“Buy & Hold” Real Estate can infer several things, but for illustration purposes, let’s use a single family home rented by a tenant.
At first glance, this strategy may not appear to generate life changing income for you; however the long-term wealth building opportunity is absolutely incredible!
To keep the numbers very simple let’s assume you purchase a nice $250,000 – 3 bedroom, 2 bathroom home. That is the average price of a home in Regina. (Regina was recently listed by the Money Sense Magazine as #2 on their “Best Place to buy Real Estate”see article below.)
To invest in this home, you talk to your Mortgage Broker and get an investor mortgage requiring you to have a 20% down payment.
|Monthly Mortgage Payment:
(30 Year Amortization, 4% Interest)
|Monthly Property Taxes:||$180|
|Monthly Property Insurance:||$100|
|Total Monthly Payment:||$1,231|
|Monthly Rental Income:||$1,400|
|Monthly Positive Cash Flow:||$169|
So based on this example, you would be earning $169 each and every month from a single family home. Not exactly exciting is it? But look closer… it’s much better than you think…
Three Income Streams:
- Monthly Positive Cash Flow: In our example you would be earning $169 each month from this investment.
- Mortgage Loan Reduction: Each month you are building equity into your investment. This is very different from most other types of investing. What I mean is that each month that the tenant pays you rent – you send a mortgage payment to the bank. A portion of this payment is reducing the mortgage balance every single month. And every dollar that is paid off the mortgage is wealth to you. You have your tenant paying off your debt – how great is that? In this example that’s $290/month. That is a second income stream to you.
- Appreciation: Over time your property will appreciate. Even if your property only appreciates at 3% per year, it would be worth $257,500 after the first year you own it. That’s an extra $7,500 a year and is another income stream to you. If you divide $7,500 by 12 months, it equals $625 each month.
Are you getting excited now? You should be!
Now, one single family home provides you with these three income streams. Let’s add them up:
|Monthly Positive Cash Flow:||$169|
|Monthly Loan Reduction:||$290|
|Total Monthly Return:||$1,084|
This is from only one home, but imagine if you own two or three? Do the math–these numbers get large very quickly.
But the hidden factor in all of this is that most of the $1084 is disguised. You can’t spend it. So you can’t book that trip to Mexico or plan that second honeymoon to Las Vegas.
Getting wealthy takes time and if you spend all your profits you won’t get ahead…Real Estate investing is powerful and wise, because it automatically forces you to build your wealth.
In terms of wealth building assets, it really doesn’t get any better than this.
I welcome your comments on this week’s blog in the comment section below.
Helping You…..Build Your Wealth!
Regina, Sask. – Four years ago, Regina had the country’s hottest housing market. This year, the city nabbed the No. 2 spot on our list, mainly because its economy is on fire. Sectors such as oil, potash, uranium, diamonds and farming are all booming, and Regina has the lowest unemployment rate of all the cities we ranked, at 4.6 per cent.
Much of the growth is due to healthy immigration into the province, which reached a record 3,400 people in 2010. Although housing prices have more than doubled over the past four years, the average cost is still a reasonable $260,000.
GDP expected to grow by 3.4 per cent this year, and a large grocery warehousing and distribution firm recently opened a one-million-square-foot facility for trucks to drop off and transfer goods, making Regina a new Asia-Pacific gateway for trade and adding 800 new jobs in the city. Read full article here
Helping You…Build Your Wealth!