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s money?” ? I already told you about it, didn’t I? ? “But isn?t that what makes real estate such a great investment?” ? Well, yes. Let us look at the two problems in the older book that illustrate the power of leverage ? Financial Planning Problems 1 amp。 2 ? Page 563 (from the old book) (continued) 12 Real Estate and Leverage 1. Calculating the Return on Investment. Dave bought a rental property for $200,000 cash. One year later, he sold it for $240,000. What was the return on his $200,000 investment? 2. Calculating the Return on Investment using Financial Leverage. Suppose Dave invested only $20,000 of his own money and borrowed $180,000 (90% financing). What was his return on investment? Page 563, Financial Planning Problems 1 amp。 advisors ? Find a reputable, experienced trustee ? Usually have high operating fees and expenses ? Can not be your home or business ? Nor your parent’s nor children’s ? But it can be your brother’s or sister’s (?) 15 Real Estate and IRAs ? Must have sufficient cash in the account to perform necessary transactions ? If not, you must either sell the property, or ? Deposit more cash into the IRA ? But if you go over the annual maximum contribution level, then you will be penalized 6% per year on the amount overdeposited until there is sufficient cash in the IRA and you are able to withdraw the amount overdeposited ? For this reason, often people “pool” their IRAs ? Which is normally forbidden (?) ? Again, seek a reputable, experienced trustee (continued) 16 Real Estate and IRAs ? The advantages can be dubious ? Investment real estate often has many of the same advantages as an IRA without any the constraints of an IRA ? Capital gains taxes are deferred until you sell the property which may not be until retirement ? Ine is usually negative or minimal for years ? Real estate offers many tax deductions which you will not get if it is inside an IRA ? And capital gains on real estate can currently be eliminated if you simply live in the property for two years before you sell it – “principal residence” ? $250,000 singl