When I tell some of my friends that I am a real estate investor during these 'tough' economic times, they tell me that I am crazy. They'll say "Tom, haven't you seen the news? Now is a terrible time to be in real estate. The market is horrible." Well, if I'm going to buy a suit or shoes or even a car, I'm going to want to pick it up for as much of a discount as possible. And right now, real estate is on sale! Doesn't this make it the perfect time to get involved?

So for those of you fortunate enough to have money, the big question is what should you do with your money? The obvious answer: Do NOT put it in a bank! Why earn 2% when inflation is over 5%? The safest bet is to invest in revenue producing assets. There are many types of investments in which you may focus: gold, silver, foreign currencies, the stock market, etc... But right now, for this economy, investing in real estate is ideal for me. Why?

First, if purchased properly, you should be able to generate consistent monthly income. Can you do this with other investments? If you purchase gold bullion and give it to someone else to hold onto for 1 year, will they pay you monthly payments to hold onto it? Probably not. If you provide housing for someone for an entire year, will they pay you a monthly stipend greater than what you own to live in your property? Absolutely!

When purchasing real estate, you should always calculate if you can positively cash flow on a monthly basis. If you purchase real estate only for the equity and the market changes, you lose your equity. Add your inability to cash flow into the equation, and you have investors walking away from properties and higher foreclosure rates. Sounds like a situation many people in this economy are finding themselves in! However, if your purchase real estate for the cash flow and you lose your equity, well, you're still receiving monthly cash flow so you can be patient and wait for the market to appreciate again.

This leads us to the second reason to invest: appreciation. Since 1968, home values have consistently appreciated at a rate of about 6.34% per year! Sure, some years have been better than others, but for the past 40+ years, homes have steadily increased in value. I think about my parent's house in Nebraska that they bought in 1983 for about $50,000. When they sold it 20 years later, it had more than doubled in value! Ask anyone who has been living in their house for more than 20 years and they will tell you of similar increases in value.

Think about the financial advantages of purchasing a property, holding onto it for 20 years, and having the value double in that time period. Wouldn't that investment be worthwhile? Now, imagine if you have tenants living in the property, paying your mortgage, and providing you with an extra couple hundred dollars a month while it appreciates! Isn't that even better!

If you have a 401k and contribute to it for 20 years, the amount will grow significantly. But who is paying for your 401k while is grows in value? You are. And who is paying for your rental while it appreciates? Your tenant! Which retirement plan sounds most secure for your future, Social Security, investing in the stock market, or investing in multiple properties? It's a no brainer!

Now to my favorite reason to invest in real estate: leverage. Let's take a look at how you are able to take advantage of leveraging banks in growing your net worth with real estate versus investing in the stock market. Say you have $100,000 to invest and you are trying to decide between investing in the stock market or in real estate. If you invested $100,000 into the stock market, how much value would you be able to receive? Well, $100,000 worth of stock. But what if you invested $100,000 into a commercial property? How much value could you receive? In many cases, you could invest $100,000 into a $1,000,000 property and leverage a financial institution for the remaining $900,000! (Try going to a bank and telling them that you are willing to put 10% down if they will finance the remaining 90% of Berkshire Hathaway stock. They will laugh you out of the bank.) As a stock grows in value, you are receiving benefit only in that increment. But as real estate grows in value, you are benefitting at a much higher per cent.

To clarify, let's go over an example. Let's say both the stock you wanted to invest in and the property you want to invest in had a great year and doubled in value. How would each scenario work out?

In the stock scenario, if your $100,000 investment doubled, you would have $200,000. And to take full advantage of this windfall of funds, you would have to sell off your stock and receive a pre-tax gain of $100,000. Not bad.

In the real estate scenario, if your property value doubles, then your $100,000 investment will have earned you $2,000,000! Remember, it's the value of the property that doubled, not your investment. And, unlike with the stock example, you wouldn't necessarily have to sell to take advantage of your windfall. Say you decide to refinance at 70% loan to value. You would have ($2 mil x 70% minus $900,000 loan repayment and $100,000 initial investment) $400,000 profit minus fees. And is this income taxed? No! So you would be able to keep it all.

And what to do with $400,000? Well, why not invest in another commercial property worth $4 million? Now, between the 2 deals, you would have already accumulated a net worth of $6 million dollars through real estate as compared to $200,000 through the stock market!

In summary, the main reasons why investing in real estate now is better than any other type of investment is that it generates consistent, it has a history of appreciating value, great tax advantages, and you can leverage financial institutions to assist you with funding your deals.