How to Create a Real Estate Money Machine and Retire With Income by Michael Douville

Author:Michael Douville
Language: eng
Format: epub
Tags: 'retirement, real estate, financial independence, cash flow, retirement income, rental income, monthly income, rentals, income properties'
Publisher: Michael Douville

Strategy Plan for Accumulation – How to Select A Portfolio

I live in Phoenix, Arizona the 6th largest metropolitan area in the United States. Phoenix is expected to double its population in twenty years. The city is dynamic and roads, freeways, schools, shopping centers, hotels, sports complexes and arenas, business centers, etc are being built. This construction changes the demographic make up of the metropolitan area and the paths of growth and expansion. Developers work with the city planners to build neighborhoods to accommodate the increase in population. Land & home prices vary according to the local amenity package as well as access to transportation, the quality of schools, and the distance to work. Freeway development opens up outlying areas but also changes traffic patterns and sometimes results in closing of access to older, established areas creating change. What is true today may not be true tomorrow; for better or worse, Metropolitan areas are in a state of flux. A metropolitan area that is dynamic may bring uncertainty, but it also brings tremendous opportunity.

As cities grow, there is a change in the desirability due to this dynamism. I try to anticipate the growth and the change in value brought about by the demographic shifts. I attempt to forecast 10 years into the future as to the areas, values and appreciation rates. I buy affordable homes in the outlying area that will have a strong future amenity package. I buy good properties and wait for future development. The art is recognizing the growth paths the city will take. As an example, freeway development has always brought accelerated appreciation to Real Estate value because it is time of travel not distance that is important. I am aware that everyone wants good freeway access; however, no one wants to be too close to the road! As freeways are built and outlying areas are developed, inner areas start to lose their attractiveness. Growth and appreciation shift to new properties with no economic obsolescence and same or less time of commute. The inner properties will have diminished growth or a regression to the mean of value. These shifts take time but these shifts definitely take place and we as investors need to be aware and re-evaluate our portfolio periodically. Phases of growth for most cities and neighborhoods have been defined as Growth, Maturity, Decline, and Revitalization.

I have earned enormous capital & rental returns by identifying trends early and purchasing before the values have risen outside of my purchasing parameters. (I will discuss the formula a little later.) Every city has an area that is considered the “high rent district”. This area is usually disproportionately higher than other sections of the city; indeed, often large production or track builders offer the same model elsewhere with a variance in price of 30% or higher. I try to purchase in the area of highest desirability and still maintain my investment parameter. In other words, I try to purchase the best area I can afford and still maintain my returns. Better areas appreciate faster and hold their value better during economic downturns.

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