Real Estate has historically been the safest and most profitable vehicle for investment. However, there is no such thing as investment without risk, even in Real Estate. All numbers and estimations given by us – electronically, orally or in print – are based on the information that was given to us by real estate developers and by our research of investment publications, trade publications and other expert business sources. We can use historical precedent and current market conditions and trends to project future expectations. However, no projection is ever a guarantee of future profitability. We strongly recommend investors to carefully inspect the available properties and to do their own research before investing. It is always advisable to consult a licensed professional before purchasing property. Also, in order to know the tax benefits a particular property will bring, the investor should consult a professional tax advisor who specializes in working with Real Estate investors.
Disclaimer
When I bought my house for 172,500 in May, 1998, the Dow was at 9033. I made a down payment of $34,500. On August 19, 2010, the Dow closed at 10788.
I sold the house several years ago for $400,000, but let's assume that I still owned it and was still living in it. My mortgage payments were lower than the rent I would have paid, so I won't factor them in.
Even though the house lost a lot of value in real estate downturn, it is still worth over $350,000 as of August, 2010 - more than double the price I paid for it.
For many American families, the equity in their home makes up a large portion of their net worth. Most people who have owned a home for 10 years or more have discovered their home is the best investment they have ever made.
Purchase an investment home in a good area, rent it out, and your tenants are covering your mortgage payments as you are building your equity.
OK, it's not quite that simple. You will have repairs from time to time, and there will be times you are not collecting rent due to vacancy or tenant delinquency. This is one of the costs of building your investment net worth. As long as you have sufficient cash reserves and cash flow, your long-term gain will far exceed these costs.
In many areas of the country, housing has hit the bottom and properties are beginning to appreciate again. Mortgage rates are
I sold the house several years ago for $400,000, but let's assume that I still owned it and was still living in it. My mortgage payments were lower than the rent I would have paid, so I won't factor them in.
Even though the house lost a lot of value in real estate downturn, it is still worth over $350,000 as of August, 2010 - more than double the price I paid for it.
Your Home and Your Net Worth
For many American families, the equity in their home makes up a large portion of their net worth. Most people who have owned a home for 10 years or more have discovered their home is the best investment they have ever made.
What if You Could Duplicate Your Best Investment?
Purchase an investment home in a good area, rent it out, and your tenants are covering your mortgage payments as you are building your equity.
OK, it's not quite that simple. You will have repairs from time to time, and there will be times you are not collecting rent due to vacancy or tenant delinquency. This is one of the costs of building your investment net worth. As long as you have sufficient cash reserves and cash flow, your long-term gain will far exceed these costs.
It's All About Timing
In many areas of the country, housing has hit the bottom and properties are beginning to appreciate again. Mortgage rates are
| Table 1. Comparison of the tolal value of the investment. | ||
| Real Estate | Dow | |
| May, 1998 | $172,500 | $9,033 |
| August 19, 2010 | $350,000 | $10,788 |
| % Increase | 103% | 19.4% |
| $$ Increase on the $34,500 investment | $177,500 | $8,439* |
| Table 2. Comparison of the total growth of the money invested, had I invested my $34,500 down payment in the stock market instead of Real Estate. | ||
| Real Estate | Dow | |
| May, 1988 | $34,500 | $34,500 |
|
Aug., 2010 Appreciation Equity |
$212,000 | $41,193 |
|
Aug., 2010 Mortgage principal payments |
$25,679 | N/A |
|
Aug., 2010 Total equity |
$237,679 | $41,193 |
|
% Increase on $34,500 investment |
688.9% | 19.4% |
|
$$ Increase on $34,500 investment |
$203,179 | $1,794 |
Real Estate Investment vs. The Stock Market
| Table 3. Tax deductions. We can deduct mortgage interest. We cannot deduct from our stocks. | ||
| Real Estate | Dow | |
| Total Tax Deductions 1988-2010 | $107,449 | ZERO |
*Since $34,500 was the total amount invested in the down payment for the house, we are comparing the return on $34,500 had we invested in the stock market for the same time period.
lower than we may ever see again.
That means, in today's market, if you purchase an investment property below market with 20% down and a low, low mortgage rate, the monthly cash flow can be impressive. Keep the profit from the cash flow in your reserve fund to cover repairs and vacancies.
Don't buy more than 1 or 2 unless you are an experienced investor and you have an adequate cash reserve - 6-12 months of mortgage payments - in the bank.
If you are on our email list, we will inform you of select investment opportunities from time to time.
That means, in today's market, if you purchase an investment property below market with 20% down and a low, low mortgage rate, the monthly cash flow can be impressive. Keep the profit from the cash flow in your reserve fund to cover repairs and vacancies.
Don't buy more than 1 or 2 unless you are an experienced investor and you have an adequate cash reserve - 6-12 months of mortgage payments - in the bank.
If you are on our email list, we will inform you of select investment opportunities from time to time.