Real Estate – An Investment Choice
“Buy as many homes as you can afford and rent them out”.
If one of the world’s richest men gives investment advice like that to young individual investors then I believe, we should all stand up, pay attention and take our notes carefully. That is true because over the last five years or so such advice has been at the very least, considered controversial. Among the thousands of unfortunate families who could not keep up with their mortgage payments and of which hundreds lost their homes, were many so – called “property investors”. These are the individuals who gobbled up as many residential properties during the good times and had them financed with 30 year bank mortgages. When things started to fall apart and both the tenants and their landlords could no longer keep up with their rental and mortgage payments, the whole world started showing similar symptoms of the same cold.
“I would buy a couple thousand homes if I had a way of managing them”
Now we’re talking. This multi billionaire not only recommends that the rest of us mortals go out and buy up some real estate, he is also hinting that if “it were not too much trouble to manage” he would himself buy a “couple thousand” homes! There is a saying, “if it sounds too good to be true then it probably isn’t true” – but what if the words are coming out of the mouth of one of the biggest investors that probably the world has ever known? I am sure many would join me at least in my curiosity. And we should at least consider the current realities in the residential property market, particularly in the USA where this mega investor resides. There are at least two states in the US where population growth continues to fuel the demand for residential property and three bed-roomed houses in very good neighbourhoods are selling for as little as $30 000 at the moment.
“As many as you can afford”
He did not exactly use the word “afford” but it is of course, important that we take note of the words “stressed prices” and at the “lowest mortgage rates”. The “mortgage crisis” as it became notoriously known was as a result of too many banks selling too many houses to too many people who could hardly afford them. I know quite a few unfortunate “property investors” who today do not even have a place of their own to live in. But a not too large property portfolio that is not too heavily mortgaged is an investment, that in my opinion, is still “as safe as houses”. My own modest portfolio of about twenty residential units, are worth well over a million dollars and at the time of writing, only 20% mortgaged.