STRATEGY
SINGLE FAMILY
What Is the Right Real Estate Investment for You?
PART I OF FINDING THE RIGHT NICHE
by W.J. Mencarow
investment for me?” That depends on how much training and experience you have, and how much money, time, and energy you are willing to commit. Many investors start with single- family houses. They are the easiest kind of real estate to find, finance, leverage, rent, manage, and sell. Well-located houses in stable economic areas are the safest real estate investment (living indoors will never go out of style). These houses attract desirable tenants, have the lowest maintenance, fewest government regulations, lowest tenant turnover, and proven long-term appreciation (averaging 3.25 percent annually since World War II). Like other real estate, they also provide tax shelter.
Suppose a 25-year old investor buys one house a year for 15 years, each financed by a 15-year mortgage. Bought right, each should have at least a break-even cashflow for the first few years and positive cashflow as rents are gradually raised. In year 15, the tenants will have paid off the first house. Every year they will own another mortgage-free house. In 30 years, they will own 15 houses with no mortgages, giving them thousands of dollars in rent income every month and a huge net worth. Before you do this, you should know that, like every investment, houses have risks. The cashflow is not as good as some other real estate investments. If you put little down you will have a large mortgage
Real estate always forgives.”
My father, a remarkably successful real estate investor, taught me that (and so much else). He meant that if you pay too much for a property, hold on to it. Eventually, it will “forgive” your mistake and become profitable through appreciation, cashflow, and tax benefits. Many people ask, “what is the best real estate investment?” That is the wrong question. The right question is, “what is the best real estate
56 | think realty magazine :: august 2020
Made with FlippingBook Online newsletter