What real estate investment strategy are you using ?

A lot of people come to me talking about the ‘gross rental multiplier’ on a single family home, or about how important it is to get maximum cash flow, or how they won’t look at properties under a certain capitalization rate.

Poor planning is the downfall of many would be investors. Maybe they don’t know what to look for in an investment property. Sometimes they don’t have their criteria nailed down. More often than not, they have a basic misunderstanding of wealth building.

One of the first things you need to do before you build your real estate portfolio is determine whether or not you should be following the Growth model for investing, or the Income model for investing.

Which model you choose will depend on a number of factors, mainly the size of the gap between how much equity you have, and how much equity you’ll need in retirement.

As we discussed yesterday, the income you receive in retirement is directly tied to how much equity you have. Your income is based on the return you make on your equity. The more equity, the more income.

In the Growth model, you are trying to accumulate as many assets as you can, in order to benefit from the appreciation and principle debt reduction over a large portfolio. In the Income model you are primarily investing your equity in order to receive cash flow to live on (or use for other business ventures).

What this means is, unless you already have a few million in equity, you should focus on Growth, rather than Income.

If you only have $100,000 in equity, it would be detrimental to look for an investment that will maximize your cash flow. What I would do is leverage that 100K into a portfolio of real estate in the Kitchener Waterloo area that is positioned to appreciate over the next several years (and your individual situation will determine the holding time).

In real estate, you benefit from owning more real estate, not from owning more of one piece of real estate. Leverage, used in combination with due diligence and a solid educational base, will allow you to accelerate the growth of your equity considerably.

Call me now @ 519 570 4447 for a free no obligation consultation about how your equity can be growing faster.

Benjamin Bach Cartoon

Benjamin Bach is passionate about helping people build wealth for an abundant retirement. He works with investors from across North America, helping them Retire Rich, and earlier than they thought possible!

Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447. More info on Benjamin can be found at http://www.kitchenerwaterloorealestateinvestments.com/

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12 responses to “What real estate investment strategy are you using ?

  1. Focusing on growth presupposes that a person can afford to feed the alligator monthly. If there is no cash flow then there is cash OUT-flow which can be counter productive over time and without market protection. While I agree that real estate can be an incredible tool, I think they need to round out a portfolio with a bit of both, income and growth as it would only make sense that the income could pay or offset the costs of growth not impacting your lifestyle cash flow.

  2. I have many people come to me with bad credit, what investment strategy would you recommend to someone that would be facing high interest rates? Let’s say 10 to 12%?

    Do they still stand a chance to get involved in real estate investing while their credit is bad?

  3. entrepreneursjournal

    I like your blog. Very informative. I personally am starting my real estate investing career with starting off with small condo’s in metropolitan suburbs. I read a book called ”Building Wealth One House at a Time” by can’tremember who. The basic idea is to get one condo/sfh at positive cash flow w/ 5-10% down payment and then get another and another and another so overtime you have multiple properties with increasing equities. I’d like to eventually get into multi-family units but want more cash for stability first. I have a blog about entrepreneurship and wealth building on wordpress too. Let me know if you want to write something for it sometime. Thanks.

    Entrepreneursjournal
    http://entrepreneursjournal.wordpress.com

  4. Yes you are right the main reason of downfall in real estate is lack of knowledge about what to look for in an investment property. People do not have criteria and many a times do not consult with known real estate experts and result is loss. They only think to buy property but never think where and what they should buy.

  5. As i think investment in real estate is a matter of anticipation and a good knowledge of variation of market is required. One more thing that should be considered is that investment in real estate should be for mid term and not for short or long term.

  6. There are many potential pitfalls to real estate which investors need to realize and which tends to require a sizable cash reserve for investors. A property being vacant for two or three months can seriously hurt a novice investor. A large repair or maintenance can similarly hurt (home warranties are potential solutions). I agree that real estate is a potentially powerful wealth creator, and I love the idea of other people paying down your mortgage, but the illiquidity and possible cash flow issues have to be publicized to potential investors.
    http://www.cpegenie.com

  7. I would strongly suggest you stay focused on a buy and hold stratergy because it could be 10 years before prices reaaly go up but they will and good return over a long period is almost certian

    Thanks
    Mike

  8. I would say that the buy and hold is still the best stratergy with a 10 to 15 year time horizon

    Mike

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  10. For my book…their family lives in Kentucky, and the father is a real-estate agent, but the mother doesn’t work and I realized that the dad should have a better-paying job to support his family..

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