Why Do I Invest in Real Estate?

[Aaron Laster]

With both of my parents being entrepreneurs, I realized early on that working for others wouldn't give me the freedom I wanted in life. I went from selling snacks & sodas in vending machines at my dad's barbershop with my brothers to buying, holding, and selling real estate. I have always invested in products/services that I am able to understand, and I believe you should too!

After reading Rich Dad, Poor Dad by Robert Kiyosaki (like most other real estate investors) my sophomore year of college, I began to flip items on eBay to save enough money for a down payment on my first rental property. I told everyone in my immediate family and close friends that I wanted to invest in real estate just to put the good energy out into the universe. During my first senior year of college (😂), a family friend told my dad and me that they had a package of 2 properties for sale. From there, we went into a partnership and bought 1 of the properties with cash and the other via a land contract with 0% interest.

If I can do it, anyone can, and below you will find my top 3 reasons for investing in real estate.

Cash Flow

When buying real estate we all hear, location, location, location. Yes, this is important for appreciation, but a strong foundation for any business starts with a solid cash flow. In my opinion, if you are acquiring a property only for appreciation and not cash flow then you are doing more speculating than investing. Cash flow is the number 1 reason why I invest in real estate. The appreciation is just the cherry on top!

I would consider myself a conservative investor, and my goal from day 1 was to profit at least $200 per door each month for each of my rental units. This is an attainable goal for anyone, but you must buy right. You make your money when you buy, not when you sell.

Control

One of the biggest advantages to investing in real estate opposed to any other asset class is that you are in control of the land, the mineral rights beneath the land, and the air rights above the land (a form of God's money). You can acquire a property and sell it shortly after, fix and flip it, or buy and hold it. With this amount of control comes options and the ability to be creative when structuring deals. When you buy a stock, you're buying a paper asset (a form of people's money) and the company executives honestly don't seem to care if you lose your hard earned money by investing in the stock of the company they work for.

I'll admit that real estate is less liquid than the stock market, but by investing in real estate you don't have to worry about the market's volatility. Even if the worst case scenario happens again, like in 2008, the value of the property may go down for a few years, but the rental income will stay the same.

Tax Benefits

Before I even begin with this section, I am not a CPA, and you should talk to your tax professional about the tax strategies that would work best for your situation.

Over the last 2-3 years, I've heard the saying "It doesn't matter what you make, what matters is what you keep" at least 100 times. Most, if not all, business owners in America receive tax benefits, but real estate offers tax benefits that are hard to find in any other industry. Name another industry that allows you to take advantage of depreciation and cost segregation, and I may invest a couple of bucks.

Throughout this article, I have talked about rental income a few times, and this has been my main strategy for making money in real estate on purpose. Rental income is classified as passive income and not active income. While passive income still requires taxes, what you end up paying can be less cumbersome. For those that are making active income from real estate, there are also ways to shave some zeros off of your tax bill, such as a 1031 exchange.

_____________________________________________________________________________________________________________________________

I hope this article inspires someone to get out and take action because it's never too late to invest in real estate! If you have any questions, comments or would like to partner on a deal, respond to this post or shoot me a message.

[Aaron Laster]

@Tyler Kaye & @Andrew Syrios  I appreciate you guys taking the time to read my post and your feedback.