The rich getting richer – real estate perspective

The rich are getting richer, and the poor are getting poorer. 

And the middle class are getting poorer and starting to disappear!  I’m seeing this everyday in the real estate market, especially now when foreclosures are at an all time high and borrowing money is becoming more and more difficult.  The “poor” are losing their homes to foreclosure and the middle class cannot afford to buy homes because of the strict lending guidelines.  Furthermore, the poor have hurt their credit due to these foreclosures, which will prevent them from building their wealth in the years to come.  

All this is making the rich even richer!  Right now, only the individuals with cash and great credit can purchase investment property.  In addition, they are buying these investment properties at such low prices it’s as if they are stealing directly from the poor!  Here’s an example.  The poor buys a 3-family home for $500,000 five years ago using a special mortgage.  Today, it gets foreclosed on by the bank and goes back on the market for $250,000.  The rich then come in and buy the property for $200,000, clean it up, and rent it back to the poor and middle class for huge profit.  

I don’t know about you but I definitely want to be doing what the “rich” are doing.  Where do you stand? 

 Financial Education

I’m also noticing that many of us are not as financially educated as we should be.  For those of you who are 25 or older, you probably own at least 1 property.  If you do, that’s great!  But there is one thing that a financially educated person will do with that home that others do not.  A financially responsible and educated person would immediately set up a HELOC or Home Equity Line of Credit for their home.  This allows you to access a portion of the equity in your home for major purchases such as home improvements or purchasing other properties.  This would also be helpful in an emergency if you needed cash quickly.  

A HELOC is especially useful to those individuals who have a lot of equity tied up in a property and they can leverage it to purchase more property.  For example, a friend of mine wanted to buy a property but would only be able to buy it if they can close in 5 days.  She went home, pulled out her check book, and wrote a check out for the full purchase price.  To add to my point, I’ve sold many houses to all different types of people.  Out of all my clients, the one who bought the most expensive house was the one who had a HELOC in place.  Taking advantage of a HELOC is just one simple example of how the financially educated end up having the most wealth. 

Do you have a HELOC set up on your home?

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Financial Freedom

Financial freedom, loosely defined, is a state of financial well-being where your passive income can support your style of living.  “Passive income” is defined as the income you receive that’s not from your day to day job.  The majority of us has not heard of, or understands the meaning of financial freedom.  Some of us know what it is but do not care about it.  A few of us thoroughly understand this concept and are trying to achieve it.  And only a handful of individuals have achieved this state of financial freedom.  Which one are you?

There are many advantages of financial freedom.  You don’t have to work, you don’t have to worry about retirement, you can have the freedom to do the things you want to do, you can support your family… just to name a few.  The 3 basic stages of financial freedom are:

--Stage 1:  your passive income equals your living expenses(housing, food, clothing, car, basic expenses, etc).

--Stage 2:  your passive income exceeds your living expenses and you can live very comfortably. 

--Stage 3:  your passive income greatly exceeds your living expenses beyond stage 2 and you have money left over to do the things that you want(charity, buy toys, etc).

There are many ways to achieve financial freedom but the most realistic way is through real estate.  Basically, becoming a landlord.  Each investment property that you buy, not only gives you tax benefits, but also generates income or positive cash flow.  If a property is bought correctly, you can generate $500-$1000 a month income and sometimes even more.  Let’s say for example your cost of living is $4000/month.  All you need is 4 properties generating $1000/month to achieve financial freedom. 

Of course, this is easier said than done and it can take a lot of time.  Let’s say for example a family makes $100k per year.  By living a very conservative lifestyle in the beginning, this couple can save $40k per year.  Keeping all things constant, they can buy their first investment property in 2 years and start making an extra $1000/month.  If they continue living the same conservative lifestyle, they can buy their second investment property 1.5 years later.  So on and so forth… and in 6 years time, they can own 4 investment properties generating $4000/month thus achieving the first stage of financial freedom. 

I’m trying to reach stage 1 and I’m in the process of looking for and purchasing my first investment property.  If you are thinking of buying real estate as well, or know anyone who is, let’s work together and I can help you achieve your goals. 

Who do you know that is financially free or on their path to financial freedom?  What are they doing to achieve this?  Do you want to be financially free?  If so, how do you plan on doing that?

Wii must be really bored...

The Nintendo Wii's revolutionary high tech remote has spawned a new era of user interface and the remote is no longer just used for video games.  Technology enthusiasts(aka- geeks and nerds), have come up with many creative ways to use the Wii remote such as using it to play virtual guitars/drums, controling robotic arms, using it to mix music and playing first person shooter computer games(starwars) just to name a few.  The website www.wiili.org is a great resource for people who want to hack their Wii remotes and there are some very cool videos demonstrating their hacks. 

A few of the highlights are:

1.  Wii DJ
2.  Controlling a robotic arm
3.  Drums
4.  Sticks

What I would love to see is having a Street Fighter type game taking advantage of the Wiimotes.  This would definitely get those kids off their butts and get some cardio going.  Another practical use would be to have it control robotic arms to handle delicate/sensitive/dangerous operations such as defusing a bomb.  And of course, I want to see a volleyball game come out for the Wii.  What are some other cool ideas or games you can think of that can take advantage of this technology?