What are the top 5 reasons I love investing in property? Let me tell you – money, money, money, money and money.
All right, so all the 5 reasons aren’t money but the first one is and that’s because there are two main ways to make money in property investing – the equity growth or the increase in value of your property over time and the cash flow that you make on a monthly basis.
Now, most investors I meet don’t know much about cash flow because they don’t have any, they’re usually putting money every month into their investments, but for me I’m a cash flow investor so I make sure the properties that I buy make me money on a monthly basis and that’s the real kind of income that I generate from my portfolio is through cash flow when properties go up in value as well that’s great but that’s just a bonus. So, I love it because you can make tons of cash in property.
Reason number two is that you can be creative. Now, what does that mean? Well, most people believe that real estate is a very fixed thing that the interest rate is X that the loan to value that the bank will give you is Y but really, you know, what is the value of a property? Who controls that? Can you push the bank? Can you get the seller to work with you?
The answer to all those questions is yes, you can be creative.
I love being creative when I buy property because it reduces my investments and of course every time I reduce my investment my ROI goes up significantly. I can be creative with real estate, I can buy property with none of my money, why do I have to use my money to buy property? There is no law that says that I must use my money to buy property. So being creative in real estate allows you to do some creative deals, increase your ROI, make more money.
Number three is using leverage
By this I mean the LTV ‘the loan to value’ from the bank. I know from my own experience that banks are keen to lend money on property and they lend amazing amounts.
Can you imagine if I was to start a business and I was to go to a bank and say, ‘Hey Mr. Banker, I’m starting this new business I want you to lend me 80% of the money that I need for the business and I’m not even going to give you a share of my business, I’m just going to pay you interest.’ The bank would never do that. It’s way too risky. If the bank is going to lend you 80% of the value of your business, I can be pretty sure they want at least 80% of the business in terms of shares but they lend money on property all the time without taking an equity stake in that property and that’s beautiful.
So that means that you can buy a property for $100,000, for example, let’s say you get $80,000 from the bank as a loan you’re putting $20,000 in, if that property goes up to $120,000 and you sell it, all you have to do is give back the bank their $80,000 – you’ve made 100% ROI on your $20,000 and that’s because of leverage and that means you’re making more money.
So I guess number three as well is also back to money, but because we can leverage real estate we can use other people’s money to buy it and it’s standard and it’s easy and it’s obvious it’s not hard, you don’t have to go and find investors and put pitches in, it’s just really simple.
Reason 4: real estate is always there.
If you’re going to go and start a business and you want to make money great. I love business I own tons of businesses, I’ve started business, run businesses and I can tell you that it’s risky especially today, you know there’s so much change in the world and businesses go up and down, you could have the best business today and by next year you could have 10 competitors who undercut you and kind of like could mess up the market and your business could be nothing, when you buy a piece of real estate it’s there, it’s solid, it’s long term, it’s not going to go anywhere sure there are ups and downs in the market but it’s nowhere near as crazy as what happens in business.
I love real estate for that matter – it’s there and that means that you’re going to guarantee to make money long term provided you can be in the market long term which goes back to point one – make sure you got cash flow. Property is that it’s a solid, stable investment and it’s going to be there forever.
Managing your portfolio
Now point number five is managed outsourcing what I mean by that? Well let’s go back to the business example: you start a business and to become successful and then you want to find someone to run it for you. That’s a super amazing challenge you’ve got to find a CEO, the right qualifications, you know it’s so difficult and then they might not work out, they might have a different vision and they could completely mess it up. They could also do a very good job, but what I’m saying is it’s hard to find someone to run your business for you.
Finding someone to manage your portfolio is a piece of cake, there are hundreds of companies who do management, there are hundreds of companies who do maintenance, there are hundreds of companies who fix things and find tenants and do advertising. So, it’s just a case of finding someone who’s doing a good job already. It’s not like you go to one of these shops and say, ‘oh I want to borrow a CEO for a week and see how they do with my business.’ You can’t do that but with real estate you can.
So being able to outsource the management of your portfolio means that it’s a much easier thing to move away from and become financially free through. So, again, to sneak money into number five does that mean that you’ll make more money long term? I like to think so.
Those are my 5 reasons why I love investing in property. There are many more of course but those 5 get me excited and cause me to look at deals all the time.