I would like to take the time in this week’s article to recommend a great book. I know this is not a book club, but if you are interested in investing in real estate, it is a must read. The book is “Rich Dad, Poor Dad” by Robert Kiyosaki. I believe the book was published in 1997, but many of the principles discussed in this book should get you thinking. The concept is simple, buy and rent real estate in order to build wealth over the long term.
With today’s market, there are many factors that could possibly make this the best time in years to invest in real estate. The first factor is that real estate is on sale right now. The market prices continue to be low and indications are that they may go slightly lower or stay flat for a few to come. There are many distressed sales in the form of foreclosures and short sales that provide opportunities for an investor to buy a great house at a great price. The next factor is that interest rates are the lowest they have been in my adult lifetime. This would keep the monthly payments down and give you the ability to build equity in the investment property. The last factor, and this is important, the market is overloaded with families that have been foreclosed or have short sold their home. All of these people are potentially great rental candidates. Just because a family short sold their $500,000 homes doesn’t mean they can’t afford $2,000 per month on a rental.
“Rich Dad, Poor Dad” discusses real estate versus other investment opportunities. What other investment allows you to put a percentage down and allow you ownership? If you want $200,000 worth of stock, you have to spend $200,000. If you want to buy a $200,000 house, an investor would typically put 20 percent or $40,000 down. Once you own the property and have it rented, your tenants are making your monthly payments for you. In this time, your equity position is going up. It won't be long until the market starts to go up again. This also will accelerate your equity in any home. So you put a small percentage down and have someone else make your payments. What other investment allows that?
So go get “Rich Dad, Poor Dad”. Start looking for homes in the area that are great deals and could offer great value to a tenant. Good luck and great investing!