Real Estate Investing Basics

Why Invest In Real Estate?

Expertise:
72 Articles Written
Why Invest in Real Estate?

“It’s tangible, it’s solid, it’s beautiful. It’s artistic, from my standpoint, and I just love real estate.” -Donald Trump

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Let me ask you a very simple, yet profound question: Why invest in real estate? Understanding the answer or answers to this question will help you along your investment career.

The following are a few common answers I have received when I ask the question:

Why People Invest in Real Estate

Freedom:

Frankly, this is why I started investing in real estate.  I was star struck with the idea of riches that would give me the freedom to stop working for someone else.  I have a great job that I absolutely love that pays the bills but I still wanted long term freedom.  It seems so easy:  you buy-and-hold cash flow properties over time, sacrificing and delaying gratification; in five, ten or twenty years you have a pile of monthly cash flow and you get freedom.

I suspect most people reading this blog would agree that freedom is their main driver for investing in real estate investing.

Control:

Some investors I speak with want real estate to give them some level of control over their financial lives because, let’s face it, we have zero control in financial investments outside of real estate investing.

Alternatives:

Some investors will admit that real estate is nothing more than a portion of their overall investment portfolio.  Perhaps they have divided their portfolio to include mutual funds, stocks, and real estate investment, etc.  Or maybe they are looking to achieve higher returns out of their cash through active management.

Job, Escape or Interest:

A few investors look at real estate investing as a career or chance to own a company.  Even others look at real estate as a means to eventually replace the job or career they hate.  Many dive in head first, as if they are running away from something versus running towards something.

Creating Value or Thrill of Hunt:

I know many investors who would rather tell you about the thrill of chasing a deal down or their last remodel.  They pursue that addictive feeling and are always looking for the next rush or opportunity to turn the next ugly duckling into a beautiful swan.

Options:

After many years of real estate investing I have come to realize that I love investing in real estate because it has given us so many more options. We have options to keep working, buying, and traveling, etc.  The more we invest the more doors it opens up.

Why I Invest in Real Estate

It is hard for me to admit but I was wrong in the beginning of my career.  I fell hard for the sexy pitch of earning freedom.  Frankly, freedom is ok but I want options, and truth be told I want lots of options. That is why I keep working so hard to find the next deal, to find the next investor, and to keep building our growing portfolio.

Some might think Freedom and Options are the same thing.  But to me Freedom really meant I could stop doing something while Options means I can do other things. Having lived through this realization – I can tell you firsthand that having options is better than having freedom.  I would say you get freedom first and then you build or acquire options.

I write this post for two reasons.  First, I want to acknowledge that I was wrong.  I am not chasing freedom rather, I am creating options.  Second, I want each reader to be honest, figure out what Real Estate Investing means to his or her self.  I suspect that no matter why you think you are investing, if you peel back the onion you are really looking to create options for you and your family.

Good Investing

Photo: Eric

    Jason Grote
    Replied almost 7 years ago
    These are the things that drew us in as well! We don’t have to chase freedom… We live in America! Americans are already free, but you are so right, many of us do not have options. The potential to have options is afforded to us by the many freedoms we have in this country. That is why foreigners are flooding into the land of opportunity. Most of them succeed while many born in this country continue struggling. The difference? They position themselves. Great thought provoking post Michael! POSITION YOURSELF FOR OPTIONS… That’ll preach!
    Mike Z
    Replied almost 7 years ago
    Jason Thank You. Good Investing
    Jeff Brown
    Replied almost 7 years ago
    The one with the most options wins. 🙂
    Ali
    Replied almost 7 years ago
    Oooh, I like this one Jeff! Options allow room for failure, because if one thing fails we can just go to something else. I think that is the problem for so many people- they rely solely on one security and assume or hope it never flunks out. Look how well that worked for people with the recent market crash. Options = awesome.
    Mike Z
    Replied almost 7 years ago
    Jeff Wish I had closed with that statement!!! Perfect Good Investing
    Julian Mear
    Replied almost 7 years ago
    Your post is well articulated, couldn’t agree more. I was pursuing a career as a professional snowboarder when I broke my back. I realized that I needed to find another option for myself so that I could have the financial freedom and time to spend on the other things I love. Luckily my dad has been involved as a RE investor for about 15 years and I was able to hop on board (no pun intended), soon to find that RE was a passion of mine as well. Our company Winvest focuses on providing hassle free turnkey investments for the busy working professional. But as you said, investing creates multiple outlets and options ultimately leading to passive income and more free time! Ali in the video is one of our partners, and has been able to retire from his corporate job, due to RE!
    Michael
    Replied almost 7 years ago
    Well put Michael. OPTIONS That is so true. Freedom can be defined in many different ways and everybody’s version of freedom could be different. But to have the option to decide what you make of freedom is the key. Good post and thanks for sharing. I like Jeff’s humorous Quote – The one with the most options wins
    Mike Z
    Replied almost 7 years ago
    Julian, Best of Luck Good Investing
    Michael
    Replied almost 7 years ago
    Well put Michael. OPTIONS That is so true. Freedom can be defined in many different ways and everybody’s version of freedom could be different. But to have the option to decide what you make of freedom is the key. Good post and thanks for sharing. I like Jeff’s humorous Quote – The one with the most options wins
    John Wahlgren
    Replied almost 7 years ago
    Great post! Very inspiring for a newbie like me.
    Mike Z
    Replied almost 7 years ago
    John Thank you and Best of Luck Good Investing
    Will Barnard
    Replied almost 7 years ago
    Nice blog post. As Jeff stated, having options is key and RE gives you more options than any other investment vehicle known to man or beast. I love options, and I did this biz for many of the reasons you listed above, plus I was born to be an entrepreneur and have been self employed since the old age of 19. Wow, 20 years jets by quick.
    Mike Z
    Replied almost 7 years ago
    Will Great story. Wish I had started at 19. Good Investing
    Cheryl
    Replied almost 7 years ago
    I’m with the Donald on this one. He nailed exactly why I love real estate. And from your list, I’m all about Creating Value/Thrill of the Hunt – with emphasis on the last part of your statement – “opportunity to turn the next ugly duckling into a beautiful swan.” Great post!
    Mike Z
    Replied almost 7 years ago
    Cheryl, I still love the hunt and turning an ugly property into a performing asset Good Investing
    Herbert Heagh-Avritt
    Replied about 6 years ago
    Mike, I thought you would like to know that your words are still inspiring people today. I really enjoyed your story, and I applaud that you realized you had achieved freedom, and that it keeps getting better. Thank you for sharing.
    Brian
    Replied about 6 years ago
    Well…I would have also said financial freedom. However, I think Michael persuaded me otherwise. In my financial freedom vision, I didn’t exactly see myself sitting around doing nothing (okay maybe I did envision some traveling). In my financial freedom vision I usually pictured myself doing other things that I wanted to do…or in Michael’s words having the option to do other things that I wanted to do. Good article, Michael!
    Brian
    Replied about 6 years ago
    Well…I would have also said financial freedom. However, I think Michael persuaded me otherwise. In my financial freedom vision, I didn’t exactly see myself sitting around doing nothing (okay maybe I did envision some traveling). In my financial freedom vision I usually pictured myself doing other things that I wanted to do…or in Michael’s words having the option to do other things that I wanted to do. Good article, Michael!
    Charles Brady
    Replied about 6 years ago
    Mike: First thank you! This is not only true, but a very important concept that I feel we should all internalize. Options, I have worked for many companies and came close, but my close call was stopped by one persons lack of identity or purpose. In this it is my focus and desire that can bring to fruition these options. I feel deeply that at 59, I can still make options: if I dedicate my will and drive to doing so. This really made me rethink and increased my commitment to Real Estate. So again, thank you. Excellent perspective.
    Frank
    Replied over 5 years ago
    Great Article Michael…I agree…I do want the financial freedom but having Options is huge. I’m getting ready to dive into real estate investing and will use my 9-5 job as one use of leverage for purchasing properties. It’ll be nice to have the option to walk away from my day job if I choose to that. Thanks for Posting !
    Katherine T. Real estate investor from Alabaster, Alabama
    Replied about 5 years ago
    Great posts that have precisely articulated why I want to venture into real estate! As a novice, this is frankly intimidating but the desire of having the option of spending quality time with my growing kids trumps the fear of the challenges ahead. For now, I am working an 8-5 job and will be using this income to get me started. Planning on enrolling in the real estate school to educate myself on basics this month. Any advise on getting started is very welcome.
    Nkiruka Okeke Investor from Manassas, Virginia
    Replied over 4 years ago
    Because you have the option to be free.
    Nkiruka Okeke Investor from Manassas, Virginia
    Replied over 4 years ago
    I think we all go through different stages. As we learn, we can evolve or we could be highly influenced by our circumstances. You have convinced me that options are the best, It’s like freedom squared.
    Wilson Narvasa from Goleta, California
    Replied over 4 years ago
    Control: of my own destiny Creating Value: From a business stand point, I’d hope to make good decisions to help scale. Thrill of the Hunt: I see opportunity where others might see a danger. Real estate investing is a game that involves risk, but through education that risk is reduced creating better rewards. Options: This really encompasses the top reasons. Through real estate I feel I’ll be able to have the freedom to make my own path; choose what type of business model i see could work; education myself in the subjects that are actually important in life; and finally the ability to choose family over work as opposed to hoping to find time for family. Thanks for the Article Mike!
    Judy E Smith
    Replied about 4 years ago
    Will you [please mail me the book. I do not own a computer or website as of yet. I am willing to pay for the book and postage, Michael.: Thank you.
    Account Closed from Houston, Texas
    Replied over 3 years ago
    Thanks Michael, This is a great read listing many of the reasons that most of us invest or have the interest to invest.
    Stacey Pollard
    Replied almost 3 years ago
    Thanks for the well-written article. I am newbie to REI who wants to create options that will allow be more financially stable and be ale to give back to my family and community.
    Steven Winfield Investor from Jamaica, New York
    Replied over 1 year ago
    This post was a great read. I am a bricklayer in Brooklyn NY. The pay is great and it helps me to buy my first property and is making a profit. like Jim Rohn says profits are better than wages. and when you make enough profit that brings you more and more portions to do bigger and better things. thank you BiggerPockets and you mike for bringing us this information
    Ruth Powell
    Replied over 1 year ago
    Great article. What is your five step process? Thanks.
    Sean Venard from Stanford, California
    Replied about 1 year ago
    Great points Michael! I particularly am attracted to the ability to impact cash flow and add value. I am not at all confident I can do that with equities, but it seems to eminently possible in real estate. Your last point is very wise; its tempting and easy to run away from something, but ultimately you need to run towards something. Freedom from and options to.
    Murali Sundaram
    Replied 9 months ago
    Nice article Michael. What is your 5 step process?
    Ken Bailey Contractor from yucca valley, ca
    Replied 7 months ago
    Thanks Michael, At least I know for sure I am chasing options.
    Phillip Anjorin
    Replied 7 months ago
    Stopped reading at Donald Trump. I don’t want to dupe people, i want to invest honestly. Thanks.