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 Why Invest in Income Property?
The fundamental benefit of investing in income producing real estate
is the opportunity to own a tangible asset that has the
ability to both grow in value and generate income. Couple that
with the advantages of owning an asset for which the bank may be willing to
finance up to 75% of the purchase, the tenants help pay the monthly
mortgage, yet you reap all of the benefits, such as a
growing income stream, future appreciation, and potential tax advantages.
As for risk, while it is certainly present in the short
run, an owner’s risk tends to
diminish systematically over time as the mortgage balance
is paid down, rents are raised annually, and property values increase
over the long term.
The Power of “Financial Leverage”
Investing in income property also allows you to take full advantage
of the extremely powerful investment tool known as "financial leverage". What is
financial leverage? It’s simply the ability
to purchase an asset of much greater value than the initial amount
invested. Why is this so important? Let’s do the
math. If you were to invest $250,000 in a stock or mutual fund and
that investment appreciated by 10%, your gain would be
$25,000. If you were to take that same $250,000, apply
it as a down payment on a $1,000,000 apartment building, and it appreciated
by
the same 10%, your gain would be $100,000, or four times greater!
Probably more than any other single factor, the opportunity
to apply the fundamentals of financial leverage is why real estate has always been such an attractive investment alternative
for investors.
A Historical Price Perspective
Over the long term, we know that real estate prices in Nevada and California
have appreciated approximately 6-7% on an annualized basis.
As with virtually any investment, however, there is no guarantee your
journey will be a smooth ride upward each and every year. For example,
witness the 13.6% price decline from 1990-1995 and the
subsequent 51% gain over the ensuing five years. Then
there was the astonishing 124% climb from 2000-2006, followed by
a 25-30% erosion since. If you've been a homeowner or
real estate investor for any length of time, I'm sure this sounds familiar
and you may have weathered other market cycles through the years.
Bottom line, ups and downs are simply part of the real estate market . . . or any
investment market for that matter.
Why Buy Income Property Today?
Certainly no one can argue that real estate prices in the West
escalated pretty dramatically from 1995-2006 . . . over 239% in
fact! Understanding
that, we always counsel those
investors who may be in the market with the intent
of quickly “flipping” a
property in the near term to proceed with caution.
Does that mean that now is a bad time to invest in income property?
No, not at all, and certainly not for the more patient
investor. The combination of moderating prices and
historically low interest rates, coupled with 3-5% annual rent
increases continues
to present an excellent window of opportunity.
 So . . . what should YOU do?
We would suggest that there is never
a bad time to invest in real estate for the long
term investor and that now is as good a time as any. And, as
you should always do before committing your hard
earned dollars to anything, we recommend that you do your homework
and seek good counsel . . . contact
us today!
Bottom line . . . don’t wait to buy Real Estate, buy Real
Estate and wait!
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