It’s not your fault if you’ve fallen for the 24/7 cable business “news” channels and their frenzied suggestions to buy, buy, buy the stock market as if it were the only game in town. Ever notice who’s advertising on those media outlets? It’s almost exclusively deep-pocketed brokers and other assorted moneygrubbers who stand to make money from an ever-increasing pool of new investors to fleece. In the world of media, believe us, advertisers have a BIG say in regard to the content of the channel.
What we’d like to do now is offer a glimpse
of investing in a certain asset that earns real money – income property investing. Want numbers? It will be our pleasure. First off, what do you consider to be a good annual Return On Investment on Wall Street? 10 percent? 15 percent? We hope you’re sitting down because,
according to a recent analysis by Dalbar, the average return for an investor over the previous 20 years was 2.1 percent. When you consider that the average inflation rate for the same time period was 2.5 percent, two decades of stock market investing would have set you back -0.04 in real terms of wealth.
In a word, that is icky news. You would have almost been better off not investing at all.
Now let’s look at the numbers from a real world income property example we have intimate knowledge regarding. The house is a 3 bedroom / 1 bath residential in St.
Louis, Missouri. The purchase price of $79,500 requires
a $19,557 outlay of cash to cover the down payment and mortgage closing costs. For many people, this chunk of change is a formidable amount, which is entirely understandable. What you need to realize, though, is the amazing ROI that cash gets you.
The St. Louis property we’re talking about is already rented for $1,050 monthly. This amount covers ALL expenses, including the monthly mortgage payment, and leavesa positive cash flow of $350 monthly. The bottom line is a first year profit of 39 percent. Over the course of ten years, you can expect to average about 27 percent profit. The good news is that investors with a bit of cash have an excellent selection of low-priced properties to choose from, and the rental pool is growing by leaps and bounds.
If numbers like the ones we just discussed don’t get you excited about learning more, you might have drunk too much of the Wall Street Kool-Aid. As a dedicated philanthropist to up-and-coming investors, Jason Hartman urges you to stick with the Young Wealth blog and podcast. We’ll do our best to reverse the damage. (Top image: Flickr | 401(K) 2013)
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