I pulled these thoughts form a newsletter by Chris McLaughlin. What Difference Does a Few Years Make?For those that are young enough not to clearly remember the early 70's a quick trip down memory lane can serve an important purpose...it demonstrates what a difference a few years can make and why it is important to find passive sources of income early in life.
Bill Downey, an expert in commodities, recently published a quick spotlight that focused on prices as of August 15, 1971...just a few days short of 29 years from today.
Average cost of a new house was $25,250 versus $190,000 today (from a high of over $260,000 just two years ago). If you had purchased ten average priced BRAND NEW homes (with a mortgage payment of less than $275 each!), rented them out and allowed the mortgage to cover the expenses, today you would hold nearly $2 million dollars of real estate free and clear...and still be able to collect rents for as long as desired! Average annual income was $10,600 versus $38,000 today. Notice, earning power has not kept pace with inflation. In fact, experts agree the average worker has lost purchasing power each and every year for nearly 30 years. Average monthly rent $150 versus $820 today. Of course, rents for brand new homes would have been higher but imagine, even with a "high" mortgage of $275 for each house, you would still generate more monthly income from ten houses than the average employee working full-time...before paying off the mortgages!
Those of us who are older, take just a few minutes to imagine how different our life would be today if you had purchased a few average little homes 29 years ago. If you don't have at least 2 million dollars sitting safely in a retirement account while continuing to generate a monthly income, ask yourself why? On the other hand, those of you who are young should consider this...the United States entered a period of high inflation and rapidly escalating prices in the late 70's and early 80's yet it dwarfs the amount of spending taking place in the past six months of the current economic decline. Money creation expands the supply of money and eventually leads to inflationary pressures - to date, that has been adjusted and dealt with but experts agree, the amount of new money creation currently in existence is unlike any in the history of the United States. If you make one investment in life then simply allow it to pay for itself, it could easily create a retirement income or source of revenue for you and your children well into the future....even as unemployment and actual wages shrink.
Anyone that had the foresight to invest in real estate during the early 70's would enjoy an additional $5,000 to $6,000 per month while having access to nearly $2 million dollars in their real estate portfolio. Instead, most Americans trusted their hard earned dollars to 401k accounts, savings bonds and other "trusted" sources that have left them high and dry when they needed it most. Here is a simple recipe for success...buy now, allow it to pay for itself and forget you even own it then reap the rewards in your old age. It's a time tested method that has led millions of average Americans just like you down the road to wealth. Consider this...the federal deficit is an estimated 2 Trillion for this year alone...with trillion dollar deficits projected for the next decade!
Thanks Chris for these timely thoughts and insights. I now have something to think about(regret) when I review my 401 accounts. Meanwhile on to work to sell and market homes in the Gainesville Florida real estate market. Visit my Gainesville Florida real estate site for great buys on foreclosures that you might be able to turn into a rental. Good investing.......
Jack.
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