@Account Closed Thanks for your perspective. Boy, you really raise an interesting point. I have to admit I have been struggling with this very issue. I understand what you are driving at in your comment but let me make sure. We all know what it means to assume ; )
So 50k a decade ago at 2.12% annual inflation or 23.39% total, would have been roughly 40,500. Hop in your DeLorean, punch in the year 1965 inflation was about 4.12% or 652.6 total. That 50K is roughly 6,640. I am not familiar enough with the Indianapolis market but I am guessing that a 50K home sold for 6,6k in 1965.
I also think that others will make the argument that CAPex, refurb, vacancy will chew-up cash flow. Even if the residence is initially fully renovated, after likely 15 years you will have to put in some more expensive items (ie HVAC) and repeat again at the 30 year mark. So no real cash flow is obtained.
So we are left with the old principle and interest pay down and inflation working in our favor. The customers paid off your 38K loan (50,000 - 12,000). For argument sake we will take the same historic 30 year inflation rate of 652%which means that 50k home is worth 326k in 2045 but in real terms it remains 50K because inflation hits all cost of living expenses.
Bob, what are your thoughts on just using the 50K to get into real estate, with the understanding where one starts is not where one wants to stay/end. As an investor builds their portfolio they look for markets with cash flow but greater possibility of appreciation. These same markets are also likely have a greater entrance fee.
