The American job force began losing its morale for the traditional 40 hour work week only to commute away from home day after day for another man’s dream in about the mid 90’s; about the time the .com craze was in full effect and the power of the internet was being realized. The Covid Pandemic was a catalyst to this sentiment as people were laid off, given less hours or made to follow unfounded policies from overzealous administrators. All of a sudden America & the rest of the world began to understand that to be self-sufficient is to survive in uncertain times.
The wake of devastation the Covid virus left behind was horrific, turning the service industry on its head, effected the supply chain and closed down century old businesses for good. But, there is always some kind of silver lining if you choose to look for it: Much to our good fortune, it couldn’t have happened at a time more aptly suited for people to adapt and support themselves through exciting and empowering ways. That is likely because more than ever, there are alternative avenues for making money with less effort and in quantities large enough to change their lives with. We have seen teenagers make millions on youtube. We have seen people with no knowledge of the stock market ride the crypto wave and make more in a few days than some do in lifetimes. We live in the era of podcast, NFTs, Etsy & Onlyfans, so why wouldn’t people naturally seek an easier way to support themselves.
What can be lost in the fast-paced practice of dreamers & opportunist chase for the next big payout, is the probability of success in any given venture towards financial freedom. So I’ll ask this of you: What is the most assured way of getting there? Not how fast, not how rich, but how likely. The aforementioned concepts have all shared huge effects on wealth both positive & negative but only one way has had such proven & repeatable success for so many millions of people that it is the tendency of all investors to fall back on when other avenues become too adverse. Would you believe that the long term stability of the real estate market is where stock traders flee to when their market crashes; as it has and will again. It is Real Estate, The Great American equalizer that has the ability to make any man wealthy but also contains the priceless ability to have more of the one valuable thing that you can’t get back once its gone… time.
While it may not be as easy to get there, in theory, as say youtubing or obtaining Onlyfans “VIPS” to look at your feet, it IS something that anyone who knows the formula can succeed in with patiences and persistance. Passive income is anything that makes you money while you sleep… or fly, or fish or golf. The passive income an investor earns in real estate is lucrative on many levels, such as that when you receive rent on your property, you not only put money in your pocket every month but you are also paying down any loan taken out on your asset which gives you equity build in the same breath.
Here is where the real life changing opportunity can arise & if your are prepared you will cease it. That is acting when the time is right to sell but instead of just selling, you exchange the property for another. Exchange? Yes, a completely legal way to aquire more property while minimizing the amount of gains you can be taxed on known as a 1031 Exchange. So if you just sell at a large profit and walk away from the real estate game, sure you might have made a little money, but the amount the government takes encourages reinvestment in its very nature. This keeps Sam, that Uncle nobody thinks is fun, out of your pocket as much as possible through the sheer act of reinvesting some of that accumulated wealth in a very legal, but very under-utilized way that a 1031 provides.
Here is the formula in a nutshell:
1.) Save money + establish great credit.
2.) Become at least moderately versed in Cap rate, ROI, expenses, depreciation, rental market demand and then interview a few realtors till one shares a firm grasp of these concepts and identifies themselves as an actual investment realtor.
3.) Be strategic, patient and open minded until you purchase your first investment property.
4.) Interview and acquire reliable tenants (The most common way new investors lose money or fall victim to the trauma of bad tenants is failure to do proper vetting: Credit/Background check, personal referrals and a serious security deposit).
5.) Use a small portion of your return to add upgrades throughout ownership instead of all at once. If there is an opportunity to build out more rentable units, I would take advantage of that.
6.) After 2 years of ownership, Sell the property when you stand to make a substantial profit and when opportunity presents itself to use a 1031 Exchange to acquire a property of greater value and/or more properties. You have 45 days after the sale of your relinquished property to identify exchange properties and 180 days to close.
7.) Rinse, repeat & grow a real estate portfolio which gives you the financial freedom to do exactly what you want to do with your time.
Those seven steps are your stairway to continued and lasting success and it begins and ends with property ownership. Unlike a standard real estate transaction, because there are two escrows and many parties involved, a 1031 Exchange intermediary is used to assure the smooth transition for everyone involved.
Here is where it gets interesting, accumulating rental properties via 1031 isn’t the only way to create wealth in real estate. If you are a Veteran, I have a protocol for you. If you are a contractor or have affordable access to one as well as bulk, quality material and storage, then I have another protocol for you! From flipping to building a guest house to offset your mortgage, Realty is the key to abundance for so many.
Here in the United States, where it isn’t necessarily the land of opportunity but the opportunity for land that gives real estate the intrinsic ability to make a poor man rich and a rich man poor. A great equalizer for so many to create the freedom to take ownership of your own time exist, tried and true in what I’ve shared with you today. So now that you know, let us shift the sands of time with winds of change.
-Written by Devin J. Reese, CRS
Real Estate Advisor:
Investment & Residential Specialist
*Any unauthorized use of the authors intellectual property will be pursued to the fullest extend of the law.