Friday, June 10, 2005

Weddings & Real Estate

Dear Readers,
With June here, we are reminded about what a popular month it is for weddings. This got me to thinking what the average cost of a wedding is these days, so I started searching the internet. I visited several sites and was shocked at the amount of money people are apparently paying for weddings. Did you know the average cost of a wedding now is around $30,000? I knew it had gotten exorbitant, but that blew my mind. This is even more scary when I think of the divorce rate.

Being a practical person, I couldn't help but wonder what more productive (and profitable) thing could be done with that money. Being a real estate person, it made me wonder what would happen if a small wedding was planned and the rest of the money was used for a down payment on an investment property (no, not a primary residence).

It seems like you could have a decent wedding for $10,000, doesn't it? $10,000. That's still a lot of money! So, if they took the other $20,000 and made a 20% down payment on a $100,000 investment property (no not primary residence) what would happen?

Being conservative and looking at long term appreciation rates, we could use 5% as a reasonable annual rate of appreciation. In 30 years a 100,000 property should be worth $300,000 or more, through compounding. In the meantime, with a 20% downpayment, the property should "pay for itself". By "pay for itself" I mean cover all expenses... mortgage, taxes, insurance, maintenance, etc.

The average age of a bride these days is 27. 29 for the groom. So, by the time they are 57 & 59, they already have an investment that will generate a nice cash flow or can be used to refinance for cash to put into another investment. The wise thing, of course, would be to watch the value (and income/expense ratios) and refinance when it "computes", so they can keep investing in more investment properties. By the time they are of actual retirement age, they're going to literally be real estate millionaires... and all this is because they were willing to have a "small" wedding.

Practical? I think so. Something to seriously consider? Absolutely.

Have a great day!

P.S.: In my post I mentioned the $20,000 should not be used for a down payment on a primary residence. Why? Because I think it should be used strictly for an investment. The primary residence should be paid for from the couples earnings. They may rent for a while, and move several times over the course of their marriage. But, the original $20,000 investment is setting them up for life!

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