A Cheap Way To Invest In Real Estate

| August 5, 2009 | 0 Comments

I was absolutely floored by the number of responses to my article on Monday.  I never imagined it would evoke such a powerful reaction!  If you missed that article, you’ll find a link at the bottom of this page… the title was, “Is Now The Time To Buy Real Estate?”

I asked a simple question and came up with a solid answer.

I couldn’t believe the number of readers who disagreed with my ideas.  I think John C. summed it up best when he wrote in:

“We have not yet hit the bottom.  Unemployment is still climbing, so buy all the rental properties you want. To whom are you planning to rent them too???”

Look, it’s true the housing market is in the toilet.  Home values have been decimated.  Property values have been falling for three years straight.  But now we’re starting to see signs of a turnaround.

That was the point I was trying to make.

If you want to make big money, you don’t buy when times are good… you don’t buy when times are bad… you buy when times are moving from the worst ever to not so bad.  Big investors make money when they buy, not when they sell.

Think of Warren Buffett.

He’s only willing to buy when he gets a deal… and you don’t get a deal in a hot market.  You get the best deals in a market that’s been crushed.

That’s why I think now’s a good time to be investing in real estate.

Owning real estate isn’t for everyone.

John brought up a good point.  He asked who’s going to rent our houses?  To be honest, I have no idea.  I have a property manager who finds the renters for my real estate investments.  And I highly recommend using a professional to manage your rentals too.  It costs a little more, but the peace of mind they provide is hard to beat.

Anyway, John’s comment made me realize not everyone wants to own rental property.  Not everyone has the money for a down payment… or credit for a loan.  Some investors don’t want the hassle of managing a rental property (and believe me, it can be a hassle sometimes).

That got me thinking.  Can we profit from the housing rebound without actually buying a house?

It was a good question.  And after I did a bunch of research, I found something really interesting.  I found a way to profit from the rebound in housing.  And it will cost you less than $15.

That’s right, less than $15.

Here’s my thinking…

Once home values start to rebound, mortgage credit will start to loosen up.  Now, don’t get me wrong.  We’re not going to return to the free money days we witnessed a few years ago.  It will be difficult to get a mortgage for some time… but eventually that will change.

As credit loosens, more buyers are able to purchase homes.  More buyers mean more demand.  And it eventually leads to an increase in home values.

So who benefits from rising home values and easier mortgages?

Homebuilders of course.  They have another advantage going for them as well.  Cheap labor.  Unemployment is high right now, and that means labor costs are very competitive.  I don’t know about you, but I know lots of people happy to have a job and a paycheck… no matter the size.

Because labor’s cheap, the cost of building a home is low.  And that means bigger profits for the homebuilders.

Now, I haven’t had time to look at each and every homebuilder one by one (it’s on my to-do list).  But I did find an easy way to invest in a group of homebuilders all at the same time.  Take a look at SPDR S&P Homebuilders ETF (XHB).

This ETF holds a number of homebuilders as well as related suppliers.  It’s a great way to get exposure to the entire housing market.  A single share of this ETF can be purchased for less than $15.  It’s an easy and less expensive way to profit from a rebound in the housing industry.

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Category: Real Estate

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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