With the stock market tumbling, many investors are looking to stable cash flow investments backed by a hard asset such as real estate. Most investors realize that the ponzi scheme of the stock market keeps investors in high risk and highly volatile investments. Simply put, its gambling! The stock market only rises if you continue to pump more money into it, just like a ponzi scheme. What do you think is going to happen when the baby boomers start to slowly take all of their money out of the stock market to live on because their investments do not cash flow well enough to retire off of? The air will be let out of the balloon.
Most financial planners will tell you that you should put your money in mutual funds or various hybrid insurance products that literally suck the wealth right out of you. On top of significantly reducing your returns due to the high fees the mutual fund companies charge, you are taking 100% of the risk. They make money through fees weather you make money or not. Ask yourself; is that the right business relationship I want to be in? Most of the world population invests this way primarily because it’s been drilled into our heads by the large investment companies, politicians via the tax code that incentivize 401k and mutual fund investing, and the financial industry in itself. They want you to invest for the long term so that they make money off of you for the long term.
The U.S. debt was just downgraded to AA+ by the S&P, signifying an increase in risk related to the government’s ability to pay its debt. In my opinion, it was not done soon enough. Not because I think that the U.S. debt is really in danger of default just this moment, but because of the politicians’ relationships to the banking system and their ability to steal money from the WORLD. They are so closely intertwined that they are giving each other bail outs on the trillions of dollars of loans that they have already made trillions of dollars on, via the fractional reserve banking system. People are so focused on the $14 Trillion in debt, just like the politicians want you to be, that they are not focusing on the hundreds of trillions of funny money loans already given out by the banks. For every $1 that anyone deposits into the bank the bank gets to lend out AT LEAST $10 and make interest on that money. It use to be $40 to $1. That means that the more the banks lend, the more money they make, and the more funny money is pumped into the economy which increases the likelihood of hyperinflation.
If hyperinflation happens, real estate prices, commodities prices, gold, silver and any hard asset should sky rocket making it a perfect time to buy real estate. It’s the perfect storm. You can buy discounted real estate due to the massive amount of foreclosures, while using debt at low interest rates, and have the opportunity to buy at the bottom of the market. What’s great about real estate is that instead of investing in something unstable like the stock market, where you have no collateral for the investment, you actually have a hard asset that can pay you above stock market returns just with the cash flow. The long term average of the stock market is close to 8%. Most of the real estate investments I personally invest in make 8% – 10% in cash flow from the rental income without financing and 15% – 25% with financing with a much lower risk. The rental income from the investment will cover your note payment, your expenses and still give you positive monthly cash flow. On top of that your risk is decreased because you are backed by a hard asset and under market value. Most people believe that investing is risky, and it is if you do not know what you are doing. Getting educated on how to invest is key.
The U.S. politicians need to get the debt situation in order, but if you plan on protecting yourself in case they don’t, investing in real estate should be your perfect hedge. On top of that you will be able to retire off of cash flow instead of worrying about the market value of your stock portfolio and wondering if it will be enough for you to retire.
Owens Consulting Group founder Mathew Owens is a California licensed CPA and a full time real estate investor. He has completed over 100 transactions in the past three years, representing approximately $10 million in real estate, most of which has been sold to cash flow investors. He does multiple live educational events and online webinars. Find out more info about him and his blogs at www.ocgproperties.com