YW Blogcast 51 - Cash Flow for the Young Investor

If you’re a young investor who has been following the Young Wealth blog for a while now, you might have noticed a slight intemperate tone, at times, when the subject of the stock market is broached. For several reasons, which we may get into at a later date, our two plus decades of investing experience has revealed gaping holes in what used to be Wall Street’s unassailable position as Middle America’s primary path to building wealth.

Suffice it for now to say the stock market, driven by irrational speculation, amounts to little more than taking a spin at the roulette wheel in Vegas except it’s not as much fun. About now, you might be saying to yourself, “Well, where does that leave me, the young investor, most pious and pompous editor? If not the stock market, then what?”

Good question and it just so happens we have an answer for you. It’s called income property and it so happens to be the most powerful method we know of to create wealth in America today. We’d like to present, as an example, a single family residential property in Atlanta that would make an excellent starter property for your portfolio.

The purchase price for this piece of real estate is $102,000. If a young investor has decent credit and stable employment, a lender will likely ask for a 20% down payment, which works out to a little over $20,000. The home is red brick, built in 1999, located in a nice neighborhood, and will be fully rehabbed and rent ready for the new owner. Rent in the area is about $1,150 monthly – we’ve run the numbers because this is the kind of deal we love to jump on – and the cash flow AFTER the mortgage and all other expenses have been paid is about $151 monthly. No one here will try to convince you that the amount is a fortune because it’s not but cash flow is only part of the range of benefits. In addition, you’re getting your mortgage paid off by someone else (the tenant), while your investment appreciates over time.

The icing on top of the cake is that this income property will be owned outright by you at the end of the mortgage term. Considering you only put down 20% to buy the thing and someone made payments on it, the result is same as if you bought the property outright for twenty cents on the dollar. If you are one of the fortunate few to read through this short description and latch onto the possibilities, congratulations, we’ll be seeing you on Lifestyles of the Rich and Famous before it’s all over.

By the way, don’t try this strategy on Wall Street; it doesn’t work.