Thanks so much for checking out the Real Estate Today podcast. We continue our series on cash flow properties. Today we talk about evaluating your investment strategy.
Bob Nelson: I’m Bob Nelson, real estate investment broker with PacWest Real Estate Investments. I’ve been dealing with the concepts of investing and owning passive investment property: cash flow properties. Most likely that’s a house, a duplex, an apartment complex, an office building that you’re going to lease to someone else, an industrial property, et cetera. You’re owning it so that it can generate an income stream with a tenant providing that particular income stream in the form of rent. I suggested that you’d write down, no matter how advanced you are in your thinking, how much property that you own.
It would be a good time … Toward the end of the year, it’s a great time to sit down and evaluate where am I, what am I doing, why am I doing what I’m doing, and write it down. A written real estate investment strategy requires you to focus on where you are and where you would like to be in the future. Why am I doing what I’m doing? How long am I going to probably hold the assets that I currently own? They all have a fairly finite holding period. The game plan might be I’m going to own it for five years, which means I’m going to re-evaluate my process at the end of every year or sooner, possibly, if economy starts to change but at least you’ve got a game plan as to why you’re doing what you’re doing.
The reason you’re writing it down, you’re going to next include the next generation down who’s going to take over when you decide to retire, or when mother nature causes you to retire, or you simply are no longer there and on the wrong side of the daisies. Again, it’s a great time also to identify the property performance and the expectation for that property. For those of you getting started, can you tolerate negative cash flow, which means taking on as much of a mortgage as you possibly can, which also then means buying as large a property as you can possibly buy, and that may generate negative cash flow. Can you tolerate that? If you’re earning a lot of money at your job, yes you can tolerate that as long as your job is stable.
Take a look also at the timing of your upgrading effort. When is it time to re-roof the property, re-side it, et cetera? Those don’t come as … You can see them coming down the pike and identify the parties to be involved.
I’m Bob Nelson, real estate investment broker with PacWest Real Estate Investments.
For more expert insight and analyses of the investment real estate market, listen to more podcasts by clicking on the button below.
Leave a Reply