 Good day fellow investors. Now I have been mentioning here and there that I think real estate even now is a great risk reward investment. However a lot of the comments are what if interest rates go up, what if real estate prices fall and that's the key reason behind this video. There is a huge difference between investing in real estate and speculating in real estate. When investing you look at what is your investment and what is your return on investment coming from the cash flows from the real estate and so on. When you speculate you look at current real estate prices and then hope that it will go up 5, 10, 20% in the next few years. Then what are you going to do? Sell or be afraid that it will fall. So it's a terrible way to look at real estate and I think the speculation part, the behavioral part really deters investors from looking at real estate now because real estate prices have searched in the past and it's immediately a bubble don't invest. However if you look at from an investing perspective you will see what are the benefits of diversifying your wealth, your portfolio with real estate. I'll first show a financial example of what does investing in real estate mean and then I'll go through five tips on how to find good real estate investments that I have applied to my investment and it works very well for now. All right finances as we are value investors we always look to find an investment that has a lot of value with a margin of safety so that we can't lose much but the upside remains unlimited so that's the essence of a value investor. Now if you take cash and if you invest in real estate the return on that cash is small. However I found extreme value in mortgages because of their extremely low historical interest rates. Interest rates haven't been so low in the past 500 years so as value investors we should take advantage of the historically low mortgages. Now I know the question will be what happens if interest rates rise your mortgage will be fixed and your tenant rents will rise or even if real estate prices fall because of higher interest rates the rent the tenants are paying will remain the same because it will always be in relation to the yield on investment so higher interest rates it means also higher rent yields on the price so you are always covered there. Your main concern as an investor is to cover for the mortgage payments that's it so if you find an investment a real estate property that has sufficient cash flows to cover for the mortgage payments over the long term then you are set then that's a good investment and that will lead to amazing returns in the long term with low risk no matter what happens in the short time with real estate prices no matter what happens with interest rates no matter what happens with inflation so you try to protect yourself first as always. If I look at current mortgage rates for an investment property they are around 4% 4.5% in Europe 4% in the US so extremely low so the point is to find real estate properties that will cover for both the repayment of the principal and the interest rate thus we are looking somewhere at the 5.56% yield from real estates which is very possible if I look at the median price in Boston is 561 000 while the median rent is 2700 which is a 5.7% yield which is enough to cover a 4% mortgage with a 20% down payment so let's look at the finances to buy the median price in Boston of 561 400 dollars you need a mortgage of 450 000 with the 20% down payment of 112 000 at 4% fixed interest rate 30 year mortgage the payment would be around 2150 which is lower than the 2700 let's estimate there are some additional costs you have to cover for the vacancy months that will inevitably come here and there refurbishment so let's say you don't even make a cent per month on the investment in 40 years you just repay your mortgage so you invested 112 000 as a down payment and after 30 years even if home prices don't move don't go anywhere you get a 561 000 property 100% owned so the investment is just north of 5% per year which is not bad now let's imagine that real estate prices double in the next 40 years will they double well if inflation is around 2% and you can expect real estate prices to double in the next 40 years that's the minimum if there will be higher inflation which is a possibility i'm talking about three decades here and in the three decades you still get your fixed mortgage rate so if real estate prices double in the next 40 years the 560 000 home in Boston becomes a 1.1 million home in Boston while your mortgage payment is still the same and it becomes an 8% return over 40 years and this not even calculating the increases in rent alongside inflation the funny thing is that after 30 years let's say rent also doubles then you get a 64 800 rent income per year or a yearly 54 percent return on your down payment this is how investing in real estate works i don't care what will happen with prices in the next few months in the next year all we care is that i have tenants in my apartment that pay for part or most of my mortgage so that's investing that's it let's go on the five tips that i want to share with you that might make you find it easier to invest in real estate the first thing there is difference between investing in real estate and stocks because when you invest in stocks most of your competition is from speculators everybody looks at prices go up and down prices are very volatile when you invest in real estate your competition comes from people that buy their homes to live thus it is very interesting how that works when prices go up they rush to buy in fear that prices don't go higher when prices fall real estate prices fall everybody is scared to buy because they are in fear of buying and seeing prices go even lower because even these people that are concerned in buying their home are always speculators everybody loves speculating in real estate so take advantage of their behavioral fallacies running into a hot market and going away from a falling market when foreclosures make those who took too high mortgages sell so when you can't buy in foreclosures really look and dig deep into that because you might find real bargains secondly and the most important thing with real estate which is today very difficult to find with stocks real estate still have a moat you cannot increase the number of apartments in historical town centers you cannot increase the number of beachfront properties in that cool area that everybody likes so a lot of real estate has really a moat and that's what you need to look when investing in real estate don't look at hot trendy spots or something like that look at real estate with a moat where the rent will cover your mortgage rate even if it's a little bit more expensive than the cheapest real estate there with the highest yield look for real estates with a moat old houses that cannot be destroyed old neighborhoods that have to look like that for the next 200 years will always have their appeal because those can't be replicated and demand will grow grow grow so you have fixed supply and growth in demand the best investment opportunity there is always look for a moat number three stocks we like to see a bit what's going on invest put our money see what happens take our money out and and then redo the same process with real estate you have to invest a lot of time in the beginning a lot of time in research you have to turn around 500 000 real estates to find a few interesting properties on which you will make an offer and then on that offer perhaps one will be accepted because your offer will be ridiculously low that's how you invest in real estate and then you have to okay manage so you have to put some effort constantly over the long time but there is no more excitement however people usually look at two free real estate properties and then they invest i when i bought my last real estate properties for one year i have looked approximately at 50 60 real estate properties per day online and then me and my wife thankfully she was helping with that we looked at about 10 properties per week for about eight months and we found three we made three offers one was to my surprise accepted and that's how we found our real estate bargain so really dig into research before buying learn about the market learn everything you can know about the specific local market where you think there is a mode a long-term mode and where the rent covers your mortgage then you are really investing for the long term you buy once and you forget about it for the next 50 years number four what i showed you about boston there were medium prices and as we have learned in our video about extremist time and mediocristan the median statistic is made of large differences there are different prices different real estate properties so really try to distance yourself from the median by buying below the median price with a higher rent always with the mode and everything with a lot of effort you can save yourself a little bit of capital in the beginning and have a higher yield higher rent there are some kinds of properties that yield better yields or give more stability and so on and so that's all you will research if you follow the previous tip so the more research you do you really have to be an expert on the area you are researching you need a few months to become an expert but it is worth it you will see later why just on a financial example let's say we lower the price of the property from five hundred sixty thousand in boston to five hundred thousand and we find it with a higher rent of three thousand now the monthly payment for the mortgage is nineteen hundred and the rent is one thousand one hundred above that does and when we add the cost we might even get a five hundred dollars per month cash return on the investment or six percent on the down payment at the six percent on the already above mentioned inflationary eight percent which is really to be expected that house prices double in the next 40 years and you find yourself with a 14 percent annual return that will probably only increase with higher rents so 14 percent return from real estate with let's say low risk i find it one of the best opportunities the current market offers however you really have to put a lot of effort into investing in such a thing it takes as i said research maintenance land loading tenants and everything involved with that however it really pays with a small down payment you can provide yourself passive income for the rest of your life so really think about it number five to conclude don't speculate with real estate you hear a lot of stories of people that speculated with real estate some do good some do get do bad but when you invest in real estate that's a completely different story don't take credit card debt to pay for the down payment that's crazy and that's speculating always keep a margin of safety so that no matter what happens you can always pay the mortgage even if the vacancy is a little bit longer than the average expected in the area so really think about lowering your risk keep your list low and leaving that as an investment for the very very long term if you can reach a return of 14 15 percent it is much better than any stock will ever offer you and with the current low mortgage rates it is really possible to reach such a return i'm talking about 14 percent per year growing alongside the growing rents and fixed costs over the next 50 years so imagine what would a part of your portfolio the risk because it's in real estate returning 15 per year due to your financial well-being in comparison to what you're doing now or what you have been doing in the last two three five ten years with stocks depending on how much you are investing that's my message for today really think about diversification that doesn't have to happen now as you're probably following this channel and you will make a lot of money on stocks in the next year two three years you can also diversify when you have enough for a down payment however i would really advise to diversify from stocks when you make a lot of money on stocks into something stable that will bring you yield a cash flow and passive income because you never know what can happen to stocks and even if stocks double in the next three years you can lose 80 percent like that in a market crisis and i'm really looking forward to the comments about speculating and investing how do you feel about investing in real estate if stock prices fall let's say in the next two three years and do you think that that fear of stock of real estate prices falling sorry hinders you in making investment diversified rational decisions for your portfolio thank you i'll see you in the next video