It can be scary and overwhelming investing in real estate for the first time, but using The Real Real investing challenge makes it easy to get started. With 90% of millionaires achieving that status by investing in real estate, it’s no wonder you are excited about building wealth through real estate.
There are many ways to invest in real estate. In order to keep things simple, we’ll focus on using a more passive long-term approach that is similar to purchasing stocks. This means you don’t have to come up with a huge downpayment, become a landlord, or fix toilets at 3 am when a tenant calls.
If you are interested in learning investing basics check out the retirement investing guide and the short-term investing guide.
Let’s dive into real estate investing and how the Real Real investing challenge works.
What is The Real Real investing challenge?
The Real Real investing challenge is simple. Decide on an amount that you would like to invest in real estate each month. Pick the real estate ETF, Real Estate Investment Trust (REIT), or use a platform like Fundrise. We recommend a low-fee index fund or REIT to make things simpler. Then simply purchase more of that each month.
The reason The Real Real works so well is that no matter what the market is doing you’ll end up “dollar-cost averaging” into real estate. Meaning, when the market is high your money will buy you fewer shares in the real estate asset, and when the market is down your money will buy you more shares.
The key is investing on a regular schedule like the 1st of every month.
Over time you’ll build a strong investing position in real estate and learn more about more active real estate investing.
Example of Dollar-Cost Averaging
Let’s say you choose to invest in the Vanguard Real Estate ETF with stock ticker: VNQ.
Let’s say the initial price is $100 and you choose to invest $100 every month.
Month 1: $50 per share = you buy 2 shares. Total invested = $100
Month 2: $200 per share = you buy 0.5 shares. Total invested = $200
Month 3: $100 per share = you buy 1 share. Total invested =$300
Yet because you didn’t try to time the market you now own 3.5 shares at an average price of $85.71 per share.
That’s the power of dollar-cost averaging!
When is the best time to start?
The best time to start The Real Real investing challenge is as a part of a larger investing strategy. Real estate is a phenomenal asset and as a beginner investor, it is important to diversify your holdings across different types of assets including real estate. The beauty of The Real Real challenge is you don’t have to become a landlord, do a bunch of research on properties, nor time the market because your money buys you more shares of your ETF or REIT when prices are lower and less when prices are higher.
When we discuss long-term real estate investing, compounding interest and appreciation become the main vehicles to building wealth. The longer you are in the market the more time your money has to work for you. To determine how quickly your money will double at a given rate of return or interest rate, use the Rule of 72.
Who is The Real Real for?
The Real Real investing challenge is for beginner real estate investors. Perhaps you are interested in more active investing where you purchase properties directly, The Real Real provides a way for you to get started immediately. As you learn more about active real estate investing you’ll benefit from owning real estate through The Real Real.
Additionally, this challenge is for anyone who doesn’t want to become a landlord and wants to have the ability to sell their shares more easily in the future. Buying and selling properties takes time, effort, and money by using a REIT or real estate ETF you have similar liquidity to stocks.
There are tax advantages to owning real estate outright that an ETF or REIT does not provide. Investments in this form resemble stocks so be aware of this distinction.
You can sign-up for The Real Real investing challenge on the Ostrich app.
How to implement the Real Real investing challenge
Step 1
Sign up for The Real Real investing challenge and set an amount you’d like to invest each month.
Step 2
Pick an existing retirement account or brokerage account to invest with. If you don’t have one open up a new brokerage account or learn about our favorite investing tools.
Step 3
Pick a real estate ETF or a real estate investment trust to purchase with your added funds each month. Check out Vanguard’s Real Estate ETF (stock ticker: VNQ).
Bonus
If you want to really crush this challenge set up an automatic transfer each month.
Step 4
Check-in monthly on Ostrich to share your progress and get support from The Flock!
Tips for long-term investing
Here are some long-term investing tips to help you during The Real Real investing challenge!
Time in the market is more important than timing the market
Due to compound interest, the daily, weekly, and monthly fluctuations are not as important for long-term investing. It’s more important that you are investing regularly so you can let your money grow in the markets.
The power of low-cost index funds
Low-cost index funds are a way for you to invest in a basket of stocks or in this case real estate companies all at once. It allows you to achieve the average return without having to constantly pick stocks, trade stocks, and become an active investor. In fact, only 24% of actively managed funds outperformed low-cost index funds in the past decade, according to Morningstar.
Patience is a virtue
When investing in the long-term it’s best not to constantly check your stock portfolio. Research has shown this can negatively impact your mental health. That being said it is important to monitor periodically, but avoid making big decisions when you are at a peak emotional state.
Use tax-advantaged accounts
If you are investing for the long-term and don’t need to sell your stock portfolio for the cash any time soon, prioritize investing through tax-advantaged accounts. For those with a 401k or 403(b) use those accounts first and then consider contributing to a Roth IRA or traditional IRA. There are limits on how much you can contribute each year so check the limits on the IRS website (401k, 403(b), IRAs).
Benefits of The Real Real investing Challenge
There are many benefits from participating in The Real Real investing challenge.
Your money works for you
Every time you invest using the dollar-cost averaging approach you put your money to work for you. This is how to build wealth in the long-term is to have your money making more money. While early on it may not seem like much is happening initially. Over the course of 5, 10, 25, 50 years your money will continue to grow looking like a hockey stick of growth.
Feel more in control
It’s easy to get bogged down in the minutia of day-to-day life. Yet, when you employ dollar-cost averaging you will start to feel less anxious and more optimistic about the future. Investing for the long term builds your safety net and a strong foundation to live the life of your dreams.
Better financial decisions
Grounding yourself in a regular real estate investing schedule, you will feel less reactive to the random ticks, tips, and tricks that get thrown around about investing. You’ll be in a better position to research investment opportunities and invest in a way that aligns with what you wish to accomplish in life.
Tools to get there quicker
Automation
Set up an automatic transfer from your checking account to your Real Real investing account. This will ensure that you don’t forget to invest and make it easier to stay on track. Additionally, if you set up the transfer through your brokerage account you likely can automate the purchase of the stock as well. This is one of the best ways to take the burden of remembering off of your shoulders and allow you to focus on other more fun things in your life.
Retirement account
There are tax advantages to investing through your retirement account. Don’t have a retirement account? That’s okay! Setup an individual retirement account (IRA) that you control through one of our partners. Check to see if a Roth IRA or traditional IRA is better for you. Additionally, if you choose to become an active real estate investor you can often use the money in your IRA. You’ll need to talk to the bank that holds your IRA to confirm before withdrawing any money.
Related investing challenges to The Real Real include: Acquire Then Retire, Feeling Rothy, Roth Me Bro, You’re FIREd, DCA is the Way, and FIREd Up.
What to do with your newfound habit
Now that you are diversifying your investments into real estate like a champ and investing in your future regularly, you can focus on other financial goals. Here are some ideas of other healthy money habits you can work on next.
Build your emergency fund
It’s important to have at least a few months’ worth (6 months is considered healthy) of living expenses built up. This provides a cushion for your quality of life in case you lose your income. If you feel like 6 months isn’t enough try building your savings to the level of your annual salary or until you feel comfortable.
Invest for the long-term
Another great use of your new savings is to invest. Research shows that investing for the long-term (10+ years) is the way to go. We recommend getting started with low-cost index funds vs. purchasing individual stocks and using the dollar cost average investing method. Check out our favorite brokerage accounts and our favorite auto investing tools on the Ostrich App.
Take a small calculated bet
Investing for the long-term is proven to be the most sure-fire and safe way to build wealth, but it is boring. Boring is good for your major goals. We like boring! But if you have a little extra money after making your boring investments and you are okay with losing a small amount of money, explore alternative moonshot investments. This could be anything from investing in cryptocurrency, NFTs, startups, art, collectibles, or that penny stock. The key is not to make this your main strategy. Never invest more than you can afford to lose not just financially, but also psychologically.
Give back
When you have built a strong financial foundation for yourself, one of the most rewarding things you can do is to give back. Whether it’s donating time, money, or resources, you can support the causes that are important to you. Check out the Don’t Hate Donate challenge on Ostrich.
Conclusion
The Real Real investing challenge helps you invest in real estate as a beginner. Exposure to real estate will help you build wealth over the long term plus ensure you enjoy real estate before diving in further. Using automation and Ostrich you will build good money habits and gain confidence in your financial future. Feeling less anxious about money, you will be able to focus on the things you enjoy most in life while having peace of mind your money is working for you and you own the asset class that 90% of millionaires have used. Join Ostrich to get started on The Real Real investing challenge and begin to build your real estate empire.