Dividend stocks at this time around due to the following reasons:
1) Company cash are at all-time highs, meaning they will (some already have) spend a huge portion of that on buyback as a mean of increasing their EPS on the relatively flat Y-Y revenue growth. Data have shown that the increase in overall buyback is a sign of late-stage economic recovery.
2) Unless you are down paying 100% cash for your property, you are playing with leverage. Let say a property cost $1M, you down pay $0.2M (20%). You own 20% equity and 80% in liability. If the overall property value increases 10% to $1.1M, your equity will increase to 50% from $0.2M to $0.3M b/c debt is fixed at $0.8M. However, in bad times, your equity will leverage downward. You are now in a very risky position b/c you might potentially lose not only your equity position, but also increase your liabilities. Property value has been flat starting a few months ago, so now isn’t the best time to invest in rental properties regardless of the overall mortgage market.
If you were to invest in a rental property (due to some local knowledge discrepancy), invest in adjustment rate mortgage (ARM) in part due to the lower mortgage rate and the volatility the overall mortgage market will face with the Federal Reserve drying up liquidity in the overall equity/debt market in the coming months.
Intersection notepad 