Stocks, bonds, CDs, annuities are all somewhat liquid with taking a small hit to principle. That is where the “shirtsleeves to shirtsleeves in three generations” comes in. As future generations inherit there parents and grandparents wealth in these liquid investments, they cash them in to take the fancy vacation or buy the new car, etc.

Families that understand the value of these cash producing assets, can sustain this wealth for many generations. If one generation does not teach the younger generation the value of these assets, they will surely sell (sometimes at a low price due to the illiquidity) and spend through the money like a lottery winner.

Compare real estate/small business (RESB)ownership to the stock market. RESB can be leveraged and while the leverage is in place, the note (asset) is being paid down by a renter/customer until the note (asset) is paid off.

First off, you cannot leverage stocks but only to a point. If the stock (asset) price goes down, you will have a margin call – meaning you will have to put more money into the asset just to continue with the original value. Also, you don’t have anyone paying down on the loan for this asset. In fact, you will have interest payments that you will have to pay or the principle value will be liquidated to cover it. And if you pass this on to the kids, they will more than likely sell it to consume.

Don’t get me wrong, I think you can make money in the stock market and that they can give decent returns. I just see too many people put money in the market with false expectations. Let’s be real, if you throw money in a market and expect it to magically grow and provide for you and your family for generations to come, that truely is the lazy man’s way to make money!

A good example would be the house my wife and I purchased. It was a foreclosure that that we bought for 30% below market value for our neighborhood. It needs some repairs that will total about 10% of the final market value. This means once we fix it up and sell it we will make a 25% profit on our investment (that is if we paid the house off in the mean time).

There is always money to be made in any investment arena as long as you do your homework and find value.

I think a sample of one (neither yours nor mine) doesn’t tell the whole story about whether real estate is good or not.

I have 4 more properties and if I make $$ on them all then I would certainly declare that real estate investment is a perfect way to make money. However, I KNOW that I’m a very small player so I have the greatest confidence that real estate is making some people very rich.

I was listening to a radio ad the other day and it said over the past 30 years home values have doubled approximately every 10 years. There is a formula to calculate the yearly percentage increase but to keep things simple it comes to about 7% every year.

My knowledge of economic history tells me that an average year of inflation is approximately 3%. Wages typically increase with inflation. So, if wages go up 3% per year but home prices increase 7% per year there will have to be a breaking point. I think this is why we are seeing real estate, both in buying and lending, becoming a huge stresser on our economy. Simple math tells me that unless people start buying lesser and lesser homes that they won’t be able to afford homes.

I myself am an example. I make very good money, probably the top 10% in my town. Me and my wife bought our first house 2 years ago. And to tell you the truth, the payment is more than I’m truly comfortable with. The bad part is its $30k less than the median home price here. So, how do people here and in other places who make an average wage buy a home? Crazy mortgages. I think that real estate will be a poor investment for at least the next 10 years. It needs to so everyone can catch up.