Recession-proof Your Investment - Don't lose 60% of your buying power...

My Reasons For Investing In Real Estate

Cash

I think number one is the passive income, being able to bring in the monthly cash flow from your deals, which allows you to eventually get your time back. Some people may want $5000 - $10,000 passive income a month. If you can get $500 A house and you want to get $5,000 a month coming in, then, you need 10 houses. When it comes down to it all, real estate is just simple math. It's just figuring out the equation and finding the answer with the numbers given. If you're able to bring in $5,000 a month from your rental property, then that's $5,000 less that you have to go and trade your time for. So now you buy the time back that you can spend with family, friends, travel, etc. Give back to a non-profit, volunteer, whatever you want to do with your time - because you now have money coming in passively that you don't have to work for.

Whether you buy a business, run your own business, or invest, the goal is to figure out a way to make money in your sleep - figure out a way that you can create money passively. You can invest your money - where's that now your money is the one working hard for you, so you don't have to work hard for it. The younger you start investing, the faster that you will get closer and closer to where you don't have to work for money.

Credit

The second benefit that I like is appreciation. The cash flow that you get from real estate investing is a good thing, but it is also appreciated over time, as the house prices increase over time. They also go down but it's cyclical over time. If you bought a house in 1950, compared to today it is going to be higher. We look at a house to purchase at $99 a month. My parents bought their house for $25,000 back in 1992, we sold that house back in 2021 for around $75,000. It was in a rural area, but the house essentially tripled in price over a little bit under 30 years.

The ONLY Recession-Proof Investment

So that's the thing with real estate, it's gonna go up and continue to go up. Why? Because of inflation, every year. The Federal Reserve doesn't try to wipe out inflation, it's just trying to keep inflation around 2%. So that means you lose 20% of your buying power every 10 years. Think about this, you lose 20% of your buying power every 10 years. So, over 30 years, it is 60%. So yeah, if you think about it, looking at that example, you bought something for $25,000 in the early 90s. And then almost 30 years later it tripled in value.

Money is worthless

The government continues to print more money. Now, if it causes inflation, that's when we're gonna have a recession. They had to raise rates to pull the market down to stop activity and consumption. Inflation causes the cost of goods to go up because it costs more money to buy the same stuff. So it's no different here. However, with real estate, you buy assets that go up in value, because in a high inflation environment, your real estate goes up. It's gonna take more of those same dollars to buy that same property. Why? Because the dollar is worthless. So that's why real estate is a great hedge against inflation. That's why you see Wall Street hedge funds that have been buying real estate the last few years because the writing was on the wall with all the quantitative easing.

Hedge against inflation

The Federal Reserve buying all these mortgages and just pouring all the stimulus money in during the pandemic, it was just a matter of time we knew inflation was coming - that's why you see a lot of people have been buying real estate, in order to get that cash on cash return for the money in order to just park their money in real estate as a hedge against inflation. What do you prefer an inflation-proof asset class or your money just sitting in a bank losing value?

Write-offs

It's important to invest in real estate and leverage the great tax advantages. You're able to write off expenses to keep up your properties each year. Additionally, you have annual depreciation for your asset, you take your purchase price, subtract out the value of that land, then you divide that by 27.5. Boom! Now you have a depreciation that you can offset the rental income coming for the property that the IRS allows and encourages. At the end of the day, you're actually writing off and depreciating bringing down a valuable asset that in real life is actually going up in value. Real estate is one of the few opportunities that allow you to do that.

Tax advantages

One of the big tax advantages on a commercial real estate side, when you look at multifamily, you're able to do cost segregation studies, and you're able to pull forward a large amount of depreciation as phased out for those 27.5 years You're able to pull that for a lot of it to the first year and with which is called bonus depreciation. And with that, it allows you just to be able to write off more loss up front. For a deal like our 18 units, we had to put about $210,000 down but we did a cost segregation study on 18 units and our first-year loss passive loss for the IRS. We're gonna wipe out $175,000 in income the first year and if you don't use all that, it rolls over to the next year. So these are great tax advantages that come from investing in real estate.

Diversification

You don't want to have all your money in stocks, the stock market just dropped like 20%, in the last four or five months… wow! So if you had all your money completely exposed to the stock market, you're gonna be hurting, whereas if you had 20%-30%, in real estate, you're diversified and holding a strong passive income stream, so, you can ride out any storm.

Build equity

People must live somewhere and rents are going to go up or hold steady for the near future more than likely in most markets as they're already at astronomical highs right now. For the last two years, we received so much rent growth and with being diversified, your portfolio is just gonna help you be able to weather the storm and be able to get to your ultimate goal when you start talking about retirement. I think the last thing, over time the equity that you build up into properties is the icing on the cake. You can refinance, pull out that capital, tax-free buy other assets that are cash flowing, and continue to supercharge your portfolio.

Monopoly In Real Life

Eventually, over time, 5-10 years, you keep up with your maintenance, rents go up, you can refinance, again, take that money out, tax-free, go buy another asset. You can go buy an apartment building, and now you can do another, cost segregation, pull that depreciation for the few years and write that off, get the cash flows coming in for the apartment building, and just continue to go over and over again, it's truly like Monopoly. That's the name of the game and you can build generational wealth that you can pass down to your family, to your kids and grandkids. Now, you're not trading your time for money. You can free yourself up to build other businesses that you're interested in because you're able to build your asset portfolio and hand it off to the property manager to manage the day-in and day-out operations. You just cash checks and build your lifestyle business and build wealth!