It’s easy to say, isn’t? Just make time your friend. Rolls right off the tongue effortlessly. Like so many things in life, an easy concept to grasp. The execution? Not always so. What can you do to get time over to your side of the table?
First thing outa da chute ya wanna understand what happens when ya lose. Most times, it’s not catastrophic. It’s a down year maybe, sometimes more. If the loss leaves your income property viable, as is the case most of the time, the real downside is what happens after the smoke clears. And what’s that? You’re on the investment treadmill, that’s what. You get tired, but end up going nowhere. It’s the time it takes for you to get back to where you were before the loss — time you’ll never get back. Why is it so important? Simple — while you’re spendin’ three years just gettin’ back to square one, you will have also had three birthdays. At that point, time wasn’t your friend.
This is why the new real estate investment reality in which we find ourselves must be viewed without any expectation of appreciation whatsoever. We must now pigeonhole appreciation as a luxury. Purposeful Plans constructed using no appreciation in the analysis will allow you to come through almost any loss in property value with a possible gain in equity. What’d he say? Huh? No, really.
If, for example, your Plan calls for retirement in another 10 years or so, the only reliable way to ‘grow’ your capital (increase your equity position if you prefer), is to apply cash flow, any tax savings achieved via depreciation, and any extra cash available from other sources, to the loan balance. It’s entirely possible to lose 20% in value over a decade while totally wiping out the property’s debt. Notice how none of this is rocket science?
Keep your eye on the ball — and that ball is your ultimate goal of generating as much after tax retirement income as possible.
Remember the cool arithmetic problem we had in junior high? The one where you started the first of the month with a penny, and it doubled every day without interruption, ’till the last day of the month (30 days). I remember being dumbfounded at how much money ya had at month’s end — nearly $11 Million! However, if the growth missed but five days, you wouldn’t even hit $500,000 – lost time is brutal to capital growth. You not only lose the time it took for the loss to happen, but the time it then takes to get back to where you’d been.
Yet, an investor with say, $225,000 (20% down + closing costs.) can find themselves not only free and clear in 12-18 years using just the property’s cash flow for loan reduction acceleration, but would end up with income of $5-8,000 a month — much of it tax sheltered. I wonder if they’d care much if the property had never gone up a dime in value in all that time?
Yeah, I’m with you, probably not much.
Time must be courted aggressively. It must be part of your Plan to incorporate the wooing of time to your side of the table. You must win that battle. The most powerful weapon in your arsenal is kicking any expectation of appreciation to the curb. Once you’ve done that, your odds of time becoming your friend increase greatly.
Tick tock.
Hey, speakin’ of tick tock, isn’t it time you called me? I’m at 619 889-7100. Have a good one.
Related posts:
- Real Estate Investors — Are You In ‘Wait ‘n See’ Mode? Breaking News: Time Ain’t Your Friend
- How Does The Real Estate Investor Know When It’s Time To Make The Next Move?
- As a Real Estate Investor How Do You Know When It’s Time To Make Your Next Move?
- Real Estate Investors Learn Lessons – Many Of Them As Kids
- The Challenge Of Coming Back From Loss — Real Estate Investors Learn From Mistakes
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