Now, I’m not here to necessarily bash on stocks… I’m not! They can be a good investment but often times the benefit of investing in real estate outweighs the benefits of stocks. I’m going to drop some groundbreaking truths here. When the majority are doing one thing, look to other ways. The average population in the U.S. are invested in stocks, bonds, and mutual funds yet only 5% of the population is considered wealthy. We have to examine this. If the idea of “compounding interest” has been so popular, why did 2008 put MANY people out of financial stability? I like to quote one of my favorite financial leaders of today, Garrett Gunderson. “…I’m thinking, who did it (Compound Interest) work for? It’s the banks! It (Compound Interest) always works for the banks”. Now if you dissect that quote, there are a serious level of truth there. When you go get a 30-year mortgage for your own home, is the compounding interest in play? Absolutely, a 4% interest rate really ends up being close to 80% interest. Yet, if we invest our money in stocks, bonds, and mutual funds, why aren’t we seeing the same? Let’s discover why…
1. Mathematical Fallacy
Today, the stocks market is doing a fair return of 5-6% a year. But if you look at the month to month appreciation of the stock, it tells us a different story. Imagine if you had a $10,000 investment that fell -5% the first month and rose back to 5% the next month, am I back at $10,000? Nope! I’ll actually be at $9975. But WAIT! You’re saying the -5% and the 5% should equal out to 0%, right? Well, if you take the $10,000 and hit it with a -5%, it’ll bring us down to $9500. But if we take the $9500 and give it a 5% return, we only get a gain of $475 which only leaves us with $9975. We actually LOST $25! Because the stock market doesn’t ALWAYS go up in value, this scenario can be expected… How the heck are you going to ever make money? Oh! and did I tell you that your financial advisor or your stock broker makes money no matter what happens? Sucks, doesn’t it? We’re going to talk about why this type of investment doesn’t work in 21st century.
2. Stop the Accumulation Mentality
Another idea borrowed from Mr. Garrett Gunderson here… If you’re thinking about saving or investing in stocks to retirement, let me just cut to the chase and tell you that you probably won’t. Not even a $2 million dollar retirement account will save you at age 65. Let’s “retire” the idea of retirement altogether here, shall we? What if I told you that you DON’T have to wait and save up to 65 to retire? What if I told you that the objective to your retirement is NOT accumulation but it’s CASHFLOW. Here’s the difference… Would you rather have a $1 million dollars in your bank account or have $5,000 come to you every single month without having to put in any hours? Which one? Now you also have additional choices… If you had to choice of taking that $5,000/mo. and upping it to $10,000/mo. would you choose Cashflow? The beauty of cashflow is that it’s not about how much you save up but rather what asset you’re invested in. Thankfully, real estate gives you that option. By the way, a million dollars today is going to worth no more than $700,000 in about 30 years so you have inflation that works against you. Stop the accumulation mentality and think CASHFLOW. Millionaires and Billionaires invest in cashflow, not accumulation. So if you can simply buy 5-10 rental properties that pay you $1000/mo. each, would you invest in those? Not only that, with the strategies that I know, you can buy rental properties without using credit or cash. Owning rental properties also have HUGE tax advatanges that allows you to pay little to no income on the rental income. PLUS! People are living longer these days… Just HOW MUCH do people have to save to retire? We gotta shift our mental frame here… No more saving to retirement… Build CASHFLOW for retirement.
3. Real Estate is Actually Recession Proof… IF done right…
In 2008, the real estate crash scared 80% of the “real estate investors” away. The truth is… They were never real estate investors. The 20% that survived actually came out of the crash swinging and even more wealthier. Let me tell you right now that any given recession, there are the few that take advantage of the low prices and come out winning. The 20% of the real estate investors that survived learned the business, they understand the market and they invested in CASHFLOW. Remember my point #2? If you’re simply investing in real estate in the hopes that it’ll appreciate, you’re treating it like the stock market game. IT WON’T WORK! If you want to keep your investments protected from recession, you MUST invest in cashflow. That’s the objective of the game. Those who were over-leveraged (more debt than what the property is worth) crashed and burned because they didn’t invest in a property that cashfows. While the stock market plummeted 30% or more, those who invested in cashflow didn’t even feel the pinch. They kept collecting rent! In fact, the demand for rental properties have nearly doubled since 2011. Meaning, those who invested in cashflow are now getting rewarded for their smartness! More demand means higher rent! Which ultimately means bigger cashflow!
4.. Take Control… Stop giving Your Money for Others to Manage.
The financial companies that sell you stocks, bonds and mutual funds spend billions… BILLIONS OF DOLLARS in marketing and advertising to convince YOU that Investing = the Stock Market. This is clearly a trap laid down for you so that you put your money with them. Guess what? The more you invest with them, they’ll charge you management fees, account activation fees, transaction fees, more crappy fees that you probably don’t know about. Why hand your money to someone else to manage when YOU can learn how to do it and take charge. Let me shock you a little bit here… STOP BEING LAZY! If you delegate your money management to some “smart advisor”, you are better off spending that money on a Vegas trip. The only person who truly care about your well-being, your retirement, and your financial health is YOU. These financial corporations only care about charging you fees. Isnt’ that why the same people invented the concept of “diversification” and “Keeping it safe”. This is the most absurd thing that I have ever heard! Why invest in something that you don’t understand and that you have no passion in?! Take CONTROL and learn. You can’t delegate this… Like you can’t delegate sleep or eating. YOU’RE the one that has to do it and take responsibility. Now, I’m ALL about partnerships. If you want to invest in real estate with someone whose got more expertise while you learn, I have NO problem with that as long as you’re willing to understand the investment and enjoy doing it.