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    VIDEO: A Key Insight From Our Webinar Series On Real Estate Investing

    Addressing the top concern PP members have about housing
    by Adam Taggart

    Tuesday, April 16, 2019, 12:14 PM

During this past weekend's episode of our ongoing webinar series on real estate investing, we put the presenter, Russell Gray on the spot.

He had just finished talking about the role of (prudent) leverage in real estate and how it acts as a force-multiplier for:

  • boosting income received vs income invested
  • increasing total return (often by several multiples)
  • extracting gained equity and re-investing it to produce more cash flow by purchashing additional property
  • mitigating risk (though risk will always be involved)

But, leverage is perhaps the biggest concern Peak Prosperity readers have regarding real estate. So I asked him: If we go through another burst housing bubble price correction, will leverage become a killer?

The answer is nuanced and Russ did a great job addressing it. Here's his answer:

After this last episode, I received this in an email from an audience member: “This webinar series rivals any class I’ve ever taken in so far as value.”

If you haven't been watching this series, you've been missing out on graduate-level instruction in a key area of wealth-building.

One of the most common phrases we're hearing as feedback is: This so relevant and valuable to real life, why they heck aren't they teaching us this in school?

That's a hotly debatable point. But what matters here is that Peak Prosperity is making this information available to you now. And for $thousands less than you'd have to pay if you were to go to the number of in-person seminars it would require to get the same degree of material.

For those who have been watching the series, don't forget that your 20% discount to Episode #5 expires at midnight tonight, so register now.

And for those who have not been watching, check out the microsite we've built for this in-process series. You haven't missed the bus. You can purchase past episodes to watch at any time, and watch the 2-hour Episode #1 for free, so you have a strong sense of what you'll be getting.

Again, our goal here to educate you so that you can identify opportunity and be positioned to act on it. Whether you ulitmately decide to act sooner or later, be sure to get yourself educated now.

 

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6 Comments

  • Mon, Apr 15, 2019 - 10:58pm

    #1

    tourcarve

    Status Member (Offline)

    Joined: May 21 2009

    Posts: 10

    Thank you for this!

    It is exactly the kind of question that I have been thinking about and wanting to ask about and talk about.

     

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  • Mon, Apr 15, 2019 - 10:59pm

    #2

    Grover

    Status Gold Member (Offline)

    Joined: Feb 15 2011

    Posts: 691

    Taxes

    The biggest problem I have with Real Estate Investing is taxes. The real estate is fixed to the land and fixed to a taxing district. I bought my home about 2 decades ago when I thought it would be a good place to escape the madness that was sure to ensue. I picked a place within semi-reasonable commuting distance to my job but outside of the urban/suburban boundary.
    Suburbia caught up with me. Now, there are developments within a mile of my home. As a result, my property is ‘valued’ much higher by the local taxing districts than what it is worth – its productive ability. I did my taxes about a month ago and looked at my expenditures and associated taxes at the time. My real estate taxes rose to 1.1% of my assessed property value. Who could compain about that? Unfortunately, that amounted to 13.4% of my expenditures for 2018.
    That’s just one tax. It is unavoidable. If I were to decide not to pay that tax, the taxing agency would attach a lein to my property. Eventually, I would pay the tax or forfeit my ownership. It’s really that simple. The reality is that I have to decide what expenditures to cut in order to pay this tax.
    Last year, I went out to eat at restaurants a total of 5 meals. I stayed in a motel 1 night on the way back from a week long backpacking trip. I’m not complaining. My home cooking is better and I really needed a shower after the trip. I’m just saying that the taxes that seem to be reasonable for those who are “rich” become onerous in reality.
    I paid for my house and property with money money left over after I paid all appropriate taxes. Although I own it supposedly “free and clear”, I’m still subjected to yearly taxes (based on value – for those of you who think a wealth tax is fair) that eat a substantial portion of my resources. How much is too much?
    The local renters scream that rent prices are exceeding their ability to pay … yet they are mostly responsible for voting for additional governmental services that need to be funded. They thought the “rich” were going to pay the taxes, but it was just included with their rent payment. Who would have guessed that there isn’t a free lunch anywhere?
    Imagine if you had purchased a property for investment purposes, and the taxing district increased their levy. Would you just suck it up and pay the taxes … or would you increase the rental fees to cover your costs? If the local demand is high, the answer is obvious.
    Real estate is a great investment option as long as the taxes are reasonable. If you’re in an area that sees you as a ‘cash cow,’ be wary. To paraphrase an old axiom, expect higher taxes until you finally are relieved of the expense by death.
    Grover

     

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  • Tue, Apr 16, 2019 - 4:38pm

    #3
    richcabot

    richcabot

    Status Bronze Member (Offline)

    Joined: Apr 05 2011

    Posts: 197

    Falling prices

    The answer makes sense on the surface, be in the middle of the cost range.  What happens if you invest and the prices drop significantly due to a recession like 2008 (or worse).  Houses will be foreclosed on and resold at significantly lower prices.  Competitors will spring up offering these houses for rent at lower prices than yours because their costs are lower (they just bought the bargain priced house).  Rental prices at any given quality level will be pushed down.  Just because the cash flow pencils out today doesn’t mean it will when the bottom falls out.
    What am I missing?

     

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  • Tue, Apr 16, 2019 - 7:17pm

    #4
    Uncletommy

    Uncletommy

    Status Bronze Member (Offline)

    Joined: May 03 2014

    Posts: 524

    Asset or liability?

    Years ago, we followed the same logic that Grover outlined in his post. We extracted a good deal of value in produce, meat and other by-products of rural/acreage living. The asthetics of living in a natural setting, the flocks of geese and swans making their semi-annual sojourns north and south, the wood fires kindled with our own wood and other “immeasureables” made life complete. It allowed us to raise a family on a single income and still pay down a mortgage. “Free and clear” is a wonderful thought, but as an asset class, It don’t pay no bills. The place has appreciated over the years and taxes reflect it. However, the productive value of the place is only as good as the amount of labour one is willing to put into it. Most of those who have shown an interest in the place are interested mainly in a place to store their RV and motorized toys.As we approach our senior years, it seems that most of those interested parties are looking for a discounted property, because of the additional work! Even renting the place out only belies the hassle of maintainance costs and necessary upgrades to justify the investment. I have lost my sentimentality about the connection with the place and will gladly sell to the highest bidder. Real estate needs to cash flow! That’s what real estate is all about. Otherwise, to all you benificent QE bargain-hunters:
    :

     

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  • Wed, Apr 17, 2019 - 11:21am

    #5
    Jeffleonard90@gmail.com

    [email protected]

    Status Member (Offline)

    Joined: Aug 17 2012

    Posts: 38

    Some Cool Links to Help with finding rentals

    Have not jumped in yet buying a rental property, I have been crunching numbers and gathering information however.  I now have some time to spend to really start this process in earnest(putting in offers).  I have been using the following websites to help narrow things down:
    Calculator for ROI, Cashflow, etc.
    https://www.calculator.net/rental-property-calculator.html
    Rental  Prices Specific to Address
    https://www.rentometer.com/
    These help get you in a general ballpark to determine if a market is worth extra time.

     

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  • Wed, Apr 17, 2019 - 9:49pm

    Reply to #4

    Grover

    Status Gold Member (Offline)

    Joined: Feb 15 2011

    Posts: 691

    Heaven or Hell

    uncletommy,
    If you’re seriously considering selling your place, consider marketing it to preppers. The same things that attracted you to this place will be attractive to those who see the current situation as being unsustainable. The old adage applies – if you’ve got lemons, make lemonade.
    I’ve had people come to my place and remark that it is a lot of work. I tell them that it is. I work 24/7 and I still can’t get everything done – that’s 24 hours per week, 7 months per year. Those folks have compact yards that can be mown with an electric mower in less than 15 minutes. Even that is considered a burden to them. For them, my place would be worse than hell. Why would I want to sell at a discount to someone who wouldn’t appreciate it and would let the place fall into disarray? I’m not that desperate. Neither should you be.
    Grover

     

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