BROKER: US Preferred

Why Invest in Real Estate?

Real Estate Investment Benefits

  • Cash flow
  • Tax advantages (1031 exchange & depreciation)
  • Property appreciation
  • Hedge against inflation
  • Investment diversification
  • Positive leverage

7 Keys for Real Estate Investment 

"To invest or Not Invest, That is the Question"

  • Determine liquidity level needed
  • Marketability
  • Property management
  • Rate of return
  • Leverage opportunity
  • Tax impact
  • Investment Risk

Real Estate Investment Rules of Thumb

  • Invest, don't speculate
  • Have a complete plan that includes liquid asset accumulation
  • Maintain cash reserves!!!
  • Work with trusted advisors, not gimmick programs

 

Buy 1 Home Per Year

         After 10 years (using 7.2% appreciation for example only) 

                   Purchase price total   $2,372,000

                                           Value    $3,550,000

                        Value Increase  =   $1,178,000

                                

            After 20 years (using 7.2% appreciation for example only)

                                       Paid   $3,450,000

                                       Value $7,100,000

                Value Increase =    $3,650,000

               (With only $474,400 invested)     Note:  Rent income projected at $40,000/month/Projected   PITI  is   $25,000/month, creating $180,000 year Net Income.  

  1.  180,000
  2.  193,000
  3.  207,000             
  4.  221,000                                        
  5.  237,000                                       
  6.  253,000                  
  7.  272,000                  
  8.  310,000                   
  9.  332,000                   
  10.  355,000 X 10 homes owned  (Buying 1 home per year for 10 years) 

 

Leverage Factor

         Which Down Payment Gives the Largest Return?

Down Value of Property Initial Investment Value after 10 years Profit Increase Annual Increase
5% 250,000 12,500 500,000 250,000 2000% 200%
10% 250,000 25,000 500,000 250,000 1000% 100%
20% 250,000 50,000 500,000 250,000 500% 50%
0% 250,000 0 500,000 250,000 Infinite Infinite
Cash 250,000 250,000 500,000 250,000 100% 10%

 

"What Makes Real Estate the World's Best Investment?" by Gary Eldred, Ph.D.

Following is an excerpt from the introduction:
 
As the "baby boom" generation ages, concern about adequately funding retirement has reached a fever pitch. Social Security looks less and less likely to provide any semblance of former benefits in the near future, driving individual investors to take charge of their own financial future. Investors are looking for the simple answer, the "magic bullet," to funding a long and happy retirement.

What type of investment will give the best performance over the long haul?

Many financial "experts" argue that over the long term, the stock market has outperformed all other investments. This claim is based on the assertion that from 1926 to 2005, the S&P 500 returned an average annual 10.46% gain. Putting aside for a moment the veracity of that assertion, we'd argue instead that real estate has been and, in fact, remains the world's best investment.

The ownership of small income properties (such as single family homes, duplexes, and small apartment buildings) is a path to wealth building that you can count on.
 
A real estate investor uses small properties to grow wealth in six key ways:
  1. Collecting a dependable and growing income (rents)
  2. Value increases (appreciation)
  3. Mortgage payoff (amortization)
  4. Value creation (property improvement)
  5. Instant gain (bargain purchase price)
  6. Government benefits (tax credits, tax deductions, rent vouchers,
    advantageous loans, etc.)

  Gary Eldred, Ph.D. is real estate faculty at Trump University. See www.Trumpuniversity.com to learn more about the author.