Real Estate Is Still A Great Investment Today
Is real estate still a good investment? Last year real estate was appreciating above the 30% level. Many people were dropping money by the bags full in Bend, Oregon area real estate. Now, real estate has cooled off a little bit and many people are beginning to think that real estate may be a something to be avoided.
Before we get too excited about the real estate sky falling, let’s look at the hard facts. Real estate appreciated at a national average of 5% at a time when stocks appreciated at an average of 10%. However, the real estate investor will accumulate MORE wealth than the stock investor, even though the return on stocks appears to be higher.
How can this happen? The answer to that is leverage. Leverage, as applied here, means the money you borrow increases your power position. With a real estate investment you create wealth as your wealth grows on the money you borrowed from the lender. The more you leverage, the faster your wealth will grow.
Do the math. For every $100,000 purchase of stock you make, you will realize $10,000 in appreciation if you net at 10% return. The original $100,000 is in the form of cash. For every $100,000 of real estate you purchase you will have only $10,000 or less, out of pocket but our return is $5,000, or 50% or more, and you have someone in the house making your payments. Which is the better deal?
But there is more.
You can take cash out of your real estate through loans. The loan proceeds are not taxable. Real estate investing allows you, through loans, to take money out of your property for other investments. Think about it! You can use tax free (or deferred) money to invest in another property and you get to keep the original property.
I’m sure now you can see why I find real estate investing so appealing. Even considering the recent changes to lending guidelines and lenders going out of business, real estate is still the way to create wealth safely. If you know you’ve made a profit, and how much you’ve made, when you buy a property rather than hoping for future profit, you will do well and you will create wealth. The key is to not pay retail and only work with motivated sellers.
Copyright 2007 by Don Loyd
Don Loyd has been active in Central Oregon Real Estate for more than 37 years as a Real Estate Agent/Broker, Investor, Developer, General Contractor, and Corporate Marketing Vice President.
Don’s resume includes teaching under-graduate and through post-graduate course work. He serves as President of the Oregon Association of Professional Real Estate Investors and Executive Director of Northwest Real Estate Institute.
Don is also an investment mentor and group leader of Central Oregon Real Estate Investment Club. Meeting weekly, the group learns the nuts and bolts of sound, safe real estate investing and receives encouragement in their investment career.
He’s authored four books: My New Reality Journal, Marketing and Selling Your Home – A Practical Guide for FSBOs, Earn Amazing Money – Think Your Way to Riches, and Creating Wealth for Women.
Don’s articles appear on several web sites and he is a contributing real estate investment writer for Cascade Business News.
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