I – Income
- Receive cash in-hand, monthly. Can you envision consistently collecting checks that require little-to-no work? This concept exists, passive income. Investors maintain control over a property’s revenue stream. YOU make the decisions affecting the profitability of your income-producing asset. You’ve officially reached ‘boss’ status.
D – Depreciation
- Earn more, pay less. Why are the wealthy taxed lightly? Phantom expenses known as tax-benefits; owners write-off property depreciation as an expense. Effectively utilizing ‘loop holes’, in regards to property ownership, grants flexibility. Remember the old adage, “a penny saved is a penny earned”.
E – Equity
- Increase ownership for free. Is this possible? Yes, with happy tenants. They pay you, you pay the mortgage. The principal balance shrinks as equity rises. Each month you own a bit more of the asset than when you initially purchased it. Get excited.
A – Appreciation
- Relax as property values mature. How can assets depreciate and appreciate simultaneously? Over time; forced by the owner or the market. Owners appreciate their properties with rent increases, property repairs, home additions, etc. This is termed forced appreciation. Properties also experience market appreciation. Population growth, increased employment opportunities, and area beautification; all assist in increasing value. Competent investment decisions and management efforts not only maximize profit but grow asset value. It’s not 1 way to do 50 things but 50 ways to do 1 thing; in this case, increase profits.
L – Leverage
- Feel great spending other people’s money. Who could resist? Investors acquire properties through mortgages. A maximum 20% down payment for total control, an exceptional deal. Anyone can prosper from this unbalanced transfer of ownership. Investors also employ current assets to acquire additional assets by capitalizing on built-in and/or earned equity. Yet another way to take advantage of a prime investment.
Many suggest real estate is too risky; others advise avoiding it altogether. As always, it’s imperative to self-educate before pursuing any investment. It’s just as important to factor reserves for unexpected expenses and be prepared with exit strategies if plans falter.