Creating a Real Estate Dividend
February 3rd, 2009
With dividend cutting in the stock market, where does it really pay off to create residual income? The short answer that come jumping out at me is Multifamily real estate; not commercial; not all residential properties; and most definitely not condo’s. Why not commercial? Well as you see all over the news every day, retailers are hurting bad, so unless you can afford to buy a strip center in a great location and sit on it for the next 2-4 years before you start to see a return…Good Luck. Most retail prices for residential real estate here in the Seattle area is valued to high to give you a 1:1 rent to mortgage payment ratio. In most cases my client that purchases distressed properties we can get a 1:1 ratio and more than sometimes a small net income from that property that will only grow with long term ownership. The reason for not purchasing condo’s for investment is very simple; no matter how you cut it you still have a HOA payment; which will put you upside down every month.
People are losing their homes, having to down grade further in their present rental, or they are not in a position to buy a house. So they still need to live somewhere; and living with your parents until your 30 or 40 might be great for some; but not for most of us. Where are these people going to go? Apartments! Duplexes! MIL! Anywhere cheaper than what those people had. So we are seeing an increasing in demand for multifamily housing which will only grow as the economy get worse. What does multifamily give you…Lot’s of rent. Not only lots of rent, but you have other people paying your mortgage. You also get to raise rent which intern increases your capitalization rate; which increases your properties value! So if you have been thinking about a good safe place to put your money, that actual makes you money. Not only does it make you money, but you start a process of creating Generational Wealth by purchasing multifamily real estate.
