Welcome to week 7: Goals, Objectives, and Attitudes for success
Chris’s real estate investment philosophy is simple: buy for cash flow, and count any appreciation as a bonus. The goal is to make money in any market, so Chris advises his clients to position themselves for a profitable sale, and only sell when the price is enough to justify giving up the cash flow. He views cash flow from his rental portfolio as an annuity which, when properly managed, will support him for the rest of his life.
Those short term gains are very temporary, and your profitable sale may indicate market conditions that prevent you from replacing your cash-flowing property. Unless you’re paying off debt, or timing the next downturn to make a better buy, short term gains rarely outweigh that long term annuity.
Real estate without debt is the most amazing cash flow machine in the world. Debt is what cripples and bankrupts many real estate investors. It has its place and Chris uses it, but he will only finance a property to term, meaning he won’t take out a loan with a balloon payment mid-way through the amortization. When that balloon comes due, access to financing or reasonable rates may not be available. Essentially, Chris advises his clients to buy and hold, creating positive cash flow.
Cash flow is king and debt is death.
Real estate markets change every few years, and access to financing can change even faster. Investors seem to make their biggest mistakes when the market is booming and access to financing is easy. But can you imagine a mortgage free property ever not being profitable? There’s nothing like the warm glow of positive cash-flow security – and that is Chris’s goal for every property, and every client.
In 2008, the country was in a free-fall. All the news was bad, and many identify the downturn as the worst since the Great Depression. The mortgage industry has worked its way through a painful but necessary transition. Liar Loans and easy money is gone, and buyers need to bring at least some money to the closing table.
A few major banks have offered conventional loans with three percent down. Chris visited our Nashville office and was shocked by all the residential high rises under construction. Miami is seeing the same high rise boom, which seems crazy. A massive influx of inventory will surely impact property values. Chris advises his clients to be alert to the next big buying opportunity. A handful of real estate investors with cash used the last downturn as a once in a lifetime buying opportunity. And the next time the market turns, Chris plans to position himself and his clients to do the same.
Next week, I’m going to tell you about Chris’s experience as a Property Manager.
For a free copy of the full book, A Real Estate Investor’s Guide to Profitability, email FreeBook@ROOSTRealEstateCo.com and we will send you one. Or download a free e-book version here: MakeRealEstateWork.com/free-book