This is not how it ends.
Thriving in the midst of the economic downturn
Chicken little said, “the sky is falling.” With the talk of (COVID 19) job layoffs, financial collapse, quarantine and the massive list of soundbites the media uses to grab your attention, indeed they have created fear in people.
Please always remember we are not at the mercy of the next event. It is not what happens, it is how we respond to what happens that defines us. This is a great time to look deep and ask yourself who am I. With a lot of time you now have on your hands for solitude, you want to dig deep and discover your spirit. It is time to lead, follow or get left behind. Choose your path wisely.
Keep a light mood but keep a strong spirit.
Nothing out there in this world is stronger than who you are inside. Having experienced a bankruptcy and a divorce myself, I have discovered this first hand. After having lost everything I ever worked for and cared about I went into a deep state of shut down. I found myself with stage 4 adrenal failure (this is where your adrenals stop producing hormones) I was told my body has gone into hibernation mode with my organs were only running at the capacity to sustain life. I felt catatonic and could hardly move. Yet the little interaction I did have with people I was repeatedly complimented for my strong spirit.
We are here to thrive not merely survive.
I pulled myself out of financial despair and I found love again. As my wealth has always been derived from my investments I wanted to indeed build up a stronger investment portfolio. I did however want to insure that the economics that created the housing bubble and global collapse would never again affect my finances. I spent about 3 years studying markets and identifying those indicators that suggest markets are rising or falling. I figured day traders trade stocks and commodities by the day, by the hour and even by the minute, so why then did so many people get burned in real estate because the markets shift much slower than commodities. The answer of course was quickly discovered no one talks about it. I had to research this to discover it all.
What I found was intriguing to say the least. I started my companybased on this research and share it all in my weekly blogs.
I have since been investing in emerging marketsand monitoring market conditions to more effectively ride the up waves of economic prosperity to be better positioned to do 1031 exchangeswhen the markets suggest it is time to move my assets to the next emerging market.
“If I can do this from stage 4 adrenal failure, I am convinced these economic challenges we face are no hill for you climbers.”
Your financial abundance and successes are only limited by your desires
Yes, it is your attitude that will define who you are. Chicken Little thought the world was coming to an end. That might be true if that’s what you choose to see.
The five wealth building principles:
There are a number of ways to rebound after financial bruises. As this is a real estate investing blog and I have biases toward real estate investing let’s talk about using real estate to build or rebuild your economic future. After all, it is only real estate that can provide to you all 5 of the wealth building principles. Using as many of these wealth building principals as possible (preferably all 5) and being purposeful and having a plan for success:
· Income: you want as many streams of income as you can get. It is said that 7 streams of income safeguard you against any economic downturns. With a Varity of income streams you will always have at least one income stream that will do well or thrive during challenging times. For real estate positive cash flow is that income.
· Deductions: A dollar saved is a dollar earned. In real estate we have the best tax deductions available to reduce the amount of taxable income we make. By making good money and then legally reducing the amount of taxes we pay on that income through tax deductions you are successfully taking advantage of your financial future.But wait there is more. Depreciation adds additional tax deductions. I believe it was around the 70’s when the depreciation schedule was adapted. This is a tax incentive that Ronald Reagan put into place that allows owners of rental property to depreciate the value of your income producing property each year. In short the IRS says your property values are depreciating each year and the value of that depreciation is considered a tax deduction for you. So while we all know the value of real estate typically climbs each year, the IRS says here, lets give you a tax incentive because we want to give people incentives to provide housing for the growing population.
· Equity Build up: When we finance property and pay down the mortgage each month a portion of that payment goes to reducing the total amount owed. For each dollar that your mortgage payment goes to reduce the balance owed is considered equity build up. As this mortgage payment is essentially paid through the rent payments from your tenant this equity build up is another income stream for you.
· Appreciation: This one speaks for itself. The national average of home value increases over the past 50 years has been 6%. So, for every $100k in property that you own you essentially grow your assets by $6,000. With this in mind how many millions of dollars of real estate do you wish to control?
· Leverage: OPM. Here it is the infamous other people’s money rule to gaining wealth. Borrow money from any source, bank, private lender, Mortgage brokers and the portion of money the lender borrows you (typically 80% in real estate investing) also generates all the above 4 wealth building benefits. So, if you gain the benefits off of a $100,000 property and use 80% OPM. The 20% of cash you contributed essentially grew 5-fold. (You contribute $20k, OPM contributes 80% and you gain benefits on the entire investment portfolio of $100k. Another way to look at it is this. If you had $100k in cash, you could buy $100 k worth of real estate. Or you could use leverage (OPM) and purchase and control $500k in real estate investments with your same $100K IN CASH and gain all the wealth building principles of the entire $500k portfolio.
Real estate, the IDEAL Investment.
O.k. look at the first letter of each these 5 wealth building principles and you will see it spells IDEAL. Only real estate offers the ability to gain access to all 5 wealth building principles with one investment. This is why 90% of today’s millionaires have real estate in their portfolio.
Who are you, what defines you.
So as the dust settles from this pandemic and you are working to build your cash flow and portfolio back up you will want to dig deep, You want to be (keep informed) there will be real estate deals found everywhere.
We don’t want to prey on the unfortunate we do want to create win win situations where we can help people out of there financial challenges and give them hope. For some selling their properties will be their first choice. For others we have a huge opportunity as good investors to create win win situations and help solve problems for people while positioning ourselves for a profit.
Never fall into temptation to score big at the result of burning others. There are way to many deals out there to burn the unfortunate.
Who are you, what do you want to be remembered for: For me I want to create and sustain wealth by helping others succeed.
The author’s opinion cannot be construed as tax or legal advice, and may not represent the views of HTBUSA or its stakeholders. HTBUSA is not a legal service or professional tax service. As with any investment, there is an inherent risk in investing in real estate.