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5 Keys To Increase Your Wealth
5 Keys To Increase Your Wealth
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5 Keys to Increase Your Wealth in 2012
What is the economic climate for the areas in which you are investing? For example, a
recent look at the seasonally adjusted unemployment rates for each of the states sees
a swing of more than 9%. In other words, while things are tough, they’re not tough all
over. What is the job market like in your area? Are people having a hard time making ends
meet and needing to find affordable housing? Or, have people weathered the storm and
are now ready to get back into home ownership?
From unemployment to the amount of foreclosure activity, the circumstances across the
country can be as different as night and day. Your job is to understand your market’s
economy in detail and conclude why it is what it is. Only by understanding the economy
in your market will you be able to understand why things are the way they are and have
a plan in place to capitalize on it.
While store closings have made the headlines in the past, the truth is many businesses
are poised to expand in 2012. New shopping centers can be extremely attractive to
home buyers. Finding these new developments is often as simple as taking a different
route to your regular destinations and taking note of what you see out the car window as
you drive by. If you see signs of land being cleared, surveying or the beginnings of con-
struction in and around major roadways, it is a pretty safe bet that a new influx is coming
into the community. Any changes designed to handle increased traffic flow can tip you
off to new developments, too. Widening traffic lanes and installing new traffic lights are
just a couple of telltale signs.
Also, getting to know those who work in the road and building departments for your city
or county—or at the very least, attending city planning meetings —can make you aware
of significant projects being proposed or scheduled to begin.
As you begin, you’ll want to be sure that you are comparing “apples to apples.” In other
words, year built, square footage, number of bedrooms, lot size, etc. Should all be com-
parable. Take special note if home prices are accelerating faster in one area than in oth-
ers. What might be the cause for this? Is there anything from your research in Keys #1
or #2 that could provide a clue? Also, you will want to check the average home price in
neighboring communities to see whether it is higher or lower. Doing so will provide you
an idea of where the biggest demand is.
The more you study pricing, the quicker you’ll be able to recognize a bargain or when a
seller has lost touch with reality. Realtors and real estate agents are a terrific source for
pricing trends given their access to the Multiple Listing Service (MLS). Also, the Internet
and local newspapers can be helpful in your search.
For example:
$70,000
- $5,000 (Repair Cost Estimate)
= $65,000 (Maximum Allowable Offer to your seller)
When you determine the MAO, make your offer 3% - 5% below that to give yourself
negotiating room. You never want to pay more than your MAO allows. The better your
negotiation skills—your work with Keys #1-3 will help here—the more money you stand
to make. However, don’t take advantage of the seller. Make sure they benefit from the
transaction too. Doing so will build good word-of-mouth and a positive reputation.
If the property is less than 900 square feet add 50% more to your repair estimate be-
cause there is a limit to how far repair costs will drop due to size.
incentives, real estate investing can create tremendous tax advantages. In fact, even be-
fore the downturn, several provisions of the U.S. tax code were written with the specific
purpose of encouraging real estate development and investing. Government legislators
know that America needs an ever-expanding supply of decent and affordable housing,
and that the government itself is poorly equipped to provide it.
You have to know how to play the game. You’ll need to hire a savvy tax accountant or
other real estate investment advisors. They will introduce you to the concepts and calcu-
lations that you need to know to begin asking the right questions.
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