Colorado Property Investment.
In current times, Colorado is an amazing place to invest in Real Estate. We are mortgage lenders and do not have the authority to suggest how, when or why to invest in Real Estate. However, our staff has funded many investment properties in the past and have picked up on some interesting strategies over the years. Again, I cannot stress enough that property investing is a personal endeavour and strategies vary from person to person and no one strategy is failsafe.
With that said, let me suggest a particular strategy that, if executed correctly, could create long-term wealth with a reasonable amount of risk.
Take an example. Imagine you buy a piece of Colorado Real estate for 300k. Most investment property loans require between 20-25% down. The down payment is usually the biggest obstacle for a real estate investor. In this scenario, 25% would be 75k, a sizable amount of money for most. There are “other” suggested ways to buy investment properties with “no money down” but they are often flawed. The most proven and, obviously, more difficult way to do it is to save up that down payment!
Suggest that you have the down payment money saved. Remember, the down payment money for an investment property cannot be gifted from a family member like a primary residence purchase can so be sure to have the money in your bank account for at least 3 months prior to beginning the loan.
This strategy also requires more discipline than most investments. The idea is to put the loan term at 15 years instead of 30 years. This ensures much more principal is being paid every month when compared to a 30-year loan. Next, the idea is to “overpay” the 15-year loan schedule. The normal payment without taxes and insurance would be around $1,664.30. The next step would be to pay an additional 1k per month on top of the payment to further reduce the principal of the loan. If the full 15-year payment + the 1k extra per month was paid for the entire life of the loan, the loan would be paid in full in less than 8 years. From the day the last payment is made, the property then turns from a 2664.20/month liability into a 2k/month cash-flow producing property.
The idea of this strategy is to acquire between 3-10 of these properties over the next 3-10 years. With this strategy, an investor could potentially create a wealth-producing machine which would produce between 6-20k per month depending on the number of properties. Once the properties are paid off, the cash-flow remains until they are sold. Appreciation should also be factored into the strategy but for the sake of the philosophy of the investments, the cash-flow is what is most important because it does not end as long as the properties are managed correctly.
Though this strategy requires a great deal of patience and delayed gratification, it can be done, and if done properly, can set an investor up for an early retirement.
To buy an investment property or to inquire about any type of financing questions, contact Colorado Lenders, Inc today!