PSST! WANNA HOT DEAL?

This influx can lead to some strange moments, like when a NEWSWEEK reporter parked in front of the duplex at 77 Foothills Boulevard this month and called Edi Stocker, a Santa Monica, Calif., systems manager. Stocker began talking about the property, which he bought last month after attending Carr's seminar. Informed that the reporter was parked in front of it, Stocker bubbled with questions. "What does it look like?... How's the neighborhood?" Like many new Pocatello landlords, he's only seen it in photos. He and other investors rely on the home inspector and appraiser to look over the property, reducing the obvious risks of getting scammed by buying a house sight unseen.

Stocker bought the duplex with help from Todd Bohn, a local real-estate agent who caters to out-of-staters. Most agents spend long hours schlepping clients around to show property, but since most of Bohn's buyers never visit Idaho, he rarely leaves the office, relying mostly on e-mail. Bohn's wife sits in the adjoining office; she manages the properties for most of these investors, collecting rents and sending out repairmen in exchange for a cut of the monthly rent. Like most cash-flow enthusiasts, Bohn expresses disdain for the stock market. "[People] don't need GE stock--GE stock could go down to zero," he says. "But no matter what happens with the market, everybody needs a place to live."

For years economists have disputed that wisdom. Stocks, they say, offer higher returns, greater liquidity, easier diversification and lower transaction costs than real estate. Traditionally, housing has been viewed as "an intimidating, large asset that's awkward and illiquid," says National Association of Realtors economist David Lereah. But he says that's outdated thinking. Easier-to-get mortgages have raised liquidity, he says, and the tax advantages and leverage (which boosts returns) mean most people should have more assets in real estate.

Still, some see the growing enthusiasm for investment properties as evidence of a housing price bubble. Credit Suisse First Boston analyst Ivy Zelman says investors bought 14.5 percent of homes sold in 2004, a 31 percent increase over 2003. She worries most about places where investors are using "interest-only" mortgages to get deals done, such as Las Vegas, Phoenix and Los Angeles. If investor demand went back to preboom levels, she figures prices nationally would decrease more than 7 percent. "It's a red flag," Zelman says.

Even if ditching mutual funds in favor of Idaho apartments sounds ludicrous, these Pocatello investors probably face less risk than the folks flipping condos in Vegas or Miami. And now that they've had a taste of positive cash-flow investing, most are hungry for more. Seminar leaders like Carr and Owens say they're starting to direct investors toward rentals even further inland, including cities in Kansas and Nebraska. In the last year Stocker, the owner of the Foothills Boulevard duplex, has also bought rentals in Alabama and Florida; he hopes to buy at least 10 altogether. "Next year I plan to buy a motorcycle and take a tour of my properties," he says, since he's never seen any of them. Whether this boom continues or not, at least he's in for a heck of a ride.

© 2005