A Man With a Plan... but Will It Work?
By Michael Masterson
DB, a two-year ETR subscriber, is a 27-year-old, three-year employee of a Fortune 500 financial services company. The work is fine, he says, but he has a desire to "crack into real estate."
In the past year, while keeping his day job, DB took classes and acquired a real estate license. DB also signed on "with a major real estate brokerage as a referral associate." His idea is to use the referral associate program to learn the business and then branch out on his own. He says he doesn't have access to sufficient capital to invest/flip properties himself. "My credit is mediocre at best," he says, "and short-term savings are non-existent."
He wants to know if I think he is on the right path - if he can use real estate as a vehicle to "create the freedom to finally enjoy my life and devote my time to charitable work."
The answer to this is easy: Yes.
Real estate is a great way to build wealth, because:
- It's simple. You can do well by faithfully following a few basic rules.
- It's safely leveragable. If you do follow those basic rules, you can dramatically increase your return on investment (ROI) without significantly increasing your risk.
- It's real. My stocks and bonds are ultimately nothing more than promises on slips of paper made by corporations that don't care about me. My real estate is tangible. I can touch it, live in it, put a fence around it.
Real estate investing is also something I can do on a very part-time basis. Apart from the initial time it takes to assess and buy a property (which, for me, is usually mitigated by having a managing partner), I pay very little attention to it. If it is land that I am "banking," I just pay some minor taxes every year. If it is an apartment complex that I rent out, I spend five minutes once a month reading a management report. If it's a limited partnership I've invested in, I do even less than that. (That's because I only invest in limited partnerships run by trustworthy friends with long, proven track records.)
If you think the time I invest in real estate is more than you want to spend on a "passive" investment, you may be setting yourself up for trouble. I'm a big believer in a Warren Buffett approach to stock investing (buying quality for cheap and holding onto it). But even that - for me - takes more time than real estate, because the companies I tend to invest in are in a constant state of change and, therefore, more complicated than real estate.
In Nicaragua, I am an active partner in a real estate development project. But aside from that, I have done nothing but passive real estate developing over the past 25 years. And except for three investments I let a partner make that totally broke the basic rules (the rules Justin Ford sets out in Main Street Millionaire), I have never lost money. When I tally up my net worth and see how much of it came from the businesses I've owned versus real estate, I find that half came from real estate. Considering the relatively tiny amount of time I spend as a real estate investor, that is impressive.
One last word of caution for DB: Passive real estate investing takes time. Don't expect to become independently rich in five years. It's more like a 20-year deal. But if you stick to it, it will make you very comfortable. You'll be glad you got into it.
And one final bit of encouragement. Real estate prices in the overpriced areas (such as Florida and California) are already dropping and will probably continue to drop (a lot) in the next six to 18 months. So save your cash and get ready to take advantage of some great buying opportunities.
Taken From Michael Masterson-Early To Rise
www.Goldkeymi.com
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