My Real Estate Investment Strategy

I Am A Simple Man 

My goal is to be able to make money in any market.  I buy for cash flow as a rule and any appreciation I realize is a bonus.  I will actively position myself for a profitable sale should the opportunity arise.  However, that sales price has to be exceptional to give up the cash I have come to enjoy.  I look at the cash flow from my rental portfolio as an annuity, that when properly managed, will support me for the rest of my life.  Cash flow is king.

I Really Don’t Like To Sell My Houses

Short term gains are nice, but they are often temporary.  The reality is that the market that allows the profitable sale is also the market that may preclude you from buying new properties to replace that cash flow.  In other words, you may find yourself with cash on hand with nowhere to invest it that makes sense. So, unless you have debt to pay off or think you can time the next downturn and drop in values to make a better buy, think long and hard about that short term gain relative to the long term annuity.

I Want To Ultimately Be Debt Free

Real estate without debt is the most amazing cash flow machine in the world.  Debt is what cripples and bankrupts so many real estate investors. Debt has its place and I use it, but only when I am supremely confident in my numbers, and only when I can finance a property ‘to term’.  

If You Must Borrow Money – Finance To Term

Financing to term means your lender is going to hold the note for the entire amortization period.  Many loans are amortized over say twenty years but they have a balloon payment due in say 10 years.  This means you either pay off the balance of the loan or be in a position to extend the loan or refinance it at the ten-year mark.  I do not want to count on being able to do that.  

The Easy Path To Bankruptcy

Taking a mortgage that results in negative cash flow is a sure path to bankruptcy.  Lots of people will teach you how to borrow money, not one of them will teach you how to pay it back.  Real estate is not a liquid investment. You can’t write a check against it and you can’t cash it out at a moment’s notice like a stock or bond.  Even selling a house at a fire sale price for cash takes a few days to close. Debt can ruin you if you don’t control it and yourself.

In a nutshell, I buy and hold.  I do not flip properties. Cash flow is king.  Debt is often death. Real estate markets change every few years.  Access to financing can change even faster based on world events that have no bearing on the local market. And finally, I think investors make more mistakes in markets that are doing well than they do in markets that are struggling.  

I’d Love To Hear Your Story

What works for you?  I’d love to hear what is working for you in your market.  Comment below and join the conversation.