Should Network Marketers invest their profits in real estate?

Why did I pick up Real Estate in the middle of the Housing Bust?

When everyone else seemed to be cutting their losses and running for the hills, I delved deep into Real estate seminars and began seeking out the “players”. What were they doing when everyone was crying doom and gloom? The answer might surprise you.

I had been looking into real estate well before my days in network marketing due to the simple fact that reliable passive income is not found there but in real assets. You see, in any marketing opportunity you don’t own anything. You don’t control the assets unless you own the operation. Kiyosaki always harps on focusing on investments you actually have control over, something which is not the case with paper assets such as stocks and bonds. If you rely on those types of investments you’re basically putting your financial future in someone else’s hands. This is in my opinion very risky, not to mention scary as heck! Certain marketing opportunities and securities are a great way to make some cash if you know what you’re doing, but hardly a way to build long term wealth.

My other mentor and sponsor in my primary business, marketing guru Mike Dillard, frequently reminds us in his inner circle that the network marketing industry is a great way to make some money, but it shouldn’t be your long term road to wealth. He asks us “Passive income in this industry is a thing of the past; do you want to keep building businesses forever?” I don’t know about you, but I’d like to kick back one day.

Something you don’t see guys like Mike post on Twitter is the fact that in the offline hours they are running around their hometowns picking up real estate left and right. Why real estate? It’s easy, it’s versatile, it’s always going to be around, there is lots of it, and you can borrow money to buy it. Smart investors can buy property with none of their own money invested, which means your ROI is infinite. Where else can you achieve such a feat? Try to get a bank to lend you money to buy a stock or mutual fund, or try to get an insurance agent to write a policy on one. Good luck with that.

So why is this moment in time a special time to get into real estate? Because everything is on sale now. Just before the housing boom peaked the professionals were selling like crazy because they knew the bubble was about to burst. They will notice when a market is no longer driven by logic. Dave Lindahl coined the ‘Waitress Test’: “when your waitress tells you that she’s investing in real estate it’s time to get the hell out of the market.” The non-professionals will buy based on emotion, while the professional investor will buy based on research and education. There are two emotions that drive the non-professional investor: fear and greed. Towards the peak of the boom they were pushed to buy based on greed because they were affraid to miss out. Today they are held back by fear because they are watching all the doom and gloom in the media.

The reality is that current recession is so strong that the opportunities created by it are going to make more people real estate millionaires than ever before.

At this time, with the dabblers gone, the professionals are moving back into the market buying as much as they can. They love market crashes and recessions because it means there is a major 50% off sale is coming! I should note that many are not holding on to properties over 150K as they are still considered volatile. You might believe the media that we reached the bottom, sales are up, and things are going great. However, several factors still demand caution:

1. Current sales are driven by REO’s, short-sales, and foreclosed properties. In fact, in some markets they make up as much as 75% of total sales. This is not the traditional market by any means, so don’t go blindly by the news media.
2. New foreclosures have not tapered off. In Maricopa county (Phoenix-Metro) for example, there are 500-600 new daily notices. More than 170.000 adjustable rate mortgages have yet to adjust within the next 3 years.
3. Most foreclosures occur in properties valued at 170K and up. This is where many many people bit off more than they could chew in terms of affordability. First time home buyers have purchased homes for 300K with no money down and now many of those homes have dipped below 200K causing the owners to walk away.

So where are the pro’s making their money today? Smaller homes under 100K. Why? Well, traditional financing is still troublesome. You are looking for cash buyers (buy & hold investors) or FHA borrowers, and they are looking for homes in that price range. Besides, how badly can you mess up with a 50K home? At average rents, you can easily get cashflow from one. Who cares if if takes 5 years before it’s worth 100-150K again? I bet your other investments aren’t paying you a few hundred dollars every month each. Especially now, cashflow is everything because appreciation is an unknown at the moment.

So when you get your emotions in check and educate yourself properly you will find that professional investors can make money in ANY type of market condition. How? Because they can adjust their strategy based on changing environments. Education and experience allows them to do this while the lack thereof bars the dabblers from doing the same.

So that’s how I have arrived at this crossroads. The biggest real estate opportunity in recent history is here today and I can’t see a better place to invest network marketing profits. If you hunker down and do what the masses do, you will have what the masses have: uncertainty and financial insecurity. But to break away from the herd you need to get yourself educated. Fill your shelves with the right stuff. None of this is new and there is no need to reinvent the wheel. Study, seek out a mentor and hit the road!

-Tiemen Staal
http://www.workfornobody.com