Owning real estate investments is a tool. Just like working a job is a tool. Owning your small part of a mutual fund is a tool. And even employer matching is a tool. You need to have a full understanding of your real estate investing goals to make the most out of the tool.
Cash or Growth?
I can hear you now. “What growth?” So let us discuss that first. Growth happens in an economy. You can’t stop it. Check the history of this blog and you will see that when things were steam rolling up and up and up I also said slow downs happen in an economy. You can’t stop recessions, either. (Remember the “new economy” of the tech age? We were going to be recession proof! The kids in their twenties then are now in their thirties looking around and asking “What happened?” “Uh, life.”)
Growth is going to happen. Sooner or later. Have you checked out the length of mortgages lately? Most are still either 15 or 30 years. What was you life like in 1996? Has it changed? How about 1981? Jeez, in ’81 we were in a recession about to hit a huge economic boom in the mid ’80s only to have the S&L crisis of the early ’90s only to be followed by one of the longest, biggest economic growth periods our country has known with a couple minor fall backs in there before we got to the big bust of the mid to late 2000’s. See, economies expand and retract.
Buying real estate now, so long as you can truly afford it and be able to absorb any more minor set backs, is an investment of a lifetime. Never have you had so much harvestable equity waiting for you in the future. (1 year? 3? 10? I don’t know, either.) And with the lower prices and higher rent demands you by extension get better cash flow!
ALWAYS keep an eye on growth when purchasing income property. Even when the aim is cash. (This post is long enough. I’ll talk more about cash on the next post.) Look for neighborhoods that people are taking care of. Where young people are moving in and fixing up the older generation’s previously well-cared for homes. Schools are important! So are perceptions. All these things, and more, matter.
But don’t chase trendy growth. That’s getting in to speculation. We all saw how that worked out. Tried and true neighborhoods is what I like. Or, if all else fails, follow the jobs!