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Quality Versus Quantity in Real Estate Investing
I know a lot of people need to flip properties, whether it is wholesale or retail, to generate some cash to pay off some bills and to live on. But as you get your cash flow needs taken care of and start to build your portfolio, I want you to remember that it is not the number of houses that is important; it is the amount of income from each property. I have heard so many new investors tell me that they want to own 50, 100 even 200 properties but that is the wrong approach. Let me explain. For example, let me ask you this question, would you rather have fifty houses with $100.00 a month cash flow or would you rather have ten houses with $500.00 cash flow each? They both have the same amount of income. But which is going to give you the biggest bang for your buck? Which is going to be the least or most amount of headache in managing the property? Which is going to have the most repairs? I would like to suggest that you start out with a goal to set yourself a minimum amount of cash flow you want on each property, ours is $200.00. Now $200.00 may not sound like much, but we never buy them unless we get paid. After we purchase, fix up and re-finance, we put $5,000 to $10,000 cash in our pocket. Now as you get your bills paid off and you are debt free, you will not have to get as much cash out. Remember even though your cash out re-finance money is tax-free and you don’t pay taxes on borrowed money, it is a debt and it must be paid back. So if you don’t need the money when you get to that point, do not cash out as much at that point.
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This intel was contributed by larryg
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May, 2012
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