| Investors, what can I say? – real estate ownership is one of the foundational keys to building wealth and financial independence in America. True investing is a building process, a plan or strategy, applied over time to make your money work for you toward a financial goal. “Wealth” means different things to everyone, but financial independence can be defined when your passive cashflow (investment returns) exceeds your living expenses – your money works for you, and You work ONLY when (and on what!), You want to!!!
That said, 2004-2005 was great for speculators, but THIS is the BEST investor market we have seen, or will see, for a while! Experienced investors know that you make your money when you purchase, and all the factors which make this a great Buyer’s market are fantastic for investors. Personally, I jumped on a great residential rental deal in Nov 2007. The best deals go against the common market — if you are interested in real estate investments for long term security, I encourage you to get on before the bandwagon starts rolling again! But before you jump into real estate . . .
- Discuss your goals with a good financial planner. Financial goals usually fall under three categories
- Capital appreciation to build wealth and increase net worth
- Capital preservation to maintain net worth and keep up with inflation
- Cashflow to supplement income
- There are many different investment vehicles, and even many different real estate investment choices. Your financial planner should help you identify which investments best fit your goals and circumstances. Do you want to actively manage, or just put your money to work? Will it help reduce the taxes you pay? Will it provide enough to pay for college or retirement? What about estate planning?
- There are risks involved with any investment plan, just like driving any vehicle involves risk, but you don’t have to drive in a “risky” manner. You minimize driving risk by understanding how your car works and the rules of the road. You minimize investment risk taking “Driver’s Ed” and building a team of professional contacts to help you understand the “rules of the road” for your investment.
- The biggest risk is lost opportunity. The longer your money is not working for you, in one investment or another, you are GUARANTEED TO LOSE 100% of all that might have been!
- Time is your best friend, and worst enemy! Time and consistency separate investors from the speculators. A little investment now will usually out perform a much larger investment made later, so unless if you KNOW you will have lots of money to invest in a few years, I encourage you to begin planning for your financial future!
Now, I am not a financial planner, tax advisor, estate attorney or such to give any specific advice, but as a real estate professional, and from my own experience investing in real estate, I would like to offer some thoughts on why I believe real estate is one of the best vehicles to achieve financial independence:
- Leverage — Real estate is one of the few investments which can be purchased with pennies on the dollar up front, and a promise to pay the rest over time. The beauty is, your capital appreciation comes over the full value, not just the amount invested, so your ROI (Return On Investment) is SWEET!
- “Ain’t makin’ no more” as Will Rogers said — Barring a major economic catastrophe or population annihilation, there will always be an increasing demand for housing. Granted there are local shifts and temporary adjustments, but overall Prescott remains a “destination location” that folks love moving to!
- Cashflow — In addition to rental income, American tax law was written (I’ve heard) mostly by business owners and landlords. Personally, I’ve seen tax returns when the bank balance has gone up AND taxable income went down because of legal deductions allowed for rentals. Ask your accountant!
- Choices — land, residential rental, commercial, notes & paper. These are just a few varieties of real estate investment strategies available to fit almost any of Your goals!!!