Categorized | Strategies

Make An Educated Decision

retireThe primary purpose of investing is to create a life-long estate for oneself and one’s family. Most people will want to eventually stop working for a living, preferring to step off the treadmill and relax, travel, enjoy life, or do nothing. Worse yet, many will be forced to stop working — making non-fixed investments a necessity. Even after retirement, they will not have true financial security.

There are other good reasons to consider investing in the “real business” of Residential Income Properties. According to the U.S. Census Bureau (February 2009) the population of the United States is growing, and growing fast:

  • One birth every seven seconds
  • One death every 12 seconds
  • One immigrant (net) every 33 seconds
  • Net gain of one person every 11 seconds

By the year 2035, the Census Bureau estimates that the United States population will grow by 72 million people. The current population of 306 million is expected to swell to 378 million. That amounts to a net population increase of 2.77 million each year for the next 26 years. Based on an average of 2.5 people per household, this indicates a need for an additional 1.1 million new dwellings to meet the demand. In 2009, forecast for additional new rental units construction stands at 214,000 (Realtor.org). Even after figuring a 100% occupancy rate, that still leaves more than 2.23 million people each year, for the next 26 years, without a place to call home. So, where will these people find housing? Will they purchase an existing or newly-constructed home? Will they qualify for loans or have the down payments to purchase properties? It seems clear that the outlook for investment in Residential Income Property is stable for many years to come.

Furthermore, according to Brookings Institute researchers, massive American construction projects will constitute a $25 trillion development market by 2030, nearly, twice the size of the entire U.S. economy today (14.58 trillion, 2008 est. source CIA Fact-Book). The majority of these funds will flow into ten metro regions called “Megapolitans.” By 2040 two of every three Americans will live in one of these regions:

  1. Seattle/Portland
  2. Phoenix/Tucson
  3. Boston/New York/Washington D.C.
  4. Chicago/Detroit/Pittsburgh
  5. Sacramento/San Francisco
  6. San Antonio/Dallas/Kansas City
  7. Raleigh-Durham/Atlanta
  8. Los Angeles/Las Vegas
  9. Houston/New Orleans
  10. Miami/Tampa

Clearly, an investment in Residential Income Property is more than an investment in real estate; it is an investment in a “real business” with a profit-loss agenda and the consequences of success or failure.

Real Estate business is not a cyclical enterprise and therefore requires the investor to be visionary, patient, and committed to success in the long term. It is not a get-rich-quick vehicle to wealth and it has nothing to do with timing the market. It requires a hands-on investor with a proactive attitude for managing business affairs, and willingness to learn and apply that knowledge in daily operations. Over time this attitude, along with hard work and acquired experience, will guide the investor toward success using the steady processes described in this site. If followed and executed faithfully, the strategy as outlined will lead to an exponential growth of wealth.

Ninety-five percent of retirees in the United States rely on bare sustenance incomes. These retirees did not realize the importance of investing in non-fixed passive investments, such as real estate. If investments do not produce enough to offset tax increases and inflation, they are actually losing money each year. Investing in real estate allows one to stay ahead of taxes and, more importantly, ahead of inflation. Investing in Residential Income Properties, therefore, is a hedge against inflation.

In real estate investing, education and implementation of that knowledge is what generates wealth and ultimately, financial freedom. The current “perfect storm” conditions provide a once-in-a-lifetime opportunity to become financially independent and wealthy, but not for investors who stay on the sidelines. Real estate investing is less beneficial and far less profitable for those who wait to buy than for those who buy and wait.

Why Invest in Residential Income Properties?

There are five main reasons why investors choose real estate investments:

  1. Cash flow.
  2. Debt reduction and equity build-up.
  3. Appreciation.
  4. Tax benefits
  5. Leverage

Consider the two most basic of human needs: Food and shelter.

We cannot survive without food. Yet, once we have food, our needs turn to shelter. Being a provider and a supplier (seller) of shelter for number of people for number of years can be very profitable and thus, make the investor wealthy beyond his or her dreams.

Unlike in any other businesses, Residential Income Property investments offer profit in multiple ways:

1) Appreciation of the property.
2) Rent payments that generate a steady stream of income that overtime becomes residual income. Simply put, this is like an actor receiving residual income from television show reruns.

These investments work for the investor 24 hours a day, seven days, 365 days a year, with no vacations, no holidays and no sick days. A good economy versus a bad economy does not affect rent due dates. Alternatively, in other businesses there’s only one way to profit — from the sale of a product or a service. Moreover, in a weak economy or recession, selling these products and services becomes more difficult.
The top ten reasons why investing properly in Residential Income Properties is a smart way to increase one’s financial wealth are as follows:

  1. The population is increasing at an exponential rate.
  2. The supply of land for residential real estate construction is limited.
  3. Inflation causes a rise in land value.
  4. Inflation causes a rise in rent.
  5. As rents increase, property values increase.
  6. The average annual price increase of real estate in the United States from 1968 through 2004 has been 6.4% (Realtor.org).
  7. Residential Income Property investments have led all other commercial real estate asset types, for total return over the past twenty years (National Council of Real Estate Investment Fiduciaries, NCREIF).
  8. Real estate investing offers unique tax shelter benefits unrealized in other industries.
  9. Real estate offers the highest leveraged use of all types of investments.
  10. Real estate investing is relatively easy and highly lucrative.

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