In the real estate lounge, you can leave whenever you want. But to get to the door, you need to get through a gauntlet of muscly-armed bouncers will all demand a gruesome payment on the way out.

This is something that the online gurus didn’t tell me.

For any would-be real estate investors, let me give you a realistic taste of what you can expect when selling an appreciated investment property.

This Year: Painful Profits

The “pound of flesh” I paid to sell my houses:

I gave $85,000 to Uncle Sam
I gave $55,000 to the State of Minnesota
I gave $40,000 to the Contractor
I gave $20,000 for my Realtors
I gave $30,000 for the Buyer’s Realtors
I gave $30,000 in depreciation recapture taxes
I gave thousands more to the county, the closer, and on and on.

Selling my houses left me with a chunk of cash… and chopped over $200,000 from our net worth- all at the same time.

My Financial Aron Ralston Moment

At times, this year felt like our financial "Aron Ralston" moment (the Utah hiker who famously cut off his own arm to gain his freedom and his life.)

I can’t tell you how hard it was to give years’ worth of my salary to dubious governmental causes. But simply put, that was the price of freedom- and the only thing worse than paying the money… was not paying the money (and staying stuck).

We’re glad we sold. But that’s not the million dollar question. The most important question is this:

Would I do it all over again if I was 25?

Reflecting On Why Real Estate Worked

In short, yes. I would do it all over again. In fact, I would have gone even bigger.

Despite my exit-cost-whining, real estate worked for us. With sustained effort, our rentals turned us from a financial train wreck into a Shinkahnsen bullet train.

“Sure” you say, “but the stock market works too - and without the house calls”.

Believe me, I know. I’m a stock man myself now.

But for young folks, I’m still giving the edge to real estate over stocks for two reasons:

Life Skills
Leverage

Skills

I quickly learned construction, plumbing, electric, business and marketing, law, tax code, hiring, firing, and rapid-problem solving. I know of no better business, nay, life education than managing real estate.

From the fixed-up foreclosure we now live in to the leases I wrote last week to rent out our house while in Europe- so much of what I do and who I am wouldn’t be possible without having attended the school of owning properties.

Leverage

Ok, but why did real estate work financially for us? Why was it better than a Vanguard fund? The answer is simple: leverage. In 2012, they let a broke 25-year-old kid take the reins of a quarter-million-dollar apartment building - for $9,000. You won’t find a deal like this anywhere else in the world of investing.

With a small FHA down payment on that first 4-plex, I kicked off years of significant cashflow and appreciation on valuable assets.

Conclusion

These days, financial success hinges on a few things:

Hard work
Luck
Understanding the hyper-capitalistic system in which we live

In the age of declining dollars, owning assets is the only game in town.

Real estate is the only asset class that teaches you something and lets you own humongous assets early in life with fixed-rate debt and relatively little money.

Then vs Now

And I know- current times are tough in real estate. It would be very hard to replicate what we did in 2012 at this exact moment in time. My hunch is that it won’t be this difficult forever.

If and when things change for the better, the key question for you is- would you dive in?

Many of you don’t need the hassle. But just maybe you’re reading this now and wouldn’t mind riding the bull for a few years if it meant landing a new place in your finances- and maybe your life.

Real estate completely changed our trajectory. Maybe it could change yours too.