People Perish for a Lack of Knowledge…
Being in the real estate industry for the last 30 years, I have come across many individuals their 50s 60s and 70s who would tell me “I wish I would have known someone like you to guide me to invest in real estate, I would be much better off financially now at retirement.” Unfortunately, many of these individuals are taking an extra job at the local supermarket, retail stores, etc for minimum wage in order to make extra or they have decreased their lifestyle to manage a fixed income. Imagine working all of your life and not being able to live the lifestyle you grew accustomed to at the time of retirement.
Now that is one end of the spectrum, I have also come across many individuals in their 20s, 30s, 40s who are looking to invest their hard earned money, but are scared of the big unknown real estate market and end up losing money in the stock market. These individuals all have told me the same thing, “I thought you needed a lot of money to invest in real estate.” Or “I want to invest and buy my first home”. What I like about this age group is that they are eager and with the given education and knowledge of Real Estate they are ready to create a better financial future for their future selves.
Here is my solution to all of these age groups: “Buy and Hold”
Buy and Hold is also called “Long Term Passive Income”. This method has a number of advantages for any age investor. If done correctly this method can make anyone financially stable creating a mouthing residual income, which allows them to keep their lifestyle, do the things they love to do while money enters their account while they sleep.
I love this quote by Warren Buffet “If you don’t find a way to make money while you sleep, you will work until you die.”. I couldn’t agree more.
Keys to Success with the “Buy and Hold” method
Key 1: With the “Buy and Hold” method you create leverage or OPM (Other People’s Money). Leverage allows you to use banks and other types of lenders to actually purchase real estate putting very little of your money and in some cases nothing at all. You read correctly when investing in real estate you can put very little money down especially on your first investment. You can put down as little as 3.5%-5% and including closing cost, all you would need is around 15k-18k.
Key 2: Now let’s put some of this leverage back into your pocket. How? The US government has a great policy encouraging people to invest in real estate by giving some amazing tax benefits. Tax deductions alone can cover up to 15k in one year. That means instead of paying the government 15k you end up keeping 15k in your pocket as well as making your original down payment back in one year. Wow! Investing in real estate you could never go to sleep rich and wake up broke like stocks and trades. This method of investing adds stability to your investment portfolio.
Key 3: Equity could be used either when selling the property or even better by refinancing the property and cashing money out free of tax. Many people think it is better to sell and take the money and purchase another property. In most cases, it’s better to refinance, rent, and avoid being taxed on the sale especially in a buyers market. You should sell when the market goes back up if that is your final long-term decision.
Whether the market is up or down there are always opportunities arising and one should be able to identify them and be prepared to take action.
Good properties that are priced right are not going to wait too long if you are hesitant to take action when someone else will!
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