When is real estate investing the right decision for you and for the market and would a corporate rental property be a good idea?
I was meeting with my financial advisor this week and we were discussing “Dollar Cost Averaging”. According to Wikipedia “Dollar cost averaging (DCA) is an investment strategy for reducing the impact of volatility on large purchases of financial assets such as equities. By dividing the total sum to be invested in the market (e.g. $100,000) into equal amounts put into the market at regular intervals (e.g. $1000 over 100 weeks), DCA reduces the risk of incurring a substantial loss resulting from investing the entire “lump sum” just before a fall in the market. Dollar cost averaging is not always the most profitable way to invest a large sum, but it minimizes downside risk.”
I know DCA makes sense, but is it an approach to be applied to real estate? YES! If I look back over my 20 years of real estate investing my biggest successes were all about market timing, but did I really know that when I bought? No, not really 🙂 My challenge today is more about adjusting my expectations because not all real estate purchases can be as good as my best ones. However, if I sit on the sidelines too long and don’t keep investing I will have no financial successes at all.
So my advice is DCA! Think of real estate in the terms of Dollar Cost Averaging which means it is always a good time to buy and always a good time to sell, the devil is just in the details.
Start by setting specific goals for your investment. Do you want the property to have a positive cash flow from day one? Do you expect the value of the property to go up significantly so you make your profit in equity increase? Do you want to use the property as an wealth transfer tool to the next generation? Do you want the property to be part of your 401K? Do you have the time to make more money by doing a corporate rental?
What you buy and how you finance it will greatly depend on what your goals are, so don’t buy the wrong property for you. I talk more about this in both The Corporate Housing Handbook and Idiots Guide: Making Money with Rental Properties.
News Today: According to the June 2014 Fannie Mae National Housing Survey
40% of Americans say that now is a good time to sell.
70% say it’s a good time to buy.
48% feel that home prices will go up in the next 12 months.