The Death of the American Dream- The Only Way Out
The American Dream is being systematically and intentionally destroyed for our generation and future generations to come.
We are being creatively conned out of our opportunity to enjoy the opportunities our parents and grand parents were afforded and what is worse is many of us are playing right into the trap that wall street has set, creating a future of indentured servitude where real wealth and prosperity are now nothing more than a mirage.
This is not a rallying cry for socialism and a raising the minimum wage, but rather a condemnation of the way that government policies and the creatively greedy financial system has placed an insurmountable burden upon the middle class that is now prohibiting prosperity for future generations of Americans.
This is not an opinion piece, we can get to the statistics now and describe just how this broad daylight heist is taking place right in front our our faces as we buy-in as unsuspecting marks, while these corporate con-men plunder our future prospects.
Lets take a look at the data-
In inflation adjusted terms, median household income is nearly the same as it was for our parents 40 years ago for people who work full time.
Median home prices in the US in 1970 were $17,100, while today the median home price in the US is $216,700 over 12.6 times more.
The Middle Class is shrinking like never before and the disparity of wealth in America is growing each day.
So naturally you may ask yourself the obvious question, why is this happening?
The 2008 crisis caused a massive shift in home ownership in the US that systematically destroyed the equity of tens of millions of Americans and caused massive foreclosures nationwide. It is no secret now that the crash was caused by massive carelessness and outright illegal acts by the biggest banks in the country who then, with hat in hand, were bailed out to the tune of over four and a half trillion dollars created by the FED (AKA a tax on the American people) and basically given a blank checkbook to go use this money to go invest with no guidelines as to how this money would actually “trickle down” to the middle class, which it never did.
Instead institutional investors saw an opportunity to go and buy back the homes they kicked homeowners out of at 10 cents on the dollar and subsequently sell them back to us at a profit, or rent them back to Americans, many of whom could now not qualify to buy a home due to the crisis that wall street created.
Wait, what the F***?
Thats right, have a look at these telling statistics-
A 2017 article in Bloomberg states that “hedge funds, private-equity firms and real estate investment trusts have raised about $20 billion to purchase as many as 200,000 homes to rent.”
By decreasing home ownership nationwide and buying up massive portfolios of single family homes that families used to own, building their families future wealth and instead create a new generation of renters, these firms could increase their yields.
Why collect mere interest on loans when these firms could own the assets, build wealth through appreciation and enjoy massive yields from rental income in the meantime?
This is why the American Dream is in a 60 year decline with US citizens in more debt than ever before. We are stuck paying rent instead of owning real estate and subsequently accumulating less wealth in the middle class than ever before and this is a trend that is rapidly increasing.
So what, if anything, can we do to prevent lives of indentured servitude to our wall street landlords?
The Old Way- Moving On Up
It used to be that Americans could pick a decent paying career, buy a house, have a few kids and move up to a better house every few years, increasing our equity positions and net worth with the rise in real estate prices, but we saw how that played out in 2008 with the wealth of our parents being wiped out or if we were lucky, just cut in half.
We used to be able to take a balanced approach to investing in the stock market and enjoy steady appreciation from US based companies producing great products sold all over the world and balancing and diversifying our portfolios to hit those 5-8% yields that would provide our retirement and our children’s eventual inheritance. However with the massive quantitative easing that has inflated the stock market to new highs and irresponsible practices like corporate stock buy backs being the norm instead of paying out investor dividends, a large scale crash in the stock market looks more inevitable every day. When this current cheap money fueled debt bubble pops it will not be pretty for stock market investors.
The New Way- Finding Yields and Taking Back Homeownership
With everything I’ve mentioned above you may think that I believe a large scale correction in the housing market is on the horizon and that there is little hope for those who do not rush to sell their homes and take their profits now, but that is not what I am suggesting.
Sure highly levered markets like those in the Northwest and in California are going to see a large reduction in equity as this is a trend that has already started in these markets. However there is a massive opportunity right now for all Americans willing to seek an unconventional and innovative path to wealth. You see as private investors we are not beholden to shareholders and thus can make swift decisions that will enable a brighter financial future for ourselves and our families. We do not need to sell when markets dip unless we take on too much debt and put ourselves in a precarious position.
Think of all the companies like Zillow, Open Door, Offer Pad and others of the like, who are now gobbling up homes as quickly as possible and reselling them at extremely thin margins to prospective buyers. How quickly does that business model take on water when prices decline, homes sit on the market and shareholders demand liquidation? Not long.
Nationwide Yield Based Real Estate Investing
It is not lost on me that I am speaking to a very small percentage of potential investors who are willing to seek out high yielding single family real estate that may be located thousands of miles from their hometown. However this is the new model and this is what the big money is doing that is causing such a massive wealth gap in the US.
You see the advantage of the new model is mobility, pursuing high yields nationwide as opposed to investing only in your back yard. This is the new way to build a high yielding and diverse portfolio that we used to seek in the stock market.
Instead of moving up to the next home you can barely afford, this new age of investors can chose to instead purchase cash-flowing rental property that will create a cash surplus as opposed to going further into debt for that newer slightly larger home.
Warren Buffet himself said on CNBC,
“I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could.”
Accumulating high yield single family rental homes may be easier now than it has been in decades. While many markets are over inflated causing low yields, homes in other markets outside of your backyard may be the best investment available to the middle class investor. With interest rates near historic lows, rental rates at all time highs and prices that have lagged in markets outside the major coastal markets, single family rental property is a MASSIVE opportunity. While we built our wealth through the stock market and building equity in our primary residences in past decades, becoming a landlord in these high yielding rental markets may be the most sure path to building wealth for those in the middle class and quite possibly be the only way to save the American dream.
To do so, investors must buy with a longterm yield based approach, being sure to use debt responsibly and understand that this is an investment for income, not focused solely on appreciation and speculation. While many speculative investors yearn for the HGTV buy and flip exit strategy, the new model is a long term, buy and hold strategy that limits leverage, focusing on debt reduction and passive income rather than short term profits.
In the coming weeks and months I will be writing a series of posts on how this new model is structured and how it can be implemented to build a brighter future for Americans nationwide. We will pinpoint the highest yielding rental markets in the country that are still affordable and go in depth on what makes a great rental property and how to acquire these properties with a long term strategy in mind, while reaping the immediate rewards of increased cashflow. Step by step it is my intention to provide for those bold enough to shun the outdated and ineffective investment model of the past, a new model for the American dream and a way out of the systematic debt hamster-wheel that the 1% is shackling Americans to tighter and tighter each day.
More to come…