Greetings Real Estate Investors!
Today we continue our series on the top reasons for investing in Residential Real Estate. Last post we spoke about Passive Residual Income an there is certainly no disputing the power of a check in the mail each month. But coming in at a close second is the ability of real estate to create generational wealth. This is because unlike other investment vehicles such as stocks, bonds, 401k’s etc. residential real estate holds its value in perpetuity. Now that doesn’t mean it will last forever, but it is pretty close because as long as there is land and people to live on that land, there will need to be some place for them to live.
Almost Impossible to Lose Your Principal
The biggest contrast here is with stocks because even the biggest names (think Lehman Brothers, Enron, Blockbuster) can crash and burn their investors big time. If you had holdings in any of these and many other companies when then went bankrupt you literally lost everything! Now of course the prudent investor will diversify their portfolio to hedge against major losses but it is still a betting scenario. With real estate it is almost impossible to lose your principal investment entirely. Even in the biggest real estate crash in history of the early 2000’s most properties only lost between 20% – 50% of their total value, with most of that consisting of gains that had been achieved during the boom years. Real Estate is exactly what it’s name implies: Real. And as a result of that even in a catastrophic loss such as a fire, as long as you have insurance, you will not lose your principal investment.
The Grind for Greatness
So now that we are all reminded of what a powerful investment vehicle real estate is it’s time to focus on Reason #2 being Generational Wealth. We all work so hard every day to build a future for ourselves and for our families. At the end of the day we have hopefully made progress towards a countless number of goals that include increasing our net worth, spending more time with family, acquiring more assets, getting more income and helping our children prepare to accomplish their goals. But some days it seems as if we are fighting against the current. Another day another dollar is a harsh reality in the modern world, but each day counts, and each dollar compounds with the next and before you know it you are becoming wealthy in your mind, body, soul and assets.
The Gift that Keeps Giving
But the prudent person is always aware of the end. It is a depressing thought but we all have one thing in common and that is that one day we will not be here. Wherever we may be at that point it is incredibly comforting to know that our children will be taken care of and in all hopes better off than we were. Life insurance is great but it is a lump sum that will be spent, hopefully invested but will otherwise disappear. So in addition to life insurance you must consider adding Residential Real Estate to your plan for your bequeathment. This is because once the property is paid off it will continue to provide income for your children (and their children, etc.) long after you have cast off this mortal coil. It will also allow them a smooth introduction into the value of building their own portfolios and perhaps within their generation or the next they could live entirely off the income produced by these assets.
It’s Never Too Late to Start
What if you only have enough funds to purchase one property and that in order to pay off the property prior to turning 65 you will be negative around $300 a month? Then you will have retirement income once it is paid off and you will be able to leave an amazing asset to your children. No of course you must make this decision with the scope of your entire financial picture but with some prudent planning you should be able to accomplish this essential task and begin to create generational wealth for your family!
Thanks for reading and check back next week for the next reason: Inflation Hedging.
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