Investment can sometimes be risky. However, there are exceptions. When the right strategies are exercised, income property can be a reliable investment. It’s possible to increase return and minimize risk at the same time. Keep reading to learn how.
Put Money in the Bank
While many advise income property investors to put their money into the property, Jason Hartman doesn’t recommend it. Instead, it’s best to put as minimal of an amount as possible into the property deal itself. This is because when more leverage is used, risk is actually reduced. Leverage puts the borrower into a position of power, which can be a great thing.
Making and Losing Money in Real Estate
There are many people out there who have made a great deal of money with income property. However, there are also people who have lost money. It’s important to understand why these people lost money. Chances are, they bought a piece of income property for speculative reasons. This property probably had terrible cash flow. In the end, it likely had to be sold for a loss. This is an example of the buy-high, sell-low strategy employed by too many investors and which just doesn’t work.
Ups and Downs
Real estate operates in cycles, and like anything else, has its ups and downs. However, if you pay close attention you’ll notice a generally upward trend. This means, if you can last through the hard times, there will always be a peak following. Jason Hartman believes staying power, or the ability of an investor to stay in a market during tough times, is key to a safe investing career.
Successful investing shouldn’t involve gambling. It’s not meant to help you “get rich quick.” Real estate investment is a legitimate process of creating wealth over time. So the buy-low and sell-high strategy, requiring speculation, isn’t necessarily the answer to creating wealth.
Jason Hartman says “anything without income or rent is not an investment, but rather a speculation.” This is precisely why certain investments, such as precious metals, don’t provide a reliable method to create real wealth for the future. The fact of the matter is, you can’t receive the same benefits from speculating as you can with a solid income property investment. Good income property investments have the potential to provide:
- Consistent, positive cash flow.
- Great tax benefits.
- Invest with only 20% of your money.
- Low interest rates.
Income property, overall, is a safer investment. Anytime an investor steps into the realm of “buy low, sell high”, it’s necessary to speculate. Speculation is risky. The bottom line is this: an investment has to produce income in order to be
a reliable, safe investment capable of producing real wealth for the future. (Top Image: Flickr | Daniel Dionne)
The Young Wealth Team