Books
in black and white
Main menu
Share a book About us Home
Books
Biology Business Chemistry Computers Culture Economics Fiction Games Guide History Management Mathematical Medicine Mental Fitnes Physics Psychology Scince Sport Technics
Ads

Automatic wealth The 6 steps to financial independence - Masreson M.

Masreson M. Automatic wealth The 6 steps to financial independence - Wiley & sons , 2005. - 291 p.
ISBN 0-471-71027
Download (direct link): automaticwealththesixstepsto2005.pdf
Previous << 1 .. 72 73 74 75 76 77 < 78 > 79 80 81 82 83 84 .. 110 >> Next

11 1 11 $733,165 $94,011 $827,176 $17,048 $1,421
12 1 12 $874,175 $113,112 $987,286 $19,101 $1,592
13 1 13 $1,031,242 $134,367 $1,165,609 $21,256 $1,771
14 1 14 $1,205,410 $157,886 $1,363,295 $23,518 $1,960
15 1 15 $1,397,791 $183,780 $1,581,571 $25,894 $2,158
Accelerating Your Success
As a final supposition, let’s say you want to move at a very brisk pace. We’ll suppose you start with three properties in your first year. Then, every year after that, your goal will be to buy one more than you bought in the previous year. So you’d buy three in year one, four in year two, five in year three, and so on.
This method can work very well for those who are willing to put a good deal of time into their property investments. (If you rely only on friends and colleagues to spot good properties for you, you may not have as much opportunity as you need.)
You increase your buying activity only as you increase your experience. And with each new successful property, your equity grows. As your track record develops, you also get more opportunities with lenders and potential investment partners. So let’s see what this might look like.
196 AUTOMATIC WEALTH
ACCELERATED PROGRESS
YEAR NEW PROPERTIES BOUGHT TOTAL PROPERTIES OWNED TOTAL NET EQUITY TO DATE TOTAL RENTS TO DATE TOTAL EQUITY + NET RENTS TO DATE NET RENTS MONTHLY RENTAL INCOME
1 3 3 $52,626 $3,600 $56,226 $3,600 $300
2 4 7 $146,890 $12,420 $159,310 $8,820 $735
3 5 12 $292,392 $28,296 $320,688 $15,876 $1,323
4 6 18 $499,353 $53,301 $552,654 $25,005 $2,084
5 7 25 $778,660 $89,766 $868,426 $36,465 $3,039
6 8 33 $1,141,908 $140,307 $1,282,215 $50,541 $4,212
7 9 42 $1,601,445 $207,847 $1,809,292 $67,541 $5,628
8 10 52 $2,170,421 $295,651 $2,466,072 $87,803 $7,317
9 11 63 $2,862,842 $407,346 $3,270,189 $111,696 $9,308
10 12 75 $3,693,625 $546,966 $4,240,591 $139,620 $11,635
11 13 88 $4,678,654 $718,977 $5,397,631 $172,011 $14,334
12 14 102 $5,834,847 $928,323 $6,763,170 $209,346 $17,445
13 15 117 $7,180,223 $1,180,461 $8,360,684 $252,138 $21,012
14 16 133 $8,733,969 $1,481,410 $10,215,380 $300,950 $25,079
15 17 150 $10,516,523 $1,837,798 $12,354,321 $356,388 $29,699
Under this accelerated scenario, you build over $1.6 million in equity and receive more than $65,000 a year in net rents (after all expenses) by year seven!
As you’re about to discover, each property you buy should provide you with a good rental return plus sizable capital appreciation potential. Do this consistently, and you can build hundreds of thousands of dollars in equity, cash, or both in a few short years.
So what’s the first step?
The First Commandment of Successful Property Investing:
Cover Your Downside
The best way to limit your risk and maximize your profit potential is to make sure you’re buying every property at a good value. What’s a good value? Well, to answer that question, let me make the analogy to stocks.
First, companies that regularly pay dividends regularly make money. And psychologically, when the price of a company’s stock is falling,
Step 5: Get Richer While You Sleep 197
it’s easier to hold onto it if the company is profitable than it is if the company is losing money.
Second, investors are at least receiving some dividend payments from the company while waiting for its stock to come back. So they don’t feel much pressure to sell.
So how does this apply to real estate?
Well, dividends are like net rents in real estate—the money you put in your pocket every month or year after paying all the carrying costs of a property. But instead of the current, miserable 2 percent yields offered by today’s blue-chip stocks, you can find net rents in the range of 8 percent, 10 percent, 12 percent, or more.
Not only is this a very respectable return in itself, it gives you a very important margin of safety in case market values drop. Even if you have to lower your rent 8 percent to 10 percent in a down market, you can cover your mortgage and expenses while waiting for a recovery or planning an exit strategy.
If you invest carefully in a growing market, you may never experience the downside of real estate investing. But smart investors cover their downsides—by having an exit strategy (or Plan B) before they make the investment.
You can do that with real estate by making sure that, if rents go down 10 percent or 15 percent, you can still make all your payments and hold onto the property. If you can survive when things get bad, when things go well, they’ll go very well. And when they don’t go well, they won’t be a disaster. You’ll be ready to fight another day and take advantage of the next opportunity when it comes along.
Let’s take a look at why it is so important to take care of the downside. Consider the following $265,000 swing on a single property.
Why One Investor Made $164,000 and Another Lost $101,000 on the Same House in a Few Short Years
Several years ago, I bought a beautiful home in a quiet neighborhood a block from the Intracoastal Waterway. I paid $182,000 for the property and sold it about four years later for $390,000.
Previous << 1 .. 72 73 74 75 76 77 < 78 > 79 80 81 82 83 84 .. 110 >> Next