FOMO on Real Estate… Two Schools of Thought
Yeah, Yeah, Yeah… FOMO (fear of missing out) is probably not the best reason to buy out of state investment properties. But it may not be the worst either. The fact that you are starting to see signs of FOMO creeping into your real estate investing life may be because your friends have mentioned it often. Or maybe you have heard about the huge appreciation rates that property owners are seeing nationwide. Whatever the reason, I am hearing this as a major factor when people are considering investing in real estate or have already invested and are considering adding more properties to their portfolio.
The key is understanding yourself as an investor and includes many variables. We basically sell properties to two types of investors: Millennials and then Young Boomers/Old Gen X’ers. Each group sees investing very differently.
Let’s start with Millennials. Most Millennials that we work with make very good money and have taken advantage of the last decade in the stock market by consistently saving and investing and have built up a sizeable nest egg. But now they feel the stock market is at or near its high and they see real estate as a very viable investment option. They are not afraid of investing out of state and many Millennials feel that investing in out of state properties is the only way for them to still invest in real estate at affordable prices. And because the prices are so low, they truly do have FOMO, they fear missing out on what they believe is a once in a generation opportunity to build wealth through real estate. We tell them there is still time, but it is true that it is getting harder and harder to source nice, performing investment properties. Millennials also typically want to buy as many as they can and are happy to leverage their money, often with our asset-based lending, to buy more properties than they could paying all cash. Their goal is to accumulate enough properties and then pay those off over the following 10 years or so to completely replace their income(s) and be financially free from that point on.
Our second client base is Young Boomers/Older Gen X’ers. They have made it to near retirement (our typical client in this age group is 55-60) and they are looking for a plan to augment their retirement. They have FOMO on a comfortable retirement. They are looking to invest in real estate because to them it represents a safe (no ups and downs like the stock market), secure and predictable investment. We typically show them how they can take $160k-200k and buy 4 properties from us with financing and will be able to pay those off within 7ish years using positive net monthly cash flow so that they will owe those properties free and clear in a relatively short period of time, after which they will receive all of the net cash flows and significantly juice up their retirements. It is a simple concept that we are applying with more and more clients to help them significantly increase their retirement income.
Ultimately though, it starts with you. There is no reason to have FOMO. But there is also no reason to sit on the fence and do nothing. Take a good look at your investments and ask yourself if you are where you want to be financially. Ask yourself if real estate is the right fit for you, and lastly…listen to and go with your gut.