There are many things to love about this industry.

Here are a few…

I’ve spent most of my thirty-year career in Investment Real Estate.  First as a commercial lender, then as a commercial broker.

I founded and ultimately sold a Property Management business that had 25 employees, 300 clients, 1,500 units under management at its peak.

So it’s fair to say that I have an intimate relationship with Real Estate.  As with any serious relationship, there are things you love about it and things you don’t love so much.  I thought I’d share some of that with you.

Here are the 10 Things I Love About Real Estate

1. Nearly unlimited income potential

There is virtually no limit to how much money you can make in real estate

I’m not aware of many other industries where your upside is unlimited.   Unless you start the next Facebook or Uber, or become the next Warren Buffett, chances are you will run into some limitation on the amount of money you can make.   Certainly, working for someone else will come with very real upside limitations, usually at the whim of someone else, your boss.

If you are a commission based real estate practitioner (i.e. real estate agent, mortgage broker), you get paid on transactions closed.   The more transactions you do, the more you get paid.   Figure out a way to manage dozens (or hundreds) or more transactions a month, through technology and proper personnel management, and you could find yourself in the 1% of income earners.

If you are a real estate investor, you are paid through either cash flow on properties held and managed, or on profits from sale.   Get really good at understanding markets, raising money and honing your investment skills, and you could easily find yourself with enough cash flow and/or profits on properties bought and sold at higher values that you created, to put you in the upper echelon of income earners.

2. You are you’re own Boss

Real Estate is the perfect industry for the entrepreneur that wants to forge their own destiny

Throughout my entire 25-year career, I was a salaried employee for only one of those years.   Real Estate is an entrepreneur’s game.   As a real estate agent or mortgage broker, you may be “hanging your license” with a real estate firm and operating under their structure and systems, but you are commission only and really working for yourself.

This structure of work provides the type of independence from bosses, performance reviews, deadlines and quotas that many of us seek.   You can work when you want, how you want, where you want.

Workaholic, are you?   Real Estate is for you.   Seeking a more balanced life?   Real Estate can provide that too.

3. Passive Income

Real Estate can provide the type of retirement income traditionally found in pensions and retirement plans

Passive Income is defined as income generated on “passive activities”.  In other words, activities that don’t require your direct efforts or involvement.   This is generally associated, in real estate, with net rental income from properties you own.   Investors in the financial markets receive passive income in the form of dividend payments on stocks they own.

Passive Income is the goal of many would be real estate investors, or anyone looking to supplement or create a stream of income for retirement.

Passive Income is not part of the real estate agents or mortgage brokers world.   It’s reserved for those who have made the leap into owning real estate.   I’ll be writing many more articles on what it takes to build a passive income stream from real estate.

4. Financial Independence

Real Estate provides one of the most direct paths to financial freedom

See Reason #3.   Generating a passive stream of income is the key to financial independence.   Very few other industries or career choices provide this type of opportunity.  Even the successful small business owner is in many ways tied to the success of their business.   If they don’t show up, the business suffers.

Investors in the financial sector who are smart enough to save and re-invest their incomes into financial vehicles can also achieve this through savvy stock picking, and dividends.   In my humble opinion, however, the stock market as a way of actively generating financial independence is a fool’s game for all but the very savvy and well researched investors.   For the rest of us, it’s a long game used as a diversification strategy to other forms of wealth creation.

5. Live in what you invest in

What other investment can also double as your home?

This is a very unique aspect of real estate.   The fact that you can purchase a property that serves as both your home, and an investment vehicle for you.   I can’t think of any other investment type that offers that, or anything close to it.

One proven strategy for would be real estate investors trying to break into real estate investing is to purchase a duplex (2 unit property), a triplex (3 unit property), or fourplex (4 unit property) where they live in one of the units, and rent out the other to help offset the cost of the property, namely the mortgage, taxes and insurance.

Lenders generally provide the same type of attractive financing on 2-4-unit properties as they do for single family homes, providing the investor with attractive interest rates and low down payments.

6. Best Tax Treatment

Real estate investments get the best tax treatment of all investment types.

Anybody who owns real estate, whether their primary home or investment property, has benefited from the overwhelmingly generous tax treatment afforded owners of real estate.

Homeowners get the benefit of deducting interest on their primary and second homes on loans up to $750,000.   So, for example, if I have a mortgage of $500,000 at an interest rate of 4.00%, I’m able to deduct $20,000 off of my income resulting in real cash tax savings of $7,000 (assuming a 35% total tax bracket).

Further, when homeowners go to sell their property, they don’t have to pay tax on up to $500,000 (for a couple, $250,000 for an individual) on any profit they realize on the sale of that property.  There are no equivalent tax benefits in the financial (stock and bond) markets.

Investors who own rental property get even better deductions including:

• – Full deduction on interest payments
• – Full deduction on operating expenses such as utilities, insurance, management fees and repairs
• – Deduction of depreciation which is a “phantom” expense. In other words, an expense that doesn’t actually cost you any money out of pocket, but one you get to deduct anyway
• – Capital Gains Deferral thanks to IRS Section 1031 which states that the tax owed on any profits generated on the sale of a property by an investor can be deferred indefinitely as long as that investor uses the proceeds from the sale to purchase another investment property of equal or greater value
  

7. Real Estate is everywhere

Everywhere you look is a potential real estate opportunity

When I look back at where my love for real estate came from, I believe it was formed from growing up in the rapidly expanding San Fernando Valley, Los Angeles, in the 1970’s and 1980’s.   Everywhere I looked was real estate.   Every square inch of available land had either a home, an apartment building, a shopping center, or an office building.   Each one of those properties, to this starry eyed would-be real estate mogul, was an opportunity to generate income, opportunity and a life of financial freedom.

8. You Can do it anywhere

Once you understand a market, you can do real estate literally anywhere

See Reason #7.   With real estate existing literally everywhere throughout the country and the world, the would-be real estate practitioner / investor can stake claim to a career in real estate almost anywhere.   All it takes is desire, market knowledge, patience, perseverance and a whole lot of courage.

Feel like living in Nashville, go learn that market and become an expert and create a career.  Boise, Idaho more your style, well the same applies, as well as just about any other market in the country that isn’t in an economic death spiral.

9. Windfall Income Opportunity (Big Hits)

Real estate provides the real estate investor (ballplayer) with the chance to hit singles, doubles, triples, home runs, and the occasional Grand Slam!

The real estate agent who sells multi-million-dollar homes can see average commissions in the $50,000 to $75,000 or more range, on just one deal.

The average real estate home flipper can see profits range from $25,000 (single), to $50,000 (double) to as much as $100,000 to $200,000 (triple) on just one deal, and far more for those with the financial wherewithal and risk tolerance to play in the multi-million-dollar game.

The skilled commercial investor can see profits on multi-million-dollar real estate deals range from $250,000 to $500,000 (home run).  It’s not uncommon for skilled investors to who are masters at the craft, and the right timing, and a bit of luck, see profits of $1M or more on a single investment (Grand Slams).

I remember early in my career witnessing a very savvy and well capitalized real estate investment company in San Francisco generate a profit of over $250M in just three years on the sale of a massive apartment project.   I personally was able to pay for my son’s entire college tuition on one small apartment deal.

10. The Creative Side

Unlock your creative side through remodeling property

I saved, what I feel is, the best for last.   What I realized in my experience was that the creative side of real estate was in some ways as fulfilling, if not more, than the independence and financial rewards from real estate.

I’ve always known that I had a creative artistic side of me but just didn’t know where it would manifest itself.   When I began buying and remodeling homes, apartment buildings and office buildings, I became intimately involved with designers in choosing paint colors, flooring, counter tops, cabinet types, lights (who would have thought there were thousands of types of lights), cabinet hardware, and much more.

Remodeling real estate gives the investor a sort of blank canvass to completely change the look and feel of a property, and to watch it become a work of art.   Truly fulfilling.

As you can see, I’m clearly a fan of real estate for all the reasons above, and more.

However, as amazing it sounds, a career in real estate, or even investing in real estate as a side hustle to build wealth and retirement security is not without its challenges, risks and frustrations.

Read Part II of this blog on The 10 Things I Hate About Real Estate to learn just how intense, uncertain and risky a career in real estate can be.

Scott K Raymond