One of the best reasons to invest in real estate is appreciation. Although real estate values go up or down on a short term basis, in the long term (typically over a 10 year period) they always go up.
I will give you an example. Let’s look at what happened to the real estate market between January 1988 and December 2009. In that time we have had crashes, depreciation, prices shot up, there was another decline, yet throughout this period real estate values show a steady growth. In Toronto alone the 22
Cash Cow Properties by Sunil Tulsiani average price for a property went from $200,000 to $391,360 (almost double in value). If, at this time, you had bought a property worth $200,000, had paid a down payment of 20% (that’s $40,000). Over this time your mortgage would have been paid off by your renter and your $40,000 would have appreciated by almost $350,000 which means your investment, today, would be almost double its original price. What if, at the time, you had three properties like this? You would be a millionaire today!
“Okay,” you say, “but that was then and this is now.
Surely prices can’t continue to increase as they have in the past?” I answer, “They can and they will.” And to drive the point home I would ask you to just look at the previous example once again. In fact I believe that prices will more than double in the future allowing you the opportunity to make money.
It is worth casting a look at:
http://www.realosophy.com/Analytics/Main.aspx
which shows just what has happened with Toronto real estate values over time from figures reported by real estate agents themselves.
To see the future and understand a little more of what I am saying weigh together these dominant trends: 1
Population growth. During the next 20 years, the population of Canada will increase by at least 10
million people.
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Cash Cow Properties by Sunil Tulsiani 2
Incomes. During the next 20 years, employees, entrepreneurs, professionals, and business owners will see their incomes rise by over 50 percent.
3
Vacation homes. During the next 20 years, at least 3 million more Canadians (and foreign nationals) will choose to buy vacation homes within Canada and the United States.
4
Echo boomers. During the next 20 years, more than 10 million echo boomers (children and grandchildren of the baby boomers) will enter the housing market to buy homes.
5
Restrictions on development. During the next 20 years, zoning, environmental laws, building regulations, and land shortages will continue to restrict development in those areas where most people want to live.
6
Immigrants and minorities. Canada’s visible minority population is growing much faster than its total population: 25% growth from 1996 to 2001
versus 4% growth in the general population. This is due largely to increased immigration from Asia, Africa, the Caribbean, Central and South America and the Middle East. In 2001, about 70% of the visible minority population was born outside Canada. From 1981 to 2001, Canada’s five largest cities—Toronto, Montréal, Vancouver, Ottawa–Gatineau and Calgary—received large shares from West Asia, South Asia and East Asia. Currently only 30 percent 24
Cash Cow Properties by Sunil Tulsiani of our fastest growing immigrant and minority groups (Hispanics, blacks, Asians) own their own homes.
With government programs and lender outreach efforts in full swing, during the next 20 years people in these minority and immigrant groups will continue to buy homes in record numbers.
7
Investors. During the next 20 years, more than 10 million baby boomers will need retirement income. They will increasingly turn to real estate investment to meet this need. Demand for property as an investment will continue to explode.
You don’t need advanced knowledge of economics and demographics to recognize the fact that every major social trend is pushing real estate prices upward.
In real estate you can make money the moment you buy a property. Unlike most other investments, you can buy real estate for less than its market value.
Distressed owners, owners who want to sell fast and hassle-free, lenders who own foreclosures and poorly informed sellers frequently part with their properties at prices (or terms) that immediately put dollars into your pocket.
Some investors flip properties they buy at a bargain price to generate quick cash. Others hold for the long term and use the bargain price (or terms) to boost their long-term profits. Either way, bargain prices fill your bank accounts with money.
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Cash Cow Properties by Sunil Tulsiani As you might suspect, most small-time investors mismanage their rental properties. Why? The reasons can be many and bear in mind, this is one of the best ways to get a Cash Cow property, a tired landlord, a lazy landlord, a landlord who is mostly out of town, someone who is no longer really interested in the property and so on. The bottom line is that you can simply grab the property for an excellent price or great terms and start building your wealth.
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Cash Cow Properties by Sunil Tulsiani
#3 – Cash Cow
Properties
So what is a cash cow property? Simply put it is a property which puts money into your pocket every month after paying off all expenses. It is important, when doing your due diligence, to take into account all expenses involved prior to acquiring it.
The term "cash cow" is a metaphor dating generations. The term once referred to a high yield-producing dairy cow. Once the cow was bought, the cow continued to produce milk throughout its lifespan, providing the farmer with a living income. A Cash Cow property is exactly the same.
One of the benefits to owning a cash cow is the minimal monetary outlay required to acquire the property. Your property is being paid off by someone else (the renter) and you get to enjoy the benefits of surplus cash. What a wonderful way to get wealthy!
Buy below market value!
Those who attend my real estate investing training sessions will know that one of the most important 27
Cash Cow Properties by Sunil Tulsiani things you should do is to invest in below market value properties or have the vendor give you a VTB
(Vendor Take Back) mortgage, which is also known as seller financing. As long as the numbers make sense it is ok to set up a VTB and borrow the rest from a bank.
How do you do know that you are really buying below market value? The answer is very simple. You will need to get the sold comparables (sold comps) for properties in the area. This simply means that if the property you are thinking of investing in is 1000
square feet the property next to it should be a similar price provided it is similar in nature.
In Canada you need to use a licensed realtor to give you this type of information. At Private Investment Club (PIC) we provide sold comps to our own members (some conditions do apply). In order for a sold comp to be meaningful it should not be more than six months old.