11 Ways Real Estate Makes You Richer Than Stocks

Ashley:
Have you ever felt like you’re working harder but your savings aren’t moving an inch? If you’re dumping every spare dollar into stocks hoping you’re crypto, it’s big, or crossing your fingers hoping to retire 30 years from now. Today we’re going to shake things up and let you know everything there is to know about wealth building

Tony:
Real estate isn’t just for the rich or experienced, it’s actually the fastest way to start building tangible wealth even if you’re starting out with almost nothing. And today we’ve got 11 undeniable reasons why real estate should be your next move, especially if you’ve never invested before.

Ashley:
This is the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And with that, let’s jump into the first reason. Now, reason number one is leverage. You can control a several hundred thousand dollars asset with sometimes nothing, sometimes maybe a percentage of what it costs. And I think most other types of wealth building activities, it’s a little bit harder to do that. Now if you’re buying maybe a business, you go out and get an SBA loan or you sell or finance that true, you can do it that way. But I think about stocks, you probably more well versed in this than I am, but I can’t walk into Chase and say, Hey, can I get, I want to buy a million dollars worth of stock. Can you give me 800,000 of that? I’m just going to give you 200,000. So the leverage ability to have a small percentage of the overall value of this asset come from you directly, I think is a big important reason why more folks think about investing in real estate.

Ashley:
I always remember when I was younger, my uncle was talking about somebody who borrowed money to invest in the stock market and he was just talking like, why would they borrow money to invest? You should save your money and invest it. That’s such a bad idea to owe the bank money and then you’re just investing in the stock market. Don’t take on that debt, blah, blah, blah. And that always stuck with me. And I find it funny today because as a real estate investor, I take on debt all the time to invest, but I’m doing best. But I do think there’s a different mindset around investing in stocks with taking a loan from the bank to invest in stocks versus taking a loan from the bank to invest in a rental property. So I guess technically you could borrow money to invest in the stock market and pay it back every month, but you really have to run your numbers.

Ashley:
And I think that’s a big divide there is that you do have more control over the performance and analyzing a deal than you do over a stock. So if you’re getting dividends from the stock and you say, oh, I’m just going to use my dividend payments to pay back my loan every month, my loan payment, and I’m going to make X amount of dollars in cashflow, I don’t know if that what the term would technically be called. I think that’s a lot harder to analyze and to gauge compared to real estate. So I would say not to borrow money to invest in the stock market or other investments, but for real estate I think you have that control. There’s ways to know what your numbers are going to be and yes, there are circumstances that come up when you need to put in a capital improvement, things like that, but that is also improving the value of the property.

Ashley:
So there’s those different things. As far as the business side, buying a business, yes, you can go out and get the SBA loan, there are a million hoops to have to jump through sometimes I had a partner who bought a couple of businesses and they actually took his rental properties as collateral. So not only were they lending towards the business, but he had to give up all that equity and put those properties as collateral. And so until he pays off this SBA loan, those properties, he can’t even tap into that equity because they were collateral above and beyond the business value. So I would say SBA loans aren’t as great as mortgages either because it’s not as straightforward too.

Tony:
I think there’s some misconceptions that ash around how much cash do you actually need to control the piece of real estate? And a lot of Ricks just automatically assume, Hey, I’ve got to put down 20, 25, 30%. And yeah, while those are options, those loan products exist. We just had Jeff GaN on recently and he talked about all the different loan products that are popping up for real estate investors. And there are so many different options out there, some low down, some no down payments. I think we’ll touch on those a little bit later. But say you go out and buy a house hack, you could house hack your first real estate deal, FHA 3.5%, or if you’re a veteran, you can use a VA loan for zero down If you qualify for something like naco, which we’ve talked about a lot, 0% down. So again, the ability to go out there and get a true tangible appreciating asset for three and a half, five, 10, maybe 15% of the overall assets value is one of the unique parts of investing in real estate.

Ashley:
Yeah, I think one thing to add too on the business side is I think it is a lot easier to invest in a property, be a landlord for example, than it is to actually run a business. And I’m not saying as far as the time you have to put into it or things like that, it’s more of the laws, the rules, the regulations like paying workers’ comp, especially if you have employees for your business, paying workers’ comp, making sure you have all the insurance that you need, are you paying into their disability? What are the HR rules that you need to follow, making sure you’re doing payroll every week, getting your business, what types of license do you need? So I helped another investor start a couple businesses like an insurance agency. I started my own liquor store and especially doing ground up startup, those are a lot harder to get funding for the liquor store. I had to use cash to fund the whole thing, so that was a lot of liquor. That first liquor order was very, very expensive. But now I own all of our inventory and cash, so that’s great. But still I think it’s so much easier to get funding, have little money into something.

Tony:
That’s the first big reason. I’d say reason number two is you get cashflow today versus someday in the distant future, right? 401k is what’s the age of Ashley? 59 and a half that you can tap into your 401k funds. But what happens if you want some actual cash flow, some extra income today, you don’t want to have to wait however long you need to wait to hit that benchmark. And obviously with real estate, if you buy the right type of property, not only do you get paid this very low down payment option, but you also get the ability to maybe have some cash coming in on a monthly basis as well. And I don’t know, dividends pay maybe one or 2%, barely keeping up with inflation. So the idea that you get the long-term payoff but you also get some cash in your pocket today is another reason real estate is so attractive.

Ashley:
And I think to kind of add on to that piece as far as the cashflow, like with real estate or property, you have the opportunity to create additional income stream. So say this property has a garage, you can charge people to rent the garage, you could charge people like you live near a stadium. You could charge people to park in your parking lot. That is one of the best things I think there is about real estate is there is opportunity to generate additional revenue. So we just had a DFA on and she talked about building an A DU or a dad do onto an existing property to basically create two single family homes and generate, she was generating 300 K above and beyond in additional equity above and beyond what she was putting into building these properties. So that’s a huge chunk of equity to gain just from building an additional property or additional building on the property.

Tony:
I get it might not sound super sexy to say, yeah, I have this property, I’m making 200 bucks per month. But when you think about the work that goes into it after you own it, you’ve got a property manager in place, you can start stacking these up without it taking up an incredible amount of your time. And although it’s maybe not as passive as investing in stocks, the cashflow you’re getting for the effort that goes into, it’s probably a good return on your time. So I think that’s the second reason is that you get this ability to get cashflow today and if you keep buying, we interviewed Dave Meyer not too long ago and he said, my goal was just to very unsexy buy a couple of rentals every couple of years and do that for 15 years and I’ll be in a really good spot and I’m so happy he said that because he just simplified it in a way that I think a lot of rookies need to hear.

Tony:
You don’t have to do anything amazing. You don’t have to be a great marketer, you don’t have to be a great copywriter, you don’t have to be a great salesperson. You just got to know how to choose markets, analyze deals, and find good property managers. If you do that effectively over and over again, that $200 here, $300 there really starts to add up over time. And then I guess the other piece to this too is that rents go up, and we’ll talk about this a little bit more later, but it’s like the rent you’re getting today could be very different than the rent you’re getting 10 years from now. So it grows over time as well.

Ashley:
And from what I’ve seen at least is that your mortgage payment, the principal and interest will stay the same. If you’ve got a 30 year fixed rate, your insurance and your property taxes will increase. And as long as you’re not in Florida or somewhere where they’re doubling that your rent should outpace how much your mortgage payment is increasing with those expenses. So as time goes on, you’ll see that there becomes a wider and wider gap of profit that you’re making from the property.

Tony:
Alright, moving on to reason number three is that your tenants pay down your loan. If you’re investing in the stock market, maybe you’ve got employer match, but aside from that, you’re the only person who’s responsible for making sure that that amount is growing month over month and year over year. But when you own a piece of real estate, you sign a lease, tenants move in, or if you’re like me, maybe you have a guest staying at your property. If it’s a short-term rental, they are the people who are paying you the money that’s needed to cover your mortgage and hopefully a little bit more above and beyond that. So you don’t need to be disciplined in the way that you do with the 401k to make sure you’re stocking away money every month. It’s just going to happen automatically.

Ashley:
Yeah, I think that a big issue with this is that when someone, I guess when you’re growing up, you hear of retirement accounts and you hear that is that the standard way to invest when you get a job? You’ve got to invest into your 401k, you’ve got to invest into your retirement account. But really that is not the complete answer. You don’t have to follow that path. And I think this is one of the biggest eye-opening awakening things for me was the equity that gets built up in your property. It’s like, yes, your 401k, as you put money in over time, maybe your employer match, you see that grow, you see the compound interest of continuously investing in that. But what is also super amazing is when you own a property and after 10 years and 10 years can go fast, you look at like, oh my god, I have so much equity in that property.

Ashley:
And a huge part of that, it could be appreciation, but it is that loan pay down from your tenant paying that down for you and all of a sudden you can now tap into a hundred thousand dollars in equity from this property and it’s still cash flowing free every month. So it’s still bringing in money and you’re building all this wealth. And I think that was a big realization for me of like, okay, yeah, I bought these $200, $150 cashflowing properties for years and it’s like, okay, yeah, that adds up to a good chunk of money. And over time that cashflow has increased and it’s great. But the real aha moment for me was when I looked at how much my equity has grown over the past 10 years in some of the properties and each additional, and I think that is the real wealth builder right there. It’s not usually the cashflow, it’s the equity from the tenant mortgage pay down and the appreciation in the property.

Tony:
Even in a flat market, it’d say that there’s no appreciation, you’re still going to win because of this loan pay down. And we had David Green in the podcast at one point and he talked about just like if you just buy a property, put it on a 15 year fixed mortgage, and you do that every year, every couple of years, it’s like every 15 years you’re going to have a property getting paid off where there’s no loan on that property anymore and you own it free and clear. Now all of that cashflow is yours, right, aside from your operating expenses and property taxes. But yeah, the ability to have the loan going down while the property value is going up. Another big reason why investing in real estate is such a big win.

Ashley:
Next we’ll cover the legal IRS twists that can wipe out part of your W2 tax bill plus how 8% inflation might actually flatten your wallet if you’re holding property. All that right after a quick word from today’s show sponsors, okay, you’ve got the quick wins. Let’s see how real estate can protect and accelerate your wealth.

Tony:
Alright, so reason number four, there are multiple ways to build wealth. We talked about this a little bit before on reason number three, but stocks, I guess you really only win in one condition and that’s if the value of those stocks go up. But if the market goes sideways for a few years, and I think this is the worst for people who are nearing retirement age and then the market does something crazy and it’s like right when they’re looking to retire, they see this big drop in their stock portfolio that sucks. And even for new investors, I think the volatility, the up and down of the stock market can maybe rattle new investors and get them to sell at the wrong time. But with real estate, I think there’s multiple ways that you can really build well. So we already talked about your loan balance being paid down by your guests.

Tony:
There’s the appreciation aspect of just the value of that going up over time. There’s the cashflow component which we discussed, and then you also have the ability to get tax benefits. We have a very, right now a very real estate investing friendly administration and the tax benefits of investing in real estate just got better. So you’re not just looking at, man, I need the price of this stock to go up. There’s a lot of different factors that can help you build wealth when it comes to owning real estate. Yeah, it even reminds me of the first deal that I ever did and it kind of combines a lot of what we’ve talked about already, but my very first real estate deal, I had a very low down payment option of a $0 out of pocket. So my cash to acquire this asset was pretty much zero.

Tony:
The property I purchased for $100,000, I had a loan that covered the purchase price and the renovation. And when I was done at appre for about $250,000, so with $0 out pocket, I was able to get an asset that was valued at $250,000. Then in addition to owning the asset, I got tenants that moved in, paid me rent, and that was cash flow close to about I think 150 to 200 bucks a month. Not life-changing money, but again, no cash out of pocket asset that appreciated and I’m getting cash flow every single month. It’s hard to beat that, hard to beat that. So again, multiple ways to build wealth when you’re doing real estate the right way.

Ashley:
I had a situation where I was at a bank and I was getting a line of credit with my partner and he was getting a line of credit on a property and we were talking to the loan officer as we’re closing on our line of credits together and we’re telling him about this property that we just got under contract. We were so excited, it was like $37,000, it’s duplex, and we were going to ask our private money lender to lend on it. I had the actual BiggerPockets calculator report with me. I was showing my partner while we were waiting. So I hand it to the loan officer er, he goes, well, I probably could give you a better interest rate, let me know what your private lender is doing. And we just kind of look at each other. So we’re like, well, what could you do?

Ashley:
And so he said, I’ll give you a 90 day unsecured loan. So no collateral not backed for anything with the exact dollar amount we needed to close on that property. And I can’t remember what the interest rate was on that 90 day loan, but very minimal. So basically the loan started the day we closed on the property and he just wanted us to come back to that same bank and refinance into a long-term loan to pay off that short-term loan. And so we did, and we got an appraisal within a week. The only thing we had done to the property in that week was put a $800 fridge in there and the property appraised for 55,000 or something like that. And they let us take 80% of it, and me and my partner each walked away with $2,000 each in cash that was above and beyond what we needed to pay off that loan, the 90 day loan, and to put some reserves in the property and the bank account for the property. And we each got 2K each. And so that was like, wow, this is so cool that there are this many options out there to build wealth and that we were able to put money back into our pocket and our tenants will pay back that 2K plus interest for each of us along with the property

Tony:
Hard to beat. There’s so much flexibility in how you can approach these deals. So yeah. Alright, reason number five is real estate investing is one of the best avenues to build wealth when it comes to taxes and reducing your taxable income. The average American’s probably going to lose 20 to 35 to maybe even 40% of their earned income to taxes on an annual basis. And there are a lot of people who dread that April deadline every single year. However, again, real estate investing allows you to reduce or sometimes completely eliminate not only your income earned through real estate investing, but your income earned through other places as well through your W2 income. I’ll give you guys a quick example. We invest a lot in short-term rentals obviously, and there’s something called the short-term rental tax loophole. It’s not real loophole, it’s like in the IRS tax code.

Tony:
But basically if you do what’s called material participation, if you materially participate inside of your short-term rental, managing it, talking to guests, setting up, doing whatever, then you have the ability to offset some of your paper losses against other forms of active income, including your W2 income. And I’ve met a lot of short-term rental investors. I’ve worked with a lot of short-term rental investors who have been able to eliminate their tax bill from their day jobs by investing in short-term rentals, qualifying for material participation, performing a cost segregation study, getting bonus appreciation. And I’m throwing out a lot of terms right here that you may not be familiar with, but just know if you get a good TPA, you buy a good piece of real estate, there is an opportunity to get your W2 taxable income down to zero. So imagine even if you buy a property and you just break even, you get no cashflow, but you get the ability to offset or reduce or eliminate the taxes you’re paying in your day job, is that worth it? I know people who just buy a short term rental every single year for no reason other than to eliminate their tax burden from their day job. And is that not a great strategy? How much more money are you getting back on an annual basis while still getting the appreciation that we talked about while still maybe getting some of the cashflow we talked about? So the tax benefits I think are something that a lot of rookies overlook when it comes to investing in real estate.

Ashley:
This was also something that took me a while to realize that okay, I’m paying X amount in taxes from my W2, but if I’m able to offset that, that’s money back in my pocket. So a great way to look at it is if, okay, so if you make 200 KA year, but maybe you do, I love the example with a live and flip where you live in the property for two years and then you sell it and since it was your primary residence for two of the last five years, you don’t have to pay any taxes on the gain. So if you made 200 K, that could be you making 400 K in your W2 depending what tax bracket you’re in and other things you have going on, but most likely you’re paying close to 50% tax as if you’re just straight W2 and have no other credits or deductions or anything like that.

Ashley:
So I always think of it that way too. I don’t have to work as hard if I take advantage of all of these tax savings, he why I’m doing a live and flip right now so that in a year and a half to go, I can have a big payday and not have to pay any taxes on it. And yeah, it’s a little bit of a sacrifice not living in a very nice remodeled home and slowly getting remodeled, but you could also do a live and flip and completely remodel the home before you actually move into the property. But the live and flip strategy with selling your property for tax-free gain, I think another big one is the short-term rental loophole. I’m doing two of my first cost eggs for this year going through that, learning that whole side of things. But yeah, you can’t get these kind of write-offs and these deductions and these tax advantages, these legal loopholes with investing in a lot of other asset classes.

Tony:
I think that’s why there’s the saying that whatever, like 80% of millionaires own real estate, and I don’t think it’s necessarily because all of them maybe started off in real estate, but they realize that maybe they’ve got a really successful business and real estate is the best way to protect all of that income that they’re making. So again, even if you don’t want to build a massive portfolio, maybe you’ve already got a really successful day job that you enjoy, maybe you’ve got a really successful business that you plan to keep still, including real estate as part of your wealth building strategy can help just to offset the taxes you’re paying on those other forms of income. Alright, reason number six, real estate is actually a good hedge against inflation. We saw inflation go crazy post COVID and whatever eggs were $13 a dozen. But what we saw was that real estate prices and rent for the most part paced with inflation. And while inflation was going crazy and egg prices were going up and all these different things, we also saw home value skyrocket during that same time. So when you think about trying to make sure that the money you have sitting in, I don’t know your savings account losing value, had you parked that same money into a real estate deal, it would’ve gone up or maybe even exceeded what inflation was doing. So inflation sucks in a lot of different ways, but if you own real estate, it actually can be something that boosts your portfolio.

Ashley:
Yeah, and I think a big thing about this too is that inflation are a lot of things that it impacts you directly, especially when it’s a lot of things you have to buy and with inflation, with rent, you’re on the other side of things. So you are seeing inflation when you go to the supermarket, you’re buying eggs, things like that. And usually as it goes through the supply chain that inflation is being impacted by everyone. And most of the time it’s not like someone is making X amount and benefiting off of the inflation where you do see it benefiting as a real estate investor, your mortgage payment stays fixed as I harped on before. So as rents increase and property values increase, the amount that you are paying in your mortgage payment is most likely the largest cost that you will have on your property and it is staying fixed. And I think that is one of the greatest values. Like as I said, the insurance, the property taxes can go up, but that is staying fixed, that your largest payment, most likely, hopefully mere monthly payment is that amount and that is staying fixed. And I think that’s where inflation can really be a benefit to you.

Tony:
Alright, reason number seven, you can force appreciation on real estate. You can’t call Tim Cook and say, Tim, I need the value of Apple stock to go up 10% in the next 90 days. But you can with a piece of real estate, buy maybe an undeveloped piece of land, you can buy an old fixer upper type of home and over the course of 3, 6, 9, 12 months, however long it takes, improve the value of that property to a point where now you can maybe tap into some of that equity with stocks. A lot of that’s outside of your control, you just got to ride it out and have the patience to know that over time, historically the stock market has gone up. But I think waiting at times can make someone feel a little powerless. But with real estate investing, paint, lowering, siding, bedrooms, all of those things can raise value instantly.

Tony:
So much so that there’s an entire strategy called the burr strategy where you buy, you rehab, you rent it, you refinance, and in that process you’re able to improve the value of the property, maybe get some cash back and then rent that thing out so you get the cashflow as well. So the ability to force appreciation, something that you don’t really have in the stock market. I will say if you buy a business, there is the ability to maybe force appreciation in a business, right? Because you can go in, find a business that’s under operating or mismanaged and improve efficiency. So that does exist there. But I guess when we talk about real estate versus stocks, very stark contrast in your ability to force appreciation. And I talked about this a little bit earlier, one of the earlier reasons, but remember my first deal, I bought it for 100 k, I spent about 60 k on the rehab and it appraised for $250,000 and we’re talking about a three or maybe four month rehab.

Tony:
So where in three or four months can I go out and almost double the value of what I bought something for in real estate? You can. So I think that’s the major benefit here. Reason number eight is that real estate is tangible and insurable. Ashley, you talked earlier about your friend who bought the businesses and had to put up his real estate as collateral. The reason why is because sometimes businesses don’t really have a lot of inherent value outside of maybe the machinery that’s inside of them if you even have that sort of business. So there’s more risk for a lender to lend on a business because a lot of times you as the business owner are the majority of the value when it comes to real estate investing. The value is in the tangible asset. It doesn’t matter if I’m there or not, there’s still value in those four walls sitting on a fixed foundation.

Tony:
So the ability to get insurance, we’re talking about properties that are worth several hundred thousand dollars that cost maybe a couple thousand bucks a year to ensure. So if something terrible were to happen, you can go get that thing rebuilt or replaced for pretty nominal cost. So I think stocks are a little bit more ephemeral in that sense, where it’s like I can’t really see the stocks that I have aside from the dashboard to my E-Trade account crypto, I don’t even know enough about crypto to speak confidently about where you go view crypto. But with real estate as an asset, you can see it, you can touch it, banks like it, it’s easier to ensure, easier to feel and to see and grow.

Ashley:
The one thing I will say about this though is the liquidity banks aren’t in the business to sell houses. They aren’t in the business to sell equipment if your business fails and do a big auction. So banks do prefer, or people do prefer to lend with your brokerage account as collateral because that is way easier to dispose of and do a disposition and to recoup their capital based off of that. So that is one good side is that if you are going to do stock investments is that they are better collateral because they are more liquid. So you are more likely to get favorable terms for the lending. Next would be real estate. It is easier to appraise the value. The value is the depreciation of a property is over, what is it, 29 and a half years I think it is. And equipment. Equipment in your business probably has a five, five-year depreciation value.

Ashley:
And most equipment, vehicles, cars, those are depreciating assets that even though on your tax return your property is depreciating, most of the time it’s actually an appreciating asset. That’s I think a big difference there is that you have this equipment and stuff in your business that you can get insurance on, you can get money to finance and buy these properties, but by the time you’re done paying off the loan, the property, the equipment has most likely decreased a lot in value and it’s time to go ahead and buy another piece of equipment so you can get the insurance, you can get everything on the equipment on the, I don’t know if you can get insurance on your brokerage account, but you can get financing on it. But the overall package of things that you can get, for example, the short-term rental insurance that you can get nowadays just amazes me.

Ashley:
And a lot of this I’m learning from some of the reels you’ve been doing, Tony on social media about just if somebody does damage, all of the things that can be covered. If something happens to the property and you lose out on income, like getting the insurance to pay the full booking to you, it just seems like there’s so low risk of things happening because your insurance will cover it. Obviously you don’t want to have a million claims, but I just find it so interesting how much insurance can protect you not only for your property, but also as a landlord or short term rental host. One more point on that too is as a business owner, what kind of protection do you have? Okay, say you own a construction company and if you damage somebody’s house or whatever, your insurance will kick in or your property that you’re working on, something happens, your insurance will cover for it to be fixed, things like that.

Ashley:
But you as the worker, do you actually have insurance on yourself besides just disability or do you even have it since you’re the owner of the property? And disability does not pay a lot of money at all. So I would actually be really interested to compare as a business owner, what are your options If you physically cannot work anymore or you lose out on income because of something somebody cancels, you’re supposed to put on a roof tomorrow and the person cancels because of whatever reason. I would love to compare those two things and see who’s actually more protected as a short-term rental host or as a small business owner. So Tony, make that real comparing those two.

Tony:
Well coming up, we’re going to tackle exit flexibility and really just kind of the no excuse strategy that lets you live for free with real estate investing. But we’ll take a final break to hear a word from today’s show sponsors. Alright, so with what we’ve covered so far, you’ve got Sam and inflation on your side when you start investing in real estate, but let’s figure out how real estate investing can also protect your downside because I think that’s a part of smart investing is not just looking at the upside but looking at the downside as well. And that takes us to reason number nine is that real estate investing gives you more exit strategies, which means there’s less risk associated with buying a piece of real estate. If you buy a piece of stock, I dunno, say you bought Blockbuster right before Netflix took off.

Tony:
What options do you really have with that stock? You either sell it or you ride it to zero, right? Those are really your only two options with something like a piece of blockbuster stock. But with real estate, there’s so many different ways that I could go about trying to monetize or at least break even on a deal. I can buy a piece of real estate and I can wholesale it to another investor. I don’t even have to do anything. I can just get it under contract, sell that contract to someone else, right? Check your local laws, right? Because different in every state, but I can literally buy a piece of real estate and just turn around and resell it to someone else. I can buy a piece of real estate and I can place a tenant inside of it and I can get cashflow. I can buy a piece of real estate and I can tear it down and I can build two townhomes on top of it. I can buy a piece of real estate and I can so on and so on and so on. There are so many different strategies you can put in place with a piece of real estate to try and protect, not only maximizing your upside, but also giving you more options if things go wrong.

Ashley:
In 2022 when interest rates really started to increase, I actually had to pivot my strategy because what I was going to do would no longer work because by the time I got a property under contract and by the time it closed, the interest rate had changed so much and I wasn’t doing conventional financing where you lock in your rate when you start the loan process. So this was a really great benefit to me at the time and I was able to completely pivot and change what I was doing so that the deal still worked. And I think that is a huge advantage of real estate is that there’s so much you can do with it as far as revenue wise, strategy wise, tax wise, even just your funding options for collateral. If you really are in a hard spot and you have equity in the property, you could tap into the property and get a line of credit to help you get through the hard times where when you’re a business owner and you are not showing cashflow, you are having a hard time, it may be a lot harder to actually get a line of credit from the bank to float you through a period of time.

Ashley:
So yeah, I think this is a great reason to invest in real estate is just the multiple exit strategies that are available or pivots per se.

Tony:
And we’re obviously in a higher interest rate environment and what we’ve seen a lot of real estate investors do is maybe pivoting away even from the traditional rent out the entire house to one tenant where now they’re pivoting to, well, hey, what if I rented out by the room? Tenants are going to get more affordable places to live. I’m going to be able to make more money and cover my costs and still be profitable. So even within the same property, without changing anything, you can just change how you execute the renting strategy and change the amount of income that you make. You could do a medium-term furnish rental in the same four walls. You could do a short-term rental in the same four walls. So having multiple options around what’s the best way for me to maximize this property while also minimizing my downside hard to do and other strategies I think, alright, reason number 10 is there’s less volatility, which means you get to sleep better at night.

Tony:
I think about when I used to work at Tesla and I wasn’t the only person that did this, we all did this, but we would just, every morning the topic at the water cooler was, Hey, what’s the stock price at today? Every morning someone was talking about, Hey, where’s the stock at today? Hey, where’s the stock at today? What’s the stock looking like? And I think because there’s this real time ticker in the stock market, it could just be a little bit more fear inducing, like panic inducing because you can see it go up, you can see it go down. It just feels like you’re on this rollercoaster in real estate. There’s no ticker, there’s no CMBC squawk box for Tony and Ashley’s real estate portfolio. And I think because of that you can sleep easier at night because you know that generally speaking, the value of your real estate is going to go up over time. So if you’re someone who I think can maybe get a little bit emotional or maybe you experience decision fatigue, the kind of slower burning process of investing in real estate could be the change you’re looking for. Way less volatility.

Ashley:
Tony, I am disappointed you’re not tracking your Zillow estimate daily to see what the value. I have this money app and you put all your assets in it and it’s just like a good dashboard for me to glance at everything. And I don’t have my business properties in there, but just my personal assets. And it has you link your real estate to the Zillows estimate. So just for my personal houses, it says in the last month, I’ve gained $18,700 in value from the Zillow.

Tony:
And for our rookies that don’t know, the Zillow estimate is the Bible that every single appraiser uses to gauge the value of a home, right? So I’m totally kidding. Your Zillow’s estimate is not worth the paper that is printed on. So you always definitely want to get a true appraisal. Alright, moving on to our final reason. Reason number 11, real estate offers multiple creative ways to get into real estate. We already talked about, I think the low down payment options from a loan perspective, but I’ll give you guys an example. We bought a 13 room motel in Zion or right outside of Zion National Park in Utah, and we were able to negotiate directly with the seller and they financed the deal for, so there was no bank involved in that transaction yet we were still able to go in and take control of that asset, become the actual owners, and now it’s ours with zero bank involvement. And you hear stories like that all the time. So I think you’re only limited by how creative you can be, and obviously there’s rules and regulations you need to follow in each market, but outside of breaking the law, there’s really no limitations on what you and a seller can come to when it comes to an agreement. And whatever works for the both of you is what you guys can agree to.

Ashley:
I remember my first experience seeing creative financing, it was the investor I was working for, somebody was purchasing a building from him and they were getting bank financing and then they were putting in a little bit of their own cash for a down payment, but then they also had the seller hold part of the mortgage. So I think it was maybe like part 80% was the bank, 10% was the buyer, and then 10% was seller financed over five years for a very low interest rate rate. It was amortized over 30 years, but it was a balloon payment and five or something like that. So it was a very minimal payment. And the bank said, yeah, the cashflow supports the structure. We are 100% okay with that. And this buyer didn’t have to come with 20% down. He was able to buy this property with only 10% down being creative.

Ashley:
And that’s kind of hard to do on the residential side of lending. But if you go and get a commercial mortgage, which you can 100%, get a commercial mortgage on a duplex, on a single family home if it’s for investment purposes and you can do something creative like this, there’s just so many options with it. Well, thank you guys so much for joining us for this episode of Realestate Rookie. Make sure you are subscribed to us on YouTube, and if you’re not already, follow us on Instagram at BiggerPockets Rookie. I’m Ashley. He’s Tony. And we’ll see you guys on the next episode.