- Joined
- Aug 29, 2007
- Messages
- 2,042
Mitch
Personally I have removed my investments from the residential home/apartment rental property business over the last few years.
No more buildings for me I only rent out the land now.
However when I was buying I was extremely selective in the choice of properties after I had cut my teeth on what in my younger years were very poor investments.
Number one rule was never buy new. Too competitive with home buyers and no room to negotiate. For me the most exciting and challenging part of investing was the negotiations involved in buying. Older buildings always had a better return when you factor repair and rehab costs into the negotiation process.
What I eventually followed was a formula for purchasing properties closely resembled the 50% rule.
I learned every property over time would eventually eat up 50% of your income, on average, in expenses as part of a larger portfolio. That includes every conceivable expense you can imagine. All the things from taxes right on down to the paper clip on the tenants file. Everything that every mom and pop investor always neglect to consider as expenses.
50% it turned out was a valid number as a ballpark average that most old school (and some new) investors will attest to over extended time when holding numerous properties.
From the remainder of the income I subtract my debt servicing based on 100% financing at the prevailing interest rate. I always pay myself first.
Over time the interest rate determined whether I held or sold properties. I never forced what I considered "Artificial Cash Flow" by paying down a mortgage. I did however refinance at times to supplement positive cash flow on properties.
Beyond refinancing I never considered appreciation when purchasing properties. They stood alone on there own merit cash flow wise from day one or they were a bad buy.
I viewed appreciation as speculation and that had no place in my business plan. It may be fine as part of a sales pitch but did not fit my income property investment strategy.
My minimum cash flow target was always $100/door/ month from day one. That was always enough considering cash flow increased every year after that. However many were far greater than that.
Once I adopted this investment philosophy I always made money on every investment regardless of the economy. Real estate investments at least as it seems I spent or lost as much on everything else I did.
I am highly skeptical of any other investors numbers that do not follow these rules if they in fact hold multiple properties and expect to do so over extended periods of time. Keeping in mind I am small time and have no interest in numbers that multi million dollar investors may throw around.
But that`s just me, I`m old, I`m tired, I have been through the mill more than a few times and I do not buy into anything that sounds too good to be true when it comes to making money.. or anything else for that matter.
This system works, these properties do exist always will exist, but they are not for arm chair investors.
Wow that`s way too long for anyone to waste there time reading.
Personally I have removed my investments from the residential home/apartment rental property business over the last few years.
No more buildings for me I only rent out the land now.
However when I was buying I was extremely selective in the choice of properties after I had cut my teeth on what in my younger years were very poor investments.
Number one rule was never buy new. Too competitive with home buyers and no room to negotiate. For me the most exciting and challenging part of investing was the negotiations involved in buying. Older buildings always had a better return when you factor repair and rehab costs into the negotiation process.
What I eventually followed was a formula for purchasing properties closely resembled the 50% rule.
I learned every property over time would eventually eat up 50% of your income, on average, in expenses as part of a larger portfolio. That includes every conceivable expense you can imagine. All the things from taxes right on down to the paper clip on the tenants file. Everything that every mom and pop investor always neglect to consider as expenses.
50% it turned out was a valid number as a ballpark average that most old school (and some new) investors will attest to over extended time when holding numerous properties.
From the remainder of the income I subtract my debt servicing based on 100% financing at the prevailing interest rate. I always pay myself first.
Over time the interest rate determined whether I held or sold properties. I never forced what I considered "Artificial Cash Flow" by paying down a mortgage. I did however refinance at times to supplement positive cash flow on properties.
Beyond refinancing I never considered appreciation when purchasing properties. They stood alone on there own merit cash flow wise from day one or they were a bad buy.
I viewed appreciation as speculation and that had no place in my business plan. It may be fine as part of a sales pitch but did not fit my income property investment strategy.
My minimum cash flow target was always $100/door/ month from day one. That was always enough considering cash flow increased every year after that. However many were far greater than that.
Once I adopted this investment philosophy I always made money on every investment regardless of the economy. Real estate investments at least as it seems I spent or lost as much on everything else I did.
I am highly skeptical of any other investors numbers that do not follow these rules if they in fact hold multiple properties and expect to do so over extended periods of time. Keeping in mind I am small time and have no interest in numbers that multi million dollar investors may throw around.
But that`s just me, I`m old, I`m tired, I have been through the mill more than a few times and I do not buy into anything that sounds too good to be true when it comes to making money.. or anything else for that matter.
This system works, these properties do exist always will exist, but they are not for arm chair investors.
Wow that`s way too long for anyone to waste there time reading.
