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