profit when the property is sold. But this is difficult to achieve in real life according to Australian property investor Rick Otton.
In his real estate book ‘How to Buy a House for a Dollar’, Rick Otton discusses the strategy of ‘buy and hold’ and why it no longer works in this current economic climate.
“Buying property costs money, and holding property costs money. Everything seems to be going fine and then, 38 months or so into their 30-year mortgage (on average), people often find themselves stressed out of their minds, and struggling to scrape enough cash together to maintain a normal lifestyle” he said.
Mr. Otton explained that the monthly mortgage payment will always be more than the tenant’s rent, and the owner has to pay the difference personally every month.
“People often negatively gear for the sake of tax deductions alone – they lose real money every month to save tax, which in itself makes no sense. It makes no sense because you are taking money out of your pocket every month in order to lose money,” he said.
Properties should be bought and held for the wealth and cash flow, not losses, according to Mr. Otton. “Usually the kind of property that grows in value actually costs money each month to hold onto, so we’re negatively geared. Which means we need cash flow again, not only to keep ourselves fed and clothed, but also to keep holding the house while it grows in value,” he elaborated.
The secret, Mr. Otton revealed, is to use some properties to generate cash flow, and use other properties to grow wealth.
“Yes, your buy-and-hold property that grows in value will cost money to hold onto. But if you have a few cash flow machines that have more money coming in each week than goes out, then holding onto that property doesn’t cause problems,” he said.
Mr. Otton is widely known for his ground-breaking property investment strategies that do not require large deposits or bank loans. His strategies are known and have been proven in several countries including Australia, New Zealand, United Kingdom and the U.S. He conducts seminars, property workshops and bootcamps to share investment property tips for beginners in the real estate market.
“My strategies are all duplicable and transferable. They’ve changed not only our lives, but thousands of our students’ lives as well,” he said.
Learn more about Rick Otton’s property investing strategies by attending his latest Book Tour. You can reserve your seat free of charge at http://www.howtobuyahouseforadollar.com/