I wrote this blog after reading an article in the commercial appeal that is linked here about interest incomes plunging in America.
Americans Save Less Than 6% of Their Income
Recent economic reports from the U.S. Commerce Department suggest that while incomes have grown by a paltry .03%, once adjusted for inflation, those incomes are actually a negative .1%. With incomes growing at such low rates, economists would expect a savings rate to actually go up and spending to go down, but exactly the opposite happened in September. Why does that matter to us as real estate investors?
Invest in Real Estate for the Retrun
Paul Ashworth, chief economists at Capitol Economics said economists are not as worried about the report when considering that most Americans are actually transferring their incomes to debt service instead of saving. Why are we not saving as much in savings accounts? Because when inflation is factored in, savings account returns are negative. People are tired of paying banks to have savings accounts.
We are seeing an increase in many Americans looking for alternative ways to protect their capitol. Garbage bags of money buried in the backyard or stuffed between the mattresses or even rolled in cellophane and locked in outdoor plastic storage bins Tony Soprano style will actually earn you more money that paying a bank servicing fees that wipe out the exciting .1% return they promise with balloons.
Real estate investing can be a great way to build not only income from positive cash flow, but it can also be a great way to protect existing capitol. By purchasing hard assets and an appreciating asset as well, regular everyday Americans are able to build wealth and protect their capitol without worrying about a savings rate being eroded by inflation. This doesn't even take into account the monthly cash flow earned on investment property which make the accumulation of investment real estate the best answer to falling earned interest rates on savings accounts.