Creating Leverage Through Investments Is Essential

Brian DeLucia
As our world economy shifts to a new informational age, it is becoming imperative that individuals possess the financial education to control their own lives while learning the basics of modernizing their beliefs on money and investing. Those taking control of their money and modernizing their portfolio will be big winners in the future. But individuals who continue relying on conventional methods that worked in the old economy face an extremely risky future. Yet, most experts through the media or sales representatives of financial products continue to preach the same advice in regards to saving money, putting enough away into 401Ks, diversifying, IRAs, and other methods of investing through paper assets. And most of these people are struggling to beat the averages. Isn’t this basically gambling with your money? It is time to look ahead and examine our future challenges.

Most Americans have suffered significant losses off their paper assets. The future of the 401K is bleak. Mutual funds are becoming an outdated resource for many people. And uncertainty within the market in general is becoming too unstable for most general investors. Even more individuals have not been allocating enough resources towards their retirement. Many are failing to realize they lack enough allocated assets to fund their retirements. Retiring today with $500,000 dollars aside in your portfolio might not cover 20 years. Sadly, many others are not even investing one dime into their future. And just leaving money in the bank creates a stalemate. When a large number of individuals leave significant portions of money sitting in the bank, interest rates drop considerably and that money is failing to work for you and many others in the United States…resulting in a slowdown of economic growth.

The tools for investing in the old economy are slow. If you are in your late-30’s or early-40’s with very little allocated towards your retirement … you are in trouble. Individuals in their 50’s without significant resources allocated towards investments will have an extremely difficult time setting enough assets aside enough to fund a retirement. Am I creating skepticism in your mind? I am sure that is the case for the majority. But in about 15 years, the patterns of our population growth will reach the stage where it will result in drastic financial implications. And the effects of our government creating short-term solutions to create quick growth spurts in our economy, while pushing problems into the future, will reach a breaking point. The old adage many sales representatives preach regarding how the stock market always goes up will not hold up by that stage.

Let’s examine the facts together…
--Between 75 and 100 million baby boomers will be forced to withdrawl from their IRAs. That is a significant amount of money that is leaving the market within a short time span. If you feel disappointed with the decreasing value of your paper assets such as stocks, 401K, or mutual funds in the past couple years, then you will be very upset in about 15-20 years when the bottom falls out on their value.

--More people will be eligible for social security benefits than people contributing towards it for the first time. I can easily see social security benefits being reduced in the future.

--The cost of healthcare is already increasing at higher rates than inflation. Medical care will account for a huge portion of most retirees’ expenses. The future of Medicare will be uncertain by that stage. And the government is already warning people not to rely on Medicaid to cover nursing home expenses. Medicaid expenses are the primary reason many states are currently experiencing budget deficits. How much longer can the state governments afford to fund Medicaid is becoming uncertain.

--Most individuals have retirement plans based on a contribution system rather than a defined benefit that most employees had several years ago. A contribution plan is only good until you use up all your funds. And even nearly 90 percent of companies that still pay defined benefits to their employees or retirees are running low on funds to continue paying out over the long-term. The Pension Benefit Guaranty Corporation, which guarantees pension payments to a retiree whose employer ran out of resources to continue payments, also find themselves running low on funds.

--The evolution of the Roth IRA is generating more cash flow for the government right now, but will result in significantly less funds being generated by the government several years down the road.

Why real estate investing?

Many factors are emerging that are favorable for real estate. Our population is growing at high rates, resulting in several markets on the verge of exploding very favorably for real estate investors over the next 50 to 100 years. With the demand for housing rapidly increasing, the government is very supportive of real estate investors. Banks are looking to give money to real estate investors that display credibility. And with lots of families running into hard time provides many opportunities to create win-win situations for all sides. The new age form of creating leverage within your long-term planning is becoming alive. Many wealthy individuals park their money in real estate because it offers better security than paper assets. But most people have a perception that real estate investing was exclusive to only the very wealthy individuals, but anyone has an opportunity to profit through real estate and set up a bright future with the proper education.

The encouraging news that many individuals are not aware of is that debt is a good thing in regards to investment properties. That is what I call "productive" or "good" debt, unlike "bad" debt such as credit card expenses. And what about taxes? Investing in real estate gives you a few favorable scenarios in regards to taxes. You have the ability to tax-defer and roll that money from your gains into larger investment properties. That is not an option with paper assets, which are taxed at very high rates. Financing is a lot more flexible and creative with real estate investments. Anyone with the proper knowledge can create no-money down deals, very little money down, or using other people’s money to purchase investments. It is very easy with the proper education to purchase a $100,000 dollar property for under $10,000 dollars or even with no money down. With paper assets, you must pay the full value and you use your own money.

These scenarios allow individuals to build their retirement portfolio several years faster than the conventional methods of yesterday. Why do some people fail in real estate? Lacking the proper education is a very good reason. And there are specific tools I use such as software programs exclusively developed by the world’s top real estate investor, Dr. Dolf DeRoos. These programs allow me to punch specific numbers regarding a property and it breaks down the revenues and tax benefits I will receive from a particular property. It takes the heart out of the equation when deciding on whether to act on a potential deal. That certainty is not available with paper assets. Without utilizing the proper education with real estate investments is dangerous. It results in poor choices regarding investments, attracting desired tenants, using too much of your own money upfront on a deal, or failing to have the correct written language within your contracts.

When you have the proper knowledge and supporting team together involving your investments – it essentially places you in a position to really prosper through real estate investing. There are even companies that take care of all the work for you in locating, arranging renovation, refinancing, and finding a tenant on no money down deals if you simply do not have the time to do perform these tasks. Investing in real estate simply allows you to achieve a few objectives. It allows your money to work for you in a secure vehicle. By utilizing the leverage available through real estate, individuals can build their retirement portfolios rather quickly. That means if you are in your 50’s, it is not too late to begin re-designing your life and retiring within the next five to ten years.

If you are part of our younger generation such as myself, you have the potential to retire by the time you are 35 or 40 years old, even sooner in some cases. Our younger generation has been trained to focus on finding job security and several years in college to earn a great paycheck. Can you imagine the potential we have as individuals and a nation if we shift our focus to increasing our financial education? We will create several impressive solutions for the problems emerging today. Start building your education today. That is the key to a bright future!