Oh, we all want it, don’t we?
That perfect relationship that we can hold onto for a long time to come… But I’m not talking about a man here, or a ring. I’m talking about real estate that will bring you solid cashflow month after month!
When you find a property you like, don’t waste time considering all the what-if’s and how-to’s. Put an offer on it instead. The rest will fall into place. (I’ll get to that soon.)
Keep Your Eye On the Prize!
When you’re looking at investment properties, you’re definitely looking for those you want to hold onto. (Yes, just like Mr. Right.) And you’re going to kiss a lot of frogs. (Yes, just like all the Mr. Wrongs you meet along the way to finding Mr. Right.)
In short, you’re always exploring your options. And, boy, when it comes to looking at all the different properties that are available to you in the world there are a whole lot of options to consider!!
You have to be clear on what you’re looking for in a man… ’er, I mean properties!
- Is it something you want to hold onto over the long haul… that gives you appreciation when it comes time to sell it?
- Is it a shorter-term relationship you’re after… like quick cashflow that you’d find in a fix-n-flip? (So you can move on to the next property pronto.)
- Are you a bit of risk-taker looking for a property that MIGHT give you excellent returns? Let’s call this the “bad boy” of investing strategies that you’re willing to jump on the back of a bike with just for the thrill of it all. It might pay off big… or it might end up taking you for a costly, heartbreaking ride.
- Or is it the safer, low-risk strategy you seek? That’s kind of like looking for a nice guy who you know will always treat you right and be there for you through thick and thin. While he may not be real exciting, the stability can’t be beat. When it comes to a safe, low-risk strategy in real estate investing, you’re likely looking at low returns, too. Just keep that in mind.
- Finally, are you looking at properties locally or does distance investing appeal to you more? Either way, you need to develop relationships with people who will help you reach your goals… because you cannot do everything on your own and you can’t wear all the different hats you’ll need to wear when it comes to doing the deal and running the property. (I’ll cover this in an upcoming article.)
When it comes to real estate investing there are several strategies you can employ to get you to your goals once you know what type of investor you are, how much risk you’re willing to take and are able to handle financially, what types of properties you like to invest in, and whether or not you like to swing a hammer. You might really like doing different parts of your rehab projects. That goes for the buy-and-holds in your life, too.
Buy and hold is my favorite strategy for several reasons:
- It gives you greater stability. Every month I know the cashflow I’ll be earning per door. If that is a single-family residence that’s just one door. If it’s a multi-family property, I get to multiply that cashflow by the number of doors. As you move forward in your real estate investing business and build your skills you might see the major advantages of investing in multi-family properties. This is definitely a buy-and-hold strategy! (And it can be very lucrative.)
- You can push up the appreciation. If I have a property that I’ve taken for the long term, there are things I can do to bump up rents and bump up the value. It could be something very simple like giving the exterior of the property more curb appeal. You’ve heard the old adage of “slapping a little lipstick on the pig”? Well, it’s like that. Even a pig can look pretty with the right improvements and lipstick. In this case, it landscaping and painting, but you get the idea. It doesn’t have to cost a lot of money to make these improvements either, but it will likely cost you time… because there are lots of things you can do on your own. (You don’t have to hire the expensive landscaper to take out ugly shrubs and plant blooming flowers.)
- You get to depreciate the property over 27.5 years. This is a big benefit. If you hold onto a property long enough, you’ll be able to take the depreciation that occurs over time. That may not mean much to you now, but come tax time it certainly will. You can depreciate the property, plus depreciate line items. For example, if you put in nice, new appliances when you take the property over, those items have a depreciation schedule. Every year for a period of time their value goes down (it depreciates), which means you get to claim that depreciated value on your taxes. Rather your tax professional can… and I’m no tax professional, so please don’t take this as legal or tax advice!
- You can use the property in different ways even beyond your typical rental. For example, I can put a business inside the property… perhaps creating an assisted living for elders or sober living for those who really need it, or maybe I could turn it into an income-producing vacation rental or corporate rental. Those can earn you thousands of dollars a month. I know several people who are using that strategy right now. But you can’t use this strategy if you don’t intend to hold onto the property over the long haul.
- You’re not stuck buying properties in in own back yard. You can use the buy-and-hold strategy anywhere. In fact, I can’t think of a place where you can’t buy property and hold onto it for years to come. At least nowhere that I’d want to own properties here in the States. For me, it’s local properties I prefer over those in other states. I like to be able to drive by them and check on them whenever I feel the need. That’s not to say buying in other states is a mistake. You can do that with little issue, but you will need a dependable team that know how to handle problems that may arise. (Unless you can jet to that property at a moment’s notice.)
What If You’ve Fallen in Love with a Property?
First, that’s a big mistake.
As a real estate investor and entrepreneur, your goal is not to fall in love with properties! This is a BUSINESS. You are in the business of real estate investing. You are participating in deals to earn an income or boost the income you are already earning. Buying and holding a property has nothing to do with loving it, it has to do with the number and the return you are getting on your investment.
For now, let’s leave falling in love to the dating world.
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