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7 Reasons Why Real Estate is the Best Investment
Joe: Hey, it’s Joe Crump. Seven reasons why real estate is the best investment. Number one. You can quit your job. You can quit your job and it’ll pay for your lifestyle and you won’t have to put in very many hours’ worth of work. Most people I know that have quit their job have gone from doing 40 hours or 60 hours a week in their regular job to making twice as much money as a real estate investor working 5, 10 to 20 hours a week as a real estate investor. And the better you get at this, the fewer hours you have to put in and the more money you make for the hours you do put in. So being able to have that freedom is a wonderful thing.
Joe: Cash flow is also a great thing for real estate investors. And I’m talking about cash flow on short term investments. If you use the For Rent Method where you buy a property and turn around and flip that property and make a chunk of cash without using your credit without using your money or down payments, and being able to flip that property and making $5,000 or $10,000 or $20,000 on a quick flip like that. That short term cash flow can be a great way to support yourself, support your family and have a great lifestyle.
Joe: Number three is long term value. Once you buy properties where you can flip them, you’re going to want to start keeping some of those properties. Once you make enough money to be able to support yourself, you’re going to want to start keeping those properties. And once you keep those properties, that’s your path to true wealth. Because that will start to build, they’ll grow in value over time, they’ll give you income, passive income, that you don’t have to do anything to receive. You can have somebody else manage those properties for you. I don’t manage any of my own properties so all I have to do is make sure that the money comes in and I get notes from my property manager that tells me what’s going on, how much money was spent on this and how many vacancies we have and you know, what problems we’ve got and what the good things are and they’ll send the reports, the financial reports to my bookkeeper and she puts all that stuff into QuickBooks and keeps track of it and gives me reports so all I have to do is look at it and say okay, here’s where our problems are, here’s what’s going on. Here’s what’s positive and what do we need to do? Is there anything I need to be involved with?
Joe: Most of the time the answer is no because after you’ve worked with people for a while, whether it’s your property manager, your bookkeeper or the vendors who are working on your properties, once you’ve done that for a while you’re going to have good people and you’re going to be able to count on them and all you’re going to have to do is look at the numbers to make sure it’s all on track. And as long as you do that you’re going to be fine.
Joe: Another reason is tax savings. That’s number four. Tax savings is a great thing. Let’s say you buy ten $100K subject to properties. Now you’ve got $1M worth of property. Typically you can pull that off in a year. So you can own $1M worth of property in a year. Now, you’re still going to have mortgages on those properties, but hopefully you’ve got, you know, 20% or 30% equity in those properties as well, so when you bought into them you bought into you know, $200K or $300K worth of equity. And you also have cash flow on those properties. So each one of those properties is going to give you a couple hundred dollars a month let’s say of income after you pay all your expenses and property management and mortgage, you know, principal, interest taxes and insurance. All that stuff is taken care of.
Joe: NNow, at the end of the year, if you’ve got a mortgage on those properties or even if you don’t, you’re still going to have depreciation on those properties. And the way depreciation works is they’re going to take the tax basis of the property and so, let’s say you bought the property for $100K. And the tax assessor says that $20K is the value of the land and $80K is the value of the improvement. You’re then going to be able to depreciate the improvement over 27.5 years. That’s 3.64% of that amount. So that’s going to be somewhere around $3,500 a year that you’re going to be able to deduct from your income because you’re an investor. You’re going to have it off of you active income. So you’re going to be able to deduct it from your active income. That means that if you made $10K that year and that means you can take that $3,500 and subtract it from that $10K and only pay taxes on that $6,500. So, essentially, if you’re in a 30% tax bracket that means that on that $3,500 you’re not going to have to pay that 30% that you would have normally had to pay on that $3,500. So you’re going to save about $1,200 on your taxes.
Joe: Now, over that group of properties, you have 10 of those subject to properties, that means you just saved you know, $10K or $15K on your taxes depending on your tax rate which may be anywhere from 29% to 40% or so depending on your income. So tax savings can be a wonderful thing. And it really adds up over time and it’ll help keep your costs down.
Joe: The fifth thing is the freedom that you get from this process. Everybody has different things that they want to do in their lives. For me I wanted to be able to be home with my kids and watch them grow up. And I was able to do that because of real estate investing. I was able to be home. I worked at home, my hours were very flexible. I didn’t work even five days a week. And I was able to build a pretty huge business even with the time that I was able to do that. And I had excess money to be able to put into the things that I found interesting. I love to travel so I was able to take my family to Europe and to Japan and all over the place.
Joe: I was able to travel to India. I was able to go to the places that I wanted to see in this world. I was also able to spend money on things that fascinate me like filmmaking. I am a filmmaker and I was able to make a couple of feature films because of that. They’re on Amazon. You can go check them out. Just check out my name, Joe Crump and you’ll find me on Amazon.
Joe: One of them is a documentary and one of them is a feature movie, a scripted movie. So it gave me the ability to do those things because I had the funds to be able to make that stuff happen. You have things that you want to do in your life. There are charities that you want to be able to donate. There’s projects that you want to be able to support. There’s family members that you want to be able to take care of. All those things will happen if you can build a real estate investing business that’s successful. So that’s one of the great reasons to be able to do this.
Joe: Another thing, another reason I like real estate investing so well is because it works great with a Roth IRA. A self-directed Roth IRA is one of the best things that I ever set up and I’ve put most of my properties into the Roth as I was buying them. I kept out enough money to be able to support myself until I got to that 59.5 age range and then as I’m getting older now I’m able to pull that money out of my Roth IRA when I decide to do that and I don’t have to pay any taxes on it. On a regular IRA you can put money into and not have to pay taxes on that money going into it. But you have to pay taxes on it when you pull that money out. On a Roth IRA you can put that money into, you have to do after tax money that goes into it. But you don’t need very much. Maybe only put $3,500 into that Roth IRA. And then you use that money as option money to purchase other properties and flip properties inside that, and buy subject tos which you can buy inside a Roth and you can start building your portfolio in that Roth and then by the time you’re ready to retire, you’ll have hundreds of thousands, millions of dollars in that Roth IRA that you’ll be able to pull out without paying any income tax on that money at all.
Joe: So essentially you reduce your taxes to zero when you have it inside a Roth. So that’s a wonderful reason to invest in real estate.
Joe: The other, and the seventh reason that I like real estate as an investment is it’s a tangible asset. It’s a real thing. You can go to it, you can see it, you can look at the community around it, you can be the one who’s in charge of the managers. You are in control. If you go out and buy the stocks that stuff is just a black box. You have no control over the businesses, you have no control over the CEOs. The only thing that those CEOs are looking at is short term profits because the way they keep their position as CEO is if they make money that next quarter. And if they don’t make money that next quarter, they’re not going to be able to keep that position.
Joe: So they’re constantly looking at short term value of their company rather than being able to look at the long term value which is what you can do if you have real estate. You can look at where am I going to be in five years and ten years, in thirty years. You know, how long are you going to live? I’m expecting to be around here for at least another thirty years. Hopefully more than that. And if I am, I want to make sure that my business is still in place to be able to make that happen. And having tangible assets that I can control, that I can manage, that I can rent out is going to make that much, much more likely to succeed than I believe the stock market would do.
Joe: Anyway. That’s why most of my assets are in real estate. All right. I hope that helps. If you like this channel hit the subscribe button, hit the bell and it’ll send you a notification every time I send out a new video. Also go to ZeroDownInvesting.com and check out my mentor program. Go to PushButtonAutomarketer.com and check out the automated system that we use to bring in leads every day and then go to JoeCrumpBlog.com and sign up for my free newsletter for all the free information that’s on that site.
Joe: All right. I hope that helps. Good luck.