Why Real Estate?

Question

Hey gang,

Glad to be on this site and poking around learning all the information I can about REI, but this afternoon I just stepped back (figuratively, of course), and thought to consider the question: why real estate at all?

More specifically, I'm learning and becoming a wise steward of my own finances (after living care free in this respect for several years), but, in a funny way, seeing that movie The Big Short changed my conception about what money can do and the ways we can make it work for us (I know, somewhat bizarre - my friends left only with terror of Wall Street), so I was initially (and still am) researching stock market investments, but then I stumbled across this site. Now, because it seems so difficult to give some return on investment percentage for the active investor, i.e. someone who flips or buys and holds, why does real estate seem so appealing? To put it bluntly, how much money can you make in this business?

Thanks in advance for anything someone might have to contribute to this, it was sort of a wandering thought as I'm weighing potential other options.

JTM

Ryan Dossey · Answer

One of the main reasons I'm involved in Real Estate is that I personally love the work. I pulled a 14 hour today and will likely work crazy hours tomorrow. But I closed on a rehab that will make me 30k in a matter of a few weeks, got an offer accepted on a 6 property package, picked out hardwood, appliances, granite, and paint on a high end rehab, I spoke with an investor over seas in Australia, I signed a JV with investors from NY, I got to play with my dogs whenever I wanted, and at the end of the day I'm in a great mood.

I still remember when I hated everyday but Friday. How I lived paycheck to paycheck. I would count down the days for months till I got to take my one vacation a year.

Now... I honestly have to check my phone to tell what day of the week it is. I get to spend time with the folks I love. I get to meet some of the coolest people in the world. Ontop of all that I'm making great money.

I looked into DOZENS of other businesses. Franchises, College, Motorcycle Repair, Music Teacher, Import/Export, Amazon, Ebay, and on.

After my first deal closed I've been hooked ever since.

Welcome to the site! Check out the podcasts!

Joshua Martin · Answer

WOW! Haha. Somebody liked this thread today which brought it up in my feed. It must've been like my first or second post ever on BP. I was still mulling over real estate, hahahaha.

I don't do anything else these days, and @Ryan Dossey is even on here, who I'm likely to hire to take my calls soon! And @Gino Barbaro, who I've listened to on many podcasts. Thanks for the early input guys, really.

Now I can say, probably some 40 houses into the business between buy and hold, wholesaling, and brokering MLS deals, there is no longer any question that real estate is the best avenue. And, in response to my initial inquiry about returns, I would tell my 3 yr younger self to just shoot for that infinity symbol ;)

Lol. Thanks for liking this someone, really brings me back, and I'd say if you somehow stumbled across this because you may have been wondering about real estate, go in, go all in.

Best,

JTM

Joshua Martin · Answer

Thanks for the responses everyone. I mulled them all over, listening to more of the podcast in between my original post, and also came across that book everyone talks about on the podcast, Rich Dad, Poor Dad. That was game changer. I also met with an old family friend who I knew (but only vaguely knew) owned properties. I don't know if he's a 'big time' player in the area, but he and his wife have some 50 properties, so I think I might have found something of a mentor as well. In short, I'm totally in. Thanks for your feedback everyone, and I'll see you on the forums.

JTM

James DeRoest · Answer

In my case it was either a new 911 or real estate. I was this close to buying a new Carrera.

Instead I bought a duplex.

Should have bought the 911.

Josh Caldwell · Answer

real estate has intrinsic value.   Even when our market crashes we still have value.  stocks bonds and even precious metals all have value because people believe that they have value.  Real estate will always have value because people will always need a place to live.  The safety of real estate cant be matched by any other investment

Christopher Webb · Answer

The amount of money you make is effectively limitless. Look at people like Donald Trump. Real estate has so many aspects and business opportunities - way beyond just fixing and flipping. Real estate allows the creative use of resources and partnerships to create something. I got a business degree in college that was focused on real estate. We often discussed theory as to why people were interested in the business. Real estate is a limited resource - we can never have more or less real estate than what currently exists. Real estate is all about creating value - there is something rewarding and exciting about taking something, using your resources and network to make it worth more. Also, real estate, while very numbers based, is truly a people business. As humans, we love to interact with each other and love to help each other solve problems and meet our needs. Real estate is fun. For me, there is nothing else that gets me as excited. Do something you love and it won't feel like work.

Gino Barbaro · Answer

@Joshua Martin

Hi Joshua

In business, it isn't what you make, it is what you keep.  Real estate has several tax advantages, cost segregation and when an investor refinances a property, the proceeds are free from taxes. there is also a 1031 exchange where investors can sell their investment and purchase another investment and defer their cap gains.

The government recognizes that it can not provide housing at an affordable cost, so it gives investors these incentives to fill the void.

It is a business and constantly has to be  worked, but one of the best ways to create wealth.

Gino

Joshua Martin · Answer

@James DeRoest Should've bought the 911.

Robert Gunther · Answer

Interesting, I had a similar thought.  I want to buy a Lamborghini Huracan, they are about $250k.  They are just a depreciating asset.  If purchased new, you loose about 35% the first year and they drop maybe 15 - 20% per year until they are about 10 years old (based on what the Gallardo has done) and then sorta level out.

I decided to buy a property, which I will collect rent on for the next 10 years.  Plus, probably some appreciation.

So my net worth will increase over the next 10 years from the property investment, as the car depreciates.

When my income producing asset meets my fully depreciated Huracan in 10 years, I'm sure they will get along nicely.

Bhekizwe M. · Answer

the leverage behind most transactions."Most financially free people have made their wealth through or in real estate" is another favourite

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