One of the most common questions likely heard as a real estate professional comes from concerned clients trying to decide if they should focus their efforts on saving or investing. It’s a natural question but it’s your duty to let them know that they should rephrase the question – the concept of saving for the future, at least as defined by past generations, is a quaint concept with little meaning in the modern financial world.

There was a serious change in American economic policy in the early 1970s, when President Nixon took our nation off the gold standard. The result has been more than four decades of eternally creeping inflation, and inflation kills savings accounts. The basic problem is that your money loses purchasing power at whatever the prevailing inflation rate is. For an example, let’s say annual inflation averages about 4%, which is what the government claims, though we’re certain the actual number is much higher.

This means that if your nest egg is stashed in assets that pay less than 4%, you’re losing money while “saving.” With most “safe” methods of saving, such as interest-bearing checking accounts, money market accounts, T-bills, or certificates of deposit, all paying under the inflationary rate, you are not making progress towards the land of financial independence. In fact, you’re going backwards. Such choices might be better than burying your money in a Mason jar in the back yard, but just barely.

That’s why it’s critical to impress upon your clients the truth of the Savings vs. Investing paradigm. You can call it what you want but if it’s not earning you more than inflation, you’re not improving your situation. At the very least you should steer people towards mutual funds with a long term track record of at least 10% annually.

Even better would be to sit down and work through an example of the myriad ways to profit from income property investing. This is not the time for high pressure sales. This is the time to communicate as friend to friend in the spirit of providing the insight of your expertise. If you can get them to listen and truly open their minds, there’s no reason you shouldn’t be cultivating a lifetime customer and recurring commissions.

Consider this. Most people have some inkling that they should be investing in real estate. Here’s your chance to prove to them exactly why.

The AIPIS Team

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