INVESTMENT STRATEGY
- Manage your real estate as you would your stock portfolio:
- Just as you should make periodic adjustments to optimize your stock market portfolio. We encourage you to also make periodic adjustments to optimize your real estate portfolio.
- Leverage your investment:
- Archimedes said, ‘If you give me a lever (i.e. real estate loan) and a place to stand (i.e. a property), I can move the world. Here is what I mean by leverage. In America, 100% capital outlay is not required to purchase a property, only 20%. However, compounding interest works it’s magic on 100% of the property value.
- Rule of 72 But Better:
- In finance, the rule of 72 is used to estimate how long it takes for an investment to double. The formula is 72 divided by the annual interest rate equals the number of years it takes to double your initial investment. 72 divided by 8% equals 9 years. An initial capital investment of $20,000 in stocks or mutual fun at an interest rate of 8% annually would return $40,000 in 9 years. Here is how it get’s better. Purchase a $100,000 property with an initial capital outlay of $20,000. At 8% appreciation per year for nine year, your initial investment of $20,000 would increase nearly 20 times to $199,900. You would double your initial investment in a little over two years.
- The Secret You Should Know:
- There are real estate markets in America that have historically appreciated an average of 8% year over year for the past 50 years. Go find those markets.
- Diversify:
- Invest in real properties in multiple markets, not just the one you live near. You don’t only have one stock in your stock portfolio. Likewise, don’t only invest in only one city.
- Use technical indicators to make objective decisions:
- Use indicators like median home price, number of sales, MoM and YoY data to make your property purchase decisions. Run a nationwide REMAP2.com real estate search to find the perfect market for you.
- Track trends-national housing market data:
- Similar to how index funds give you an indication of the health of the stock markets, national, state and metro area housing trends give you the health of a specific real estate market. Take the advise of Warren Buffet when he explains that investing does not have to be like being in the batters box of a base ball game. You do not have to swing until you see a strike or favorable market conditions in a up or down market.
- Look for bargains:
- Once you have found your perfect market, use other tools like Zillow.com or Realtor.com to narrow the search and find the best bargain.
ENTRY STRATEGY
- When interest rates are low (Warren Buffett low gravity investing)
- When market begins appreciating
- When rents are high
- When you can secure immediate equity
- When there are solid reasons for market growth
- Markey cycles, when other are selling
- Seasonal cycles fall and winter
EXIT STRATEGY
- When market begins depreciating
- Market cycles, when others are buying
- Seasonal cycles spring and summer
- When you want to 1039 exchange into commercial property