June 2017

Forget Everything You’ve Read: Buying a House is NOT For Suckers

Recently, one of my favorite online financial gurus, Grant Cardone, put out a video that exclaimed, “Buying a house is for suckers!”

Before that, he wrote here on Entrepreneur that, “Unless you have 20 million bucks in the bank, in cash, you have no business buying a house.”

It’s not the first time I’ve heard him say this, nor is he the only financial guru peddling this message today. Author James Altucher has described time and time again how he’s refused to own a house. Remit Sethi, the blogger behind the I Can Teach You to Be Rich brand, often cautions readers to be wary of buying real estate. Even Robert Kiyosaki, author of Rich Dad Poor Dad, has become famous for informing the public that a home is a liability, not an asset.

Related: An Investor Answers: “Should I Buy a House for Myself or Purchase an Investment Property?”

Yet, for the majority of Americans, home ownership is clearly a part of the American Dream. Even a guy like me — a landlord for the past decade — has had to stop and ask if there is any truth to this. Is owning a home truly for suckers, as Cardone said? Or was the headline over his Business Insider video just click bait?

Here, my goal is to explore the the three primary reasons Cardone and other financial gurus typically use for arguing against buying a house — and offer a counter-argument.

1. It depends where you live.

Should you own your home? Maybe. But, maybe not. Real estate is expensive. In fact, that’s one of the primary reasons a lot of homeowners and landlords fail.

Besides the mortgage payment, the owner of the house also has to fix the plumbing, replace the roof, shovel the snow, paint the walls, replace the carpet — you get the idea. There are a lot of hidden expenses above and beyond the cost of the mortgage to consider, and the older the property is, the greater those expenses tend to be.

However, in many areas, it is still cheaper to own than rent. For example, in my town, I can purchase a decent single family home for around $75,000, which works out to a mortgage of around $500 per month, with taxes and insurance included. That same house would rent for about $1,000 per month. So, does the average homeowner of a $75,000 house have $500 in house-related expenses each month? Not unless he or she owns a terrible home.

Therefore, where I live, at least, it makes a lot more financial sense to own versus buy — even with the repairs and maintenance required. Of course, in some areas, it might be far less expensive to rent than to own, while in larger cities such as New York, San Francisco, Miami and other cities,the opposite is often true. All these facts add up to why you shouldn’t take blanket advice from the internet when you make your decisions.

multifamily-markets

2. Owning a house makes you immobile — or does it?

This was the primary reason Cardone put forward for his argument against buying a house. “To make money today, you need mobility,” he wrote.

Related: Buying a House: The Ultimate Guide to Purchasing Your First Property

Personally, I found that weird — because I’ve lived in the same county for 10 years, and I’ve made money. Lots of it.

So, do you truly need mobility to make money? Sure, mobility is fun. I remember “mobile life.” Living out of a suitcase, sleeping on friends’ couches, eating leftover cold mac ’n cheese I found in the back of the fridge. All hail mobility!

But, then, a funny thing happens: We grow up. We start having responsibility for things in our life. We actually want some kind of stability. We want to raise our kids in the same place. We don’t want to lose the friendships we have with our neighbors. We want to avoid having to move again and again and again because of someone else’s decision.

When you rent a home, yes, you can leave when your lease is up, which might be six or nine months down the road. Or, if you sell your house, you can be out in a month or two. Even better, if you need to move suddenly, you can just rent your house out to a tenant and — gasp — move! Now, you are building wealth through rental properties and you are free to be mobile — whatever that means.

3. Is real estate a bad investment?

Many financial bloggers love to point out that real estate values climb at a pace slower than that of stocks. Okay, that might be true, but it doesn’t tell the whole story.

As famed economist and Nobel prize winner Robert Shiller has pointed out, using the S&P/Case-Shiller Index, home values over the past 100 years have appreciated, on average, at nearly the same rate as inflation: around 3 percent.

So, should we immediately reject buying a house because it doesn’t appreciate fast enough?

Of course not. Real estate appreciation is just one of several benefits to owning property. When you own real estate, you don’t usually pay 100 percent cash for it. Instead, you obtain a loan and use a small down payment to take possession. That way, although the price of your property may increase only 3 percent, your actual return on investment could be significantly higher

(Continue reading on BiggerPockets…)

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

Last year (2015) was a pretty slow year for real estate investing for me.

flipped a house and bought a primary residence for myself, but other than that, I was so busy with a hundred other things — like managing the properties I already own, taking a road trip around the entire USA, and writing The Book on Rental Property Investing — that buying new properties got pushed to the back.

However, this year I decided things were going to be different.

So this year I’ve already purchased seven units, flipped two houses, I have four more units under contract to close soon, and we’re just nine months through the year!

Best of all, these properties will add around $150,000 to my net worth and over $2,000 a month to my passive income.

So how did I 10x my results this year compared to last?

Well, today I want to share with you the four fundamental choices I made in my life that helped me 10x my real estate investing this year.

4 Fundamental Choices That Helped Me 10x My Real Estate Investing This Year

1. Set a Big Goal

On January 1st of this year, my wife and I sat down at one of our favorite restaurants for our annual review of our goals. Over gourmet burgers and fries, we discussed how we did on our previous year’s goals and what we wanted to get out of the coming year.

And one of the specific goals we made was to buy a dozen units this year.

Why 12?

Well, I knew 12 would be a stretch goal, especially with the 40+ hours I was spending working on content for BiggerPockets, our first baby due in a few months, and the upheaval that would cause.

But I also saw 12 as something I could achieve if I put my heart into it.

But goal setting is fairly worthless if you don’t also plan a strategy for how you are going to get to that goal. It’s great that you want to become a millionaire, win a Grammy, go to the moon — but do you have a plan to achieve it? So our conversation on that New Year’s day led us toward another fundamental change that helped me 10x my goals this year:

wholesaling-tools

2. Get Help

So, as you know, I wanted to buy a dozen units this year, but I also knew this year would likely be the most crazy year of my life so far.

Related: There is a Major Problem With Your Goals

So I knew I needed help.

After putting out a call on Facebook for an assistant, I found Tracey.

While Tracey helps me with a variety of tasks in my life, primarily she is my acquisitions manager. In other words, I placed her in charge of finding real estate deals for me.

Tracey came on board in February, and within seven days — with no prior real estate experience — she had our first property under contract.

How?

(Continue reading on BiggerPockets…)

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

I keep hearing people say things like “I hate my job” or “I don’t make enough money” or “my stupid boss said [this]or [that]” or asking questions about how to become an entrepreneur.

And then a week, a month, a year, a lifetime later… they are still at that job.

They have dreams of spending more time with family, traveling the world, working on their own thing…

…but it never happens.

Sure, maybe they jump over to another job, but let’s be honest: The same jerk co-workers, boss, time clock, and TPS reports are there, too.

So how does someone quit their job — for good?

If you want to know how to become an entrepreneur and start living life on your own terms, you are going to have to grow up and understand four simple truths.

How to Become an Entrepreneur, in 4 (Not So) Easy Steps

1. You’ve Got to Take It — No One is Going to Give it to You

Look: If you really want to learn how to become an entrepreneur, you need to stop living reactively. This means stop living life like you are a pinball, getting hit back and forth by everyone and everything else.

What do you want with your life? Really. What do you want?

Who do you want to be?

What do you want to spend your days doing?

What makes you happy and fulfilled?

How do you want to look?

Where do you want to live?

Related: 10 Simple, Everyday Things You MUST Do to Be a Successful Entrepreneur

Figure out who you want to be, and then stop living reactively and spend the rest of your life going after it with everything you have.

offset-income

2. To Learn How to Become an Entrepreneur, Use Your Collateral

If you are looking to quit your job, it’s likely you have a few ideas on how you want to do it. Maybe you are going to flip houses. Maybe you are going to open up a gas station. Maybe you are going to sell products on Amazon.

But it’s going to fail if you don’t have collateral.

What’s collateral? It’s a term used in Cal Newport’s incredible book So Good They Can’t Ignore You that comprises the knowledge, experience, and skills you’ve acquired in a given industry, over time. Too many people try to start businesses without collateral and wind up broke — or worse.

Let me give you an example. I’ve been investing in real estate for a decade. I know how to find, analyze, and finance deals. I know how to flip houses. I know how to manage tenants.

But if I decided to open up a burger joint because it sounds fun, my lack of collateral is going to kill me. I don’t know anything about burgers. But could I open up a roofing company? There’s a much better chance at that.

So maybe you want to open up a Crossfit gym or a plumbing company or a music studio or whatever. Before you do, ask yourself: Do you have the necessary collateral?

The fastest way to quit your job is to use the collateral you’ve built up at your job and start getting paid for it. Maybe that means freelancing or jumping into a related field. But it doesn’t mean jumping ship and starting something new just because you are bored. Play to your strengths and use the collateral you have.

(Continue reading on BiggerPockets…)

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.