Ep 38 - Buy Stocks and Collect Rent Is Terrible Investing Advice?
What does this is broke. Millennial financier which are host muhammad khan and today going to be talking about buy stocks and collect rent is terrible investing advice so this is an interesting medium article that was suggested to me in my mailing list and i was like wait. What is this. So i actually scroll through the article reading through a seven minute read. It was actually very interesting ourselves like you know what. Let's talk about this in this week's episode labral no finance so the article will be linked. It'll be in the show notes if you guys want to give it a squirrel as well after listening to the podcast but the main fundamental advice and i to a certain degree. I agree with the advice. Was that buying stocks and collecting rent from real estate. It is terrible. Investing advice if taken at face value so what that means is if you are just listening to these people like on tiktok or instagram. Listen man. I don't think those are the best places. You should be getting your financial literally literacy from. I would prefer podcast and maybe youtube videos with like known people. I'm not even going to save myself. Hey man there's other people out there if you want to listen to them or books and whatnot but jentzsch try to stay away from them but those people tend to say like lock bought ten k. Of tesla i made fifty k and like two days. You can as well. That's not true. Not true okay. That's not how it works. Never take it face value. And that's what some people always kind of get sucked into its vast cash. Like you can. Oh my god. I can become a millionaire so quick. Let me do this. And that's what gets them to crash and burn. Never take that advised. Never go down there out. The other one is like collecting. Do you can just get this real estate property for a mill. You can flip it. You can do the birsh strategy. You can have five hundred real. Estate portfolio is under your belt in a year. That doesn't happen either. The amount of hard work and dedication that goes into burr and just real estate is mind boggling. You will never understand until you go through that first house process of how annoying it is. This show is not explicit. If i could curse you would know how bad it is in. How tough it is you get used to it and got the hang of plus starting with your first one you will understand how bad and tough. It is so kind of go into like why i kind of agree with like in this face value sense. So what this means is like anything that you take at face value. We can have negative impacts. Just straight up buying tesla because it's going office cool. It's a tech sock that's bad it can always plummet. I think what was last. Time is trading either fifty eight hundred fifty eight times. It's earned over its earnings. It's way too high. It could technically a bubble. I know the stock market has changed. Psychologically or how it works based on from like prior periods but it is still bad to always see it in that sense. It's always like a risk for something like tesla for you to invest in and again i have money tesla just enough. Why it's not that. I don't i am down to take that risk and i am aware of the downfalls that could come with that said frisk. There's other stocks and that's why you should always do your research where you do like basically all your due diligence. You buy the blue chip stocks the ones you know. That can't do banned such as microsoft or google or like energy stocks. Like stuff like that. Where you know like okay this sector. I know i'm good because it's been good forever. Let's go that and even then you're supposed to do your due diligence kind of revamp every year. So is this still doing good. Oh my god. Oil has been plummeting down for ten years. Maybe let's move to electric or something solar or something of the sort like some changing the strategy up. You're always supposed to do that so always do like some form of research deep dive into what you're doing. It doesn't matter what it is. It doesn't even have to be stocks. Anything even people tell you. Make some you've been making six figures in a month bs degreasers. Everything is hard work and dedication in time you will rarely ever get lucky out of nowhere and make something like that. I know people who have gotten lucky. They put ten on farm stock pharmacy. Stock boom jumped up or pharmaceutical should say jumped up like crazy overnight. Similar to like crypto. They met a couple of hundred grant. That can't happen. That is extremely rare. The opposite is more so and you don't hear those sites where they lost their knee. Which is the more common thing The just just enough. Why from that perspective on like why. The stocks portion is like bad advice as taking that so our i should say now real estate just kind of dive into each segments so real estate this article actually cut kind of dives into y. Real estate is bad at face value. Go on talking about how. Their neighbor purchased a house for one point one meal. Sounds like they're in brooklyn somewhere and then they later sold it for seven hundred k which makes me doubt it's brooklyn so what that means is real. Estate is a good investment. I will tell anyone who ever asked me. Real estate is a beautiful investment. You can make a lot of money in a good money in it as long as doing the right thing. The thing is like this example. This person overpaid onset. Property sold it a year after and sold for four hundred kate. Less that is a very bad deal now. Why did this person by there wasn't like given detail that wasn't a rental. Property was like a investment property was just for like personal property unsure but they overpaid on said real estate. There was a bubble in said market or neighborhood or whatever it popped or day just got ripped off and then they had to sell what again for whatever reason selling it within a year is fairly fast for whatever reason they got gypped. So there's always like a couple of rules of you're supposed to look at your you're supposed to see like is it worth it is. What am i buying for is a cash flow so it doesn't matter even if i bought her for a meal as long as my cabras like let's say yours is ten percent or as you know like this is my casual. I am happy with this even if my price drops to one hundred k. Yes i may have overpaid it but the goal was my cash flow. Was my math. Like i am still making one k. A month i am happy with that. Because that was my cash flow could have been hired for waited a little while but if you ever have that mindset you'll always you'll never buy a property or you'll never take that risk but right you did your due diligence and it worked for you with those numbers. Again it dropped. That's fine the appreciation. I always see icing on the cake. Unless you're trying to flip it doesn't matter as you just need to make sure your numbers work. The other thing article gets into which i agree it does create stress. Like if you buy especially if it's like somewhere like in a large city so just near a city house and let's say you give twenty percent down average houses like seven eight hundred k and brooklyn. I believe kobe more. Now who knows prices skyrocketing. Let's say it's a mill you put twenty five percent now. Two hundred fifty grand a seven hundred fifty k. On top of your head for the rest of your life for thirty years at least unless you're planning on paying it off earlier which most people don't rich people do. Fyi but that's like a huge debt on your head and your stress is always going to be there an intriguing left. You're also tied down to that investment. Now if it's even an announcement its own property that's even worse if it's an investment you're tied down to it because that's it. You can't put your money other places again unless you're well versed into what you're doing. This is all face value type situations if you're a brand new guy. You don't know what you're doing you're tied down. You don't know how to refinance the house. You don't know how to do a cash-out refinance i should say you don't know how to do the birsh strategy. You don't know how to earn other sources of income to be able to purchase the next property because you've got such a high end property or high amount property you can't even invest in stocks anymore or get other source of income again all these different strategies. Play out you always have to crush. The numbers may short work. Don't just see these people align these fake gurus especially who tell you just do this and you'll become his by my course and you'll make billions of dollars. None do your research figure it out. Get a mentor. Trying to go down all those different routes and this is the interesting piece which no one about. There's a lot of bad real estate out there. There's a lot of bad real estate. Trust me there is a lot of bad real people will say no there is. There's bad deals out there. I have seen so many bad deals where i'm like. You are out of your damn mind. Like i've seen people selling houses that are worthless twenty k. For seventy k. And i have seen people purchasing said properties. That's a bad sign because either eight is a bubble in that market that people are buying even crabby properties like that to that. The person just got shipped off. So there's a lot of bad properties out there that you should always do your due diligence. Nbc short worth it. Get the take a contractor which you even if you have to pay him or her. Get your information. Do your due diligence get an inspector. Do the math again crunch. The numbers get relative sales around the neighborhood. Get an appraisal. Which would do that for you. All that information. You make that decision and know what you are getting into or not. Just don't buy a bad property. Even if it's as long as i always say from the perspective if your cash flow works if this is the cap rate let's say ten percent of your capri it works and boom. You're good to go continue with that property. You'll make a good. You'll make some good cash so moving on from there so we're going to talk about stocks on why that could be bad from a face value perspective. Go back to tesla. Like i don't believe it's a bubble. I believe there's a psychological impact to it. I believe that name-brand is hip. I guess or in with the millennials the younger population who are normally in these high paying jobs like such as like fan companies. Google facebook amazon etc. and they. They want to get a car like that. Because techy est car you can get it's luxury slash techy so it's nice to have and i know more so people would try to get like a benza. What i would prefer but also being a millennial. I'm like this is a new tech car. Before that was always getting a benz get some german car. Like a beamer. Some stuff like that. Bmw already but now it's even myself. It's tesla i haven't gotten one yet. I do but like it. Might because of that brand recognition that has gotten similar chapel. But apple's worth it due to its cash flow and whatnot and it's revenue. Tesla gets it from that like okay. It makes sense for it to have. But it's still like. I said way too much expensive minutes should be but it's still keeps going up. Does that mean is always going to go up. That's what people thought bitcoin. it was at twenty km. Then it plummeted down to five. It's background what is it like thirteen fourteen now. It wasn't going back up. Is it going to hit by twenty again. who knows. That's the risk you're taking. There's other certain stocks that you can do good where you. That's where you're supposed to do your research. That's where he's supposed to do due diligence and that's when things start to blow up and you go down there out. I think beyond me it was a good example. I don't know if it's over inflated now but it was a good point at that time. Zoom douse a great test. Run per se from the digitization off the economy where everyone blew up on zoom. That's disguise rocketed. Just shot up like crazy. Because of everyone was using their revenue stream. Shot up their user. Shot up it made sense so stuff like that happens. If you have the faith in the company who did research into them. You can make a lot of money. Even warren buffett said that give him like back in the daytime money he can easily double or triple his profit easily. He can do that with the chunk of cash. He's working with now because it's too large with a smaller chunk of cash. You can easily do it. So yeah the other thing is. There's a lot of companies that are formed out of thin air tech companies now because this is more so the tech market they just formed out of nowhere. They literally have either. No revenue look like negative revenue for years. No growth happening at all. Like is just terrible and basically. They're just coming out with billions of dollars like i should say. Negative profits nine revenue. Like making absolutely no says they're not seeing your year growth on their revenue. They're not seeing anything changed. Their net profit is always negatively. I have over is like that. Okay i i know the point of what they're trying to do. They're all trying to pull an amazon type strategy. It doesn't always work. You can make that but it doesn't always work. So that's another factor. The other interesting factor is this can vary by country but in the us the government feel like most countries are all doing this but at least the us government they're printing trillions trillions of dollars literally out of thin air that will cause inflation. We don't know when but it will and can cause an inflation down the road. The reason they're doing it. I don't wanna get too deep into interests are extremely low so it's extremely cheap to borrow against themselves. Which is always very weird. So that's why it's it's smart for them to kind of do it at this point in time but it can cause inflation down the road if you obviously overstep your boundaries. Seems like with the government trying to do that but the interesting thing of a thing about this is rich. People actually know when to sell when this starts happening because for them. Inflation is an extra form of tax. There rather not pay. They're usually smart on one and by to sell certain assets that get impacted by inflation. So now you're probably thinking okay. Well what are you doing utah. All these the sounds like terrible. How do i invest. What do i do so this is what this podcast is for to give you advice on what to do and again. You don't have to take the advice from us. I always tell you anything. I even say questioning. Maybe i'm talking cancer. The word maybe. I don't know what i'm talking. Well you do your own due-diligence. I will say that. Learn increase your financial knowledge and literacy learnt. Read some books. There's a lot of free content out there. There are some cheap paid content out there as well which is books i would always is the best one. You don't need to buy courses. you don't need to go college trust me. They don't teach you anything over there. You can easily learn everything online. Majority of the stuff is free. There's a lot of great youtube content out there that he could easily. Just watch a lot of podcasts. Out there i've personally learned from both podcast and youtube and people. I am a people person. I've learned a lot from people. I dig information out of them so like that's whatever your avenue works you learn from there and experience is beautiful gift that you can take try test tested out. Failure will help you learn. Just always be careful on how much you're trying to fill whip. Don't put your family's life savings into this and then basically fail lose everything next thing. Give everything this. What i just said. Give everything a hard look and question every single little thing like why are you going to buy tesla. Is there a valid reason. Are you just trying to jump on. The hype is a fomo or is it. You've truly believe and have faith in elon. Musk and the company. Because he's selling tequila now for some weird reason under tesla why like. What is the reason. This is an interesting one. Always have an emergency plan before you take these crazy risks. Unless you're young. you're you're like me. You're down to take the risk and you have extra cash flow. You're not in those bad situations where you can't have an emergency fund. Just in case anything can happen you can. You'll do a job. Something can happen to you your funds or whatever. Your investment canfield economy could just should've hit two thousand eight again. You don't know a recession kit. Anything can happen. So always have an emergency fund. You can follow dave ramsey dave. Dave ramsey's advice on the emergency fund with the baby steps Definitely go down there. Step one is one thousand dollars and then step. Three is three to six months of funds to basically to have so definitely look into that. If you guys have not already and final thing is like. I kind of always push for this. Have different streams of income. So listen i know this. Might sound counterintuitive. To what i just said like the stocks and the real estate are the difference james. But there's other ways you can do it as well. All of your free methods like you can be a freelancer. You can start at youtube channel more so these are freer to take a risk on because failing wouldn't lose you too much money you can do side hustles. You can start selling stuff on amazon. You can do drop shipping hate. Try it all out if you fill trying to fill with little money as possible little to no money as possible if anything and then try out those things and i would always recommend you like trying to have a couple of different. Streams of income in like youtube is a great source. You can make a good extra chunk of cash from that. Like i said side-hustle same thing. Let's say into real estate. Get your realtor's license. Maybe so a couple of properties year. Hey that might be depending on where you are a good chunk of cash to help you out and build some funds to purchase them real estate property to protect our skin. See like those types of things again. Once you get to that point and knowledge where you can have like different businesses different reels they properties data of like other streams of income coming which is how normally rich people have so. And that's the point. That's where we're trying to get to from broke millennial originally so basically that was i- pieces of advice for this episode. We're going to basically ended up over here. I do hope you guys found this helpful. If you did definitely subscribe to our podcast. If you are listening from be sure to leave his aid review would help us out a lot. And if you'd like to support us check us out on patron name is broken. Lineal finance all links will be in the show notes for the episode. Ed on that piece.