Dollar Cost Averaging

[Lee S.]

Hello all, i'm on track to buy my first rental here in the next 3 months, I could do it now but I'm really busy in the next 6 weeks and I don't want to rush it.  Anyways, does anyone look at long term buy and hold from a dollar cost averaging perspective?

This is a strategy that many people use in the stock market where I have spent most of my investing efforts, seems the same concept would work in REI. Example for those that don't know this concept, if you buy stock at $100 because you believe long term it will gain value, but short term it drops to $80. If you buy more stock you can bring your average cost down to $90 if you bought equal amounts, then super size your returns when the stock continues up as you previously predicted.

How would this apply to real estate?  One of the concerns I think any RE investor has is where is the market at this moment and where will it be in the short and long term.  My plan is to focus more on "B" level properties with cash flow and use the concept of dollar cost averaging to smooth things out over the long term.  We can only guess where the market will be this time next year, but if I acquire roughly the same amount of property each year, the ups and downs will smooth out, the great deals in a down market will help carry the less spectacular deals in an up market and if i'm cash flowing on all properties at purchase I shouldn't have too many issues since rents don't fluctuate nearly as much as home values.

This is the one area where I get a little "paralysis by analysis" wondering if we are in an up or down market today (my newbie opinion is we are somewhere in the middle).  This "dollar cost averaging" concept helps me look past the short term fluctuations.

Anyone else look at it this way?  Feel free to correct my thought process.