Real Estate: An IDEAL Strategy

In today's busy World, we understand that not everyone has several hours every week to focus on their investments.  We want to help our investors achieve their investment goals with little to no effort on their part.  We want to make things as easy as possible for them.  Using real estate, we can help you achieve your goals much sooner than traditional stock picking.  When done properly, real estate can yield cash returns of 5-10% and total returns of 15-20%. We use the acronym IDEAL to explain the main benefits of real estate investing:


When done properly, real estate brings high cash flow.  In our opinion, this is the most important aspect of the IDEAL acronym.  When the wheels fall off and the local economy begins to sputter, cash flow will come to the rescue.  Those who buy on speculation will get crushed when their cash flow turns negative and they have to put in some of their own money out of pocket for an extended period of time.


This accounting term means you can depreciate a real estate asset each year, allowing you to decrease the amount of income tax you pay (higher tax percentage) and change it over to a deferred capital gain when you pay recapture at the sale of real estate (lower tax percentage).


Paying down the mortgage over time lets you build equity.  This is an often overlooked way to build wealth with real estate.  True, this is money you can not access readily, but it silently builds up over time, creating a sizeable nest egg.


Over time, the resale price of a property generally goes up with inflation.  In a hot market with high demand and low supply, this can happen even faster.  Although not always a guarantee and can fluctuate, over time appreciation will turbo charge your real estate investment.  As with inflation, the price of land and the building on top of it should go up at least with inflation.  Just think of the prices of all those building materials and the wages paid to those building the homes.  They almost always go up over time.


By borrowing money from the bank and using OPM (other people's money) a real estate investor can get a better rate of return than if they use 100% of their own money.  Let's say you have $100,000 to invest and you are looking at investing in real estate.  You can buy 1 house using $100,000 or 5 houses with a 20% down payment of $20,000 on each of them.  Over time, you will be much further ahead when you leverage money.  There is higher risk that comes with leverage, but if you invest in solid markets as we recommend, you can anticipate safe, reliable returns.

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