In this economy, it’s more and more clear that you can't buy a piece of paper to make you rich. Everyone I’ve spoken to over the last 10 months has lost money in the market. That’s obvious. What interests me is how other people have been making money given these challenging times.
The people I’ve been encountering, the ones still doing well, are investing in real estate. As you may know, I’ve been espousing this for quite sometime. My philosophy has always been to buy something with inherent value, such as land, property, or something with an attached asset - like a deed of trust. Even gold and silver are a much wiser investment than a stock. Some won’t agree with me on this. I don’t care. It’s proven itself over and over again. Those of you that disagree - have fun waiting 5 years to get back to where you were a year ago. Those of you that agree with me, you already know why.
OK - now that we’ve got those people out of here, let me explain a few things. First - we need to learn our lessons - sometimes the easy way, sometimes the hard way. And we need to remember that no investment is ever 100% safe. Even T-bills? Not even T-bills, and I can tell you why.
As of today, the long term T-bills rate is somewhere between 2% - 2.17%. And according to some accounts, the rate of inflation in 2008 was 3.85%. So if you had $1000 invested in a T-bill last year hoping to earn $20 -$21.70, then you’re a bit sad, because after trying to be safe, your $1000 is now only worth $983.36. (I used the 2.17% to compute) So those people ‘investing’ in T-bills have lost about $17 for every thousand. So do you think it's safe? No, it's Paper Poor...
Where does that leave us? You need to buy tangible assets. Gold, silver for the smaller investors. Coins - not bullion. For the larger investor - ones known as accredited investors - you should have diversified your portfolio into several sectors, and real estate should make up the most. And I’m not speaking of REITs. Actual property that is making money - positive cashflow - not negative (not a vacant lot that you may want to build a house on someday. Remember: Cash-flow is KING!) THIS is how you get yourself out of this economic mess the world is in. Become Dirt Rich...
There are many avenues to do this. You can go educate yourself about buying properties with strong cash-flow. You can learn how to find these properties. You can then learn how to make an offer, do the due diligence and study the financials of a property. You can learn which markets in the USA are still doing well. If you’re lucky enough to find a building and buy it, you can learn to manage it. Then learn to manage it well. Hopefully, your money is still yours, and your learning curve hasn’t depleted what you had.
If all of this sounds a little overwhelming, not to worry. Partner with someone doing it. I started doing real estate deals in 1996, and have some hard-fought experience under my belt. I’ve been doing all of those things I just listed for quite some time, and have learned many lessons and pitfalls to watch out for in the process. Take your time and read, listen and learn. You'll succeed if you're smart about it.
The last few years have been a challenge for all of us. But the future can be and should be one of great change - Change that can turn loss into gain!
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