Improvement on that is avoid family housing and go for industrial/commercial.
You can get a quality property with minimal leverage for your $2million. You will get a blue chip tenant like a national retailer or even a government department, and they'll sign a 10 year lease with mandated, upwards only, CPI-indexed increases each year. You won't even have to fork over 8-10% on a property manager because the tenant will maintain the property. And at the end of it, you'll have a property worth much, much more than what you paid for it.
Compare to a portfolio of houses, this strategy is higher return, lower risk and much lower management. The problem with family housing is that they are full of families, with all the associated problems that brings. Families split up, move out, get into trouble, have parties - blue chip businesses just keep their place tidy, make money and get on with life.
Commercial property is much more sensitive to cyclical downturns than family housing. 10 or 15 year leases are mostly in either downtown, prime location property (with very limited supply) or in new developments, where you only get them once. After that you're left to the market.
As usual, I think diversification if best for a stable portfolio. Mix various types of property, in various locations with various target markets, and then real estate is very sensible investment option.
Yes, I'm talking about a prime location property. That's why you are putting down $2million with leverage (say $4 million total buy).
Of course there are cyclical downturns, and also upturns. The idea is to get a low risk passive income, not to flip it and make money. Any blue chip property is going to stay blue chip regardless of market conditions, unless the location goes sour. But that's part of your due diligence.
> And at the end of it, you'll have a property worth much, much more than what you paid for it.
Unless there was a property bubble. Ireland recently had a massive property crash. Properties that were sold for €200million are now worth €20mil or less. Lots of people are stuck owning empty hotels and business centres with no tenants.
Well, obviously you don't buy an overvalued or speculative property. I'm talking about the dirt and building underneath an established business, like a fast food retailer, or, like I said, a government department.
For all the overvalued properties out there, there are still plenty which have maintained solid value based on solid cashflow from solid leases. As long as the lease is still going, then the value of the property is a function of the cashflow of the lease. The value of the lease is a function of the value of the tenant. If you do your due diligence all these mistakes can be avoided.
You can get a quality property with minimal leverage for your $2million. You will get a blue chip tenant like a national retailer or even a government department, and they'll sign a 10 year lease with mandated, upwards only, CPI-indexed increases each year. You won't even have to fork over 8-10% on a property manager because the tenant will maintain the property. And at the end of it, you'll have a property worth much, much more than what you paid for it.
Compare to a portfolio of houses, this strategy is higher return, lower risk and much lower management. The problem with family housing is that they are full of families, with all the associated problems that brings. Families split up, move out, get into trouble, have parties - blue chip businesses just keep their place tidy, make money and get on with life.