Real Estate Investing
By Jeff Riddell
Andrew Carnegie said:
More money has been made in real estate than in all industrial investments combined
The big boys know all about it and have made fortunes for generations through real estate. Even the railroad barons of the 19th century knew that wealth was in real estate. When they built the transcontinental railroad in the 1860s, the government gave them 640 acres of land for each mile of track they built. They believed they could sell the land for millions as business was drawn to the railroad, and they were right.
Real estate is a long term investment. Patient real estate investors will be rewarded. So don’t let age hold you back—there are few investments that will treat you better. Although there are times when the stock market looks inviting, the averages show that the stock market does not outperform real estate over the long haul but we’ll come.
Think where you would be if you started with $25,000 and kept it invested in real estate for 40 years, doubling every five years. You would end up with $1,600,000. If you had $100,000 to invest instead of $25,000, the result would be $6,400,000. If you started at 25, you would be there by the time you turned 65.
The “Rule of 72”—divide 72 by any annual interest rate and it will tell you approximately how many years it will take to double your money—says that you need 15% equity growth each year to double your money in five years (try it out at www.moneychimp.com [1]). The value of your real estate would need to appreciate about 5% per year for your investment to double in five years. Although 15% annual return may be higher than the norm, you should strive to do it even if you need to invest some sweat equity. Consider this example: $5,000 compounding at 10% for 30 years equals $87,247 but at 15% the number is $331,059 and at 20% the number is $1,186,882. No, your eyes are not deceiving you—the compounding rate makes a big difference in overall returns over long periods of time, and with leverage (mortgage) it is possible to achieve even higher equity compounding—but more on mortgages later.
But you’ll never achieve wealth from real estate investing unless you take the plunge. Laurence J. Peter said:
There are two kinds of failures: those who thought and never did, and those who did and never thought
Unfortunately, many people read about real estate investing but never get started in a serious and meaningful way. They keep their day jobs and dream about financial independence. These are the people who later say “I missed my chance, prices are so high now—I’m just too late.” You will never just happen to be in the right place at the right time. Comedian Bob Hope said
I’ve always been in the right place at the
right time. Of course, I steered myself there.
You can do it. Thomas Edison said:
If we did the things we are capable of doing, we would literally astound ourselves
So don’t procrastinate, get started. Life is not a golf game—you only get one round.
BIO
Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with thirty-five years of experience assisting people with a variety of residential and commercial real estate matters. U.S. 1031 Exchange Services, Inc is a 1031 exchange qualified intermediary (QI) and a member of the Federation of Exchange Accommodators (FEA). As President of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than twenty years. Jeff has been awarded the Certified Exchange Specialist (CES) certification.
As a licensed securities registered representative and real estate broker, Jeff is uniquely qualified to assist those who wish to avail themselves of 1031 and 1033 exchange tax savings and also guides investors in diversifying their portfolios with non-publicly traded REIT, LP and LLC real estate investments. Jeff’s new book, 21st Century Real Estate Investing Featuring 1031 + TIC has recently been published and is available at Amazon.com. Jeff may be reached at 941-366-1300 or via email at jeff@us1031.com [2].
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