How to Be Cautiously Fierce When Investing in Real Estate
Despite what we went through in the recession in 2008, real estate investment is still one of the best places to put your money—if you know how to do it right. There’s no doubt that investing in real estate can be intimidating, and for most it seems like the financial barrier of entry is too high to overcome. They also worry about the risks of another market drop. But appreciation is only one spoke in the real estate investment wheel, and we want to give you more information about important time-tested characteristics that will keep you safe as you invest.
We offer a webinar called, How to Invest in Real Estate Safely. Watch the full webinar for a more in-depth approach. For this post, we’re giving a broad brush view of these characteristics:
What will the property be worth in 30 years when the mortgage is paid back? This characteristic is pretty straightforward. Shelter is not an investment that will ever go out of style. So, over a 30 year period we can assume a reasonable appreciation on any property.
What is the monthly overage compared to the loan payment you owe on the property? A common threshold is about 10 percent (if you used 20k for down payment you’d want about $2,000 per year of passive income. Another benefit of cash flow is that the rent you charge will likely increase over time, and (minding inflation) your passive income could actually double.
What is the primary tax benefit of owning property? When we sell a property, it’s taxed at a capital gains tax, which is less than income tax, so that’s a savings. You can also deduct expenses and depreciation of the income from the cash flow amount.
How can you use cash flow to create the velocity of money? By putting a down payment and making monthly payments instead of using cash to pay off the property, you can buy other property to enhance the rate of return even more.
Now that you know there’s more to real estate investing than slowly watching the value of a home increase, what is the best way to secure a loan and get the down payment for a property? Our expertise is recommending a financial strategy called Infinite Banking, and it will give you the ability to acquire property while getting all of the benefits from the characteristics above. Here’s the short version of how it works in a real estate investment scenario.
about our Perpetual Wealth Strategy (Infinite Banking is at the center of this financial system).
a whole life insurance policy with a cash addition.
up the policy and create cash value (what we call a Wealth Maximization Account).
from your cash value to pay for the property.
the loan while you still receive a steady return on the money in your policy and all of the benefits we talked about above.
How does this work? For some time, whole life insurance has gotten a bad rap. But for over a hundred years it has been a financial product commonly used by the wealthiest Americans to save for retirement, build wealth, and provide capital to fund investments. The key is to structure your policy wisely with a cash addition. When you borrow against your policy’s cash value with a policy loan, you are accessing capital to reinvest in other performing assets like real estate. Because you can borrow against your policy, your initial cash value is still earning interest. By becoming the financier as well as the borrower, you are maximizing the use of your dollar. The same dollar is used to purchase (or invest) while simultaneously earning an interest rate—making up for the opportunity cost of cash.
We want to give you more details about the Perpetual Wealth Strategy and how it can help you get started in real estate investments. We invite you to take 2 minutes to sign up for a FREE, extensive eCourse called Infinite 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal financial strategy and start changing your wealth paradigm!
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Learn how to Invest in Real Estate Safely