RealNews RoundUp
Each week I round-up the best real estate articles and break them down for you in an easy to digest format. Here are the articles I’ve found most interesting over the last couple weeks:
The Article: Gallup: Real Estate’s Lead as Best Investment Shrinks; Gold Rises
The Highlights: Home prices and mortgage interest rates are way up, so is real estate STILL the preferred investment in America if it’s going to cost so much more?
According to a recent Gallup poll, yes…
Real estate was voted the best long-term investment for the 11th consecutive year, consistently beating other investment types like gold, stocks, and bonds.
That said, the proportion of Americans choosing real estate this year is down sharply from last year’s record-high of 45% but is on par with the typical proportion of people selecting real estate from 2016-2020, before housing prices skyrocketed during the pandemic.
My Take: This article is a great lesson in always reading more than just the headline! Perception will change year-to-year, but perception isn’t reality. When making important investment decisions, it’s best to look at history—trends over time.
Since 1991, the average annual home price increase has been 4.3%, according to the FHFA. Since 2000, the average rate has been 4.7%, and since 2012, the average rate has been 7.7%. The average stock market return is about 10% per year for nearly the last century, as measured by the S&P 500 index, but is much more volatile and can vacillate wildly from year to year or even month to month.
It’s always best to have a diverse investment portfolio, but real estate remains the preferred investment, is a great alternative to stocks, and offers lower risk, and yields better returns long-term…even in a tumultuous marketplace.
The Article: Norada: 28 Passive Income Ideas 2023 for Young Adults with Little Money
The Highlights: The Consumer Price Index increased 6.4% from January 2022 to January 2023. Consumer prices for shelter increased 7.9% over the last year--the largest 12-month advance since June 1982, when prices for shelter rose 9.0 percent.
It’s more important than ever to maximize every dollar, and to tap into ways to earn passive income. What is passive income? Simply put: it’s money you make without working to earn it. Here are few things the article suggests doing to generate passive income:
1. Cash back websites
2. Start a YouTube channel
3. Amazon FBA (Fulfillment by Amazon)
4. Selling stock photos online
5. Become a silent business partner
6. Lend money for interest-based income
7. Affiliate marketing
8. Rent our your car
9. Monetize a blog
10. Write a book
11. Podcasting
12. Own a renal property…
… and the list goes on.
My Take:
The idea of generating passive income is essential to wealth-creation! There are only so many hours in a day, and if you want to create more money with less work, passive income is the ticket.
That said, don’t waste your time reading this article in its entirety! The ideas are either obvious or assume a level of skill or monetary investment that is unrealistic for most “young adults with little money” as the headline touts.
For example, becoming a silent business partner requires a large monetary investment in a business. Monetizing a blog or podcast is something most people would love to do, but it not only requires years of writing/creating for free *before* it’s able to be monetized, but it also requires a bit of luck given the over-saturated market. Not to mention the production equipment needed to make it top-notch (not cheap!).
I think some of these ideas, like renting out a car, hosting an AirBnB, and buying a long-term rental property are fantastic passive income ideas, but might not be as attainable to a young adult just out of college.
My advice would be to choose one of these that seems truly passive and low-risk, and work toward it—even if it’s not attainable for you yet given the monetary requirements.
The Article: Forbes: Things to Consider when Leveraging Real Estate to Build Wealth
The Highlights: What should you consider when working to build wealth through real estate? First--what is the role of debt? There are generally two schools of thought…
1. Debt is evil. You must do everything you can to eliminate debt and get out from under creditors.
2. Debt is the only way to generate wealth. Get as much money as you can from many lending sources to build your fortune.
(Check out by breakdown of two influential financial gurus on this topic HERE!)
As it relates to real estate, borrowing money via a mortgage creates leverage both ways!
As the borrower: Selling for more than you’ve purchased your home for creates a 100%+ return on your investment.
As the lender: If you sell a home for less than you’ve purchased for, you have negative equity. Meaning you pay back the loan amount plus more.
Give careful consideration to things like updates, location, and how long you plan to live in a home before you sell so you can use this leverage to your advantage.
Another consideration, if you have around 40% equity in your home, there is a good argument to be made for keeping that debt on your balance sheet.
You not only reap tax benefits but you can invest excess funds they may otherwise be used to pay off your mortgage into things like stocks, bonds, or even an investment property that returns above and beyond the interest you’re paying on the loan.
My Take: Great advice in this article! It’s no surprise I think real estate is the best long-term wealth-creation strategy, and there are ways to use the debt created by this strategy to your advantage. There’s good debt and bad debt, and the good kind makes money *for you*. There’s a huge difference between credit card debt (bad) and mortgage debt (good). Good debt benefits you from a tax and money-making standpoint.
There are systems in place that make success possible with good debt. Check out my tips for hacking the real estate tax code (here), or how to qualify for multiple mortgages (here).