My Grandpa was a financially conservative man. He didn’t waste money, he didn’t buy anything that didn’t have a purpose. Grandpa was similarly choosy with words. Through the years, he passed on only one piece of financial advice: buy one property per year.
Back in the 30’s, you could buy a new home for $15k and let it appreciate while you raised your family. By the time you got your gold watch from your employer of 50 years, your house would be paid off and ready to pass along to the kids. If you could afford to, you could buy more than one property and rent them out to people who would effectively pay the mortgage for you.
Obviously, times have changed, but not as much as you might think. Real estate is still one of the only investments that consistently appreciates. And unless your mattress is lumpy due to the gold bars you’ve been hoarding, you may want to pay attention to the following statement: real estate appreciates OVER TIME, with very few exceptions. In fact, history dictates that over a ten year period, a property will nearly double in value. Semi-recent history, however, is still looming over the heads of would-be investors, sending them back to the safety of their suffocating corporate offices. In all fairness, sometimes it takes more than ten years, but on the other hand, sometimes you can make a ton of money in the metaphoric blink of an eye.
So, I think some perspective is in order. Did real estate all over the United States generally depreciate for a time? Yes. However….after a period of time that is barely noticeable in the grand scheme of a 30-year mortgage, you may have noticed values are steadily climbing once again (and are projected to continue). So, if you were confident/fortunate enough to hold onto your investment properties through the scary part, you are probably beginning to breath regularly again, because as I have already stated, real estate appreciates over time.
So how do I do it, you ask? The same way Gramps did. Sure, home values are much higher but interest rates are 1/4 of what they were when my grandparents invested in real estate. If you can save, beg, borrow, or steal (for the record, I’m totally not advocating the latter three options) a 20% down payment, you can purchase a home and let a renter pay your mortgage. And, if you’re a veteran like me, use your VA loan to purchase your primary residence with no money down and hold onto that 20% for a down payment on the investment property.
There are some really creative options out there; if I were to write about them all this blog would get really boring, because, let’s face it, numbers are boring to read.
Bottom line… ask us how likely it is that a well-maintained property will not appreciate over the course of 15-30 years. Not likely at all.