I don’t buy the 12% year after year inflation returns in the general case. If you were really able to get real estate returns like that with such a simple method, no one would even bother with stocks or bonds.
Analyzing properties using this formula, it is very possible to achieve more than 20% annual returns. A few people I know get more than 30%.
And it doesn’t surprise me that people don’t get into real estate because they don’t know about this. How many times have I read on this site about how moronic people are still buying houses? How many people here have derided the financial acumen of those who posted “well should I buy now or not?” And then you’re surprised that most people don’t know about how powerful real estate can be if used properly?
And to be honest, it’s a lot of work. But for those people who think that stocks perform better than real estate, I shrug and wish them luck.
Lastly, your home is an asset that you can live in. You can pay the mortgage, expenses, and all that, but it’s possible for you to use it to make your life easier. Now maybe it’s too risky, and maybe it shouldn’t be used that way. But if the equity gets to be great enough, it’s like having money socked under a mattress – sooner or later, you’ll ask yourself if you can somehow make the money work harder for you. Can you make your money work harder for you? Can it be efficient? If it’s too risky, great. Go ahead and sleep well at night. A lot of people do the standard – savings, 401k, Roth/Regular IRA, pension, CD’s, stock market. I do too. However I go the extra step and use the equity. That way, 100% of my money is working hard.
My suggestion is to research it yourself and see if he is correct. From where I stand, he’s wrong. I know a lot of people will read this guy’s article and think, yeah yeah he’s totally right because it fits with the bubble. However, like I said, don’t let your ideology blind you.
(disclaimer 1: i am not telling you to buy any California property or properties)
