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Make Money With Real Estate

Updated on November 4, 2014

Where The Money Is

Now this is a topic I am very excited to be writing about! I feel that there is just not enough education in the area of real estate investing and people are suffering as a result. Remember we are talking about income property here not your primary residence. I have nothing against your home but unless you're using it for film shoots, or renting it out to foreign exchange students, it's probably not putting any money in your pocket on a daily basis. I have put money into many different types of investment opportunities but none have ever compared to the success I have had with real estate which I think is the best kept secret in the world of investing (I believe one of the reasons that true real estate investing is purposely ignored by the media and the education system is because it's the real deal!). I honestly believe this is some of the most valuable information you can find about real estate investing because there are no fancy gimmicks designed to sell some short sighted system, just facts. This is not so much a 'how to' but more of a 'why to' (I will be writing more about the 'how to' at a later date but I think understanding the 'why' is a critical first step).

Don't be fooled, this is not a "get rich quick with real estate" sales pitch, in fact my point is to illustrate the exact opposite, that there is no getting rich quick with real estate investing and that is precisely why it actually works and will actually make you rich. This is about the long run, and there is nothing wrong with that. This fast paced, 'needed it yesterday', society we are living in is leading us down the wrong path. Like everything else, growing wealthy is a process so enjoy the ride. In the end all you will have is the ride anyway. Realize this now and you will get yourself in the right mindset, ignore this and you are stacking the odds towards living a life of chasing fast money and failing time and time again. And really, that's what it's all about, the odds. Let me explain.

There are many different ways to make money out there (I've tried quite a few of them actually but the results were often mediocre). In terms of investing we have many different vehicles to choose from, we can buy stocks, dabble in the foreign exchange, start our own business etc. At first all these options sound exciting and glamorous but let's look at it realistically. Taking into account the odds it is unlikely that you will exceed an average performance when we look at avenues like stock trading or trading on the foreign exchange. Simply put, there's just too much competition and it's unlikely that you will be getting the kind of information needed to give you an edge that will ensure consistent profitability. Remember, if your profits are not relatively consistent you've got a problem, so don't waste time with denial or deluded wishful thinking. If you truly believe you have a real edge, by all means carry on with your strategy, but keep a close eye on your numbers and be real with yourself.

A slightly less volatile tactic, holding stocks for the long term, will on average make a decent return, but again, even seasoned brokers rarely do better than industry averages so do not bank on this to make you financially free. As for starting your own business, remember that all important statistic that 9 in 10 fail within the first year. Again, odds are not so good. Now my intention is not to have you forsake all other investments but in my experience the average person is very heavy in non real estate related investments and very light in the property department. I am merely proposing that maybe more weight should be put into an area that has very good odds in succeeding, so good in fact, that banks are willing to lend you most of the money needed to buy the investment. Think about that for a second, this is extremely telling. The banks know that the odds are in your favor so they are willing to front you the money even though you may not be that skilled at running an income property! Translation: It doesn't take a rocket scientist. This is not to say that you shouldn't learn all you can about the ins and outs of income properties but it does illustrate that the money lenders are somewhat confident that the average joe can probably do a half decent job. They would not be so generous if you asked to borrow the same funds to buy stocks in a company you have no control over. And that's another key point, with real estate you have the critical advantage of having some control while many of the other avenues offer almost no control. A little education and your ability to control more of the important factors related to buying income properties improves. Since we are on the topic of getting educated about the subject I highly recommend anything written by Robert Kiyosaki of Rich Dad, Poor Dad fame or Donald Trump. They both tend to stay away from short term fads like zero money down gimmicks and instead stick to the fundamentals. Very simply put their books made me profits that were thousands of times what they cost...honestly I've never been able to say that about anything else I've read.

Now I am not one of those guys proclaiming to be a multimillionaire all thanks to a few slick deals. Again, this a long term plan, but by following simple rules my portfolio has already grown quite nicely with multi-unit buildings that are home to both commercial and residential units. The nice thing is that not only do the tenants pay off the mortgages on these properties but these investments also generate cash flow, that very elusive thing known as 'actual money' that only exists on paper with many other systems. This cash can be saved up so that a reserve account can be established for minor repairs and to cover any losses due to vacancies. When you are starting to feel nice and comfortable with the amount in your reserve account you can actually start taking some profits which can be used to fund another wise investment if you so choose. It's a beautiful thing.

OK, up until now we have stayed on the rosier side of things and I'm sure the skeptics are starting to get a little frustrated. What if I can't find good tenants? What about the structural, plumbing and electrical problems to deal with etc.? What about when the economy tanks? What about property taxes going up?...I'm not going to lie, you are going to have to deal with all these issues and many more at one time or another but on the bright side if you own your own home you probably already have experience with a lot of this (and in this case the money is not coming out of your personal account if you've done it right!). The nice thing is that when you feel you have learned enough and the time is right, you can hand the day to day operations over to a professional management company for a reasonable fee and start managing from a higher level. Actually, when buying larger properties there are usually already management companies in place and their fees are factored into the deal and the overall profitability of the property. But let's not get off track and start looking at the 'how' just yet. Are you starting to see why income properties are such nice assets to hold? I hope so. Remember we haven't even mentioned how these properties tend to appreciate over the long term (but that's just a bonus, they would still be good investments without the appreciation) and how they can have very beneficial taxation rules.

So let this all sink in and think about it for a while. There is a lot more to cover but real estate investing is a huge topic and there's just too much to take in at once. I hope this got you curious enough to want to learn a little more. And in case you are wondering why anyone would want to disclose this information to others and just make more competitors for themselves, my answer would be as follows: True investors understand that income properties are meant to be revenue generating machines, like little individual small businesses, and therefore know that a buyer is offering to buy the property for the opportunity to profit as well, and thus fair and educated owners offer the properties at a price that makes it possible for both sides to benefit. It's a win win so the more players in the game the merrier. There are also times in people's lives when they need to be renters and other times when they are owners. In fact I am both at this point in my life. So remember, the game just goes on and on and it works best when everyone knows how it's played! I hope this was informative. More to come.


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