Building wealth is all about the ROI (Return on Investment). Making your money work for you instead of just stock-piling it and hoping it will be enough to retire you. As with any type of investing there is risk involved in being a real estate guru. But it has been my experience that the benefits far outweigh the risks.
One of the most advantageous things about real estate investing is the ability to use leverage instead of cash to do your deals.
Let’s say you have $50,000.00 that you would like to invest. You find a rental property selling for $60,000.00. The fair market value of the house is $70,000. Banks will generally loan 70% of the fair market value. Therefore, you could get a loan for around $52,000. You use $10,000 of your “investment” money and purchase the rental property.
If it’s a 3-bedroom house in a fair neighborhood. The house would easily bring $750 per month or more in rental income. Yes, there are expenses—taxes, insurance, the payment on that mortgage, vacancy, maintenance. But even after all that, in effect the $10,000 you invested in purchasing this property is giving you a return of 15%. How many other investments in your portfolio are showing you that kind of return? Don’t forget, you’ve only spent $10,000 of the $50,000 that you are planning to invest, so you can do it 4 more times.
Another super quality of buying real estate is you earn that ROI tax deferred. ... Read More…