Secrets the "Rich Know About Real Estate Investing" That You Don't
Attention: This is for people who want to learn about & start investing, in real estate.
Did you know Arnold Schwarzenegger made his 1st Million NOT from making movies, but by investing in real estate? In fact, he started with a 6 plex, and has since built a $300 million real estate empire.
In fact, over the last two centuries, there are reports that about 90 percent of the world’s millionaires have been created by investing in real estate.
How accurate that is, I’m not sure, but either way, many of the richest people in the world have got their, and are continuing to grow their wealth, by investing in real estate.
So, how can you too, join the rich?
Well, by investing in real estate, duh!
But I’m sure your thinking it's too difficult to own real estate.
I myself thought the same thing, that besides owning the home that I lived in, owning additional properties was only for the super-rich.
I thought people whom did invest in real estate had expensive software that analyzed properties in such detail that it would then tell them if it was a good investment or not.
I also assumed that people whom invested in real state were extremely smart.
Whom understood all those fancy financial ratios that investors use.
Such as Net Present Value (NPV), WACC, debt-to-equity and IRR, just to name a few.
confusing right? :)
In fact.
Before I started buying investment properties, I went on the internet and typed in:
real estate investing software.
I remember the results were for software programs that costs thousands of dollars.
Right there it almost stopped me dead in my tracks from investing in real estate.
I assumed that’s what all real estate investors were using and thought that it was the only way to know if a property would be a good investment or not.
Later on I found out that was not the case at all.
That investing in real estate and understanding the numbers is quite easy, and once you learn it..
..it’s as simple as calculating 1+1=2.
Let’s jump back to the main topic.
Why do 90% of millionaires invest in real estate? Why did Arnold Schwarzenegger invest in real estate?
Do they know something you don’t?
Yes, they do!
So, pay attention, as I’m going to share what they know and you don’t.
Because once you understand these 4 secrets about real estate investing, which are...
The Big 4
The Little 3
The 3 Myths
The 5 Pillars
...you too can become a part of that 90%.
The Big 4
Once you understand the big 4.
You are going to stand up and scream.
Because you will realize that investing in real estate is the best way to invest your hard-earned money.
The first of the Big 4..
..Which in my mind is the best reason to invest in real estate..
Leverage
What does it even mean? According to Investopedia:
"the investment strategy of using borrowed money".
Specifically, the use of various financial instruments or borrowed capital to increase the potential return of an investment.
So how can you use leverage to buy real estate then?
Well with real estate, you don’t have to pay the full purchase price of a property.
Since it is an asset built on land.
There is THEN value in the land.
Financial institutions recognize this value.
And will allow you to only have to pay out of pocket a minimum percentage of the purchase price.
With the bank loaning you the balance. :)
Let me show you in an example.
Buying a $250K Property
You make an offer using a Realtor for the $250K and the seller accepts it.
With real estate though, you actually don’t have to pay out of your own savings the full value of the home; the $250K.
You can leverage the bank’s money.
Meaning, you can borrow from the bank almost the full value, 80-95%, of the purchase price of the property.
Now, the rules regarding the amount that is required for the down payment could change depending on government regulations.
But for now..
We will stick with the current rules of 2018 and use the 20% minimum down payment that is required to purchase an investment property.
This means that the buyer will need to come up with only $50,000 out of their own pocket.
And the bank will finance the rest.
$200,000.
This is why real estate is one of the best investments.
Because you are buying an investment using other people’s money.
In this case, you are using the banks money, and yet you can still make great returns.
Even after paying the bank back for however many years your mortgage is.
Which normally is 25 years.
Now, let me share with you what the rich are doing to get richer and how others are becoming rich investing in real estate!
Ready?
This is going to be good!
The Rich’s Blueprint
They are using their savings and buying real estate, leveraging the balance of the purchase price of the property.
But.
Here’s what the rich don’t want you to know:
"They are buying more than one property, because they know that after they have paid back the loan they received from the bank, they will own that property free and clear".
Imagine if you were to buy 4 properties each valued at $250K!
Yes..
You would need $200,000.
But in 25 years, or when you have paid the mortgages back in full.
You would have a million dollars in real estate.
Making you?
Yup, you guessed it..
A millionaire!
That is the power of leverage, borrowing the balance of the purchase price for a property, using financial institutions money.
Appreciation
Adrian Ede says this is one of the FOUR Wealth accelerators of real estate investing in this article.
As investors, we hope our property appreciates over time.
Meaning it will increase in value from the time you purchase it until you sell it.
But you just never want to count on it.
This is because as a real estate investor you want to be conservative.
Risk-averse.
When analyzing a property to purchase.
I myself never project that a property will appreciate in value upon purchasing it.
"This is because it allows you to focus only on the return the property will make based on the income it generates and how much the mortgage is being paid down".
If the property does appreciate in value..
This just me