Recently, a friend of mine asked me what is the beauty about Real Estate? He noticed I post online and offline (even print media) about it and I told him the following points to ponder and lo and behold he invested a small piece of Real Estate in our city.
I told him the following advantages explaining like a 7 year old kid sharing his candy:
Number 1. The GOLDEN RULE IN REAL ESTATE INVESTMENT is that it ALWAYS APPRECIATE IN VALUE and only in the event of a fortuitous event (Flood, storm, fire earthquake, man-made disasters, etc.) it will lose its value. For Example: Johnny is a middle income earner and has enough savings for the next 6 months to secure his personal/ family/ work expenses and got this simple idea about investing in Real Estate. Johnny does not need to be a millionaire to be a Real Estate Investor because he only needs to pay the EQUITY which is around 20% of the Total Contract Price payable in 12, 24, 36, 48 months depending on the developer before the date of turnover. COME NOW, the beauty in REAL ESTATE INVESTING lies in the margin of profit it creates or the CAPITAL APPRECIATION amounting to 10% in the minimum to as high as 100% of the total money invested. Therefore, Johnny made a respectable profit even when the REAL ESTATE is not yet delivered to him or before the bank/ government financing kicked in. NOW, put into perspective if Johnny invested in multiple pieces of REAL ESTATE surely he can have the financial freedom he wants in much a faster rate.
Number 2. BUY LAND they aren’t making anymore of it. Today, at the turn of the 21st Century the world’s population is growing rapidly and you do not need to be an astrophysicist or a molecular scientist to know that the availability of LAND cannot accommodate all the people on this Earth, therefore, LAND only APPRECIATES except as mentioned above.
Number 3. It improves cashflow. Real Estate investors make money thru increasing the velocity of their Real Estate Investments. Real estate rentals can increase 4% to 10% per year depending on the area. The power of compounding builds a nest egg for reaching financial freedom. It is also important to know the tax implications and benefits for every real estate lease. Moreover, the edge of real estate over other investments like Stock trading, UITFs, VUL’s and other money market scheme is that it can provide monthly income. For example, Jack invested in two condominium units in a wonderful area with sufficient traffic, near business districts and commercial centres and developed by a reputable developer. If the monthly amortization of bank financing is at P45,000.00 for the two (2) units at a 15 year term, Jack, can lease out the 2 units on a monthly and daily rate to yield cashflow. He can lease out each unit for P30,000.00 monthly term making P60,000.00 for the two (2) with a cashflow of P20,000.00 per month exclusive of fees and other charges or he can lease it out at P2,500.00 per day for each unit making P5,000.00 per day x 20 days (sample), with a total of P100,000.00 per month of cashflow. Take note, the monthly payment is only P45,000.00 and the cashflow per month can be P15,000.00 to P55,000.00 depending on market demand. It is important to note that Jack must have the data of real estate rentals in the area and his two (2) units are spick and span to attract clients.
Number 4. Real Estate is the best and traditional form of mortgage to secure a loan or business credit. In a civilized society, REAL ESTATE is always the best form of SECURITY to use CREDIT since banks and other financial institutions prefer things which appreciates in VALUE over time as mentioned in RULE NUMBER 1.
Number 5. Your job is NOT PERMANENT. Real Estate has a character PERMANENCE in the sense that it can be passed from generation to generation and also at the very least you can have a passive income by selling and leasing real estate.In the final analysis, you have to manage your investments well or hire trusted professionals who can do the legwork for you. You must FOCUS or Follow One Course Until Successful in the exciting, challenging, and nerve wracking world of Real Estate to ensure success and financial freedom.
Jetro Carlo Pinili, RN REB