Having worked in and managed different types of investments, I’ve settled on real estate investing as my personal favorite. As far as return and how to make money, real estate investing is weighted with advantages. I think that knowing those advantages can really empower you as a real estate investor and help you accumulate the wealth you need to be financially free! Last week I covered the first two things that make investing in real estate so awesome: demand and leverage. This week I’m covering cash flow and control.
During my time in real estate investing, I’ve found eight reasons behind why it’s such an awesome investment. Here are the first four:
- Cash flow: I learned about the cash flow advantage back in the early 1980’s. I was moving out of state and could not sell my house. It was a nice 3 bedroom, 2 bath in a popular middle class neighborhood. I was forced to rent it and it turned into one of the best investments I ever had. I needed the rent to pay the mortgage. What I did not know at the time was that in a year or so, the rent would go up but the mortgage would stay the same. This produced positive cash flow. In several years, I was receiving positive cash flow of over $500 per month! And the beauty of it was that I did not have to sell the house to get cash. Instead I get to keep my asset and keep making money. Having rental properties is like having an orchard. The houses produce cash (fruit) and you are able to pick the fruit without killing the tree. This constant cash flow element of real estate investing is a definite winner in my book.
- Control: I also like the fact that in real estate, you have direct control over your investment. I can’t control what happens to Apple over the next year. But I do have an element of control when it comes to a physical asset like property. It’s like this: My wife Becky’s grandfather had a pecan orchard. We were able to pick pecans every year and sell them for cash. In fact, her grandfather was a wise man. He “grafted” branches into some of the young pecan trees. That produced pecans that were much larger. They also had a softer shell so you could easily crack them with your bare hands. He improved his investment because he had control over it. You can do the same thing with real estate. You can paint it, put new carpet or floors, landscape it, update the plumbing, etc. If your real estate is struggling to bring in cash, then it is in your power to change that. That doesn’t happen with every investment.
These are only four of the reasons real estate is so amazing. Stay tuned next Thursday for two more reasons why real estate investing is awesome!
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