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Wealth Creation, Real Estate And The Internet ? The Golden Triangle?
As a seasoned real estate investor, I am always on the look out for cash flow positive property opportunities. That is, the ?gearing? level of debt (mortgage) for the prospective acquisition must always leave my property portfolio in a positive cash flow position having regard to potential rental income. (I will never negatively gear a property purchase.) I naturally take into account the estimated maintenance expenditure and other outgoings in computing the equity that I will need to invest into the purchase to ensure the property will be cash flow positive. Thus, each investment property purchased, adds to my net annual income. I only buy at wholesale prices (at least 20% less than market value) and usually find that after doing the sums; I need to put in another 25% of my own capital. Hence, the new acquisition is initially geared to a maximum of 55% of current resale value. My system necessitates that I always purchase two properties in each individual ?wealth cycle?. As soon as there is enough combined equity to do so ? due to a rise in property values and/or the reduction in the mortgage via the two rental incomes - I sell either one of the pair, which leaves the remaining property freehold. Result: one more freehold (unencumbered) property added to my portfolio of freehold properties. I then consider that particular wealth cycle completed and immediately begin to look for another two acquisitions to repeat the process. Sounds easy ? well it is easy and becomes more so with experience. However, what is worth pondering over is the comparison of the net rental return of a freehold investment property, to the net return of a smaller income producing website. My most recent wealth cycle completion left me with a freehold 2-bedroom apartment (we call them home-units here in Australia). The property is now worth about $120,000.00 and currently rents for $125.00 per week. A smaller website, for example, one that receives on average three or four e-book sales a week and earns a modest income from Google Adsense, can also produce $125.00 a week. So, if the return is the same and the owner?s input is negligible in both situations, why isn?t the website worth $120,000.00 in comparison? The website owner, of course, would be extremely lucky to receive 3 - 5% of $120,000.00. I feel that this anomaly has been partly created from the result of the dot com boom and bust cycle and partly because, in spite of all the hype, the economics of the Internet is still in its infancy. Can cyberspace be considered real estate? Or is a website merely at best a business proposition with some added intellectual property? Whatever the answer, I feel that Adsense (and similar programs) have underpinned both the prospective and the potential value of website valuation. The cash flow from a few websites, each with an average return of $125.00 per week has enormous wealth creation potential for the master wealth creator. I could foresee the linking of a pair of income producing websites with a higher geared property acquisition (purchased at wholesale price), so that the monetary effect would be as if the rents of three properties were now quickly paying off the mortgage of the new acquisition. In this example two of ?the properties? are in cyberspace yet it is important to understand that the net monetary effect would be exactly the same. A couple of websites is ?no big deal? - yet if one considers that those same two websites can give you a freehold income producing property approximately every five years, then the values and economics of the internet will need to be rewritten.
Charles Goodwin is the author of the highly rated book ?The Secrets Of Wealth Creation Revealed? (available as a paperback or e-book.) Charles can be contacted at http://www.wealth-creators-club.com or his Blog ?The Esoteric Charles Goodwin? at http://charlesgoodwin.blogspot.com/
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MORE ARTICLES: The 'Website' CHECKLIST : Domains, Hosting, Web Design This article is meant to all who already have a website or who propose to buy it. Website – the term comprises three things : Domain, Hosting (Web space) & Web DesignThere are numerous company offering these services.
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