Friday, November 20, 2009
A year and a half ago I read the book 'Millionaire Real Estate Investor' by Gary Keller. In that book he interviewed the most wealthiest REAL ESTATE INVESTORS across the country to see why they were so successful. One of the basic themes in the book is to always buy a house with at least 20% equity. Another idea from the book is not buy a house in the hopes for appreciation. If you buy your first rental property with more than 20% equity ,you will be able to do a cash out refinance a year later. You can use this cash to buy your next property. When you own two rental properties, you are well on your way to creating wealth and passive cash flow. I made the mistake of buying a rental four years ago in the hopes of appreciation and now I have to hold onto that house for 15 years or more before I see a nice gain. I wish I would have read that book 5 years ago so I could have avoided a couple of mistakes I made when buying rentals.
Thursday, November 19, 2009
I figured I would talk about the other forgotten reason why owning rental homes is nice. You get a tax deduction for depreciation and other expenses related to the property. Depreciation is calculated by taking the purchase price of the home minus land value then divide it by 27.5. This tax deduction can save you money on taxes every year that you own the rental property. This is very beneficial for someone who is a w2 employee because these people don't get to write off items like self employed people. When I was a w2 employee, I would hardly pay any taxes and I would also select the least amount to be taken out of my checks every month. That really helped me on my take home pay. The rental tax deduction is limited to 25k per year.If you go over that amount during a year, you would just keep carry over the loss to another year. You can also carry that loss over until you sell a rental home for a profit. You would then just use that loss to offset any profit that was made from the sale of the rental home. I found out from my accountant that I have 240k in unused losses from my rental properties. That means if I buy a home today and pay 100k for it, and I sell it for 140k a year from now. I will not have to pay any taxes because I will use my unused losses to offset that income. I am very excited about the prospect of making money and not paying any taxes legally.
Tuesday, November 10, 2009
I wanted to show someone now that a person who has 100k now and just an average income how to retire in 10 years. I have been finding properties FOR SALE IN THE SACRAMENTO CA area that are selling for 70k or less. The amazing thing about this is that the rents on these houses are still $1000.0 to $1150.0 per month. I have caculated that if you were to put 25% down your loan amount is $52,500.0. A payment on that loan amount for 10 years at 6% is $712.0 per month. This payment includes P.I.T.I. If the rent is $1150.0 per month and you take away a $150.0 per month for property management and utilities you still have a positve cash flow of $288.0 per month. These are all homes that once sold for 200k. If you buy six of these homes over the next 12 months, you would have $1728.0 of positve cash flow along with the fact that you will own these 6 homes free and clear in 10 years. I would be conservative and say that these homes would be worth 150k in 10 years. You would have 900k in equity and $6000.0 per month in net income.I think you could at least work part time with this income or even retire.
Friday, November 6, 2009
The purpose of this blog is to show people how they can build wealth by buying homes with equity. I am also going to show people how to retire sooner than average by purchasing homes with significant cash flow. I will show you where to find great deals on properties so that you dont have to wait thirty years for appreciation to build your wealth. My first blog post will give you step by step instructions on how a person with an average income can retire in ten years.