The Rule of 72 and Getting Rich in Real Estate!

At the current time, it's no secret the price of real estate has stopped increasing and has started to fall in most parts of the country. Though this may be bad news for people who were planning on their homes going up in price quickly, a dip in price is good news for those looking to invest in real estate.In the coming years, many people will be making money because they bought into this real estate market downturn. Making a lot of money in real estate is of course, easier said than done, but it is certainly not unprecedented.

The first step on the road to riches is to gain the understanding of the tried-and-true theory of making money in real estate. The first step in gaining this knowledge is an understanding of the rule of 72.The Rule of 72

The rule of 72 helps us understand the effects of compounding interest over longer periods of time. It states, compounding interest will double the price of a commodity in the number of years of 72 divided by the yearly interest rate. For instance, if you had $10,000 in the bank and it was earning six percent per year, you would divide 72 by 6 to find out how long it would take the $10,000 to double into $20,000.

The answer is, of course, 12. So, if you were to invest for a very long period of time, for instance, 36 years; your $10,000 investment would turn into $20,000 in 12 years, $40,000 in 24 years, and $80,000 in 36 years.It is common for real estate to increase 6 percent in a year. In fact, this would be a relatively slow market. The price of realty doesn't always go up, but when there is a hot market, it is not uncommon to see real estate increase by 20 to 30 percent in one year.

Since the market is not always hot, it doesn't make sense to use the rule of 72 to calculate for enormous gains like 30 percent. Those types of gains are an aberration. However, since the '50s real estate has increased, in some areas, by an average of 8 percent. For simplicity reasons however, lets use the figure of 7.2 percent.If a commodity increases by 7.2 percent per year, the rule of 72 tells us that its price will double every 10 years. 72 divided by 7.2 is 10. So, you can see that over the long haul it is smart to be invested in real estate all the time.

Leverage

Simply doubling your money every 10 years will not put you on the fast track to wealth. To get on the fast track to wealth, you must incorporate leverage. With leverage you control a large amount of worth, while only having invested a small amount of money. Here's how leverage works in real estate. If you are able to put down 20 percent on a $200,000 property, you will have invested $40,000. If the price of that property doubles in the next 10 years, which the rule of 72 tells us it will at a yearly interest rate of 7.2 percent, the price of the property will be worth $400,000 after the 10 year period. If you had been able to rent out the property with your tenants making the monthly mortgage payments, as well as paying your taxes and insurance, you will have made $200,000 with your $40,000 investment.

This is leverage at work because the rule of 72 should have doubled your $40,000, but you actually made $200,000 because of the leverage your mortgage, combined with renting gave you.If your mortgage happened to have been an interest only mortgage, the property would never be paid off, but your monthly payment would have been low enough to have your tenants paying the mortgage payments each month without you suffering a negative cash flow.

At this point, you could sell the property and receive $200,000 minus probably, $5,000 to $6,000 for expenses, at closing. Plus you will also get back your original $40,000 down payment. Of course, as a real estate investor, your next move would be to use your $235,000 to make down payments on other properties.You can see how a person could use the rule of 72 and leverage over and over again to become very wealthy. This is not a far-fetched hypothesis. It is a proven theory that has worked countless times.

For many people, the trick is to find the original down payment he/she will need to get started. Aside from the rule of 72 and a thorough understanding of how leverage works, knowing how to get started with little or no money is the next biggest key to success in real estate investing. However, it will be the topic for another discussion.

Caravan park directory with sales and rentals

Also known as caravans and RVs, motorhomes have become increasingly popular with people that love the outdoors. A caravan or motorhome is exactly what the name suggests, a home on wheels; just like an ordinary home a motor home has a kitchen, seating area, sleeping space and a chemical toilet. People all over the US have started using motorhomes to enjoy the outdoors, and also as substitutes for camping equipment. Although RVs (Recreational Vehicles) are now considered as mobile homes, traditionally mobile homes have been larger in size when compared to RVs. RVs have been in existence for nearly 40 years now, but it is only recently that motorhomes have received the recognition they deserve. A stigma attached with people living in motorhomes was that only poor people lived in motorhomes on a full time basis. The truth is many people have sold their houses, and decided to live in motorhomes because they enjoy travelling when they like, without having to worry about accommodation expenses. Today RVs can cost up to $150,000 depending on the facilities they offer. If one were to attempt to differentiate between an RV and a mobile home, the biggest difference will be that RVs have their transportation integrated into the structure; whereas a mobile home (trailer) is designed to be more stationary. Mobile homes are usually moved to a trailer park once, and they remain there for a long time. In essence mobile homes are designed to be an alternative to housing where as RVs are as the name suggests for more adventure and recreational activities.

Motorhomes are divided into the following categories:Class A

(motorcoach)Class A motorcoaches are constructed on a commercial truck chassis, or a specially designed motor vehicle chassis, or a commercial bus chassis. Class A motorcoaches are one of the largest motorhomes, and have ample space for a family to live in. Class A motorcoaches are ideal for people that want to travel in luxury. Today luxury motorhomes come equipped with internet connections, and spacious bedrooms. No wonder people have started selling their homes to live in motorhomes!

Class B (campervan)

As the name suggests, campervans are built using a van, and are considerably smaller than motorcoaches. Compared to a van, the diving cabin is unaltered, but the back of the van is converted into storage cum living area. The roof is raised to allow more space.

Class C (Motorhomes)

These are custom motorhomes built on truck (pickup) chassis. A motorhome is larger than a camper van. Class C motorhomes can also be built on freightliner trucks as well, and are almost as large as or sometimes larger than motorcoaches also. What differentiates class C motorhome from class A motorhomes is their custom “cab-over” design. Ideally, for shorter trips and limited budgets, a class B campervan is the ideal buy. However for larger families or for people looking to live in motorhomes permanently, a class A motorcoach or a Class C motorhome is the ideal option. Another vital aspect when it comes to choosing motorhome is the price, which more often than not depends on the features that the motorhome is offering.

Motorhome vs. Trailer

If you are looking to buy a mobile home or motorhome, then there are few things you need to keep in mind. Just like a normal house, a mobile home too can be as expensive as you want it to be. Recently, Featherlite launched a motorhome worth $2.5 million, so your budget is important. If you plan on using the motorhome as a permanent residence then a trailer is the ideal option. Also if you already own a vehicle, a trailer is a good idea as it can be attached to the back of your truck or pickup. However, if your vehicle is a car or some other luxury vehicle, then you can go for an RV or motorhome. Effectively it all comes down to the budget and the purpose of the mobile home.

Rental Property Investing with IRAs

An individual retirement account is familiar to most when it is referred to by its abbreviation IRA. What most people are not familiar with, however, are the strategies you can use to crank up your return on investment.The idea of buying a home through an individual retirement account may seem out of sorts. It is not. Most people incorrectly assume they can only invest in mutual funds, stocks or bonds.

The average person will always invest in the stock market in some form or another with their IRA. The question is whether you want to be average when planning for your financial future. If not, you need to think outside the box.Using your IRA to buy homes and such might sound like an aggressive idea that might raise the ire of the IRS. In truth, it is not and the IRS has said as much. The language allowing it is right in the tax code, to wit, this is not a loophole strategy.

Truth be told, you have the right to invest your retirement dollars in many more investment areas then you are led to believe. So, why haven’t you been told this? Well, most stock investment brokers don’t make money in real estate, so why would they promote it?To buy a home with your IRA, we need to back up a few steps. You cannot open an IRA at your stock broker. Instead, you must open a self-directed IRA. IRAs held by investment firms restrict you to stock marketing investing since that is where they make their money.

This form of IRA can be held both as a traditional or Roth IRA. The structure, however, is a bit different. There is an independent custodian overseeing the account. It is required by law to make sure people don’t crazy with investments. The custodian is not expensive.After setting up your account, you can invest in property. That being said, there are some minor limitations put forth in the tax regulations by the IRS. You cannot buy, for instance, your own home, which would be self dealing.

You cannot buy property from yourself or family members. That is it. Doing so would be considered self-dealing, which is a no-no in the tax world. The prohibition applies even if you buy the property at fair market value.From a procedural point of view, you do no actually purchase anything. The IRA does. Technically, the custodian of the IRA will sign on behalf of the account and so on. You then relax and watch your balance grow as rental payments come in or appreciation occurs.

You might recall I mentioned the Roth option above. Yes, you can use this strategy with the Roth account. In fact, it is preferable. Why? When you retire, all distributions from the Roth will be income tax free. That makes for an excellent investment.The above represents a very simplified look at maximizing your IRA investment with property. That being said, it is one of the outside of the box wealth building strategies that can produce tremendous returns.

Buy a Second Home with Your IRA

Retirement vehicles such as individual retirement accounts come with an common understanding regarding how they can be used. This understanding can sometimes be incorrect as it is with IRAs.If I have an individual retirement account, I have to invest in the stock market. Everyone know this is the way it works, right? Well, the literature and commercials spewed out by investment firms might suggest as much, but it is not true.

Investing in mutual funds, stocks and bonds is a way to make gains, but not huge ones unless you get lucky. The wealthy do not do so. Instead, they think outside of the box on the issue and investing in property through an IRA is a tremendous strategy.Every time I read about a new wealth building strategy, I do so with a healthy bit of skepticism. If it sounds to good to be true, it often is. This strategy, however, does not push any limits or validate itself because of a loophole. It is basic IRA planning.

Section 408 of the tax code states clearly you can invest IRA contribution in a variety of property. The wealthy have used this approach for a long time and more than a few now own big portfolios of commercial property, rental properties and so on through their IRAs.The nuts and bolts of the strategy are fairly simple, but the devil is in the details. In general, you open a self-directed IRA and use that vehicle to invest in property entities. Get it right and you can make a bundle. Get it wrong and it is a nightmare, so do this with professional help.

As the name suggest, you are in control of the individual retirement account. This means you get to set the parameters of what can be invested in and what cannot so long as it is legal. Homes, condos and so on are legal investments under the tax code.Once up and running, it is time to put money into the account. How you do this is entirely dependent upon your specific situation. You can roll money in from another account or perhaps just make contributions. Consult with your financial advisor for the best answer.

Most people use their IRA to purchase secondary properties. The classic example is using the strategy to buy rental properties. Millions of Americans now own second homes, and the IRA strategy is a perfect way to pursue ownership. Heck, you can even buy an RV.From a procedural point of view, you do no actually purchase anything. The IRA does. Technically, the custodian of the IRA will sign on behalf of the account and so on. You then relax and watch your balance grow as rental payments come in or appreciation occurs.

To really maximize the strategy, many people will look to a different type of individual retirement account. You guessed it. The Roth. The strategy works the same, but the benefits are better. All distributions for the Roth are tax free, so you can set yourself up for retirement.The above represents a very simplified look at maximizing your IRA investment with property. That being said, it is one of the outside of the box wealth building strategies that can produce tremendous returns.

Are You Doing Business With Monopoly Money?

During the depths of the Great Depression, the Monopoly game appeared in the marketplace. For many children, Monopoly is the first introduction to using money for business decisions.Monopoly teaches players to buy and sell property, collect and pay rents. The game is fun, especially for the winners.

My question is: Are the lessons you learned playing Monopoly killing your capacity to make real money in your business? Monopoly teaches money myths that can keep you struggling with money in your business.A Monopoly game begins with a fixed amount of money. The game ends with the same amount of money. By the end of the game, the winner has most of the money. This leads to the first Monopoly Money Myth: The amount of money available is limited.

The truth is that Monopoly is not a money-making game. No one actually makes money in Monopoly because Monopoly is a zero sum game. This is why Monopoly is not a good example of what happens in business. A successful business makes money by creating products and services. Successful businesses are not zero sum games.

This is how it works. You create a product. The product costs you money to produce, market, and sell. If you sell the product for more than your costs, you make a profit. This profit is money that did not exist when you started the game.When you create a profit, you create money. You add more money to the money supply. It's not just that you have more money, but more money now exists. This is the essential money difference between Monopoly and business. No one makes money in Monopoly. In contrast, when businesses make profits, they actually increase the amount of money available.

What lesson does this teach? Monopoly teaches players that money is a commodity in limited supply. In the real world, money is not a commodity in limited supply, because money is created in transactions. This is why the amount of money available is potentially unlimited. The more transactions that occur, the more money is created.

Sell your house fast in Ipswich

Sometimes, we have to sell our homes fast.There comes a time when selling is a must. If you need to sell a home fast in Ipswich, or anywhere else, for that matter, there are a few things you can do to sell fast and with the least hassle.

Set the price right. We all want to get the best price on a house sale, but when time is of the essence, we lose the ability to haggle. If you want to get sell your house in Ipswich fast, without having to wait around for your home to sell, set your price below the going value or whats called the realistic value. set the price to what would sell in the given time you want to move.

Advertise well. Getting the word out that your house is for sale is one of the most important parts of getting it over with quickly. Take out newspaper ads, let everyone you know be aware that you're selling, and place ads on local real estate websites. If no one knows you're selling, your chances of selling a home quickly in Ipswich go down dramatically.

In addition, you can look for people who buy houses. These investors can pay you quickly for your home and close in a matter of days. Look for a home buying investor with a lot of experience, whether your home is in Ipswich or any other location. Investors also offer the benefit that they'll take care of most of your paperwork and other hassles, leaving you free to take the money and go.

Perhaps you need to get out of a sticky financial situation quickly. Maybe your home needs more repairs to go on the market normally than you feel comfortable making. Perhaps you're dealing with a nasty divorce that everyone wants to put behind them. Perhaps you just got a new job and have to move as soon as you can! No matter what your reasons for needing to sell your house fast in Ipswich, pricing it well, advertising properly, and dealing with an investor who has experience buying houses can help you get the job done.

If you're in need of someone to buy your house quickly in Ipswich or anywhere else, you can visit my website, pinewoodpropertysolutions. I'll give you a written offer without any obligation, pay cash for your home, and close as quickly as you need to. You can locate me at www. pinewoodpropertysolutions.co.uk.

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