Happy Hanukkah, Happy Kwanzaa, Merry Christmas and Eid Mubarak.
Have a wonderful, safe holiday everyone
Sunday, December 24, 2006
Thursday, December 21, 2006
What is the best way to make money in real estate?
Buy property without using any of your own money.
Seems like a no brainier, but you will meet people that still believe that it's a good idea to use there own cash and credit to buy real estate.
How much real estate could you invest in if you never needed to use your own money?
This is simply called using leverage.
But the opposite of using leverage is to pay ALL cash for property and own it free and clear.
Why do some people still want to own real estate free and clear?
Because they believe that they are making more money if they borrow as little as possible to buy it.
Lets look at 2 examples to see which example makes more money.
Example 1.
Use $40,000 of your personal savings to buy a house with 20% down and get a loan for the rest.
You may cash flow $400 per month.
And on this one house you will also be getting -
A) equity build up like a personal saving account.
B) good appreciation as the house goes up in value.
C) great tax deductions that will lower your tax bill.
Example 2.
Use a $80,000 new business line of credit instead of your own CASH and buy 2 houses.
You may cash flow $200 per house per month for a total cash flow of $400 a month.
And you are making money on TWO pieces of investment real estate instead of one.
Your also getting -
A) Double the equity build up.
B) Double the appreciation.
C) Double the tax deductions.
AND YOU NEVER USED A DOLLAR OF YOUR OWN CASH.
The entire down payment came from a new business line of credit!
Seems like a no brainier, but you will meet people that still believe that it's a good idea to use there own cash and credit to buy real estate.
How much real estate could you invest in if you never needed to use your own money?
This is simply called using leverage.
But the opposite of using leverage is to pay ALL cash for property and own it free and clear.
Why do some people still want to own real estate free and clear?
Because they believe that they are making more money if they borrow as little as possible to buy it.
Lets look at 2 examples to see which example makes more money.
Example 1.
Use $40,000 of your personal savings to buy a house with 20% down and get a loan for the rest.
You may cash flow $400 per month.
And on this one house you will also be getting -
A) equity build up like a personal saving account.
B) good appreciation as the house goes up in value.
C) great tax deductions that will lower your tax bill.
Example 2.
Use a $80,000 new business line of credit instead of your own CASH and buy 2 houses.
You may cash flow $200 per house per month for a total cash flow of $400 a month.
And you are making money on TWO pieces of investment real estate instead of one.
Your also getting -
A) Double the equity build up.
B) Double the appreciation.
C) Double the tax deductions.
AND YOU NEVER USED A DOLLAR OF YOUR OWN CASH.
The entire down payment came from a new business line of credit!
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