Why Invest in Real Estate
Why invest in real estate? People ask it all the time. I think it’s totally ridiculous that they would as but then again, I’m the crazy guy that’s done thousands of deals and I love real estate investing!
“I don’t know how to do it.” “I don’t know where to go” “I’ve heard stories where people lost a lot of money” this is what usually get from people.
Real estate isn’t something that is built into our culture as a part of what we do for retirement, it’s something reserved for the strange or for the wealthy and you know couple of hundred years ago if you were born in this country you are a real estate investor, it was not only your heritage, it was your retirement game plan, it’s what you pass on to your children. Today and since the industrial revolution we’ve really lost that and I think that’s sad, it was one of the original American ideals.
Why and how?
What is the big buzz on it? Why would anyone even consider investing in real estate? it all comes down to financial freedom. I don’t mean financial freedom in a really kind “ohhhhh! buzzy residual income!” kind of way I’m talking about a technical definition.Every single time I ask people what it means to be financially free, I normally get some kind of this kind of answer “oh financial freedom is to do what you want, when you want, how you want” I’m a little bit of math nerd on this stuff, my technical definition of financial freedom is having enough residual income to out way your monthly expenses
if your living expenses, your house, rent, mortgage, debts, your health medical bills, food, and all those things and the travel that you want come out to $4800 a month, $7900 a month, $11000 a month whatever it is, if you had a residual income coming from real estate that actually paid it all, then you would not have to work because your liabilities would be covered so that is the minimum definition of what financial freedom is
Do you know your number? Have you done a basic budget? Do you know what your monthly needs are?if you take those monthly needs then you know exactly what kind of residual income you need. When you get to that specific number you are technically financially free
in America this is the game plan that we teach people, go to college, get good grades, get a degree, get a job, make someone else a lot of money, don’t worry it will take care of you from week to week and check to check like a lot of people live and then when you get to retirement… you are screwed! you can rely on “social insecurity”. Okay, that was may be a little heavy handed, the problem is that if you were just trading dollars for hours whether you are a doctor or a lawyer or whether you are the janitor it doesn’t matter if you don’t work you don’t earn and so the key is to doing something that will generate a true residual income and of course real estate is a really great way to do that. So if you are in a career or a job where you are trading dollars for hours here is the bottom line problem with it, you have fallen into society’s game plan which says stock money in a way 401k, put it in the stock market.
Stock Market V.S. Real Estate
I’m going to do something that I love to do I’m going to compare real estate and the stock market and I need to throw out a little disclaimer I think you all pretty much know by now that I’m having a love affair with real estate I love real estate and it’s not that I hate the stock market it’s really just more that I hate the stock market when I compare it to real estate
Here’s my handy dandy cheat-sheet
Stock market does not pay you a cash flow but real estate does, why would you ever put your money in something that doesn’t pay you? Boggles my mind.
in stock market you could save for 30 or 40 years and at their average rates you are guaranteed to never get enough of what you need so if it’s broken why would you actually use it versus real estate there’s actually a shot that in a 5 or 10 are even a 15 year period of time that you could accumulate enough wealth and cash flow to successfully retire.
There is no inflation hedge in the stock market, so if the dollar loses value so does your stock market money but in real estate it is the inflation hedge it’s a hard, tangible asset that when everything loses value and things inflate what happens to value of your real estate? It goes up and what does it do in the meantime? Pays you cash flow.
You don’t have any control against the stock market why would you invest in something that millions, hundreds and millions of other people do that you have no control over versus real estate guess who owns it? You. You’ve got that original ownership.
You are usually penalized if you are going to invest in stock market there’s early withdraw penalties depending if it’s qualified funds versus real estate you are not penalized you are actually encouraged, you actually pick up leverage, you will actually make more money if you do it.
In the stock market, you got reduced tax advantages because bottom line in real estate you are taking advantage of the biggest tax advantage
if you invest on the stock market and it’s broken and it’s not enough to get you what you want to do, where you want to be, it puts you in a mindset of scarcity so it puts you in a fear mode, it puts you in a ‘I’m never going to have enough’ mode, real estate on the other hand, what happens over time? Your cash flow increases, your wealth increases again this is all contingent on whether or not you have got the right strategy but one is guaranteed to not work for 99% of Americans and the other one at least has a much better shot than that especially if you got the right system.