Jeffrey again! Thanks, Ben, for taking over last week’s post for me. Today I’m going to answer the question that I most often get after telling people what I do: “So what?”
Most people are surrounded by real estate all the time and it seems as normal to them as the alarm clock ringing, the bus driving by in the morning, and a cup of coffee. They get up in the morning surrounded by not-particularly-exciting things; go off to work to do a not-particularly-exciting job in order to get some dollars, and stick those dollars in the bank. They repeat this cycle over and over until they have enough dollars to buy themselves something “nice”, like a pair of new shoes, a new car, or a flat-screen TV. Over time their “nice” thing loses value and they continue going to their not-particularly-exciting job in order to get more dollars to buy more things.
Real estate is different. Here’s why: to buy a piece of real estate, unlike almost any other asset, it is not only normal but EXPECTED that the buyer will do it with someone else’s money, skipping most of the not-particularly-exciting-job aspect entirely. Then, once the piece of real estate is set up properly, it not only doesn’t lose value but gets those oh-so-coveted dollars for its owners with which to buy more things! (In my case that’s more real estate, but hey, it’s free money now, splurge on yourself if you want 😉
Imagine two scenarios, one in which you get a hot stock tip for a brand new company that a friend of yours thinks is going to do well in the next year, the other in which a friend of yours decides to sell their home and move to Florida and be with their lover. See if you can answer the following questions about those two scenarios:
If you didn’t have the money to buy either, which do you think it would be easier to borrow the money to buy, assuming both were priced low compared to their market value?
Which do you think would be more likely to pay you a monthly check for your decision: a new company that’s scrimping and saving for every penny to generate growth or a happy renter?
If the company went bankrupt and the house burned down, which would you rather have: a piece of paper that says you used to own a piece of XYZ company, or a piece of land and a fat insurance payoff check?
If it turned out that both the company and the house needed some work, which would you expect to be more successful: telling a professional management team you disapprove of what they’ve spent the last X years of their life on, or calling a contractor to come make repairs?
Hopefully, by now you’re starting to see my point. Real estate is in a category all it’s own. Real estate is simply a more controllable investment than anything else, it can’t be stolen, it’s straight-forward to repair or improve, it’s well understood, profitable and all of those things combine to make it incredibly lendable. The government wants people to invest in real estate and lenders are encouraged to be extra friendly to people buying their first property, so it’s possible to borrow 100% of the purchase price for a new home solely through professional institutions. Imagine what things you would buy if someone else was willing to buy them for you!
Are you excited about the possibilities of real estate yet? If so, let me know what you’d like to buy! If not, what’s holding you back? Leave your answers in the comments below, and see you next week!