In the conversation about real estate investments, a lot of people are for it and many are against it. Investment philosophy can be very personal. For me, real estate is something I like to invest in, but it’s important to understand all the factors that come into play, such as interest rates, inflation, borrowing costs, affordability, and more. So, in this episode, I will talk about the impact these kinds of investments can have on your financial future and retirement.
You can find show notes and more information by clicking here: https://bit.ly/3YaBFKN
🗓️ Meet with me: https://paradigmwealthpartners.com/begin-your-journey/#calendly
↔️ Connect with me on LinkedIn: https://www.linkedin.com/in/jbednarii/
🌐 Paradigm Wealth Partners (website) – Financial planning for career professionals who want to retire and stay retired: https://paradigmwealthpartners.com/
🌐 What the Wealth (website) – Adding clarity to difficult financial topics: https://whatthewealth.com/
▶️ YouTube: What the Wealth / Paradigm Wealth Partners
If you or someone you care about could use the help of a financial advisor and sees the value in establishing a financial plan, please reach out to me.
Thanks for Listening!
Jonathan
In the conversation about real estate investments, a lot of people are for it and many are against it. Investment philosophy can be very personal. For me, real estate is something I like to invest in, but it’s important to understand all the factors that come into play, such as interest rates, inflation, borrowing costs, affordability, and more. So, in this episode, I will talk about the impact these kinds of investments can have on your financial future and retirement.
You can find show notes and more information by clicking here: https://bit.ly/3YaBFKN
🗓️ Meet with me: https://paradigmwealthpartners.com/begin-your-journey/#calendly
↔️ Connect with me on LinkedIn: https://www.linkedin.com/in/jbednarii/
🌐 Paradigm Wealth Partners (website) – Financial planning for career professionals who want to retire and stay retired: https://paradigmwealthpartners.com/
🌐 What the Wealth (website) – Adding clarity to difficult financial topics: https://whatthewealth.com/
▶️ YouTube: What the Wealth / Paradigm Wealth Partners
If you or someone you care about could use the help of a financial advisor and sees the value in establishing a financial plan, please reach out to me.
Thanks for Listening!
Jonathan
Welcome to what the Wealth? A financial planning and investment podcast for professionals and families to help you navigate life's financial transitions. Jonathan's mission is to facilitate the ability for you to plan for and create the life you love, free from anxiety about money. And now here's your host, certified financial planner, jonathan Bedner.
Speaker 2:Hello, welcome to the what the Wealth podcast. Today I want to talk to you about buying rentals and investing in real estate as a way to build and shape your financial future, your retirement, and you know how they can impact you. So what I want to talk about is the notion. There's a lot of I guess it's a hot issue. You know, don't invest in real estate or do invest in real estate. There's a lot of people that are for the idea and a lot of people that are against the idea and obviously this is a very personal decision, personal investment philosophy. I personally like investing in real estate. I think it's got a good opportunity.
Speaker 2:I think that historically, real estate has done very, very well. There's always a lot of factors that come into this around. You know interest rates and inflation and you know borrowing costs and you know affordability what houses actually cost? Can you even find them? Obviously, over the last 10 or 15 years, you've seen a huge movement in the bigger pockets community, which is a community of mostly younger people, young professionals, but also some older people who are very real estate savvy and are buying properties for their future and their retirement, and actually some of them have gone on to quit their jobs and just become full-time real estate investors and they do this one door at a time, meaning buying one property, or one door, one unit at a time, and they grow their portfolio. They all do it in different ways. Some of them use leverage Most of them probably use leverage, which means they're borrowing from your banks or other resources to buy these properties.
Speaker 2:But there's a lot of people out there that say real estate investing is bad if it doesn't cash flow. Now, of course, you want your investment to cash flow. Or it might not make sense to own the property If you own a rental and the only rent that you get doesn't even cover the mortgage. If you have one, plus taxes, plus real estate insurance you know those basic costs, maintenance then it may not be worth the risk to own that investment. Or maybe you have the wrong investment. You think it's good, but you didn't do your due diligence, and so there's a lot of due diligence you can do on the back end to determine does real estate investing make sense?
Speaker 2:Now, I am a believer when you own real estate, it should be an intentional decision, meaning you don't just turn all of your houses into rentals just because it's an easy thought or it's an easy process. I'm of the belief that your house is your home. That's where your family is, that's where you know you provide shelter and protection for your loved ones, for your family, and when you own a rental, you should go buy a rental for the sheer reason that that is going to be a rental. Don't make your home an accidental rental. Use your home as your safe haven, as your house, and then Go out and if you want to become a real estate investor, purchase real estate for the sole reason of being a rental. So when you go through the evaluation phase, you know again you're gonna want to look at zip codes, schools they are, they building around you.
Speaker 2:There's a lot again, a lot of different factors that go into does real estate investing make sense? Does a certain curtain property that you're looking at make sense? Once you get a general idea, then you want to know what are those. You know areas that you're in. What are those rent for, what is the average rent, what you know rent increases going into and what is historically rent raised. I guess is what I'm trying to say. Are they raising the rent by five percent a year, or is it eight percent? Is it three percent?
Speaker 2:I see a lot of real estate investors, especially the novice ones, the ones that haven't made this Really a dedicated push and a dedicated part of their portfolio in their future, is they and I've actually done this in my own rental real estate is you get kind of lulled to sleep to their good tenants. They pay on time, you know they don't cause me any trouble and so I'm just gonna keep their rent the same and fast forward five years down the road. They're still paying the same rent they were five years ago. But property tax goes up, insurance, you know, can go up, maintenance will pop up and they're conditioning. Maybe it needs paint, maybe it needs carpet plumbing leak, whatever. So you're gonna need to address that, and the way you address that is through those rental increases. So Let me take a step back and talk about. You know why I think Some people get it wrong when they talk about real estate.
Speaker 2:What I see other financial professionals and real estate people talk about when they're talking about Should you own real estate and should you use that in your portfolio To make money. And what they talk about is you know how much does it cash flow and does it cover the mortgage, if you have one, and property taxes and vacancy rates and Insurance and maintenance, as it cover those things. And what they say is you know, if you, if you don't make a profit or you break even or you barely make a profit, then it doesn't make sense. You know, it doesn't make sense to take that risk and I actually don't believe that. And here's why if let's just say that you, you use leverage, you put down 20% on a house and you're gonna, you know, go to a bank and you're gonna get a mortgage and you're going to Rent this house or condo or townhouse or whatever it may be, out to people, I Am of the mindset I that, especially if you're working now, if you're retired and your near retirement and you're planning to actually live off of this income, that may be a different story, but if you're a young professional and you're gonna work 10, 20 more years, I think that this could make a lot of sense.
Speaker 2:So my thought is and again, this is counterintuitive from a lot of other professionals but my thought is if, if you can use someone else's money, even if you're break-even or even if you're barely making a profit, but if you can use someone else's money to pay for that asset for you, then you are building wealth that someone else won't take a chance on or is advising people not to take a chance on Because it's not cash flowing enough. There's not enough profit after all the expenses For you to put in your pocket and a lot of things that we do. We talk about Compounding wealth over time and building that wealth and the way you do that is in bite-sized chunks. It doesn't matter if it breaks even. It doesn't matter if the profit is small. Right now we're looking at Rinting this out for the next 10, 20 years, letting someone else Pay for that asset, and then also when you move into retirement Whether that's retiring early, at 50 or 55, or you want to work longer, until 60, 65, 70, whatever it may be, but turning that income on to supplement your income. When you're in retirement, whether you get pension, social Security, you're taking income from your investments, whatever it may be.
Speaker 2:People need a place to live. You see apartments being built everywhere. There's a reason people are building apartments. They make money with them now. They need to make a little bit more money now because that's their business model. But for some of the smaller investors, the people that don't have three, four, five Hundred doors you've just got. You know you're looking to make your first investment or you've got two or three or four. I wouldn't get caught up in the idea that they have to have big profits. They have to make a lot of money now, or it doesn't make sense.
Speaker 2:I think again, if someone else, if you can I call this velocity of money. But if you can use someone else's money to pay for your assets, what kind of sweet or deal is that? Now it should break even. You don't wanna be forking money out of your pocket every month to make the mortgage payment or to pay the insurance or to pay the lawn people. So you do want it to at least break even, but I don't think you have to get caught up in it. Making $500 or $1,000 a month profit every month, that's nonsense. The beauty of this is accumulating doors, accumulating properties, using someone else's money, so that sometime in the future you can turn these investments on and provide that income for you and your family. You can always sell these properties down the road and again, someone else paid for most of, if not all of them.
Speaker 2:This is a huge wealth building tool that, again, a lot of people, a lot of advisors and financial professionals, overlook for the sheer fact that they're not thinking long term. And a lot of advisors coach clients around think long term, don't get worried about the volatility day to day, and I think that's very important. I think you should take that same mindset to real estate investing. If you're comfortable owning real estate, don't think about it in the next one month, one, six months, one year. Think about it long term. How can this benefit my financial life and my wealth building process over a long term? I think you'd be surprised.
Speaker 2:I'm a huge believer in real estate investing, have several real estate properties myself and think it's a great way to build wealth long term. I don't think you should only or exclusively build wealth that way, because it gets really hard to cut off a brick to go to the grocery store and buy a loaf of bread. So I think you should have some real estate potentially. If it fits your investor profile and you're willing to own that risk and you're comfortable with real estate, I think you should have some of that. But I think it also makes sense to own investments in the stock market and have those kinds of investments, because that is another powerful wealth building tool. So just kind of want to talk a little bit about my belief in real estate, contrary to what a lot of people think. But I think it's really, really important, especially again if you can leverage someone else to build your wealth for you. Thanks for listening to the what the Wealth podcast. Be confident in your retirement. Have a wonderful day.
Speaker 1:Thank you for joining us on what the Wealth. For more information, get in touch with Jonathan at whatthewealthcom. Remember to subscribe to the podcast so you don't miss any information that can help you create the life you love. The information of this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific, individualized financial, legal or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision. Security is offered through LPL Financial member. Finra, SIPC. Investment advice offered through Paradigm Wealth Partners, a registered investment advisor and separate entity from LPL Financial.