Creating Cash Flow

It's Always Nice to be Nice to the Nice

It's a unique saying that I learned early on in my working career "It's Always Nice to be Nice to the Nice". I thought, well that makes sense, but business shouldn't be that way. You have to be ruthless, and cut-throat and do whatever it takes to be successful, or at least that what was projected on TV, in the news, and in my small world of influence.

Yet, I learned over time in business that it is important to be a good steward, and treat people better than you would expect to be treated.

You would be surprised how often a simple hello to a neighbor at a prospective house can go. I have found myself spending time talking to neighbors gaining valuable wisdom of life, the neighborhood and the property.

It might not seem like much, but we as real estate investors are dealing with a basic need of life, shelter. How we act towards others has long term last impressions.

I recently had to learn a valuable lesson about only surrounding yourself with people who live by this creed. If you fail to follow this mantra, you are essentially failing yourself.

Have a positive experience with a vendor, client, or prospect? I would love to hear it.

It is our job to pay it forward!

Kevin Kaczmarek is the founder of Capital Blueprints, LLC an IRA education and investment company in Carmel, IN. Recognized as an innovative thinker, teacher and business leader Kevin helps others achieve their financial goals with Self Directed IRA Investments, and Passive Income Strategies. Kevin can be reached at kevin@capitalblueprints.com or 317-564-4820

Happy Holidays to All!!

To all my biggerpockets family and friends I want to wish each and everyone one of you a joyful, peaceful and happy holiday season. I thank each of you for helping me grow in 2010 and I look forward to building relationships, networking, and most importantly of all, creating a better space on this earth than it was this year.

Another Spoof of "The Office"

We are trying to be more creative in our marketing approach to events. Your feedback is appreciated.

Resolve to be Mr. or Mrs. January

As we prepare for the New Year, resolutions come to mind, filled with new goals and excitement! I challenge you to consider one resolution for the New Year that will greatly benefit you and your family not only today, but tomorrow……. "Be a Mr. or Mrs. January and not a Mr. or Mrs. December"

What does this mean?

When it comes time to contribute money to your IRA that you will use to purchase real estate or other assets with your Self-Directed IRA, there is no better time to contribute to your IRA than in January.

Let’s use this example:

Mrs. January makes a 2011 IRA contribution of $5000 in January. She expects to earn a 15% return each year. Whereas, Mr. December makes that same $5000 contribution but waits till December (12 months later) because in his mind, tax free investing is important but not as important as other things that have to be done during the year. He too earns 15% on his investments.

Now, consider this.... By the mere fact that Mrs. January earns 15% for 12 months, she earns more interest every year.

Mr. December also earns 15% on his capital...... but only for 1 month that year.

The result: After 10 years, Mrs. January’s IRA is worth $14,000 more than Mr. December's because she contributed early and earned more interest every year!! Pretty powerful!

In 2011 and every year after this, remember, action today creates wealth tomorrow!

Are you a Mrs. January or a Mr. December?

When is a 13% return better than a 15% return?

Returns, Returns, Returns!

We as investors are always looking at the rate of return on our investments. Stock and Mutual Fund prospectus love to show an average annual rate of return in their paperwork to give you an idea of what you can expect to earn year over year. Lets take a look at the rates of return for a popular mutual fund before the market crashed.

Year 1: 26% return

Year 2: 19% return

Year 3: 18% return

Year 4: 35% return

Year 5: -23% return

Investing just $10,000 over those five years would yield an 83.9% return or $18,391.79. Pretty good huh?

Now lets compare this example: A land contract note that you purchase yielding 13% a year.

Years 1 - 5: 13% return each year

Investing $10,000 into that land contract note would yield an 84.24% return or $18,424.35. A better return and it comes without the risk of market violatility.

What makes consistent investing like land contract notes even more attractive is when we look at returns for year 6

In year 6 of the mutual fund return they yielded a 11% loss. Dropping the value of the mutual fund to $16,368.69. It would take a 41% gain in year 7 to get back to that 15% rate of return.

In year 6 of the land contract note however, with the 13% return, the account value increases to $20,819.52.

As you can see from a simple small investment with consistent returns not only produces better returns over the long run but also gives you much more piece of mind, more stablity and solid financial growth!

Compounding Returns in your Self Directed IRA

By now you have heard many different aspects of why I am an advocate of Self Directed IRA's and everyone talks about real estate being a great investment in a SDIRA, but why?

Let's take a look at an example:

Bonnie Alderson buys an investment property for $25,000. Her property management firm finds a tenant where she will net $500 a month in her ROTH IRA. Bonnie also believes in contributing the annual max to her IRA so after 1 year in her IRA she has the following:

A property worth $25,000 (we are assuming no increase in value)

$11,000 in available cash. $5,000 from contributions, $6,000 from payments

In year 2 she follows the same formula. On New Years eve, her account consists of:

A property worth $25,000

$22,000 in available cash. $5,000 from contributions, $6,000 from payments

Now look what happens in year 3. She has enough for a second $25,000 property. How much did it cost her out of her own money? Just the $10,000 from contributions

If Bonnie kept up with this program for 10 years she would end up with:

11 $25,000 properties

Earning $72,000 a year in cashflow

All from an original $25,000 purchase and 10 years of $5,000 contributions. Bonnie now owns $275,000 in real estate with cash flow for life!

In 20 years that would grow to:

103 $25,000 properties worth $2,575,000

Bonnie also receives $618,000 a year in cash flow for the life of the properties.

It gets even better if Bonnie does this in a ROTH IRA. Its all tax free