Choosing Investments in Tough Economic Times
In today’s economy, there is more uncertainty among investors than there is among novices shopping around at an antique store.
What does the new leadership in Washington mean for the stock market? What do the seemingly endless billion-dollar bailouts mean for the overall economy? I wish I had a crystal ball so I could answer these questions – but, just like everyone else out there, I’m left guessing.
What I can comment on, though, is what I know about the relative stability of some of the investment vehicles we can choose from.
When most investors think of their options, they think of:
- CDs
- Money market accounts
- Savings accounts
- Mutual funds
- Stocks
All of the above are foundational parts of the American economy, and all represent passive investments that require little to no effort. Plus, they all offer the potential for growing your financial portfolio.
That’s the good news. The downsides to these traditional investments are several, and are worth mentioning here so I can give you a full picture of how they stack up against real estate… which is an investment that’s more up my alley.
First, market-based investments are historically more risky. Sure, the market has gone up (overall) in the past century. But just ask someone invested in the market who was set to retire this year if they feel comfortable doing that right now, and you’ll see how important timing is when it comes to being successful with these investments.
For many investors, the risk of the stock market is too much to bear. They prefer the security of CDs, money market accounts, and savings accounts. The downside, here, is that these investment vehicles move in the slow lane, growing at a modest pace that requires time and patience.
Another downside to traditional investments is that (with the exception of dividend-paying stocks) they do not produce any cash flow income. And if you choose to put your money in them, you have to sacrifice liquidity.
The way to avoid these downsides is to consider real estate as an alternative investment vehicle.
Properly purchased real estate pays for itself, can be acquired with little (or none) of your own money, and produces monthly cash flow income. Add to that the appreciation in value over time, and you have a winning investment combination.
Real estate is ripe with advantages that you just can’t find with more traditional market-based investments. You might even all it a “miracle” investment medium. However, many investors still shy away from it, for the following reasons:
- Fear of maintaining/managing income-producing properties
- Lack of familiarity with the purchase process
- Lack of trust in the seemingly volatile real estate market
These are all valid concerns – so let’s look at each one in some detail. (For the purposes of this article, I’m going to limit myself to residential property – single-family homes and multi-family buildings, as opposed to raw land or commercial real estate.)
First, we have the fear of managing and maintaining the properties. Images of busted plumbing, roof leaks, and eviction notices may come to mind – and there are certainly times when those kinds of things can arise. But you rarely wind up with a major problem if you do your homework before you purchase the property.
In general, multi-family properties tend to be easier to manage and maintain than single-family properties. For one thing, you’ve got the benefit of consolidated maintenance costs. Plus, when one tenant moves out, you’re not stuck with zero income coming in until they’re replaced. You have the financial security of multiple tenants.
Now, we’re talking!
What about people who avoid investing in real estate because they’re not familiar with the process? This is an issue that makes me scratch my head. After all, investors with no real knowledge or savvy put millions into the stock market every year – and feel perfectly comfortable with it.
Meanwhile, with real estate, it’s so easy to become educated about what you’re doing – about how to select, purchase, and then manage the properties that make up your portfolio. And that education is readily available, whether you’re interested in investing in single-family or multi-family properties.
Last on our list of the concerns that prevent people from investing in real estate has to do with perceived market volatility. Well… forget the dismal view of real estate you get from the media. What they’re talking about is just a byproduct of the economic downturn – and, quite honestly, that was a necessary shift to keep real estate affordable for the long haul.
From an investor’s perspective, real estate prices are now excellent, demand is consistent (because people always need a place to live), and there are plenty of properties to choose from.
When you consider all of the above factors, real estate might be the best investment vehicle for you in the current economy. So what are you waiting for?
[Ed. Note: David Lindahl, known as the “Apartment King,” has been investing in single-family homes and apartment buildings for eight years. He is the author of several popular moneymaking home-study programs, including “Apartment House Riches.” He can be reached at dave@real-estate-fortune.com and www.rementor.com.David Lindahl
Dave Lindahl has rehabbed over 521 houses in just under 10 years and owns over 2204 apartment units. Starting out as a struggling landscaper with no experience in construction, Dave accepted an opportunity to renovate a foreclosed house for a local bank during the wintertime when there was no landscaping to do in Boston. The job was completed mostly with the advice of relatives and friends who knew how to do the work.After completing the first house, he did another and then (after getting over his initial fears) began to buy and hold small apartment buildings for himself. To get the money for down payments (he originally used credit cards until they ran out!), Dave would rehab single-family houses to "flip" for chunks of money, so he could buy more apartment buildings. With in the first 14 months, Dave's apartment buildings created a positive cash flow of over $10,300 a month for him and his family and with in three and one half years Dave became a multi-millionaire.Today, Dave has earned millions of dollars renovating houses for resale, and owns over 1811 apartment units with a monthly cash flow equaling what most people make in a year!