Real estate is one of the most ancient forms of wealth there is. It’s older than money itself, and it lets both the smart and the stupid get rich. It’s still incredibly hot today thanks to the oldest principle in economics: supply & demand.
Buy land. They’re not making it any more.Mark Twain
I love the sleek, sexy ways to
scam be as tax efficient as possible with my investments. But I will begrudgingly admit this is an absolute fundamental (when done right).
Note: I am not advocating for simply buying a house because that’s what everyone expects you to do and your friends got one. The kind of real estate I’m thinking about is much more in a commercial or landlord sense.
So, what makes real estate a potentially worthwhile investment?
Get Rich with Consistent Income
This is reason #1 why you should be slow to buy a house just to live in. It ties up a lot of capital which you can use to create an actual additional income. If you must buy a house, do it in a way that will get you income in the process.
As a landlord, rental property owner, or farmer, creating an income stream via your real estate is the best thing you can do. It’s the OG of “passive” income.
The feudal system in the Middle Ages required serfs to work the lord’s land. They would pay “rent” with a portion of their harvest. All the lord has to do is sit on the land and “protect” the area (which in practice meant protecting themselves and leaving the peasants outside the castle walls during times of attack). Hence the term landlord. And also the origin of the protection racket common to mob movies.
These days, provided you’re not managing a slum but actually providing a real service, having a series of investment properties can be an incredibly safe income. If you live in a state that allows squatters to stay in your building in a long, tied-up eviction process, then heads up (CA, NY).
Get Rich with Asset Appreciation
Their home is the biggest asset most Americans will own. Most real estate is also owned by Boomers. For most of those Boomers, they simply bought a long time ago and waited. It’s that simple. Even if you’re switching houses every 10 years, you’ve still built equity in each home over that period. Getting in the game quickly matters the most because your biggest ally is time in the real estate market.
While your land or home is generating crops or rent money, it can also appreciate. AKA you can sell it for more money in a few years.
Not many assets can do this for you. A business is the closest relative, but even that takes a lot of upkeep—way more than a house or land.
Nevertheless, this is an absolute win-win. Generate income while the principal investment itself also grows in value.
Stay Rich When Real Estate Beats Inflation
I’m always raising the alarm on inflation because I hate it. It’s theft from the poorest and the savers. The way to protect yourself is through investment. Real estate consistently beats inflation over the last several decades.
There are Lots of Ways to Win in Real Estate
You can be an idiot and still win big with real estate.
- You buy a house. Over the next couple years, the average home value in the neighborhood increases. You’re wealthier.
- You buy a house. The neighborhood value stays flat, but you make improvements to the home. You’re wealthier.
- You buy a house. You take a job in a different city but instead of selling your house for no gain or a loss, you rent it out. The renters pay off the mortgage (and then some). You’re wealthier.
- You buy a house. You go away for a month on a long vacation. You rent out your house as an AirBnB. You’re wealthier.
It’s really not complicated. It just takes capital.
If you’re trying to aggressively earn wealth then you’ll probably do some combination of these.
Next: find out how to flip homes and build a portfolio of rental properties without paying capital gains taxes.