If I were a Rich Man....

You remember the song? "If I were a rich man" from Fiddler on the Roof.

Well, in today's real estate market, here's what I'd do.

Let's suppose that I had a million dollars (remember this is my fairy tale). I'd go out looking to buy four Naperville homes whose value would range between $400,000 and $600,000. I'd negotiate very carefully and try to buy these properties way below their listed price. Maybe 75% or 80% of their value. I might have to write 10 offers to get one together. And, I'd put down 50% of the price paid for a fixed 30 year mortgage. That would mean that I'd make monthly income (not a lot at first) from the rents. It would also mean that I could keep my rental prices below market which would mean that I'd get my houses rented.

So, I would be leveraging my million dollars and would end up controlling two million dollars of property. I'd hold these investments (and yes they are investments) for seven to twenty years. Again, that's long-term. And, when I retired, I could sell one of the properties and live quite contentedly for many years. And, I'd still get monthly income from the other properties.

Ah....If I were a rich man...

But, I'm not. And, I suspect, you're not. However, if you have some reserve funds just sitting, this may be a wise investment approach. Let's say you have $50,000. You could buy a $200,000 townhome and rent it out. In fact, if you have older children and would like them out of your hair, this might be the way to do it. And, they can have roommates who would each contribute to the monthly rent. Not a bad idea, is it?

So consider when everyone is screaming how bad the real estate market is, it means that for wise investor, it's a time to buy. Just like the stock market. When everyone is selling and your hand shakes as you place that order, it's usually a good long term investment.

C 2007 Move UP to Naperville Blog, Eileen Landau