| I invite you to take the next few minutes to learn | | | | property?It is amazing what a cleanup, a little |
| the truth about the real estate market, how it | | | | landscaping and a paint job can do to increase the |
| compares to other methods of building assets and | | | | value of a property. Only a few hundred dollars well |
| why it is such a lucrative form of investing. Many | | | | spent can result in huge value gains in Orlando |
| potential investors will say, 'I need to get into the | | | | Investment Property. Your $110,000 property with a |
| Florida Investment Property market', especially taking | | | | little effort could easily be worth $115,000, $120,000 |
| into account current stock market fluctuations and | | | | or more virtually overnight! Do you have to do any |
| the HOT market for investment properties, but | | | | of this work yourself? Absolutely not! If you like to |
| simply don't know the facts about Orlando property | | | | do that sort of thing then have at it, but if not, |
| investing and how to use sale and leaseback method | | | | simply hire it done and accept a little lower net |
| of property management.When is the last time your | | | | gain.Reason 4: |
| financial advisor or stockbroker tried to convince you | | | | Superior Tax Position: The tax code in the United |
| that moving a portion of your assets into the Florida | | | | States is geared to reward Investors who make |
| Investment Property market might be a good idea? | | | | housing and other property available to the |
| Never Right? The 'why' is simple. They don't earn | | | | population. When you invest in stocks, you are taxed |
| commissions when you buy Florida Investment | | | | at some of the highest rates in the tax code. When |
| Property. It is also likely that you have probably | | | | you invest in Orlando Investment Property, you put |
| never had an 'apples to apples' comparison of stocks | | | | yourself in one of the best tax positions in the |
| versus Florida Investment Property quite like the one | | | | business world. Remember the wealthy that hold |
| you will see here.Reason 1: | | | | substantial portions of their assets in Orlando |
| Leverage: Banks will not typically loan money to buy | | | | Investment Property? Tax advantages are one of |
| stocks. Banks will however, compete fiercely to loan | | | | the main reasons this is true.Continuing with the |
| money to buy Florida Investment Property. Your first | | | | above example, let's say that you have completed |
| question should be, 'why is that'? It has to do with | | | | your 'deal' with the $10,000 invested with a 90% |
| risk management, which we will discuss later. The | | | | mortgage to purchase the $100,000 property that |
| fact that banks want to loan you money to buy | | | | appraised for $110,000 (because you 'found a good |
| Florida Investment Property creates a situation which | | | | deal'), which you improved to say, $115,000 by |
| we will call LEVERAGE.Let's assume that you have | | | | spending another $1000 on cleanup etc. Assume that |
| $10,000 to put into some type of investment. If you | | | | one year passes and the Orlando Investment |
| choose to buy $10,000 worth of stocks, you will own | | | | Property market grew by 6%, your property would |
| exactly $10,000 worth of stocks. Pretty | | | | now be worth $122,000. So far, so good right? If |
| straight-forward. However, suppose you choose to | | | | you are like most people, you may want to spend |
| invest that $10,000 into Florida Investment Property | | | | some of your hard earned money.Let's do the |
| using a 90% mortgage (which in many cases can go | | | | numbers. You have a mortgage at current rates that |
| up to 95-100% mortgages in today's market), you | | | | started at $90,000 and after a year worth of |
| will own $100,000 worth of Florida Investment | | | | payments (the majority of which are tax deductible) |
| Property. If both of your investments were to | | | | you still owe approximately $89,000. However, your |
| appreciate by 10%, your actual gain with your stocks | | | | property is now worth approximately $122,000. If |
| would be $1000 where your actual gain with Florida | | | | you were to refinance at 90% once again, you |
| Investment Property would be $10,000. That | | | | would take out a new mortgage of approximately |
| equates to an actual 10% return on investment vs. a | | | | $110,000. This will leave you with approximately |
| 100% return on investment. That's what we call | | | | $21,000 in cash in your pocket. Now, the BIG |
| leverage.Leverage: Florida Real Estate vs. Stocks | | | | question; do you have to pay tax on that money? |
| The traditional argument against Florida Investment | | | | Absolutely Not! You have not sold the property or |
| Property Investing (mainly from Stock Brokers) has | | | | realized a 'capital gain'. You have simply borrowed |
| always been 'I can get an average of 10% from | | | | money from yourself. You are able to do what you |
| stocks with little effort so why would I invest in | | | | wish with that money, free from any tax |
| Orlando Investment Property that only appreciates | | | | whatsoever. Obviously, a good strategy might be to |
| 6-7% per year'? This point-of-view is not taking | | | | purchase two more properties just like your first |
| leverage into account.If you take the above | | | | deal!Also, we have not taken into account the fact |
| statement to be true and compare the REAL | | | | that ALL of your interest payments on this property |
| numbers, the stock investment gained 10% of the | | | | are tax deductible. In addition, you are also able to |
| initial $10,000 value (or $1000) and the Orlando | | | | depreciate the property itself and all of its contents |
| Investment Property investment gained 6% of the | | | | for additional tax advantages if you choose to do |
| initial $100,000 value (or $6000). That is still an actual | | | | so.Let's be fair and compare the Orlando Investment |
| return of 10% versus 60%. It is not hard to see | | | | Property tax position with the stock scenario. |
| which investment provides a greater immediate | | | | Assume that the $10,000 initial stock investment |
| return on investment. Additionally. these numbers do | | | | grew by 10% in the first year, creating a gain of |
| not take into account any income from your | | | | $1000 and you wish to access it. If you draw it out, |
| property during the course of the year, or the | | | | you will pay from 20-28% (or higher) in capital gains |
| substantial tax advantages to owning property, which | | | | tax in order to have access to this money. This |
| we will discuss later.Reason 2: | | | | reduces your net gain to $800 (actual 8%) or less, |
| Value: As we mentioned previously, if you invest | | | | depending on your tax situation. Compare that to |
| $10,000 into purchasing stocks, you own $10,000 | | | | Orlando Investment Property and you are beginning |
| worth of stocks (a fairly obvious point). If you invest | | | | to get the picture.Reason 5: |
| $10,000 into purchasing Orlando Investment Property | | | | Limit Your Exposure To Risk |
| using the leverage of a 90% mortgage, you own | | | | Risk Management: Do you remember at the top |
| $100,000 worth of Orlando Investment Property | | | | when we said that banks would compete fiercely to |
| right? Well, only if you paid retail for your property. | | | | loan you money on Orlando Investment Property? |
| Any savvy investor will tell you that there are | | | | The answer to the 'why' is very simple. Low Risk. |
| excellent deals to be had in Orlando Investment | | | | Banks incur little if any risk when loaning money on |
| Property, you just have to find them.What if you | | | | Orlando Investment Property due to the steady, |
| purchased a $100,000 property that happened to be | | | | solid growth rate of the property market, as well as |
| worth $110,000 the day you bought it? Does it | | | | the fact that if you default on your payments they |
| happen? The answer is yes, all the time. If you have | | | | will simply sell the property to somebody else. This is |
| your eyes open and are willing to 'go through the | | | | in direct contrast to the volatile stock market, which |
| numbers' to find good deals, they are all around you. | | | | can vary daily with sharp increases and decreases in |
| You may be asking yourself, why would anybody sell | | | | value. Furthermore, banks realize that a property isn't |
| a $110,000 property for $100,000?Value: Making | | | | going anywhere, whereas many investors know all |
| money when you buy. | | | | too well about .com and other types of companies |
| The reasons are endless as to why a quick sale is | | | | that were there yesterday and gone today.This is all |
| desired, but just to name a few: job relocation, | | | | not to say that Orlando Investment Property |
| divorce, an estate is being settled or maybe a | | | | markets don't go down from time to time, however |
| current appraisal on the property simply wasn't done | | | | the dips are much less dramatic than that which can |
| prior to selling. By 'finding this deal' you have | | | | take place in the stock market, proven out by the |
| accomplished two things.You have added $10,000 to | | | | banks' willingness to loan money on property.Reason |
| your asset column in the form of equity.You have | | | | 6: |
| created additional LEVERAGE for yourself as the | | | | Protecting your peace of mind. |
| value of your property increases (a 6-10% gain on | | | | Finally, Now that we understand the value of |
| $110,000 is better than a 6-10% gain on $100,000!) | | | | leverage and risk management we realize that a 6% |
| Remember, you make money in Orlando Investment | | | | Orlando Investment Property gain 'beats the pants |
| Property when you buy, not when you sell.Reason 3: | | | | off' a 10% stock gain in actual return on investment |
| Control: Let's take our assumption one step further. | | | | by a wide margin (approximately 50%, not taking |
| When you buy your $10,000 worth of stocks, what | | | | into account several factors that can increase this |
| can you do to increase its value? If we follow the | | | | number such as tax advantages, income on property |
| previous assumption, you have invested $10,000 | | | | etc.) Owning good, solid Orlando Investment |
| using a 90% mortgage to purchase a $100,000 | | | | Property allows you to sleep at night, or go on an |
| property that has an actual value of $110,000 | | | | extended vacation without worrying about your |
| because you 'found a good deal'. So what can you do | | | | asset column. This is directly opposed to holding a |
| to further increase the value of your new $110,000 | | | | substantial percentage of your assets in stocks. |