Archive for the 'Getting Started' Category
Let’s start with: Why have an LLC?
There are mainly two reasons why you want any kind of business structure:
Pay less tax, and protect your assets.
Before you jump into creating your LLCs for your real estate holdings, there are a few things to consider. Do NOT make these three mistakes.
Think about the most successful people you know. Here are 17 things I’ll bet they’re constantly doing.
Think of the most successful person you know. Maybe we’re talking about a work colleague or a mentor. Maybe this is someone you knew growing up or in school — and you can’t believe how much he or she has achieved since then.
Ignoring the fact that stocks, bonds, mutual funds, and other investments are either over-valued or providing negative real returns, real estate has almost always been the best use of capital specifically because of your ability to leverage your investment.
If used properly, leverage will significantly enhance your return on investment. This is easy to do if you invest in income-producing real estate but much more difficult, if not impossible, if you’re investing in stocks or mutual funds.
You’ll often hear people say that they don’t like real estate because if you look at the long-term returns of the stock market, it seems to have a better return over the long-term.
Of course, when they say this, they are leaving a few key things out.
Successful real estate investing relies on several factors, but as the old adage goes, “location, location, location” is top of the list. But “location” is a broad term, and evaluating the right place to invest your dollars in real estate means identifying the right market in both the macro and micro senses.
Small is Big!
If you own one investment property you are a significant investor and contributor to the American economy. The engaged (as opposed to “aspiring,”) real estate investor population is estimated to be at 11.1 million individuals and companies. Together this tier of investors owns $3.1 trillion in single-family residential (SFR) asset value representing 13.3 million homes.
A few years ago, I was chatting about financial freedom with a close friend. My friend was very interested in becoming financially independent, and really wanted to discuss how she could increase her wealth.
However, when I shared my journey to financial independence, she had a lot of reservations.
Financial liberation is beyond most people’s reach because of the following four myths and destructive mind-sets:
1. The Retirement Myth
2. The Financial Freedom Myth
3. The Entitlement Mentality
4. The Fallacy of “Someday”
The Retirement Myth
The retirement myth is the idea that the purpose of life is to work for thirty years, save enough money, and then stop working and live off one’s savings. This destructive myth causes many people to stay in jobs they don’t like and that don’t allow them full expression of their best talents. It makes us sell our “birthright” for a “mess of pottage” in the form of golden handcuffs and benefits. It often leads to small lives built around limited dreams.
For some investors, the goal is to own properties “free and clear,” that is, with no mortgage debt. While this is a worthy goal, it does not necessarily make financial sense.
For example, consider a $100,000 property that brings in $9,600 per year in net income (net means gross rents collected, less expenses, such as property taxes, insurance, maintenance, and property management). The $100,000 in equity thus yields a 9.6 percent annual return on investment ($9,600, the annual net cash flow, divided by $100,000, the cash invested).
Here are 21 ways to compress the distance from where you are now to financial freedom:
- Earn more, and save more.
- Spend less – thus reducing the amount of passive income you need to become financially free.
- Leverage other people’s time, other people’s knowledge, other people’s relationships, other people’s money, other people’s deal flow.
- Use leverage to create positive arbitrage.
- Start a business in parallel to your W-2 job so you can earn – spend – tax, rather than the job trap of earn – tax – spend. Read more »
1. “Identify your problems but give your power and energy to solutions.” — Tony Robbins
2. “You live longer once you realize that any time spent being unhappy is wasted.” — Ruth E. Renkl
3. “The only true wisdom is knowing that you know nothing.” — Socrates
4. “If you are not willing to risk the usual you will have to settle for the ordinary.” — Jim Rohn
With real estate, people often don’t understand how an investor is paid. I mean, stocks historically provide an annual rate of return of about 10% and are low hassle. Comparatively, real estate values historically only return about 5% annual appreciation…and with more hassle! Right? So then how can real estate be a good investment? Once you know the answer to this question and act, wealth creation begins. I’ll start showing you how right now.
When I tell people that I am a real estate investor, or that I work at a real estate investing firm, one of the first questions they ask me is: “oh, do you flip houses?”
The question gets a little annoying after a while but I understand why people ask it – it’s because most people’s knowledge of real estate investing comes from what you see on television, and flipping shows are everywhere on TV.
So when I tell people what kind of investing I really do, I get a lot of blank stares as they try to fit what I do into their paradigm of “real estate investing”.
1. It’s not how much money you make that matters, it’s how much you keep.
2. Don’t let friends, family, or co-workers talk you out of real estate investing unless they have more money than they know what to do with. If that’s the case, do what they’re doing.
3. Free contracts are worth what you pay for them. Have your contracts approved by an attorney who will defend them in court. If you have to ask why, you’re new to the business.
Single-family homes have the widest market appeal.
In a softening marketplace, real estate that houses jobs (retail, office, etc.) will generally show rental weakness before the real estate that houses people (single family homes). Changes in job indicators give investors in single-family homes opportunities to re-position faster than investors in commercial property can.