LY Med's video: 5 Reasons NOT to Invest In Real Estate 2 3 Investing Rx Ep 9

Thanks for tuning back for part two of our three part series on real estate. In our last video we talked about 20 pretty incredible benefits to owning and investing in real estate, but in this video I’m going to take the opposite approach and discuss the risks and negatives of real estate. 1) Expensive: we aren’t talking about REITS or syndications here, but actual physical real estate. It can cost a lot of upfront money, where you can easily buy fractional shares on M1 Finance for a $1. 2) Unexpected cost: unexpected cost and real estate go hand in hand. a lot of these cost aren’t reflected in those “mortgage” calculators people use, which may lead to to thinking a home is cheaper than they really are. These include things like: a. Closing fees b. Inspection cost c. Property tax d. Insurance e. Utilities f. HOA g. Vacancy h. Repairs i. Rainy day fund j. And then finally - mortgage 3) Lots of work/stress: buying a home is stressful. As is renovating it, finding renters and selling. Some feel like its a second job. You may end up with a property manager but that also cost money. 4) Illiquid: This means an asset is hard to convert back to cash. Homes may be hard to sell or find a renter. In down markets, you can lose a lot of money fast. 5) Debt: The biggest reason why real estate investment is risky is debt. Leverage, or borrowing money/debt to maximize returns, is,one of the fundamental groundwork of real estate investing. Unfortunately, home prices have skyrocketed since the 1980s, way outpacing earnings. Now people are borrowing more and more. This was the cause of the 2008 recession and we were/are in similar conditions now. Many took out multiple loans, sometimes strategically using the BRRR method, to grow their AirBnB or real estate empire. Unfortunately, as we can see, being exposed with a lot of debt and even a few months without income can cause everything to come crashing down. This is not an attack on real estate investment. Real estate is actually a great investment– I plan on investing in it myself – only after it makes financial sense to do so. Its OK to wait – its OK to have a secure job, to have secure finances. Again, I'm not here to tell you what to do, but to look at all the pros and cons. See if it makes sense for you financially, your investment philosophies, and your risk tolerance. Thanks for watching