You are Your Best Real-Estate Asset
There are four reasons why you should prioritize investing in yourself.
There are many different real-estate assets you can invest in, from commercial offices and single-family homes to office buildings and retail stores, each with unique costs and risks. However, none of these can compete with the highest-yielding asset — you.
You are the best real-estate asset because it's your confidence and expertise that guide your investment decisions and produce results. And you'll only succeed in this industry by consistently making the best strategic choices.
Investing in yourself first is a formula that has worked for many of today's real-estate entrepreneurs and is an approach that will work for you.
Here are four reasons why you should prioritize investing in yourself.
1. You appreciate faster
Real estate is considered one of the best investment vehicles since it naturally increases in value over time, especially with the right improvements and operational strategies. Optimizing rents, replacing windows and other enhancements will gradually raise the value of your real-estate asset.
For example, commercial real-estate values increased by 11% in the past year, as reported by Green Street's Commercial Property Price Index. The CCIM Institute also notes the compounding returns of appreciation and improvements, estimating a 10% increase in property value yields a 50% markup on an investor's 20% down-payment investment.
Likewise, your character, expertise and potential are powerful assets that generate incremental returns and can be improved steadily through traditional education, self-study, mentorship and hands-on experience.
Despite this parallel between investors and real estate, we learn much faster than any real property can appreciate in value. Whereas it could take ten years to capture the full equity of a property, some rookie operators need just one month of dedicated study and practice to become a functional real-estate "expert".
2. You are the best hedge against volatility
Real estate is a highly sought-after investment as it hedges against volatility in the financial markets better than any other asset. Employing a basic statistical tool is how investors collectively reached this "volatility-resistant" perspective.
In finance, standard deviation quantifies the susceptibility of an asset to ups and downs in the market. The standard deviation of a blended public/private real-estate portfolio is approximately 14% less than a mix of stocks and bonds, which are considered the next most stable financial assets.
This distinctive disparity in the volatility metric indicates that real estate always maintains an intrinsic value no matter how bearish the economy is, providing essentials such as homes, restaurants and workplaces. Similarly, regardless of market fluctuations, your proficiency and education in real estate are always crucial and in demand.
A collapsing economy can't erase your earned knowledge of deal negotiation, alliance formation and lean operations. These skills hold greater value than any piece of land, and you can exploit them to navigate even the most turbulent economic waters.
3. You provide the greatest leverage
Unlike many other investment vehicles, real estate lets you scale quickly by harnessing other peoples' money. Specifically, property owners rarely pay for a property using all cash. Rather, they deposit part of the outlay and secure the rest from a bank or private lender.
Prominent players in the industry tend to favor a similar structure. Case in point, in 2018, Real Capital Solutions — a real-estate investor in Chicago — purchased a $118 million office tower, putting only $12 million down upfront while financing the rest of the purchase with liquidity provided by capital partners.
The firm's successful acquisition of capital of such magnitude — for 90% of the price, no less — required its owners to leverage their 30 years of industry know-how and networking prowess.
As an educated and experienced individual, you too can capitalize on your insight and credentials to sway your investor network, family, team and even the competition to achieve the impossible. In other words, you can also buy a mega office building with a 10% down payment.
Real estate is one of the few industries where you can leverage your talents and relationships to scale even more quickly.
4. You are 100% in control
On a purely individualistic level, you're the best real-estate asset in the world because you're 100% in control of yourself. The brightest minds in finance would agree that ideal investments are those you exercise the most control over.
UBS Global's 2019 survey of leading family offices and wealth managers worldwide found that more than half the assets in the average private equity portfolio — 54%, to be exact — were direct investments that gave investors the most command.
These investments have become more popular and attractive because the more influence an operator has, the less vulnerable an investment is to external forces such as changing consumer tastes, unemployment rates or weather conditions.
With tighter reins, it's easier to predict returns. You hold complete authority over your work ethic, mindset and commitment toward excellence and prosperity. As a result, the more you master and improve yourself, the further you'll advance in any niche of the real-estate industry.
You first, then real estate
Before investing in any real estate endeavor, invest in yourself. Your knowledge, experience and skill in real estate hold more value than any piece of property.
Additionally, investing in yourself first protects you in any economic downturn, delivers the optimal return, and — best of all — is entirely within your control.
Your real-estate journey begins with you, so have faith in yourself, do the work and take the leap.
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