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The other CYA

CYA—usually stands for Cover Your Ass. How can you CYA financially? One great way to CYA is to Convert Your Assets…the other CYA

With the power of the dollar declining in the global marketplace, there are a number of financial moves that can be prudent. Each day you hold on to a dollar, your buying power of your dollar decreases. Your dollar buys less gas, less food, and less home than ever before. The old adage that a, “penny saved is a penny earned” doesn’t hold up well over time.

It is important to have money saved up. Most financial gurus recommend having between 3-6 months of savings for emergencies and safety padding for hard times.

Converting your declining, assets (cash), into real estate wise for three reasons: Leverage, Appreciation, and Equity.

Leverage. Investing in real estate allows you realize a gain on an investment of money much larger than your actual interest in the property. A $5k investment can allow you to realize gain on a $100k or $200k investment. You can’t do that in stocks or bonds. Can you?

Appreciation. The appreciation, or increase in value, is the primary reason why it is beneficial to invest in real estate. Since land is a constantly diminishing material and building materials are increasing in expense, the cost of real estate constantly increases. Your dollar, which will be worth less(or worthless) tomorrow, can secure an asset that will be worth more tomorrow than today.

Equity. As you make payments on a home, the loan amount decreases. Therefore your liability decreases. In the case of a rental property, the loan amount is being paid down by another person. This increase in equity (the difference between what it’s worth and what you owe) is what is so profitable down the road.

With the talks of recession and a generally negative outlook regarding the economy nearly everywhere one turns, the opportunities for building wealth seem to be increasing. It’s as though negativity and opportunity are directly correlated in real estate. Many people tend to believe that foreclosures are the key to making money in real estate. Foreclosures can be good deals, but they aren’t always the best deal.

Any excess assets that can be converted to real estate will be a good move in the long run. While stocks are volatile, real estate tends to be more stable and is, in general, a long-term investment. Seeing real estate as a long-term investment help keep perspective on the best investment you will ever make. Remember, if the road to success were easy everyone would be doing it.

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