PROPERTY PYRAMIDING FOR PROFIT
(The Savvy Investors “Secret” To Massive Wealth)
Many of us do not realize it, but one of mankind’s most precious commodities is TIME. We can ALWAYS make more money… but we can’t create more TIME… can we?
Two of the biggest obstacles we face in Real Estate Investing are TIME (how to achieve financial freedom before we expire!) and COMPLACENCY (reaching a “comfort level” and not “LEVERAGING” our assets).
"Pyramiding" is a little known technique employed by most savvy investors to systematically leverage the equity of one property to purchase multiple, or larger income properties...typically using a process called a "1031 Tax Deferred Exchange". Pyramiding enables an investor to typically ACQUIRE TWICE THE NUMBER OF PROPERTIES IN HALF THE TIME of conventional methods.
“PYRAMIDING” is simply a savvy investor’s own version of monopoly...acquiring properties and building an "inverted pyramid”starting with one, then adding multiple properties one on top of the other...building a "pyramid of assets". The process looks likes this:
STEP #1: Acquire your first property with at least 30% down… an 8% or higher “CAP” rate… and/or a 10% or higher “cash on cash” return. The property MUST CASH FLOW from day 1.
STEP #2: Once this property attains a 50% or greater equity position, or if you have owned the property for 7-8 years, either PULL MONEY FROM THE EQUITY and buy another property… or better yet… 1031 TAX DEFER EXCHANGE into 2 replacement properties.
STEP #3: Repeat steps 1 and 2… until you die… and pass your large ( by now!) portfolio of properties on to your heirs.
If you own a property that has a 50% or greater equity position… you’re sitting on “DEAD MONEY”. That money has STOPPED WORKING FOR YOU! That money has “RETIRED” before you have!
Or, if you have owned your property for 7-8 years, typically, your "ROE" (Return on Equity) the most important property performance metric... has plunged significantly, and it's time to "Pyramid" into a larger, or several replacement properties.
“Pyramiding” your properties will get you to Financial Independence much sooner than the traditional “BUY AND HOLD” tactic that typically takes 20-30 years. Why wait 20-30 years… AT THE MERCY OF THE LOCAL MARKET, when you can “ARRIVE” at your destination much sooner! Following this process SOLVES THE TIME ISSUE! Makes sense, right?
Now let’s address COMPLACENCY… which costs investors literally HUNDREDS OF THOUSANDS OF DOLLARS or perhaps millions during the course of their investing career, because they get “COMFORTABLE”.
It’s been said that “comfort is the enemy of progress”, and it’s never been more true than in Real Estate Investing. The rental checks are coming in EVERY MONTH… WHY rock the boat, right? WRONG!!
Many investors OWN MULTIPLE PROPERTIES FREE AND CLEAR. Understand that EVERY INVESTOR is different in their goals and outlook, but MANY DON’T REALIZE that by “PYRAMIDING /LEVERAGING” these properties, THEY COULD START BY OWNING ONE, AND END UP OWNING 10-20 DURING THE COURSE OF THEIR INVESTING CAREER!
Here’s an example: A guy in San Jose, California owns 2 rental properties valued at $500,000 each, and both are free and clear. The total asset position is $1,000,000. So he has $1,000,000 tied up in these properties and he’s getting $3,000 a month rent for each. Although we know there are several variables, for simplicity’s sake, let’s say he’s getting a 7.2% cash on cash return on his asset (yearly rent of $72,000 divided by $1,000,000) = 7.2% return).
If he had “PYRAMIDED” his two properties years ago when they reached the 50% equity threshold ($500,000 value - $250,000 mortgage loan = $250,000 equity) and used a 1031 Tax Deferred Exchange… he could have acquired 4 $500,000 replacement rentals with a $125,000 down payment on each! TODAY HE WOULD HAVE OWNED 2 MILLION OF REAL ESTATE INSTEAD OF 1 MILLION, AND WOULD BE RECEIVING RENT ON 4 PROPERTIES INSTEAD OF 2!!
Don’t “lose your edge”… STAY ENGAGED and don’t allow “comfort” to cost you millions! Acquire, and EXCHANGE, EXCHANGE, EXCHANGE! “PYRAMIDING” throughout your investment career will ensure that YOUR MONEY WILL NEVER “GET LAZY”. NOT pyramiding your properties is the classic "LOST OPPORTUNITY COST" and is a CRIPPLING WEALTH KILLER!
The 1031 Tax Deferred Exchange is THE MOST POWERFUL WEALTH BUILDING TOOL available to investors. It is a CRUCIAL ELEMENT to Pyramiding that allows you to “roll over” your profits into your next property TAX DEFERRED…VASTLY IMPROVING YOUR PURCHASING POWER.
OK, we know what you’re thinking at this point… “Yeah, the process sounds logical, but I’M NOT SURE IF I WANT TO TAKE ON THE WORK of selling/exchanging my properties every 7-8 years.”
WE HAVE GOOD NEWS FOR YOU… the real estate investing world is changing rapidly. Thanks to the INTERNET and BIG DATA.
The Internet now allows us to identify potential Investment Property ANYWHERE…regardless of where we live. The Internet TRANSCENDS LOCATION AND DISTANCE! Investors are no longer limited to LOCAL MARKETS!
BIG DATA just recently allowed us to utilize TECHNICAL ANALYSIS to IDENTIFY EMERGING MARKETS and invest during the CORRECT MARKET CYCLE. Utilizing these advantages, an Investor… ANYWHERE in the country, can invest EVERYWHERE!!
The traditional paradigm has always LIMITED INVESTORS OPPORTUNITIES to the LOCAL MARKET. NOT the case anymore…with professional property management, the internet, and big data… the NEW PARADIGM is “LIVE ANYWHERE – INVEST EVERYWHERE”! “LANDLORDS” ARE NOW “INVESTORS” and “PROPERTIES” are now “ASSETS”. So if it's a LOCAL MARKET, or an out of the area, or an out of state market...we have you covered!
The concept is simple… “GO WHERE THE MONEY IS” (Emerging Markets!), invest WHEN you’ll MAKE MONEY (Correct Market Cycle!), ride the “APPRECIATION WAVE”, and SELL/EXCHANGE BEFORE YOU LOSE MONEY (Exit Strategy!).
Sound complicated and a lot of work? But what IF THERE WAS A COMPANY who could IDENTIFY AN EMERGING MARKET… have a NETWORK OF PROFESSIONAL RESOURCES in that market, advised you WHAT PROPERTY TO BUY, WHEN to sell/exchange into replacement properties, monitored your “ASSET” for you on a monthly basis, DID MOST ALL OF THE WORK, and WAS WITH YOU EVERY STEP OF THE WAY, YOUR ENTIRE INVESTING CAREER (if you so choose). WOULD THAT MAKE THINGS EASIER?
INVESTMENT PROPERTY USA IS THAT COMPANY! YOU have the easy part! All you have to do is PICK UP THE PHONE AND CALL US, WE DO ALL THE HEAVY LIFTING… YOUR ENTIRE INVESTMENT CAREER!
There are typically 4 different approaches to Pyramiding that involve vacation homes, retirement properties, or various types of investment properties. CALL US TODAY for a FREE "ROE ANALYSIS" of your present assets, and which approach best fits your desired outcome.
INVESTMENT PROPERTY USA
“Live Anywhere – Invest Everywhere”