at 11:00 am

   [...] Why Is Real Estate The Best Investment? [...]

5. 4 Ways To Create More Time | Wasaga Beach Real Estate-Wasaga Beach Homes For Sale-Wasaga Beach News said at February 4th, 2010 at 6:23 am

   [...] often heard excuse for not getting on with some new project whether it be investing in real estate or getting a home ready to [...]

6. Treat The Renters Of Your Investment Property Like Gold Dust | Wasaga Beach Real Estate-Wasaga Beach Homes For Sale-Wasaga Beach News said at June 24th, 2010 at 2:46 pm

   [...] simplistic and there are other considerations such as where to buy, tax benefits and [...]

Leave a Reply

Name (required)

Email (will not be published) (required)

Website