Epic Real Estate Investing - Why NOW You MUST Buy Real Estate | 865

Episode Date: December 13, 2019

Do you wait because the bubble will burst or do you wait for yourself to get involved in real estate? Stop procrastinating! Today, Matt explains why you MUST buy real estate NOW! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit r-e-I-A's.com.

Here's Matt. Hello and welcome to the epic real estate investing show. And today I want to talk to you about real estate. Yeah, no surprise there, right? That's what we talk about each and every day. And this is one of the more popular real estate investing podcasts available. But I wouldn't even call it a real estate show or a real estate podcast. It's really a money show disguised as a real estate show, meaning it's what real estate

it makes available to the average person. You've heard me say it more than once, at least, that it's the final frontier, where the average person has a legitimate shot at creating real wealth for themselves. And it's created more wealth than anything else on the planet than any other industry, any other investment vehicle. And the reason for that is, I don't know, I'd say five-fold.

First one is appreciation. That's what most people think of when they get started and get involved in real estate. or they're deciding whether to get in or get out. They're trying to time the market. Are we buying at a low? Am I selling at a high? And that's what most people think about.

And I would really say that's probably the most uneducated information to operate from and make your decisions on whether to get involved in real estate or not. But with all that said, real estate does appreciate overtime. There's not a single veteran real estate investor I've ever met that, the wishes they didn't buy more a long time ago. They all say something to the extent that I wish I would have bought more and sold less because they'd be in a much better position right now than if they did, right? I mean, just imagine if you bought 20 homes 20 years ago, where would you be today?

No one thinks about the 20 homes they flipped 20 years ago because that money has come and gone and been spent. But the 20 homes that you bought and held, that's created real wealth for you for sure. And it doesn't really matter which time in history you purchased that. A good 20 year span like that, you're going to be better off than you were when you before, or you'd be better off now than you would if you hadn't purchased those properties 20 years ago. So yes, appreciation. And I'm going to circle back around to appreciation because that's the real point I want to make today.

But then the second thing is also cash flow, right? If you buy real estate right, it can produce an income for you to where your money is now working for you. You get up and go to work every day for your money, and then you can park your money into some real estate, and it can generate income and work for you also. So you kind of got two people working together for your financial freedom. So that's another reason I like real estate. Third reason is the depreciation that comes with real estate. And the depreciation is a part of the tax code that makes an allowance for the property's deterioration over time. You give you 27 and a half years.

I don't really know exactly where that number came from. I'm sure there is a really solid reason. is what are twice 27 and a half years, but over 27 and a half years, you can depreciate that property, and that can become a significant, particularly if you own more than one property, a significant deduction in your taxes.

And a lot of people don't really take serious consideration of that when they're making a real estate purchase because it's not money coming into your bank account. But what it is, it's each year when it's time to get even with Uncle Sam and pay up, it's less money that's leaving your bank account. So it doesn't feel like income, but it certainly is a return on your investment, that area of real estate.

And another thing that kind of goes with depreciation are the deductions that you can get because when you own real estate, you technically qualify as a small business owner. And there's a lot of deductions you can take there as well. So even less money that's going out to Uncle Sam. In fact, if you just took the median household income in America, it fluctuates. And depending on which source you're reading, it's right around $45,000. We'll just say it's a nice $50,000 a year. Most Americans at that median price point, with the purchase of just a few investment

properties, can virtually eliminate their tax liability, legally, honestly, ethically, with Uncle Sam's blessing even. You don't need any special financial knowledge. You don't need a special CPA. it's just by the nature of owning real estate and filling in the blanks on your tax returns, you can make so much of that go away. And that right there alone should be a good enough reason for most people to get involved in real estate. Because, you know, if you're working for $50,000 a year, I don't know what your tax liability would be or what that would be. I don't know, say it was $10,000 a year you paid in taxes.

But if you're able to virtually eliminate that and keep $10,000 of that $50,000, even if you didn't make any money on the real estate at all, that would be worth it. That's 10 extra grand a year. And I'm not sure what the exact numbers would be, but you get the point. Just kind of embrace that idea or that theory. So that alone right there. And then the fourth reason that real estate is a really good investment and why everyone should do it and why it makes this a money show.

And it's the big distinction between your primary residence as an investment and your income property as an investment, other than the word has income attached to it. but your primary residence, that's you going to work, making the money, and paying that bill every month, paying the mortgage off every month. That's you buying the real estate. And we've talked about that several times here over the last decade or so of why that's not really a good investment. It might be a purchase that makes you feel good about yourself and that's perfectly okay. I'll never judge you for that. Buy what you want to buy. But it's when you look at it as an investment and an investment for the future, it's a really poor performing investment. investment. And that's for another episode. But the big distinction is when it's an investment property and someone is using that property and paying you each month for its use, that's them buying that investment property for you. That's what makes it such a good investment. We call that amortization or paying down the debt. But it's not you paying it down. It's somebody else paying it down for you. Somebody else is buying that for you. That's what makes it such a good investment.

And then the fifth thing would be the ability to use leverage. The ability to use leverage in real estate doesn't really exist to the average person in any other investment opportunity. And I'm sure if you get into the high ups of Wall Street and you start playing that big bank game, that's even above my head. I'd imagine there's some opportunities for leverage there. But for the average everyday person, the average everyday American citizen, real estate is really the only place where you can access that type of leverage.

And what that means is you put a little bit of money down and a bank gives you the rest, the majority of it. And that does a couple things. One, it gives you all the benefits of ownership without actually owning the property, like the amortization, like the tax deductions and like the appreciation and like the cash flow. Like you don't even own the whole thing and you get to benefit from all of that. So that's one great use of a, or one great reason for leverage. The second thing is the money that you do put in,

there because it's leveraged, it grows at five times the rate, meaning typically a traditional purchase with real estate would be a 20% down. And then the bank gives you the rest. So if you're putting 20% down and they put in the 80%, you put your money in and it appreciates, you're getting the appreciation not on just your 20%. You're getting appreciation on your 20% plus the bank's 80%. So it's five times the growth. And so that's a really good.

argument or four or five really good arguments for real estate and why we call this the money show disguised as a real estate show. And that's why it's produced more wealth because you have all of those factors working for you. And even if just one of them kind of, you know, you have a couple soft years in the appreciation, the other three or four profit centers are working for you still. Or, you know, you have a big repair on an investment property and it eats up all of your cash flow for the year. And that's a big complaint a of people have. That's like, well, I didn't make any money this year because, you know, the water heater blew and it took up a whole year's worth of cash flow. Yeah, but you still have the other

three or four profit centers working for you as well. And then all you have to do is make an adjustment to your cost basis and you didn't lose a thing. You might have lost the actual physical income, but your wealth creation did not take a hit, not the hit that you think did. Certainly not enough for you to get as upset as you're getting because you lost the cash flow. I mean, we love the cash flow because that's what sets us free. And that's what, for a big reason, a lot of people get involved. First, they're focused on the appreciation. And then they're focused on the cash flow.

Our smarter investors are thinking of both. But your most sophisticated investors, our listeners here, are thinking of the amortization, and they're thinking of the depreciation. They're thinking of the tax deductions. And they're thinking of all the wealth creation power that leverage gives us. Right now, we are coming out of a 10-year run, a really good run, 10, 11, 9 years, whatever it may be, longer than most. Like typically the real estate cycle would have reset by now if you look back in history.

And there's a lot of people thinking about should I get started now or is it too late? Should I wait? Is there a recession coming? A depression coming? Is there a bubble that's going to burst? Certainly there is. I mean, if you wait long enough, it's going to happen, right? But do you wait yourself to get involved or get started?

That's a big question that a lot of people are having right now because it's been so good for so long. Well, here's the thing. A couple of things I have to speak on this. And I had a couple interviews here today. And I don't want to play those interviews tomorrow and the day after. So today's Friday. So I'll play these interviews on Saturday and Sunday.

And you'll hear them. And in this context of timing the market, and I've been talking about this for at least a decade. And it really has to do with the concept of supply and demand. The supply being the houses, real estate. The demand being people, right? The people represent the demand. And each generation is a little bit bigger than the previous. So the demand is growing.

It is growing and growing and growing. It is already, there's already enough demand here right now, walking the planet to fuel your investment portfolio for the rest of your life. Gasp that. the demand is already here. You can't lose. There might be some ups and downs along the way, but you can't lose unless people just decide to start living out underneath the stars with no shelter.

That's not going to happen. So I look at that. And if you buy real estate with income in mind, who cares what the value does? Who cares if it goes up or down? Because you're not going to sell it anyway. you know, one of the things, one of the quotes that I really embrace, and it's because, you know, I was in the music business. And when the digital download came along and just kind of wiped me out and just kind of reset that whole industry and kind of left so many of us just flailing, like, oh, what do we do now?

And I ended up bagging groceries. And I just kind of look back at all the times where people had given me advice and nothing, no advice about the future, no advice about technology, it was going to happen. but I had a good six months in that grocery store bag and groceries to really reflect on things that had been told to me along the way that I ignored. And I think about that now as I'm older that you've got to learn from other people's mistakes because we're not going to be here long enough to make them all on our own. I read that from Mr. Mark Twain years and years ago, and it just has always stuck with me. So I'm just looking at what other people have done and what other people are doing.

And, you know, everybody that's been in real estate for 30, 40 years all wish that they would have bought more and sold less. And they all be better off today than they were if they hadn't. And so moving forward, yeah, we might readjust. We might reset our society or our economy next year, maybe two years or three years from now. It's going to happen. It has to. It just always does. I can't imagine it not.

long enough, it will. But if you're owning real estate and you bought it for income, it doesn't matter. Oh, the point I was trying to make about that mistake thing, not being here long enough and taking advice from other people, was I was going there with Mr. Warren Buffett, a guy who's done very well for himself and made a lot of mistakes in the past. And that's why he's so smart is because he learns from his mistakes. And we can be really smart, too, if we learn from his mistakes without us having to go make them all over again on our own. And that is his favorite buying period, excuse me, his favorite holding period is forever. When he makes an investment, he never intends to sell it.

And that's one of the more successful investors, the more the wealthiest investors of maybe even history, right? Certainly our lifetime. That's for certain. And if you think about that and you look at real estate, it really is the final frontier. I mean, you've got enough evidence all around you. You've got enough statistics all around you.

You've got enough people walk on the planet that have regret for not buying more. That you've got to heed that advice. You've got to take that lesson. You've got to buy and hold and hold and hold and keep buying and holding. And certainly you can flip properties. Certainly you can wholesale properties. but the end game or the end result should be to keep putting money into your bank account so you can buy and hold more.

You know, just last week, it was maybe two weeks ago. But Mercedes had an event. She went to a conference and it was all about, it's not something to do with investments and money. And she was on a panel. She was a speaker. And they were talking about real estate in different capacities and different forums. And the big complaint from the big dogs, the big investors that were there,

was they can't find enough properties to buy. They are trying so hard to deploy their money to just buy and hold, buy and hold. Because, and this is the big thing that I've been talking about here for a decade, is the concept of supply and demand, the people walking the earth that represent the demand, there's already enough of them here to fuel your real estate portfolio for the rest of your life. And now it's here. Now they're really impacting the market because the supply, it's limited.

And the big investors, the big money that's out there in the market, can't find enough to buy. Certainly there's onesies and twosies here and there. But, I mean, they're trying to buy, you know, packages at a time. And that should be a big indicator as to why you want to buy and hold and hold forever. And another aspect of that that's really key. when you look at the supply and demand, is when I talk about each generation is a little bit bigger than the previous.

So we've got the baby boomers, and we're just starting to see the first baby boomers start to pass away, right? They're making their transition into the next phase of life. And right behind them is a group called the millennials. And I think right behind them is some other generation. I don't know if they're calling X or Z,

but they're a little bit bigger than the millennials. The point being is not, now there's, I'm not just focusing on the demand, but I'm focusing on the desires and the character traits and the personalities of these big generations.

Because it's 50%, it's at least half of the millennials aren't looking to purchase a property. They don't want to be owners. They want to be mobile. They want that flexibility. And what that says is with that massive portion

of the population, that there will be more tenants ever than ever in history. So not only is the demand for housing bigger, the demand from tenants is bigger than it's ever been. And who can benefit from that? You, the real estate investor, the one that buys and holds and holds forever. And I'm not saying I've been telling you this for 10 years to demonstrate how smart I am. No, it's just looking at it. at how the different proportions of our generations, how they impact commerce, how they impact industry.

And I talked about this today in these couple interviews, and you'll probably hear me repeat myself a little bit over the next two days, just a little bit. But it's, you know, when the baby boomers were born, they had an amazing impact on baby food. Gerber was a result. They became teenagers, and you had Levi Strauss, had their big boom. And then Ford, the Ford must,

They had the big boom. And then when they reached the age and started starting families, you know, the famous story. I don't know if a few of you even know this person's name, Lee Ayacocca, and he saved a dying company called Chrysler by introducing the minivan just because he saw this demographic is bigger than they've ever been. They're going to have families. They need to cart those families around. And he saved that whole car company with the minivan. And now, as this generation is getting bigger and bigger, or excuse me, that is getting older and older. or excuse me, that is getting older and older,

it's having an impact on health care. It's having an impact on assisted living. And it's having an impact on just elderly housing, right? That's moving through and it's having that impact on every single industry and it corresponds directly with their age. So to predict the future, all you have to do is look at the generation behind them. That's even bigger. And they're not only that they bigger,

It's a bigger bubble, meaning it was a bigger portion of a population born in a more narrow time frame. I used to know these stats, like backwards and forwards because I used to give this presentation all the time like 10 years ago. But it's like three million more, but squished into like a three year less period, if that makes sense. I mean, if you looked at a garden hose and the baby boomers was the baseball going down through the garden hose, you can see this big bulge. going through the garden hose. Like the millennials are the big softball right behind it. And this Generation Z could potentially be the soccer ball right behind it. I don't know, maybe a junior soccer ball.

But you get the point. And every time that ball moves down through that hose, it's going to have an impact in a different industry. And it's happening all over again. So it's not that I'm smart. I just saw it happen. Someone taught this to me. And now we're here to benefit from it.

and we're seeing it actually happen. So all my flippers out there, all my wholesalers out there, start grabbing some of those for yourself and hold on to them. You know, and if you might, if you've heard the horror stories of being a landlord and tenants trash in your houses and, you know, all those types of stories that we hear and the phone ringing in the middle of the night for a clogged toilet,

which I have never had that phone call before, but that's just the story that always goes around. But if you want to get wealthy and you want to sure-fire way to do it, just become a good landlord. Become better at it. Don't put less than deserving tenants in your property that aren't going to take care and respect your property. Learn how to do it. It's the most sure-fire way that's going to happen. And it's going to continue to happen.

And there's enough demand walking this planet to fuel that for you for the rest of your life. And just think what that's like. You don't need a 401k. You need a fourplex. That's it for today. God bless and to your success. I'm Matt Terrio. Living the Dream.

The cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash flow. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com.