I recently met up with a friend for dinner and the topic of real estate came up. He just turned 38 and was thinking it might be time to buy a place. He would rather live in a high rise
Real Estate Is The Ideal Investment
Is Real Estate really the best investment?
As Robert Kiyosaki says, “Real estate investing has created more millionaires than any other form of investing because of its many advantages. Whether you’re investing for cash flow or capital gains, your success is dependent on your education.”
It has often been said that Real Estate is the I.D.E.A.L investment.Each of the five letters in Ideal stands for an advantage to real estate as an investment.
A.Income: Income from your investment strategy is achieved through (1) positive cash flow, (2) net tax credits (tax shelter), personal contribution and (3) financing equity.
B.Depreciation: The government allows you to depreciate the value of your property, even though it continues to gain in value. Residential properties are normally depreciated at a rate of 27.5 years on improvements only. Land must be deducted from your acquisition cost before depreciation; usually,the land is valued at 10-20% of the acquisition cost.
C.Equity Increase: Equity is the difference between market value and encumbrances. When you make mortgage payments a portion is paid on the principal balance, which reduces the mortgage balance and increases your equity.
D.Appreciation: One of the major barometers of the economy is the value of real estate. In a strong economy, real estate will normally exceed the national inflation rate. If Real Estate Investments are selected in a growing area, the growth rate is substantially greater than the national inflation rate.For our analysis we use 6% annual appreciation.
E.Leverage: Real Estate can be purchased with the use of “OPM” (Other Peoples’ Money). This is done through creative financing, seller financing, traditional mortgages and applied allowances. The Rate of Return (ROI) is calculated on your actual cash investment. The difference between paying cash for property vs. putting 20% down or less will result in ROI of 15% for cash or over 50% when leveraged.
So, are you ready to start making I.D.E.A.L. investments?
Rudy Alfaro is one of the very few real estate agents who truly understands their role as a Real Estate agent. He serves as the Director on every client's production of finding a new home or investmen....
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