The Name of the Game is Cash Flow

Every time you watch the news, read a paper or look at your inbox, you hear tons of investment advice. Everybody wants to sell you something and they all try and make a great case for why their investment suggestion is "the bomb".

As you might guess, I am a big believer in real estate (yes, even in this market!). It is not that I love real estate for the sake of it, I love its main benefit to me; cash flow.

Most investments that folks peddle are dependent upon capital gains (appreciation, buy low, sell high, etc.). Stocks can pay dividends, but that is not the rule and the dividends can be stopped at any time. Beyond that, you normally get stuck waiting for the price you can sell for to exceed the price you paid (less broker fees of course!).

The beauty of real estate is the cash flow you get regardless of the value the property has. If you buy today and the value decreases, you still make money on your investment. When you consider the compound effects of leverage and tax benefits, real estate is an investment like no other. That is why it is the single biggest wealth producer in America.

Are there downsides? You betcha, but they are easily remedied by the smart investor. The biggest reasons I get from people that keep them from investing in real estate focus on fear and lack of knowledge. We always fear what we don't know or understand. We also assume that if other people don't do it, we probably should'nt either.

Consumers in the US are taught to invest in 2 things; IRA's and 401k's. This means that we are encouraged and taught to invest in 1 asset class only, stocks. We are told to keep our money in the market and ride out the down times and keep a long term perspective on our investment. We are also encouraged to "dollar cost average" our investment, which simply means to buy the same stocks repeatedly regardless of the price. The idea being that you can average your acquisition price over a long period time which is supposed to improve your overall returns.

It is amazing to me that we all simply buy this advice because somebody that is an expert (salesman) says it is good for us. I bet a lot of you are thinking that advice is not so good now given the huge losses most people have taken over the past 2-3 years. On top of this, the very same people that managed your money and encouraged your investment ALWAYS get paid regardless of how your investment does. The fees you pay out are the management fees for the employees and traders that manage the fund you invested in. The Wall Street guys will make money regardless while playing the game with your money. You win, they get paid more, you lose, they still get paid!

I wish I could get a job like that! To top it all off, these same folks use your stocks to perform various sophisticated trades and transactions that do not benefit you yet makes then huge returns. If you don't remember anything else I write, remember that we are being taught to hand over our money to the Wall Street guys to play with without any repurcussions for their performance or their profits. This is NOT a smart play by anybody (except the Wall Street guys that benefit which is brilliant for them!).

For 2011 start thinking independently of the so-called experts. The deck is stacked in favor of the big banks and financial firms. If they get clobbered by their bad decisions, you and I get to bail them out with taxpayer funded programs. If they make tons of money and you lose, oh well, no bail out for you.

So, after my railing against the Wall Street crowd, that is why I love real estate. I control it. I can leverage it. It provides me monthly income. And it is tangible. That means that it will be there and functional regardless of its market value. That is a far safer, better investment than almost anything else out there.