Epic Real Estate Investing - Why Rental Properties are Good Investments | 1030

Episode Date: May 26, 2020

Very often, Mercedes is asked what’s the difference between investing in real estate and stocks. In short, the difference is huge! Hence, Mercedes shares the 5 key reasons why real estate properties are such a good investment vehicle especially during these uncertain times! Tune in and explore your REI options so that your money works for you!   Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing Show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays brought to you by Epic Real Estate Investing. My name is Mercedes-Torres, your turnkey. girl and I am lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created the

epic real estate empire. I help busy professionals create passive income through real estate investing so they can retire even sooner. And on this show, I share with you real live tips and real estate experiences that I've experienced or that people in our world have experienced so that you can benefit and create cash flow in your world. And before we get started with our show, I wanted to let you know that this show is brought to you by Ridge Lending Group. Have you been searching for a lender that is not only knowledgeable but experienced and actually talks with you about your financial situation?

Well, we found that in Ridge Lending Group. They are Epic Real Estate exclusive lender. and not only do they do our personal loans for Matt and myself, they do it for all of our clients. They are amazing. Ridge Lending Group is run by Ms. Chaley Ridge herself, who is a nationwide lender that focuses on the needs of not only residential real estate, but of real estate for investors. She's not only an investor herself, so truly understand. understands the lingal and the concept of real estate investing, but she spent over 20 years educating and helping thousands create passive income in their world. Seriously, if you want it done

right, you should use Ridge Lending Group. So go to Ridgelendinggroup.com, click on the Get Started tab and tell them I sent you because you will get financial and lending education with epic love. So let's jump right into this week's episode because I often get questions about, you know, what's the difference between a real estate investment property and a stock? Now, I'm going to jump right into why real estate properties are such good investment. That's a great question, isn't it? Residential real estate ownership is gaining ever-increasing interest from investors, and it's for several reasons. So I'm going to share with you how and why these reasons are, because during these uncertain times, I want you to explore your options on how to get your money to work for you.

First, real estate provides more predictable returns than stocks and bonds will ever. And what I mean predictable, I mean, can you seriously predict what the stock market does or what it will do? Mind you, history does repeat itself, but nobody has a crystal ball as to what the stock market is going to do tomorrow. I mean, certainly didn't predict this whole COVID-19 situation. And it is one of those things where you have no control over it and you really truly have to understand what the stock market does, how it performs, how it acts and how it's performed in the past. Having said that, the returns for real estate are much more predict.

than the returns for a stock market. Just look at history itself on how rate of returns are determined in the rental market and how returns perform and are determined in a stock market. Next, real estate provides an inflation hedge because rental rates, thus cash flow, usually rise at least as much as inflation rate. Now, let's talk about that in a little more detail. So you do know that inflation, well, it happens. It's as certain as taxes and death. But one thing to think about is if you go back in history and analyze what rents

have done over time, rents have increased over time, like no doubt. doubt. I remember my mom telling me a story about when she first came to America, they arrived here from Puerto Rico, and when they first came here to California specifically, when they got here, they would pay $75 in rent. Now, mind you, they got here in the 60s, but $75 in rent. Now, that same house, we still live in the neighborhood, now rents for $7,000. For $75 in rent. Now, that same house, we still live in the neighborhood, now rents for $1,600. Isn't that crazy? The reality is that despite the fact that inflation happens, rent also increases no matter what. And when I provide a properly portfolio or a pro forma for our clients, I always include inflation and I also include appreciation. But I include a portfolio. But I include a pro forma for our clients. I always include inflation.

but I include it in very small, minute numbers so that you can fully understand and grasp the concept of what a property is doing today. And it's just given that inflation is going to happen and so will increases in rents. Third, real estate provides an excellent place for capital. Now, in times where you're unsure of prospects of stocks and bonds and the money, market or when you expect long-term returns in equity, real estate provides a place where you can park your money and it is almost definitely going to be conserved in one way or another. So what happens if you park your money in a stock and the stock market crashes tomorrow? Well, it crashes.

You have no control over the crash. over why it crash, over how it crashed, it just crashed. And inevitably, you lost your money. And if you go to zero, there is not one thing you can do about it except take the money, if you have any left, out of that stock. But if the real estate market crashes, like it did in 2007, in 2008, it was when the mortgage industry crash. I mean, yes, properties lost their value for sure. But for those of us that were investors, you were still able to collect rents. Now, this takes me on to the path of, well, if you buy a investment property and you buy it right, no matter what, you can still benefit from the rents. So let's just assume you buy, I'm going to use a very typical figure,

a $100,000 property. That $100,000 property, if you buy it with conventional lending, you'll have to come in with 20%. So you'll come in with $20,000. Now, I'm using $100,000 because it's easy math. So that $100,000 property will likely rent for about $1,000 a month. Remember, you only put down $20,000 for this property. And the reality is you're going to be collecting about $1,000 in rent. Now, you still have to factor in taxes, insurance, property management, and then a little bit for maintenance. But at the end of the day, you're collecting $1,000. Your mortgage payment is probably going to be between the $500 and $550 range with today's rates. And you'll still have to cover your taxes or your insurance. And you're likely going to be in, let's just say, $600. Okay? All in just with that. I'm not covering anything else. But at the end of the day, if the market crashed tomorrow, and I'm talking about the real estate market. If the real estate market crashed tomorrow and you had to drop that $1,000 rent, and you had to drop it to $600.

You may not be able to cash well, but you is certainly able to make your mortgage payment, your taxes, and your insurance. Versus if the stock market crashed and you lost all of your money, there is not one thing you can do about collecting dividends because it went to zero. So I know that was a long-winded explanation.

But I wanted to give you an idea as to what would happen if the stock market crashed versus if the real estate market crashed. So let's now talk about equity. Like I mentioned earlier, I mean, nobody has a crystal ball. But the equity created in a real estate investment property provides an excellent base for financing than any other investment opportunity out there. Again, no crystal ball, but it's almost a given that your property will increase in value. And over time, instead of borrowing to get capital to invest, you know, like borrowing from a bank, you can simply borrow against the equity to finance other projects, which means you can buy another property or you can pay for your children's education. regardless, the relative ease in borrowing against an investment combined with a deductibility

of the mortgage interest makes this option a less expensive method for financing other opportunities for you. Now, this is something if you are comfortable with taking on an additional risk, but to be honest, it is one of those things where if you have money sitting idle in an investment, property, then why not take that money and put it to work for you again? Fifth, almost one of my favorites. Let's talk about cash flow. In addition to providing cash flow, you're also providing a home for someone that needs a roof over their head. So it's a win-win situation. It provides you with cash flow while you're providing a home for a family. Now, I will tell you,

This feels amazing. To know that you are providing a roof over someone's head for a family that has two little ones growing up in the society is an absolute great feeling. But it's even better to know that you're providing this with cash flow every single month. And finally, and by far my favorite, are tax deductions. I mean, appreciation, depreciation, and amortization, you don't get any of this with stocks. Now, I'm not going to go into this in great details. I've covered this greatly in other podcasts, but so many underestimate the power of tax deductions. The returns that you are getting from tax deduction is often higher returns than the cash flow itself.

Truth be told, I like tax deductions more than cash flow. But that's me. Many people focus on the cash flow and the ROI and the cash on cash return that they're getting every month. But they fail to even for one second focus on what they're getting at the end of the year when they sit with their tax prepare or their CPA or their CFO. You get so much more from tax deductions and it is so often just overlooked by many. So if you have a little stash of cash, you know, under the mattress or in the cookie jar or sitting in the bank and you're wondering, should I invest in Nike stock or Starbucks or Nabisco stock? Consider how much control you'll have over that investment. Consider how many times you can increase the rent on your Nike stock. consider, you know, what you can do to add value to your Nabisco stock.

And consider what will happen. If you need that money that you use to buy an investment property, consider if you took that money and you parked it in Nike stock and you needed it back. You know, what kind of penalties will you be paying? Are you even able to get it back? With that said, I will leave it up to you to help you to help you to, determine what's going to be a better investment for you, stocks or real estate rental properties. That's it for today, my friends. If this podcast served you in any way, provided food for thought

and got your wheels turning, really had you think about how can I create passive income in my world? Leave us a review or send me your thoughts. Leaving a review will allow other people to really grasp what this show is all about because if it helped you, it may help somebody else. Or if you need some guidance or some assistance with your real estate investment strategy, don't hesitate to reach out to me. Myself and our team are here to absolutely guide you through the process of creating passive income in your world. So go to cashflow savvy.com. That's savvy with two Vs. Reach out to us by hitting the contact us or send me an email at Mercedes at epic real estate.com. I embrace every email. And although it sometimes may take me a few days to get back to you, I do respond to every single

email that comes my way. Have a great day. Make it an epic week. Is Wall Street failing to meet your expectations? Has your 401k tragically turned into a 201k or worse? Don't panic. You don't have a money problem. You have an idea problem. We're You're cashflow savvy.com, and we'd like to share with you a new idea how one small shift can transform your financial future and accelerate its arrival. Go to cashflow savvy.com to get this new idea that Wall Street doesn't want you to know about. Cashflow savvy.com. More control, less risk. Cashflow savvy.com. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com. Thank you.