Real Estate is not Passive

Two years ago, my cousin's pit bull escaped and seriously-injured a child.

He lived in his parents’ rental property.

Lawsuits rolled in. The neighbors won (rightfully so).

To cover litigation and fees that kept rolling in, my family had to sell their property.

Not only was a lot of money lost, but those two years felt like ten. And the damage still lives with them today.

--- 𝐀 𝐟𝐞𝐰 𝐥𝐢𝐟𝐞-𝐥𝐞𝐬𝐬𝐨𝐧𝐬 on real estate & risk ---

𝟏) 𝐏𝐫𝐨𝐭𝐞𝐜𝐭 𝐘𝐨𝐮𝐫𝐬𝐞𝐥𝐟

Accidents happen.

Proper insurance is necessary. And the emotional damage will live on, the right insurance-type could have eased the financial pain.

Umbrella insurance is liability insurance, over-and-above what you already have on your homeowner’s coverage. It’s nickname is “lawsuit” insurance, and sadly, my family members didn’t have it.

It is very affordable, and sold in increments of $1M.

On top of that, it’s also common to create a legal entity (like a LLC) to separate the real estate risk from your personal situation.

It’s not always necessary, but the added layer can’t hurt.

Notably, if your accounting isn’t managed properly, the LLC protection can be "pierced" in a court of law and your personal assets become vulnerable again.

𝟐) 𝐑𝐞𝐚𝐥 𝐞𝐬𝐭𝐚𝐭𝐞 𝐢𝐬 𝐧𝐨𝐭 𝐩𝐚𝐬𝐬𝐢𝐯𝐞

Real estate is a wonderful asset class that's created wealth for millions.

But please don't accept the narrative that it is "passive".

It takes capital, maintenance, patience dealing with nonsense from tenants, and a some ongoing paranoia.

If you can manage those items, and buy some great properties, you’re a great fit to build wealth via real estate.

𝟑) 𝐘𝐨𝐮𝐫 𝐥𝐮𝐜𝐤 𝐝𝐨𝐞𝐬 not 𝐞𝐪𝐮𝐚𝐥 𝐦𝐲 𝐟𝐨𝐫𝐭𝐮𝐧𝐞

Imagine buying a starter home in the Bay Area *before* ‘Silicon Valley’ was a thing.

Those families lucked into generational wealth.

Don't be fooled to believe *any* dirt will appreciate the same.

California coastal dirt is not the same as Arkansas dirt.

And often, luck is the difference-maker.

𝟒) 𝐏𝐞𝐨𝐩𝐥𝐞 𝐢𝐧𝐯𝐞𝐬𝐭 𝐢𝐧 𝐰𝐡𝐚𝐭'𝐬 𝐟𝐚𝐦𝐢𝐥𝐢𝐚𝐫

Real estate will *always* be popular.

Homes are familiar, and we know how they work or how to fix them if they break.

Investing in a physical property is way different than investing in public stock markets.

When the stock market is down, you see red that day.

But when real estate is down, it (usually) doesn’t sink into the ground.

To the naked eye, it appears impenetrable. Stable. Consistent.

𝐌𝐲 𝐜𝐨𝐧𝐜𝐥𝐮𝐬𝐢𝐨𝐧?

I respect real estate as a powerful asset class.

But with it, comes equally-as-powerful risks you must accept.

I choose to respect its risk.