Should You Invest in Real Estate Beyond Your Home?

Speaker A00:00:00

Investing in real estate seems glamorous until you realize this. You just paid a million dollars to become an on call plumber for strangers. Yeah, it's really that, isn't it? So I got this listener question.I said, this is a great way to start the show. Ralph, I own my home, but I keep hearing about investing in real estate. Should I think about rentals or REITs?And I'll talk a little bit later about what a REIT is. What a great question. And here's the truth. I want to start off by saying this. Real estate is not for everyone.You really have to understand it before you jump into it. I'll tell you a story a little bit about how I had a client that jumped right into it, didn't really understand what he was getting into.But real estate, whether it's rentals, REITs, or even land, is. So many times I hear about this talk by these financial gurus everywhere. It's the next big step to build wealth. But is it really right for everybody?That's what I'm gonna talk about on today's show.This is Financially Confident Christian, your daily dose of gospel, grounded insight and faith driven tips to help you break the cycle of financial shame with confidence. Hello there, welcome. My name is Ralph. Thank you for being here today and thank you for joining me again.I appreciate the trust you place in me and I'm so excited to continue this investment series with you. And today we're going to talk about another great tool in your investment tool belt.Just picture this tool belt you've got and this 30 day series is we're adding more tools each day. Well, today we're going to talk about the idea of rentals, real estate and REITs.You might be saying, Ralph, okay, what gives you the right to talk about this? The truth is I've advised clients for years on how this real estate fits or in many cases doesn't fit into their overall financial strategy.So here's a big takeaway. Before I even get too far into it today, you got to think about this. It's not a one size fits all answer.If you keep hearing, well, I've got to get invested in real estate, I got to get invested in real estate.It depends because I've seen the challenges when people jump right into this and I've seen people completely destroy their finances if they're not well prepared for that. It can be a real disaster. Unfortunately, I've seen people lose their entire life savings because of this. Let me tell you about that story.I had this One client, he was typical 9 to 5, working job, had a regular, regular job, paid a salary. And he said, ralph, I really want to build wealth. He said, I'm thinking about buying rental properties.And I said, okay, well, let's come in and talk about it. Well, next thing you know, he calls me, says, Ralph, I bought 10 rental properties. I said, wait a second, you bought how many rental properties?Said, Yeah, I bought 10. I said, okay, well that. He says, no, I saw this guru online, said the best way to build wealth is to buy rental properties. But here's the problem.This client wasn't clear what he was getting into. Like I said a few minutes ago, he had a full time job. He had no concept of what it was going to be like to manage 10 rental properties.He didn't have the time to do it. She had to pay somebody to be his rental manager. Well, guess what? That ate into the profits and it created this huge headache.And even though yes, rentals can be a good fit, in his particular case, the headaches outweighed the cash flow. So think about that. That's a warning right there. I hated to see it happen. I mean, the guy lost everything he worked so hard for.Now, on the other hand, I had another client. Now they invested in a REIT. Talk about REITs right now, because I really want you to understand what a REIT is.So a REIT is a real estate investment trust. And Basically the way REITs work is this. A REIT is basically a mutual fund for real estate.A fund manager goes out and creates this fund, and in that fund it owns different pieces of real estate. But here's the benefit to that. You don't have to be that landlord at three in the morning when a toilet gets backed up or a pipe bursts.It's all part of a puzzle that somebody else is putting together. You get that real estate exposure, you get the benefit of being in that market, but you don't have that stress of tenants and repairs.And I love what Robert Kiyosaki says. Robert's one of these fellows that really understands real estate. He's an investment guru and I love what he said.He said this, he said, don't work for money, let money work for you. And I said, you know what, Robert? That's a great way to put it. What do you think? That was a great way to put it?Because wisdom and stewardship matter. But as I said, if you're hearing a theme in this whole series, it's really all about balance. So let's get into the details a little bit.The truth is, rentals can provide some steady income. But you got to remember this not only to bring income, you got to worry about property management.You got to worry about the other costs associated with that. You're going to have tenants. All of a sudden, people are going to call you and say, ralph, I got a problem with my place.You're going to get situations where they don't pay their bill. Yes, that happens. Believe it or not. People move in and they don't pay rent, and unfortunately, a lot of times they don't take care of your places.So you got to understand. You got to have a complete understanding before you jump into this.My wife and I talked about this many times when we first started getting into different investments. I said, we should really go buy some rental property. She's like, ralph, I don't know. I don't know if I had the stomach for that.So we decided not to do it. And I think that was the right decision for us. Everybody's different now.One of the hybrids you can take, and I love this approach, is these things up. REITs, we talked about those a few minutes ago. It's just like a stock.Think about it in terms of, like, it's a stock, but that stock owns rental properties. It could be commercial rental properties, residential rental properties. But here's the beautiful benefit of it.No tenants, no repairs, and just exposure to that property market without that worry. It's really that hybrid approach. So you're probably asking Ralph. Okay, I don't know. What are you telling me, Ralph? Is this the right answer for me?It depends. Real estate can help balance your portfolio. I've seen it work great when the stock market's in a bad spot.It helps you build that swing or helps you to level out those swings in the market. We talked about yesterday that. That dollar cost. Remember we talked about that pizza yesterday.Well, real estate can do the same sort of thing, but you got to understand this from the jump. You got to have the stomach for it. Like I've talked about many times in this investment series, don't put all your eggs in one basket.But on the other side of that, my father was famous for saying this. He said, son, they're not making any more land. And that's true. That's one of the values of investing in real estate. So he's got a point.But here's the thing you really need to understand. A lot of people don't get this. Like any investment, real estate carries risk.I've had clients Say to me, ralph, I'm going to invest in real estate because there's no risk. Well, guess what? There are risks. The value of the property can drop. That's what happened to my client that bought 10 rental properties.In addition to not having the time, he bought him in a city and the city went downhill big time. The area in town where he had those rental properties, unfortunately the rental properties basically became worthless.It became a terrible part of town. Nobody wanted to live there. So he ended up losing them all in bankruptcy. So that's one of the problems.The values can fall, tenants can leave, tenants listen to this. Tenants will get up in the middle of the night and move away. And you're thinking, I didn't get a rent check last month.You go to check on the property, they haven't lived there in weeks. It's just, it's a fact of the matter. Sometimes they won't pay you, sometimes you have to take them to court.I've had horror stories with clients who have spent months and sometimes up to two years trying to get a tenant out of a house. And the truth is, markets shift as well. But you've got to know the risks.So the key in any of this, in all of these investment things, is understand balance. You can't chase that greed. And unfortunately, I think that's what my one client was doing.He was thinking, yeah, I'm going to go own 10 properties, I'm going to be super wealthy, I'm going to quit my full time job and this is all I'm going to do. But see, the Bible tells us to do something a little bit different. It talks about that stewardship. So let's get right into our Bible verse today.It comes from the book of Proverbs, chapter 24, verse 27. Put your outdoor work in order and get your fields ready. After that, build your house. And I think that's profitable for us today.What is the scripture telling us? Put your outdoor work in order, do your homework, understand this real estate investment, understand what you're getting ready to get into.Once you do that, by all means, if it fits with your investment model, if you've got the resources to do it, if you've got the ability, the desire to do it, fantastic. Build that house, buy that rental property, get involved in that reit.But understand the whole process, understand all the cost, understand the commitment that you're making. It's a big deal. Why would we pray together right now? Lord, we just come to you right now. We thank you for the gift of these choices, Lord.It's so awesome that you give us investment ideas and investment choices, Lord. But at the same time, we ask that you would give us wisdom to really understand if real estate fits in your plan for our life, Lord.Help us to see that plan in our lives, Lord. Help us to guard our hearts against greed and investing and trying to go get that, that quick win, Lord.And we just thank you for the opportunities, Lord. We thank you for the things you've given us and help us to be a better steward of all the resources you give us in our everyday lives.And we ask this with confidence in the name of Jesus. Amen. All right, so here's your action step for this week. Just one little thing I want you to do.I want you to really research REITs, or maybe research a particular property.You might not have any interest in buying one right now, but do some research, understand what it looks like, learn what to invest in, learn how it performs under talk to other people that you might know who are involved in rental properties or in REITs and SEE does this fit for what I'm going to do. So let's recap for a second. Like I said earlier, real estate can be profitable. But understand me, hear me on this.It's not simple and it's not risk free. It requires management. And sometimes those REITs, if you really want to get into real estate, investment is a better option.Like I said, it's kind of like a stock. It's a diversification. It's a diversification tool, but not the only tool. Our main toolbox needs to be stewardship and wisdom.Because days matter more in the long term than chasing quick wins. So here's my key takeaway for today. Don't chase those quick wins. Now. Tomorrow on the show, we're going to talk about ethical investing.Yes, there is such a thing. Tomorrow we're going to talk about aligning your money with your values. It's a disconnect a lot of people don't think about.But tomorrow I'm going to get into that and really talk about do my investment choices align with my beliefs and values? It's going to be a great show tomorrow. I'm going to encourage you to check it out. Here's something else I want you to check out.One of the passions of my life is helping people. And I just finished writing my third book. It's called how to Become a Financially confident Christian. It's 30 years of trials.It's 30 years of challenges and just great stories of people that I've had honor to work with over the years. And I'd like to give you a copy of this book absolutely free. You can download it right from this website.Just go to financiallyconfidentchristian.com/becoming I'm gonna give you that again, it's financiallyconfidentchristian.com/becoming go there, enter your name, enter your email address and download a copy of my book. You're going to love it. It is a passion project of mine and it really helps you become the that financially confident Christian.And as I close it, I want you to remember this. God has a plan for you. Listen to his voice. Listen for his voice. You can do this. I truly believe in you.More importantly than that, God believes in you. So believe in yourself. Go out there today and be a financially confident Christian. Be financially savvy. God bless you. And you have a great day today.