Most landlords I know own their own home and have raised enough capital to buy other homes to rent out. It's a great idea. Get someone else to pay your mortgage while you maintain ownership of the real estate. And because real estate over the long term tends to appreciate, this approach can result in terrific profits.
Motley Fool Income Investor
holding American Financial Realty Trust
But what's in it for banks, such as Wachovia
All this allows banks to improve liquidity, eliminate depreciation expense associated with owning real estate, avoid regulatory concerns, and increase earnings and key financial ratios. It's win-win all around. (Income Investor editor Mathew Emmert expounds more on this concept if you need more details.)
Is there a downside? I can think of two. First, Bank of America
The other downside is potential short-term real estate risk. If, for some reason, the company needs to dispose of real estate quickly in an unfavorable market, shareholders would be hurt. Also, if it buys property in a crummy area that does not appreciate as expected, they'll be left holding the bag.
As with all investments, particularly with ones involving banks, it behooves you to really dive into the company's 10-K. But from my perspective, American Financial is not an investment I'll be making a withdrawal from anytime soon.
For related Fool links, see:
Want to get into the landlord business? Better have a look at the Fool's Home Center first.
Fool contributor Lawrence Meyers owns shares of American Financial Realty and wishes he was Snidely Whiplash so he could demand the rent.