Posted by lo on December 18, 2002 at 12:36:38:
- You can study the market and buy 15-20% below the
“fair market value”…your first profit…
You can rent it for more than expenses to create a
monthly “cash flow”…your second profit…
You can expect it to appreciate 5% most years,…
sometimes much more…your third profit.
You can depreciate it over 27.5 years…fourth profit.
You have lots of deductions including interest.
ex: $18,000 in interest deduction means you take off
$18,000 of your gross annual income when you prepare
taxes. We are averaging a “net worth” improvement
of $35,000 the first year on a $175,000 rental property.
Net Worth is Assets - Liabilities = Net Worth
A person earning $50,000 yr would have a tough time
saving $10,000. Buy one such property and make
$35,000 the first year and $20,000 every year after.
Live in it and you can buy zero down. That’s maximum
leverage so you’re litterally making 200-400% on YOUR
money.
Example 10% down on $200,000 house and it goes up 10%
the first year. You got 100% on YOUR money. The rest
was the banks money.
Example 5% down on the same $200,000 house and it goes
up the same 10%…You just made 200% on YOUR money.
Leverage…use as little of your own money as possible.
Use the excess to buy more properties.