The foundation of liberty …

As the United States celebrates its independence this week, it’s a good time to consider something of utmost importance to real estate investors …

Property rights.

After all, if you can’t safely, securely own private property … then there’s no hope of accumulating wealth and personal prosperity.

Private property ownership is the foundation of personal wealth.

Of course, most Americans today assume the right to own private property is the natural order of things … like the sun coming up every day. It’s always been there and always will be.

But a quick trip back through history shows that until the United States shocked the world with the radical notion of sovereign individuals …

… most people lived in societies where only royalty and elite owned and controlled property.

In fact, many of the terms we use every day are derived from this very system of elitism.

Contrary to common belief, the “real” in “real estate” doesn’t mean real or tangible … it means royal … as in king.

So “real estate” really means “the king’s property”.

The king’s subjects (the common folks) didn’t own any property … they only worked the king’s property in exchange for keeping 75% of the literal fruits of their labor.

Of course, by contrast to modern society’s tax rates, you could make the argument that keeping 75% is pretty good! But that’s a discussion and debate for another day.

Another common term, which is somewhat self-explanatory, is “landlord”.

Because even though the land was owned by the king, he needed loyal insiders to help him manage it all … keeping the workers (serfs) productive and paying their taxes.

The “lords” of the land were effectively agents of the king, conveniently positioned in the flow of revenue from the produce of the land to the coffers of the king.

Ironically, even though today there’s technically no “king”, and individuals can “own” private property, the system is still essentially the same.

Working class folks go to work and then pay about 25% of their paycheck to the landlord.

So if you’re not King Uncle Sam and collecting a slice of the workers’ pay through direct taxation (which was originally unconstitutional) …

… the next best thing is to own rental real estate … where as both a property owner and landlord, you collect a piece of the worker’s productivity too.

And as Tom Wheelwright so accurately explains, the tax code is a big part of what aligns the individual property owner with Uncle Sam.

The “king” shares a slice of his tax revenue with the landlord in the form of tax deductions … which incentivizes you to provide housing to the working class folks.

The BIG difference between the old feudal system with its kings, lords, and peasants … and the American experiment where individuals are sovereign … is in the old system, there was no path for a peasant to become a lord.

But the American Dream is where the common people, through their own initiative and efforts, have the right and opportunity to go from rags to riches without regard to birthright.

It may not be a perfectly level playing field, but it’s a heck of a lot better than what most people throughout history have had access to.

This revolutionary concept has unleashed more innovation and productivity than any other economic system in history … and people worldwide are largely all better off because of it.

So while the United States is far from perfect … and today’s adaptation of the American system has probably deviated quite a bit from what the founders originally envisioned …

… the American Dream still has people worldwide striving to get into the United States to get in on the action.

And every time YOU exercise your unalienable right to own private property and create prosperity for yourself and your family, while providing housing for working class people who aren’t ready to be “lords” yet …

… you celebrate and reinforce the system that makes your prosperity and theirs possible.

Sure, we may disagree about a lot of the strategies and tactics for keeping opportunity open for all, but if you’re truly interested in individual prosperity …

celebrating, exercising, and protecting private property rights should be something we can all agree on.

Until next time … good investing!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

The disrupted American Dream …

One of today’s most popular buzzwords is “disruptive”.  It describes an event, idea, or invention that upends the status quo in some aspect of life or society.

“Disruptive technology” is used for everything from Amazon to Uber.

And as we’ve previously discussed, many of these things impact real estate and investing.

But disruption transcends technology.

Donald Trump’s election and Brexit are two examples.  The world appeared to be on one course … then boom.  A new direction.

So, political norms, societal norms, government and business models …almost everything is being disrupted right before our eyes.

In fact, disruption is so commonplace, it’s become the new normal.

But really, disruption is nothing new.  It goes back to pre-historic times.

The wheel was disruptive … and revolutionized the world (sorry, we had to…)

Farming was disruptive.  It changed the entire societal model … accelerating labor specialization, commerce … even banking.

The printing press was disruptive … connecting human minds past and present at greater speed, for lower cost, and with greater accuracy than ever before.

The U.S. Constitution was disruptive … protecting private property rights for the common man … the foundation on which all personal wealth is based.

That’s a personal favorite. 😉

Radio, telephone, personal computing, the internet, smart phone … all disruptive … each one taking idea sharing to never-before-seen levels.

Trains, automobiles, and airplanes all disrupted the transportation norms of their time … allowing people and their possessions to circulate faster and less expensively.

Now blockchain technology … at least for now … is threatening to disrupt how freely money and wealth circulate.  And governments have noticed.  Uh oh.

Of course, history shows with every disruption, there are winners and losers.

For every railroad baron or millionaire automobile maker, there were thousands of wagon-makers and liveries put out of business.

So while disruption isn’t new … the rate is unprecedented.  The world we live and invest in is evolving at a dizzying pace.

Blink and you miss huge opportunity.  Or worse, you get wiped out by a trend you didn’t even see coming.

The faster the world is going … the further ahead you need to look.

 So with this mindset, here’s a headline that caught our attention …

Why it makes more sense to rent than buy – Market Watch, 1/13/18

Obviously, a real estate headline.  But disruptive?  Seems pretty mundane.

After all, the rent vs. buy debate has been going on forever … usually linked to temporary circumstances favoring one side over the other at the time.

But this article references two interesting reports …

One is the ATTOM Data Solutions 2018 Rental Affordability Report.

It notes … buying a home is more affordable than renting in 54 percent of U.S. markets, but 64 percent of the population live where it’s cheaper to rent.

Hmmm …

Looks like folks prefer to rent where they want to live than buy where the numbers make sense.  Apparently, buying just isn’t that important to them.

Which leads to the second report, A Revision of the American Dream of Homeownership.

This one’s a premium report, so the link’s to the press release … but look at the title … “a REVISION of the American Dream”.

The idea that something so foundational as the American Dream is being … disrupted … is something worth thinking about.

Market Watch did another article based on this report … “Renting is better than owning to build wealth – if you’re disciplined to invest as well.”

Some might say it’s a hit-piece on real estate to entice millennials to put their savings in the stock market rather than a home.

But that would be cynical.

More interesting is the possibility there’s really a disruptive trend developing in terms of the way society views home ownership.

Consider this …

We have a friend who’s a very successful millennial, who can easily afford to own any kind of car … several of them … if he wanted to.

He doesn’t.

Now that he’s discovered ride-sharing, he sees no value in owning a car … not as a status symbol or an investment.

We’re not suggesting this guy’s viewpoint represents the millions of millennials out there.  But it’s worth noting.

Millennials are a big, powerful demographic rolling through the seasons of life … just like the baby boomers did.

Except millennials aren’t like Boomers …they live in a different world and view it through their own lens.

Career, opportunity, family, community, home ownership … roots … are very different today compared to 50 years ago.

In a world where you may change jobs a dozen or more times in a career, and you operate in a global economy, with a social network that’s not local, but virtual …

… home ownership can go from being stabilizing to burdensome.

The sharing economy is changing the way people think about the value of owning things they simply want the use of.

Absent paradigms of ownership, sharing is arguably more efficient.  But for the first time in history, it’s logistically possible.

No generation before has had as many options for sharing as there are today.  

And while pay-per-use seems like a no-brainer when discussing a depreciating asset like a vehicle, Market Watch isn’t the first to argue a home isn’t a great investment.

The pioneer in the “your home is not an asset” mindset is none other than our good friend (and boomer), Robert Kiyosaki.

Of course, Robert’s an avid real estate investor, so his issue isn’t real estate.  It’s about respecting the difference between consuming and investing.

Investing is about profit.  But when you consume, you want value … the right mix of quality, service, and price.

Some people rent their residence because they get a better value, have less responsibility, enjoy more flexibility and variety …

… and it frees up money to invest in rental properties.  They get a better ROI.

So they own real estate … just not the home they live in.

If there’s a new attitude about home ownership working its way into the marketplace, it could lead to a new experience in landlording too.

Because now you might have more affluent, well-qualified tenants competing for longer term tenancies in nicer properties in better areas.

Stable people with good jobs and incomes, who want to live and keep a nice home in a good area, but don’t want the responsibility of home ownership … can be great tenants.

They can also be a way for you to collect premium properties while someone else pays for them.

It’s a trend we’re watching.

Until next time … good investing!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.