Mission Statement:
"To invest in our future and elevate our financial well-being"
Take the Risk
No one hears about how much money one can make investing in real estate. That's probably because it is a well-kept secret. If everyone knew about it, everyone would be doing it, right?
Wrong. Much like starting your own business, investing in real estate requires entrepreneurial skills and a vision, which is why not everyone is jumping on the real-estate bandwagon.
In fact, most people aren't willing to take the risk that real-estate investing entails; fortunately, these are the same people that will make you rich by renting from you. The little secret is that there are hundreds of individuals who procrastinate for every one individual who has a vision and chooses to take the risk.
What Lies Ahead?
When I initially started investing in real estate, I really didn't have a clear vision. The only thing I was sure of was that I wanted financial freedom. Of course, achieving these goals did not come without a price, and only afterward did I develop a plan and vision of where I was headed.
Investing in real estate requires a lot of time; you need to deal with a vast array of tenants -- good ones as well as bad. Just like a business, you also have to deal with operating and fixed expenses, such as heating bills and renovation costs. On the other hand, I don't have to wear a suit all day and run around doing someone else's bidding. My dress code consists of shorts and a shirt six months out of the year unless I'm on vacation; in that case, it's 10 months out of the year. If I want to go out of town for a few days, I go. I don't have to ask for vacation time. While I'm out of town, my rents keep ticking away 24 hours a day, seven days a week, whether I'm on the job or not. And those loans keep amortizing. The magic is happening just the same.
The Benefits
Aside from being your own boss, having the freedom to travel while earning profits, increasing your net worth, and having a place of your own to call home, investing in real estate holds even more benefits.
Cash Flow
Cash flow is the difference between your income and your expenses on a piece of property. You can have a positive or negative cash flow. Obviously, you'll feel a lot better if the cash flow is positive.
My advice on cash flow is this: Never use all of your positive cash flow for rapid debt reduction. You will be walking a thin line. By keeping a strong positive cash flow, you will have more options and space to maneuver.
Appreciation
Appreciation is the increase in value of a property. There are two kinds of appreciation. The first is from economic conditions beyond your control, such as inflation. But you won't gain much from this type of appreciation since the gain is offset by the higher cost of living.
The second kind is market appreciation, which you can control. When you improve a property (through renovations), you force its value higher. You can purchase a piece of property in need of repairs and bring it back up to neighborhood standards or slightly higher; this will give you a property that is much higher in value.
Leverage
Leverage is the ability to borrow a percentage of the value of a piece of property. Real estate, in comparison to other investments, offers a very high degree of leverage. In some cases, a couple buying a single-family home can obtain 95% financing. This allows individuals to purchase real estate with little, if any, of their own money. What other investments offer such a high degree of leverage?
Amortization
With leverage, or the use of other people's money, comes a repayment schedule. Your outstanding balance is reduced with every payment you make. Part of each payment goes to interest (applied first) and the rest goes to pay off the principal. The principal reduction is called amortization -- reducing debt. Hence, amortization can make you wealthy, slowly and steadily.
Tax Advantages
Owning real estate with the goal of making a profit allows you to deduct interest payments and other expenses come tax time. But don't be fooled into buying real estate for the tax advantages; rather, purchase it because it makes economic sense to do so.
Benefits of Buying
Owning a real-estate business is a great way to achieve your financial freedom. What could be more worthwhile than taking up real estate as either a full-time business or even a hobby? The benefits are definitely there. Don't expect to go through real-estate investing without making any mistakes. Like most businesses, there is a learning curve. You will only learn the real-estate game by being active and understanding the buying process.
To be successful, you need to learn the market, how to locate property, inspect property, negotiate your deal, contract to buy, finance the purchase, and close the transaction. You can't possible learn all this at once; the only way you'll ever be ready to understand, is by actually going through the motions.
