Turning Six Cents into $400
Six cents! Six cents! That's all they gave me.
While driving to close on a condo we were buying, I pulled up my banking app to ensure the funds were in place to close on the deal. While reviewing my account details, I realized it also happened to be payday, you know, where the bank pays you your monthly interest payments. Woohoo! I was excited until I saw that this monthly payment was a whopping six cents. Talk about making bank!!
I couldn't help but smile as I instantly learned a valuable lesson: In order to realize any kind of return on my money, I must utilize an investment vehicle. I knew my numbers going in to purchase the condo, and I understood that within a couple of hours, that very same money would be returning me over $400 a month as opposed to the $.06 I would get if I left that money in the bank. My mind was put to ease knowing that I was making the right decision.
I'm not saying that investing in real estate is the best investment vehicle for everyone, but I know for me, as long as I carefully analyze each deal, I can get a far better return on my money through real estate compared to many other investment vehicles. To keep it brief, I narrowed it down to two main reasons I will keep investing in real estate:
1- My investment is backed by an asset. If the worst case scenario comes to pass and the market crashes, I will still own my property. When the housing market is down, home ownership usually dips and demand for rental properties increase. Sure, my cash flow may decrease a bit if I have to lower the rent, but there is still value in the property that I can always hold on to, and people will always need a place to live. If I had all of my money in the stock market and the market crashed, my money is gone and I have nothing to show for it (ask me how I know).
2- Cash flow and appreciation. We only buy properties that we know will put at least a few hundred dollars in our pocket each month (after expenses). We may not be hitting it big like some do with other investment vehicles, but we can predict with pretty good accuracy what our return will be for years down the road. In addition to the cash flow, history has shown that properties appreciate, and the value of our assets will usually follow that upward trend.
To me, putting my money into real estate is a logical thing to do. I know if I just let my money sit in a bank, I may accumulate enough to take my family out for ice cream in ten years. If I am proactive and do something more with that money, I can realize far greater returns and actually make progress towards reaching my financial goals.