Building protection into your life can ultimately result in better production and quality of life. While window shopping for real estate is nice to do on a Sunday afternoon, actually investing in it requires a reasonable amount of due diligence that will not only encompass locating a property below market value, but also commencing efforts to analyze and assess its financial sensibility. Many people decide they want to invest in real estate but aren’t sure where to begin. That is why I recommend working with a mentor or coach to guide you or investing with a development company with a tried-and-true track record.
Over the last 22 years, analyzing and assessing real estate for passive cash flow has been my game. The job and career goals in this industry do not just have to be about making money — they may include creating a legacy or creating jobs and wealth for others. Real estate can add to your purpose and expansion in life. Here are four ways to make the most of investing in real estate.
1. Passive Cash Flow
Let’s face it: Everyone would love a little extra cash in their pocket every month. I bought my first property when I was 21. It was a townhouse in Lake Ridge, Virginia. I had just moved to the area, and I did not know anyone. So I worked my day job and bought the property, which I renovated at night and on weekends. I rented it out and brought in some modest income monthly, quarterly and annually that didn’t require a lot of active working hours like my 9-to-5 job. I sold it a year later to the real estate agent who had sold it to me. That was a sign that real estate investing was for me, and my career in real estate investing took off from there.
2. Purpose And Passion
Ultimately, for many people, investing in real estate just feels good — especially when you acquire properties that are beautiful and architecturally pleasing to the eye after improving them. Yes, there is beauty in everything, including real estate. This can motivate you and certainly spill over into other areas of your life, resulting in more value for you and your family to do more, be more and get creative. Creativity breathes energy into your life.
3. Teach Your Children
If you own a rental property, it will require maintenance at some point. If you are a hands-on person like I am, you may elect to do the work yourself. This is a great opportunity to have your children tag along and learn the value of things — the value of doing the work and what it takes to create monetary value in a property. If you are more hands-off, you will need to schedule contractors and crews — and still, your children can be part of this delegation, creation and leadership through the process of completing tasks to the desired outcome. Learning and teaching is the game.
4. Get Ahead With Diversified Retirement Savings
America’s Social Security and retirement planning system was designed within a different reality than we are experiencing today, and it comes down to three factors:
In 1901, life expectancy in the U.S. was 49 years.
In 1960, life expectancy was 69 years.
As of today, life expectancy is 78 years.
Moreover, healthcare costs are rising faster than wages and inflation, and stock market returns adjusted for inflation are just too low to really help the average investor get ahead. To keep pace with these rising costs and adjusted inflation, real estate investing, particularly in multifamily, is a means of diversifying and achieving 15%-18% annual returns with brick-and-mortar investments. You can even invest in real estate through your Self-Directed IRA (SDIRA) to see the maximum benefits of maintaining your retirement plan while accessing an investment vehicle with much higher returns.
In multifamily real estate, values are based on net operating income, not comparables. Look, for example, at a 200-unit apartment complex. If the management raises rents by $25 per unit, the value of the property instantly goes up by $850,000, making for a much safer investment.
What is the future? I don’t know, but to a very great extent, it is surely being determined by the choices you are making today. Ultimately, you must ask yourself: What is your passion? Although real estate is a fantastic investment, the greatest investment you will ever make is in yourself. Get after it today.