Why Real Estate
What do the names Brad Kelley, Herbert Simon and Jorge Perez mean to you? No, they are not famous actors, congressmen or presidential candidates…at least as far as I know. All three of these men are on The Forbes 400, The Richest People in America list. Why is that special to us real estate investors (or potential real estate investors)? They are three of 26 people on The Forbes 400 list who earned their fortunes in real estate. That represents about seven percent of the entire list!
This is not the highest percentage on the list, other industries, such as technology, food and beverage and especially investments have more, but most of them require a specialized education, specific skill set and/or significant monetary outlay to get into the industry. With real estate, anyone can do it. This is not rocket science, however there are no people on the list that earned their fortune as a rocket scientist, but you get the point.
Real estate is not for the ignorant either. You need to have good negotiating and management skills and it does not hurt to know a little about construction. A good head for math is helpful as well.
Investing in real estate does take a little money; after all it is called “investing”. Relatively speaking, it does not take much. The beauty of a real estate investment is the power of leverage. You can purchase income producing properties using other people’s money (OPM) for as little as a 20 percent down payment and if you get real creative it can be acquired for nothing down, but that is very rare in this market.
Using the incredible power of OPM, your initial investment can compound exponentially, maybe eventually you could even end up on The Forbes 400 list yourself. If that is your goal remember, you cannot think small. However, even for us small investors, real estate investment can lead to a very comfortable net worth.
One caution on OPM, leverage also increases the risk in real estate. We will discuss that in a future blog.
Scott Abernathy, MPM, RMP, GRI