# Entrepreneur_The Weekly Elhanan Magidovich Post 2- Long-term or short-term real estate investment?
# Entrepreneur_week Elhanan Magidovich Post 2-
Long-term or short-term real estate investments?
Real estate investors can be broadly divided into two types:
the first one- Short-term investors, aiming to buy property, improve and sell profit. The buy-cheap approach is expensive.
The second- Long-term investors, those investing for years, seeking long-term holdings of the property and enjoying its cash flow over the period, which is known as strategic: Buy and Hold, Buy, Rent and Hold.
Proper reservation and disclosure-
Continuing on my opening post 1, I adhere to a strategy of increasing asset holding over time, building an asset array with a monthly positive cash flow, and only optimizing the holding to increase it and increase the monthly cash flow. However, I do occasionally make quick deals when there is an opportunity and / or if needed.
But as a general rule, the main strategy is for asset collection to be rented.
Having written the reservation instead of apologizing to the holders of quick transaction access, I would like to elaborate on my worldview and my set of considerations that have led me to adhere to this strategy.
The benefits of long-term investment in real estate are:
  1. Cash Flow: When done correctly - it brings positive cash flow and this is passive income.
  2. Tax advantage: The country has relatively low taxation on rental income, although the trend on this issue is likely to change. Some countries abroad also have relatively low taxation policies on rental income for individuals.
  3. Good partners: The bank is your quiet partner, the big advantage is that the bank does not share your profits when the value of the asset increases over time, and also does not bother you.
  4. Transfer the debt: The renters pay the loan for you.
  5. Gift property: In another, you can say that the tenant purchases the property for you.
  6. Gift from a different angle: Even in the case of zero cash flow (Rahmana Litzlan), at the end of the period, you have property purchased by others.
  7. Money in the walls: The increase in value of the asset can be used by refinancing, thereby increasing the holding of additional assets and increasing the number of assets over the years.
  8. Self-indulgence: Want to increase her salary? No problem, when renewing contracts you can make a decision that raises a negligible amount of 5-10% Try asking your boss for an increase of 5% per year? In addition, when you recognize an increase of 5-10% in gross wages, you see a lot less because of taxation, in real estate you get the almost net increase in your pocket.
  9. Future financial security: Tomorrow, if the investor crosses Wanders Road, his successors receive assets that are free of any mortgage (life insurance protector) which is a meteoric increase in their net worth, as well as they receive a higher passive income (no mortgage for any incoming rental).
  10. Level Jump: Further to the 9 section, when the heirs receive clean assets, it is much easier for them to enlarge the empire, because they have a huge amount of money in refinancing walls and continued asset collection (see section 7).
  11. Fencing: Multi-assets actually sets us up for a situation, some of which stand vacant, which is particularly frightening for the Maccabees and the Flip people.
  12. Fun life: You have a two-month vacation, you know what… Take four months in the Maldives, the rent knocks and the income flows, even on vacation.
Comparing these two routes:
Yielding Property vs. Exit Transactions:
  1. Example of the successful: As a rule, most equity and tycoons in any business show that long-term holding is much more profitable and stable than trading. In both stock and real estate.
  2. Let the money flow: Imagine you have a barn with milking cows, the Exit's rationale says, let's bury the cow, invest in cow breeding, which the cows will grease, and then slaughter the cows to make a profit from the sale of an entrecote.
    On the other hand, long-term investing means - wait a minute ... I have a cowshed that gives me milk and that milk brings me money all the time, why sell? Let's just make sure there are more cows and more cowshed, why slaughter dairy cows? That's part of Warren Buffett's value proposition of which I'm influenced. Investment must have continued intrinsic value.
  3. Psychology combined with vengeful reality: Fast money that comes to us from the exit is addictive, after a few rounds everyone is sure that it will continue to win, and then in weak periods eat the money. In a rental property, the money never ends, it simply continues to flow from the rental side, along with the enjoyment of the value increase (see sections 7 and 8 above), such as the story of a kind of youth.
  4. The additional aspect of psychological weakness- Exit success is welcome, but successes in many exits can be a problem, for an investor with no iron discipline, the sin of hubris can hit him. Multiple success can lead to a belief in the "gold touch" capability, in assets whose current earnings are mainly due to rental income, have more tranquility by dealing with smaller amounts in daily living, the larger profits we will reap in the future or use the value of the asset to finance new transactions or cash out.
  5. Kind banks: Banks and financial institutions estimate net worth backed by assets, much more than cash flow. Because everyone knows that cash is much easier to spend and lose than stable assets. That is why banks also easily lend a balance to multiple asset owners.
  6. Multi Profit Tracks: The rental property has several profit paths at the same time, the Exit property only has the exercise and profit margins.
    The avenues of income in the property yield:
    A. Rental income
    B. Purchase of the property by the tenants - pay the mortgage
    third. In Israel, for example, investing in a property also brings in profits in the form of compound interest. According to the past 50 years (well I said I like long term) we see an average increase of 2% per annum on the value of the property consistently, even though there are periods of declines. This, at the end of the deal, increases the capital gains mainly when there is leverage .
    D. You can always decide to exercise and also enjoy the value of the property that went up as an exit (at a discount).
So what's better?
I honestly do not think there is a way or better approach than others, in my view I think it is more a matter of character. There are some people who love and adapt to short-term investments and some people who, according to their nature, are looking for long-distance investments.
As a long-term investor, I sometimes incorporate the flip strategy into transactions that constitute an opportunity for quick profits and find no interest in holding them long-term for various reasons that do not suit my behavior.
In the photo: Me and in the background in a pile drilling phase in an entrepreneurial project of building a villa for investment / rotation.



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Eyal ForerLior LustigGad RegensburgerElad YaakoviAdam Alon Recent Posters
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Eyal Forer
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Eyal Forer

Nice points!

Lior Lustig
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Lior Lustig

Thanks Elhanan. Regarding life insurance - is this also valid for investment assets or only for residential property? Can umbrella insurance also include a death issue?

Gad Regensburger
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Gad Regensburger

By definition, real estate is an inflationary sector in which time brokerage serves the debt.
short explanation:
Fixed interest rate at 3.39 (last interest rate I took) for 7 years ARM
If inflation is 3% in fact the effective payment is 0.39% or in fact inflation has paid 21% of the debt.

By definition! Real estate gives the most value to Buy and Hold holders.
Real estate is an inflationary business.

Elad Yaakovi
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Elad Yaakovi

Excellent post

Adam Alon
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Adam Alon

I liked that after everything you wrote at the end, you were showing a picture of a deal you were making Flip

Alexander Feldberg
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Alexander Feldberg

Daniela Feldberg

Shlomi Raznabi
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Shlomi Raznabi

Good post! I would love to explain the refinancing section on an apartment. Is it an all-purpose loan with a mortgage up to 50% of the property or is there another way to re-mortgage and get the money directly into the account? There is an 1-2% gap between loans

Ori Eizenberg
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Ori Eizenberg

Question clarification to Point 9 - Why do heirs get a clean property?
1. There's a pretty high inheritance tax
2. I have real estate mortgages in the US: I don't know that if I die the debt is gone, I don't know that there is a life insurance mortgage

Also in terms of taxation: The US tax on rent is like work, and it is not low, and the 15% in Israel also does not include any expenses except depreciation
So the effective taxation is quite high

In spite of all this, I agree with everything you have written and return on a similar strategy

Liran Cohen
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Liran Cohen

What fun an extended post that teaches and fun, thank you!

Just refine a bit for the wizards, you can make flip deals and it is not contrary to the rental strategy but be smart with your profits and reinvest them in rental homes, create a portfolio of rental properties that are combined with leverage / loans and profits you create

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