Clearly, the stock market has been a scary place to be recently. Not surprisingly, many investors are choosing to leave this volatile market in an effort to cut their losses. To that end, I believe one of the best ways to protect yourself is to have some of your money invested in and backed by hard assets. Remember that all of the investments I offer are backed by hard assets.
So are you going to leave your financial future in the hands of the government or in this crazy stock market? If not, let’s look at some of the reasons you may want to add Real Estate to your portfolio. Regina and Saskatoon are some of the best performing markets for investing in rental Real Estate. The vacancy rate is very low – less than one percent. There are new people moving into the cities every day. There are usually many calls for one advertised rental. Many times we don’t even have to advertise as we have tenants referring their friends.
As I was out looking at properties earlier in the week, I met a young couple who were planning to sell their current home as they were building a new home in the city. The home wasn’t perfect for our portfolio so we started to chat. They told me they had thought of keeping their property as a rental but felt they needed the money out of this place to be able to afford the new place. They told me they had paid $140,000 8 years ago before the boom and now owed less than $120,000. The 2 bedroom bungalow with a one bedroom basement suite was now on sale for $279,900.
I showed them how they could keep both properties and have it cost them less than if they sold property #1. Let’s go through the scenario I painted for them… Keep the current home, refinance and pull up to 80% of current value or about $216,000 minus what they owe $120,000 leaves them with $96,000 to apply to their new home costing around $400,000. Now their new mortgage payment is $1600/mth based on 4% interest and 25 year amortization on a mortgage of $304,000. Their present property can then be rented out for approximately $2000 per month; their cash flow would be $500 per month. They could then apply that $285/mth direct to principal pay down to their new home essentially reducing their amortization to 19 years. And use the other $215 to make up for the increased mortgage payment.
Now they have tenants paying down home #1 so they have a forced savings of about $5,000 per year, and if the market increases by just 3% – their net worth has increased by another $20,000.
What would you do if you were in their shoes? Let’s hope some naysayers don’t talk them out of it.
On another note I want to send out a big “Congratulations” to Janci and Jarrod. They signed up for the Tigrent Learning classes through Robert Kiwosaki’s group. I am so proud of them. They have attended 2 classes now with the last one being “Creative Financing.” When we talked yesterday they were making an offer on a sixplex and asking for Vendor Financing. I’ll keep you posted on how it went.
Helping You…Build Your Wealth!