To remind ourselves why we invest in real estate, sometimes it helps to compare it to everything else.
One day, I confidently strode to the counter at a small running shoe store, eager to purchase a nice pair of Salomons for $140.
As the sales guy was about to ring me up, half-jokingly, I asked, “Do you accept bitcoin?”
“No, we don’t,” he replied, while smiling.
He paused, then asked me with a sparkle of fascination in his eye, “Do you have any?”
“Just a little,” I said.
He followed up, “Oh, wow!” and looked at me with idolatry.
That transaction happened last April, after bitcoin prices soared. Since then, bitcoin would go on to fall over 75% from its all-time high.
I don’t think that the shoe guy would react the same way today. Might he wonder how a bitcoin holder could even afford shoes?
Spy balloons aren’t the only high altitude objects that have been shot down out of the sky.
When the Fed began jacking up rates last year and the easy money dried up, many asset class balloons deflated.
Let’s see how 8 popular ones have performed since last year, peering through GRE financially-free binoculars:
📉Down 18% last year, the S&P 500 had its worst year since 2008. It’s recovered a little early this year. Last year, IPOs hit their lowest level since 2016 in a stagnant market.
I have yet to see one real life example where retail stock and mutual fund investing has propelled one into wealth. That’s why it’s a real mystery that the masses act obsequious toward them.
💰Where’s the cash flow? The S&P’s dividend yield is still under 2%.
📉My shoe salesman shifted his sentiment because it cratered 65% last year. But in 2023, it’s up 30%+.
Crypto was out and alcohol was in during this year’s Super Bowl ads—whatever that tells you about society.
I like bitcoin’s fixed supply. There will never be more than 21 million of them issued. But that doesn’t mean that it’s the currency of the future.
💰Where’s the cash flow? It’s basically zero. Bitcoin holders tried to get yield on imploded exchanges like FTX and Celsius; they basically had their crypto confiscated.
📉The classic hedge and “money insurance” was down 2% in 2022. The shiny metal ticked up 2% this year. It has lagged inflation.
💰Where’s the cash flow? Though there are creative ways to generate yield from most any asset, it’s basically zero.
📉High inflation has moved supersavers toward poverty. Today’s best “high-yield” savings accounts still generate returns lower than inflation.
Your prosperity is being eaten daily. Depending on what you believe the true rate of inflation is, $100,000 in savings is annually debased down to between $82,000 and $94,000.
💰Where’s the cash flow? In real terms, it’s less than zero.
📉 From the one-month to the 30-year government treasury, yields are less than inflation.
💰Where’s the cash flow? In real terms, it’s less than zero.
📉 Though not an asset class, it’s a nascent way to speculate and game your way to financial gain due to many states’ recent legalization.
The proliferation of mobile gambling apps—including sports apps like DraftKings and FanDuel—are especially dangerous. The casino is right in the palm of your hand.
Few realize that federal gambling winnings tax must often be paid on your substantial gains in: casinos, sports books, lotteries, raffles, the horse track, and even bingo.
You can be dinged 24%. Casinos even report big winnings to the IRS. Details. Would the IRS raid a retirement home over bingo winnings?
💰Where’s the cash flow? Not applicable.
📈 Up 2% last year and about even early this year. Oil prices are famously volatile.
Everyone still has 2020’s jaw dropping price dip to -$38 per barrel seared into their mind. Yes, that’s negative $38.
Prices at the gas pump have been like an inflation billboard.
At last week’s SOTU address, President Biden said: “We’re going to need oil for at least another decade.” He’s got that right.
💰Where’s the cash flow? Some oil stocks pay 4%-5% dividends.
📈 Up 10.2% last year (source). But this year, some geographic markets are up and others are down. I don’t expect much price movement in our core Midwest and South markets.
💰Where’s the cash flow? As rents are catching up to rising prices, it’s as high as 8% in some Midwestern and Mid-Atlantic markets, and Memphis. By historic measures, it’s not high. But it’s better than most anywhere else.
Yep, even DraftKings.
Half of Americans say they are worse off now than a year ago, according to a Gallup poll released last week. That’s the highest proportion since 2009.
That makes sense. Most people are impoverished by inflation.
💔Good investments should be painfully obvious. Otherwise, they’re not worth making. Here’s how to explain to your friend what you do in fifteen seconds:
- Small down payment
- Bank buys you the property
- Tenants pay down the loan
- Property manager handles everything
- You collect cash every month
- Inflation builds you massive wealth (here’s how)
When you list out the benefits of real estate investing compared to the downturn in other investments, it’s painfully obvious. It’s even more painful than watching my Eagles lose the Super Bowl.
As the longtime king of wealth-builders, we know that Real Estate Pays 5 Ways. Without inordinate risk, total ROIs of 30%+ are common.
That’s because in addition to any appreciation and cash flow, you could add on another 3–5% annual ROI for tenant-made principal paydown, 20%+ for leveraged inflation-profiting, and an embarrassment of rich tax benefits… that have never once embarrassed me.
However, there’s bad news.
I expect some upward pressure on mortgage rates in coming months.That’s due to hot jobs, inflation, and GDP reports.
Thought getting your money to work for you creates wealth? It doesn’t! That’s a myth. My one-hour investing video course is now 100% free: Real Estate Pays 5 Ways. For a limited time, you can learn how wealth is really created, here.
