Transactional real estate is a J-O-B not an investment. Some call it a chunker strategy, some call it flipping and you can make money on it. But let’s call a spade a spade, when flipping property you are working a job. A really bad job since, if your calculations are not correct, or if you did not purchase correctly, it may have a negative financial impact. The flipside can happen as well as, when a property is flipped properly in the (right market), you can be rewarded very well. The bigger the risk the bigger the reward sort of thing.
This technique can make money and that is great, but it does not continue to pay dividends. This is why it should not be called an investment, you make a calculated risk when purchasing, in hopes for a one time return on one aspect of the potential returns that real estate can generate. You are looking for returns on the spread in the value from the before repair value and the after repair value. This of course can be a great tool to generate cash to make a true investment and it has proven to be a great tool.
The investment itself is when you capture multiple avenues of income or growth from diversified and or re occurring dividends. Such as:
I = Income / Monthly cash flow
D = Deductions / tax benefits such as deductions and appreciation
E = Equity / The debt reduced on the mortgage that is paid for by the tenant
A = Appreciation / Value growth from year to year (national average is 6% past 50 yrs
L = Leverage / the ability to have 1005 of these above benefits while borrowing 80% of the money used to make the purchase
Seriously, real estate investing is simply an IDEAL investment. If you would like to find out more about IDEAL Real Estate Investing, check out our IDEAL Investment Property Calculator!