Investment Properties Guide

Posted: Buying Investment Property

Open houses are a good time to explore new properties

Look in newspapers, on the internet, and go through real estate brokers. When finding a real estate broker, respond to an ad that looks somewhat intriguing rather than call and ask them directly. You will find that the broker will be more willing to help you if you are a possible sell to one of his properties that he or she is already trying to sell to someone rather than try to approach him or her cold.

Do not worry about the commission that you will pay the broker. They will definitely earn it, as they can find better financing than you can. Also, they can especially find better property than you can. Think of real estate brokers as fetch-dogs. They can catch much more game than you alone can, but you must give the dogs treats for their work, or they will not be interested in helping you.

We must say a bit more about real estate brokers’ commissions. They definitely earn it. Many people think it’s a good idea to get their real estate license so that they do not have to pay commission to a broker. If you think this way you will get yourself into trouble. You are forgetting that you are investing. Investing involves spending money to make more money. You want the maximum back from the money you spent; you shouldn’t spend your time trying to find ways to spend less. You should instead want to spend as much as possible, because you are going to get plenty back on each dollar you spend. The more you spend the better. This is especially true with property and real estate brokers. They are in the market and have their eyes on it. They are much more likely to find you a good piece of property with good financing than you are. Let them have the commission and take your fantastic property which will be the beginning of your fortune. Surely you can pay them some money if they ensure you a much bigger head start to your fortune than without their help, can’t you?

Remember, when you go shopping, you should take a good, hard look at each property, rather than just skim though lots of them. You want to go inside, investigate the whole thing inside out, rather than just simply examine the property from the outside.

When you find a property that suits your needs, you should buy it as soon as possible. William Nickerson said it best: “You should start as soon as possible, with financing as heavy as possible, always with the safety proviso that the mortgage payments can be handled from the property income after expenses are paid.”

Posted: Buying Investment Property

The Pyramiding Power of Capitalism and Real Estate

When somebody puts his or her money into stock, it grows. It grows linearly, but it does not grow geometrically. When something grows geometrically, it is growing at a much, much faster pace. Whoever figures out the power of pyramiding will be rich. It is the secret force of capitalism that separates the rich and the poor. It is the only way to become filthy rich. If you take advantage of it, you, too, will be rich.

This secret power is the power of borrowed money. Borrowing money is the surest way to riches. The middle class and the poor always try to avoid debt, and that is precisely why they remain poor and middle class. It is not their fault though, for the only debt they know of is consumer debt, which is bad. Some debt can be good; some debt can make you rich.

Every fortune in history was built upon debt; borrowed money is the driving force behind every millionaire’s fortune. So, you are probably thinking, “How can I tap into this power of borrowed money?” The answer is simple: invest in real estate! Real estate is full of borrowed money! Banks practically throw it at you. All you need is 20%, and they’ll give you the other 80!

Compare this to stock investment. You put in $20,000 into stock; you put another $20,000 into a property worth $100,000, and you borrowed the rest from the bank. We’ll say the bank is charging you 5% interest on your loan.

Time goes on, and both of your investments appreciate exactly the same amount – 6%. What does that leave you with? The stock has made you $1,200, and the real estate has made you $6,000, minus the $4000 that you owe for the loan, for a total of $2,000. The stock made only 60% of the real estate’s earnings. So, the real estate has made you 10%, but the stock only made you 6%. Clearly the real estate is the way to go.

But, it gets even better. What happens if your investments made 8%? Real estate would have earned you $4,000, but the stock would have earned you only $1,600 – only 40% of the real estate’s earnings. Do you see how real estate really is taking advantage of expontential growth?

What about the second investment you make? Say our investments make 8%, so now we have $21,200 from our stock and $24,000 from our real estate. We invest it again. We buy $21,200 worth of stock, and $120,000 worth of real estate, borrowing the other $96,000 at 5% interest. This time our investments earn again 8%, the stock earning $1,696 and the real estate earning $4,800. The stock, in this case, only earned 35%. It keeps getting better with time; real estate continues to earn a higher and higher percentage of the amount of capital invested, but stock is linear progression.

Real estate truly takes advantage of borrowed money, the essence of capitalism; it takes advantage of the pyramiding power of other people’s money.