Real Estate Investing is Still the Best Investment
…And Way Better Than The Stock Market
If Real Estate Investing is still the best investment, then why are people still investing in the stock market or other investments. I think there are a number of reasons: 1) real estate investing is too much work; 2) people don`t want to take responsibility for their investments; 3) real estate investing is boring.
First of all ….
why is Real Estate Investing still the best investment?
Suppose you purchase an investment property for $200,000. Let’s say you put $40,000 as a down payment and finance the rest. Over the next year your property grows in value at a rate of 5% (in some areas it’s more and in some areas it’s less). This means your property is now worth $210,000. Your Return on Investment (ROI) for your $40,000 is $10,000 or 25% … in just 1 year. But that’s boring isn’t it? What if you paid less and your appreciation was more?
- Monthly Income
But remember, this is an income property that you are renting out to make money. So assume your monthly expenses, which includes your mortgage, insurance, taxes, maintenance, management, vacancies, etc. are approximately $1,300. And let’s assume you can rent this property for $1,500. That’s a cash flow of $200 a month or $2,400 a year. And the good news is that when times are tough in a bad economy, more people are renting so your rental income is even more secure.
- Principal Pay Down
You are also paying off your mortgage during that time. At today’s interest rates, you might earn another $4,000 of equity because of your principal pay down.
Total profit on this one $40,000 investment is:
$ 2,400 Monthly Cash Flow
$ 4,000 Principal Pay Down
That’s a return of 41% and that’s only in the first year.
Take Control of your Investments
So what about property management, unforeseen expenses and cash flow? There are a lot of people getting rich in Real Estate Investing because they know how to deal with these things. It`s a part of Real Estate Investing. It just means that you have to take some responsibility for your investment and learn something about Real Estate Investing. And remember, you don’t have to do everything yourself.
When was the last time you made good consistent returns on your stock market investments? Or what kind of returns are you getting on your mutual funds? What kind of control do you have with these investments?
With your stock investments you have absolutely no control, other than get in and get out. You can’t influence how well your investment performs. You can’t influence changes in the company you are investing in or the demand for their product or service. You can’t ask your broker to talk to the CEO to change his or her strategy so that revenues might increase, which will influence investors to buy more stock and hopefully the price will increase or dividends will go up. In mutual funds there are even more people involved that you can’t influence.
I consider the stock market to be pure speculation and another form of legalized gambling.
In Real Estate Investing there are lots of ways to improve the value of your investment so that it appreciates more and so that it rents faster and for a higher rent. You are in control.
With a little more effort, and by taking a bit more responsibility for your investments, you could be earning amazing returns in real estate. Diversification within your Real Estate Investment portfolio will also help reduce your risks and provide an even higher return than I showed here (e.g. Lease Options).
Don`t have the time? You need to make time or keep getting the returns you have been getting .. . maybe! Real Estate Investing may not be exciting. You can’t stand around and talk to people about how much money you are going to make in such-and-such a stock or how much money you lost in another stock.
Real Estate Investing is a slow proven method to financial success.