The HBH Group Real Estate News

Consume, consume, consume – consumption of goods and services is what makes our market-based economy click.  Money has to move from person to person to keep the economy going.  Most of my readers can hearken back to your college days when you sat through an accounting class, sifting through all those benign terms like debits, credits and the like.  I also know that a very few of you actually liked those topics and became CPA’s, financial advisors and CFP’s.  Realistically, most of you turned to other interests other than subjects such as asset acquisition.  If I can, I would like to ask you to recall the definition of the term “asset”.  In this article, we are going to analyze that term and its meaning. 

  

According to the investor’s dictionary, an asset is defined as any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, real estate and other property.  In our society, we have recently become focused on buying consumables vs. buying assets such as income-producing property.  In order to create real wealth, a young person or couple must master the art of acquiring assets and not consuming cash and resources. Real estate is one of those durable assets that is in limited supply, which increases its value over time.  My team and I counsel our clients in this area, encouraging them to invest their cash in durable long term assets such as buying income-producing properties and othger real estate. 

Obviously I am focused on my clients real estate interests and when they buy properties, I profit (which I usually take my profit and buy more properties for my company and personal holdings as well).   In addition, there are many other durable assets that can be added to an investment portfolio.  Each has its only particular attractions, but when an investor buys properties there are some unique benefits that many other investments do not offer.  For instance, when a person buys property they usually use some one else’s money, yet they have a position in the equity of that property.  In fact, often it is possible to involve other silent partners to buy properties of an income-producing nature – you just act as the liaison.  So you earn equity position in this manner without using any of your own money.  Try that with stocks and bonds!  It is much easier to buy properties this way than any other asset.   Indeed when you buy properties, particularly income-producing properties it is like creating your own cash machine - your own personal ATM!

Further, buying properties as an investment will offer some unique tax advantages like no other asset.  Did you ever ask yourself why the wealthiest people in the world pay fewer taxes per capita?  Many of them have vast property holdings and in many cases they buy those properties with financing (not their own money).  See your CPA for more detail in this area.

So to sum up...  If you really want to create true wealth in your lifetime, you need to break the consumption habit,  Begin now to buy properties or assets that will increase in value.  Say no to things you really don't need and learn to identify the difference between a want and a need.  So many people have difficulty in this area and wind up being a slave to their credit cards as a result - Don't be one of them.