How To Put Your Child Through College The Easy Way
by Jim Scott

Investment real estate has proven to be a solid method of accumulating wealth over the long term. This column will focus on purchasing, owning and managing small apartment buildings. If you purchase a duplex, triplex or four-plex apartment and follow the three rules below, you could easily finance Harvard Medical School. And after that help fund your retirement.

This is not a get-rich-quick scheme that is the province of late-night infomercials. It is a simple method of creating disposable income at some future date with minimal taxes. Owning these units is not as difficult as your might think. And your chances for success are extremely high unlike other investment vehicles.

Rule 1: Buy Quality Minimizing risk is very important for this plan to work. The surest way to reduce risk is to buy the best possible location. I have seen certain neighborhoods in San Diego deteriorate and in the process destroy real estate equities and cash flows. You pay a lot more for buying in the beach areas and the better Metro neighborhoods. But you get two key ingredients for success. First, rents in better areas go up faster as upscale tenants can afford rent increases. Second, these neighborhoods are less likely to deteriorate-this protects your future rent increases and equity build-up. Paying more today means greater profit in the long run. 

Rule 2: Pay to have someone else do the management. Property management is relatively easy for one or two years. Managing property over a long period of time can be a demoralizing experience. Pay a professional to manage the property-it is cheaper in the long run. It is much easier to keep the building long term if you do not have to do the work. 

Rule 3: Reinvest the Cash Flow This is the most important rule. All of the cash flow must be applied to your mortgage. Using this method, a typical 30 year mortgage can be paid off in about 18 years. You will have a free and clear asset that produces an inflation-protected monthly cash flow. After your child is through with graduate school, you still have the asset and the cash flow. And both will be automatically protected from inflation.

Owning a small apartment building is a relatively safe and easy way to building wealth. And it can be relatively immune from recessions. I have written a 35-page paper on investing in apartments in San Diego County. It covers the market from 1960 to the present Call me and I will send you a complimentary copy. If you are serious about this method of wealth building, you should read this paper. 

You can reach Jim Scott by email or at his office at 1111 Fort Stockton Drive. Jim's direct line is 885-9511. 

Jim has been a homeowner in Mission Hills since 1976. Scott & Quinn is the oldest full service real estate company in Mission Hills. There is also a professional property management team on staff.