Real Estate Investing | The Big Kahuna of Forced Savings Accounts
Real Estate Investing is more than just creating passive income.
Sure, real estate investing is an exceptional all around investment. If and only if, you can stomach the persistent possibility of being called out by a tenant to fix a clogged toilet, a broken AC when its 95 degrees, or that leaky roof in a downpour. That said, you can pay a management company to look after it for you, but then that cuts into your passive income. And passive income is why you want to be in any real estate investment. Appreciation, well that’s the cherry on top! More on that later.
If you’re good with managing tenants, or paying someone else to do so, you will be rewarded for each property in many different ways.
BUT, You must control your emotions!
The hidden value of real estate investing.
The greatest deterrent to saving money is most certainly, human nature. This character flaw, one that we all suffer from, is driven by the part of the brain that controls emotion, the temporal lobe. Its job is to provide a brief euphoria after we unload our hard-earned dollars, and then ‘help us’ rationalize why spending the money now, rather than later, was A-OK.
It’s those who can avoid succumbing to the temporal lobes ‘peer pressure’, who actually get ahead financially. But, what if that’s not how you’re wired, what if you become Milquetoast at the sight of that new Lululemon down jacket, and you just cant resist the purchase? Perhaps you’re in dire need of a forced savings account.
Huh, Forced Savings Account?
A forced savings account is a means of squirrling your money away, before you give your temporal lobe a chance to influence your behavior. Things like employer sponsored 401k plans, automatic withdrawal into a savings account, and my favorite, real estate investing are great examples of forced savings accounts. Anything that will provide an extra layer of protection from our aformentioned character flaw, will do the trick.
Even the best savers struggle with rationalizing why now is a good time to spend. Heck, they may be a great saver, but their spouse, well not so much. That creates problems of its own. All the more reason to put it away before you, your spouse, your kids, or some other leach has a chance to get his/her grimy mitts on it.
Why Real Estate is the Big Kahuna
Its like the lock box, within the safe, protected by an armed guard. Ok, well maybe that’s a bit of an exaggeration. Perhaps the guards aren’t armed, but you get the point.
But really, real estate is not liquid, because liquidity = accessibility, and accessibility=emotional rationalizing, as previously discussed.
When accessibility is dangled in front of our temporal lobe, then you can guess what comes out on the short end of that stick. You guessed it, our pocketbook!
Real estate investing is multi-dimensional. When bought at the right price, it provides steady cash flow, tax benefits, and potentially price appreciation. Oh, and by the way, someone else pays your mortgage off for you. Where can you find a deal that good. The rub is, do you want to manage tenants, do you want to service the mortgage debt, and do you have a long enough time horizon. If you answered yes to all of these, then start searching for a cash flowing property.
Slick Photo compliments of: