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Your job creates a living; rental real estate create a lifestyle

The beauty of rental real estate is it is passive.  Or mostly passive.  Particularly if you have a property manager taking care of it for you.

It sits there quietly appreciating (most of the time).  Like any investment it does not go up all of the time.  There are dips and swings.  But over time the trend has been and likely will continue to be…up.

The job

Meanwhile you continue to show up for your job and collect a paycheck.  That paycheck puts food on the table, pays the mortgage, taxes, and insurance, puts fuel in the automobile, and hopefully there is a little left over for a nice vacation once in awhile.  All the while your real estate just keeps going up and up and up.

OPM

What happens in 15-20 years is that you find your job has kept pace with inflation (hopefully), and if you play your cards right you might even be able to eek out a small gain.  Your stocks/IRAs have appreciated maybe to the tune of 8%/year if you are lucky.  But your rental real estate now has hundreds of thousands of dollars of equity!  That is because the market appreciation is on OPM — other people’s money.  When your rental appreciates, it is on the entire value of the house — which includes your down payment and the bank loan.  So you are making money off the bank loan.  We did a video about this in the Learning Center under the Owners tab on our website.

So now 15-20 years later with that equity you have some real capital to work with.  You can re-invest some of it by buying more rentals.  You can send your kid to college, not just fix up the house but actually do a major remodel the right way, go on an extended vacation, or anything else you want to improve and increase your lifestyle.

See?  The job earns you a living; the real estate a lifestyle.