EP 3: Is Real Estate Right For You?

Are you frustrated watching your hard earned money ride the knee jerking Wall street roller coaster? Are you looking to diversify into alternate investments and set them on autopilot to achieve financial freedom? It's time to learn the ways of the wealthy. It's time to Think Outside the Stocks with your host Madhvi Jain, an immigrant from India and ex IT professional who will bring you industry experts to illustrate a passive and holistic financial approach to build not just passive income but but also your generational wealth. Madvi is on a mission to change the financial trajectory of one family at a time. And a thousand more to go. Are you going to be part of this vision? And now without further ado, here is the host of Think Outside the Stocks, Madhvi Jain.

Hey, hey, hey. Welcome to Think Outside the Stocks episode number three. I'm your host Madhvi Chen and thank you so much for joining us again today in episode number three. We are going to continue our short course and today's module is going to be is real estate even right investment for you? So let's jump right in. We know that world's richest people have become millionaires by participating in real estate. So why real estate today? Let's take a look at the advantages of the real estate. The advantages of real estate is one that it builds cash flow. It provides you that true diversification outside of the stock market, it provides the advantages of leverage and we will talk about it what it means in a minute. It also gives you advantages in terms of taxes and hey, finally it helps you increase your net worth right. Now let's take a look at these advantages one by one. Number one, how does it build cash flow? It's pretty simple, right? You get the rental income, you have your expenses. When it comes to mortgage payments, the property tax, the insurance and other maintenance items, you reduce the expenses from your income and what you are left with is your cash flow. You start building this cash flow as your income and slowly you will start creating this passive streams of income for you. The second advantage, true diversification outside of the stock market. This is not just about participating in REITs but in real estate, the direct real estate investments. We can have various investment types. We can diversify across the emerging market. And lastly, it is not tied to that stock market volatility. So no wonder Andrew Carnegie says that the 90% of world's millionaires are created through real estate. The second advantage is leverage. If you have to purchase a rental property which is 100k of value, not in this world, not in these times, but still consider that 100k of investment. How much money do you have to bring to the table? About 20, 25% as a down payment, say 25,000 invested towards this 100k investment. That's the 75% leverage, that is the loan that you will get from from the bank if this property appreciates 25%. So from 100k it becomes 125k. That's 25,000 in profit. But to start with, you had invested just 25k into it. So this is 100% profit. Can you do that with your stocks? Can you create this leverage situation with your stocks? Next, it provides you multiple tax advantages. Now you're thinking about that investor point of view. First, you take your expense write off, you take your interest write off. And there is something called depreciation benefit in a rental real estate which is actually a paper loss that you can write off on your income. So here it's providing you the 3 level of tax advantages to your rental income. So most likely your cash flow, a majority of your cash flow becomes tax smart. And next, when you sell this property, it adds tremendous amount of value in your net worth in your generational wealth. Because first of all it has appreciated over the period of time. And secondly, when the rent was paying to your mortgages and mortgage was getting paid in principal and interest, the principal part created equity for you. So the two fold appreciation and equity is increasing your net worth when you sell this house. And my favorite reason why I like it because it's a risk managed investments. It is backed by a real tangible asset like stock market. It's not going to go up and down and have that fluctuation of prices. Secondly, it is protected against disasters. You purchase the insurance policy on these houses. So if something happens like fire or other natural disasters, the this property is going to have some insurance and that protection. So by having this risk managed asset, you are actually looking at capital preservation perspective and a risk managed investment. So if the real estate is this incredible way of building cash flow, provide to diversification, provide leverage advantages, tax advantages and build your net worth, how do we do it? Most likely busy professionals like you have dwell into the real estate world by being a landlord, by renting out properties and by creating one or more rental real estate, a rental portfolio so you can participate in this real estate realm. In our next module of creating active income with passive real estate investments, we will talk about is rental real estate really a passive stream of income? Thank you for listening. Episode number three and in our next episode, episode number four we are going to talk to the author of my most favorite book, in fact the book that I Live and Breathe by Go Giver. The co author of this book, Bob Burg, is going to join us in the next episode and you might think that what is Bob Burke, the author of Go Giver has to do with Think Outside the Stocks? Well, Bob is going to talk about his Go Giver philosophy. So if you have that purpose and passion in your mind and you're thinking twice about implementing it with the Go Giver's way, Bob's way, you are going to look at how you can be successful in your purpose and passion. So trust me, even if it is little off track, it will make tremendous sense to you. And we will also talk to Bob about how does he think outside the stocks and what and who helps him to keep this entire financial structure on track. So stay tuned for episode number four.

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