Right now every real estate "expert" is blabbing on about how horrible the real estate market is...
The problem is they aren't saying who the market is horrible for, because it's definitely not horrible for real estate investors.
As an example, back in the early 2000s I bought a small two-bedroom condo for $33,000 as an investment. This condo rents around around $550 a month and I still own it today. It has provided a few hundred dollars of positive cash-flow each month since acquired.
Right now, I'm helping an investor acquire a 1,964 square foot 5 bedroom single-family home for $25,000. This home is a foreclosure and needs about $10,000 in updates. Once updated, it will easily rent for $975 a month.
This investor is going to have a beautiful 5-bedroom home for around $35,000 and will enjoy monthly positive cash-flow of around $700. His annual cash-flow will be around $8,400 and he will have his entire investment back in less than 5 years. He is paying cash for the property and will not have a mortgage payment.
This investor "sees" the real estate market as the best investment opportunity in the last 10 years.
Its easy to see that his investment is far better than my investment. I paid $33,000 for a small two-bedroom condo. He will invest $35,000 for a 5 bedroom single family home. I paid $36.66 a square foot. He will pay $12.72 a square foot.
Where else can you invest $35,000 and receive $700 a month for life?
This investors annual return on investment will be around 24%. Of course, there will be vacancies and repairs throughout his ownership. These costs will probably pull the return on investment down to around 15% a year.
This investor could simply use the monthly net income to offset his living expenses. However, this is not what he is planning to do. Instead, he is going to use the cashflow boost strategy...
The Cashflow Boost Strategy
Believe it or not, the weatlhiest people in the world (including Warren Buffett) use this strategy with their investments. It's nothing new or crazy.
The idea is to simply reinvest the cashflow received into new income producing assets.
It's the same thing as reinevsting dividends back into stocks or mutual funds. Well, this investor is going to do the same thing with his real estate cashflow.
As an example, he might decide to use the $700 monthly cash-flow to buy shares of AT&T stock. This stock pays dividends of around 6% a year.
The dividend income is additional cashflow and actually boosts his annual income and return on investment.
On a high level, he is having someone else buy $700 of AT&T stock for him each month. This little process can continue for life - as long as he doesn't sell the home.
To accomplish the same thing without this real estate investment, he would have to invest $700 a month out of his paycheck each month, year-after-year. His annual income would only be around 6% - the annual dividend yield from the AT&T stock.
However, his annual return will be well over 15% a year when combining the income from the real estate and the dividends earned from the stock.
There you have it - the "cashflow boost!"
The only question that remains is - will you use the "cashflow boost" to your advantage?
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