|
I Help Homeowners With Equity Become Investors with
$$Millions.
Why is it that you are looking at real estate investment? Is it
because you have friends that have done well? Is it because you
have done well? Is it because you are curious why so many that have
created wealth through real estate started with very little, and
you want to know how to do it too?
We aren't going to talk about fix-and-flips, or tax lien sales,
or pre-forclosure deals. Real estate isn't the magic answer, it
is the practical answer. The results sometimes seem magical.
Real Estate as an Investment
Real Estate as an investment tool is unmatched by stocks, bonds, CDs, and other investment instruments. Consider that unlike most financial instruments such as stocks, bonds, and similar financial instruments, banks are willing to loan you up to 100% of the value of your real estate and at relatively low interest rates. It shows that the biggest financial institutions of our day also believe that real estate is a relatively safe investment. The downside that many attribute to real estate investment is that returns are lower when investing in real estate. That is what is commonly said and commonly believed. Whether or not that is true depends on what markets you invest in, if you understand how to use leverage to increase your returns, and if you know what to look for in the properties you buy.
Benefits of Investing in Real Estate:
UNBELIEVABLE LONG-TERM RETURNS
I can show you how to make fantastic long-term returns through investing in real estate even at moderate appreciation levels.
GREAT TAX BREAKS
The tax breaks on real estate really are phenomenal. It turns an already good investment vehicle into a great one.
Real Estate Investing Risk
"But isn't investing in real estate risky?", I have heard some
say and as with anything worth doing, it has risks. Take a second
with me to analyze those risks. The risks that hurt you the worst are the ones you don't know to watch for. Below I have put together a small
article on the risks of real estate and then a second article on
the rewards of real estate.
Like most successful real estate investors, you are now aware of the risks and also of the potential rewards.
The risks are real and, believe me, the rewards are real too.
Using Leverage
Leverage is investing with borrowed money to increase your returns. Using leverage is not new and has been used by the wealthy for centuries.
Leverage can help you make much better returns on your investment dollars.
Banks use this principle every day which is why banking is such a profitable industry.
Some real estate gurus call this "Being your own Bank" because now you are the one borrowing at a lower return in order to make a higher return.
On the cautious side, leverage introduces increased risk into the equation.
Each investor has their own comfort level with the amount of leverage they wish to allow in their investments.
The amount of leverage should be determined by the individual investor as it fits in with their investment plan.
Too much leverage can hurt you during a downturn in the market, and with too little leverage, your assets aren't productive enough for you and you don't end up where you want or need to be.
To use an example of why leverage is important, we can use a real example that I am familiar with. A person we will call Bob, moved into the area and bought the home he was looking for at $250,000, paying cash for the home. His home did well as the market appreciated and within five years was worth $400k. By this time, the children were out of the home, and the client wanted to move into a nicer home on the golf course nearby. The home on the golf course was $500k and the client felt disappointed that he did not have the funds to purchase the home without using a mortgage.
If we were able to rewind time back to when Bob had initially purchased the home when moving into the area and done things a little different, he could have had more than enough money to buy the new home with cash when the time came, even with using leverage very conservatively.
When moving in, Bob could have purchased three homes using mortgages on all three of the homes. For simplicity sake we will say the homes were all $250k and Bob put down 33% on each home. With that kind of downpayment, there is a good chance Bob would have been able to make a little money month to month by renting out the other two homes, and then used that money to pay his own mortgage. Then five years later, Bob could have sold the three different homes for the estimated $400k and captured nearly $150k profit on each home plus the client would recoup their initial investment of $250k. If you figure that Bob paid approximately 25% tax (most likely the taxes would be lower) on the profits from the two rentals, and transaction costs of $25k per home sold that would still leave Bob with $550,000 dollars.
So Bob would have been approximately $150,000 further ahead five years later. That would have averaged out to $30,000 per year just for applying some leverage to his own home and using the additional capital to buy two rentals. After paying cash for his new golf course home, he would still have had $50,000 to invest or spend as he saw fit.
Using leverage is powerful and can create wealth for you just as it does for banks. You should discuss your situation and your options with someone who understands leverage and risk as they help you analyze the risks versus. the rewards. Ultimately you will make the decision on what amount of leverage you are comfortable with.
Get in it for the long run
To really make great money in real estate investing, do it for the long run. Real estate has its buyer's markets and its seller's markets, its high years, and low years. It is the investors who are always getting in and out of the market the often get stuck and lose their money. You can't day trade the real estate market. Begin now developing a long-term strategy that works for you. Your every day agent may not be able to help you very well with investing in real estate. Be sure to hire a professional who understands investment real estate and has been doing it for a number of years themselves. Most agents sell real estate, but few understand the investment side of it and few do it themselves. You wouldn't hire a stock broker who doesn't own stocks. Make sure your agent knows what they are doing and do it themselves.
What Properties to Buy
This is where I earn my value as a real estate agent and I spend a good portion of my time keeping current on good investment options in the current market. Until I know more about you I can't start listing off properties. Different types of properties work well for different types of people. I have some clients that will only buy condos, and some that will never buy condos. I have some that only do land, and those that never do land. Helping you find the right properties has to do with what your investment strategy is or will be. Please email me or call me and let's get together on the phone or in person. We can set up a time to put together an investment strategy that is personalized to you, your situation, your likes, and your dislikes. Then we can help you find some good investment properties that fit your real estate investment strategy.
If you have a moment, please read:
The greatest investment you ever bought.
In my opinion, and hopefully yours, one of the greatest investments a family makes is their own home.
At some point you were talking to your grandparents, parents, another relative or a friend that has been around
for a long time and were blown away at how low their house price was when they bought it years ago.
To use an example that I am familiar with, my grandparents paid the small fortune of $30,000 for their dream
home back in the sixties. That amount was a lot of money for a home back then where they lived.
Financially, it was a risk, and it was also the greatest financial decision they ever made.
However, now that they can see first hand how real estate performs over the years, they look
back now and wish that they had bought a few more homes back then and then rented them out to cover the mortgage.
The average home in their neighborhood goes for $330,000 today.
Investing Today, Relaxing Tomorrow
The sooner one starts investing in real estate, the sooner those
investments start working hard for them, and the sooner one can
change their financial situation forever. Investing in real estate
is not all roses and there are common mistakes made by those new
to investing that can be avoided with the right knowledge. There
is a learning curve to investing in real estate and the more you
know as an investor, the better your investment picks and purchases
will be.
Investing in New Mexico
New Mexico (NM) holds the key to building wealth for many out there who have not yet started.
NM is also a fantastic location for those who have already started creating wealth through real estate, but
would like to diversify into another market. Though there are a few different good long-term markets, most are much more expensive and
the ratio of rent vs mortgage payments is much worse in those other markets. Because housing prices are lower in NM, it makes it that much
easier to get into real estate investments here and to diversify into NM. You can get a good new or newer home in NM for as low as $135k.
That is far below the entry price of most good long-term markets.
In addition to being affordable, the rental market is good. Unlike so many of the good long-term markets where prices have already risen much
faster than rents, New Mexico rental market is good and the renter can pay most of sometimes all of the mortgage with the rental amount. Many of the other good long-term markets
like California, Nevada, and Phoenix have such high home prices vs rental prices, it is much harder to find an investment that without a very large negative cash-flow. You could
always buy in those markets and put more money down so that your cash flow isn't negative, but then your rate of returns decrease because you have to tie up so much capital into the one investment.
New Mexico just makes sense for most looking to diversify or to buy their first investment.
Work with the Best
As a potential buyer, the real estate agent you hire to help you with your next investment purchase gets paid at closing by the seller
and gets the same amount whether
they are great or not so great. Would you agree, it is then in your best interest to find someone great?
If you are looking to invest in real estate, you may consider using a real estate agent that does invests themselves and knows the investment market.
A professional real estate agent with experience and knowledge in real estate investing can act as an advisor to help you avoid
many of the mistakes common to those new to investing or those investing
in a different market for the first time. I would love to have a chance to earn you as a client and help you through the process of creating
wealth through real estate investment. If you are interested in discussing investment ideas or current investment deals in New Mexico, give me a call or
send me an email and we will start discussing the New Mexico market to make sure it is a good fit for your next investment.
Sincerely,
Jared Murphy
Real Estate Advisor
Allstar Realty
(505) 615-2718
|
