Question #4: Can I get money out of my real estate investment at any time or will I have to wait?

Real estate is generally a long-term investment. If you have a need for the money you are intending to invest in the next two to five years, real estate is probably not the best investment choice.

Liquidity

Liquidity is defined as: the ability to convert an asset to cash quickly. Also known as “marketability”.

Unfortunately, real estate is not very liquid or easily converted to cash.

The high value of real estate makes it difficult to easily convert it to cash, because buyers often don’t have enough cash lying around to buy a piece of real estate. As well, there are a limited number of buyers that will be interested in any piece of property, reducing marketability.

Quick Cash

There are ways to get cash out of real estate quickly. However, these methods often require selling below the full value or taking out a high interest loan.

The Need for Planning

As we work together to chart a course to retirement freedom, we hope to identify future needs for cash. In our analysis we would include items like college tuition, weddings, and anniversary cruises.

Reserves

If we choose to work together, Maclennan Investment Group requires each investor to have a reserve account that will allow them to meet unforeseen expenses and to cover vacancies in their investments. Usually, this is 3-6 months of property expenses.

In general, you are able to pull cash out of your real estate investment once the property sells or through refinancing the property, if the value has increased.

Question # 3: How often do I get money from my real estate investment?

Their are many different types of real estate investments. They range from bare land and developed lots, to office buildings and houses.

Most of the investments that we assist our clients with are income-producing investments. This means that the properties have a tenant (renter), of some kind, that pays rent.

Typically, an agreement is made between a landlord and tenant through a written lease. The lease will spell out the details of how much the rent is and how often it will be paid.

The majority of leases are written to receive monthly rent. Some leases are over longer periods of time. For instance, agricultural land is generally leased on an annual basis. But the majority of leases are written with monthly rent.

Generally, Monthly Income

Most investors when they start out will invest in multi-family investments. Rent is usually collected on a monthly basis. Therefore, you can expect to get monthly income.

The amount of income can vary from month to month. Buildings need repairs, tenants move out, and taxes need to be paid all affecting net income.

Question #2: Is there a chance I would lose my money by investing in real estate?

The short answer is yes. Real estate is an investment and there is a chance that money can be lost.

However, nothing is a guaranteed investment. There is some risk, though it may be incredibly small, no matter where you put your money.

Did you hear the story about the Israeli woman that faithfully stuffed her life savings into her mattress? Over the years she accumulated well over $1,000,000 in cash in her mattress. This was all well and good until her daughter bought a replacement mattress and threw the old one out with the garbage. Who would have thought that a mattress wouldn’t be a safe place to keep your cash?

Strategy and Planning Can Reduce Risk

There are ways to lower the amount of risk you take on any investment.

Diversification

Just as keeping all of your money in one mattress is probably a bad idea, so is placing all of your money in one asset.

Give a portion to seven, or even to eight,
for you know not what disaster may happen on earth.

- King Solomon (Ecc. 11:2)

Spreading your investment capital into different assets protects you from the risk of losing all of your money in one fell swoop.

If you had invested all of your money in New Orleans prior to Katrina, there is a good chance you would have lost a good deal of your savings. Many investors and homeowners learned the hard way that insurance companies are very particular about the difference between rain damage and flood damage.

Leverage

Leverage is the ability to control a large asset with a smaller amount of investor funds. With real estate investing this comes by using a loan. The loan may take the form of a mortgage or a note and deed of trust in California.

With leverage an investor can buy multiple properties, reaping the benefits of diversification. For example, imagine an investor plans to buy his properties with 30% down and a mortgage of 70% of the purchase price.

With $100,000 this investor can purchase three (3) properties valued at $100,000 a piece and have $10,000 in hand for reserves. A purchase price of $100,000 x 30% down payment = $30,000.

Purchasing multiple properties spreads the risk of a loss of income over multiple locations. A tree falling on one property will not cause the investor to lose all of their money.

Caveat: Leverage can cut both ways. If a property were to go down in value, the first thing to decrease is the investor’s equity. This is a risk that each individual will have to determine they are comfortable with.

You Can Lose Money, but You Can Minimize the Risk

Yes you can lose money by investing in real estate. You can also lose money while stuffing into your mattress.

We have identified two ways to minimize risk, diversification and leverage. We didn’t even mention buying multiple unit properties, buying below market properties, and other strategies that can minimize the risk of owning real estate.

Question: How much do I have to invest with Maclennan Investment Group?

You can invest as little or as much as you want with Maclennan Investment Group. However, you will probably need at least $50,000  to invest in a single property.

We offer investment solutions tailored to the individual needs of each investor. We can provide solutions for people with $50,000 to over $10,000,000 to invest.

Why a $50,000 minimum?

Our investments are not like stocks where you can buy a few shares for $100.

With Maclennan Investment Group you will be investing in the ownership of real estate. You will be buying a house, a duplex, a triplex, or an apartment house with your money. These investments require more capital to begin.

In most regions the average minimum cost of investment quality real estate is around $200,000. A twenty percent (20%) down payment is equal to $40,000, leaving about $10,000 for closing costs. An investor would need $50,000 to invest in this type of real estate.

Are there exceptions to the minimum?

Yes. It is possible to invest in real estate with less than $50,000. However, this solution often requires that you have a partner or partners to make up the difference. Having a partner is not something that everyone is comfortable with.

If you have $50,000 to invest, we can start you on a Course to Retirement Freedom.