As a property manager, I see many decision points in which people decide to become a real estate investor. Here are some common ones:
- They are moving out of one house and into another or relocating to another city because of a work situation. It may make more sense to keep that house as a rental property than to sell it.
- They have inherited a property, and they decide it makes more sense to lease out the property than to sell it.
- They have looked at the benefits of becoming real estate agents in the Oklahoma City metro area, and have decided to buy 5, 10, or more properties over time.
My personal story was that I saw what great deals I could get on rental properties, and I just couldn’t match those returns with any other type of investment I could find. Back in the late 1990s when I first started investing as real estate agents, It didn’t have the appeal that it does now. And even though there is certainly more competition to find great deals now than there was in the last 1990s, real estate is as powerful an investment as was back then. The reasons for sticking with real estate haven’t changed all that much in the last 100 years.
And, the numbers that support these reasons are no secret. For example, getting a 10%+ return on their cash with rental property is a reasonable expectation. In the example in that article, someone buys a property for $100,000 with a $20,000 down payment. But when you consider the positive cash flow, the real return on investment is 20%+!
This article provides an additional perspective based on these reasons that haven’t changed in the last 100 years from the perspective of the OKC metro area market in particular.
Every Day the Value of Your Money Is Eroded More and More by the Effects of Inflation.
Every 17 years your money loses about half of its purchasing power. The average inflation rate over time is 3.4%. It’s easy to see that investors who keep their money in very secure investments such as CD accounts, which have been paying as low as 1.75% annually, are losing ground to inflation.
Let me be the first to confess that the value of real estate can go down. In some real estate markets like those on the east and west coast of the United States, real estate values are very cyclical. Historically, real estate values in Oklahoma have not gone up like they do on the coasts, but they also don’t plummet like they have on the coasts when the market is in a downswing. Oklahoma has had a consistent 4% rate of appreciation, but the market we are right now (April 2021) has pushed up prices more than I have ever seen.
The consistent 4% appreciation of Oklahoma City metro area real estate has been a very nice hedge against the erosive effects of inflation.
The Stock Market Has Proven to Be an Unreliable Investment for People Who Want Some Assurances About the Growth of Their Investment.
I will be the first to admit that I’m biased toward the stock market. I’ve never been successful as a stock market investor, and it’s not for lack of trying. But I did come to that realization…and I’ve avoided investing in the stock market ever since. This flies in the face of the advice of many financial advisors who suggest that one should diversify their investments so that if one class of assets is not performing, on average your overall portfolio will make positive returns. That’s the theory, anyway. Warren Buffet is famous for saying that you should keep all of your eggs in one basket, and protect that basket with everything you’ve got.
That philosophy makes sense to me because focusing on rental properties has helped me to become a real estate investor. It helped me to become an expert in the operation of the business of property management, which protects my basket and the basket of the owners I represent.
And you have to admit, the stock market definitely has a sketchy track record from where I stand even though it’s currently near an all-time high (DOW Jones Industrial Average 34,000+). For example, after the year 2000, the stock market lost an incredible $5.5 trillion in value within a 27 month period. Many people lost, in that short period of time, what took chema lifetime to accumulate.
Consumer Debt Is Draining Americans of Their Hard-Earned Money.
The average American household owes over $7,000 in credit card debt, and over $148,000 in total debt. The slightest hiccup can cause a downward spiral because of this high debt load. As a result, many average families experience severe financial challenges. In today’s job market, downsizing and other factors make job loss a constant threat to many workers.
When you carry a balance on your credit cards, it really hurts your money situation. The average credit card interest rate is almost 18%. Contrast that to 8 to 10% return on investment one can get with a real estate investment, which is realistic in the Oklahoma City metro area real estate market.
Have You Looked at Cd Rates Lately?
The best CD rates I could find (April 2021) were 1% if you tie up your money for 5 years. Yikes. It’s actually worse than just letting your money sit in a savings account earning nothing because you have to tie up your money.
If you were to invest $20,000 at 1% for 5 years, you’d have about $1,000 in interest at the end of that five-year term.
When you compare where you would be in 5 years had you invested the $100,000 example property, here is what you would have created with your $20,000 investment:
$10,600 in positive cash flow
$12,500 in debt reduction of original $80,000 loan
The Social Security Benefits Program Won’t Last Forever Unless Changes Are Made to the Program.
Experts say the fund may run out of money as soon as 2035. And, do you really want to try to eke out a retirement on a social security check?
People Are Now More Than Ever Looking for Secure, Proven Investments That Generate Good, Solid Returns.
Real estate investing offers proven ways for an average person to get reliable high rates of return on investment.
Imagine How Investing in Oklahoma City Metro Area Rental Properties Could Change Your Financial Future.
Imagine that you have a substantial amount of equity in rental properties. Everyday you own the property a little more of their mortgages are paid down by the tenants, and their values keep increasing higher and higher. You look to the day when the mortgages will be paid off, and all the retirement income you need will come from your rental properties. You are not that concerned about social security or some sort of 401K plan because whether you have these or not it is irrelevant you won’t need that money.
And, there are several aspects of real estate investing that force financial discipline. For example, It’s much more difficult to sell your real estate than it is to sell your stocks or a mutual fund. What I mean is that it takes more effort, not that it’s necessarily going to be difficult to sell your real estate if you really want to sell it. What gets real estate agents wealthy in the long run is holding onto real estate that goes up in value while the underlying debt decreases.