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Residential vs. Commercial Real Estate

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A tale of 3 friends and vacation home investing *A Warning*

I want to share with you a story that many of our members said helped them truly grasp the variables of Lifestyle Asset investing.

If you can just understand this (true) story, you will immediately understand the opportunity of short term rentals.

Let me know what you think. You can always book a call to speak with us FREE here.

The Story Of Three Friends

I’d like to share a story about 3 friends - and this story explains it all. It explains our whole Lifestyle Asset model, and why we're so passionate about this. If you want to understand everything about what we do by reading just one chapter - read this one.

Okay, back to our 3 -

All three are successful.

They're all business owners or professionals, commanding their own income, but looking for more than the everyday grind.

They all have a decent net worth. They all have money to invest.

The year is 2006, and real estate values are booming.

#1 buys a short term rental home in summer of 2006 for $450k.

Sure it's pricey for the area, but he was diligent with his research and knows what he wants. He’s looking forward to not only renting it out, but using it with his friends and family. Since he was putting 20% down, he immediately gets it ready to accept guests and starts renting it out to realize his ROI.

He got a modest ROI on his $90,000 down payment of around 6% net profit his first year. He also now owns a beautiful lake home that he uses with his family.

The other two wait. They want to see what the market does.

Sure enough, 2008 comes with a fury, with a real estate recession in full swing. #1's property value drops 20% by the time the recession ends in 2011. At one point it's only worth $360k. #1’s life begins to turn upside down with other nonrelated issues.

#2 and #3 secretly feel grateful that they didn't get into a STR property.

"I would have lost so much value on the home" they think to themselves.

Both of them think about #1, but they don't dare ask how he's doing with his investment, since they don't want to pour salt in a wound, and truthfully they don't know how bad he might be hurting.

The reality is that while #1's home lost some serious value in the crash, his asset continued to produce a monthly income for him, in fact it started to mature as an asset and it averaged a 12% ROI through the crash. Amidst all of the other turmoil in his life, he was able to hold onto the lake house, use it with his family and put an extra $10,800 in his pocket each year after all expenses and mortgage payments.

#2 & #3 Continue to wait.

#2 is poking around Zillow online and he looks at a few properties he's considered and sees they're at an all-time low price. He finds an agent and snags a great cabin property at just $360k in a great location.

His agent mentions that this is probably one of the best buys he's seen in his career. "You got an amazing deal" he tells #2.

#2 gets excited. He got a great deal. His property can only go up. He goes to work getting the property ready, and figures he'll have it all set for guests in the fall. After all, he got such a good buy on it, no rush to get it rented right away. It feels nice not to be under the gun.

Truth be told, #3 would have purchased a property also at this unprecedented time...

but he was too busy.

#3’s business had gotten more complicated, and while he was making more money, most weekends he found himself wishing he could slow things down and get away to the lake with his family & friends like he used to, but he just didn't have the time.

"Gotta push through. Now's the time to cash in", he tells himself, working more hours than ever before.

Slowly but surely, life goes on -

Real estate values start coming back up.

#1's Lake home is completely paid off from the rents he has been receiving. Its value has more than recovered and is now worth $600k, produces an annual income of $60k per year, and has provided he and his kids countless memories at the lake while they were growing up.

#2's Vacation home is not quite paid off but he is well on his way. The same home he purchased for $360k at the bottom of they market has almost doubled in value and is worth $600k now. It also provides an annual income of $12,000 per year with plenty of open time for he and his family to use it.

Time continues to pass by.

Kids graduate high school and head off to college.
All 3 find themselves surprised at how fast time flies.

Before they know it - it's 2020. Some new strain of virus out of China appears to be spreading kind of rapidly, and a lot of news networks are taking it and running with it.

Pundits and commentators mention this one feels different.
The talking heads run special coverage for weeks.
Before anyone knew it, the whole world is in a new tailspin.

#3 tells himself "man I'm glad I held on to my money. I bet #1 and #2 are really struggling right now with their rentals. Cities won't even let you rent! Folks won't be booking for months!"

He feels good that he's held on to a lot of capital, but even he is afraid - after all, his business is way down since the pandemic, and no one really knows how to change that or how long it'll be till we get back to normal - if that's even going to be a thing again.

#3 still dreams of a cabin property he can escape to, but with things as they are now, he wonders when that will make sense again, if it ever does.

The buys are likely to be great - historically low - during this new disruption, so hopefully he can get into one soon...

and... CUT.

Let's hit pause on our story, so I can tell you:

THE GREAT SECRET

Have you ever heard the expression in the casino business, "In the long run, the house always wins!" ?

Of course -

But it's a little different in real estate.

In the long run, whoever OWNS the house ALWAYS wins!

And whoever gets into the game first wins.

Do you want to guess who our winner is in the story above?

#1 bought a property at a high price back in 2006. He got it renting right away, and has enjoyed cash flow and a modestly-increasing cash-on-cash return every year.

Some years were better than others, but every year was good. He has months where he doesn't cover his expenses, but he's never had a year where he didn't. Plus, he's been paying down the mortgage all this time with the money from his guests, and using his property yearly.

Not to mention, once he realized first hand how he still made money in the worst real estate market in history, he continued to follow his long term plan and now he's purchased 3 more properties!

#1 DOESN'T CARE about his property value, because he's not selling it anytime soon. He appreciates his net worth increasing over time due to holding the property, but he mostly appreciates the lifestyle & financial freedom his properties generate for him!

#2 bought at a GREAT time at a GREAT price, and walked in with instant equity - almost a 6 figure net worth increase overnight. Happy as can be, he got his property set up and started bringing in cash flow that year. He's made a consistent revenue of $60-90k a year on his investment while his mortgage is getting paid down. His property value has gone up and down too, which he worries about sometimes, but since he's made so much cash flow, he's thinking about getting a few more properties very soon. Notice that he "won" - not as big or as well as #1, but he won.

#3 Never Got Into The Game. He Still Talks About It But Something Always Seems To Stop Him. He has no Lifestyle or Financial Freedom from his investments because he was too busy worrying about timing the market correctly

This is a story about me and two of my best friends.

The Big Secret

FORTUNE FAVORS THOSE WHO TAKE ACTION & TIME IS THE GREAT EQUALIZER

Whether you buy at the top of the market or the bottom of the market, it usually ends up a wash in the end on property value. Your 15 yr runs will look very much the same.

Buy high, buy low - it's not the key factor. The key factor is cash flow & time. Buy profitable, period.

Property values go up and down but cash flow remains quite constant and rises over time.

If your long-term plan is to ride the market and get in at a low time and get out at a high time, I wish you the best of luck. Realize though, that you're not running a business, you are engaging in market speculation.

Speculation is gambling, not business.

There is no business plan for speculation. It's all just guessing.

If Your Long-Term Plan Is To Buy Cash Producing Assets, Vacation In Them For Free & Steadily Build Your Net Worth & Passive Income, Then The Actual Market Being High Or Low Is Largely Irrelevant!

This is the #1 mistake we see holding back most would-be lifestyle asset investors. They think the market is the variable they need to focus on.

We make money in low markets.
We make money in high markets.
He who OWNS THE HOUSE always wins in the long term.

If you've been confused in the past about "riding the market" and you're looking for a solid long-term strategy that will build your net worth, generate cashflow, and give you lifestyle freedom...

That is exactly what we teach step-by-step inside the Vodyssey Empire Club.

Or, you could wait.

It's up to you!

 

Extra Tip: Commercial vs Residental Properties
Investing in real estate now is a smart decision for anyone looking to make a sound return on their investment. Real estate, specifically residential vs commercial real estate, is a great way to invest in a tangible asset that will continue to gain value over time. Residential real estate is a great option for investors, especially those looking to purchase a property and either rent it out, or flip it in the future. With the current trends in residential real estate, it is a good bet for anyone looking to make a return on their investment.

Commercial real estate, on the other hand, is a great option for investors looking for a long-term return on their investment. With the current trends in commercial real estate, investors are able to purchase a piece of property and rent it out to businesses, which can provide a steady stream of income. Additionally, commercial real estate has been known to appreciate in value over time, making it a great investment for those who want to make the most out of their money. Investing in real estate now, instead of waiting, is a smart decision for anyone looking to make a sound return on their investment.

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