As a young kid, I remember seeing the man who came to empty the coins out of the video game machines that were in every corner store at the time. He had a big ring of keys and I remember asking him if those keys were all for his coin boxes and he said no, “I own a bunch of houses too.” The man didn’t look like anyone special. He didn’t look like a rich tycoon in a suit like the cartoons portray wealthy people winning at the game of monopoly. He wore jeans and his t-shirt of the day. As a young impressionable kid, that was one of the chance conversations that showed me anything was possible and anyone can choose the path they want to be on.
Over time I’ve have lots of other examples from parents, friends and mentors in life – some more positive than others, but I always saw the lesson if it wasn’t a positive one.
Having a paper route as a grade schooler was great for me to learn grass roots business and get ahead at a young age to start saving and investing when young. You had to go and knock on doors and collect real hard cash from clients. If you worked fast, delivered great service you received compliments and tips. I was making a couple hundred dollars a month back in the late 80’s when the banks actually paid you interest. I remember seeing a good amount of interest on even a few hundred dollars in the bank which was pretty cool. Making money on your money, branded in ink, right there in your banking pocket book. No wonder banks have largely taken away those little ledger books and interest today from a bank is virtually nowhere to be found. The economy changed and the banks turned the tides on clients. Less tellers, less interest, more fees and more profits for shareholders and the banks themselves, but that’s a whole other story reserved for another blog post.
As time has passed and I’ve become a student of the history of wealth and money. Real estate always comes up time and time again and the stats are pretty powerful! More Millionaires have been made from real estate over time than any other industry out there. Depending on the country, only 3-5% of people will own one income property. Most of those are accidental landlords that have inherited a property, or they chose to hold onto their previous house as a rental when they upgraded to a larger house in a different neighbourhood. Are their rentals spitting out wads of cash each month after the bills are paid? Based on my experience the answer is unfortunately NO.
The numbers drop when you look at those who have more than 2 income properties. It’s 1%. If you look at the distribution of wealth in the world, they are similar. 80-90% of the wealth is controlled and owned by 1% of the population. This is what gets me really excited to continue doing better and better with real estate in my lifetime – there is less competition at the top!
Real estate really is a tangible investment vessel. It is one of those investments where you can touch it, feel it, see it, fix it, improve it, design it, market it and really mold it into almost anything that you and the city will allow it to be. Compared to the stock market that is controlled by large hedge fund investors, you have a lot more control over a proper real estate investment in any type of market. There is money to be made in an up market with real estate and in a down market.
Buying properties is really like buying into a small, medium or large business depending on the size of the property. Is a business worth more to the market place when it cuts costs and increases revenues? Heck yes. Same goes with real estate. All through there are many different ways to make money in real estate, I prefer multi-family buy and hold projects because they can be influenced in so many positive ways by improving them with tighter management and all round better numbers by increasing rents and decreasing expenses. You can also be creative in real estate with the terms and conditions on how you buy the property, how you finance the property, how you sell the property, who you sign leases with, the terms of the leases, and the services you will provide to stand out from the crowd just to name a few!
Like all businesses, the better you or your team is at managing people, projects and planning, the better you will do as an investor. With the proper cash flow or margin in real estate investing, you can afford to outsource these tasks. You can systemize and automate things just like any other part of your life. There are also have lots of tax write offs in terms of mortgage interest, management, repairs, depreciation, and other fees you might incur along the way. Not only is there money to be made on what is left over each month if done properly, but there is mortgage pay down and hopefully appreciation in the areas you invest in on a yearly basis. (Although I was taught a long time ago never to bank on appreciation – it is a bonus when it happens! Most of my first investments had very slow appreciation which trained me well)
So, these are a lot of the main reasons I’ve put so much time, effort, mentorship time and money into real estate investing over the past 15 years. You will continue to learn more and more about the benefits of investing in real estate as you continue to follow this blog. I hope that my energy and enthusiasm for overcoming hurdles in a sometimes intimidating and large investment like real estate will only fuel your fire to buy property number 5, 25 or 200+!