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Here Is How You Can Capitalize on the Wealth Building
Potential
of Real Estate
The link that brought you here stated that if you
had purchased a small duplex
(two unit apartment building) in 2002, you'd be $16,000 richer today.
Here is how it works:
Purchase Price:
$100,000
Mortgage:
90,000
Cash Down Pmt.*
$ 10,000
... and we're not done yet! *(If
you have little or no cash to invest, you need to read our E-book on
investing in real
estate with no money and minimum risk.)
It is vital to your
success as a real estate investor to financially analyze any
property you are considering in order to avoid making a financial
mistake.
Your property analysis will look something like this:
Property operating income and expenses: Scheduled Gross Income:
($800/month X 2 units X 12 months) = $19,200 yr.
Less: Vacancy Allowance - 5% =
- 960
Operating Income before expenses
$18,240
Less: Operating Expenses - 40% =
- 7,296
Net Operating Income (before mortgage pmts.) =
$10,944
*Less: Mortgage Payments =
- 7,633
Cash Flow (pre-tax profit) =
$ 3,311
=3.3% return on your $10,000 investment
* Mortgage is
based on $90,000 at 7% interest for 25 years
= $636.10/month X 12 months = $7,633/yr. This
property looks like a good one. You will realize a positive cash
flow giving you
a 3.8% return on your invested capital. When you purchase with no
money down,
however, preparing a financial analysis is critical. You want to
know, before you buy,
if you will be facing a negative cash flow where you have to put money
into the
property to cover operating expenses and mortgage payments, until you can
increase
rents.
We cover this topic in detail in our investment course
Where does the $16,000 profit come
in?
You own an investment property worth $100,000 the
year you purchased it (2002).
Assuming you maintain the property and keep your rents at current market value,
your
property should appreciate at least two percent per year in value.
(Historically, 2%
annual appreciation is ultra conservative over a five year period or more.)
$100,000 property at 2% per year appreciation for five years, compounded = $110,408.
Your property has increased in value by $10,408 in five years.
There is one more thing to consider here. You own a $100,000
property but have only
$10,000 of your money invested.
So far, you have made
$10,000 profit with only a $10,000
investment. You doubled your money in five years.
Where else can you earn 20% per year on your money?
The above figures do not include the cash flows or profit you were able to pocket
each year.
Now for the remaining $6,000 profit:
During that five years your tenants, by paying
rent, have
paid down your $90,000 mortgage to $83,750. That amounts to an additional
profit
of $6,250 that you will realize as added equity in your property
when you sell..
Your total profit would have been approximately
$16,250
for the 5 years
you owned the duplex.
You now know how fortunes are made in real estate.
There is one more point you need to know. If you still think real
estate investing is too
complicated to learn, the above property analysis example uses the same basic
formula
(in simplified form ) that professional investors use, even when purchasing multi-million
dollar properties.
Simple, huh?
Our investment program includes the complete software program for
preparing
professional investment property analyses.
These are not just "pie in the sky" figures.
Investors worldwide are reaping the same
fantastic profits, even in a slow economy. By the way,
knowledgeable investors
capitalize on a slow economy. Their profit picture greatly increases when
buying
distressed properties in a down market. But, you have to know what
you are doing. One more interesting fact.
Many investors like properties that have little or no
"cash flow". In fact they will buy properties with a negative cash
flow in order to
gain a taxable loss to write off some of their profits from other
properties. They
buy these negative cash properties because they know the property will
continue to
appreciate, as we saw in the above example. Many of them become
involved in
"flipping" which you have probably heard about. We have a complete
E-book
available on the topic of flipping and the other related ways of becoming
a real estate
investor when your cash is limited. Learn
how you can become a professional investor yourself and reap the
financial
rewards they earn. Our program takes you from beginning to end in the
sound
investment practices used by the pros.
Continue your tour
to learn more.
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Disclaimer: The above figures are a typical example
of the kind of profits you
can expect from prudent real estate investing.
The results we show here are
based on conservative figures.
Your results may
vary depending on
your area market conditions, the economy in general, the property itself etc.
This is the reason you must know what you are doing before investing in
real estate. |
