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2010 is offering some of the greatest Real Estate opportunites in History-REMEMBER tough times never last-in a couple of years people will be kicking themselves that they did not invest in Real Estate now in this down market.
Have you ever wondered what it would be like to wake up in the morning with enough money coming in that you could do what you want that day? Would you consider yourself "Rich"? Here's a definition of "Rich" that many people use:
"Rich" is the ability to wake up in the morning with the physical health, knowledge, friends, financial freedom, and passion to do what you want that day.
Financial freedom occurs when your annual investment income(your money at work) exceeds your annual lifestyle expenses. At this point you have "Wake-Up Money."
Many people have achieved or are on the path to achieving this lifestyle by investing in affordable 3 bedroom 2 bath homes in the area. Many of them have modest incomes but have become rich through their investment in local Real Estate.
These people understand that we have 3 choices in life.
1. You at work. Do you worry you will be working the rest of your life.
2. Your money at work. Do you dream of someday not having to work.
3. Charity. Do you worry about being dependent on others?
If you prefer Choice 2 and want to get on the path to "Wake-Up Money" this plan is devoted to showing you the way. Peter Lynch the great stock market guru and author of "Beating the Street" was once asked what he thought was the greatest investment. His answer: "a single family house."
A Simple Investment
Homes are one of the three basics of life: food, shelter, and clothing. Homes are simple investments that most people understand because they already own them. Ask yourself these questions: Do I own a home? Has it been a good investment over the long term? What would my net worth be like if I owned 10 of them? What would my lifestyle be like if they were all free and clear?
What if?
If you purchased 10 houses 15 years ago(average price on affordable homes then was about $75,000/each) and financed them on 15 year loans, today the houses are free and clear. Today, they are probably worth about $225,000 each and your portfolio of 10 houses is worth 2.25 million. Your houses would probably be earning you a net income of about $10,000 per month in "Wake-up Money."
Three "Rules of Thumb" help investors build wealth quickly
1. The "Rule of 72" is used to estimate how long it will take your money to double itself at a given rate of return on your investment. If you divide your rate of return into 72, the answer is how long it will take your money to double. For example, if you earn 6% on a savings account, it will take you 12 years for your money to double in value-72 divided by 6. If you were able to increase your return to 10%, your money will double in 7.2 years-72 divided by 10.
2. The "Rule of Leverage" One of the beauties of Real Estate(as opposed to other forms of investment) is that you can use leverage to increase your rate of return. You leverage your investment by using a loan on the property and reducing the amount of your own money you invest. The the tenant makes the payments for you by paying rent. When you leverage(use a loan), our rate of return is increased. For example, if your purchase a property for $100,000 cash and it goes up in value by 3%, you have earned 3% on your money($3000 divided by $100,000) plus the amount of rent collected. However, if you purchased the property with a 10% down payment ($10,000) and a $90,000 loan, your rate of return will be 10 times greater or 30%($3000 divided by $10,000)
3. The "Rule of Return" A simple way to figure your first year return on investment is to:
a. Convert your down payment to a fraction.
b. Multiply the denominator times the appreciation rate to find your first year return on investment.
For example, if your down payment is 20%, when we convert it to a fraction your down payment is 1/5. The denominator is 5. Multiply the denominator (5) times the property's appreciation rate (say 3%) and your first year return on investment is 15%.
The Benefits of Residential Real Estate Investment
Residential Real Estate offers 5 major benefits. Most other investments offer only 1 or 2.
1. Cash Flow-The rent provides income, i.e. "Wake-Up Money." This is your ultimate goal. When your property is free and clear, you have the maximum cash flow and "Wake-Up Money."
2. Leverage-You can own $200,000 worth of Real Estate with only 10-25% cash.
You can also borrow cash out of one property to buy another. Your short term goal is to use leverage to acquire a portfolio of Real Estate. Your long term goal is to pay off the loans off and own your property free and clear.
3. Debt Reduction-Real Estate is one of the few investments where someone else will help make your payments. In essence the tenant makes the payments and reduces your debt.
4. Tax Savings- You are allowed to depreciate the house and write off your expenses in order to reduce your taxes.
5. Appreciation-Over the long term the value for houses has risen. The average sales price of a home has more than doubled over the past 15 years. In this soft market now is the time to get a great value!
Free and Clear
These are three magic words for the person who is committed to creating "Wake-Up Money." Many investors consider free and clear houses as the ultimate investment for 3 reasons:
1. They generate large amounts of cash flow.
2. The house is appreciating in value over the long term.
3. There is very little risk because there is no debt.
Remember "Life has no rehearsals, only preformances."
Contact me today to start finding the best 3 brm 2 bath homes in the western suburbs between 180-230,000. So that you can have some "Wake -Up Money" in your future. Call 952-475-9541 or joel@homesbyjoel.com
Homes by Joel is brought to you by Joel Hentges of Counselor Realty. Assisting people to buy or sell homes and real estate in the Greater Lake Minnetonka area. Especially in Chanhassen, Deephaven, Excelsior, Minnetonka, Minnetrista, Mound, Orono, Tonka Bay, and Wayzata MN Minnesota. With many Minnetonka lakeshore homes available.
www.homesbyjoel.com
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