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ARE YOU READY?
In order to be comfortable investing in real estate, it is important that you have your personal financial house in order. Experts recommend you do the following:
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Pay yourself first by saving at least 10% of your gross annual earnings.
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Set up a separate bank account where that savings will be automatically deposited. Consider putting them into a money market account.
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Create an emergency fund with those deposits equal to the amount your family will need to live for six to nine months with no income. This emergency fund is never to be touched unless there is an actual emergency.
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Once your emergency fund is fully funded, continue to save until you have an amount sufficient to begin your investment program. Set this up in another account which you may call an investment savings account. Never spend your investment savings account on frivolous pleasures like vacations or cars. It should only be spent on costs directly related to purchasing property.
Other recommendations:
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Try not to borrow money for anything that depreciates like cars, boats, etc.
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Never buy a brand new automobile. Let someone else take the depreciation hit.
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Never lease an automobile unless it is for business purposes.
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Always pay your credit card bills in full every month.
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Fully fund your 403(b) or 401(k) funds each year.
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Fully fund your Roth IRA each year, if you are eligible.
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If your employer matches retirement savings, fully fund each year up to the matching point.
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Borrow money for items that appreciate like mortgages or lines of credit.
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Spend money on expert advice like financial planners, attorneys, estate planners and accountants.
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Make sure you are covered by insurance including life, disability, health and fire and liability insurance. Once you are age 55-60 include a long term disability plan.
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Create an emergency fund as outlined above before considering any of the investments below.
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Invest in real estate. Think location, location, location. Borrow as much as possible letting the tenants pay off the mortgage. Do 1031 exchanges in order to preserve the capital acquired.
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Diversify your investment program to include stocks, bonds and mutual funds as your financial advisors recommend.
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Keep a record of every dollar spent and update it at least monthly. There are lots of software programs available to assist you.
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Save a minimum of 10% of your net income and invest it wisely; give another 10% to charity and live off the remaining 80%.
To assist you with your investment goals, we have created several worksheets:
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Funds needed for retirement
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Net worth statement
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Source of income statement
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Investment assessment worksheet
Please sign up and receive our informative worksheets now! Investment Assessment
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