286- Real Estate Investing
b"If you think that because real estate lets you leverage your investment, the rate of return is much higher than a business/stock investment, and is, therefore a better place for beginner investors to put their money, think again. This is a commonly held idea that is completely mistaken.\\xa0\\n\\nPhil and other expert investors including Warren Buffett have owned real estate, everything from subdivisions to large farms, apartments, commercial property, and single-family homes. If you were to do a real estate versus business/stock ownership returns comparison, we could pit the hottest real estate markets against the hottest Rule #1 investors. But it seems better to use the average real estate market and the average Rule #1 investor.\\n\\nAs Rule #1 investors, we incur almost no management responsibility\\u2014a significant advantage. We have to spend about 15 minutes a week reading and researching, and that\\u2019s it. We\\u2019re required to know the basics of Rule #1 investing, but it\\u2019s easier to learn than real estate investing once you know the advantages.\\xa0\\n\\nLet\\u2019s say a Rule #1 investor had $50,000 to invest. They could buy a wonderful business at an attractive price, and when it gets unattractive, sell and buy another. We do that for 30 years, averaging 15%. After 30 years, the investment would be worth $3.3 million.\\n\\nNow compare that to a real estate investment. Say the average person buys a $250,000 house for $50,000 down with a 6%, 30-year fixed mortgage. Their payments are $1,200 a month, but they rent it for $1,200 and cover the mortgage payments. They\\u2019re in the hole for insurance, maintenance, advertising, and taxes. Their only choice would be to re-leverage their investment and buy more real estate\\u2014which is a whole lot different than being retired, isn\\u2019t it?\\n\\nNow that you're starting to think about what assets you want to invest in, make sure you understand the distinguishing characteristics to look for when buying a piece of a company. Does the business have honest management, a large moat, margin of safety, and meaning to you? Research those companies more deeply to determine which abide by Rule #1 principles. If their numbers look good, these are companies you want to add to your watchlist.\\n\\nToday, Danielle and Phil discuss whether or not it\\u2019s possible to make real estate a beneficial component of a high-performing financial portfolio.\\n\\nLearn more about buying stocks within your circle of competence with this 3 Circles Exercise Guide! Click here to download: https://bit.ly/2F9rn9C\\nLearn more about your ad choices. Visit megaphone.fm/adchoices"