Get Filthy Stinking Rich In Real Estate
Are you looking to get filthy stinking rich? Real estate was probably not a way to do it over the last 5 years. However, with the huge adjustment in prices real estate is starting to look more attractive. There are several ways to make money in real estate. One way is flipping properties and another is buying and holding.
Flipping a property for big profits appeals to a lot of people. There are tons of books, blogs and websites about this topic. Search around in Google and you will see what I mean. It appeals to many because of the limited market risk, the potential for big profits and no tenant headaches.
One problem with flipping is the competition. The market is full of investors looking for deals on a daily basis. Often times, when a good deal does show up the competition gets it before you or there are multiple offers that bid the price up to high.
In Sarasota, Florida many of the investors are trying to buy the forecloses homes at the county courthouse auctions. Recently, I have heard from many investors that the homes are selling for retails prices. It is getting tougher and tougher to find homes that can be bought at wholesale prices.
Another way but far less exciting is to buy homes and keep them for the long haul. This is more of the tortoise approach to real estate but can still be very lucrative. One problem with flipping is that you have to keep doing it. You will always have to find homes at wholesale prices and fix them up. When will you ever be able to relax? Wouldn't it be nice to own a bunch of homes that were paid off? Imagine sitting on the beach relaxing while you have $10,000 -$20,000 a month in rental income.
Time Value of Money - If you have ever taken any kind of finance course or read a finance book then you are probably familiar with the phrase 'time value of money'. This is essentially just how money can grow over time and a dollar yesterday is worth more than a dollar today because you could have invested that money and earned some interest. For example, if you invested $10,000 today and earned 6% a year for 10 years then your money would grow to $17,908.
If is fun to see how money will grow over time. Financial advisers tell people to start investing early on in life. For example, let's say that you started investing when you were 20 years old. Assume you invested $10,000 and then added $10,000 every year until you were 65 years old. If your money earned 5% a year your investments would grow to $1,766,701. Now assume you did the same thing but only started at 40 years of age (20 years later). Your money would only grow to $534,998 which is less than a third. Now you can see why financial advisers want you to start early.
Now let's see what how the time value of money works in the real estate world. Say you bought a home for $100,000 with an $80,000 mortgage, 15 year mortgage. Assume the income equals the expenses.
Look below at the following appreciation rates. After 15 years your home would be worth the following:
* 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 if you bought several of these homes. You would have built up a nice little retirement plan that generated monthly rental checks. That is not a bad way to retire. While your flipper friends are out looking for homes to repair, paint and sell you are sitting on the beach enjoying the scenery.
Article Source: FxTradingStock.com
About the Author
Marc Rasmussen - Sarasota Mortgage
by: Marc Rasmussen
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Word Count: 672
Date: Fri, 18 Jun 2010
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