Like Nick Aalerud, you also may focus primarily on stocks, bonds, mutual funds, and the sort. This is what he knew when he started. And he soon became tired of doing all the due diligence he could on a particular stock, purchasing it, only to have a “revised earnings” report would show up the next day and tank the price, or the CEO was rumored to be having an affair, and the unconfirmed news of his divorce sent the stock price plummeting.
Very simply, he wanted more control over what he purchased. (Don’t you?)
Everything has certain risks associated with it. The “trick,” if you want to call it that, is to LIMIT the amount of risk in anything you invest, by controlling as many variables as you can.
Real Estate has certain inherent advantages to it:
• It is a Tangible Asset – Shelter is a basic need, and will never be out of demand.
• The industry can be considered an Inefficient Marketplace – This means opportunities are easier to find, and competition isn’t as fierce, if you know how and where to look.
• One is able to build Immediate “Sweat Equity” by forcing values up in rehabbing a house, instead of waiting for the market to appreciate.
• Long Term Appreciation – Like stocks, bonds, and mutual funds, real estate values also have always gone up, long term.
• Certain acquisitions and investment opportunities can pay Significant Dividends (Rental Income)
• Tax Advantages of Ownership – “Phantom Cash Flow” is what CPAs call the depreciation one is able to take on their tax returns, from property ownership.
• Property is Insurable up to 100%, in case the worst happens. (How’s that for a worst case scenario?)
• Can be Leveraged.
Think about this: Would your bank lend you money, if you told them you were going to go out and buy their own stock with it as an investment? Of course they’d say no – it’s too risky an investment. Interesting, isn’t it?
The benefit we like best is that all the risks involved in real estate are CONTROLLABLE to a great extent. Because of our education, experience, and our network, we are able to put acquisition, management and exit strategies in place to help make the most of any opportunity we come across.
To say the least, although he believes in diversification, Nick has never looked back at the financial markets since.