==== ==== HOW TO GET RICH in Real Estate www.realestateinvasion.com ==== ====
Do you want to get filthy rich? Sounds pretty good to me. There are lots of rich people who made their fortunes in real estate. There are many different ways to make money in real estate but two come to mind - flipping properties and buying for the long haul. Flipping can be fun because of the limited risk and exposure to the price changes in the real estate market. You may enjoy buying a handyman special and fixing the house and making it look pretty. If you watch HGTV they make it look fun and exciting. There are a lot of investors running around looking for homes that they can buy, fix up and flip for a quick buck. Unfortunately, there may be too many of them. Often times when a good deal comes around it gets bid up to the point where the profit margins are too thin. In Sarasota, Florida where I live there are plenty of investors going to the courthouse auctions and bidding on the foreclosures. Lately, I have heard from several different investors is that the foreclosing banks are bidding up the homes to retail value so an investor cannot buy it, fix it and sell it. Another way to get rich in real estate is buying and holding. You won't make as much money in the beginning but ten or twenty years down the road you might be better off. The problem with flipping property is that you will always have to do it. Unless, of course you are good with your money and put it away religiously. When will you ever be able to relax if you always have to go out and find homes to flip. Wouldn't it be nice to own a number of paid off homes? Imagine waking up every day during your retirement without having to go out and scour the countryside looking for houses to fix up. Time Value of Money - If you have ever read a finance book or taken a finance course then you are probably family with the time family of money concept. This is basically the concept that money will grow over time and that a dollar today is worth more than one tomorrow because it can invested and grown. for example, if you invest $10,000 today in a stock that grows 6%a year for ten years then your investment will have grown to $17,908. It is interesting to see how money can grow over the long haul. This why financial advisers tell you to start investing early in life. For example, assume that when you are 20 years old you invest $10,000 and add $10,000 to your investment every year until you are 65. Assuming that you earn 5% a year you can expect to the money to grow to $1,766,701. Now, lets assume you are 40 years old and want to retire at 65. So you invest $10,000 initially and then $10,000 every year for 25 years and earn 5%. Your money will only grow to $534,998. See what a difference the 20 years makes? If you started at age 20 versus 40 you would over 3 times the amount of money.
Let's translate the time of money into real estate. Imagine buying a home for $100,000 where you make a down payment of $20,000 and get a mortgage for $80,000. To keep it simple assume that you get a 15 year mortgage and that the rental income equals the expenses. Look below at the appreciation rates to see what your home would be worth after 15 years: 1% - $116,096 2% - $134,586 3% - $155,796 4% - $180,094 5% - $207,892 6% - $239,655 7% - $275,903 8% - $317,216 So after 15 years your mortgage is paid off and the home appreciated. Assume real estate prices appreciate 4% a year for the next 15 years. Your $20,000 investment turned into a home that you own free and clear worth $180,094. Not only that but the home can be rented out and generate passive rental income for you. Now imagine owning a bunch of these paid off homes. You would have a nice portfolio of real estate that has no debt and earns monthly income. Not a bad way to retire. You could be enjoying life on the golf course while the flippers are out there finding more homes to paint, clean and repair. Which sounds better?
Marc Rasmussen, Realtor in Sarasota, Florida, Sarasota FL Real Estate, Sarasota Mortgage
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