“Ninety percent of all millionaires become so through owning real estate.”
— ANDREW CARNEGIE
Why invest in Real Estate?
A financial advisor may or may not recommend investing in real estate. Many say that it is “risky” and are quick to point out that the real estate market typically does not historically increase at the same rate as the market (4% vs 8%).
Ultimately, some advisors will suggest a publicly traded REIT (Real Estate Investment Trust); however, this is really another paper product complete with fees, less tax benefits and lower returns than MF syndication. The biggest difference between owning actual real estate and a REIT may be the fact that instead of owning part of a property, as in MF syndication, with a REIT you own part of a company and they are subject to market changes! Thus, even though the REIT properties may be performing, the value can drop with the public markets.
“Everyone is in Real Estate.
You either pay rent or get paid.”
— TIM FERGESTAD
“Put your funds in the market and watch the market go up” (except for the years it goes down.., then my advisors said, “don’t look at it!”). Personally, it felt a lot like gambling. Just putting money into something without a plan and just expecting the value to go up. This is also like investing in crypto currency or buying a property without renting it. Savvy investors prefer something that is more tangible and has an actual business plan. I hate investing in a good company that is performing well only to see its value plummet simply due to overall market trends.
Combining such volatility with the looming liquidation of trillions of Baby Boomer retirement funds and the constantly devaluing US Dollar, I am extremely wary of paper assets.
There is a big difference between ‘Cashflow Investing’ (executing a business plan) and ‘Appreciation Investing’ (gambling / speculating).
Many people do not know what good investments are or the variety available. Unfortunately, some people hear about a good investment, but don’t understand that asset class and lose money.
“Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1.”
— WARREN BUFFETT
Commercial rental properties are an excellent inflation hedge. Unlike gold, well known for its ability to hedge inflation, Multifamily Real Estate value INCREASES with inflation and delivers cash flow. Rents generally increase during inflation periods covering the increases in expenses and general property values also increase. Furthermore, multifamily real estate can be an inflation hedge through the use of financing to purchase the building (debt is paid off over time with the inflating dollar). The dollar was also less inflated when the loan originated. These things combine to give multifamily real estate investors a significant advantage over other asset classes.
After reading all the benefits to Real Estate investing you should be asking, What types of Real Estate should I invest in? and How do I invest in Real Estate? Click below to see our NEXT BLOG for answers!
