Neighbor News
Playing Real-Life Monopoly
How to play Real Life Monopoly to maximize your profit from real estate investments.
Someone asked my wife one day what I do for a living...she said "He plays real life Monopoly." There's a lot of truth to that. I've never lost a game of Monopoly. Been playing since I was 8 years old....never lost a game...although my brother might disagree. I studied the game. Knew the probability of landing on every space, and the ROI on every property. If there were a Ph.d. of Monopoly, I'd have it. Because of this unnatural love for the game, I've discovered 3 simple rules of Monopoly that apply to real life real estate investing:
3 Rules of playing monopoly
- Buy the ROI
- Buy It Now
- Buy the Rent.
BUY THE ROI (return on investment).
So, let me ask you. What's the best property in Monopoly...Boardwalk, Park Place, Illinois Avenue, or Baltic? Most people love Boardwalk. They don't know why. It's expensive and the rent is expensive. But, I did the research. Out of those choices, Illinois Avenue has the best ROI.
The point here is Do the Math. Illinois Avenue has almost 2x better ROI than Baltic, and over 1.5 x better than Boardwalk. When you are buying real-life real estate, you have to do the math.
BUY IT NOW
In Monopoly you should buy every time you land on a property. If you don't, then the guy that rolls next will buy it. There's only so many properties to divide between the players. In real life, there's some scarcity but we really don't have that problem. But, you must buy it now to take advantage of inflation. And in this economy the benefit of very low interest rates.
Just look at what bread costs in 1970...almost 50 years ago...$1 would buy two loaves of bread. In 2016, $1 buys 5 slices. Buy it Now to take advantage of inflation.
BUY THE RENT
In a way this is all you are buying when you buy rental income properties. It's all, and ONLY, about the cash flow. You are buying the rent, with leveraged funds, and an inflating value. EVERY dollar in rent is worth $10 in value. This is how you also build net worth. You strive to push the rent's up as much as possible to increase the value of your asset. In a way this is using leverage via a capitalization rate.
So, if you're up to it, I'd be willing to start up a new Monopoly game. Just be ready for a fight. I don't plan to give up my perfect record very easily. Brian Patton, CCIM 770.634.4848