How to know who the bullies are in investing
Everyone invests in stocks because that’s what’s expected. Stocks represent Johnny, kind of bullying everybody into doing it because it’s what's always been done, even if they’re not really the best option.
Johnny and Stocks are respected because of tenure and because they aren’t new kids like Daniel; he has to prove himself. And listen, Johnny is pretty great at Karate, he’s the reigning champion. Stocks aren’t too shabby, they do grow your money. Just look at this graph below:
Stocks (invested into the S&P 500 index) provided 2% of their original investment in the form of income. They also appreciated in value 7.6% (Remember, these are all real figures from the years 2002-2022.)
Jacksonville Rental Property Investments produced 0% income at the time of purchase and only appreciated 5.2% over that 20 year span.
At face value, it looks like Stocks are going to kick Real Estate’s butt, the way everyone expected Johnny to destroy Daniel at the championship.
But Daniel had something Johnny didn’t, a Mr. Miyagi. And you, have JWB. And what’s the first thing Daniel learned? Wax on, Tax Off.
Tax Savings for Real Estate Investments Sends You into a higher ROI than with Stocks
When you invest in Stocks or bonds, you make more income, as shown in the chart above. But, neither of those investment options offers you any kind of tax savings.
Real estate investing provided almost 30% tax savings, keeping more money in your pocket. It’s not “income” in the strict sense of the word, but it isn’t going out. So just like Johnny looks, to the average eye to be a better option, when you really break down the numbers, you’ve underestimated the roundhouse kick that Daniel possesses come tax season. Real Estate investing is going to knock stocks and bonds flat when it comes time to duke it out.
But that isn’t all Daniel learned from his time with Mr. Miyagi, and it’s not going to be the only tool in your toolbelt either.
How do you catch a fly between chopsticks with real estate investing? Principal Paydown.
Mr Miyagi challenged Daniel to catch a fly with chopsticks. This was a task that required time, patience and significant practice.
In order to catch the fly, you have to open the chopsticks wide, and gain control of them, before being able to close the sticks and catch a fly. The same goes for principal paydown, another underestimated benefit of rental property investing that will eventually win you the championship.
You see, the payoff from your residents doesn’t come immediately, it happens over the course of 20-30 years. And once that time comes, you now have strict equity in the form of a house, to sell or tap into as you see fit. That is the fly that you’re looking to capture.
Let’s look at some more real numbers from our 35k investment.
After 20 years have passed, your residents will have paid into your home an amount greater than your original investment. It’s called equity, and it might feel like intangible funds to you, but it does represent a true financial asset to use and cash out as you need or see fit.
And even greater, that’s not where our lessons will end. We can’t just beat our nemesis, we have to win the championship, and our other secret weapon is Home Price Appreciation.
Home price appreciation–leverage better than stocks
Now, stock prices also increase year over year, you can see below that stocks more than tripled the original investment through appreciation alone. Round of applause, sure, Johnny gets a couple of good moves in. But we’re Daniel, the underdog, and the star of the show. We’re going to win.
That’s why in that same 20-year time frame, our original investment appreciated over 6 times. 6 TIMES more home price appreciation than what stocks are capable of. And Bonds don’t even get an honorable mention because they come in at a big fat 0.
How Much more ROI can you receive with Jacksonville rental property investing?
At face value, you may seem to think Johnny is going to win. That’s what a lot of people do when it comes to Stocks & Bonds. They’re the more typical route. The average strategy. The expected champion.
But Jacksonville Rental Property Investments outperformed Stocks by 44%, and Daniel won the championship.
Mr Miyagi wasn’t promising Daniel a swift and easy victory, he had to practice semi-menial tasks that he didn’t understand at the time was unlocking his inner potential.
We’re not going to Mr Miyagi you all the way. We’ve just told you the secrets, and we’ve shown you the potential IRR you can stand to make. But there is one more facet to all of this we would be remiss if we didn’t share.
You see, just like Daniel won the championship, rental property investing dominated stocks. Ending here to review your investment would still be an awesome success story.
But just like Mr Miyagi prepared Daniel for life, not just the championship, we want to prepare you for the long haul. All of our numbers represent the 20-year hold. Let’s look at what happens in year 30.
Why Buy and Hold provides the ultimate payoff for Real Estate Investing
Most mortgages are 30-year long loan terms. In this time frame, you’ve had residents living in the home and paying down your mortgage. After that loan term is up, you own the house 100% outright, and those mortgage payments become instantaneous cash flow.
That’s not to say there wasn’t any cash flow along the way, you can see from the table that cash flow increases steadily at rates still outpacing stocks from year 10 on. But it is the ultimate payoff (financial and emotional) when you (and Johnny) understand what all of the hard work has led you to achieve.
How to Invest the JWB way
It’s a great story and a really perfect metaphor for what we do here at JWB.
When you buy with JWB, you can rest assured that we are on your team, coaching behind the sidelines like Mr. Miyagi. We’re not a fund, syndication, or REIT. We are a vertically integrated real estate investment company (and the only one in the nation). The benefit of vertical integration is reduced costs between suppliers, and because of the streamlined process, we can create better deals for investors, and higher profits for you and us, it’s truly a win-win. Another benefit of our structure is, you don’t have to deal with residents or the headache of property management.
Ultimately, you’re the boss. You own 100% direct ownership of the homes you purchase with full control of the asset and no lock-up period or extended contractual agreements.
Our way works, plain and simple. Just ask our clients! They have earned 79% more home price appreciation than the average Jacksonville investor since 2013.
When you’re ready to start your real estate investing, give us a call. We’re here to Miyagi you to victory.