When you own the houses, you have your own personal money machine! Obviously, you must maintain the property and provide the necessary management- But, in exchange for doing that, you control the money' It's yours to spend any way you choose. Owning your own widgets is the surest path to financial independence. The basis for wealth behind nearly every rich person can be traced back to the ownership of a patent, a copyright or a deed! Owning income real estate puts you in with the right crowd.
Well-Financed Houses Are Very Little Risk
In terms of investment risk, I'm talking about the risk of losing your assets – Rental properties, like the ones I own, are about the safest kind of investment you can make. Naturally, you must avoid paying too much and taking on too much mortgage debt. Residential renters are a much easier bunch to attract than commercial tenants. Also, everyone needs a shelter. Houses are considered a basic necessity of life. The danger of anyone taking your investment houses, with any equity, is almost nil! If you buy them right and structure the financing so your tenants can pay them off, you'll be very well rewarded for your initiative.
Your Own Personal Money Machine
After many years of trying different strategies to make money with real estate, I can tell you without the slightest “hiccup” – it's not a sound idea to buy houses that don't pencil out on the day you acquire them or shortly thereafter! There's only one reason in the world that I know of to buy investment real estate, THAT'S TO MAKE MONEY. If it don't or can't, then I don't want it regardless of whatever else I may like about it.
Buy Properties That Earn Big Profits TODAY
I have been “sucked-in” on FUTURE VALUE, HIGHER POTENTIAL and PRIDE OF OWNERSHIP so many times, I'm embarrassed to admit it! Fortunately for me, I learned my hardest lessons early in my career before I lost the ranch.
If your goals are similar to mine, which are investing for current income and long- term security (at least until I'm senile), with the least amount of daily management involvement, then my strategies will work for you like they do for me. Naturally there are many things to learn and most of it should be accomplished during the early stages of your investing. On-the-job training is most effective! There are several important things you need to consider without delay.
I Have Been ‘Sucked-In' – Don't Let Big Mortgage Payments Rob Your Profits
When you acquire properties with financing, which most of us do, you should always insist on long-term paybacks. The longer the better, but nothing less than 10 years.
Be very careful when you agree on the amount of the mortgage payments. In my opinion investment properties that have combined mortgage payments higher than 50% of the scheduled income are a bit too risky, unless of course, you have adequate back-up resources to pay for negative cash flow.
I'm always satisfied when my mortgaged properties earn me a small positive cash profit consistently every month. Little profits allow me to buy more properties, which in turn provide additional little profits! First thing you know, little profits add up to big bucks.
Walt Disney was delighted to draw the first cartoons that moved on a big theater screen. He was paid just $12 apiece for each one, but he kept drawing lots of them, over and over again. Needless to say, his $12 drawings eventually made Disney a very wealthy man. It didn't happen overnight, by any means, but when you consistently keep the profits rolling in, you have the money to take on bigger and better opportunities when they present themselves.
There Is No Substitute for Cash Flow
There are several good economic reasons why I favor keeping a flock of rental houses but the reason dearest to me is – they furnish me with a pocket full of cash every month, come rain or shine! Over the years, as the mortgages are retired (paid off) I have extra cash on hand to buy discounted mortgages, including buying back my own debt. It's a very lucrative companion business to my real estate investing.
In my opinion, nothing comes ahead of cash flow! If you have it, you can continue to grow. You can transition from smaller properties to larger ones or fixers to pride- of-ownership. You can use your cash flow to buy mortgages for passive income or take a trip around the world every month when the rents come in. Cash gives you choices!