Market Cycles, Vacancy Rates & Your Income Properties

I’m not very good at fortune telling. I tell everyone my crystal ball is cracked. Want proof?
I bought a house in Suburban Maryland when the market was down. I purchased it for $8,000 lower than the previous buyer had paid for it. 5 years later I sold it for a handsome $44,000 appreciation. It sold for $142,000. The highest price ever for a townhouse in that community. Boy! I really knew what I was doing.
Er, no I didn’t. 4 years later that neighborhood was selling in the $390’s. Now, with the real estate slip on out there you could probably pick it up in the $330,000-$340,000 range. (But the lady that bought my house has “lost” $60,000 in equity over the last 10 months. Never mind that she has really “gained” $200,000 in 5 years. A little better than my $44,000.)
I don’t tell you that story to discredit myself. Only to say that when you are working with real estate anything can happen. When you are purchasing income property you need to base your numbers on today. Does the property hold it’s own today? Don’t bank on future growth to cover your negative spread. Use the future equity growth to create your wealth.
Use today’s cash flow, principal reduction and depreciation to pay for the property and to begin building that nest egg. Count on those three and you can’t go wrong.

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