Fix n Flip vs. Buy & Hold (cont’d)
In part two of this article series, we discussed how true wealth creators in real estate investing do so by leveraging their assets as many times as you can to ensure long term growth.
To further emphasize the true potential of this strategy, let’s take a look at the average sales price of single family homes in the Phoenix Metropolitan Area for the past 5 years directly from the MLS (see chart).
As you can see, in September 2012, the average sales price for a single family home was $209,824. And by August 2017 it had gone up to $319,316.
In order to simplify things, let’s just say you purchased a house at full market value back in 2012 for $210,000. And today that house is worth $319,000 That’s an increase in value of $109,000 over that 5 year period, which gives you an average annual increase in value of $21,800.
Let’s also assume that instead of paying all cash for that property, you put down 20%, or $42,000, and ﬁnanced the remaining 80% ($168k) at a rate of 4.5 to 5%. And of course, you have tenants paying down your mortgage. Over that time you would be seeing an annual rate of return on your investment of 51.9% instead of 10.38% had you paid all cash for that same property. And once again, by leveraging your cash, instead of purchasing just one property, you could have purchased 5, all producing approximately the same annual return on your actual investment.
I hope you’re beginning to see the potential of this straight forward approach to leveraging your way to becoming wealthy in real estate the smart way.
On a ﬁnal note, don’t forget that the Equity Finders Smart Map Technology actually helps you to locate properties that are being
sold under market value. So these ﬁgures are actually conservative estimates.
Smart Map is provided as a free service to our clients. Be sure to visit www.TheEquityFinders.com for complete details.
by Laura Leatherdale