Category Archives: real estate

Why does real-estate investing crush your 401k mutual funds?

Posted on by
8

You know that you can’t just save your way to a fortune … right?!

So, what to do with that ‘extra’ cash that you manage to scrounge from time to time?

In a previous post , I pointed out that we are at a UNIQUE point in history.

For the FIRST TIME that I can recall BOTH money AND real-estate are cheap!!

If you save up a deposit (AFTER paying of any pesky credit card debt) and plonk it down on a rental property (or even your own house, if you ain’t got one yet) and LOCK IT IN for 30 years, how can you EVER go wrong?

If you do buy to live in it, eventually you will move on – just keep it as a rental FOR EVER.

I don’t know what will happen over the next year or so, but over 30 years it’s a no-brainer …

… your mortgage payments remain flat (you fixed them, remember?) …

… the value of the house doubles every 7 years or so (and, you will take advantage of this ‘spare’ equity, won’t you?) …

… and – here’s the kicker – your rents rise roughly in line with inflation … see how that compounds over 10, 20 or even 30 years to spin off income that will help you stop working!

And when you eventually do retire, the real-estate strategy STILL kicks your 401k’s butt …

This built-in inflation-protection makes real-estate a great adjunct or alternative to so-called safe retirement strategies such as the Grangaard Strategy and Worry-Free Investing (two of the best that I have come across).

Try doing any of that with your 401K or mutual fund!

Let's not confuse 'saving' with 'investing' …

Posted on by
1

This goes back to a comment that I received in response to a question posted on another finance blog – one that I happen to like for early-stage savers …

I suggested that for many people, their retirement savings actually won’t be enough to fund their ideal retirement … if they’re happy to accept less, fine!

If not, then I suggested that they may need to do something a bit more active to pick up the pace …

Here is a response that I received:

“Your investing approach of “actively (business, real estate, trading)” sounds more like speculating and your savings approach (CDs, 401ks, etc.)” sounds more like investing to me. Just based on the statistics of individuals who trade rather than index…most get eaten up by fees while compounding growth usually is the better way to go using monte carlo analysis, But who knows what will happen in the future.

Posted by: klauss | February 08, 2008 at 12:21 PM “

My point is simply this:
IF your retirement plan is on track, then keep doing what you’re doing.
But, the vast majority of people can’t simply SAVE themselves into their ideal retirement; they have to INVEST in their future.
I call it ‘investing’ – investing in our future – but, if starting a part-time, work-at-home business, experimenting with actively trading stocks or options [not my personal choice], renovating then holding an income-producing property, etc. is ‘speculation’ to you …
… I simply say:

Bring it on baby!

Groovy gurus or scheming scammers?

Posted on by
Reply

There is plenty of ‘investment advice’ floating around im books, in newspaper ads and, yes, even in blogs!

You know you need the financial education to get ahead, so how do you tell the good from the bad?

For a start, try the Fedral Trade Commission’s Test Your Investment IQ …

Done? Now take a look at this BS Detector – it’s aimed at real-estate ‘gurus’ but will work pretty much for any type of financial advice.

And, if you have an interest in investing in real estate, and want to read some books, here is a very opinionated assessment of a number of the s-called real estate gurus out there and some of their books.

You might be surprised at some of the names ….

It seems that this guy doesn’t like ANYBODY, but he has some interesting things to say about them.

If you’ve been to some of these seminars or read some of these real-estate investing authors, let me know what YOU think.

Is NOW a good time to buy real estate?

Posted on by
4

Absolutely!

… it’s pretty much ALWAYS a good time to real-estate estate.

But there are two BEST times to buy real estate:

1. When REAL ESTATE is on sale

This means that prices are weak, or you can buy the property at a real discount (I don’t mean when the developer listed the property at an inflated price then ‘discounted’ it later!), or you can buy it and ‘tweak’ it (renovate it, change its use, or add value some other way).

2. When MONEY is on sale

Historical interest rates hover around 8% (they have been much lower for the past few years … but, remember when they hit 15%?!), but when they drop below 6% money is ON SALE! This means that you can afford a much larger mortgage payment, and rents can even be higher than your mortgage payment.

Usually, property prices and interest rates work in opposite directions:

When money is cheap real estate prices go sky high (remember what happened to property prices in the last few years?).

When money is expensive real estate is usually cheap (at 15% interest rates, who can afford to buy?).

Soon … or, even right now for some real estate in some areas, for perhaps the first time in living memory, BOTH real estate and money is ON SALE!

This is the big double whammy that you can’t afford to miss out on. How to you take advantage of this?

BUY real estate …. but, do your research: some areas are still dropping … look for areas that have bottomed out (or look for emerging markets)  or you feel are close to it.

Now, here’s the secret …

If real-estate still drops a little, it doesn’t matter! Why?

Because, you will:

1. Buy and hold for the long run

2. You will make rental income (that will increase over time, while your mortgage payments stay flat, assuming you fix the rates)

3. You will lock in your finance for AS LONG AS THE BANK WILL LET YOU … because MONEY IS ON SALE and you want to keep buying it at that price for ever if you can!

There will be plenty of opportunity here to make mistakes … but, the combination of cheaper property prices, incredibly low interest rates (compared to historical averages) and holding for the long term will correct any small errors in judgment made now.

Open your eyes to the bargains that should start appearing soon (if they haven’t already) and …. buy!

.

.

.