Recently, I got a call from a friend who is interested in moving forward with investing in real estate but has been repeatedly discouraged by the people who care most in her life such as friends and family.
She has money saved, is ready to invest, and wants a better future for herself. So, why is it that the people around her have been so adamant against her moving forward? She’s even begun to wonder if her friends and family don’t want her to succeed.
However, what I told her is that the opposite is true. The people that care will want to keep you safe. They will want to protect you from anything that might not go well in your life. Sometimes, advice is given from an overprotective perspective.
However, real estate is not as big a risk as many might believe. If you understand your situation as well as the circumstances of the current market, investing in real estate can be a very good thing.
It’s my genuine opinion that these people truly care. If you never invest or take risks you will be safe, but you will miss out on great opportunities. My best advice is to always invest based on cash flow. There are a lot of cost associated with selling an investment property, so my investment philosophy has to do with running the numbers.
Find the positive difference between the cost of your mortgage and how much you can rent out a property for. This number should give you some solid ground on which to base your decision.
Ask yourself if this is a slim or a wide margin, and whether it will be an asset for you in our Ventura County real estate market. If you have a gap of about $1,000 or more, you’ve got plenty of cushion in case something goes wrong.
Also, worry more about what an asset is producing for you month to month than about appreciation. In terms of percentage for cash flow, I usually look in the range of 15% and above. Most of my properties are producing at least 19% to 20%.
Decisions should be based more on numbers than on feelings. To be truly “economy-proof,” you should base your investment on cash flow instead of equity.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.