By Mike Selvaggio, CRS
Will Rogers has a famous quote: “Real estate is the only thing they are not making any more of.” When looking to select or recommend an investment, it’s a good idea to choose something that people can’t live without. Certainly, real estate falls into that category.
Real estate offers some distinct advantages over other types of investments. While stocks and other soft investments are represented by paper documents, real estate is physical; there is land and/or a building involved. When the economy takes a downturn (or the stock market takes a tumble), property owners can adjust rents slightly lower, keep their tenants and weather the storm—as long as they are not over-leveraged.
I am not advising against having a diverse investment portfolio. Rather, it just makes so much sense to put the bulk of our investment into the business that we are experts in. It’s also the one investment that provides leverage. No other investment allows you to buy with a small percentage down and get the entire product in return.
In our investment courses, including Increasing Wealth with Rentals and Other Investment Properties, we share the benefits not only of cash-on-cash return, but also how owning properties provides an exit strategy from our roles as REALTORS®. Rental properties provide eternal cash flow and have a built-in inflation rider, as rent increases in accordance with the economy.
For example, the rents of an investment property have gone from $600 a month to $1,200 a month over the last 18 years. Of course, there are tax advantages that only real estate professionals can enjoy (consult your CPA). But the theory I believe is that the tax advantages for depreciation, interest deductions and appreciation are only the icing on the cake—the cash flow is the cake.
Consider this: If you think about any property in your market 10 years ago, how would feel if you owned one now? How would it feel if you owned 10 of them now? And the last question: How would you feel, and would your life be any different, if they were all paid off?
Real estate is by far the best investment, and the only thing it does not provide is liquidity. As real estate experts, this should not be a major concern, as we understand the market better than anyone else. When you search for an investment property, do not look for the ultimate deal, just look for a fair return on your investment and let inflation and the future take care of the rest. As with any investment, there will always be risk, but as a CRS, you know the market and can minimize it.
Earn Investor Certification
Increasing Wealth with Rentals and Other Investment Properties is a required part of the bundle of courses RRC has put together to teach agents how to advise clients on investment properties as well as become savvy investors themselves. Courses are offered in person or as e-learning modules and will cover these principles, among others:
- Explain how to attract the right investors to build a niche
- How to develop a basic investor buyer interview questionnaire
- How to calculate the return on investment and income analysis for residential investments
- Calculating the cash flow of a potential rental property
- Simplifying ROI evaluations with easy-to-use financial apps
Upon completion of the program, the REALTOR® earns RRC Real Estate Investing Certification, which will help you stand out with clients and colleagues.
To learn more, be sure to take this course and some of the many others from RRC. For a full list, go to CRS.com/catalogsearch.
Photo: iStock.com/anilakkus
