The Wall Street Journal recently ran an article stating that a staggering 95% of Americans will face financial difficulties at retirement. 95% means that only 5% of the US population will retire with dignity and into a lifestyle that they can enjoy with financial freedom. How do you become a part of the exclusive 5%? It doesn't take an economics degree to know that it's not going to happen by saving change in a jar, or sticking money in the bank (nowadays, those 2 are pretty much the same thing except the jar isn't quite as annoying). The reality is that more people have become financially independent through real estate than by any other means. Real estate is without a doubt the most powerful way to build wealth.
Let's consider the options when it comes to building wealth. We can immediately dismiss any jobs or careers. It does not matter what job title you have or what career choice you make, nobody has EVER built true wealth through a job. A job is simply trading hours for dollars and the moment you stop giving your hours, you stop getting the dollars. The job is merely an asset that provides the initial capital to build the wealth.
The next option is the "safe route", things like savings accounts, CD's, bonds and money market accounts. Historically these options barely outpace inflation if they outpace at all. The end result is the equivalent of parking your money somewhere. There is absolutely a place for these engines in your portfolio, but building wealth is not what they are for. I am a fan of Dave Ramsey's analogy of these types of accounts as insurance. You need them and they have a function, but that function is to act as insurance during stormy times so you don't bottom out. They never have and never will build REAL wealth. I defy anyone to show me one millionaire who ever built their wealth from a money market account.
The stock market is always fun... and harrowing, stressful, confusing, etc. The truth is you have no control over the companies you invest in and when losses come, they come big and hard. There are virtually no tax advantages to owning stock either. I'm not saying you should never own any stock, I am merely saying that playing the stock market with your retirement fund is the epitome of risky and has a better than not chance of leaving you broke and sour in your golden years.
Historically, real estate provides reliable, consistent and stronger returns than any other investment. Using the median price for a single family home; a home bought in 1950 for $7,400 would value at $217,000 in 2007. Obviously there will always be fluctuations and dips here and there, but in the end real estate will show a steady appreciation in the long run.
If you ask 100 random people over the age of 50 what was the best investment they ever made, I would almost guarantee that the vast majority of them would say their home. I'll also be willing to bet that if they could do it all over they would try and buy a few more.
Here's a thought experiment. If you were to purchase a $125,000 home today with an investment of $15,000 and rent it out simply to break even on the mortgage, tax and insurance payment; at a conservative 4% appreciation on a 30 year note that home would be worth $405,000. That's a $280,000 profit on a $15,000 investment, not too shabby. Retirement wouldn't be too bad with that little $15,000 investment.
The concept of leverage allows you to take advantage of owning something worth of 15 times your initial investment and still be able to capitalize on 100% of the appreciation of that asset.
I can hear you now saying, "that's awesome... but 30 years is too long to wait to retire". Well, there are lots of solutions to that in real estate. Let' go with the simplest option which involves paying your loan off early by paying a little extra each month (again something you can build into the monthly rent while you are renting out your property).
Let's break down our $125,000 home from the example above and see what happens when we pay just a little more each year on the loan. Note that this is the extra payment per year.
If you were to make an additional $1,000 payment per year that same loan would be paid off in 22.5 years!
An extra $2,500 per year pays it off in just 17 years.
And finally, an extra $5,000 per year (scenario #1) pays it off in only 12.3 years.
Loan scenario 2 is barely over $100 a month in extra payment.
Of course there is nothing stopping you from repeating this scenario over and over until you quickly find yourself with the title of "real estate guru" and all of your friends wonder how you did it. It all started with 1 choice to invest in 1 property and then...
Mikel K Smith
Believing Without Seeing
December is an interesting month for people, the deluge of the Holiday's, the wrapping up of another year, the anticipation of the next and the lingering question of what all of it means. Will I spend another year at this job? What changes are on the horizon? Will it be the same office party next year? Will it ever get any better than this? December finds us looking out at our world to access what's working and what's not, when perhaps the answer to that question is closer than we think.
Each person possesses the power to transform their lives. We deny this power because it is easier to believe that we are in a world that is happening to us, rather than we are creating the world we are living in. Once we accept the premise that we are the creators of our world and that we have the power to build what we want-focus becomes the operative stance. Can we stay focused on what we want to create even while it is in the process of being created?
Life would be wonderfully magical if we could instantaneously make our wishes come true. A new house, a better job, the perfect mate-so amazing it would be to wake and create it on the spur of the moment. While we can have it, and often much more quickly than we imagine, the work, or the leadership, comes in being able to stay focused on the vision while the rest of the world is shifting to support it. Yes, the rest of the world must shift to support it, because every thought, every action, we put out in the world is what makes the realization of our dreams possible and in creating them must come after shifts take place in the physical environment. These shifts can happen easily and will always take time to manifest; so seeing may be believing, but without believing we may never see it.
The challenge is believing in our worthiness and desire in the face of what appears to be stagnation or inaction-especially in the areas or places that mean the most to us. Consider this: have you ever flippantly yearned for something, perhaps tickets to a big game or new pair of shoes-something that you wanted but it didn't mean the world to you, so you put the desire "out there" and didn't think much about it? Often, what we want appears because we weren't constantly checking to see if it was happening, we allowed what we wanted to come because we weren't focused on if it happened or not. Other times, what we want may come to us although it may not look the way we thought it would look. Did you get tickets to the game in your boss's box where you may have to talk business while watching? Were the shoes you wanted on sale but in a different color? Recognize how often you really get what you want, even if it doesn't always look like you thought it would.
So why is this so hard? Because the belief that it really isn't going to happen is often so much easier that trusting that it will. Using love as the basis for our actions, words and deeds puts us on the right path to staying in the place of possibilities. Love is expansive, love doesn't have bounds, love doesn't create walls or blocks, it flows, it is easy and it feels good--and leadership is love in action. One thing that you can do this Holiday Season (and beyond) is to be our best and anchor every action we take in love. If we do nothing else our world will change in profound and amazing ways.
This December when the nostalgia for the magic of bygone days or the yearning for a shift in your circumstance occur: stop, breathe and visualize what you want your life to look next year and know it will be so. If you can believe without seeing, next year you will see a very different picture. Lead your life as you want it to be and that means being a leader every day and every step of the way.
By Kathleen Schafer
Each person possesses the power to transform their lives. We deny this power because it is easier to believe that we are in a world that is happening to us, rather than we are creating the world we are living in. Once we accept the premise that we are the creators of our world and that we have the power to build what we want-focus becomes the operative stance. Can we stay focused on what we want to create even while it is in the process of being created?
Life would be wonderfully magical if we could instantaneously make our wishes come true. A new house, a better job, the perfect mate-so amazing it would be to wake and create it on the spur of the moment. While we can have it, and often much more quickly than we imagine, the work, or the leadership, comes in being able to stay focused on the vision while the rest of the world is shifting to support it. Yes, the rest of the world must shift to support it, because every thought, every action, we put out in the world is what makes the realization of our dreams possible and in creating them must come after shifts take place in the physical environment. These shifts can happen easily and will always take time to manifest; so seeing may be believing, but without believing we may never see it.
The challenge is believing in our worthiness and desire in the face of what appears to be stagnation or inaction-especially in the areas or places that mean the most to us. Consider this: have you ever flippantly yearned for something, perhaps tickets to a big game or new pair of shoes-something that you wanted but it didn't mean the world to you, so you put the desire "out there" and didn't think much about it? Often, what we want appears because we weren't constantly checking to see if it was happening, we allowed what we wanted to come because we weren't focused on if it happened or not. Other times, what we want may come to us although it may not look the way we thought it would look. Did you get tickets to the game in your boss's box where you may have to talk business while watching? Were the shoes you wanted on sale but in a different color? Recognize how often you really get what you want, even if it doesn't always look like you thought it would.
So why is this so hard? Because the belief that it really isn't going to happen is often so much easier that trusting that it will. Using love as the basis for our actions, words and deeds puts us on the right path to staying in the place of possibilities. Love is expansive, love doesn't have bounds, love doesn't create walls or blocks, it flows, it is easy and it feels good--and leadership is love in action. One thing that you can do this Holiday Season (and beyond) is to be our best and anchor every action we take in love. If we do nothing else our world will change in profound and amazing ways.
This December when the nostalgia for the magic of bygone days or the yearning for a shift in your circumstance occur: stop, breathe and visualize what you want your life to look next year and know it will be so. If you can believe without seeing, next year you will see a very different picture. Lead your life as you want it to be and that means being a leader every day and every step of the way.
By Kathleen Schafer
Subscribe to:
Posts (Atom)