Real Estate Investing
One of the most praised forms of investing aside from the stock market is in real estate. Many debate about which is better. Some, including myself, claim that investing in the stock market is one of the most guaranteed ways to become a millionaire. However, the real estate market is the most common way to become a millionaire. 90% of millionaires make their money in real estate. In this post I will provide information on real estate investing. This post will talk about actually owning real estate properties, not real estate investment trusts, which I will bring up in the future.
I am not an expert in real estate investing, but my grandfather is. He told me about many of situations he faced in real estate.
The Costs Of Real Estate Investing
With higher returns come bad risks. While you can have losses in the stock market, you can never loose more than what you have put into the stock market. You can easily loose more than what you put into real estate. For instance, since the cost of stocks and some entrance fees are low, you do not need to borrow money to enter the stock market (and you shouldn’t). Even in situations where the costs can be minimized, you will require significantly more money and risk in real estate. On top of that, getting tenants or buyers will cost money because advertisers do not work for free.
When investing in real estate, you will have to sink some money for leverage. If you cannot deal with considerable debt at the start, real estate investing is not for you.
The Risks Of Real Estate Investing
Oh wait, there is more. You will have to pay for maintenance, repairs, and sometimes something will show up that will shut down the property, temporarily or permanently, without any compensation.
If your property is a rental, many of the repairs will be your responsibility. I have heard of cases where landlords were called weekly to manage repairs. If you want to have even half decent reviews from your tenants these repairs must be handled almost immediately upon request.
You may even have to do some remodeling, some of which will make you hate animals. I used to wonder why landlords would forbid pets or charge more for them. That was until my grandfather told me about some issues he had with some tenants.
Some would bring their pets in without his knowledge at first. Once he was rid of them, he would come across the tenant who never took care of their pets and find the floor with excrement and urine. He had to pull up entire floorboards covered in this stuff and reeking like a sewer. If you have to do that a few times, you may dislike animals to a point you will criticize your grandchildren for owning animals, to a point you would be asking “why would you pay for something that is going to lower your house value?” Just to be clear my grandfather is a nice and very wise person.
You Could Have To Deal With Criminal Activities
If a tenant does some illegal activities it will cost you. For example, if someone uses a rental to make a meth lab, the value of the property can decrease. Those are among the best case scenarios. You may have to pay fines designed to force landlords to prevent negligence of these criminal activities. You could be sued for endangering the public or for damages cause by those criminal activities. If you knew anything about these activities, or if there is evidence that says you did, you could face criminal charges and in extreme cases the government could seize your property.
The Benefits Of Real Estate Investing
Real estate investing has reported higher returns than stocks over 20 year. There are massive tax benefits that would make a Roth IRA seem like a government rip off. You can even write off the depreciation of value for your property as a tax write off with the current US tax code. Best of all, there are few if any restrictions on when you can make money on your returns, you could have excellent cash flow.
Real Estate Investing Is Just Like A Business
High risk, high returns, and you have next to full control of your assets. Real estate investing is just like a business. No, let me reword that, it is a business, and you should manage it like one. I have heard many people say that they do not want to invest in real estate because they do not want to “clean toilets.” You never have to. You can hire people to do that while you find and research new properties. My grandfather liked doing repairs like that so he is not particularly an expert on outsourcing, but he never needed to. He is over 80 and can make repairs better than most people my age.
Like a business, all of the gains and losses you face will at least be partially because of your efforts and decisions. You need to choose the right property, the right advertisers, the right tenants/buyers, and the right people to manage and maintain these properties. Mess up on one, well some in real estate say making simple mistakes turned them from millionaires to bankrupt.
Find A Mentor
Trust me, I understand. The risks mentioned above and the stories I have heard from my grandfather and others convince me to avoid real estate investing (or at least actually owning properties). However, I intend to invest in what I am passionate about. My grandfather was clearly passionate about real estate and managing them. That’s why he was good, and you could be good too. One of the most useful pieces of advice to start in real estate investing is to find a mentor. Talk with the people you spend time with, you may learn valuable lessons in how to invest in real estate. There are many lessons for real estate investing including some provided by The Jay Morrison Academy.
The Jay Morrison Academy
The Jay Morrison Academy is one of the fastest growing businesses in America listed in the Inc 5000. The CEO is Jermaine “Jay” Morrison, or “Mr. Real Estate.” Jermaine Morrison grew up in poverty and was a criminal, now reformed. He is a successful real estate investor, CEO, social activist, best selling author. I hope I am not missing an accomplishment he made. Essentially, he is a walking and breathing embodiment of the American dream, which shows that you could be too. He grew up in poverty and was a three-time convict, what’s your excuse?
The Jay Morrison Academy is an online education institute which prides itself on educating people of different backgrounds to learn financial literacy from credit to real estate investing. They say: “our goal is to empower people from all backgrounds to create generational wealth and enjoy the freedom that comes with it” so while they pride themselves with helping people of disenfranchised backgrounds, they will not look at you any differently if you come from a more privileged background.
They offer classes online, in addition to coaching, both face to face and online. This is not just for real estate investing, they also offer classes for stock investing. Some may say that these classes teach you similar things that you can get for free. One review said that while the free lessons are good, The Jay Morrison Academy shows you not only how to make a business, but how to make a brand. A brand is the name and reputation of the business, and without a good brand, you may have to forget about making it very big. Besides, the Free Wealth Creators Club offers some courses for free. I highly recommend checking out some of these materials, especially if you are planning on making a leap into a business, or real estate.
While real estate is a risky investment, there is evidence throughout history that real estate can make you money. Remember, 90% of millionaires made their money in real estate. Furthermore, real estate investing is one of the few tangible investments, so they have real value. I wonder if that’s why they call it “real” estate.
I have heard that a housing crash is coming. However, it has been coming for many years. I believe I mentioned that almost every year someone predicts at least one market will crash. I do not know when the market will crash or rise. Trust me, I would be a trillionaire if I did. You may look at how the market is doing and try to plan around that, but there is no guarantee the crash will be as large as the one in 2008, or even that this crash is imminent.
I understand that real estate is scary, but the risks can easily be managed. My grandfather gave me advice/motivation on starting a business. “To do good, you need to be…not dumb.” Simple, but wise. You will face many situations in which will hinder you, but if you observe and learn, these situations will be nothing. I do not want to invest in real estate, yet. However, I have changed a lot over the years and may change my mind. After all, handling real estate is in my blood. I may take a real estate opportunity in the future if presented with one. But if you see opportunity in the real estate market, you should take that chance to forge your wealth.