The Real Estate Way by Woodall Justin

Author:Woodall, Justin
Language: eng
Format: epub
Published: 2019-10-07T00:00:00+00:00

Bad Advice!

Believe it or not, I’ve even heard and read where clients are advised that it’s OK to buy a property even if there is negative cash flow, which means the owner must contribute money each month in addition to rent in order to cover the mortgage and other expenses. They say you should consider it a contribution, just like you would contribute to a retirement account. Then you wait on the house to appreciate. You will never hear such lousy advice from me! That is a recipe for disaster, and it’s why people lose rental houses to foreclosure.

Do not, and I repeat, do not buy a house as an investment that does not or will not cash flow and put positive cash in your bank each month. As I’ve already stated, buy for cash flow and ROI, not appreciation. Let appreciation be a bonus. In my opinion, buying a rental house where you are required to add money to the rent received in order to pay the mortgage is a BAD investment. At that point, it’s a liability.

I get the logic behind it. Since you are contributing to an IRA or a 401K, what’s the difference? Why not contribute to real estate? But, that’s the beauty of real estate. Someone else contributes it for you! As a general rule, I’d recommend you get rid of properties with negative cash flow unless you are convinced without a shadow of a doubt that you will make it up later through appreciation. Then again, that makes it more like gambling and doesn’t really make real estate any more attractive than the stock market.

I like to maintain at least 30% equity in my properties at all times, and I like to have a large margin of cash flow. That way, if the market tanks, I can at least get out or sell a few if I absolutely have to and not lose everything. This is only if I get in a tight spot and need a back-up plan. It would be a very rare instance for me to sell. The smart thing to do is to continue renting and receiving income during a downturn. Focus on increasing your cash flow each month.

My goal in future years is to own several properties and be debt-free. Then, I’m seeing the full amount of cash flow from rent coming in with no risk of losing the properties as long as I pay the taxes. However, the proper use of debt allows me to get there faster.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.