| It seems like a matter of philosophy. There are going to be distinct advantages and disadvantages with any investment philosophy you wish to make your own. The real question is what are your long term goals? This is how I see real estate investment. PROS
- After paying off the mortgage you can still sell the house for its current value. If you select wisely, this is an additional investment.
- Monthly income that is generated as safely as possible. Since you can select a good market to invest in, and even select who is moving in. You have as much security as in a monthly payout as you are ever going to get.
- Can be used to leverage other investments. Equity can be an incredible tool.
- Makes your credit score and personal financial statement look amazing. If profitable, of course.
- You can invest money to make continued improvements on the property. And potentially increase it's value.
- Can live there is your significant other kicks you out (haha) CONS
- Limited mobility. If you invest in real estate with are with it for a while.
- High initial cost. Unlike investing in stocks, it is difficult just to buy 10 shares google. You have invest quite a bit of personal capital.
- Ties your investment to the community. Which may be a positive if you don't like the swings of the investment market. To say that an investment can be unsafe, or it is changing from a way you know how to make money to a way you don't, is an invalid reason not to do it. Any investment can be unsafe. Business lose value all the time. General Motors has lost value consistently, buying there stock doesn't mean that Google Stock isn't going to be a great idea. As for a learning curve, there was plenty to learn about stocks while learning to invest in those. There was plenty to learn about your startup before you could make it profitable. There will be plenty to learn about real estate as well. Ultimately, what are your investment goals? How much money do you need, and how are you comfortable spending? Do you need money for huge investments, or are you content to have a steady safe income? I love the idea of real estate investing just because it seems like it could replace the income from my job. Therefore, I would not have to work. Also, it gives you a base of credit to allow massive loans for massive expansions in business. Also, if you don't screw it up, it can be multi-generational income. Which is something you can not say for capital style investment. |
His point is to define "rich" as having your assets (which he defines as investments that produce income) produce enough income to cover your expenses. As soon as you reach that point, you can quit your day job and focus on managing your assets.
The point about redefining the meaning of asset is a good one - real-estate is his thing too - but he points out that the cycle joe average has been playing (at least, pre-crash) where he gets a mortgage, waits for the market to go up, then sells, then just goes out and mortgages a bigger/better place and keeps doing that...... he chooses not to define this as an Asset in this context because it's not generating income for you - it's a constant liability and bill you have to pay.