THE BIG PICTURE
INVESTING STRATEGIES
DID YOU KNOW YOU HAVE FIVE PROFIT CENTERS IN EACH OF YOUR RENTAL PROPERTIES WHEN YOU KEEP THEM FOR THE LONG TERM?
The Beauty of Buy-and-Hold
by Matt Bowles
M
ost investment opportunities have one potential profit center. When
talking about flipping properties; I am talking about holding properties.
profit center, and all your eggs were in that one speculative basket, you are sunk. Now let’s look at deeded freehold rental property (a hard asset, not to be confused with REITs or real-estate-backed securi- ties) as an alternative asset class. Of course, if you are flipping prop- erties, you are pretty much in the same boat as the mutual fund investors. Actually, you are often in a worse boat because, in addition to having only one profit center, you normally need to invest a ton of your own time. So I am not
you buy an index fund or a mutual fund or gold, for example, all you can really do is pray it goes up in value. If it does, you sell it, pay taxes on the gain and then take whatever is left over and adjust for inflation to ascertain your “real” gain. If it doesn't go up in value enough to cover your broker fees, capital gains taxes and outpace the rate of inflation, then guess what? You lost money—at least in real dollars. And since you only had one
FIVE PROFIT CENTERS When you are a “real estate investor” (not to be confused with a landlord or a rehab- ber) and you buy and hold deeded freehold rental property for the long term (leased out to qualified tenants and managed by a pro- fessional property management company), you open up five simultaneous profit centers instead of just one. And those are:
28 | think realty magazine | may :: june 2016
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