My Eye Opening Mind-Shift As an Investor Friendly Agent

Conventional wisdom often leans towards positive cash flow as the hallmark of a good investment. However, after helping dozens of investors buy in the Des Moines area, I've been convinced there's a compelling scenario where enduring a monthly loss could, paradoxically, be the smarter play. This hinges on the concept of building equity and the investor's financial resilience to absorb monthly losses. Follow along...

Imagine you have a property that, instead of putting cash in your pocket each month, actually costs you a bit. It sounds counterintuitive, right? Why opt for a property that dips into your funds rather than adding to them? The answer lies in the property's potential for equity growth.

Equity, in simple terms, is the value of the property that you truly "own" — the market value minus any debts you owe on it. In some markets, especially those with high growth potential like Des Moines (my hometown), property values can escalate significantly over time. By accepting a monthly loss, you're essentially betting on the property's value increasing enough to not only recoup these losses but also provide a substantial return in the future.

In addition to the appreciation gains, if you buy a property and either add value OR simply buy below market value on the purchase, you can be certain that equity is sitting in the property even though the cash flow might be negative.  

This strategy is akin to playing the long game. You're not looking for immediate gains but rather banking on the property's appreciation. It's a bit like planting a tree. Initially, you invest time and resources (water, fertilizer, etc.) without any immediate return. But over the years, that tree grows, becoming more valuable — whether in the form of fruit, shade, or aesthetic appeal.

Of course, this approach isn't without its risks. It requires a solid understanding of the market and a good dose of patience. More importantly, it demands financial stability. You need to have the resources to comfortably manage the monthly losses without jeopardizing your financial health. It's not for everyone, but for the right investor, with a clear vision and stable backing, this approach can turn what seems like a monthly deficit into a long-term win.

In sum, while positive cash flow is often seen as the cornerstone of real estate investment, in certain situations, enduring a monthly loss can be a strategic move towards greater future gains. It's about weighing immediate returns against the potential for significant equity growth, always keeping an eye on the market's pulse and your financial capacity to sustain the strategy.