Posted by Anne_ND on June 28, 2005 at 19:40:13:
Frank,
Thanks again for lighting a fire under all of us!
warmest regards,
Anne
Why Invest In Real Estate?? - Posted by Kris
Posted by Kris on June 25, 2005 at 22:31:43:
Hi there,
I was just curious about why someone would invest in real estate? Other than the money, what is the allure or benefits to investing in real estate??
Thanks in advance,
Kris
What do you mean, “other than money”? - Posted by Scott
Posted by Scott on June 26, 2005 at 14:04:43:
What is investing for if it’s not for the money. If your not making a “return” on your investment it’s just called a contribution.
Besides, if done correctly, it doesn’t cost a lot of money (in my case only $10 per property) and any return on $10 is Expodential. Get into a property for $10 and get someone else to not only live in it, but make ALL the payments and maintain the property. Now that is an excellent return on your money!
You don’t always have to invest Cash or Credit. But, even if you do, the Reward to Risk is minimal at best when you know what you’re doing. People can’t live in Stocks and as someone great said, “They ain’t making no more land”.
How old are you? - Posted by Jack
Posted by Jack on June 25, 2005 at 23:00:38:
Real Estate is a form of investment. It is a way to make money. That is all it is. Why would you even ask about other benefits?
Re: What do you mean, - Posted by Kris
Posted by Kris on June 26, 2005 at 14:29:17:
Is that what really draws you to it? or is it the freedom the money can provide?
I’m just curious about what makes it exciting or what sold you on choosing real estate
Re: What do you mean, - Posted by Frank Chin
Posted by Frank Chin on June 27, 2005 at 07:49:26:
Kris:
Tell you why I picked RE when I started.
Heard a commentary on TV back in the early 80’s that American families were ONLY able to maintain a standard of living comparable to the 50’s where only daddy worked by having mommy go out and take a full time job all day. The analyst wondered out loud what will happen 20 years “from now” (that’s back in the 80’s) when mom and pop are both out working?? Send the kid out to work?? Mom and pop take a second job??
Then I knew friends who had 9:00 to 5:00 jobs that took on a second job, 6:00PM to 9:00PM, to save up. If you think about it, most of them are minimum wage jobs, which pays about $6.00/hour around here. That’ll make you $108.00 per week these days, working 3 hours each night, after your first job to have another $108.00 to spend.
Looks look that’s happening right now, year 2005, i.e. mom and pop both working and can’t pay the bills. Statisitics indicate that
- Aggregate personal savings dropped to 1% to 2% from about 8% some 20 years ago.
- If the Federal government balanced its budget, taxes ought to be higher, so we’re all living off government budget deficits.
-Consumer debt, bankruptcies at a all time high - The balance of payments deficit runs into hundred of billions of year, where our standard of living is subsidizied by low cost foreign goods “that we couldn’t even pay for”
Where does “real estate” fit in??
I figured if I only bought ONE property with a fixed rate mortgage and can cash flow from day one:
-Over time, rent increases will make a even larger income because the biggest item, principal and interest is fixed.
-Over time, the value of the property goes up, the mortgage is paid down, so its like you put money in the bank, without your thinking about it.
When I decided to invest, I sold my single family house in the suburbs, where I paid $1,000/month back in the early 80’s when interest rates were 16%, and got a myself a 3 family living in one unit rent free.
I saved myself, or putting it another way, made myself $1,000/month without working 3 hours every night. And if I DID worked 3 hours every night, I would only have made $108/week, or $432.00/month even at todays rate, compared to NOT PAYING OUT $1,000/month.
You know what?? I was lucky enough to pick the right tenants that I didn’t have to rent out the place again for another 5 years!! How much time did it take me to rent out these apartments?? It came to four or so weekends where I sat home, watched TV, answer the door, and showed the place. Timewise, it came to about 60 hours of effort, for all five years. Of course, I have to maintain the place as I would my own single family house.
I got this place in 1982, and rents went up, and by 1986, I’m making $400/month more than 1982, due to high inflation back then. I was ahead now $1,200/month (expenses went up a bit) compared to living in a single family home. And in 1986, the value of the property went up from 150K when I bought it, to 360K, which is what the owner of the building next door sold it for.
Lets take a look at the numbers:
-I was ahead over $1,000/month (conservatively) for the first 4 years I lived in rental propertym so I’m $48,000 ahead by 1986 after I bought the place in 1982
-I had a paper gain of another 210K.
I bought a few other properties after this becaue I was able to save up due to living rent free, and got others where I was able to cash flow, so by 1993, when my wife “quit her job”, it was decided that she’ll manage the properties full time, be a stay at home mom, and and I continue working. So “real estate” was the wealth effect that “replaced one job”. This was accomplished in 11 years.
So how did we progress in comparison to others since the early 1980’s
-Only pop worked, and now we have our own active business.
-Real estate replaced mom’s job 12 years ago.
-Others we know where “mom and pop” both work are struggling and can’t pay the bills.
We started into RE with a simple supposition. If both of us had to work, in 20 years time, and if we needed a third income, “real estate” would be the way to go. If he hadn’t done that, one of us would’ve needed another job.
Think about this. Why are kids mishaving so much these days??
Its because mom and pop both work and many needed a third job, or live off credit cards. My wife stays home with the kids, and you can’t believe what this does to our home life.
Think about it. Did RE give us freedom??
Frank Chin
Re: What do you mean, - Posted by Scott
Posted by Scott on June 26, 2005 at 19:46:57:
You’re right, there are alot of other factors. Yes, I do enjoy my “freedom”. I spent the entire weekend with my family at a Sporting Event for my son and when I got back I had several of my offers accepted and waiting for me in the mail. Next week we are all going to a Pow Wow in the Desert.
I go in my office only 4 days per week and take Fridays and sometimes Monday off or for that matter any day I want. I golf several times per week and travel all over the country playing softball.
If I quit today over the next 4 to 5 years I would still have several thousand dollars per month coming in and have over 2 million dollars in equities to collect after that.
The TIME (not the money) I invest, makes it possible for me to do all those wonderful things which really make it all worth it.