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Real
estate is considered by many financial experts to be the ideal
investment. Our definition of Real Estate is income producing
property such as: single family home, duplexes, triplexes, and
other multi-unit apartment buildings. We are NOT talking about
vacant land, vacation or resort homes, timeshares, etc. Money
has been made in those areas, but it’s best to start with “bread
and butter” real estate. Everybody needs a place to live and
we are satisfying that need with our rental property.
Real estate is the I.D.E.A.L. investment because it provides:
I-ncome - from rents
D-epreciation - a “paper” loss that lowers your taxes but doesn’t
really cost anything.
E-quity - built up with each mortgage payment made, you’re paying
off part of the amount you owe, building up equity in the property.
A-ppreciation - due to inflation and improvements, your property
can be going up in value every year.
L-everage- you can buy income producing property with 20%, 10%,
or even 0% down and finance the rest. This is using leverage,
using a small amount of something (cash) to control a large
amount of something (a property). . . For example, if you can
buy a property worth $100,000 with just 10% down, that means
that with just $10,000 you are the owner of a $100,000 property
(or rather, you control it and owe $90,000 on it).
Leverage, when properly used in real estate investing, can give
you an unbelievable return on investment (R.O.I). Taking that
same $100,000 house as an example, if you bought that house
for all cash ($100,000) and kept if for a year, and the house
appreciated (went up in value) 10% that year, your $100,000
house is now worth $110,000. You have a $10,000 profit.
Your rate of return or R.O.I. is 10%. Not too bad, but you can
do a lot better. Let’s say that instead of paying all cash for
the property, you followed some of the techniques in this manual
and only put $10,000 down for the property and financed the
other $90,000. Now, if the property goes up just 10% in value
the next year you still have made your $10,000 profit, but your
R.O.I. has jumped from 10% to 100%.
| #1
($100,000 house) |
#2
($100,000 house) |
| $100,000
paid all cash |
$100,000
(paid $10,000 owe $90,000) |
|
1
year later:
|
1
year later: |
worth
$110,00
sold
for $110,000
|
worth
$110,000
sold
for $110,000
|
| |
Paid
off $90,000 plus returned
|
| |
$10,000
down payment
|
Profit:
$10,000
|
Profit:
$10,000
|
R.O.I.:
10%
|
R.O.I.:
100%
|
In example
#1 you would have made a $10,000 profit, but you would have
needed $100,000. In example #2 you still made $10,000, but you
only needed $10,000 so your return on investment is 100%! Now
to carry that even further, to show you the power of leverage,
let’s say you just put $1,000 down instead of $10,000. Not the
picture looks like this:
$100,000
house
$ 1,000 down payment
$ 99,000 mortgage
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Sold
1 year later for $110,000
Profit: $10,000
R.O.I.: 1000%
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You still
made the same profit dollar wise ($10,000). But by using leverage
you increased your rate of return (or return on investment)
by 10 times!
But wait! It gets even better! What if you had only invested
$100? You still would have made a $10,000 profit, but your R.O.I.
would now be 10,000%!!! You multiplied your money 100-fold in
one year! How many times would you have to do that to become
financially independent? Not too many!
But (are you ready for this?) what if you bought the same $100,000
house for NO MONEY DOWN? Let’s see what the picture looks like:
$100,000 Value
$100,000 Mortgage (NO MONEY DOWN)
House appreciated 10% in one year, was then sold for $110,000
(either for all cash or $10,000 cash and they assumed your mortgage)
$110,000 Sales price 1 year later
$ 10,000 Profit
R.O.I. IMPOSSIBLE TO CALCULATE! You have NOTHING invested and
you make a $10,000 profit! That is the POWER OF LEVERAGE! And
you can properly use that leverage to get rich in real estate!
You CAN’T get all of these I.D.E.A.L. benefits in any other
investment vehicle but real estate.
In stocks and bonds for example, they may go up in value, but
they may also go down. And when you buy stocks and bonds, even
though you may be able to finance the purchase of them, NOBODY
is going to pay you for the privilege of renting your stocks
and bonds! It’s the same way with gold and silver (or other
precious metals). YOU have to pay for them because NOBODY will
pay to rent them from you! But in real estate, you can learn
these techniques, apply them and purchase some nice rental property.
Then, since you selected a nice property in a nice neighborhood
(where property values are appreciating) you have some nice
folks called “tenants” that each month pay you for the privilege
of living in such a nice place. And, even though your property
is probably going up in value every year, Uncle Sam let’s you
act like your property is LOSING value and let’s you deduct
a certain portion from your taxes each year!
So, real estate is the I.D.E.A.L. investment. You can use the
power of leverage with other techniques to increase your wealth
even quicker.
Suppose that through using some of the techniques you’ll learn
you about that you bought that $100,000 property for just $80,000.
You’ve “locked in” a $20,000 profit. In a year that $100,000
property (that you bought for $80,000) is now worth $110,000.
So, by combining leverage with buying “bargain property”, in
a year you’ve made a $30,000 profit instead of $10,000 profit.
And look at your Return on Investment (R.O.I.):
| If
You Put Down: |
Your
Profit Is: |
Your
R.O.I. Is: |
| $10,000 |
$30,000 |
300% |
| $1,000 |
$30,000 |
3000% |
| $100 |
$30,000 |
30,000%
|
| $0 |
$30,000 |
impossible
to calculate |
Another
technique is what we call “forced appreciation”. Perhaps that
$100,000 property needs a little work. It’s structurally sound,
but it may need a little painting and cleaning up, and maybe
some shrubs or rose bushes. So you spend $1,000 on pain and
cleaning supplies and maybe some pretty plants or flowers. You
either paint and clean it yourself or maybe pay another $1,000
to have somebody else do it. Now 30 DAYS later the property
is worth $120,000. you spent $2,000 on labor, paint, and cleaning
supplies and the property has gone up $20,000 in 30 DAYS!
Now, if that $120,000 property appreciates just 10% per year
it will be worth $132,000 in just one year. A $30,000 profit
in one year!
I think now you can see the tremendous possibilities of becoming
financially independent by investing in real estate. But what
about the bad points? I’ll admit, I painted a pretty rosy picture.
But there is another side to investing in real estate - the
hassles and problems. Things like tenant headaches, repairs,
negative cash flows, and vacancies.
Yes, these problems exist. So do we just forget about investing
in this great powerful investment called “real estate” just
because of a few problems? NO WAY! We find solutions to those
potential problems and “nip ‘em in the bud”. This manual will
also show you many ways to avoid or solve the problems that
have kept others from investing in real estate.
But I want YOU to see the BIG PICTURE. I want you to hunger
for more. A better life, a more secure future (I don’t think
social security in its present form, will be around in 30 years),
more freedom, and MORE MONEY! You can accomplish these goals
by investing in real estate and you CAN do it with NO MONEY
DOWN!
The tools are now in your hands. It’s up to you to implement
them and reap the rewards!
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