Updated: Mar 13
As a real estate investor I am always looking for a deal that will beef up my portfolio. As I have gained experience in the real estate investor arena I have learned that not all deals are meant for me. That is ok because I do not want to invest in something that goes against what my current goals are. Right now my criteria with rental properties are emphasized on cash flow. I want high cash flow so that I can replace the income of my current full time job. Some of you may not have a current need for cash flow and would like to build equity for future wealth. It all depends on where want to be.
What is your current situation ?
Are you deep enough into your career where it makes sense to retire from it and equity is your best move? Or are you 25 years old just starting into your career and realize you want out now ? As stated before if you want OUT then cash flow should be your best friend. Now cash flow doesn’t meant wealth but it does make you closer to becoming financially free of your day job. Equity is where you build wealth. This is real estate and there’s enough time to do both or focus on one at a time. There are a vast amount of ways to accomplish this as well.
Cash flow isn’t what you make from the rent that your tenants pay. Cash flow is what you make after all your expenses are paid. This can include, your mortgage, property manager fee, landscaping fee, money set aside for repairs and vacancy. We will call this “real cash flow” Now I know this sounds like a lot but trust me you’re going to wish you did put money aside for repairs and vacancy in the future. So with cash flow being the emphasis you’re going to want to shoot for $400-500 a month in real cash flow per unit (door) you own. If you can have more than $400 then that’s awesome. I have not personally invested in mobile homes myself but when I’ve done the numbers and seen other testimonies this is definitely possible. I know it’s different then the normal real estate conversations you’re used to having but mobile homes maybe something you want to look into.
Appreciation is the increase in a home's value over time. How much a home appreciates each year depends on the local real estate market and any improvements to the home. A home's appreciation is calculated based on the fair market value of comparable homes for sale in the neighborhood. Equity is the difference between the your home value and how much you owe on the property. The more your home appreciates the more equity you will have to. This equity is what will make you wealthy. It can also be used to purchase more property using a home equity line of credit (HELOC) or cash out refinance (provide back link) . Different markets have different appreciation rates. For example Los Angeles, CA has average of 5.88% appreciate rate from 2000-2020 and Virginia Beach, VA appreciate rate in 2019 for the last ten years averaged .11%. Virginia Beach’s appreciate rate is lower than 80% of US communities.
Set a goal.
So let’s say you average $450 a month in real cash flow a month. You make $50k a year and want to replace your income. You would need around 10 units to completely replace your $50k a year. Now this is strictly buy and hold real estate strategy I’m talking about. This is not including other ways you can make money in real estate along the way (flipping/wholesaling). Keep in mind you do not have to do this all alone.
Do Not Deviate
Throughout our journey we are always looking for our next great deal. The hard part is not being sucked in by the next shiny deal that comes our way. You have to take the time to assess. Yes that deal may be a great one but does it align with what your goals are? You might find a gear mobile home that produces awesome cash flow , but you also know that your main goal is to find real estate that will appreciate in value higher and faster than what a mobile home will do. The quickest way to where you are going is a straight line not a zig zag.
To learn more about investing from Robert Kiyosaki (Rich Dad Poor Dad) click here
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