Have you seen your stock portfolio down this year?
According to a recent Wall Street Journal article the DOW erased all gains for this year.
“Global stocks tumbled on Friday, dragging the Dow Jones Industrial Average into negative territory for 2014 and shaking the confidence that many investors had clung to despite lackluster growth around the world.”
Investing in stocks or mutual funds can lead to increased volatility, capital losses, lack of dividends and you are not in total control of your investment.
Another problem:
“Because stock-price valuations are high, many investors believe low interest rates and inflation, strong earnings and steady economic growth are needed to keep pushing stocks higher overall.”
Investing in turnkey rental real estate allows you to capitalize on real estate appreciation and receive monthly rental income similar to dividends. You are in total control of your real estate investment as opposed to investing in a company where you have no control and anything can happen. We believe all investment portfolios should be diversified and have a physical real estate component in it.
Don’t have cash to buy real estate? No problem.
Financing rental properties to build a strong portfolio has been well regarded as a time tested and proven strategy for long term appreciation and passive monthly income. Our sellers offer up to 65% non-recourse financing to our investors that are both domestic and international.
We offer portfolio based lending which means there is no limit to the number of properties we can finance. We focus on offering financing based on the underlying property, not based upon credit scores, personal guarantees or requiring additional collateral. The other benefit of financing your investment is that it yields a higher return.
For example, there is a listing for a property available for $49,900 that is eligible for financing.
Here are the financials:
Income:
Monthly Rent: $875 or $10,500 Annually
Expenses:
Property Tax: $135 or $1,620 Annually
Insurance: $50 or $600 Annually
10% Maintenance/
Vacancy Reserve: $87.50 or $1,050 Annually
Total Expenses: $272.50 or $3,270 Annually
Net Annual Income: $10,500 – $3,270 = $7,230
Net Annual Income%: $7,230/$49,900 = 14.49%
If an investor chose to leverage their real estate investment by financing the rental property they would be able to realize a higher cash on cash return.
Assuming a loan at 8.25% with a 50% down payment
Mortgage Note: $24,950 * 8.25% / 12months = $171 or $2,058 Annually
Net Annual Income with Loan: $10,500 – $3,270 – $2,058 = $5,172
Net Annual Income %: $5,172 / $24,950 = 20.73%*
* The net yield and figures may not be all-encompassing. It does not factor the one time loan origination fees and other management expenses nor does it take into account annual rent increases and appreciation of the property.
As you can see from the example above, that is a near 6% increase in cash on cash returns simply by using leverage to finance real estate rental income properties. Generally, the higher the LTV the greater cash on cash yields can be expected. You can see the benefits of stacking additional real estate properties simply by using portfolio lending and bypassing traditional banks to substantially increase return rates.
Ask us how we can move to the next step in financing your real estate investment.
“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.”
– Robert Kiyosaki
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