Why invest in Out of Area Real Estate?

• The old adage of “Don’t put all your eggs in one basket” applies here, the more diversified your investment portfolio is the better it will weather the inevitable economic ebbs and flows of this country.
• Variety is the spice of life, if you own in different areas and visit your properties for managerial or maintenance purposes you can “Write-Off” your trip there, meals and “Site-seeing” can be viewed as part of shopping for other potential properties.
• You can buy in areas that you like, be it near the ocean, desert, forest, mountain, city, suburban, or urban community, this is subject to the property being able to stand on its own financially.
  
• Most of your friends and family will be impressed with your courage and drive to buy out of your area and a few may want to follow suit.

• States that lead the country in terms of highest average real estate value are California, New York and few other states, the point is that it is difficult to buy in these states with little money as a down payment and make the rents pay for your monthly “PITI” (principle, interest, taxes, & insurance) and association dues payments.
• There are countless numbers of cities and communities that offer a nice place to live, raise a family, retire, and work outside of your current home community which have homes that are affordable and with less than 10% down can potentially bring in monthly rents that will cover your “PITI” payment.

• Further into this website you’ll be directed to other web-pages or news-sites that offer information on growth patterns of various states, cities, or communities which have a higher than average potential to go up in value.
• Economic growth due to establishment of large businesses, government entities, universities, quality schools, local attractions, favorable weather patterns, and even ‘Hip-ness’ to the younger generations can and most likely will drive demand for select cities and communities.
• With the ever-increasing population of people who are going to retire or semi-retire in the next 10 to 30 years it would be prudent to be aware and sensitive to the inevitable migration patterns of this powerful and generally wealthy group of people.
• Foreigners are an ever increasing demographic group of people who are pumping billions of dollars every year into the United States. Europe and Asia especially have economies that are growing by leaps and bounds and those with the dreams and foresight know that future wealth and riches are in our “Land of Opportunity”.

• As mentioned earlier our aging population in the United States is going to be a very influential demographic group which will greatly affect the future value of property in select cities and states due to the immense wealth that these people will pump into the respective communities.
• Communities with a well balanced quality health care, recreation, entertainment, shopping, and favorable weather patterns will be most attractive, of course lower housing prices will be an attraction but guess where home values will go when demand and the ability to pay come into play.
• Rentals in these areas? Absolutely “Yes”, who’s going to care and service all these people and provide the lifestyle they are seeking? All these care and service people need a place to live and not all have intentions to lay down roots. And, "Yes" there are future retirees who don’t plan on staying in one place for the rest of there lives so what are all these people going to do? Rent from you of course!

• Everybody wants to make money but most make money doing the “9 to 5” job routine. The wealthiest people we usually know own real estate and lots of it. Every month the rent check comes and provides those with “Seasoned Rental Properties" (Properties that have been owned for awhile to appreciate in value, have paid down debt, have been refinanced to pull equity out, and rents have been regularly increased to match the market) a steady flow of passive income. “Passive” meaning that you are not laboring to make the money but the money you invested in the past is working to bring in the income now. What better way is there to insure yourself a secure retirement? Don’t want to hear about stocks or related products...these don’t even come close in the long run.

• If you look back 60, 40, 20, or even just 5 years ago would say that real estate values were cheaper then? You know the answer to that question. So what will real estate values be in 5, 10, 15 years from now? Probably more, a lot more.
• Here are some contributing factors...Supply and demand of course, how about the constant rising building material costs (concrete, wood, metal, stone, glass, tile, carpet, paint), or the ever increasing energy costs (it takes gasoline, natural gas, and electricity to power the equipment to build these homes), how about the cost of affordable/buildable/desireable LAND, this country is big but most of the best spots have been or are being taken up right now! The cost of labor is never in the long run going to go down.
• Getting back to supply and demand the population growth in the United States has "ALWAYS" outpaced the number of homes being built and will continue to do so. With demand on the rise and ever increasing struggle to build cheaply will only make new homes and existing homes go up in value. This is an ABSOLUTE truth!!!
• An additional note to the rising building material costs, other countries such as China, India, and some other smaller emerging countries have economies that are growing exponentially. The demand that these countries will have the on the limited world building material resources will add more pressure to the ultimate cost of creating more new housing in this country for years to come.

• Okay, we've covered the practicality of buying investment property, that it goes up in value, it brings in a return on your cash investment after time. Now how about the basic ideology of investing, taking as little money of your own to control 10 to 20 times or even more value in an asset and borrowing the remaining amount to limit your own financial exposure, this is called "leveraging". Furthermore, when your "Real Estate" investment goes up in value you only pay taxes when you sell...Hmmm not exactly so, what if you refinance the property and "cash out" (money from a loan is TAX FREE mind you!) 80% of your equity and leave the remaining 20% to allow the property to continue cash flowing out. Now you can do one of two things...You can keep the property and continue to enjoy its appreciation in value or you can do what many investors do when disposing of properties they no longer want and that's a 1031 exchange. The 1031 exchange is a powerful tool that allows all real estate investors to "Defer" paying capital gains taxes when selling their investment properties. What do you do with the "cash out" refinance money?...We'll cover this later.
• You can keep repeating this process over and over until you die, the bottom line is that you are able to enjoy the maximum return on your investments as long as you live. This is what knowledgeable investors have been doing for many years and building their wealth. It's time for you to get in on the action.

• You have a home with some equity built up, many of you have homes that are nearly paid-off or "Free and Clear" of any debts, you may have $10k to $20k or more that's sitting in the bank you thought of investing but you're not sure where to put it so you leave it with the bank earning 2-3% interest every year (What little amount you earn is taxed every year by the way and the bank is the big winner here). You have a healthy pension from the government or past employer you worked for.
• You have money that came from an inheritance, you want to sell or have sold a business, you make a lot of money at work and the IRS takes a huge chunk of that in income taxes, and yes you should consider your job as well as your Pension an asset and what ever you can save or pay out to support your investments should be considered a type of equity.
• Look carefully at your current situation and see if anything that you own or have interest in brings you a good monetary return every month or year. You cannot count your home because unless it earns you a monthly income it's not an income producing asset. If you do not see any income producing assets you need to start "AS SOON AS POSSIBLE" because the longer you are in the real estate investment game the sooner and better off you'll be.

• Many of you may think that having your home paid off or having a lot of equity is financial security. Maybe having a lot money saved up in the bank or under the mattress or maybe you might think your secure high paying job will get you through tough times. Some are well vested in the stock market and some of you may even think that Social Security will help offset some of your cost of living, this may be so but let's look at this from a real world perspective.
• Starting with Social Security, the reality is that it is a program with good intentions but it will never cover the average retired person's cost of living. Most people I know get between $500 - $1800 month from Social Security, that may seem good to some of you but that $1800 is not near enough to pay for the average persons room and board, car, insurance, entertainment, general living expenses. Oh and most of you won't qualify to start getting payments until you're way past 60, you don't even get full benefits until you're at least 70 or older. Don't plan to work and make too much money to cover the balance of what you need every month because if they find out you're working you can lose your benefits. Back to square one.
• Stocks...I really don't want to go here but here goes. Yes, stocks have made a lot of money for some people but the majority who are not full-time traders, have an inside scoop, company CEO's or CFO's with tons of stock bonuses or employees who received tons of stock options that were cheap when they got them or you're a company owner that went public and your shares shot to the moon, you probably won't make the money to retire on in the stock market. Stocks overall are not a good bet, Why?

1. LACK OF CONTROL---Other than the ability to choose which stock you want to buy and when you want to buy or sell it is the extent of the control you have over it. Most stockholders don't have any idea how or what a company is doing internally, remember Enron or WorldCom? Company managed mutual funds are vulnerable too. Remember what happened on March of 2007? The Dow dropped 500pts in a matter of hours and for what reason? Fear and reaction to the Asian market, totally unfounded with no rational thought pattern, panic selling...follow the lemmings.

2. NO LEVERAGE PURCHASES---Could be wrong but most people cannot buy stocks with a down payment and pay the balance with a loan/credit. So unless you have tens of thousands or more to spend, you're not going to control enough shares of any strong company to make a difference. If you have $10,000 and shares of Google are $500 each you can buy 20 shares, if you want to double your money the stock will have to go to $1000 this is highly unlikely in the near future. What if you use that $10,000 to buy and control the ownership of a home worth $200,000 (5% DOWN) and the value of your home goes up just 5% in one year, what did you make? Yes, you doubled your money in one year. This is such a no brainer no need to say more.

3. NO TAX SHELTER---No cashed out profits from stocks can be sheltered from income tax. You make a million from a stock and sell you'll lose half of it to taxes. Not so in a real estate investment.

4. STOCK DIVIDENDS--Won't pay enough to cover your monthly living expenses unless you control a lot of shares of some Blue Chip stock company. So unless you have tons of money or have an established portfolio, this isn't an option.

• Most everyone depends on some form of employment to subsidize for their living expenses and many feel comfortable or secure in their positions but the fact is no form of employment is truly secure. A change in the economy, a paradigm shift for the product or service the company provides, ever changing technologies, aging workforce, upcoming younger workforce willing to work for less, outsourcing to other countries are some of the examples which can lead to layoffs. Sad but true, so one needs a back-up form of income to hedge against such a catastrophic event.
• Monetary savings are a necessary thing to survive the difficult times, but believe it or not there are people out there who have large sums of cash sitting at the bank in a CD or Money Market account earning 2-4%. These people think they're doing okay but in reality they're losing money. How?! First of all the interest they earn is taxable every year and depending on their tax bracket they have to pay out between 15-40% to the IRS. Next is the ever devaluation of the dollar and inevitable inflation, this is why the money you have today will not have as strong a buying power in the future. So you need to put your money to work in an appreciating asset today such as real estate to hedge against these powerful economic forces.
• Equity in one's home, it gives one warm and fuzzy feelings knowing you'll one day have your home paid off. Some of you may remember the days of "Mortgage Burning Parties", being able to burn the document that said your home was security for money you owed to a lender. Now you owe no one, you're "Free and Clear", not exactly, other than the obvious maintenance costs there is still the government who will always want to collect the property taxes. Now unless you've been living in your home for the last 30+ years your property taxes have been going up on a regular basis, every time you buy or sell a home it gets re-assessed, it's not uncommon now for many people to have property tax bills of $5,000-$10,000 or more each and every year, and yes if you fail to pay property taxes your county government will eventually foreclose on you to collect the back taxes. Don't laugh, this happens more than you know because people are not earning enough retirement income to pay for all their living expenses. Your equity in your home is an enormous untapped resource of buying power for your yet unrealized real estate investment portfolio, but it is still vulnerable to your local housing market fluctuations. What if the value of your home drops 10% in one year? That could mean a loss of $50,000 - $100,000 for many people, that amount can mean you lost the ability to buy 3 to 5 Investment properties. We'll cover this in another segment. Bottom line is equity should be viewed as a resource to jumpstart your investment portfolio, it serves no purpose sitting idle in a "Free and Clear" property that is doing nothing to bring you valuable income.

What more is needed to say to convince you that some kind of rental property investment is one of the most important things you can do towards securing your financial future.