Monday, August 22, 2011

Good investments are boring


I have recently not paid much attention to real estate. After all, it is so boring and mundane. Today I have to go to one apartment to see what to do about a lose shower tap and then work on renting another unit that became suddenly vacant. The last unit I bought 6 months ago was a 2 bedroom apartment for $178,000 in NW Calgary bringing in $1000 per month rent. Combined with low interest rates it provides $100 net cash flow per month. So boring, but in the meantime, the mortgage payments covered by the rent pay down another $250 per month of principal. Oh! I am netting $350 per month or $4250 per year on a $60,000 down payment! That is a return of 7% not counting the benefits of appreciation (which has stalled over the last couple of years). Average annual appreciation is in the order of 4 to 6 percent or $7120 to $10,680 per year. So that would be $4250 plus $7120 = $11,370 on average per year not counting future rent increases. Give me boring anytime!

As long as you don't sell you don't lose. So sit out market volatility and take your profits at market highs. Real Estate is for the long run, 5 to 10 years at least. Looking at last week's stock market, I certainly am glad I diversified my portfolio and emphasized cash flow (which prevents forced selling).
Of course, if you are a 'buy and holder' in the stock markets, you can also ignore a lot of the day-to-day noise and collecting your regular dividend income may cause you to yawn while doing crossword puzzles in your recliner. Ah, maybe not, let's watch the shrill excitement of BNN and find some other investment gems to take advantage of.

Did you notice that Warren Buffett is not selling? He has been buying, why would that be? Is he bored too collecting dividends from Kraft and Coca-Cola?

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