Why I Chose Real Estate
There are thousands of things you can invest in.
Stocks, CDs, bonds, gold, silver, water, tax liens, stamps, commodities,
businesses, notes, coins, gems.
The list seems endless!
So why invest in real estate? Why not something else?
It’s not because other investment areas can’t generate income streams or play an important role in your overall portfolio. It’s because, of all the possible investments you can make, real estate is your best investment option.
Let me show you why.
First, real estate is everywhere, sells everywhere and sells all the time. You can look in the city or the farmlands, you can live in the heart of New York City or the farthest outskirts of Alaska. It can be summer, winter, fall or spring. Wherever you are, there’s a property for sale, and- whatever your economic situation- there’s a way for you to manage to buy it and profit from it.
You don’t need a license, or degree, or years of study and classes or even experience to buy and sell real estate. It doesn’t hurt you to have those things. With the right team behind you backing you up, you can cover all the bases like a pro and succeed from the very start. But, even if you’re on your own, you can almost always find a good deal fast.
Next, real estate does make money. Serious money.
I’m not talking a .50% annual return on a CD. I’m talking the kind of money that can support you totally, and keep supporting you for the rest of your life.
A single common unspectacular real estate deal can make you more money than most people make all year. And it doesn’t require eight hour days, five days a week at a job you don’t like. You don’t have to dress for work. You don’t have to commute. You don’t have to put up with the boss. You don’t have to worry about layoffs or be afraid of getting fired.
Why work day-in day-out for a solid year- or more!- to make the same money you could make in weeks or even days on the right real estate deal?
Suppose you’re not an employee. Suppose you’re a business or an entrepreneur? Well, here’s a business you can begin with no employee payrolls to meet and nothing like the usual complicated corporate or self-employment tax penalties or complicated regulations to follow.
Statistics tell us that roughly 90% of new businesses fail totally and fail in the three years. But in real estate? At worst, you may have an emergency and sell at less than the price you’d hoped for. But, you’ve got a house, someone out there will pay to buy it. There’s almost no possibility whatever of losing everything and going broke.
Yes, there are other investments. You can put your money in a conservative interest-bearing account in a bank. If you can put in $1,000 and get a .25% fixed interest return on it, that can bring you $25 -in four years- assuming a 4% inflation rate doesn’t effectively reduce it to zero. Or that state and federal taxes don’t leave you with less than you started with. Or that the banks themselves don’t fail.
You can invest in other things- stocks and bonds and mutual funds, or art. And those investments can make a great deal of money. Or lost a great deal of money. And the bottom line is that you can’t do a thing about it.
Will General Motors go up or down? You can make an educated guess. But unless you’re the president of GM, can you really do anything about it? Is there anything you can do personally to ensure that the international futures market that you put your money in to will grow? No.
Is there anything you can do personally to improve the value of a piece of property you own? You bet. You can do everything from adding a coat of paint to cleaning out the gutters to fixing a broken window. And the price of that home can rise out of all proportion to your efforts.
Maybe you think you should invest in a business instead. But guess what? If you invest $15,000 to start a business, your total investment is $15,000. In real estate, you can take that same $15,000, put it down, get a loan of $100,000 or $150,000 from a bank or private investors. You may even be able to get that loan for no money down.
If the $15,000 of your own money you invest in business doubles in value, you get $30,000.
If that $150,000 of someone else’s money you invested doubles in value, that comes to $300,000. Ok, you have to pay back that someone else’s $150,000. And you can’t count the $15,000 you put up to get it. Even so, you made about nine times the $15,000 that you put up. That’s not bad.
And your investment money isn’t growing insecurely. You aren’t being asked to work eight or 10 or 12 hours a day to make it happen.
It’s simple math. Put $10,000 in the bank and if you get a 10% interest rate, you made $1000 that year.
Put $10,000 down and you can own a $100,000 property. If that property goes up 10% in a year? You’ve got $10,000.
And your whole investment just doubled! And you can go right out and put it down and get another $100,000 property and just possibly double your money again.
American real estate is virtually the only business you can go into that lets you make significant investments without investing a cent of your own income, and that still lets you keep every cent of the income generated from that investment.
Buy a house with a 10% down payment, and you own the whole house, not just 10% of it. Rent rooms in that house and you get 100% of the rental income, not just 10%.
Keep that house till it raises $20,000 in value and sell it, and you keep the whole $20,000 in profit, not 10% of it.
There are no other businesses that need as little money- sometimes no money- for an initial investment and bring back as many tax breaks, immediate returns or long time gains. It’s even a hedge against inflation! Historically, real estate home appreciation has always grown faster than the inflation rate.
You may be thinking if real estate is so good, why isn’t everyone on it?
Different investors invest in different things. But every serious investor I know puts part of their income into real estate. That’s not to say you shouldn’t put part of your income into a standard retirement package. But I can’t think of a single person of wealth who hasn’t got a substantial part of their portfolio in real estate.
Other investments may promise more and promise it faster. Almost without the expectation, that promise comes at a far higher risk. Other forms of investment may ask the investor to put more money up front, or involve higher taxes, or entail the risk that the investor could lose it all.
Maybe your business idea or your stock pick is different. Maybe it’s the next Google. Maybe. The odds are overwhelming that it is not. Tens upon tens of thousands of stocks that have been launched, and barley a handful are long-term consistent winners.
Can you lose money in real estate? I guess you could if you’re really determined and work at it. Sure, you can buy a house and not insure it and light your cigarette and toss the match on the carpet. The house will burn up and your investment will blow away. Or you can find an area where proves are fluctuating and, as soon as your home drops in value somewhat, you can sell and take a loss. If you really want to make sure that it’s a loss, you can neglect to write off on your taxes.
I know: these examples are silly. But not that silly. There are people who have turned over all the money that they have on the strength of a handshake with a trusted friend or relative, and people who don’t know a thing about all the tax breaks they have available, or about the right kind of insurance to get, or even what they need to get insurance.
But, even in cases where inexperienced people with no idea what they were doing fell into real estate by complete accident — like me!- they’ve gone on to making money in it.
And why? For three reasons:
First, as I said, you don’t have to invest a lot of your own money. Sometimes you don’t have to invest a single penny of it. The very first three properties I got 25 years ago were no-money down deals. I have sold all three of them as of a few years ago. One I sold for $50,000 after living in there for two years.
Second, when you buy a property you automatically have more than you’ve invested. Buy $150,000 worth of stock and if the stock fails, you lose all $150,000. Invest $15,000 in a down payment on a home, and you own the home- a home that could exceed the value of your investment by many tens of thousands of dollars. Fix it up and write off the money spent fixing it up. If that makes it double in value, the difference is all yours. Even if the home is destroyed in a ( highly unlikely) natural disaster, if you’ve insured it properly, you’re compensated for the full value.
Third, your real estate investment makes you money as you wait for it to rise in value! How? By renting it out. Your rental income alone can pay for your investment, and pay for the improvements to the property too. (And if you think the tenants may be slow to pay, or that you don’t want to do maintenance or collect rent, relax. You can find firms that handle maintenance and collection for you.)
Fourth, you can see the changes in the property values coming because property values change slowly. A stock can crash overnight and, if you buy a painting that turns out to be a forgery, you can lose everything in the blink of an eye.
But even in a declining market, it’s nearly impossible to buy a home, clean it up and fix a few things, and not resell it at a profit. In real estate, prices may decline, but they don’t decline fast. As a rule, they decline slowly enough for you to take action in time to avoid any major losses at all, as long as you’re paying attention.
In my experience, people who lose money in real estate -and there are a few- lose it for a few very easy-to-avoid reasons.
They’re not prepared. They don’t check out the condition of the house, or the surrounding property values, or the local law and ordinances and trends. They don’t know what to look for or what to look out for. But they want to buy real estate! So they buy the first thing that appeals to them, or they pay more than the property is worth and it’s a bust.
I was watching a HUD foreclosure home for four months when finally the government decided to sell it at an auction. Fixed up, I know it would sell for $40,000. How did I know? Because I did my homework. There was a house across the street that was identical to the first house. It sold for $40,000 on the open market.
I had plenty of time to do my due diligence. The auction property needed $10,000 of rehabbing. There were some further smaller fees and $1,500 in closing costs. So, I stopped bidding at $15,000.
Sure enough, it sold for $40,000 and still needed rehabbing and other expenses. Do the numbers: This person got himself more than $10,000 in the hole. He has since lost the property. Maybe I’ll buy it the next time.
Do your homework and you’ll be okay too.
Thanks for reading!
-Syd Chase (MrNoBull)
Facebook: https://www.facebook.com/TheSydChaseGroup/
YouTube: https://www.youtube.com/channel/UC_Ge2mFnW8PaMbThCDZyqYA
