As the actor Will Rogers states… “Don’t wait to buy real estate. Buy real estate and wait.”
I have always loved this quote and pretty much live by it as well. As you all know, there are many things to invest in and within real estate there are many ways to invest. It is the buy and hold strategy that has been so instrumental in creating wealth for the 90% of millionaires we have in the world today.
12 reasons why I love buy and hold real estate can be summed up with these two acronyms. I.D.E.A.L and S.U.S.T.A.I.N.A.B.LE. Equity Builders Group was built on the principles of ideal sustainable investments.
THE FIRST 5 REASONS ARE SPELLED OUT WITHIN I.D.E.A.L
I = Income: this is your monthly (positive) cash flow.
D = Deductions: this is a forgotten benefit that seasoned investors capitalize on very well. Tax benefits such as deductions and appreciation help you to preserve the most amount of money. As the successful investors will tell you, it is not how much you make but rather how much you keep that is important!
E = Equity: an easily forgotten and hidden benefit, is equity buildup. When your tenant pays you rent and you use a portion of that to pay down the principal balance of the loan, you are building your equity up each and every month. You now owe less and have more equity being reserved which you can realize the added benefit as you sell.
A = Appreciation: this is the value growth of the property (national average is 6% appreciation per year averaged out over the past 50 yrs).
L = Leverage: this is being able to control 100% of the investment with as little as only 20% of the value coming from you in the form of cash out of your pocket (typically 75-80%) of the money used to make the purchase can be financed.
And then there are 7 benefits that are spelled out within S.U.S.T.A.I.N.A.B.L.E.
S= Safe investment: with a rapidly growing population there will always be a need for housing. In recent years with more and more people opting to rent (demand is now at a 50 year high).
U = unique: while there are similar properties, each piece of real estate is different and offers something a little different than any other property so you are not challenged with devaluation due to oversupply of the same ole product.
S = Security: once purchased with purposeful diligence, the investment real estate is quite possibly your most secure investment. It is not going anywhere and will always be there providing housing for tenants and income for property owners.
T = Tangible: real estate is a tangible investment. Unlike stocks that can vanish overnight real estate you can see, touch and feel.
A = Ageless: real estate, when properly taken care of, can last for hundreds of years and actually appreciates in value as it ages.
I = Increase: in both demand and in rental prices.
N = Needs: good quality rentals are always in need.
A = Asset: an investment asset that adds to the balance sheet.
B = Bet: against inflation which most analysts agreeing that inflation is coming. Owning real estate is a great way to bet against the inflation. Once purchased (especially with today’s low cost financing) you have a great bet against inflation.
L= Likeability: unlike many other investments (that most people do not even understand) everyone knows about, understands and likes real estate. Whether they simply want to live in or invest in it, indeed it is a product everyone knows and likes.
E = Earth: “The best investment on Earth is earth.” — Louis Glickman, real estate investor.
The 5 wealth building principles
There are great investment opportunities within any real estate investment strategy. I always consider these 16 benefits when I am making an investment purchase to see how strong my prospected purchase is.
It is the first 5 that I really put to the test when evaluating a buy and hold investment. The I.D.E.A.L (mentioned above) represent the 5 wealth building principles that many financial planners are looking for when investing. Most investments offer 2, 3 or 4 of these wealth building principals.
Only real estate buy and hold strategy can provide for all 5 of these wealth building principals.
Fix and flip and wholesale investing are great investments and can create quicker chunks of money, although it sacrifices the cash flow and perhaps the appreciation. The equity build up (in the form of renovations and update represents its investment potential). Often people will do wholesaling and /or fix and flips as a way to build quicker chunks of money so they can invest in buy and hold investments. The ultimate investment strategy.